27 Jul 2010 16:00
VALUE AND INCOME TRUST PLC
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 31 MARCH 2010
SUMMARY
|
| 31 March 2010 | 31 March 2009 |
|
|
|
|
| Net asset value per share valuing debt at par (including income) | 231.8p | 165.6p |
| Net asset value per share valuing debt at market value (including income) | 218.3p | 129.6p |
| Ordinary share price | 169.0p | 88.5p |
| Discount of ordinary share price to net asset value per share valuing debt at market value (including revenue) | 22.5% | 31.7% |
| Total interim dividend and proposed final dividend per share | 7.6p | 7.5p |
| Total assets less current liabilities | £141.8m | £111.5m |
THE YEAR
·; Net Asset Value total return (with debt at market value) of +76.3% over one year and -9.8% over three years.
·; Share price total return of +99.9% over one year and -22.5% over three years.
·; FTSE All-Share Index total return of +52.3% over one year and -0.7% over three years.
·; Dividends for the year up 1.3% - increased for 23rd consecutive year
CHAIRMAN'S STATEMENT
My last two statements commented on difficult years for Value and Income Trust and so it is pleasing to report that the year to the end of March 2010 has been more encouraging.
Over the twelve months to 31 March 2010 the net asset value total return per share (that is taking the growth in asset value and dividend together) rose by 76.3% with debt valued at market, and by 46.6% with debt valued at par. The share price total return was better than this at 99.9% because the discount to net asset value narrowed during the year. The FTSE All-Share Index total return was 52.3% over the same period. The good performance of the equity portfolio was the main feature of this result but it is interesting to note the Property Record. This part of the portfolio produced a total return of 18%. The previous year to 31 March 2009 was the only year with a negative return since the change in investment policy in 1986, which is a remarkable achievement.
Some shareholders have asked about the covenants attached to our two debentures. Information about these is included in Note 12 to the Financial Statements; you will see from this that there is plenty of headroom on both covenants in terms of capital and income.
The proposed final dividend of 3.8p would make total dividends for the year of 7.6p, an increase of 1.3%, that would be payable on 16 July 2010 to shareholders on the register on 18 June 2010. The ex dividend date will be 16 June 2010. The income account benefited towards the end of the year from a refund of VAT of £562,000. However, after putting this aside as it will not be repeated, the underlying income position is reasonably healthy.
We have also become somewhat more sanguine about the prospects for dividend growth from our investments, but it is too early to make a forecast of our dividend for the current year.
You will see from the Managers' Report that they are still able to find investments in both equities and property on attractive yields. Consequently we remain optimistic about the prospects for our investment approach and the portfolio is fully invested as this is written.
I hope that we shall see as many shareholders as possible at the Annual General Meeting on Friday 9 July 2010 which is to be held in Edinburgh this year. There will be a brief presentation on the investment outlook.
James Ferguson
27 May 2010
MANAGER'S REPORT
EQUITY PORTFOLIO
MARKET BACKGROUND
UK equities recovered almost all the previous year's losses in the last year to 31st March 2010. The FTSE All Share Index rose by 46.7% and gave a total return of 52.3% and its closing level was only 0.6% below its close on 31st March 2008, which was before the recession began. In the first half of our year the Index rose by 33% and in the second half it rose by a further 10%. The rise in the first half reflected a recovery in confidence amongst investors after the collapses of the preceding months of the winter, and the near panic of the Government which responded by cutting base rate to 0.5% and embarking on a programme of quantitative easing ("QE"). A year ago the recession was severe but investors were realising the extreme undervaluation of world equity markets as the global banking crisis eased. The second half of the year continued the steady rising trend in capital values, and the economic background began to improve with the final quarter of 2009 showing a return to modest growth in UK gross domestic product. Within the overall rising trend, high yielding companies underperformed the overall market by a substantial amount. The High Yield Index (the 175 highest yielding stocks within the FTSE 350 Index) rose by 35.1% and gave a total return of 42.1%. Mid-sized and Smallcap companies outperformed with total returns of 64.2% and 69.4% respectively. All the major world equity markets rose substantially over the last year, and the FTSE World Index (ex UK), which is measured in dollars, rose by 44.5%. Gilt yields rose by 70 basis points to 3.9% at ten years' maturity, and by 50 basis points to 4.5% on twenty year stocks. Corporate bonds performed relatively strongly and delivered a total return for the year of 8.4%, compared to 1.1% on the All Stocks Gilt Index. In the currency markets, the pound strengthened against the dollar and the euro, by 6.3% and 3.7% respectively.
The background to these movements was in the first instance a recovery in confidence and a recognition that income hungry investors could buy equities, and gain a very attractive yield compared to gilts and cash. As the year progressed the economic performance of the country as a whole passed its steepest declines, and by the end of the year, modest growth in GDP was re-established. Company reporting did not disappoint in the second half of VIT's year and reported earnings and dividends are now rising again after the steep declines of 2009.
PERFORMANCE
VIT's Aims of the Company are stated as 'investment in higher-yielding, less fashionable areas of the.…quoted equity markets, particularly in medium and smaller sized companies.' In the market recovery of the last year, low yielding cyclical companies led the rise and the FTSE High Yield Index underperformed the FTSE All Share by 9.3 percentage points. VIT's equity performance was +49.7%, well ahead of the High Yield Index but a little behind the All Share Index.
VIT's performance benefited from its mid-sized companies, in particular its largest holding, VT Group where the price rose by 59% over the year, having received a takeover bid in February. VIT's second largest holding, Rotork, rose by 65% and good relative performance also was seen in The Restaurant Group (+73%), Croda (+77%), Legal and General (+105%) and Spectris (+106%). These holdings countered the relatively sluggish performance in the high yielding defensive areas of the market such as oils, pharmaceuticals and utilities.
PORTFOLIO
Transactions during the year totalled £32.7m and net sales in the year were £0.5m. Our strategy was to keep fully invested throughout the year, and it was only at the very end of the period that we realised cash from part of our holding of VT Group, following the bid from Babcock. In the first half of the year we sold companies which we judged to be vulnerable in the recessionary climate. Stocks which fell into this category were Home Retail, Topps Tiles, Logica, and Assura. We took a considerable profit on our holding in AMEC, which had risen substantially within a nine month holding period, and we also sold Mothercare at a substantial profit after holding it for a short period. In the insurance sector we switched the holding in Aviva into Amlin, the specialist insurance underwriter and in the utility sectors we switched Scottish and Southern Electricity into Centrica, which is an integrated supplier of energy and less reliant on wholesale supplies. We sold BPP Holdings in the closing stages of the takeover bid from Apollo Global.
We bought ten new companies during the year. In addition to the stocks already mentioned we bought Mothercare, HMV, Carillion, Smiths News, De la Rue, Tesco, and Stobart Group. Apart from Tesco, these companies were all yielding more than 4% when we bought them. We added to our holdings in N Brown, Go Ahead, Interserve and Reed Elsevier, as opportunities arose during the year. Our strategy in stock selection continued to focus on improving the income on the portfolio and on companies which have been best protected in the economic downturn. Three of our companies received takeover approaches during the year; in addition to BPP Holdings and VT Group already mentioned, there was an approach for Forth Ports just as our year closed. At the end of March 2010 we were holding investments in 36 individual companies with an average net yield of 4.6%.
OUTLOOK
The recession ended in the fourth quarter of 2009. Initial estimates of a rise in GDP of only 0.1% were subsequently upgraded to 0.4%, still modest but more in line with anecdotal evidence. Modest growth of 1%-1.5% is expected in 2010. Other major economies grew faster with a rise in GDP of 1.4% in America, calculated on the same basis, and 0.9% in Japan. Growth in Continental Europe is still modest. Dividends grew by 7% in the first quarter of 2010. This compares with a reduction in dividend income on the All Share Index of 20% in 2009. Recovery in the equity market in 2009 was based largely on regaining confidence in the income flows from equities which were valued on historically high yields, both relative and absolute. As our current year begins, further growth will depend on recovering earnings and dividends. We expect company earnings to grow by more than 6% this year, excluding the banking and resource sectors. More than half of the earnings from UK companies are derived overseas, and faster growth in other parts of the world benefits our stock market, especially in times of weak sterling exchange rates.
Against this better company news, the perilous state of the UK public finances casts a long shadow, and the new Government will have to take action to reduce our fiscal deficit below the current level of 13%, which is the same as the figure for Greece. The level of public sector debt, currently at 60% of GDP, is not as high as the economies of Southern Europe, but it will rapidly grow to the size of theirs if action is not taken at the earliest opportunity. The unwinding of QE will also be a necessary consideration by the new Government.
As our new financial year begins, ten year gilts yield 3.9%, base rate is still only 0.5% and equities on average yield 3.2%. We think that overall the equity market is no longer undervalued, but is striking the right balance between recovering earnings on the one hand and the economic legacy of the Labour Government on the other. Cash returns almost nothing and the gilt market is likely to fall in our view. The real opportunity in our opinion is in the high yield sector of the equity market which currently gives an average yield of 4.8%. The FTSE All Share Index hit its all time high level on 15 June 2007 with a closing level of 3499 and a yield of 2.7%. The High Yield Index on the same day was 4182 with a yield of 3.6%. From that day to the end of March this year, the All Share Index had fallen by 16.4% but the High Yield Index was 27.5% lower over the same period, an underperformance of eleven percentage points. These companies include the oil, pharmaceutical and utility sectors, which are those considered to be the most defensive areas of economic activity. It is a mystery to us why these companies remain on such a low rating and we believe they will reward patient investors handsomely.
27 May 2010
PROPERTY PORTFOLIO
THE MARKET
Capital values of UK commercial property have continued to recover over the first quarter of 2010, but at a slower rate than in 2009. Rental values are still slipping back, but with some markets showing signs of stabilising. As reported by the Investment Property Databank (IPD) Monthly Index, capital values touched bottom last July, and have risen every month since, recovering by 13%, but are still a third below their mid-2007 peak. Retail property has led the recovery, with offices next and industrial/warehouse property lagging. The most marked differences within each sector, however, have been between property let to strong tenants on medium or long leases, and property with shaky tenants on short leases, or empty property. Bank finance for property purchases has been limited to very safe property, and institutions and cash buyers have been concentrating on security of income. Occupier demand remains very patchy, with many letting markets still weak and default rates high. Tenants are still trying to negotiate rent reductions either directly or through creditors' voluntary administrations (CVAs) or pre-pack administrations. But property, like equity and bond markets, has received a strong stimulus from the massive injection of liquidity through quantitative easing, and the attraction of its relatively high income yield when interest rates are near historic lows.
The IPD (Investment Property Databank) Annual Index showed a total return of +3.5% over 2009. Capital values fell on average by 3.6% (retail -2.4%, offices -5.9% and industrial/warehouse property -3.6%). Rental values fell by 7.9% (retail -6.9%, offices -14.0% and industrials -4.9%). The worst falls in rental values were concentrated in Central London offices (-19%). Office rents elsewhere in the United Kingdom fell by 8% on average. Average rental values in the main retail and industrial/warehouse property areas and sectors held up better, typically falling by 5%-7%.
Lending for commercial property remains very tight, but institutional buyers from both Britain and abroad are actively competing for larger and trophy properties. Activity by smaller investors and in the auction market has tailed off in recent weeks - whether that trend continues after the Election remains to be seen. There are more signs now of property disposals coming from banks and administrators. Much, of it but not all, is risky or part-let property on which the banks should not have lent in the first place.
Yields on safe property let on long leases to strong tenants still offer good value against long term bond yields and short term interest rates. The IPD average property yield, at 7.8%, represents a solid yield advantage of 4% over long term gilts, and nearly 5% over equities, fully compensating for the risk of some further falls in property rental values and tenant failures.
Economic activity in Britain is just starting to recover after a 5% GDP fall in 2009, but many smaller and service businesses, in particular remain under severe financial pressure. The withdrawal of foreign banks and low levels of business lending by British banks, even after they were re-capitalised, is still destroying jobs and putting many previously solid companies at risk. Although sterling has been devalued, and official interest rates have fallen from 5% to 0.5% over the past eighteen months, consumer confidence is low, debt is a serious problem for many families and the official unemployment figures understated is hidden through short time working. Private sector pay is being cut or frozen. Falling mortgage rates have boosted the disposable income of those in work, but low savings income, especially for pensioners, is the reverse side of that coin. The 2009 house price bounce in London and the South- East may be petering out, and the housing market is still bumping along the bottom in many parts of the country.
Substantial cuts in public spending are likely to restrain economic activity. But the rise in VAT and energy prices has produced a painful spike in the annual RPI inflation rate to over 4% in March 2010. And with a gaping Government deficit needing to be financed largely from abroad, further currency depreciation, rising interest rates and inflation are a serious threat over the next few years. The outlook for the major world economies is improving, but Britain's deficit is relatively high and our own recovery may be relatively slow.
Tenant demand for UK commercial property lags the economic cycle. Average rental values on commercial property measured by IPD may decline by about 5% on average in 2010. Central London office rents have stabilised after their sharp falls, but demand for office space elsewhere is poor, and rents are still falling. Shopping centre and retail warehouse rents may underperform high street shops. Industrial/warehouses are still suffering from oversupply and rental values may go down by 5%-10%. Capital values of commercial property may make modest progress over 2010 as a whole. The weight of money forcing yields down and capital values up has increased capital values in the first quarter, but banks are now starting to foreclose on loans in default, and the weakness of many tenants will mean some riskier properties will fall in value. 2010 may prove as testing a year for covenant quality and property re-letting as 2009, and the gap between the performance of individual properties and types may be wider as buyers and sellers discriminate more.
THE PORTFOLIO
VIT's property portfolio produced a total return of 18% over the year to March, compared with the IPD Monthly Index return of 16% over the same period. Over the longer term, VIT's property record against the main benchmark IPD Annual Index which covers calendar years and returned +3.5% in 2009.
We concentrate on properties with long, strong income streams to meet the fixed interest payments on our long-term debt. These have also produced good long-term capital performance. The total return on our property portfolio has averaged 8% a year over the past 5 years, 11% over 10 years, and 14% over the 23 years since the start. These returns are all at least 4% a year above the IPD averages.
After the purchase of four Shepherd Neame pubs on long leases for £3 million in January 2009, we have sold two smaller properties at Selby and Gloucester, where growth prospects are limited, for £1.4 million. We have also just bought from an administrator for £1.1 million at a net initial yield of 8.1%, a New Look store at Kings Heath, Birmingham.
All four former Woolworths properties have now been re-let at slightly higher rents in total but with letting costs averaging one year's rent. The new tenants are Home Bargains, Poundland, 99p Stores and a local trader with an option to purchase. These relettings and five rent reviews have added over £200,000 to annual rental income. We also extended WH Smith's leases by ten years on the Godalming and Melton Mowbray properties, benefiting their capital valuations. All properties, except Derby, which is for sale, are fully let on full repairing and insuring leases, with upward only rent reviews and an average unexpired lease term of 15 years. 99% of the rental income is reviewed five yearly.
The property portfolio is matched with £35million of long term, fixed rate loans - £20million of VIT 9 3/8% Debenture Stock repayable in 2026 and £15 million of 11% Debenture Stock, issued by our subsidiary, Audax Properties, and repayable in 2021. Because those Debenture Stocks were issued at a premium, their effective interest cost averaged 9%. We believe this is the right way to finance long-term property investment and we do not intend to replace it with shorter term bank debt. The turmoil in markets since 2007 reinforces that view.
RESULTS OF INDEPENDENT REVALUATION
The VIT property portfolio, including properties held within our subsidiary, Audax Properties, was subject to an independent professional revaluation by Messrs King Sturge and Co. at 31st March 2010.
The revaluation showed a value of £48,750,000; properties within VIT were valued at £16,675,000 while Audax Properties totalled £32,075,000. Our properties are revalued independently every six months, at 30th September and 31st March. The portfolio showed a capital gain of 6% over the past six months. Twenty-five of the properties valued at 31 March 2010 were freehold or the Scottish equivalent and one is held on a long lease with 47 years to run.
27 May 2010
BUSINESS REVIEW
The Directors have prepared this Business Review in accordance with the requirements of Section 417 of the Companies Act 2006.
A review of the Company's activities is given in the Chairman's Statement and in the Manager's Report which includes likely future developments of the business.
Aims of the Company and Investment Objective
Value and Income Trust ('VIT') is an investment trust whose shares are listed on the London Stock Exchange. VIT invests in higher-yielding, less fashionable areas of the UK commercial property and quoted equity markets, particularly in medium and smaller sized companies. VIT aims for long term real growth in dividends and capital value without undue risk.
Investment Policy
VIT's policy is to invest in quoted UK equities, UK commercial property and cash or near cash securities. It is VIT's policy not normally to invest in overseas shares or in unquoted companies. UK equities usually account for between half and three-quarters of the total portfolio and property for a quarter to a half but the asset allocation may go outside these ranges if relative market levels and investment value, or a desired increase in cash or near cash securities, make it appropriate.
VIT focuses on the fundamental values and incomes of the businesses in which it invests - their profitability, cashflows, balance sheets, management and products or services - and the location, tenants and leases of its property investments. The share portfolio has always yielded more than the FTSE All-Share Index. VIT has held between 30 and 40 individual shareholdings and between 20 and 30 individual properties in recent years, but both these ranges may change as market conditions or the size of each portfolio vary in future. No individual shareholding will account for more than 10% of the equity portfolio at the time of purchase.
VIT has had a long standing policy, since 1986, of increasing its exposure to equities and, particularly, to property through the judicious use of borrowings. All borrowings have been long term debentures to provide secure long term funding, avoiding the risks associated with short term funding of having to sell illiquid assets at a low point in markets if loans have to be repaid. Gearing has varied between a quarter and two-fifths of the total portfolio. VIT will not raise new borrowings if total net borrowings would then represent more than half of the total assets.
Principal Risks and Uncertainties
The Directors have identified principal risks and uncertainties which affect its business and these are detailed in Note 20 to the Financial Statements. Additional risks include:
• Discount volatility: The Company's shares may trade at a discount to its underlying net asset value; and
• Regulatory risk: The Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Section 1158 of the Corporation Tax Act 2010 (formerly Section 842 of the Income and Corporation Taxes Act 1988), the UKLA Listing Rules and the Companies Act, could lead to a number of detrimental outcomes and reputational damage. The Audit and Management Engagement Committee monitors compliance with regulations by reviewing internal control reports from the Administrator and the Investment Manager, OLIM Limited ('OLIM').
Key Performance Indicators
The Directors have identified the Company's share price total return and net asset value total return, relative to the FTSE All-Share Index (total return) and the Company's dividend growth, relative to the Retail Prices Index, as the three key performance indicators for determining the progress of the Company and the relevant figures may be found in "The Year", above.
Dividend
The Directors recommend that a final dividend of 3.8 pence per share (2009 - 3.7 pence) is paid on 16 July 2010 to shareholders on the register on 18 June 2010. The ex-dividend date is 16 June 2010. An interim dividend of 3.8 pence per share (2009 - 3.8 pence) was paid on 8 January 2010.
Principal Activity and Status
The business of the Company is that of an investment trust and the Directors do not envisage any change in this activity in the foreseeable future. The Company is registered as a public limited company and is an investment company as defined by Section 833 of the Companies Act 2006.
The Company has been approved by HM Revenue & Customs as an investment trust for the purposes of Section 842 of the Income and Corporation Taxes Act 1988 ("Section 842) for the year ended 31 March 2009. The Directors are of the opinion, under advice, that the Company has conducted its affairs for the year ended 31 March 2010 so as to be able to continue to obtain approval as an investment trust under Section 1158 of the Corporation Tax Act 2010 (formerly Section 842) for that year, although approval for that year would be subject to review were there to be any enquiry under the Corporation Tax Self Assessment regime.
The Company's affairs have also been conducted in such a way as to permit its Ordinary shares to be included in Individual Savings Accounts and the Directors intend that the shares will continue to be eligible in the future.
The Company makes no political donations or expenditures or donations for charitable purposes and, in common with most investment trusts, has no employees.
Share Capital
During the year ended 31 March 2010, the Company had 45,549,975 Ordinary shares of 10p nominal in issue. Each ordinary share entitles the holder to one vote on a show of hands and, on a poll, to one vote for every share held. There are no restrictions on the transfer of the ordinary shares.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable United Kingdom law and regulations.
The financial statements are published on the Company's website which is maintained by the Manager, OLIM Limited: www.olim.co.uk. The maintenance and integrity of the corporate and financial information relating to the Company is the joint responsibility of the Directors and the Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have chosen to prepare the parent company financial statements in accordance with IFRSs as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.
The Directors are responsible for keeping adequate accounting records that are sufficient to show the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance statement that comply with that law and those regulations.
The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations.
The Directors confirm to the best of their knowledge, that:
• the Financial Statements have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
• the Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the Group together with a description of the principal risks and uncertainties that the Company and the Group faces.
For and on behalf of the Board of Value and Income Trust PLC.
James Ferguson
Chairman
27 May 2010
VALUE AND INCOME TRUST PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
|
| Year ended | Year ended | |||||
|
| 31 March 2010 | 31 March 2009 | |||||
|
| Notes | Revenue | Capital | Total | Revenue | Capital | Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend income | 2 | 3,867 | - | 3,867 | 4,350 | - | 4,350 |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Rental income |
| 3,634 | - | 3,634 | 3,314 | - | 3,314 |
| Interest income on short-term deposits |
| 313 | - | 313 | 215 | - | 215 |
| Underwriting commission |
| 24 | - | 24 | - | - | - |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Other operating income |
| 3,971 | - | 3,971 | 3,529 | - | 3,529 |
|
|
|
|
|
|
|
|
|
| Other comprehensive income |
|
|
|
|
|
|
|
| Unrealised gains/(losses) on investment properties | 9 | - | 3,009 | 3,009 | - | (9,304) | (9,304) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
|
| 2 | 7,838 | 3,009 | 10,847 | 7,879 | (9,304) | (1,425) |
| Gains and losses on investments |
|
|
|
|
|
|
|
| Realised gains/(losses) on held-at-fair-value investments | 9 | - | 1,014 | 1,014 | - | (7,673) | (7,673) |
| Unrealised gains/(losses) on held-at-fair-value investments | 9 | - | 26,053 | 26,053 | - | (23,076) | (23,076) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Total income |
| 7,838 | 30,076 | 37,914 | 7,879 | (40,053) | (32,174) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Expenses |
|
|
|
|
|
|
|
| Investment management fees | 3 | (250) | (582) | (832) | (253) | (591) | (844) |
| Other operating expenses | 4 | (852) | - | (852) | (402) | - | (402) |
| VAT recoverable on investment management fees | 21 | 562 | 432 | 994 | - | - | - |
|
|
|
|
|
|
|
|
|
| Finance costs | 5 | (3,501) | - | (3,501) | (3,501) | - | (3,501) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Total expenses |
| (4,041) | (150) | (4,191) | (4,156) | (591) | (4,747) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Profit/(loss) before tax |
| 3,797 | 29,926 | 33,723 | 3,723 | (40,644) | (36,921) |
|
|
|
|
|
|
|
|
|
| Taxation | 6 | - | (149) | (149) | - | 1,400 | 1,400 |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Profit/(loss) for the period |
| 3,797 | 29,777 | 33,574 | 3,723 | (39,244) | (35,521) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Earnings per ordinary share (pence) | 7 | 8.34 | 65.37 | 73.71 | 8.17 | (86.15) | (77.98) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| The Board is proposing a final dividend of 3.8p per share, making a total dividend of 7.6p per share for the year ended 31 March 2010 (2009: 7.5p per share) which, if approved, will be payable on 16 July 2010. |
| The total column of this statement represents the Group Statement of Comprehensive Income, prepared in accordance with IFRS. |
| The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. |
| All income is attributable to the equity holders of Value and Income Trust PLC, the parent company. There are no minority interests. |
VALUE AND INCOME TRUST PLC
COMPANY STATEMENT OF COMPREHENSIVE INCOME
|
| Year ended | Year ended | |||||
|
| 31 March 2010 | 31 March 2009 | |||||
|
| Notes | Revenue | Capital | Total | Revenue | Capital | Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend income | 2 | 3,867 | - | 3,867 | 4,350 | - | 4,350 |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Rental income |
| 1,245 | - | 1,245 | 1,195 | - | 1,195 |
| Interest income on short-term deposits |
| 310 | - | 310 | 188 | - | 188 |
| Underwriting commission |
| 24 | - | 24 | - | - | - |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Other operating income |
| 1,579 | - | 1,579 | 1,383 | - | 1,383 |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Other comprehensive income |
|
|
|
|
|
|
|
| Unrealised gains/(losses) on investment properties | 9 | - | 1,337 | 1,337 | - | (2,963) | (2,963) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
|
| 2 | 5,446 | 1,337 | 6,783 | 5,733 | (2,963) | 2,770 |
| Gains and losses on investments |
|
|
|
|
|
|
|
| Realised gains/(losses) on held-at-fair-value investments | 9 | - | 806 | 806 | - | (7,795) | (7,795) |
| Unrealised gains/(losses) on held-at-fair-value investments | 9 | - | 27,760 | 27,760 | - | (27,831) | (27,831) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Total income |
| 5,446 | 29,903 | 35,349 | 5,733 | (38,589) | (32,856) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Expenses |
|
|
|
|
|
|
|
| Investment management fees | 3 | (167) | (388) | (555) | (169) | (394) | (563) |
| Other operating expenses | 4 | (363) | - | (363) | (268) | - | (268) |
| VAT recoverable on investment management fees | 21 | 562 | 432 | 994 | - | - | - |
|
|
|
|
|
|
|
|
|
| Finance costs | 5 | (1,851) | - | (1,851) | (1,851) | - | (1,851) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Total expenses |
| (1,819) | 44 | (1,775) | (2,288) | (394) | (2,682) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Profit/(loss) before tax |
| 3,627 | 29,947 | 33,574 | 3,445 | (38,983) | (35,538) |
|
|
|
|
|
|
|
|
|
| Taxation | 6 | - | - | - | 17 | - | 17 |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Profit/(loss) for the period |
| 3,627 | 29,947 | 33,574 | 3,462 | (38,983) | (35,521) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| Earnings per ordinary share (pence) | 7 | 7.96 | 65.75 | 73.71 | 7.60 | (85.58) | (77.98) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ |
| The total column of this statement represents the Statement of Comprehensive Income of the Company prepared in accordance with IFRS. |
| The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. |
| All income is attributable to the equity holders of Value and Income Trust PLC, the parent company. There are no minority interests. |
VALUE AND INCOME TRUST PLC
STATEMENT OF FINANCIAL POSITION
|
| Group | Company | |||||||
|
| As at | As at | As at | As at | |||||
|
| 31 March 2010 | 31 March 2009 | 31 March 2010 | 31 March 2009 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| ASSETS |
|
|
|
|
|
|
|
|
|
| Non current assets |
|
|
|
|
|
|
|
|
|
| Investments held at fair value through profit or loss | 9 |
| 88,638 |
| 62,301 |
| 104,471 |
| 76,427 |
| Investment properties held at fair value through profit or loss | 9 |
| 48,750 |
| 44,850 |
| 16,675 |
| 15,175 |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
|
|
|
| 137,388 |
| 107,151 |
| 121,146 |
| 91,602 |
|
|
|
|
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
| 5,670 |
| 4,903 |
| 5,551 |
| 4,830 |
|
| Other receivables | 10 | 325 |
| 1,605 |
| 316 |
| 1,339 |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
|
|
|
|
| 5,995 |
| 6,508 |
| 5,867 |
| 6,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
| TOTAL ASSETS |
|
| 143,383 |
| 113,659 |
| 127,013 |
| 97,771 |
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
|
| Other payables | 11 |
| (1,629) |
| (2,189) |
| (1,052) |
| (1,945) |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
| TOTAL ASSETS LESS CURRENT LIABILITIES |
|
| 141,754 |
| 111,470 |
| 125,961 |
| 95,826 |
|
|
|
|
|
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
|
|
|
|
|
| Debenture stock | 12 | (35,396) |
| (35,420) |
| (20,396) |
| (20,420) |
|
| Deferred tax | 13 | (793) |
| (644) |
| - |
| - |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
|
|
|
|
| (36,189) |
| (36,064) |
| (20,396) |
| (20,420) |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
| NET ASSETS |
|
| 105,565 |
| 75,406 |
| 105,565 |
| 75,406 |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
| EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Called up share capital | 14 |
| 4,555 |
| 4,555 |
| 4,555 |
| 4,555 |
| Share premium | 15 |
| 18,446 |
| 18,446 |
| 18,446 |
| 18,446 |
| Retained earnings | 16 |
| 82,564 |
| 52,405 |
| 82,564 |
| 52,405 |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
| TOTAL EQUITY |
|
| 105,565 |
| 75,406 |
| 105,565 |
| 75,406 |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
|
|
|
|
| Net Asset Value per ordinary share (pence) | 17 |
| 231.76 |
| 165.55 |
| 231.76 |
| 165.55 |
|
|
|
| _______ |
| _______ |
| _______ |
| _______ |
VALUE AND INCOME TRUST PLC
GROUP STATEMENT OF CHANGES IN EQUITY
| Group | Year ended 31 March 2010 | Year ended 31 March 2009 | |||||||
|
|
| Share | Share | Retained | Total | Share | Share | Retained | Total |
|
|
| capital | premium | earnings |
| capital | premium | earnings |
|
|
| Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Net assets at 31 March 2009 |
| 4,555 | 18,446 | 52,405 | 75,406 | 4,555 | 18,446 | 91,339 | 114,340 |
| Net profit/(loss) for the year |
| - | - | 33,574 | 33,574 | - | - | (35,521) | (35,521) |
| Dividends paid | 8 | - | - | (3,415) | (3,415) | - | - | (3,413) | (3,413) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ | ________ | ________ |
| Net assets at 31 March 2010 |
| 4,555 | 18,446 | 82,564 | 105,565 | 4,555 | 18,446 | 52,405 | 75,406 |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ | ________ | ________ |
| Company |
|
|
|
|
|
|
|
|
|
|
| Year ended 31 March 2010 | Year ended 31 March 2009 | |||||||
|
|
| Share | Share | Retained | Total | Share | Share | Retained | Total |
|
|
| capital | premium | earnings |
| capital | premium | earnings |
|
|
| Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Net assets at 31 March 2009 |
| 4,555 | 18,446 | 52,405 | 75,406 | 4,555 | 18,446 | 91,339 | 114,340 |
| Net profit/(loss) for the year |
| - | - | 33,574 | 33,574 | - | - | (35,521) | (35,521) |
| Dividends paid | 8 | - | - | (3,415) | (3,415) | - | - | (3,413) | (3,413) |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ | ________ | ________ |
| Net assets at 31 March 2010 |
| 4,555 | 18,446 | 82,564 | 105,565 | 4,555 | 18,446 | 52,405 | 75,406 |
|
|
| ________ | ________ | ________ | ________ | ________ | ________ | ________ | ________ |
VALUE AND INCOME TRUST PLC
GROUP STATEMENT OF CASH FLOWS
|
| Year ended 31 March 2010 | Year Ended 31 March 2009 | ||
|
| £'000 | £'000 | £'000 | £'000 |
| Cash flows from operating activities |
|
|
|
|
| Dividend income received |
| 3,873 |
| 4,705 |
| Rental received |
| 3,892 |
| 3,147 |
| Interest received |
| 177 |
| 215 |
| Other income |
| 24 |
| - |
| VAT on management fees refunded |
| 994 |
| - |
| Operating expenses paid |
| (1,234) |
| (1,552) |
|
|
| _________ |
| _________ |
| NET CASH FROM OPERATING ACTIVITIES |
| 7,726 |
| 6,515 |
|
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
|
| Purchase of investments | (18,426) |
| (18,214) |
|
| Sale of investments | 18,407 |
| 13,931 |
|
|
| _________ |
| _________ |
|
| NET CASH OUTFLOW FROM |
|
|
|
|
| INVESTING ACTIVITIES |
| (19) |
| (4,283) |
|
|
|
|
|
|
| Cash flow from financing activities |
|
|
|
|
| Interest paid | (3,525) |
| (3,525) |
|
| Dividends paid | (3,415) |
| (3,413) |
|
|
| _________ |
| _________ |
|
| NET CASH OUTFLOW FROM FINANCING ACTIVITIES |
| (6,940) |
| (6,938) |
|
|
| _________ |
| _________ |
| NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |
| 767 |
| (4,706) |
| Cash and cash equivalents at 1 April 2009 |
| 4,903 |
| 9,609 |
|
|
| _________ |
| _________ |
| Cash and cash equivalents at 31 March 2010 |
| 5,670 |
| 4,903 |
|
|
| _________ |
| _________ |
VALUE AND INCOME TRUST PLC
NOTES TO PRELIMINARY STATEMENT OF ANNUAL RESULTS:
| 1 | Accounting policies |
|
|
|
|
| The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee (IASC) that remain in effect, and to the extent that they have been adopted by the European Union.
The functional and reporting currency of the Group is pounds sterling because that is the currency of the primary economic environment in which the Group operates. |
|
|
|
|
| (a) Basis of preparation |
|
| The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial assets. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts (the SORP) issued by the Association of Investment Companies (AIC) in January 2009 is consistent with the requirements of IFRSs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. |
|
|
|
|
| The directors are of the opinion that the Group is engaged in a single segment of business, being investment business. |
|
|
|
|
| (b) Basis of consolidation |
|
| The consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its subsidiary). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The investment in the subsidiary is recognised at fair value in the financial statements of the Company. This is considered to be the net asset value of the shareholders' funds, as shown in its statement of financial position. |
|
|
|
|
| Audax Properties plc, a wholly owned subsidiary of the Company, charges expenses wholly to income. |
|
|
|
|
| On consolidation, however, an adjustment is made to charge 70% of the investment management fee paid by Audax Properties plc to capital. The allocation has no effect on the total return of the Company or the Group. |
|
|
|
|
| (c) Presentation of Statement of Comprehensive Income |
|
| In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's status as a UK investment company under section 833 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. Additionally the net revenue is the measure that the directors believe to be appropriate in assessing the Company's compliance with certain requirements set out in section 842 of the Income and Corporation Taxes Act 1988. |
|
|
|
|
| (d) Income |
|
| Dividend income from investments is recognised as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the period end are treated as revenue for the period. |
|
|
|
|
| Where the Group has elected to receive dividend income in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as income. Any excess in the value of shares received over the amount of cash dividend foregone is recognised as a gain in the income statement. |
|
|
|
|
| Interest receivable from cash and short term deposits and interest payable is accrued to the end of the period. |
|
|
|
|
| Rental and other income are recognised as earned. |
|
|
|
|
| (e) Expenses and Finance Costs |
|
| All expenses and finance costs are accounted for on an accruals basis. Expenses are presented as capital where a connection with the maintenance or enhancement of the value of investments can be demonstrated. In this respect, the investment management fees are allocated 30% to revenue and 70% to capital to reflect the Board's expectations of long term investment returns. Any performance fees payable are allocated to capital, reflecting the fact that, although they are calculated on a total return basis, they are expected to be attributable largely to capital performance.
It is normal practice for investment trust companies to allocate finance costs to capital on the same basis as the investment management fee allocation. However as the Company has a significant exposure to property, and property companies do not charge finance costs to capital, the directors consider it inappropriate to allocate finance costs to capital. |
|
|
|
|
| (f) Taxation |
|
| Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or the right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. |
|
|
|
|
| This is not the case for the subsidiary company and hence the Group where such provision is made, calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. |
|
|
|
|
| (g) Dividends payable |
|
| Interim dividends are recognised as a liability in the period in which they are paid as no further approval is required in respect of such dividends. Final dividends are recognised as a liability only after they have been approved by shareholders in general meeting. |
|
|
|
|
| (h) Investments |
|
| All investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value.
Subsequent to initial recognition, investments are recognised at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 constituents along with some other securities. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the income statement and are ultimately recognised in the retained earnings. |
|
|
|
|
| In respect of investment properties, fair value is established by half-yearly professional valuation on an open market basis by King Sturge and Co, Chartered Surveyors and Valuers and in accordance with the RICS Valuation Standards. |
|
|
|
|
| (i) Cash and cash equivalents |
|
| Cash and cash equivalents comprises deposits held with banks. |
|
|
|
|
| (j) Non - current liabilities |
|
| All loans and borrowings are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement. The costs of arranging any interest-bearing loans are capitalised and amortised over the life of the loan. |
|
|
|
|
| (k) Adoption of new and revised Accounting Standards |
|
| At the date of authorisation of these financial statements, various Standards, amendments to Standards and Interpretations which have not been applied to these financial statements, were in issue but were not yet effective (and in some cases, had not yet been adopted by the EU). These have not been applied to these financial statements. |
|
|
|
|
| The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. |
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
|
|
| £000 | £000 | £000 | £000 |
| 2 | Income |
|
|
|
|
|
| Investment income |
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends from listed investments in UK - franked | 3,842 | 3,842 | 4,315 | 4,315 |
|
| Dividends from listed investments in UK - unfranked | 25 | 25 | 35 | 35 |
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ |
|
|
| 3,867 | 3,867 | 4,350 | 4,350 |
|
| Other operating income |
|
|
|
|
|
| Rental income | 3,634 | 1,245 | 3,314 | 1,195 |
|
| Interest receivable on short term deposits | 313 | 310 | 215 | 188 |
|
| Underwriting commission | 24 | 24 | - | - |
|
|
| _______ | _______ | _______ | _______ |
|
| Total income | 7,838 | 5,446 | 7,879 | 5,733 |
|
|
| _______ | _______ | _______ | _______ |
| 3 | Investment management fee |
|
| ||||
|
|
| 2010 | 2009 | ||||
|
|
| Revenue | Capital | Total | Revenue | Capital | Total |
|
| Group | £000 | £000 | £000 | £000 | £000 | £000 |
|
| Investment management fee | 250 | 582 | 832 | 253 | 591 | 844 |
|
| Performance fee | - | - | - | - | - | - |
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
|
| 250 | 582 | 832 | 253 | 591 | 844 |
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
|
|
|
| 2010 | 2009 | ||||
|
|
| Revenue | Capital | Total | Revenue | Capital | Total |
|
| Company | £000 | £000 | £000 | £000 | £000 | £000 |
|
| Investment management fee | 167 | 388 | 555 | 169 | 394 | 563 |
|
| Performance fee | - | - | - | - | - | - |
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
|
| 167 | 388 | 555 | 169 | 394 | 563 |
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
|
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
|
|
| £000 | £000 | £000 | £000 |
| 4 | Other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| Auditors' remuneration |
|
|
|
|
|
| - audit | 16 | 11 | 12 | 9 |
|
| - other non-audit services | 1 | 1 | 1 | 1 |
|
| - taxation services | 2 | 1 | 2 | 1 |
|
| - out of pocket expenses | 1 | 1 | 1 | 1 |
|
| Directors' fees | 50 | 50 | 41 | 41 |
|
| Fees for company secretarial services | 133 | 88 | 130 | 87 |
|
| Other expenses | 649 | 211 | 215 | 128 |
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ |
|
|
| 852 | 363 | 402 | 268 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| Non executive directors' fees comprise the chairman's fees of £17,000 (2009 - £17,000) and fees of £12,000 (2009 - £12,000) per annum paid to each other non-executive director.
The executive directors who served during the year received no emoluments directly from the Company (2009 - nil).
The executive directors are shareholders and directors of OLIM Limited which received an investment management fee of £832,000 (2009 - £844,000) and a performance fee of £nil (2009 - £nil). | ||||
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
|
|
| £000 | £000 | £000 | £000 |
| 5 | Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
| 11% First Mortgage Debenture Stock 2021 | 1,650 | - | 1,650 | - |
|
| 9.375% Debenture Stock 2026 | 1,875 | 1,875 | 1,875 | 1,875 |
|
| Less amortisation of issue premium | (24) | (24) | (24) | (24) |
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ |
|
|
| 3,501 | 1,851 | 3,501 | 1,851 |
|
|
| _______ | _______ | _______ | _______ |
| 6 | Taxation | ||||||
|
|
| ||||||
|
| a) Analysis of the tax (credit)/charge for the year: | ||||||
|
| Group |
|
| ||||
|
|
| 2010 | 2009 | ||||
|
|
| Revenue | Capital | Total | Revenue | Capital | Total |
|
|
| £000 | £000 | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
|
|
|
| Corporation tax payable | - | - | - | - | - | - |
|
| Increase/(decrease) in deferred tax provision | - | 149 | 149 | - | (1,400) | (1,400) |
|
|
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
|
| - | 149 | 149 | - | (1,400) | (1,400) |
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
| Factors affecting the current tax charge/(credit) for year: |
|
|
|
|
| |
|
| Revenue / capital return on ordinary activities before tax |
| 33,723 |
|
| (36,921) | |
|
|
|
| _______ |
|
| _______ | |
|
| Tax thereon at 28% (2009 - 28%) |
| 9,442 |
|
| (10,338) | |
|
| Effects of: |
|
|
|
|
| |
|
| Non taxable dividends |
| (1,083) |
|
| (1,218) | |
|
| (Gains)/losses on investments not taxable |
| (8,213) |
|
| 9,815 | |
|
| Excess expenses (utilised)/ not utilised |
| (3) |
|
| 341 | |
|
| Expenses disallowed |
| 6 |
|
| - | |
|
|
|
| _______ |
|
| _______ | |
|
|
|
| 149 |
|
| (1,400) | |
|
|
|
| _______ |
|
| _______ | |
|
|
|
|
|
|
|
| |
|
| Company |
|
|
|
|
| |
|
|
| 2010 | 2009 | ||||
|
|
| Revenue | Capital | Total | Revenue | Capital | Total |
|
|
| £000 | £000 | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
|
|
|
| Corporation tax credit | - | - | - | (17) | - | (17) |
|
|
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
|
| - | - | - | (17) | - | (17) |
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
| Factors affecting the current tax charge/(credit) for year: |
|
|
|
|
| |
|
| Revenue / capital return on ordinary activities before tax |
| 33,574 |
|
| (35,538) | |
|
|
|
| _______ |
|
| _______ | |
|
| Tax thereon at 28% (2009 - 28%) |
| 9,401 |
|
| (9,951) | |
|
| Effects of: |
|
|
|
|
| |
|
| Non taxable dividends |
| (1,083) |
|
| (1,218) | |
|
| (Gains)/losses on investments not taxable |
| (8,373) |
|
| 10,805 | |
|
| Excess expenses not utilised |
| 55 |
|
| 364 | |
|
| Group relief |
| - |
|
| (17) | |
|
|
|
|
|
|
|
| |
|
|
|
| _______ |
|
| _______ | |
|
|
|
| - |
|
| (17) | |
|
|
|
| _______ |
|
| _______ | |
|
|
| ||||||
|
| b) Factors affecting the tax charge for the year | ||||||
|
| The Company has losses for tax purposes arising in the year of £196,000 (2009 £1,218,000). Under current legislation, it is unlikely that these losses will be capable of offset against the Group's future taxable profits.
Audax Properties plc revalues its property portfolio on a six monthly basis and is required to recognise a deferred tax liability in respect of all unrealised gains recognised. Any movement in this provision is recognised within taxation in the Group's Statement of Comprehensive Income | ||||||
|
|
| ||||||
|
| c) Factors affecting future tax charges | ||||||
|
| Both the Company and Audax Properties plc have deferred tax assets of £4,318,000 (2009 £4,273,000) and £3,000 (2009 £61,000) respectively at 31 March 2010 relating to total accumulated unrelieved tax losses carried forward. These have not been recognised in the accounts as it is unlikely that they will be capable of offset against the Group's future taxable profits. | ||||||
| 7 | Return per ordinary share | ||||
|
|
| ||||
|
| The return per ordinary share is based on the following figures: | ||||
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
|
|
| £000 | £000 | £000 | £000 |
|
| Revenue return | 3,797 | 3,627 | 3,723 | 3,462 |
|
| Capital return | 29,777 | 29,947 | (39,244) | (38,983) |
|
| Weighted average ordinary shares in issue | 45,549,975 | 45,549,975 | 45,549,975 | 45,549,975 |
|
|
|
|
|
|
|
|
| Return per share - revenue | 8.34p | 7.96p | 8.17p | 7.60p |
|
| Return per share - capital | 65.37p | 65.75p | (86.15p) | (85.58p) |
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ |
|
| Total return per share | 73.71p | 73.71p | (77.98p) | (77.98p) |
|
|
| _______ | _______ | _______ | _______ |
|
|
| 2010 | 2009 |
|
|
| £000 | £000 |
| 8 | Dividends |
|
|
|
|
|
|
|
|
| Dividends on ordinary shares: |
|
|
|
| Final dividend of 3.7p per share (2009 - 3.7p) paid 17 July 2009 | 1,685 | 1,685 |
|
| Interim dividend of 3.8p per share (2009 - 3.8p) paid 8 January 2010 | 1,731 | 1,731 |
|
| Unclaimed dividends refunded by Registrar | (1) | (3) |
|
|
| _______ | _______ |
|
| Dividends paid in the period | 3,415 | 3,413 |
|
|
| _______ | _______ |
|
|
|
|
|
|
| The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. | ||
|
|
| ||
|
| We note below the total dividend paid and proposed in respect of the financial year, which is the basis upon which the requirements of Section 842 ('s842') of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of dividend for the year is £3,627,000 (2009 - £3,462,000). | ||
|
|
| ||
|
|
| 2010 | 2009 |
|
|
| £000 | £000 |
|
|
|
|
|
|
| Interim dividend for the year ended 31 March 2010 - 3.8p | 1,731 | 1,731 |
|
| (2009 - 3.8p) paid 8 January 2010 |
|
|
|
| Unclaimed dividends refunded by Registrar | (1) | (3) |
|
| Proposed final dividend for the year ended 31 March 2010 - 3.8p | 1,731 | 1,685 |
|
| (2009 - 3.7p) payable 16 July 2010 | _______ | _______ |
|
|
| 3,461 | 3,413 |
|
|
| _______ | _______ |
| 9 | Investments |
|
|
| |
|
|
|
|
|
| |
|
| Group |
|
|
| |
|
|
|
|
|
| |
|
|
|
| Investment |
| |
|
|
| Equities | properties | Total | |
|
|
| £'000 | £'000 | £'000 | |
|
|
|
|
|
| |
|
| Cost at 31 March 2009 | 70,944 | 31,437 | 102,381 | |
|
| Unrealised appreciation | (8,643) | 13,413 | 4,770 | |
|
|
| _______ | _______ | _______ | |
|
| Valuation at 31 March 2009 | 62,301 | 44,850 | 107,151 | |
|
|
|
|
|
| |
|
| Purchases | 16,100 | 1,346 | 17,446 | |
|
| Sales proceeds | (16,622) | (663) | (17,285) | |
|
| Realised gains on sales | 806 | 208 | 1,014 | |
|
| Movement in unrealised appreciation in year | 26,053 | 3,009 | 29,062 | |
|
|
| _______ | _______ | _______ | |
|
| Valuation at 31 March 2010 | 88,638 | 48,750 | 137,388 | |
|
|
| _______ | _______ | _______ | |
|
|
|
|
|
| |
|
| Company |
|
|
| |
|
|
|
|
|
| |
|
|
|
| Investment |
| |
|
|
| Equities | properties | Total | |
|
|
| £'000 | £'000 | £'000 | |
|
|
|
|
|
| |
|
| Cost at 31 March 2009 | 70,969 | 11,338 | 82,307 | |
|
| Unrealised appreciation | 5,458 | 3,837 | 9,295 | |
|
|
| _______ | _______ | _______ | |
|
| Valuation at 31 March 2009 | 76,427 | 15,175 | 91,602 | |
|
|
|
|
|
| |
|
| Purchases | 16,100 | 163 | 16,263 | |
|
| Sales proceeds | (16,622) | - | (16,622) | |
|
| Realised gains on sales | 806 | - | 806 | |
|
| Movement in unrealised appreciation in year | 27,760 | 1,337 | 29,097 | |
|
|
| _______ | _______ | _______ | |
|
| Valuation at 31 March 2010 | 104,471 | 16,675 | 121,146 | |
|
|
| _______ | _______ | _______ | |
|
|
|
|
|
| |
|
| Transaction costs |
|
|
| |
|
| During the year expenses were incurred in acquiring and disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains and losses on investments in the Statement of Comprehensive Income. The total costs were as follows:- | ||||
|
|
| ||||
|
|
| 2010 | 2009 | ||
|
|
| £'000 | £'000 | ||
|
| Purchases | 200 | 276 | ||
|
| Sales | 33 | 32 | ||
|
|
| _______ | _______ | ||
|
|
| 233 | 308 | ||
|
|
| _______ | _______ | ||
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
| 10 | Other receivables | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
|
| Amounts falling due within one year: |
|
|
|
|
|
| Dividends receivable | 172 | 172 | 178 | 178 |
|
| Amounts due from brokers | - | - | 1,122 | 1,122 |
|
| Value Added Tax receivable | - | - | 245 | - |
|
| Amounts due from subsidiary | - | - | - | 17 |
|
| Prepayments and accrued income | 153 | 144 | 60 | 22 |
|
|
| _______ | _______ | _______ | _______ |
|
|
| 325 | 316 | 1,605 | 1,339 |
|
|
| _______ | _______ | _______ | _______ |
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
| 11 | Other payables | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
|
| Amounts due to brokers | - | - | 980 | 980 |
|
| Value Added Tax payable | 149 | 51 | - | 43 |
|
| Amounts due to OLIM Limited | 74 | 49 | 68 | 45 |
|
| Accruals and other creditors | 1,406 | 952 | 1,141 | 877 |
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ |
|
|
| 1,629 | 1,052 | 2,189 | 1,945 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| The amounts due to OLIM Limited comprise management fees for the month of March 2010, subsequently paid in April 2010. | ||||
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
| 12 | Non-current liabilities | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
|
| 9.375% Debenture Stock 2026 | 20,000 | 20,000 | 20,000 | 20,000 |
|
| Add:- Balance of premium less issue expenses | 420 | 420 | 444 | 444 |
|
| Less : Credit to income for the year | (24) | (24) | (24) | (24) |
|
|
| _______ | _______ | _______ | _______ |
|
|
| 20,396 | 20,396 | 20,420 | 20,420 |
|
| 11% First Mortgage Debenture Stock 2021 | 15,000 | - | 15,000 | - |
|
|
| _______ | _______ | _______ | _______ |
|
|
| 35,396 | 20,396 | 35,420 | 20,420 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| The 11% First Mortgage Debenture Stock 2021 issued by Audax Properties plc is repayable at par on 31 March 2021 and is secured over specific assets of Audax Properties plc and the Company.
The Trust Deed of the Audax Properties plc Debenture Stock contains four covenants with which the Company must comply; the assets which are subject to charge and which secure the Debenture Stock may be owned by either Audax Properties plc or its parent company, Value and Income Trust PLC.
Firstly, the value of the assets should not be less than one and one-half times the amount of the Debenture Stock; secondly, the rental income from the assets should not be less than one and one-half times the annual interest of the Debenture Stock (£1.65 million); thirdly, not more than 20 per cent. of the total value of the assets should be attributable to a single property; and finally, not more than 10 per cent. of the assets should be attributable to leaseholds having an unexpired term of less than 50 years.
The 9.375% Debenture Stock 2026 issued by Value and Income Trust PLC is repayable at par on 30 November 2026 and is secured by a floating charge over the property and assets of the Company.
The Trust Deed of the Value and Income Trust PLC Debenture Stock contains restrictions and events of default. The restriction requires that the aggregate group borrowings, £35 million, must not at any time exceed the total group capital and reserves (equivalent to net assets of £105.6 million as at 31 March 2010). | ||||
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
| 13 | Deferred tax | £000 | £000 | £000 | £000 |
|
|
|
|
|
|
|
|
| Opening balance at 31 March 2009 | 644 | - | 2,044 | - |
|
| Increase/(decrease) in deferred tax provision (see note 6) | 149 | - | (1,400) | - |
|
|
| _______ | _______ | _______ | _______ |
|
| Closing balance at 31 March 2010 | 793 | - | 644 | - |
|
|
| _______ | _______ | _______ | _______ |
|
| Calculated as follows:- |
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealised gains subject to tax on realisation | 3,223 | - | 2,694 | - |
|
| Less capital losses previously realised | (392) | - | (395) | - |
|
|
| _______ | _______ | _______ | _______ |
|
|
| 2,831 | - | 2,299 | - |
|
|
| _______ | _______ | _______ | _______ |
|
| Whereof 28% (2009 - 28%) | 793 | - | 644 | - |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| Under IAS 12, provision must be made for any potential tax liability on revaluation surpluses. As an investment trust, the Company does not incur capital gains tax. However, some properties are owned by Audax Properties plc, a subsidiary of the Company, either to ensure that the investment trust status tests are not breached or for other commercial reasons. Provision for capital gains tax has therefore been made for the revaluation surpluses on property assets held by the subsidiary to the extent that the gain cannot be sheltered by capital losses brought forward or by non trade losses. | ||||
|
|
| 2010 | 2009 |
|
|
| £000 | £000 |
| 14 | Share capital |
|
|
|
|
|
|
|
|
| Authorised: |
|
|
|
|
|
|
|
|
| 56,000,000 ordinary shares of 10p each (2008 - 56,000,000) | 5,600 | 5,600 |
|
| 13,000,000 6.25% convertible redeemable preference shares of £1 | - | 13,000 |
|
|
| _______ | _______ |
|
|
| 5,600 | 18,600 |
|
|
| _______ | _______ |
|
| Allotted, called up and fully paid: |
|
|
|
| 45,549,975 ordinary shares of 10p each (2009 - 45,549,975) | 4,555 | 4,555 |
|
|
| _______ | _______ |
|
|
| ||
|
| Following shareholders' approval of the adoption of new Articles of Association on 10 July 2009, the convertible redeemable preference shares, which had previously expired, now form no part of the issued share capital of the Company. | ||
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
|
|
| £000 | £000 | £000 | £000 |
| 15 | Share premium |
|
|
|
|
|
|
|
|
|
|
|
|
| Opening balance | 18,446 | 18,446 | 18,446 | 18,446 |
|
|
| _______ | _______ | _______ | _______ |
|
|
| 2010 | 2009 | ||||||||
|
|
| Group | Company | Group | Company | ||||||
| 16 | Retained earnings |
|
|
|
| ||||||
|
|
|
|
|
|
| ||||||
|
| Opening balance at 31 March 2009 | 52,405 | 52,405 | 91,339 | 91,339 | ||||||
|
| Profit/(loss) for the year | 33,574 | 33,574 | (35,521) | (35,521) | ||||||
|
| Dividends paid (see note 8) | (3,415) | (3,415) | (3,413) | (3,413) | ||||||
|
|
| _______ | _______ | _______ | _______ | ||||||
|
| Closing balance at 31 March 2010 | 82,564 | 82,564 | 52,405 | 52,405 | ||||||
|
|
| _______ | _______ | _______ | _______ | ||||||
|
|
|
|
|
|
| ||||||
|
| The table below shows the movement in retained earnings analysed between revenue (distributable) and capital (non-distributable) items | ||||||||||
|
|
| ||||||||||
|
|
| 2010 | 2009 | ||||||||
|
|
| Revenue | Capital | Total | Revenue | Capital | Total | ||||
|
|
| £000 | £000 | £000 | £000 | £000 | £000 | ||||
|
| Group |
|
|
|
|
|
| ||||
|
| Opening balance at 31 March 2009 | 3,473 | 48,932 | 52,405 | 3,163 | 88,176 | 91,339 | ||||
|
| Profit/(loss) for the year | 3,797 | 29,777 | 33,574 | 3,723 | (39,244) | (35,521) | ||||
|
| Dividends paid (see note 8) | (3,415) | - | (3,415) | (3,413) | - | (3,413) | ||||
|
|
| _______ | _______ | _______ | _______ | _______ | _______ | ||||
|
| Closing balance at 31 March 2010 | 3,855 | 78,709 | 82,564 | 3,473 | 48,932 | 52,405 | ||||
|
|
| _______ | _______ | _______ | _______ | _______ | _______ | ||||
|
|
|
|
|
|
|
|
| ||||
|
| Company |
|
|
|
|
|
| ||||
|
| Opening balance at 31 March 2009 | 2,071 | 50,334 | 52,405 | 2,022 | 89,317 | 91,339 | ||||
|
| Profit/(loss) for the year | 3,627 | 29,947 | 33,574 | 3,462 | (38,983) | (35,521) | ||||
|
| Dividends paid (see note 8) | (3,415) | - | (3,415) | (3,413) | - | (3,413) | ||||
|
|
| _______ | _______ | _______ | _______ | _______ | _______ | ||||
|
| Closing balance at 31 March 2010 | 2,283 | 80,281 | 82,564 | 2,071 | 50,334 | 52,405 | ||||
|
|
| _______ | _______ | _______ | _______ | _______ | _______ | ||||
| 17 | Net asset value per equity share |
|
| The net asset value per ordinary share is based on net assets attributable of £105,565,000 (2009 - £75,406,000) and on 45,549,975 (2009 - 45,549,975) ordinary shares in issue at the year end.
The net asset value per ordinary share, based on the net assets of the Group adjusted for borrowings at market value (see note 20) is 218.29p (2009 - 129.63p). |
| 18 | Reconciliation of income from operations before tax to net cash inflow from operating activities | ||||
|
|
|
|
| ||
|
|
| 2010 | 2009 | ||
|
|
| Group | Company | Group | Company |
|
|
| £000 | £000 | £000 | £000 |
|
| Income from operations before tax | 37,914 | 35,349 | (32,174) | (32,856) |
|
| Gains and losses on investments | (30,076) | (29,903) | 40,053 | 38,589 |
|
| Investment management fee | (832) | (555) | (844) | (563) |
|
| Other operating expenses | (852) | (363) | (402) | (268) |
|
| Recoverable VAT | 994 | 994 | - | - |
|
| Decrease/(increase) in receivables | 201 | (117) | 79 | 360 |
|
| Increase/(decrease) in other payables | 377 | 88 | (197) | 42 |
|
|
| _______ | _______ | _______ | _______ |
|
| Net cash from operating activities | 7,726 | 5,493 | 6,515 | 5,304 |
|
|
| _______ | _______ | _______ | _______ |
| 19 | Related Party Transactions |
|
|
|
|
| Angela Lascelles and Matthew Oakeshott are directors of OLIM Limited which has an agreement with the Company to provide investment management services.
Audax Properties plc is a wholly owned subsidiary of Value and Income Trust PLC and accordingly the latter is the ultimate controlling party. Details of the year end financial relationship between Audax Properties plc and Value and Income Trust PLC may be found in Note 11. |
| 20 | Financial instruments | ||||
|
| Risk management | ||||
|
| The Group's financial instruments comprise securities, property and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement or debtors for accrued income.
The Manager has a dedicated investment management process which ensures that the Investment Policy set is achieved. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by the Manager's Investment Committee.
Additionally, the Manager's Compliance Officer continually monitors the Group's investment and borrowing powers and reports to the Manager's Risk Management Committee.
The main risks that the Group faces from its financial instruments are:
(i) market price risk (comprising interest rate risk, currency risk and other price risk) (ii) liquidity risk (iii) credit risk | ||||
|
|
| ||||
|
| The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors. | ||||
|
|
| ||||
|
| (i) Market price risk | ||||
|
| The fair value of or future cash flows from a financial instrument held by the Group may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.
Interest rate risk
Interest rate movements may affect: - the fair value of the investments in property; and - the level of income receivable on cash deposits
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise debenture stock, providing secure long term funding. It is the Board's policy to maintain a gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of between 25% and 40%. Details of borrowings at 31 March 2010 are shown in note 12.
Interest risk profile The interest rate risk profile of the portfolio of financial assets and liabilities at the balance sheet date was as follows: | ||||
|
|
|
|
|
|
|
|
| At 31 March 2010 | Weighted average period for which rate is fixed Years | Weighted average interest rate % | Fixed rate £'000 | Floating rate £'000 |
|
| Assets |
|
|
|
|
|
| Sterling | - | - | - | 5,670 |
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ |
|
| Total assets |
|
| - | 5,670 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| At 31 March 2010 | Weighted average period for which rate is fixed Years | Weighted average interest rate % | Fixed rate £'000 | Floating rate £'000 |
|
| Liabilities |
|
|
|
|
|
| Sterling | 14 | 10.07 | 35,000 | - |
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ |
|
| Total liabilities |
|
| 35,000 | - |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| At 31 March 2009 | Weighted average period for which rate is fixed Years | Weighted average interest rate % | Fixed rate £'000 | Floating rate £'000 |
|
| Assets |
|
|
|
|
|
| Sterling | - | - | - | 4,903 |
|
|
| _______ | _______ | _______ | _______ |
|
| Total assets |
|
| - | 4,903 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| At 31 March 2009 | Weighted average period for which rate is fixed Years | Weighted average interest rate % | Fixed rate £'000 | Floating rate £'000 |
|
| Liabilities |
|
|
|
|
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| Sterling | 15 | 10.07 | 35,000 | - |
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| _______ | _______ | _______ | _______ |
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| Total liabilities |
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| 35,000 | - |
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| _______ | _______ | _______ | _______ |
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| The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on debentures is based on the interest rate payable, weighted by the total value of the loans. The maturity dates of the Group's loans are shown in note 12.
The non-interest bearing assets represent the equity element of the portfolio and other receivables. The floating rate assets consist of cash deposits on call earning interest at prevailing market rates. The Group's equity and property portfolios and short term receivables and payables have been excluded from the above tables. All financial liabilities are measured at amortised cost.
Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group's:
- profit for the year ended 31 March 2010 would increase/decrease by £49,000 (2009 - increase/ decrease by £96,000). This is mainly attributable the Group's exposure to interest rates on its floating rate cash balances. - the Group holds no financial instruments that will have an equity reserve impact.
In the opinion of the directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Group's objectives.
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| Currency risk A small proportion of the Group's investment portfolio is invested in securities whose fair value and dividend stream are affected by movements in foreign exchange rates. It is not the Group's policy to hedge this risk.
Currency sensitivity There is no sensitivity analysis included as the Group has no outstanding foreign currency denominated monetary items. Where the Group's equity investments (which are non-monetary items) are affected, they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.
Other price risk Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the Group's investments.
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. Asset allocation and stock selection, as set out in the Investment Policy, both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Group are listed on the London Stock Exchange and all investment properties are commercial properties located in UK with long strong income streams. | |||||||||||
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| Other price risk sensitivity | |||||||||||
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| If market prices at the balance sheet date had been 10% higher or lower, while all other variables remained constant, the return attributable to ordinary shareholders for the year ended 31 March 2010 would have increased/decreased by £12,841,000 (2009 - increase/decrease of £9,884,000) and equity reserves would have increased/ decreased by the same amount. | |||||||||||
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| (ii) Liquidity risk This is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities.
The Group's assets comprise of readily realisable securities which can be sold to meet commitments if required and investment properties which, by their nature, are rather less readily realisable. The maturity of the Group's existing borrowings is set out in the interest risk profile section of this note. | |||||||||||
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| (iii) Credit risk This is the failure of a counterparty to a transaction to discharge its obligations under that transaction that could result in the Group suffering a loss.
The risk is not significant and is managed as follows:
- investment transactions are carried out with a large number of brokers, whose credit standing is reviewed periodically by the Manager and limits are set on the amount that may be due from any one broker. - the risk of counterparty exposure due to failed trades causing a loss to the Group is mitigated by the review of failed trade reports on a daily basis. In addition, a stock reconciliation to third party administrators' records on a daily basis to ensure that discrepancies are picked up on a timely basis. The Manager's Compliance Officer carries out periodic reviews of the Custodian's operations and reports its findings to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held. - cash is held only with reputable banks
None of the Group's assets is secured by collateral or other credit enhancements. | |||||||||||
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| Credit risk exposure In summary, compared to the amounts on the balance sheet, the maximum exposure to credit risk at 31 March was as follows: | |||||||||||
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| 2010 | 2009 | |||||||||
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| Balance Sheet £'000 | Maximum exposure £'000 | Balance Sheet £'000 | Maximum exposure £'000 | |||||||
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| Non-current assets |
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| Investments held at fair value through profit or loss | 137,388 | 137,388 | 107,151 | 147,439 | |||||||
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| Current assets |
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| Cash and cash equivalents | 5,670 | 5,828 | 4,903 | 9,092 | |||||||
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| Other receivables | 325 | 1,447 | 1,605 | 1,113 | |||||||
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| _________ | _________ | _________ | _________ | |||||||
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| 143,383 | 144,663 | 113,659 | 157,644 | |||||||
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| _________ | _________ | _________ | _________ | |||||||
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| (iv) Property risk The Group's commercial property portfolio is subject to both market and specific property risk. Since the UK commercial property market has been markedly cyclical for many years, it is prudent to expect that to continue. The price and availability of credit, real economic growth and the constraints on the development of new property are the main influences on the property investment market.
Against that background, the specific risks to the income from the portfolio are tenants being unable to pay their rents and other charges, or leaving their properties at the end of their leases. All leases are on full repairing and insuring terms, with upward only rent reviews and the average unexpired lease length is 14 years (2009 - 15 years). OLIM is responsible for property investment management, with surveyors, solicitors and managing agents acting on the portfolio under OLIM's supervision.
None of the Group's financial assets is past due or impaired. | |||||||||||
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| Fair values of financial assets and financial liabilities All assets and liabilities of the Group other than the debenture stock are included in the balance sheet at fair value. | |||||||||||
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| (i) Fair value hierarchy disclosures The table below sets out fair value measurements using the IFRS 7 Fair Value hierarchy:- | |||||||||||
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| Level 1 | Level 2 | Level 3 | Total | |||||||
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| At 31 March 2010 | £000 | £000 | £000 | £000 | |||||||
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| Equity investments | 88,638 | - | - | 88,638 | |||||||
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| Investment properties | - | 48,750 | - | 48,750 | |||||||
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| ________ | ________ | ________ | ________ | |||||||
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| 88,638 | 48,750 | - | 137,388 | |||||||
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| ________ | ________ | ________ | ________ | |||||||
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| Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:-
Level 1 - valued using quoted prices in an active market for identical assets Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data
There were no transfers between levels during the year. | |||||||||||
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| (ii) Borrowings The fair value of borrowings has been calculated at £41,529,000 as at 31 March 2010 (2009 - £51,781,000) compared to a balance sheet value in the financial statements of £35,396,000 (2009 - £35,420,000) per note 12. | |||||||||||
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| The fair values of the debentures are determined by comparison to the fair values of equivalent gilt edged securities, discounted to reflect the differing levels of credit worthiness of the borrowers.
All other assets and liabilities of the Group are included in the balance sheet at fair value. | |||||||||||
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| Fair value | Carrying Value | |||||||||
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| 2010 | 2009 | 2010 | 2009 | |||||||
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| £000 | £000 | £000 | £000 | |||||||
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| 11% First Mortgage Debenture Stock 2021 | 18,778 | 22,824 | 15,000 | 15,000 | |||||||
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| 9.375% Debenture Stock 2026 | 22,751 | 28,957 | 20,396 | 20,420 | |||||||
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| _________ | _________ | _____--__ | _________ | |||||||
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| 41,529 | 51,781 | 35,396 | 35,420 | |||||||
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| _________ | _________ | _________ | _________ | |||||||
| 21 | Value Added Tax on Investment Management Fees | |||
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| On 28 June 2007, the European Court of Justice ruled that management fees payable by investment trust companies should be exempt from VAT. HMRC announced on 5 November 2007 its intention not to appeal against this case to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company have been processed by HMRC with our Manager, OLIM Limited.
OLIM, which has been the Company's sole investment manager since September 1986, has been able to reclaim from H.M. Revenue & Customs (HMRC), on behalf of the Company, elements of previously irrecoverable VAT, together with simple interest thereon. The recoveries have been apportioned between revenue and capital respectively in the same proportions as the original irrecoverable VAT was expensed.
As the basis of allocation has altered over the period, the apportionment reflects this. | |||
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| Revenue | Capital | Total |
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| £000 | £000 | £000 |
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| Years 1990-1996 | 268 | - | 268 |
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| Years 2001-2004 | 206 | 226 | 432 |
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| Years 2004 - 2007 | 88 | 206 | 294 |
|
|
| __________ | __________ | __________ |
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| 562 | 432 | 994 |
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| __________ | __________ | __________ |
Statutory Financial Statements and Annual General Meeting
The financial information set about above does not constitute the Company's statutory financial statements for the years ended 31 March 2010 or 31 March 2009 but is derived from those financial statements.
Statutory financial statements for the year ended 31 March 2009 have been delivered to the Registrar of Companies. The independent auditor's report in respect of the year ended 31 March 2009 was unqualified and did not contain statements under Section 498 of the Companies Act 2006.
The Annual Report and Statutory Financial Statements for the year ended 31 March 2010 were posted to shareholders in June 2010 and copies are available from the Manager, OLIM Limited, Pollen House, 10/12 Cork Street, London, W1S 3NP (www.olim.co.uk), or from the Secretaries, Aberdeen Asset Management PLC, 7th Floor, 40 Princes Street, Edinburgh, EH2 2BY.
The statutory financial statements for the year ended 31 March 2010 were delivered to the Registrar of Companies following the Company's Annual General Meeting which was held at 7th Floor, 40 Princes Street, Edinburgh, EH2 2BY on Friday 9 July 2010 at 12.30 pm.
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.
For Value and Income Trust plc
Aberdeen Asset Management PLC
Secretaries
27 May 2010