Half Yearly Report

RNS Number : 2947H

Troy Income & Growth Trust Plc

25 May 2011

 



TROY INCOME & GROWTH TRUST PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2011

The principal objective of Troy Income & Growth Trust is to provide shareholders with an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominantly UK equities.

Financial Highlights
	31 March 2011	30 September 2010	% Change
Equity shareholders' funds (£'000)	56,724	53,807	+5.4
Net asset value per share	51.50p	48.06p	+7.2
Share price (mid market)	51.00p	47.75p	+6.8
Discount to net asset value	1.0%	0.7%
Total Returns*	Six months ended 31 March 2011	1 year ended 31 March 2011	From change of mandate 17 September 2009
Share price	+8.8%	+10.3%	+30.4%
Net asset value  per share	+9.2%	+10.8%	+23.2%
FTSE All-Share Index	+8.5%	+8.7%	+21.1%
* Total return includes reinvesting the net dividend in the month that the share price goes ex-dividend.

INTERIM BOARD REPORT AS AT 31 MARCH 2011

Performance

I am pleased to report that the Company delivered a net asset value total return of 9.2% over the six month period.  The share price total return of 8.8% differed very slightly due to the small day to day fluctuations in the premium/discount to net asset value.  Both figures are ahead of the 8.5% recorded by the FTSE All-Share Index. This performance was achieved whilst exposing investors to lower levels of risk as demonstrated by the Company's net asset value being subject to less volatility than the market as a whole.

Background

The returns from the market and the behaviour of investors over the six month period to 31 March 2011 was undoubtedly influenced by the Chairman of the Federal Reserve, Ben Bernanke, and the speech that he made at the Jackson Hole Summit in August 2010. He used this forum to indicate that a second round of Quantitative Easing (QEII) was under consideration and would be implemented should the economic outlook worsen sufficiently.  Three months later, in November 2010, $600bn of additional extraordinary monetary stimulus was announced.  Most interestingly QEII was launched with the frank admission that one of the objectives of the policy was to reflate asset prices and drive a wealth effect.  The Wall Street idiom that investors should not 'fight the Fed' proved true and the FTSE All-Share total return for the period was 8.5%.  Such a return from the UK equity market was especially remarkable when the other headline events that took place during the period are considered.  Japan, the world's 3^rd largest economy, suffered a magnitude 9 earthquake and subsequent tsunami that killed tens of thousands and devastated industry and assets; and the Middle East witnessed some of the most significant social and political change for the region in living memory.  Closer to home, Ireland was forced to request an €85bn bailout to resolve the liquidity crisis caused by its failed banking system.

Company changes

The evolution of the Company has continued.  The Board has initiated the transfer of the administration of the Company's savings schemes from Aberdeen Asset Management. In future this service will be outsourced to a service provider accountable to the Company.  The transition has resulted in a temporary increase in the supply of shares to the market which has tested and proven the robustness of the discount control mechanism.

The Board has also reviewed the allocation of the investment management fee and finance costs comparing our approach to other similar trusts and in relation to the Board's expectation of future returns. These costs were previously charged 50% to capital and 50% to revenue. As a result of the review they have been allocated 65% to capital and 35% to revenue from 1 October 2010.

Gearing

It remains the opinion of the manager that the current valuation of the market does not represent a sufficient opportunity to warrant exposing investors to the higher level of risk associated with gearing.  As such the Company remains un-geared but continues to have the facilities in place to take advantage of a suitable opportunity should the market provide one.  The option to gear remains under constant review by the Board.

Dividends

The quarterly dividend rate has been increased to 0.4725p (+5%) for the first and second quarter. Barring unforeseen circumstances it is the Board's intention that the third will be 0.4725p and the fourth will be a minimum of 0.4725p. 

Outlook

The supply of money continues to be a significant factor in determining the direction of markets. In this context the end of the second round of US Quantitative Easing in June is an event that cannot be ignored.  It is unclear at the present time if we will see further monetary stimulus announced after the current programme of US treasury purchases ends.  For some time we have held the view that economic growth in Western economies will remain muted and that equity valuations are such that the upside on offer to investors is limited.  In this context the Company will remain defensively positioned but alert to opportunities should they arise.

R G Hanna

Chairman

25 May 2011

Principal Risks and Uncertainties

The principal risks facing the Company relate to the Company's investment activities and include market price risk (comprising interest rate risk, foreign currency risk and other price risk), liquidity risk and credit risk. Other risks faced by the Company include breach of regulatory rules which could lead to suspension of the Company's Stock Exchange Listing, financial penalties, or a qualified audit report. Breach of Section 1159 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains. An explanation of the principal risks and how they are managed is contained in the Directors Report within the Annual Report and Accounts for the year ended 30 September 2010.

The Company's principal risks and uncertainties have not changed since the date of the annual report and are not expected to change for the remaining six months of the Company's financial year.

Directors' Responsibility Statement

The Directors are responsible for preparing the half-yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

-    the condensed set of interim financial statements contained within the half yearly financial report have been prepared in accordance with International Accounting Standard 34; and,

-    the Interim Board Report includes a fair review of the information required by 4.2.7R (indication of important events during the first six months of the financial year and description of principal risks and uncertainties for the remaining six months of the year) and 4.2.8R (disclosure of related party transactions and changes therein) of the FSA's Disclosure and Transparency Rules.

The half yearly financial report for the six months to 31 March 2011 comprises the Interim Board Report, the Directors' Responsibility Statement and a condensed set of financial statements.

For and on behalf of the Board

R G Hanna

Chairman

25 May 2011

CONSOLIDATED INCOME STATEMENT
		Six months ended 31 March 2011 (unaudited)			Six months ended 31 March 2010 (unaudited)
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value
		-	3,921	3,921	-	4,982	4,982
Currency losses		-	(7)	(7)	-	-	-
Income	2	1,337	-	1,337	1,280	-	1,280
Investment management
fees	1	(74)	(137)	(211)	(53)	(53)	(106)
VAT recoverable on investment management fees
		19	19	38	-	-	-
Other administrative
expenses		(178)	-	(178)	(218)	-	(218)
Finance costs of
borrowing	1	(5)	(10)	(15)	(7)	(8)	(15)
		_______	______	_______	______	_______	______
Profit before taxation		1,099	3,786	4,885	1,002	4,921	5,923
Taxation	3	(12)	-	(12)	(12)	-	(12)
		_______	______	_______	______	_______	______
Profit for the period		1,087	3,786	4,873	990	4,921	5,911
		_______	______	_______	______	_______	______
Earnings per Ordinary
share (pence)	5	0.98	3.41	4.39	0.83	4.10	4.93
		_______	______	_______	______	_______	______

The total column of this statement represents the Group's Income Statement prepared in accordance with International Financial Reporting Standards ("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 and losses are attributable to the equity holders of the parent company. There are no minority interests. No operations were acquired or discontinued during the period. The Group does not have any income or expense that is not included in the profit for the period, and therefore the "profit for the period" is also the "total comprehensive income for the period."

CONSOLIDATED INCOME STATEMENT (CONTINUED)		Year ended 30 September 2010 (audited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains on investments held at fair value		-	4,765	4,765
Currency gains		-	2	2
Income	2	2,650	-	2,650
Investment management fees	1	(151)	(151)	(302)
Other administrative expenses		(357)	-	(357)
Finance costs of borrowing	1	(8)	(8)	(16)
		______	_______	______
Profit before taxation		2,134	4,608	6,742
Taxation	3	(30)	-	(30)
		______	_______	______
Profit for the period		2,104	4,608	6,712
		______	_______	______
Earnings per Ordinary share (pence)	5	1.80	3.94	5.74
		______	_______	______

CONSOLIDATED BALANCE SHEET
	As at 31 March 2011 (unaudited) £'000	As at 31 March 2010 (unaudited) £'000	As at 30 September 2010 (audited) £'000
Non-current assets
Ordinary shares	53,477	52,165	49,574
Convertibles	225	236	224
Other fixed interest	2,132	2,291	2,104
	______	_______	______
Investments held at fair value through profit or loss	55,834	54,692	51,902
	______	_______	______
Current assets
Accrued income and prepayments	403	267	344
Cash and cash equivalents	1,136	1,212	1,778
	______	_______	______
Total current assets	1,539	1,479	2,122
	______	_______	______
Total assets	57,373	56,171	54,024
Current liabilities
Trade and other payables	(649)	(412)	(217)
	______	_______	______
Total current liabilities	(649)	(412)	(217)
	______	_______	______
Net assets	56,724	55,759	53,807
	______	_______	______
Issued capital and reserves attributable to
equity holders of the parent
Called-up share capital	30,486	30,486	30,486
Share premium account	45	53,204	53,204
Special reserve	52,484	1,969	249
Capital reserve	(28,849)	(32,322)	(32,635)
Revenue reserve	2,558	2,422	2,503
	______	_______	______
Equity shareholders' funds	56,724	55,759	53,807
	______	_______	______
Net asset value per Ordinary share (pence)	51.50	48.25	48.06
	______	_______	______

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 31 March 2011 (unaudited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2010	30,486	53,204	249	(32,635)	2,503	53,807
Total comprehensive income for the period	-	-	-	3,786	1,087	4,873
Equity dividends	-	-	-	-	(1,032)	(1,032)
Cancellation of share premium	-	(53,204)	53,204	-	-	-
Shares issued from treasury	-	45	1,126	-	-	1,171
Shares bought back into treasury	-	-	(2,095)	-	-	(2,095)
	______	_______	______	______	_______	______
Balance at 31 March 2011	30,486	45	52,484	(28,849)	2,558	56,724
	______	_______	______	______	_______	______
Six months ended 31 March 2010 (unaudited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2009	30,486	53,204	4,658	(37,243)	2,887	53,992
Total comprehensive income for the period	-	-	-	4,921	990	5,911
Equity dividends	-	-	-	-	(1,455)	(1,455)
Shares bought back into treasury	-	-	(2,689)	-	-	(2,689)
	______	_______	______	______	_______	______
Balance at 31 March 2010	30,486	53,204	1,969	(32,322)	2,422	55,759
	______	_______	______	______	_______	______
Year ended 30 September 2010 (audited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2009	30,486	53,204	4,658	(37,243)	2,887	53,992
Total comprehensive income for the year	-	-	-	4,608	2,104	6,712
Equity dividends	-	-	-	-	(2,488)	(2,488)
Costs of cancellation of share premium account	-	-	(40)	-	-	(40)
Shares issued from treasury	-	-	213	-	-	213
Shares bought back into treasury	-	-	(4,582)	-	-	(4,582)
	______	_______	______	______	_______	______
Balance at 30 September 2010	30,486	53,204	249	(32,635)	2,503	53,807
	______	_______	______	______	_______	______

CONSOLIDATED CASH FLOW STATEMENT
	Six months ended 31 March 2011 (unaudited) £'000	Six months ended 31 March 2010 (unaudited) £'000			Year ended 30 September 2010 (audited) £'000
Cash flows from operating activities
Investment income received	1,283	1,237			2,548
Deposit interest received	2	-			-
Other cash receipts	38	540			538
Administrative expenses paid	(349)	(332)			(741)
	______	_______			______
Cash generated from operations	974	1,445			2,345
Finance costs paid	(15)	(15)			(16)
Taxation	(3)	(235)			(261)
	______	_______			______
Net cash inflows from operating activities	956	1,195			2,068
	______	_______			______
Cash flows from investing activities
Purchases of investments	(2,760)	(4,484)			(9,427)
Sales of investments	3,125	6,620			14,136
	______	_______			______
Net cash inflow from investing activities	365	2,136			4,709
	______	_______			______
Net cash inflow before financing	1,321	3,331			6,777
Financing activities	______	_______			______
Proceeds of issue of shares	1,171	-			213
Cost of share buy backs	(2,095)	(2,560)			(4,582)
Dividends paid	(1,032)	(1,455)			(2,488)
Costs of cancellation of share premium account	-	-			(40)
	______	_______			______
Net cash outflow from financing activities	(1,956)	(4,015)			(6,897)
	______	_______			______
Net decrease in cash and short term deposits	(635)	(684)			(120)
Cash and short term deposits at the start of the period	1,778	1,896			1,896
Effect of foreign exchange rate changes	(7)	-			2
	______	_______			______
Cash and short term deposits at the end of the period	1,136	1,212			1,778
	______	_______			______

Distribution of Assets and Liabilities
	Valuation at 30 September 2010					Valuation at 31 March 2011
					Appreciation/ (depreciation)
			Purchases	Sales
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	49,574	92.2	3,161	(3,150)	3,892	53,477	94.2
Convertibles	224	0.4	-	-	1	225	0.4
Other fixed interest	2,104	3.9	-	-	28	2,132	3.8
	______	_____	______	______	______	______	_____
	51,902	96.5	3,161	(3,150)	3,921	55,834	98.4
	______	_____	______	______	______	______	_____
Current assets	2,122	3.9				1,539	2.7
Current liabilities	(217)	(0.4)				(649)	(1.1)
	______	_____				______	_____
Net assets	53,807	100.0				56,724	100.0
	______	_____				______	_____
Net asset value per share	48.06p					51.50p
	______					______

NOTES TO THE ACCOUNTS
1.	Accounting policies
	(a)	Basis of accounting
		The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) 34 - 'Interim Financial Reporting', as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). They have also been prepared using the same accounting policies applied for the year ended 30 September 2010 financial statements, apart from the allocation of certain expenses. During the period the Board reviewed the allocation of the investment management fee and finance costs which were allocated 50% to revenue and 50% to capital. It was felt that these expenses should now be allocated 35% to revenue and 65% to capital to reflect the Board's expectations of future returns.
	(b)	Dividends payable
		Dividends are recognised in the period in which they are paid.

2.	Income	Six months ended 31 March 2011 £'000	Six months ended 31 March 2010 £'000	Year   ended 30 September 2010 £'000
	Income from listed investments
	UK dividend income	1,254	997	2,239
	Overseas dividend income	81	281	409
	Underwriting income	-	2	2
		______	_______	______
		1,335	1,280	2,650
		______	_______	______
	Other income from investment activity
	Interest on recoverable VAT on management fees	2	-	-
		______	_______	______
		2	-	-
		______	_______	______
	Total income	1,337	1,280	2,650
		______	_______	______

3.	Taxation
	Following changes in the Finance Bill 2009 dividends and other distributions from foreign companies received on or after 1 July 2009 have largely been exempt from UK corporation tax. However, the Company continues to be subject to irrecoverable US withholding tax of 15% on income received from US portfolio holdings.

4.	The following table shows the revenue for each period less the dividends declared in respect of the financial period to which they relate.
		Six months ended 31 March 2011A £'000	Six months ended 31 March 2010B £'000	Year ended  30 September 2010C £'000
	Revenue	1,087	990	2,104
	Dividends declared	(1,049)	(1,066)	(2,081)
		______	_______	______
		38	(76)	23
		______	_______	______
	A Dividends declared relate to the first two interim dividends (both 0.4725p each) declared in respect of the financial year 2010/2011.
	B Dividends declared relate to the first two interim dividends (both 0.45p each) declared in respect of the financial year 2009/2010.
	C Dividends declared relate to the four interim dividends declared in respect of the financial year 2009/2010 totalling 1.8p.

		Six months ended 31 March 2011	Six months ended 31 March 2010	Year ended 30 September 2010
5.	Return and net asset value per share	p	p	p
	Revenue return	0.98	0.83	1.80
	Capital return	3.41	4.10	3.94
		______	_______	______
	Total return	4.39	4.93	5.74
		______	_______	______
	The figures above are based on the following:
		£'000	£'000	£'000
	Revenue return	1,087	990	2,104
	Capital return	3,786	4,921	4,608
		______	_______	______
	Total return	4,873	5,911	6,712
		______	_______	______
	Weighted average number of Ordinary shares
	in issue	111,102,661	119,943,077	116,936,176
		__________	__________	__________
	The net asset value per share is based on net assets attributable to shareholders of £56,724,000 (31 March 2010 - £55,759,000; 30 September 2010 - £53,807,000) and on 110,141,432 (31 March 2010 - 115,551,182; 30 September 2010 - 111,948,182) Ordinary shares in issue at the period end.

6.

Ordinary share capital

During the six months ended 31 March 2011 there were 4,190,000 Ordinary shares of 25p each repurchased by the Company at a total cost of £2,095,206 and placed in treasury. During the six months ended 31 March 2010 there were 5,862,350 Ordinary shares repurchased at a total cost of £2,689,151 and placed in treasury. During the year ended 30 September 2010 there were 9,915,350 Ordinary shares repurchased at a total cost of £4,582,436 and placed in treasury. During the six months ended 31 March 2011 there were 2,383,250 Ordinary shares re-issued from treasury for proceeds totalling £1,171,342. During the six months ended 31 March 2010 there were no Ordinary shares re-issued from treasury. During the year ended 30 September 2010 there were 450,000 Ordinary shares re-issued from treasury for proceeds totalling £213,500.

7.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 31 March 2011 includes gains of £8,675,000 (31 March 2010 - gains of £6,522,000; 30 September 2010 - gains of £5,223,000) which relate to the revaluation of investments held at the reporting date.

8.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Consolidated Income Statement. The total costs were as follows:
				Six months ended 31 March 2011 £'000	Six months ended 31 March 2010 £'000		Year ended 30 September 2010 £'000
	Purchases			17	24		51
	Sales			4	9		21
				______	_______		______
				21	33		72
				______	_______		______

9.	Publication of non-statutory accounts
	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 March 2011 and 31 March 2010 has not been audited.
	The information for the year ended 30 September 2010 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.

10.	This Half-Yearly Financial Report was approved by the Board on 25 May 2011

.

11.	This Half-Yearly Financial Report will shortly be available for viewing on the Company's web site (www.tigt.co.uk) and will be posted to shareholders in May 2011.

For Troy Income & Growth Trust plc Steven Cowie, Secretary 25 May 2011 Enquiries: 0131 538 6610

 

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