Annual Financial Report

RNS Number : 5316U

Value and Income Trust plc

29 July 2020

 

VALUE AND INCOME TRUST PLC

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED 31 MARCH 2020

Highlights of the Year

· Net Asset Value total return (with debt at par)* of -21.8% over one year and -19.8% over three years.

· Share Price total return* of -30.7% over one year and -25.7% over three years.

· FTSE All-Share Index total return of -18.5% over one year and -12.2% over three years.

· Dividends for year up 2.5% - increased for the 33rd consecutive year.

Financial Record

	31 March 2020
NAV (valuing debt at par) (p)	253.1
NAV (valuing debt at market) (p)*	232.7
Ordinary share price (p)	165.0
Discount of share price to NAV (valuing debt at market) (%)	29.1
Dividend per share (p)	12.10
Total assets less current liabilities (£m)	176.2

* This is an Alternative Performance Measure (APM) which has been explained in the Glossary in the Annual Report.

Chairman's Statement

As this is written, markets are dominated by the development of COVID-19. This pandemic has already plunged the United Kingdom and much of the rest of the world into deep recession. It is still far too early to try to predict when and where our economy will recover and how many jobs and how many businesses will be lost. VIT's income is therefore under severe short-term pressure from cut and cancelled equity  dividends, and tenants struggling to pay rent on closed properties. However, you will see from our Investment Managers' reports that there are reasons for cautious optimism in the longer term when the crisis is past.

The Board has declared a fourth interim dividend of 3.4p per share which making total dividends of 12.1p per share for the year to 31 March 2020 compared to 11.8p in the previous year, an increase of 2.5%. The fourth interim dividend will be paid on 28 August 2020 to all Shareholders on the register as at 31 July 2020. We  are proud of the fact that this will be the 33rd year of dividend increases following the reconstruction of VIT. It is our present intention to preserve this record if possible, by using our powers to distribute part of our capital reserves of 154.4p per share if necessary. But keeping up that record will require dividend cover to be rebuilt in the years ahead.

The prospect of the repayment of the £15 million 11% Debenture stock in March 2021 gives the Board encouragement for the growth of income in the longer term. In order to secure the refinancing of this in good time, we drew down in November 2019 a £22 million loan expiring on 30 November 2026  at a net interest rate of 3.1%. 95% of the interest payable is at a fixed rate and 5% at a floating rate. The proceeds of this loan have been placed on accessible deposit, pending repayment of the Debenture and investment of the additional £7 million less costs.

Over the year, VIT's NAV total return (with debt at par) was -21.8% and the Share Price total return was -30.7%. This compares with the FTSE All-Share Index total return of -18.5%.

As noted in previous statements, the difference between the fair value and the nominal value of our two debenture stocks and our bank loans is reducing over the life of the instruments, which will be repaid at their nominal value.  The figures are set out in Note 17 to the Financial Statements. The two debentures have covenants attached to them and information about them is included in Note 12 to the Financial Statements; there is plenty of headroom in terms of both capital and income.

I would remind shareholders that new Articles of Association were adopted in July 2016.  These included a requirement for the Board to put an Ordinary Resolution to Shareholders in 2024 in relation to the future direction of the Company, including proposals that provide an opportunity for any Shareholders to realise their investment in full at NAV, less costs, by March 2027 at the latest. The details of this are shown in the Annual Report.

This year's AGM will be held in the offices of Maven Capital Partners UK LLP, First Floor, Kintyre House, 205 West George Street, Glasgow G2 2LW on Thursday, 3 September 2020 at 10.00am. However, in light of the Government advice against all non-essential travel and maintaining social distancing, Shareholders will be unable to attend the AGM in person. The Notice of Annual General Meeting can be found in the Annual Report. The Board encourages Shareholders to vote using the Proxy Form, which can be submitted to Computershare, the Company's Registrar. Proxy Forms should be completed and returned in accordance with the instructions thereon and the latest time for the receipt of Proxy  Forms  is 10.00am on Tuesday, 1 September 2020. Proxy votes can be also be submitted by CREST or online using the Registrar's Share Portal Service at www.investorcentre.co.uk/eproxy. The Board would also encourage Shareholders to submit any questions for the Board and Manager by email or by letter in advance of the AGM. Shareholders wishing to submit a question should write to: The Company Secretary, Value and Income Trust PLC, c/o Maven Capital Partners UK LLP, First Floor Kintyre House, 205 West George Street, Glasgow G2 2LW or email to: [e-mail].

James Ferguson

Chairman

29 July 2020

INVESTMENT MANAGERS' REPORTS

UK Equities

Market Background

The coronavirus COVID-19 outbreak has had a major effect on world stock markets and on the returns generated for investors in VIT's financial year, despite the virus only becoming prevalent in the final weeks of the period. Global equities had gained ground steadily during the first ten months of VIT's financial year to the end of March 2020, before dropping precipitously from the middle of February as the severe economic impact of the virus and the resultant lockdown measures became clearer. Up until that point, markets had taken heart as the economic outlook had stabilised after growth had slowed through the first half of 2019 due to the monetary and fiscal tightening seen around the world in 2018. Those circumstances changed abruptly in mid-February 2020 as it became clear that the virus had spread around the world and that draconian lockdown measures would be needed to prevent health systems from being overwhelmed. The severe impact of the virus  is illustrated by the fact that the UK stock market rose by 5.5% in the first nine months of VIT's financial year, before falling 26.0% in the three months to the end of March 2020.  Overall, the UK stock market, as measured by the FTSE All-Share Index, fell by 21.9% in the twelve-month period.

It is difficult to remember now but the UK stock market had actually entered 2020 on a relatively optimistic note after months of tortuous Brexit stalemate. The Conservatives had just won an unexpectedly large majority at the December general election, preventing the economically destructive manifesto put forward by the Labour Party from being implemented. The election result had also brought certainty to the Brexit process, with many accepting that breaking the Brexit logjam would aid businesses even if there was likely to be some economic costs associated with leaving the EU. All this now seems a distant memory with governments  around the world on an effective war footing and everyday life put on hold for literally billions of people.

As noted above, the FTSE All-Share Index fell substantially in the twelve-month reporting period by 21.9% and, including income, the total return was -18.5%. The MSCI World Index, which is measured in dollars, was much more resilient, falling by just  12.1%, and to UK based investors the fall was limited to just 7.7% as the pound weakened from $1.30 to $1.24 during the year. The UK stock market underperformed other world markets due to its high weightings in commodity and financial stocks, which have generally been poor performers in the sell-off.  Within  the UK market, large defensive global companies and utilities have been the only real safe havens during the last quarter. These types of companies tend to be amongst the very largest in the market and, consequently, the FTSE 100 Index of largest companies outperformed the more domestically focused FTSE 250 Index of mid-sized companies by over 5% in the final quarter. High yielding companies, which have an over representation in the commodity and financial sectors of the market, were also hard hit, with the FTSE Higher Yield Index falling by 28.2% over the year, performing well behind the wider market.

In the bond market, ten-year gilt yields ended VIT's year at 0.4%, down from 1.0% a year earlier, whilst twenty-year gilt yields fell to just 0.8%. The ten-year gilt yield actually traded below 0.2% during the last quarter, which is the lowest level recorded for well over 50 years and reflects the safe haven status of gilts. The total return on the FTSE All Stocks Gilt Index over the year was +9.9%, meaning the return differential between equities and gilts was almost 30% in gilts' favour. Commodities reflected the general background in financial markets and were extremely weak in the final three months of  VIT's  financial year. Perhaps the most dramatic fall was seen in the oil market where the price of a barrel of oil fell by two thirds over the course of the year to end at $23, down from $68 a year earlier. Anticipated falls in the demand for oil as a result of the economic lockdown were compounded by the decision of the Saudi Arabians to launch a price war after OPEC failed to agree production cuts in early March. Metal prices were also weak but the decline in the price of copper for example, at 23.6%, was nowhere near that recorded for oil.

Prior to the coronavirus outbreak the UK economy had actually been performing reasonably well. The UK economy grew by 1.1% in 2019, which was ahead of expectations that had been downgraded because of Brexit-related uncertainty. Entering 2020, growth expectations were rising along with business confidence, which had been buoyed by the election result. Expectations for global economic growth had also been stabilising, responding to interest rate reductions made by many central banks worldwide in the second half of 2019. Entering 2020, economists were expecting global growth of around 3% for the year, but those forecasts have been rendered irrelevant by the coronavirus outbreak.

Performance

VIT's equity portfolio underperformed the FTSE All-Share Index significantly during the reporting period. For the first ten months of the year the holdings generally performed well but they underperformed sharply during the coronavirus inspired sell-off in February and March. The total return recorded by VIT's equity portfolio was -23.7%, well behind the -18.5% recorded by the FTSE All-Share Index. As noted above, higher yielding shares, on which the portfolio is focused, underperformed the market sharply over the year, falling by 28.2% in capital terms and generating a total return of -23.8%, as measured by the FTSE Higher Yield Index. The portfolio was further hindered by its overweight positions in Travel & Leisure and Life Assurance. In particular, Cineworld (-58% to sale), Restaurant Group (-77% to sale) and Marston's (-60%) were substantial fallers in the sell-off as the government forced the shutdown of their operations in the lockdown period. The Life Assurance sector underperformed with other financial sectors as the market became concerned about their exposure to corporate credit defaults and their ability to pay dividends. Other notable underperformers included Go-Ahead (-58%), ITV (-48%) and Crest Nicholson (-51% to sale) which are all largely exposed to the UK economy. Go-Ahead has had to cope with the severe curtailment of its rail and bus networks, ITV has seen a significant drop  in advertising revenues as many companies have simply stopped spending in this area and Crest Nicholson will have to cope with  a UK housing market that has ground to a complete halt. There were some bright spots in the portfolio, including Pennon (+46%), United Utilities (+11%), Spectris (-2%) and Unilever (-7%), but these were not enough to offset the weakness seen elsewhere. Pennon, United Utilities and Unilever all benefited from investors' flight to safety with Pennon's share price also being aided by the £4.2bn disposal of its Viridor waste and recycling operation  to KKR. The portfolio  is  under-represented in these types of large global and defensive businesses, which tended to outperform in the sell-off, as they are generally much lower yielding than average. Spectris also benefited from a fortuitously-timed disposal, which left its balance sheet ungeared and the company well-placed to navigate the current difficulties.

Portfolio

The last twelve months saw sales of equities of £17.2m and purchases of £13.9m giving total transactions of £31.1m, with net sales of £3.3m. During the period prior to the coronavirus sell-off, we continued to reorganise the portfolio, selling those companies with challenged business models such as BT, Centrica and Eddie Stobart Logistics. We also made a complete disposal of Johnson Matthey, where we became concerned about the company's exposure to diesel engines. The monies raised were reinvested in new holdings in PayPoint and FDM. Both companies have attractive growth opportunities, strong balance sheets and generate cash. PayPoint is a transaction services business focused on the convenience retail store sector, whilst FDM is a global IT services business. During the year M&G, the well-known UK-based savings and investment business, demerged from the Prudential and we made a significant addition to this holding, attracted by the strong cash flows emerging from its life assurance book. We also made additions to the Vodafone, Lloyds Banking Group, DS Smith, ITV and Royal Dutch Shell holdings in this period.

As the severe economic consequences of coronavirus lockdown became clearer, we reassessed the portfolio and sold those holdings where the impact on the business was large, any possible recovery was going to be drawn out and their balance sheet positions meant that they were likely to need further equity finance to survive. As a result, we made the difficult decision to sell the portfolio's holdings in Cineworld, Restaurant Group and Crest Nicholson. We invested some of the money raised by topping up existing holdings in BHP, Royal Dutch Shell, PayPoint and M&G, where we felt that the companies were well-placed to survive the downturn and there was a good chance that they would continue to pay dividends. The equity portfolio was left with a small effective cash balance at the end of March 2020 and we will look to invest this in due course.

At the end of the year the portfolio had 31 investments. On a historic basis the yield of  the portfolio was approaching 6%. However, dividends are being suspended by a wide range of companies in an effort to preserve cash resources and it is possible that dividends from the UK stock market could fall by up to 40% in 2020 and investment income from VIT's equity portfolio is likely to reflect this trend.  It is to be hoped that dividend payments will bounce back in 2021, but it is likely that this will not cover 2020's shortfall. Any recovery in dividend payments will be crucially dependent on the speed with which lockdown measures can be eased so that companies can resume trading on a more normal basis.

Outlook

The outlook for equities has rarely been as difficult to foresee. On the one hand, the scale of economic contraction caused by the coronavirus could be at least double that caused by the financial crisis in 2008/09. Many companies have been severely affected by the virus lockdown containment measures and, in many cases, have stopped trading altogether. In response, a large number of UK companies have announced that they will be suspending dividend payments in order to preserve cash resources on their balance sheets. Large numbers have even resorted to cancelling previously declared payments, which is a sign of how fast the situation is changing. Corporate profit forecasts are meaningless at the time of writing and the dividend base of the market is subject to a high degree of uncertainty, although it is probable that UK stock market dividends will fall substantially in 2020. On the other hand, the scale of government responses around the world has been unprecedented. Measures including state support of wages, funding packages for businesses impacted by a lack of trade and other support programmes have been announced with potential costs running into the hundreds of billions of pounds in the UK alone. Worldwide, similar measures worth literally trillions of dollars have been announced and governments will be running fiscal deficits at levels never seen outside of times of war. On top of this, central banks around the world have cut interest rates sharply and many, including the Bank of England, the European Central Bank and the US Federal Reserve, have announced new quantitative easing measures or similar asset purchase programmes, which have flooded the world with liquidity. This seems to have halted the decline in share prices for the time being, which have bounced off the bottom. Whether this proves to be of only temporary relief, or the start of the recovery will be dependent on the future path of the virus, the success or otherwise of efforts to contain it and the speed with which the lockdown measures can be eased. Nonetheless, following the stock market falls and despite the uncertainty regarding corporate dividend payments, share valuations on most measures are now low and judicious investment in companies able to survive without dilutive rescue fundraising should prove profitable from here.

Patrick Harrington

OLIM Limited

29 July 2020

Property Portfolio

The Market

Average capital values of UK commercial property slipped by almost 4% on Brexit- blighted low transaction volumes over 2019, giving a total return of 0.7% including rental income for the MSCI (ex-IPD) Annual Index. This average, however, masks a sharp divergence between modest growth in industrial/warehouse and alternative sector values versus double-digit declines in all types of retail property except supermarkets. Offices showed little change. UK institutional investors were net sellers of property for most of 2019 with only occasional large overseas purchases of trophy buildings lightening the general gloom.

This year started with more optimism in the market for both property values and transaction volumes, following the decisive Conservative election victory, with the medium term outlook for both property rents and prices depending on avoiding a hard Brexit. Capital values showed little change in January and February 2020. In March that all changed. World equity markets collapsed and the UK property market froze as the COVID-19 pandemic forced many businesses to close.

The UK economy is now in a slump, with 2020 certain to show the sharpest full year drop in GDP since 1921. Property rents will fall, valuation yields will rise and capital values will be down, in many cases well down, when the market reopens over the next few months. Property investors are firefighting, ensuring tenants who can pay their rent, do; agreeing phased payment plans with tenants who are basically sound but temporarily closed; and judging which weaker tenants really cannot pay and need relief to avoid the costs of an empty property until there is a realistic chance of reletting.

There are vast variations between tenants, sectors and property types and the immediate and longer-term effects of this crisis. It is likely to accelerate and bring into ever sharper focus the structural changes in property use which are ruining so many high streets and shopping centres. Some sectors have emerged strongly from the crisis so far - notably supermarkets and convenience stores, which were already outperforming with their strong covenants and long leases and are well placed to deliver further rental and capital growth in the years ahead. Others, like pubs, are hard hit now but should still see the main players emerge in a sound long-term competitive position after the crisis is over as they gain market share from their weaker rivals who have gone under.

Overall, lease lengths in property will now shorten further, break clauses will abound, upwards only rent reviews will be under extreme pressure, either outright on new leases or indirectly through break clauses, and open market rent reviews will be almost impossible to achieve until the economy is well into recovery - and definitely not in 2020 or 2021. Meanwhile the Government, under tenant pressure, is suspending landlords' traditional tools for enforcing rent collection - eviction orders, use of Commercial Rent Arrears Recovery (CRAR) bailiffs and statutory demands for winding up.

This property crisis differs from the two previous serious downturns in VIT's history, the early 1990's and 2008-10, because for the first time strong tenants are trying not to pay their rent although they can. After tough discussions with robust and well-advised landlords, they are mostly still paying, but with some phasing where necessary. The key message for property owners now, which will ring ever louder in investors' ears after the crisis is over, is to stick to strong tenants paying realistic rents on long, index-linked, leases like VIT's, with our 15 year average unexpired lease length and 86% of rental increases index-linked. Safe, long income of that type will be valued highly after the crisis is over in a world of negative real interest rates and lacerated equity dividends.

Offices

The most profound and long-lasting effect of the pandemic will be a reduction in demand for office space, especially high value large corporate offices. The well-established trend towards hot-desking and remote working will zoom upwards. Large and medium sized companies will still keep some office space, for essential meetings from time to time at their corporate centre, but several months' experience of most people working productively and efficiently from home will lead to savage reappraisals of whether so much expensive office space is really necessary at a time when many companies will be facing an existential cash crisis. Office tenants will be extremely reluctant to renew office leases as they expire, or to resume paying full rent if they have received concessions from landlords during the crisis.

Offices in expensive big city centre locations will be worst hit, especially London where the value of its unique locational advantage in many sectors will be seriously undermined. Serviced office operators may see some additional demand for short term space for new tenants, but this will be swamped by their existing tenant base cutting back or going under, and yet again their flawed business model of taking long leases and granting short licences will prove fatal for most of them as it does in every serious downturn.

Office rents and rental values will fall far and fast right across the UK and office capital values may fall even faster. Valuation yields have been forced down, in London and the main provincial cities, to historic lows, driven by the weight of money from overseas investors in general, and the Far East in particular. Most overseas buyers will not commit to new purchases here while they are unable to travel so the office market will re-open at levels well below pre-pandemic valuations, where bottom fishers and vulture funds are actually prepared to buy.

Retail

Coronavirus will speed up the structural changes which were already revolutionising retail property. Many bricks and mortar retailers in high streets and shopping centres were already on their last legs and will never re-open. This lockdown is opening the eyes of many older consumers, in particular, to the ease of buying online and the range of goods and services and speed of delivery.

Property valuers have been persistently behind the downward curve of most retail property rental and capital values all over the UK for the past three years. Many obsolete shops and shopping centres must now be valued from their site value up, not the former retail value down. Retail warehouse values will also come under downward pressure, but the falls may be limited, in prosperous parts of Southern England at least, by their potential alternative use values, for industrial or distribution purposes, low-rent food stores for Aldi or Lidl, or even, if the site is right, residential development. However, most of those options will still be painful and slow.

The only bright light shining through the general retail property gloom is on supermarkets and convenience stores, which have seen their turnover increase by as much as 20% to 30% during this crisis. The large supermarket chains have growing on-line operations but online penetration remains far lower than in non-food retail, and many consumers still prefer the choice and convenience of their local physical food shop, and have relied on it during the lockdown. Supermarket investments, with their long and often index- related leases have massively outperformed other retail investments in recent years and that outperformance will continue.

Warehouse/Industrial Property

Warehouse and industrial properties have enjoyed a historic re-rating in recent years, so that they are now valued on yields comparable to traditional office property and well below retail property, investors' traditional favourite, for the first time since reliable property valuation records began in Britain after the Second World War. Warehouse and industrial property generally will maintain and consolidate that premium rating among the three traditional commercial property sectors, as office capital values plummet and valuation yields move out and the non-food property crash goes from bad to worse.

Although warehouse/industrial property may be more resilient, rental and capital values will still slip from their current optimistic valuations. With a wave of bankruptcies and rapidly rising unemployment, multi-let industrial estates in particular will see vacancies soar and values fall. Projected rental increases, which over-optimistic investors and valuers have had to factor in to justify buying these estates at eye-wateringly low interest yields, will just not happen.

Well-let and located distribution warehouses should hold their value better and will benefit from an accelerated trend towards online retailing, but they will still suffer a higher rate of tenant failures in this economic crash. As with supermarkets, carefully chosen warehouse investments let on long leases at realistic rents to strong tenants will continue to outperform short let sheds with shaky tenants.

Alternatives

The "Alternative" property sector (properties other than shops, industrial and offices) has been growing rapidly in importance for institutional investors in particular in recent years, to the point where it now accounts for 15% - 20% of the main UK commercial property market indices and 35% of all investment property transactions in 2019. It covers a very wide range of property types and tenants, some of whom will be hit much harder than others by the crisis, but most alternative sector investments have relatively long, often indexed leases, so the tenant's ability to pay is crucial for valuation purposes. Despite the lockdown, alternative sector tenants are major beneficiaries from the business rates holiday and the Government's furlough scheme for their generally low-paid employees, and alternative investments may outperform the more traditional sectors of the property market over the next year, but with wide variations.

Leisure

Pubs will suffer in the short term from a prolonged shutdown and slow recovery with social distancing required and only minimal income now from takeaways to offset their fixed costs. Pubcos with tied sub-tenants face a particular squeeze with rent still owed to their landlords on their leased pubs although their sub-tenants can pay no rent to them, and sell none of their beer. But, unlike restaurants, where most multiple chains were already drowning in debt, many of the leading pubcos, as well as the traditional regional brewers, have strong balance sheets with plenty of freehold assets and very long-standing banking relationships. So most profitable pubs will survive and re-open, but many individual pubs and less well-funded operators will not, as in retail and restaurants. The well-established trend of smaller pubs closing and larger and better-run pubs gaining market share should continue.

Drinking patterns will have changed during the lockdown, with Majestic for example reporting their growth in home deliveries has made up for the loss of sales from their shops, which have all closed. That is, however, unlikely to cause a long-term structural change in consumer behaviour because a visit to a pub, especially a food-led pub like many institutionally-owned managed houses, cannot really be replicated on-line or at home. Some suburban and rural pubs were doing good business with people newly working from home until they were forced to close.  Most pubs also benefit from some underlying alternative use value, usually for residential purposes, because they were typically built to serve customers living nearby.

The two leading ten pin bowling companies have both raised fresh equity during the crisis and are well placed to reopen when they are allowed. Bingo halls, however, may suffer more from a switch to online because their customer base is ageing fast and more likely to stay at home. Cinemas will also suffer from the lockdown boost to home entertainment operators like Netflix and Amazon Prime.

Caravan Parks

Caravan parks may be the biggest winner from the crisis in the leisure sector. They essentially offer their customers an affordable second home and a cheap domestic holiday option.  Both should prove attractive in these times of great uncertainty and squeezed incomes when the lockdown ends, with many Britons cautious about taking foreign holidays for some time to come, combined with lack of airline and tour operator capacity as many go under.

Health and Fitness

Health and Fitness clubs have had to close but have generally frozen their memberships. They should be able to re-open rapidly for their existing customers when permission is given, but on a limited basis with machines well apart and restricted admissions. They will also suffer some erosion of membership from job losses and reduced consumer spending.  However, better financed high-quality operators like David Lloyd and Nuffield should survive but will need to discount for some time as most people can't swim or play tennis at home. Virgin Active has a problem with weak private equity owners, but their properties are generally profitable at the operating level. The low-cost operators, like Pure Gym, will gain some members trading down, but will be more vulnerable because their basic operation is more replicable at home with online help.

Hotels

Hotel values in and after the crisis will vary dramatically by tenant and location.  Premier Inn (the well-funded Whitbread plc) should benefit from the woes of its principal competitor, the highly-geared and private- equity funded Travelodge. Hotels in London and other large city centres relying heavily on overseas tourists or big corporate customers will do far worse than provincial hotels serving British travellers and holidaymakers.

Care Homes

Care homes will be hard hit by the pandemic. Care home vacancy rates will shoot up as residents succumb to Coronavirus and new admissions slow right down - several of the main private-equity backed care homes providers are chronically over-geared and will not survive without recapitalisations and rent cuts. High quality homes with self-funded residents will continue to outperform those dependent on public funding.

Conclusion

Most sectors of the UK commercial property market face a very difficult 2020, with many still struggling in 2021 if the lockdown lasts much longer. Offices and non-food retail will suffer most, with industrial/warehouse property and supermarkets less severely affected.

Performance

VIT's property portfolio produced a total return of 6.3% over the year to March, against -0.6% for the MSCI (formerly IPD) Index, the main benchmark for commercial property performance. VIT's property record is shown in the table in the Annual Report.

We specialise in UK commercial properties with long, strong, index-related income streams to deliver above average long-term real returns. The total returns on our property portfolio have been between 8% and 12% a year over the past 3, 5, 10, 20 years and 33 years and are above the MSCI averages over all these periods. The real returns above the Retail Price Index from VIT's property portfolio were 3% last year (across six diversified sub-sectors) and between 6% and 9% a year over all cumulative periods from 3 to 33 years since the inception of our management.

Properties

All 26 properties are let on full repairing and insuring leases (tenants are responsible for repair, maintenance and outgoings), with upward only rent reviews and an average unexpired lease length now of over 15 years (17 years if the break options are not exercised). 23 of the properties valued at 31 March 2020 are freehold and 3 are long leasehold with 111, 59 and 37 years to run (Doncaster, Fareham and Horsham).

The portfolio has been fully let throughout the year, with 86% (up from 79% this time last year and up from 35% eight years ago) of the portfolio's net rental income now from index-related leases, which are either Retail Price Index-linked or with fixed rental uplifts.

Purchases and Sales

Five new properties were purchased over the year, all with RPI-linked rent reviews: a Government let driving test centre in Aberdeen, two industrial units in Thirsk and Thetford, a bowling alley in Doncaster and a pub in Newcastle upon Tyne for £10.8 million in total, at an average net initial yield on purchase of 6.9%; their average unexpired lease length was 15 years (if the break options are exercised).  Over the course of the year the sales of five properties completed: a short-let industrial unit in Luton, and the last three high street shops in Godalming, Lymington and Sudbury, plus a restaurant in Brentwood let to Prezzo for £9.2 million in total (3% above valuation) at a net sale yield of 7.4%. The property portfolio was fully invested at the year end.

Due to our strategic sales programme over the last 10 years the Company is now no longer invested in high street shops or retail warehouses.

Rental Payments

We have been working closely with our tenants during this unprecedented period, engaging and agreeing phased payment plans for temporary rental concessions, changing quarterly payments to monthly or rent deferments. As at early June, 64% of the March quarter's rent had been paid with 36% on Agreed Payment Plans, including 8% from Adelie Foods, the tenant at Milton Keynes which went into administration on 28 May 2020.

Results of Independent Revaluation

The VIT property portfolio was subject to an independent professional revaluation at 31 March 2020 by Savills. The revaluation showed a value of £70,200,000 (before taking into account the right of use asset classified as investment property related to properties held under leasehold). Our properties are revalued every six months, at 30 September and 31 March. Given the unknown future impact that COVID-19 might have on the UK property market, the leading commercial valuers (also as per the current RICS Valuation Standard) have introduced an industry-agreed "material uncertainty" clause into their valuation reports from March 2020 until further notice.

The capital value of properties held throughout the year rose by 2.7% and rental income rose by 1.4%. Higher value properties, especially Industrials and the Caravan Park performed best, but Pubs and Leisure properties were down. Of the held properties, 5 gained, 10 fell and 6 were unchanged in value. The combined total of the capital values of the 5 new purchases were 8.0% above their purchase prices excluding costs and 3.0% including costs of purchase.

Safe, long let indexed property like the VIT Property Portfolio has weathered previous downturns well (as the Property Record Table in the Annual Report shows) and should prove resilient again once all our tenants are allowed to reopen and trade.

Louise Cleary

OLIM Property Limited

29 July 2020

BUSINES REVIEW

This Business Review is intended to provide an overview of the strategy and business model of the Company as well as the key measures used by the Directors in overseeing its management. The Company is an investment trust company which invests in accordance with the investment aims and investment policy below.

The Group

Value and Income Services Limited (VIS), a wholly owned subsidiary of the Company, is authorised by the Financial Conduct Authority to act as the Company's Alternative Investment Fund Manager (AIFM).

Investment Aims

The Company invests in higher yielding UK commercial property and quoted equities, particularly in medium and smaller sized companies. The Company aims to achieve long-term real growth in dividends and capital value without undue risk.

Investment Policy

The Company's policy is to invest in quoted UK equities, UK commercial property and cash or near cash securities. It is not normally the Company's policy 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.

The Company focuses on the fundamental values and incomes of businesses in which it invests - their profitability, cash flows, balance sheets, management and products or services - and the location, tenants and leases of its property investments. The equity portfolio has generally yielded more than the FTSE All-Share Index. The Group has held between 30 and 40 individual shareholdings and between 20 and 30 individual properties in recent years. These ranges may change as market conditions or the size of each portfolio varies in future. In order to limit the risk to the equity portfolio that is derived from any particular investment, no individual shareholding will account for more than 10% of the equity portfolio at the time of purchase. Since 1986, the Company has had a longstanding policy of increasing its exposure to equities and to property through the judicious use of borrowings. Until 2015, all borrowings had been long-term debentures to provide secure long-term funding, and avoiding the risks associated with short-term funding of having to sell illiquid assets at a low point in markets if loans had to be repaid. On 26 February 2015, a five year secured term loan facility of £5m was arranged at a five year fixed interest rate of 4% p.a. including all costs. This loan was refinanced on 12 May 2016 and a new ten year secured term loan facility of £15m was arranged at a ten year interest rate of 4.4% p.a. including all costs to replace the original £5m loan arranged in February 2015.

On 28 November 2019, the Company entered into a seven year secured term loan of £22m at a fixed interest rate of 3.1% per annum (3.3% per annum after all expenses) on £20.9m and at a floating rate of Libor plus 2.35% on the balance of £1.1m. The net proceeds will be held on accessible deposit until 31 March 2021 to refinance the Company's £15m 11% First Mortgage Debenture Stock 2021 which expires on that date and to support the acquisition of further UK properties and equities in accordance with the Company's investment policy.

Gearing has varied between 25% and 40% of the total portfolio. The Company will not raise new borrowings if total net borrowings would then represent more than 50% of the total assets.

No material changes may be made to the Company's investment policy described above without the prior approval of Shareholders by the passing of an Ordinary Resolution. In the year to 31 March 2020, no material changes were made to the Company's investment policy.

Performance, Results and Dividend

As at 31 March 2020, the Net Asset Value (NAV) total return (with debt at par) over one year was -21.8% and the Share Price total return over one year was -30.7%. This compares to the FTSE All-Share Index total return over one year of -18.5%. Total assets less current liabilities was £176.2 million. The first quarterly dividend for the year to 31 March 2020 of 2.9p per share was paid on 25 October 2019, the second quarterly dividend of 2.9p per share was paid on 31 January 2020 and the third quarterly dividend of 2.9p per share was paid on 24 April 2020.

A review of the performance of the equity and property portfolios is detailed in the Chairman's Statement and in the  Investment Managers' Reports. The Directors have declared that a fourth interim dividend of 3.4p per Ordinary Share (2019 final: 3.4p) is paid on 28 August 2020 to Shareholders on the register on 31 July 2020. The ex-dividend date is 30 July 2020.  This represents an annual increase in dividends of 2.5% as compared with the 1.5% and 2.6% respective annual increases in the Consumer Price and Retail Price Indices as at the end of March 2020. This continues the Company's strong long-term record of real growth in dividends, as detailed in the Financial Highlights in the Annual Report.

The table in the Annual Report shows the revenue reserve position and dividends paid and payable by the Company.

Principal and Emerging Risks and Uncertainties

The Board has an ongoing process for identifying, evaluating and monitoring the principal and emerging risks and uncertainties facing the Group and the Parent Company. The risk register forms a key part of the Group and the Parent Company's risk management framework used to carry out a robust assessment of the risks, including a significant focus on the controls in place to mitigate them. The principal and emerging risks and uncertainties which affect the Group and the Company's business are:

Market 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 - price risk, interest rate risk and currency risk.

Price risk

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. For equities, asset allocation and stock selection, as set out in the Investment Policy, both act to reduce market risk.

VIS delegates its portfolio management responsibilities to the Investment Managers, OLIM Limited (OLIM) and OLIM Property Limited (OLIM Property) (collectively, the Investment Managers) who actively monitor market prices throughout the year and report to VIS and to the Board, which meet regularly in order to review investment strategy. The equity investments held by the Group are listed on the London Stock Exchange. All investment properties held by the Group are commercial properties located in the UK with long, strong income streams.

Interest rate risk

Interest rate movements may affect:

-  the fair value of the investments in property;

-  the level of income receivable on cash deposits; and

-  the fair value of borrowings.

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 that gearing levels are appropriate to market conditions and reviews these on a regular basis. Current borrowings comprise debenture stocks, a ten year secured term loan and a seven year secured term loan, 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%.

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 Company's policy to hedge this risk.

Liquidity risk

This is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities.

The Group's assets comprise readily realisable securities which can be sold to meet commitments, if required, and investment properties which, by their nature, are less readily realisable. The maturity of the Company's existing borrowings is set out in the interest rate risk profile section of Note 21 to the Financial Statements.

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 number of brokers, whose credit standing is reviewed periodically by OLIM (which reports to VIS) 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 is performed on a daily basis to ensure that discrepancies are picked up on a timely basis. VIS carries  out periodic reviews of the Depositary's operations and reports its findings to the Company. This review also includes checks on the maintenance and security of investments held.

-  cash is held only with reputable banks with high quality external credit ratings which are monitored on a regular basis.

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 property valuation as at 31 March 2020 by the Independent Valuers, Savills, is subject to a material uncertainty clause due to the coronavirus pandemic.

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 17 years (up from 16 years in 2019) and 15 years if break options are exercised. Details of the tenant and geographical spread of the portfolio are set out in the Annual Report. The long-term record  of performance through the varying property cycles since 1987 is set out in the Annual Report. OLIM Property is responsible for property investment management, with surveyors, solicitors and managing agents acting on the portfolio under OLIM Property's supervision.

Political risk

The full political, economic and legal consequences of the UK's decision to leave the European Union (EU) are not yet known.

It is possible that investments in the UK may be more difficult to value and assess for suitability of risk, harder to buy or sell and may be subject to greater or more frequent rises and falls in value. In the longer term there is likely to be a period of uncertainty as the UK seeks to negotiate its ongoing relationship with the EU and other global trade partners. The UK's laws and regulations, including those relating to investment companies, may in future, diverge from those of the EU.

The Board reviews regularly the political situation, together with any associated changes to the economic, regulatory and legislative environment, to ensure that any risks arising are mitigated as effectively as possible.

An explanation of certain economic and financial risks and how they are managed is contained in Note 21 to the Financial Statements.

Climate Change and Social Responsibility Risk

The Board recognises that climate change is an important emerging risk that all companies should take into consideration within their strategic planning. As referred to elsewhere in this Strategic Report and in the Statement of Corporate Governance in this Annual Report, the Company has little direct impact on environmental issues. As an investment trust company, the Company has no direct employee or environmental responsibilities. The Board is aware that the Manager continues to take into account environmental, social and governance matters when considering investment proposals.

Other Emerging Risks

The Directors are cognisant of the potential impact of the coronavirus (COVID-19) outbreak and its implications for the activities of the Manager and on the performance of investee companies and assets. This is covered in more detail in the Chairman's Statement and in the Investment Managers' Reports in the Annual Report.

While VIT's property portfolio is sufficiently robust to withstand the current market impacts of the pandemic, there is a risk that, as noted in the Investment Managers' Report, property values may fall and tenants may struggle to pay rent. If this happens, there is a risk that loan to value and interest cover covenants could be breached. If this were to occur, VIT has sufficient cash and liquid equity investments to cover any loan repayments triggered by covenant breaches.  However, as noted in the Investment Managers Report, safe, long let property like the VIT Property Portfolio should prove resilient again once all our tenants are allowed to reopen and trade.

Additional risks and uncertainties include:

-  Discount volatility: The Company's shares may trade at a price which represents a discount to its underlying net asset value.

-  Regulatory risk: The Group operates in a complex regulatory environment and therefore faces a number of regulatory risks. A breach of Section 1158 of the Corporation Tax Act 2010 would result in the Company being subject to capital gains tax on portfolio investments. Breaches of other regulations, including but not limited to, the Companies Act 2006, the FCA Listing Rules, the FCA Disclosure, Guidance and Transparency Rules, the Market Abuse Regulation, the Foreign Account Tax Compliance Act, the Common Reporting Standard, the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation and the Second Markets in Financial Instruments Directive (MiFID II), could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers to the Company could also lead to reputational damage or loss. The Audit and Management Engagement Committee monitors compliance with regulations by reviewing internal control reports from the Administrator and from the Investment Managers.

The Alternative Investment Fund Managers Directive (AIFMD) introduced a new authorisation and supervisory regime for all managers of authorised investment funds in the EU.

In accordance with the requirements of the AIFMD,  the  Company  appointed  VIS  as its Alternative Investment Fund Manager (AIFM) and BNP Paribas Securities Services as its Depositary. The Board has controls in place in the form of regular reporting from the AIFM and the Depositary to ensure that both are meeting their regulatory responsibilities in relation to the Company.

The Company must also comply with the General Data Protection Regulation (GDPR) which came into force on 25 May 2018, replacing the Data Protection Act 1998. This regulation enforces the principle of 'privacy by design and by default' and enshrines new rights for individuals, including the right to be forgotten and to data portability. The Directors have worked with the third parties that process Shareholders' personal data to ensure that their rights under the new regulation are protected.

The Company's privacy policy is available to view on the Managers' websites www.olim.co.uk and www.olimproperty.co.uk.

Key Performance Indicators

At each Board Meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives and which also enable Shareholders and prospective investors to gain an understanding of its business.

A historical record of these performance measures, with comparatives, together with the Alternative Performance Measures (APMs) are shown in the Financial Highlights and Long-Term Record in the Annual Report. Definitions of the APMs can be found in the Glossary in the Annual Report.

In addition, the Board have identified the three key performance indicators below to determine the performance of the Company:

-  Net asset value total return relative to the FTSE All-Share Index (total return);

-  Share price total return relative to the FTSE All-Share Index (total return); and

-  Dividend growth relative to the Retail Prices Index.

The net asset value (NAV) total return is considered to be a more appropriate long-term measure of Shareholder value as it includes the current NAV per share and the sum of dividends paid to date.

The share price total return relative to the FTSE All-Share Index (total return) is the theoretical return including reinvesting each dividend in additional shares in the Company at the current mid-market price on the day that the shares go ex-dividend.

Dividend growth relative to the Retail Prices Index is included to track performance against inflation.

The Board reviews the Company's investment income and operational expenses on a quarterly basis, as the Directors consider that both of these elements are important components in the generation of Shareholder returns. Further information can be found in Notes 2 and 4 to the Financial Statements in the Annual Report.

The Board consider that the FTSE All-Share Index is the most appropriate index to use as a comparison to the performance of its equity portfolio and the MSCI (formerly IPD) Index as the main benchmark for commercial property performance. The Investment Managers' Reports report on how the Company performed during the year under review against the FTSE All-Share Index and the MSCI Index. In addition, the Directors will consider economic, regulatory and political trends and factors that may impact on the Company's future development and performance.

Statement of Compliance with Investment Policy

The Company is adhering to its stated investment policy and managing the risks arising from it. This can be seen in various tables and charts throughout this Annual Report, and from the information provided in the Chairman's Statement and the Investment Managers' Reports in the Annual Report.

Employee, Environmental and Human Rights Policy

As an investment trust company, the Company has no direct employee or environmental responsibilities, nor is it responsible for the emission of greenhouse gases. Its principal responsibility to Shareholders is to ensure that the investment portfolio is properly managed and invested. The Company has no employees and accordingly, has no requirement to report separately on employment matters.

Management of the investment portfolio is undertaken by the Investment Managers through members of their portfolio management teams. In light of the nature of the Company's business, there are no relevant human rights issues and, therefore, the Company does not have a human rights policy.

Independent Auditor

The Company's Independent Auditor is required to report if there are any material inconsistencies between the content of the Strategic Report and the Financial Statements. The Independent Auditor's Report can be found in the Annual Report.

Future Strategy

The Board and the Investment Managers intend to maintain the strategic policies set out above for the year ending 31 March 2021 as it is believed that these are in the best interests of Shareholders.

At the Annual General Meeting of the Company held in July 2016, Shareholders approved an amendment to the Company's Articles of Association. The amended Articles require the Board to put an Ordinary Resolution to Shareholders in 2024 in relation to the future direction of the Company, including proposals that provide an opportunity for Shareholders to realise their investment in full at Net Asset Value, less costs, by 31 March 2027 at the latest. The reason for doing this in 2024 is to give sufficient time for refinancing the debt or for selling properties as required. The Company's Viability Statement is included in the Annual Report.

Approval

This Business Review, and the Strategic Report as a whole, was approved by the Board of Directors and signed on its behalf by:

James Ferguson

Chairman

29 July 2020

Going Concern

The Group and the Parent Company's business activities, together with the factors likely to affect their future development and performance, are set out in the Directors' Report in the Annual Report, and the financial position of the Group and of the Parent Company is described in the Chairman's Statement. In addition, Note 21 to the Financial Statements includes: the policies and processes for managing the financial risks; details of the financial instruments; and the exposures to market price risk, interest rate risk, liquidity risk, credit risk and price risk sensitivity. The Directors believe that the Group and the Parent Company are well placed to manage their business risks.

Following a detailed review, and taking into account the impact of the COVID-19 pandemic referred to in the Chairman's Statement and in the Investment Managers' Reports, the Directors have a reasonable expectation that the Group and the Parent Company have adequate financial resources to enable them to continue in operational existence for the foreseeable future, being at least 12 months from approval of the Financial Statements, and accordingly, they have continued to adopt the going concern basis (as set out in Note 1(b) to the Financial Statements when preparing the Annual Report and Financial Statements.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

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 IFRS as adopted by the EU and Article 4 of the EU IAS Regulation and have also chosen to prepare the parent company financial statements under IFRS as adopted by the EU. The Financial Statements are required by law to give a true and fair view of the state of affairs of the Group and Company and of the net return of the Group and Company for that period. In preparing these Financial Statements, the Directors are required to:

-  select suitable accounting policies and then apply them consistently;

-  make judgements and estimates that are reasonable and prudent;

-  state whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the Financial Statements; and

-  prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that 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.  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 Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's websites hosted by the Investment Managers. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

The Directors are also responsible for ensuring that the Annual Report and Financial Statements, taken as a whole is fair, balanced and understandable and provides the information necessary to assess the Company's position and performance, business model and strategy.

Directors' Responsibility Statement

Each Director confirms, to the best of his or her knowledge, that:

-  the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole as at 31 March 2020 and for the year to that date; and that

-  the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings  included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

The Directors confirm that the Annual Report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary to assess the Company's position and performance, business model and strategy.

For and on behalf of the Board of Value and Income Trust PLC

James Ferguson

Chairman

29 July 2020

Group Statement of Comprehensive Income

For the year ended 31 March

		Year ended 31 March 2020			Year ended 31 March 2019 (Restated)
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
INCOME
Investment income	2	5,931	-	5,931	6,215	-	6,215
Rental income	2	4,716	-	4,716	4,491	-	4,491
Other income	2	97	-	97	9	-	9
GAINS AND LOSSES ON INVESTMENTS		10,744	-	10,744	10,715	-	10,715
Realised (losses)/gains on held-at-fair-value investments and Investment properties	9	-	(3,482)	(3,482)	-	5,294	5,294
Unrealised losses on held-at-fair-value investments and investment properties	9	-	(31,381)	(31,381)	-	(3,613)	(3,613)
TOTAL INCOME		10,744	(34,863)	(24,119)	10,715	1,681	12,396
EXPENSES Investment management fees	3	(345)	(805)	(1,150)	(348)	(813)	(1,161)
Other operating expenses	4	(878)	-	(878)	(781)	-	(781)
FINANCE COSTS	5	(4,609)	-	(4,609)	(4,359)	-	(4,359)
TOTAL EXPENSES		(5,832)	(805)	(6,637)	(5,488)	(813)	(6,301)
(LOSS)/PROFIT BEFORE TAXATION		4,912	(35,668)	(30,756)	5,227	868	6,095
TAXATION	6	(263)	359	96	(241)	343	102
(LOSS)/PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF PARENT COMPANY		4,649	(35,309)	(30,660)	4,986	1,211	6,197
EARNINGS PER ORDINARY SHARE (PENCE)	7	10.21	(77.52)	(67.31)	10.95	2.65	13.60

The total column of this statement represents the Statement of Comprehensive Income of the Group, 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.

The Group does not have any other comprehensive income and so the total (loss)/profit, as disclosed above, is the same as the Group's total comprehensive income. All income is attributable to the equity holders of Value and Income Trust PLC, the parent company. There are no minority interests. 

The Notes form part of these Financial Statements.

The Board has declared a fourth interim dividend of 3.40p per share, making total dividends of 12.10p per share for the year ended 31 March 2020 (2019: 11.80p per share) payable on 28 August 2020 (see Note 8).

Company Statement of Comprehensive Income

For the year ended 31 March

		Year ended 31 March 2020			Year ended 31 March 2019 (Restated)
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
INCOME
Investment income	2	5,931	-	5,931	6,215	-	6,215
Rental income	2	4,716	-	4,716	4,491	-	4,491
Other income	2	97	-	97	9	-	9
		10,744	-	10,744	10,715	-	10,715
GAINS AND LOSSES ON INVESTMENTS Realised (losses)/gains on held-at-fair-value investments and investment properties	9	-	(3,482)	(3,482)	-	5,294	5,294
Unrealised losses on held-at-fair-value investments and investment properties	9	-	(30,781)	(30,781)	-	(3,015)	(3,015)
TOTAL INCOME		10,744	(34,263)	(23,519)	10,715	2,279	12,994
EXPENSES Investment management fees	3	(345)	(805)	(1,150)	(348)	(813)	(1,161)
Other operating expenses	4	(878)	-	(878)	(781)	-	(781)
FINANCE COSTS	5	(4,576)	-	(4,576)	(4,327)	-	(4,327)
TOTAL EXPENSES		(5,799)	(805)	(6,604)	(5,456)	(813)	(6,269)
(LOSS)/PROFIT BEFORE TAXATION		4,945	(35,068)	(30,123)	5,259	1,466	6,725
TAXATION	6	(263)	359	96	(241)	343	102
(LOSS)/PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF PARENT COMPANY		4,682	(34,709)	(30,027)	5,018	1,809	6,827
EARNINGS PER ORDINARY SHARE (PENCE)	7	10.28	(76.20)	(65.92)	11.02	3.97	14.99

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. 

The Company does not have any other comprehensive income and so the total (loss)/profit, as disclosed above, is the same as the Company's total comprehensive income.

The Notes form part of these Financial Statements.

Group Statement of Financial Position

As at 31 March

		As at 31 March 2020		As at 31 March 2019 (Restated)		As at 31 March 2018 (Restated)
	Note	£'000	£'000	£'000	£'000	£'000	£'000
ASSETS NON CURRENT ASSETS
Investments held at fair value through profit or loss	9		90,757		128,706		128,925
Investment properties	9		74,459		73,074		72,987
			165,216		201,780		201,912
Deferred tax asset	6		485		389		287
			165,701		202,169		202,199
CURRENT ASSETS
Cash and cash equivalents		26,428		4,338		3,639
Receivables	10	668		907		711
			27,096		5,245		4,350
TOTAL ASSETS			192,797		207,414		206,549
CURRENT LIABILITIES
Debenture stock	11	(15,000)		-		-
Payables	11	(1,624)		(1,809)		(1,860)
			(16,624)		(1,809)		(1,860)
TOTAL ASSETS LESS CURRENT LIABILITIES			176,173		205,605		204,689
NON-CURRENT LIABILITIES
Payables		(4,243)		(4,259)		(4,272)
Borrowings	12	(56,623)		(49,913)		(49,898)
			(60,866)		(54,172)		(54,170)
NET ASSETS			115,307		151,433		150,519
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Called up share capital	14		4,555		4,555		4,555
Share premium	15		18,446		18,446		18,446
Retained earnings	16		92,306		128,432		127,518
TOTAL EQUITY			115,307		151,433		150,519
NET ASSET VALUE PER ORDINARY SHARE (PENCE)	17		253.14		332.45		330.45

These Financial Statements were approved by the Board on 29 July 2020 and were signed on its behalf by:-

JAMES FERGUSON, CHAIRMAN

The Notes form part of these Financial Statements.

Company Statement of Financial Position

As at 31 March 

		As at 31 March 2020		As at 31 March 2019 (Restated)		As at 31 March 2018 (Restated)
	Note	£'000	£'000	£'000	£'000	£'000	£'000
ASSETS NON CURRENT ASSETS
Investments held at fair value through profit or loss	9		90,957		128,906		129,125
Investment properties	9		75,687		74,336		74,281
			166,644		203,242		203,406
Deferred tax asset	6		485		389		287
			167,129		203,631		203,693
CURRENT ASSETS
Cash and cash equivalents		26,228		4,138		3,439
Receivables	10	668		907		711
			26,896		5,045		4,150
TOTAL ASSETS			194,025		208,676		207,843
CURRENT LIABILITIES
Debenture stock	11	(15,630)		-		-
Payables	11	(1,659)		(1,843)		(1,894)
			(17,289)		(1,843)		(1,894)
TOTAL ASSETS LESS CURRENT LIABILITIES			176,736		206,833		205,949
NON-CURRENT LIABILITIES
Payables		(5,437)		(5,487)		(5,532)
Borrowings	12	(56,623)		(51,176)		(51,791)
			(62,060)		(56,663)		(57,323)
NET ASSETS			114,676		150,170		148,626
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Called up share capital	14		4,555		4,555		4,555
Share premium	15		18,446		18,446		18,446
Retained earnings	16		91,675		127,169		125,625
TOTAL EQUITY			114,676		150,170		148,626
NET ASSET VALUE PER ORDINARY SHARE (PENCE)	17		251.76		329.68		326.29

These Financial Statements were approved by the Board on 29 July 2020 and were signed on its behalf by:-

JAMES FERGUSON, CHAIRMAN

The Notes form part of these Financial Statements.

Statement of Changes in Equity

For the year ended 31 March

Year ended 31 March 2020

		Share capital	Share premium	Retained earnings	Total
	Note	£'000	£'000	£'000	£'000
GROUP
Net assets at 31 March 2019 (Restated)		4,555	18,446	128,432	151,433
Loss for the year		-	-	(30,660)	(30,660)
Dividends paid	8	-	-	(5,466)	(5,466)
Net assets at 31 March 2020		4,555	18,446	92,306	115,307
COMPANY
Net assets at 31 March 2019 (Restated)		4,555	18,446	127,169	150,170
Loss for the year		-	-	(30,027)	(30,027)
Dividends paid	8	-	-	(5,466)	(5,466)
Net assets at 31 March 2020		4,555	18,446	91,676	114,677

Year ended 31 March 2019

		Share capital	Share premium	Retained earnings	Total
	Note	£'000	£'000	£'000	£'000
GROUP
Net assets at 31 March 2018		4,555	18,446	127,518	150,519
Profit for the year		-	-	6,197	6,197
Dividends paid	8	-	-	(5,283)	(5,283)
Net assets at 31 March 2019		4,555	18,446	128,432	151,433
COMPANY
Net assets at 31 March 2018		4,555	18,446	125,625	148,626
Profit for the year		-	-	6,827	6,827
Dividends paid	8	-	-	(5,283)	(5,283)
Net assets at 31 March 2019		4,555	18,446	127,169	150,170

The Notes form part of these Financial Statements.

Group Statement of Cashflows

For the year ended 31 March

		2020		2019 (Restated)
	Note	£'000	£'000	£'000	£'000
Cash flows from operating activities
Dividend income received			6,466		5,994
Rental income received			4,162		4,499
Interest received			10		8
Operating expenses paid			(2,101)		(1,975)
NET CASH INFLOW FROM OPERATING ACTIVITIES	18		8,537		8,526
Cash flows from investing activities
Purchase of investments held at fair value through profit or loss		(13,900)		(21,225)
Purchase of investment properties		(10,758)		(9,409)
Sale of investments held at fair value through profit or loss		17,160		22,269
Sale of investment properties		9,199		10,178
NET CASH INFLOW FROM INVESTING ACTIVITIES			1,701		1,813
Cash flow from financing activities
Loans drawn down		22,000		-
Fees paid on new loan		(320)		-
Interest paid on loans		(4,156)		(4,153)
Finance cost of leases		(191)		(191)
Payment of lease liabilities		(15)		(13)
Dividends paid	8	(5,466)		(5,283)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES			11,852		(9,640)
NET INCREASE IN CASH AND CASH EQUIVALENTS			22,090		699
Cash and cash equivalents at 1 April 2019			4,338		3,639
CASH AND CASH EQUIVALENTS AT 31 MARCH 2020			26,428		4,338

The Notes form part of these Financial Statements.

Company Statement of Cashflows

For the year ended 31 March

		2020		2019 (Restated)
	Note	£'000	£'000	£'000	£'000
Cash flows from operating activities
Dividend income received			6,466		5,994
Rental income received			4,162		4,499
Interest received			10		8
Operating expenses paid			(2,101)		(1,975)
NET CASH INFLOW FROM OPERATING ACTIVITIES	18		8,537		8,526
Cash flows from investing activities
Purchase of investments held at fair value through profit or loss		(13,900)		(21,225)
Purchase of investment properties		(10,758)		(9,409)
Sale of investments held at fair value through profit or loss		17,160		22,269
Sale of investment properties		9,199		10,178
NET CASH INFLOW FROM INVESTING ACTIVITIES			1,701		1,813
Cash flow from financing activities
Loans drawn down		22,000		-
Fees paid on new loan		(320)		-
Interest paid on loans		(4,156)		(4,153)
Finance cost of leases		(191)		(191)
Payment of lease liabilities		(15)		(13)
Dividends paid	8	(5,466)		(5,283)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES			11,852		(9,640)
NET INCREASE IN CASH AND CASH EQUIVALENTS			22,090		699
Cash and cash equivalents at 1 April 2019			4,138		3,439
CASH AND CASH EQUIVALENTS AT 31 MARCH 2020			26,228		4,138

The Notes form part of these Financial Statements.

Notes to the Financial Statements

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 presentational currency of the Group and Company is pounds sterling because that is the currency of the primary economic environment in which the Group and Company operate. The Financial Statements and the accompanying notes are presented in pounds sterling and rounded to the nearest thousand pounds except where otherwise indicated.

(a)  Basis of preparation

The Financial Statements have been prepared on a going concern basis as disclosed 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 October 2019 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, except for the allocation of finance costs to revenue as explained in Note 1(f).

The Board has considered the requirements of IFRS 8, 'Operating Segments'. The Board is charged with setting the Group's investment strategy. The Board has delegated the day to day implementation of this strategy to the Investment Managers but the Board retains responsibility to ensure that adequate resources of the Group are directed in accordance with its decisions. The Board is of the view that the Group is engaged in a single segment of business, being investments in quoted UK equities and UK commercial properties. The view that the Group is engaged in a single segment of business is based on the fact that one of the key financial indicators received and reviewed by the Board is the total return from the investment portfolio taken as a whole. A review of the investment portfolio is included in the Investment Managers' Reports in the Annual Report.

(b)  Going concern

The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Strategic Report in the Annual Report. The financial position of the Group as at 31 March 2020 is shown in the Statement of Financial Position in the Annual Report. The cash flows of the Group for the year ended 31 March 2020 are set in the Annual Report. The Group had fixed debt totalling £71,623,000 as at 31 March 2020, as set out in Notes 11 and 12; none of the borrowings is repayable before March 2021. Note 21 sets out the Group's risk management policies and procedures, including those covering market price risk, liquidity risk and credit risk. As at 31 March 2020, the Group's total assets less current liabilities exceeded its total non current liabilities by a factor of over two. The assets of the Group consist mainly of securities and investment properties that are held in accordance with the Group's investment policy. Most of these securities are readily realisable, even in volatile markets. The Directors, who have reviewed carefully the Group's forecasts for the coming year, consider that the Group has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements.

(c)  Basis of consolidation

The consolidated Financial Statements incorporate the Financial Statements of the Company and the entity controlled by the Company (its subsidiary). An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has ability to affect those returns through its power over the investee. The Company consolidates the investee that it controls. 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.

Value and Income Services Limited is a private limited company incorporated in Scotland under company number SC467598. It is a wholly owned subsidiary of the Company and has been appointed to act as Alternative Investment Fund Manager of the Company.

(d)  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 Articles, net capital returns may 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 sections 1158-1160 of the Corporation Tax Act 2010.

(e)  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 receivable and lease incentives, where material, from investment properties under operating leases are recognised in the Statement of Comprehensive Income over the term of the lease on a straight line basis. Other income is recognised on an accruals basis.

(f)  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 and in accordance with the SORP, the investment management fees are allocated 30% to revenue and 70% to capital to reflect the Board's expectations of long term investment returns.

It is normal practice and in accordance with the SORP 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 allocate finance costs to revenue to match rental income, the Directors consider that, contrary to the SORP, it is inappropriate to allocate finance costs to capital.

(g)  Receivables and Payables

Receivables do not carry any interest and are stated at their nominal value, as reduced by any impairment calculated using an expected credit loss model. Payables are not interest bearing and are stated at their nominal value.

(h)  Taxation

The Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the date of the Statement of Financial Position.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the date of the Statement of Financial Position, 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 date of the Statement of Financial Position.

This is subject to deferred tax assets only being recognised if it is considered more probable 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 maintain 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.

(i)  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.

(j)  Investments

Equity investments

All equity investments are classified on the basis of their contractual cashflow characteristics and the Group's business model for managing its assets. The business model, which is the determining feature, is such that the portfolio of equity investments is managed, and performance is evaluated, on the basis of  fair value. Consequently, all equity investments are measured at fair value through profit or loss.

For listed investments, fair value through profit or loss 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 Statement of Comprehensive Income and are ultimately recognised in the retained earnings.

Investment property

Investment properties are initially recognised at cost, being the fair value of consideration given, including transaction costs associated with the investment property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and is included within the book cost of the property.

After initial recognition, investment properties are measured at fair value. 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 Statement of Comprehensive Income and are ultimately recognised in the retained earnings.

As disclosed in Note 21, the Group leases out all of its properties on operating leases. A property held under an operating lease is classified and accounted for as an investment property where the Group holds it to earn rental, capital appreciation or both. Any such property leased under an operating lease is carried at fair value. Fair value is established by half-yearly professional valuation on an open market basis by Savills (UK) Limited, Chartered Surveyors and Valuers, and in accordance with the RICS Valuation - Global Standards January 2020 (the 'RICS Red Book'). The determination of fair value by Savills is supported by market evidence. These valuations are disclosed in Note 9.

The Company accounts for its investment in its subsidiary at fair value. All fair value adjustments in relation to the subsidiary are eliminated on consolidation.

(k)  Cash and cash equivalents

Cash and cash equivalents comprises deposits held with banks. 

(l)  Non-current liabilities

All new loans and borrowings are initially measured at cost, being the fair value of the consideration received, less issue costs where applicable. Thereafter, 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.

(m)  Leases

The Group leases properties that meet the definition of investment property. These right-of-use assets are presented as part of Investment Properties in the Balance Sheet and held at fair-value.

(n)  Critical accounting judgements and key estimates

The preparation of the Financial Statements requires the Directors to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The critical accounting area involving a higher degree of judgement or complexity comprises the determination of fair value of the investment properties. The Group engages independent professional qualified valuers to perform the valuation. Information about the valuation techniques and inputs used in determining fair value as at 31 March 2020 is disclosed in Note 9. As a result of the COVID-19 pandemic, the valuation report from Savills as at 31 March 2020 includes a material valuation uncertainty clause which states that less weight can be attached to previous market evidence for comparison purposes to inform fully opinions of value due to there being an unprecedented set of circumstances on which to base judgement. Consequently, less certainty and a higher degree of caution should be attached to their valuation than would normally be the case

(o)   Adoption of new and revised Accounting Standards

New and revised standards and interpretations that became effective during the year, other than IFRS 16, had no significant impact on the amounts reported in these Financial Statements but may impact accounting for future transactions and arrangements. After the adoption of IFRS 16, a right-of-use asset and lease liability are required to be recognised on the Balance Sheet with the right-of use asset classified as investment property and subsequently fair-valued under IAS 40.  As the leased assets have been adjusted to have been recognised previously under finance leases, and meet the definition of and are included in investment property, they are not  affected.

At the date of authorisation of these Financial Statements, the following Standards and interpretations, which have not been applied to these Financial Statements, were in issue but were not yet effective.

Standards

IAS 1 Amendments - Classification of Liabilities as current or non-current (effective 1 January 2022)

IAS 1 and IAS 8 Amendments - Definition of Material (effective 1 January 2020)

IAS 1, 8, 34, 37, 38 and IFRS 2, 3, 6, 14 - Amendment to references to the conceptual framework (effective 1 January 2020)

IFRS  3 Amendment - Definition of a Business (effective 1 January 2020)

IFRS 17 - Insurance Contracts (effective 1 January 2023)

IFRS 9, IAS 39 and IFRS 7 Amendments - Interest Rate Benchmark Reform (effective 1 January 2020)

Interpretations

IFRIC 12, 19, 20, 22 and SIC 32 - Amendment to references to the conceptual framework (effective 1 January 2020)

The Directors do not expect the adoption of these Standards and interpretations (or any other Standards and interpretations which are in issue but not effective) will have a material impact on the Financial Statements of the Group in future periods.

2  Income

	2020		2019 (Restated)
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
Investment income
Dividends from listed investments in UK	5,931	5,931	6,215	6,215
Other operating income
Rental income (restated)	4,716	4,716	4,491	4,491
Interest receivable on short term deposits	97	97	9	9
Total income	10,744	10,744	10,715	10,715

3  Investment management fee

		2020				2019
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Group and Company
Investment management fee	345	805	1,150		348	813	1,161

A summary of the terms of the management agreement is given in the Directors' Report.

4  Other operating expenses

	2020		2019
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
Fee payable to the Company's auditor for the audit of the Company's accounts	50	50	30	30
- audit of the Subsidiary's accounts	2	2	4	4
Fee payable to the Company's former auditor for other services
- other assurance services	3	3	4	4
- other non audit services	7	7	2	2
Directors' fees	94	94	88	88
NIC on Directors' fees	5	5	4	4
Fees for company secretarial services	211	211	206	206
Direct property costs	31	31	(4)	(4)
Other expenses	475	475	447	447
	878	878	781	781

Other non-audit services provided by the former Auditor comprise consideration of compliance with covenants.

Directors' fees comprise the Chairman's fees of £28,875 (2019 - £27,500), the Audit Committee Chairman's fees of £23,500 (2019 - £20,000) and fees of £21,000 (2019 - £20,000) per annum paid to each other Director.    

Additional information on Directors' fees is given in the Directors' Remuneration Report.

OLIM Limited  received an investment management fee of £738,000 (2019 - £757,000), the basis of calculation of which is given in the Annual Report.

OLIM Property Limited received an investment management fee of £412,000 (2019 - £404,000), the basis of calculation of which is given in the Annual Report.

5  Finance costs

	2020		2019 (Restated)
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
Interest payable on: 11% First Mortgage Debenture Stock 2021	1,650	1,650	1,650	1,650
9.375% Debenture Stock 2026	1,875	1,875	1,875	1,875
Less amortisation of issue premium	(23)	(23)	(24)	(24)
Bank loan interest payable	863	863	628	628
Amortisation of loan expenses	54	54	39	39
Finance costs attributable to lease liabilities	190	157	191	159
	4,609	4,576	4,359	4,327

6  Taxation

	2020			2019 (Restated)
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
a) Analysis of the tax credit/(charge) for the year:
Group
Current tax	(263)	263	-	(241)	241	-
Deferred tax	-	96	96	-	102	102
	(263)	359	96	(241)	343	102
Factors affecting the total tax credit/(charge) for year:
(Loss)/profit before tax			(30,756)			6,095
Tax (credit)/charge thereon at 19% (2019 - 19%)			(5,844)			1,158
Effects of:
Non taxable dividends			(1,127)			(1,181)
Losses/(gains) on investments not taxable			6,624			(320)
Unrelieved finance costs			251			308
Losses brought forward now utilised			-			(67)
			(96)			(102)
	2020			2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Company
Current tax	(263)	263	-	(241)	241	-
Deferred tax	-	96	96	-	102	102
	(263)	359	96	(241)	343	102
Factors affecting the total tax credit/(charge) for year:
(Loss)/profit before tax			(30,123)			6,725
Tax (credit)/charge thereon at 19% (2019 - 19%)			(5,723)			1,278
Effects of:
Non taxable dividends			(1,127)			(1,181)
Losses/(gains) on investments not taxable			6,510			(433)
Unrelieved finance costs			244			301
Losses brought forward now utilised			-			(67)
			(96)			(102)

b) Factors affecting future tax charges

Unutilised tax losses			29,712			27,545
Potentialtaxbenefitat19%(2019-19%)			5,645			5,233
Recognised as a deferred tax non-current asset			485			389
Not recognised as a deferred tax asset			5,160			4,844
			5,645			5,233

The Company and Group have deferred tax assets of £5,645,000 (2019 - £5,233,000) at 31 March 2020 relating to total accumulated unrelieved tax losses carried forward of £29,712,000 (2019 - £27,545,000). The Company and Group have recognised deferred tax assets of £485,000 (2019 - £389,000), based on forecast profits for the next five years but have not recognised deferred tax assets of £5,160,000 (2019 - £4,844,000) arising as a result of losses carried forward. These losses do not have an expiry date but it is considered too uncertain that the Group will generate profits against which these losses would be available to offset and, on that basis, the deferred tax asset in respect of these losses has not been recognised. 

7  Return per ordinary share

	2020		2019 (Restated)
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
The return per ordinary share is based on the following figures:
Revenue return	4,649	4,682	4,986	5,018
Capital return	(35,309)	(34,709)	1,211	1,809
Weighted average ordinary shares in issue	45,549,975	45,549,975	45,549,975	45,549,975
Return per share - revenue	10.21p	10.28p	10.95p	11.02p
Return per share - capital	(77.52p)	(76.20p)	2.65p	3.97p
Total return per share	(67.31p)	(65.92p)	13.60p	14.99p

8  Dividends

	2020	2019
	£'000	£'000
Dividends on ordinary shares:
Third quarterly dividend of 2.80p per share (2019 - 2.70p) paid 26 April 2019	1,275	1,230
Final dividend of 3.40p per share (2019 - 3.30p) paid 26 July 2019	1,549	1,503
First quarterly dividend of 2.90p per share (2019 - 2.80p) paid 25 October 2019	1,321	1,275
Second quarterly dividend of 2.90p per share (2019 - 2.80p) paid 31 January 2020	1,321	1,275
Dividends paid in the period	5,466	5,283

The third interim dividend of 2.90p (2019 - 2.80p) paid on 24 April 2020, has not been included as a liability in these Financial Statements.  

The fourth interim dividend of 3.40p (2019 final - 3.40p) being paid on 28 August 2020, has not been included as a liability in these Financial Statements.

Set out below is the total dividend paid and declared in respect of the financial year, which is the basis upon which the requirements of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered. The current year's revenue available for distribution by way of dividend is £4,682,000 (2019 - £5,018,000). 

	2020	2019
	£'000	£'000
First quarterly dividend of 2.90p per share (2019- 2.80p) paid 25 October 2019	1,321	1,275
Second quarterly dividend of 2.90p per share (2019- 2.80p) paid 31 January 2020	1,321	1,275
Third quarterly dividend of 2.90p per share (2019- 2.80p) payable 24 April 2020	1,321	1,275
Fourth quarterly dividend for the year ended 31 March 2020 - 3.40p (2019 final - 3.40p) payable 28 August 2020	1,549	1,549
	5,512	5,374

9  Investments

		Equities	Investment properties		Total
		£'000	£'000		£'000
Group
Cost at 31 March 2019		93,048		46,810		139,858
Unrealised appreciation (restated)		35,658		26,264		61,922
Valuation at 31 March 2019 (restated)		128,706		73,074		201,780
Purchases		13,900		10,758		24,658
Sales proceeds		(17,160)		(9,199)		(26,359)
Realised (losses)/gains on sales		(4,432)		950		(3,482)
Movement in unrealised appreciation in year		(30,257)		(1,124)		(31,381)
Valuation at 31 March 2020		90,757		74,459		165,216
	Equities	Investment in Subsidiary		Investment properties		Total
	£'000	£'000		£'000		£'000
Company
Cost at 31 March 2019	93,048	200		55,139		148,387
Unrealised appreciation (restated)	35,658	-		19,197		54,855
Valuation at 31 March 2019 (restated)	128,706	200		74,336		203,242
Purchases	13,900	-		10,757		24,657
Sales proceeds	(17,160)	-		(9,199)		(26,359)
Realised (losses)/gains on sales	(4,432)	-		950		(3,482)
Movement in unrealised appreciation in year	(30,257)	-		(1,157)		(31,414)
Valuation at 31 March 2020	90,757	200		75,687		166,644

As noted in Notes 11 and 12, the movement in unrealised appreciation in the year disclosed in the Company's Statement of Comprehensive Income includes amortisation of £633,000 (2019 - £630,000) relating to the transfer of the 11% Debenture Stock 2021 from Audax Properties Limited to the Company in 2014. 

Of the investment properties held, properties valued at a total of £37,000,000 are held as security over the 11% Debenture Stock 2021.  

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:- 

	2020	2019
	£'000	£'000
Purchases	83	116
Sales	17	22
	100	138

The fair values of the investment properties were independently valued by professional valuation on an open market basis for existing use by Savills (UK) Limited, Chartered Surveyors, acting in the capacity of External Valuers as defined in the RICS Red Book (but not for the avoidance of doubt as an External Valuer of the portfolio as defined by the Alternative Investment Fund Managers Regulations 2013). The valuations accord with the requirements of IFRS 13 and the RICS Valuation - Global Standards (incorporating the IVSC International Valuation Standards) effective from 31 January 2020 together, where applicable, with the UK National Supplement effective 14 January 2019 (together the 'Red Book') by reference to the Investment Method whereby the net annual income derived from a property is capitalised by an appropriate capitalisation rate or Years' Purchase figure to arrive at the present Capital Value of the property after an allowance for the purchaser's costs. The relevant capitalisation rate is chosen, based on the investment rate of return expected (as derived from comparisons of other similar property investments) for the type of property concerned and taking into consideration such factors as risk, capital appreciation, security of income, ease of sale and management of the property. 

The World Health Organisation declared the Novel Coronavirus (COVID-19) a global pandemic on the 11 March 2020. Since then, global financial markets have been affected and travel restrictions have been implemented by many countries. Prior to this date, investor sentiment was positive, as can be seen by the increased levels of transactions witnessed in January and February 2020. Between 11 March 2020 and the valuation date, there was a degree of uncertainty in the market, resulting in many transactions being put on hold or withdrawn from the market.

As a result of the COVID-19 pandemic, the valuation report from Savills as at 31 March 2020 includes a material valuation uncertainty clause which states that less weight can be attached to previous market evidence for comparison purposes to inform fully opinions of value due to there being an unprecedented set of circumstances on which to base judgement. Consequently, less certainty and a higher degree of caution should be attached to their valuation than would normally be the case.

As part of Savills' standard process, the valuations were carried out by specialist valuers, which were peer reviewed and reviewed again prior to the valuation date. During the review process, the various characteristics of each asset were taken into consideration and, where appropriate, an additional level of risk was applied taking into account the effect on market sentiment brought on by COVID-19. Due to the make-up of the portfolio, which predominately comprises industrial, foodstore and long let properties, yield discounts were only applied to a number of Licenced and Leisure assets, where capitalisation rates were moved out by between 25 and 50 basis points. 

Property portfolio	Fair value - Group £'000	Key unobservable input	Inputs
			Range	Blended Yield
Industrials	24,967	Net Equivalent Yield	5.00% - 6.50%	5.97%
Pubs	22,550	Net Initial Yield	3.50% -12.00%	5.45%
Other	11,050	Net Equivalent Yield	6.00% - 7.25%	6.16%
Leisure - Bowling	8,800	Net Initial Yield	6.60% - 7.60%	7.15%
Roadside	5,842	Net Equivalent Yield	6.50% - 8.00%	7.04%
Supermarkets	1,250	Net Equivalent Yield	5.00%	5.04%
	74,459

One of the properties within the Roadside sector, previously owned by Audax Properties plc, was, on 28 March 2014, transferred to Value and Income Trust PLC (VIT). The calculation of fair value in the Company's Financial Statements is therefore greater by £1,228,000 (2019 - £1,262,000) due to the requirement to reflect the inter-group transfer at fair value at that date. The input information remains the same.

A 50 bps increase in the equivalent yield applied would have decreased the net assets attributable to the Group and Company's shareholders and the total loss for the year by £950,000. A 50 bps decrease in the equivalent yield applied would have increased the net assets attributable to the Group and Company's shareholders and the total loss for the year by £1,050,000. A 5% decrease in the rental value applied would have decreased the net assets attributable to the Group and Company's shareholders and the total loss for the year by £3,300,000. A 5% increase in the rental value applied would have increased the net assets attributable to the Group and Company's shareholders and the total loss for the year by £3,700,000.

Investment in subsidiary

	Country of incorporation	Date of acquisition	% Ownership	Principal activity
Name
Value and Income Services Limited	UK	16 January 2014	100	AIFM

10  Receivables

	2020		2019
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
Amounts falling due within one year: Dividends receivable	323	323	849	849
Prepayments and accrued income	345	345	58	58
	668	668	907	907

11  Current Liabilities

	2020		2019
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
Debenture stock
11% First Mortgage Debenture Stock 2021	15,000	15,000	-	-
Fair value adjustment	-	630	-	-
	15,000	15,630	-	-

The 11% First Mortgage Debenture Stock 2021, previously issued by Audax Properties plc, was, on 28 March 2014, transferred to Value and Income Trust PLC (VIT) following the approval of the substitution of VIT as issuer of the Debentures by the holders on 11 March 2014. Applications were made to the UK Listing Authority and the London Stock Exchange for the Debentures to be admitted in the name of VIT to the Official List and to trading on the main market of the London Stock Exchange from 28 March 2014.

The 11% First Mortgage Debenture Stock 2021, now issued by VIT, is repayable at par on 31 March 2021 and is secured over specific assets of the Company. Under IAS 39, now IFRS 9, this debenture required to be recorded initially at fair value of £19,417,000, rather than its nominal value of £15,000,000 in the Company's Financial Statements. The amortised cost of the debenture as at 31 March 2020 was £15,630,000 (2019 - £16,263,000). The amortisation of the fair value adjustment is presented as a capital item within gains/losses on investments as it relates to the reversal of a previously recognised loss on the Company's investment in its subsidiary. In the Group Financial Statements, the fair value adjustment is eliminated on consolidation.

The Trust Deed of the 11% Debenture Stock contains four covenants with which the Company has complied.

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.

Payables

	2020				2019 (Restated)
	Group		Company		Group		Company
	£'000		£'000		£'000		£'000
Amounts due to OLIM Limited	4		4		74		74
Amounts due to OLIM Property Limited	34		34		34		34
Accruals and other creditors	1,371		1,372		1,509		1,509
Value Added Tax payable	199		199		177		177
Lease liability (restated)	16		50		15		49
	1,624		1,659		1,809		1,843

The amounts due to OLIM Limited and OLIM Property Limited comprise the monthly management fee for March 2020, subsequently paid in April 2020.

12  Non-current liabilities

	2020				2019 (Restated)
	Group		Company		Group		Company
	£'000		£'000		£'000		£'000
Bank loans	37,000		37,000		15,000		15,000
Balance of costs incurred	(590)		(590)		(308)		(308)
Add: Debit to income for the year	54		54		39		39
	36,464		36,464		14,731		14,731
11% First Mortgage Debenture Stock 2021 (per Note 11)	-		-		15,000		15,000
Fair value adjustment	-		-		-		1,263
	-		-		15,000		16,263
9.375% Debenture Stock 2026	20,000		20,000		20,000		20,000
Add: Balance of premium less issue expenses	182		182		206		206
Less: Credit to income for the year	(23)		(23)		(24)		(24)
	20,159		20,159		20,182		20,182
Lease liability payable in more than one year
-  within 2-5 years	74		214		70		208
-  over 5 years	4,169		5,233		4,189		5,279
	4,243		5,437		4,259		5,487
	60,866		62,060		54,172		56,663

The Company has a £15,000,000 fixed term secured loan facility for a period of up to ten years to 31 March 2026 (2019 - £15,000,000). At 31 March 2020, £11,893,750 was drawn down at a rate of 4.344% and £3,106,250 was drawn down at a rate of 3.60%. The terms of the loan facility contain financial covenants that require the Company to ensure that:-   

-   in respect of each 3 month period ending on 31 March and 30 September (the Half Year dates), net rental income shall be at least 200 per cent of interest costs;

-   in respect of each 12 month period beginning immediately after 31 March and 30 September, net rental income shall be at least 200 per cent of interest costs; and

-   at all times, the loan shall not exceed 60 per cent of the value of the properties that have been charged.   

On 28 November 2019, the Company entered into a £22,000,000 fixed term secured loan facility for a period of up to seven years up to 30 November 2026. At 31 March 2020, £20,900,000 was drawn down at a fixed rate of 3.09229% and £1,100,000 was drawn down at a variable rate of 3.18562% (being LIBOR for the period equal in length to the interest period of the loan plus a margin of 2.35%). The terms of the loan facility contain financial covenants that require the Company to ensure that:-

-   the total debt ratio does not at any time exceed 50 per cent;

-   projected interest cover is not less than 200 per cent at all times; and

-   the Loan to Value shall not exceed 68% of the value of the properties that have been charged.   

The 9.375% Debenture Stock 2026 issued by VIT 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 9.375% Debenture Stock contains restrictions and events of default. The restrictions require that the aggregate group borrowings, £72 million, must not at any time exceed the total group capital and reserves (equivalent to net assets of £115.30 million as at 31 March 2020). 

The fair values of the loan and the debentures are disclosed in Note 21 and the net asset value per share, calculated with the borrowings at fair value, is disclosed in Note 17.  .

13  Deferred tax

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 and no provision for deferred tax is therefore required in this respect.

As disclosed in Note 6, a deferred tax asset has been recognised to reflect the estimated value of tax losses carried forward which are likely to be capable of offset against future profits.

14  Share capital

	2020	2019
	£'000	£'000
Authorised:
56,000,000 Ordinary Shares of 10p each (2019 - 56,000,000)	5,600	5,600
Called up, issued and fully paid:
45,549,975 Ordinary Shares of 10p each (2019 - 45,549,975)	4,555	4,555

15  Share premium

	2020					2019
	Group		Company		Group			Company
	£'000		£'000		£'000			£'000
Opening balance	18,446		18,446		18,446			18,446

16  Retained earnings

	2020				2019 (Restated)
	Group		Company		Group		Company
	£'000		£'000		£'000		£'000
Opening balance at 31 March 2019	128,432		127,169		127,518		125,625
(Loss)/profit for the year	(30,660)		(30,027)		6,197		6,827
Dividends paid (see Note 8)	(5,466)		(5,466)		(5,283)		(5,283)
Closing balance at 31 March 2020	92,306		91,676		128,432		127,169

The table below shows the movement in retained earnings analysed between revenue and capital items.

	2020				2019 (Restated)
	Revenue	Capital	Total		Revenue	Capital	Total
	£'000	£'000	£'000		£'000	£'000	£'000
Group
Opening balance at 31 March 2019	4,008	124,424	128,432		4,305	123,213	127,518
(Loss)/profit for the year	4,649	(35,309)	(30,660)		4,986	1,211	6,197
Dividends paid (see Note 8)	(5,466)	-	(5,466)		(5,283)	-	(5,283)
Closing balance at 31 March 2020	3,191	89,115	92,306		4,008	124,424	128,432
Company
Opening balance at 31 March 2019	2,854	124,315	127,169		3,119	122,506	125,625
(Loss)/profit for the year	4,682	(34,709)	(30,027)		5,018	1,809	6,827
Dividends paid (see Note 8)	(5,466)	-	(5,466)		(5,283)	-	(5,283)
Closing balance at 31 March 2020	2,070	89,606	91,676		2,854	124,315	127,169

17  Net asset value per equity share

The net asset values per ordinary share are based on the Group's net assets attributable of £115,307,000 (2019 - £151,433,000) and on the Company's net assets attributable of £114,676,000 (2019 - £150,170,000) and on 45,549,975 (2019 - 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 and the Company adjusted for borrowings at fair value (see Note 21) of £105,990,000 (2019 - £142,189,000) is 232.69p (2019 - 312.16p). 

	2020			2019 (Restated)
	Group	Company		Group	Company
Net assets at 31 March 2020	115,307	114,676		151,433	150,170
Fair value adjustments	(9,317)	(8,686)		(9,244)	(7,980)
Net assets with borrowings at fair value	105,990	105,990		142,189	142,190
Number of shares in issue	45,549,975	45,549,975		45,549,975	45,549,975
Net asset value per share	253.14p	251.76p		332.45p	329.68p
Net asset value per share with borrowings at fair value	232.69p	232.69p		312.16p	312.16p

18  Reconciliation of income from operations before tax to net cash inflow from operating activities

	2020				2019 (Restated)
	Group		Company		Group		Company
	£'000		£'000		£'000		£'000
Income from operations before tax	(24,119)		(23,519)		12,396		12,994
Losses/(gains) on investments	34,863		34,263		(1,681)		(2,279)
Investment management fee	(1,150)		(1,150)		(1,161)		(1,161)
Other operating expenses	(878)		(878)		(781)		(781)
Decrease/(increase) in receivables	239		239		(196)		(196)
Decrease in other payables	(418)		(418)		(51)		(51)
Net cash from operating activities	8,537		8,537		8,526		8,526

19  Reconciliation of current and non-current liabilities arising from financing activities

	2020				2019 (Restated)
	Group		Company		Group		Company
	£'000		£'000		£'000		£'000
Cash movements:
Payment of rental (for leasing)	205		206		204		204
Drawdown of loans (for Financing)	(21,680)		(21,680)		-		-
Non-cash movements:
Finance costs (for leasing)	(190)		(157)		(191)		(159)
Changes in fair value	-		633		-		630
Amortisation of loan premium and expenses and fair value adjustment	(30)		(30)		(15)		(15)
Change in debt in the year	(21,695)		(21,028)		(2)		660
Opening debt at 31 March 2019	(54,187)		(56,712)		(54,185)		(57,372)
Closing debt at 31 March 2020	(75,882)		(77,740)		(54,187)		(56,712)

20  Relationship with Related Parties

Value and Income Services Limited is a wholly owned subsidiary of Value and Income Trust PLC and all costs and expenses are borne by Value and Income Trust PLC. Value and Income Services Limited has not traded during the year.

Directors' emoluments are fully disclosed in the Directors' Remuneration Report.

21  Financial instruments and investment property risks

Risk management

The Group's and the Company's financial instruments and investment property 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 Managers have dedicated investment management processes which ensures that the Investment Policy is achieved. For equities, stock selection procedures are in place based on active portfolio management and the identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by OLIM's Investment Committee.   

Additionally, the Managers' Compliance Officers continually monitor the Group's investment and borrowing powers and report to their respective Managers. 

The main risks that the Group faces from its financial instruments are:

(i)  market risk (comprising price risk, interest rate risk and currency risk)

(ii)  liquidity risk

(iii)  credit risk 

The Board regularly reviews and agrees policies for managing each of these risks. The Managers' policies for managing these risks are summarised below and have been applied throughout the year.  

(i)   Market 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 - price risk, interest rate risk and currency risk.

Price risk 

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. For equities, 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 Company are listed on the UK Stock Exchange.

All investment properties held by the Group are commercial properties located in the UK with long, strong income streams.

Price risk sensitivity

If market prices at the date of the Statement of Financial Position had been 10% higher or lower, while all other variables remained constant, the return attributable to ordinary shareholders for the year ended 31 March 2020 would have increased/decreased by £16,522,000 (2019 - increase/decrease of £20,178,000) and equity reserves would have increased/ decreased by the same amount. 

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 and seven and ten year bank loans, 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 2020 are shown in Notes 11 and 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:   

	Weighted average period for which rate is fixed	Weighted average interest rate	Fixed rate	Floating rate
	Years	%	£'000	£'000
At 31 March 2020 Assets Sterling	1	1.14	21,756	4,672
Total assets	1	1.14	21,756	4,672
At 31 March 2020 Liabilities Sterling	5.35	6.715	72,000	-
Total liabilities	5.35	6.72	72,000	-
At 31 March 2019 Assets Sterling	-	-	-	4,338
Total assets	-	-	-	4,338
At 31 March 2019 Liabilities Sterling	5.8	8.31	50,000	-
Total liabilities	5.8	8.31	50,000	-

The weighted average interest rate on borrowings 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 Notes 11 and 12.

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 are non interest bearing and 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 2020 would increase/decrease by £43,000 (2019 - increase / decrease by £36,000). 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.

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. 

(ii)   Liquidity risk

This is the risk that the Group will encounter difficulty in meeting obligations associated with its 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 less readily realisable. The maturity of the Group's existing borrowings is set out in the interest risk profile section of this note.  

The table below details the Group's remaining contractual maturity for its financial liabilities, based on the undiscounted cash outflows, including both interest and principal cash flows, and on the earliest date upon which the Group can be required to make payment.

	Carrying value	Expected cashflows	Due within 3 months	Due between 3 months and 1 year	Due after 1 year
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2020
Borrowings	73,062	95,311	1,380	18,571	75,360
Leases	4,259	11,547	51	154	11,342
Other payables	467	467	467	-	-
Total	77,788	107,325	1,898	18,725	86,702
As at 31 March 2019 (Restated)
Borrowings	50,727	72,805	1,091	3,063	68,651
Leases	4,274	11,752	51	154	11,547
Other payables	475	475	475	-	-
Total	55,476	85,032	1,617	3,217	80,198

(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 OLIM 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 is performed on a daily basis to ensure that discrepancies are picked up on a timely basis.

-   cash is held only with reputable banks with high quality external credit ratings which are monitored on a regular basis.

Credit risk exposure 

In summary, compared to the amounts on the Group Statement of Financial Position, the maximum exposure to credit risk during the year to 31 March was as follows: 

	Balance Sheet	2020 Maximum exposure	Balance Sheet	2019 Maximum exposure
	£'000	£'000	£'000	£'000
Current assets
Cash and cash equivalents	26,428	26,428	4,338	9,306
Other receivables	668	1,185	907	6,376
	27,096	27,613	5,245	15,682

(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 17.0 years (2019 - 16 years). Details of the tenant and geographical spread of the portfolio are set out in the Annual Report. The long term record of performance through the varying property cycles since 1987 is set out in the Annual Report. OLIM Property is responsible for property investment management, with surveyors, solicitors and managing agents acting on the portfolio under OLIM Property's supervision.

The Group leases out its investment property to its tenants under operating leases. At 31 March 2020, the future minimum lease receipts under non-cancellable leases are as follows:-

	2020	2019
	£'000	£'000
Due within 1 year	4,482	4,361
Due between 2 and 5 years	17,675	17,446
Due after more than 5 years	49,642	44,485
	71,799	66,292
This amount comprises the total contracted rent receivable as at 31 March 2020.
None of the Group's financial assets is past due or impaired.

Fair values of financial assets and financial liabilities

All assets and liabilities of the Group other than receivables and payables and the borrowings are included in the Balance Sheet at fair value. 

(i) Fair value hierarchy disclosures

All assets and liabilities of the Group other than receivables and payables and the borrowings are included in the Balance Sheet at fair value. 

The table below sets out fair value measurements using the IFRS 13 Fair Value hierarchy:- 

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
At 31 March 2020
Equity investments	90,757	-	-	90,757
Investment properties	-	-	74,459	74,459
	90,757	-	74,459	165,216
At 31 March 2019 (Restated)
Equity investments	128,706	-	-	128,706
Investment properties	-	-	73,074	73,074
	128,706	-	73,074	201,780

Company and Group numbers per the above fair value disclosures are the same except for the investment of £200,000 made by the Company in its subsidiary and the differing fair value of one property which was the subject of an inter-group transfer in 2014, as disclosed in Note 9. 

Fair value categorisation within the hierarchy has been determined on the basis of the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety as follows:-

Level 1 - inputs are unadjusted quoted prices in an active market for identical assets

Level 2 - inputs, not being quoted prices, are observable, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3 - inputs are not observable 

There were no transfers between Levels during the year. 

(ii)   Borrowings 

The fair value of borrowings has been calculated at £81,317,000 as at 31 March 2020 (2019 - £59,244,000) compared to a Balance Sheet value in the Financial Statements of £71,623,000 (2019 - £49,913,000) per Notes 11 and 12.    

The fair values of the debentures are determined by comparison with the fair values of equivalent gilt edged securities, discounted to reflect the differing levels of credit worthiness of the borrowers. The fair values of the loans are determined by a discounted cash flow calculation based on the appropriate inter-bank rate plus the margin per the loan agreement. These instruments are therefore considered to be Level 2 as defined above. There were no transfers between Levels during the year.

All other assets and liabilities of the Group are included in the Balance Sheet at fair value.   

	Fair Value		Balance Sheet Value
	2020	2019	2020	2019
	£'000	£'000	£'000	£'000
11% First Mortgage Debenture Stock 2021	16,074	16,966	15,000	15,000
9.375% Debenture Stock 2026	26,740	26,620	20,159	20,182
	42,814	43,586	35,159	35,182
Bank loan	38,503	15,658	36,464	14,731
	81,317	59,244	71,623	49,913
There were no transfers between Levels during the year.

22  Prior Year Adjustments

The Financial Statements have been restated on 31 March 2018 to recognise finance lease liabilities for leasehold properties which are classified as investment property at fair value under the requirements of IAS 40 and IAS 17. Previously, the value of the leased investment property recorded on the Balance Sheet had been the net valuation of the leasehold property and the leases had been accounted for as operating leases. This has been corrected to recognise the gross valuation of the asset and a corresponding finance lease liability at the present value of minimum lease payments using the incremental borrowing rate at the inception of the lease(s). There has also been a reclassification of the charges previously netted off against Rental Income to Finance costs and unrealised gains/losses in investment property.

After the adoption of IFRS 16, a right-of-use asset and lease liability are required to be recognised on the Balance Sheet with the right-of use asset classified as investment property and subsequently fair-valued under IAS 40.  As the leased assets have been adjusted to have been recognised previously under finance leases, and meet the definition of and are included in investment property, they are not affected.

The impact of this revision had the following impact as at 1 April 2019:

(i)  The Group as a lessee recognised an additional £4,287,000 as a right-of-use asset and as a lease liability (comprising a current liability of £15,000, and a non-current liability of £4,272,000). In addition, £204,000 has been reclassified from rental to finance costs (Notes 2 and 5).

(ii)  The Company as a lessee recognised an additional £5,581,000 as a right-of-use asset and as a lease liability (comprising a current liability of £47,000, and a non-current liability of £5,534,000). The Group and Company figures are different due to an inter-group transfer of property in 2014. In addition, £204,000 has been reclassified from rental to interest payable (Notes 2 and 5).

The following tables summarise the impact of the above on both the Group's and the Company's Statement of Comprehensive Income, Balance Sheet and Statement of Cash Flows.

22   Prior Year Adjustments (Continued)

Group Statement of Comprehensive Income for the Year ended 31 March 2019

			Original				Adjustments				Restated
			Revenue	Capital	Total		Revenue	Capital	Total		Revenue	Capital	Total
			'000	'000	'000		'000	'000	'000		'000	'000	'000
Income		Note
	Investment income		6,215	-	6,215		-	-	-		6,215	-	6,215
	Rental income		4,287	-	4,287		204	-	204		4,491	-	4,491
	Other income		9	-	9		-	-	-		9	-	9
		2	10,511	-	10,511		204	-	204		10,715	-	10,715
Gains and losses on investments
	Realised gains/(losses) on held-at-fair-value investments and investment properties	9	-	5,294	5,294		-	-	-		-	5,294	5,294
	Unrealised losses on held-at-fair-value investments and investment properties	9	-	(3,600)	(3,600)		-  -	(13)	(13)		-	(3,613)	(3,613)
Total income			10,511	1,694	12,205		204	(13)	191		10,715	1,681	12,396
Expenses
	Investment management fees	3	(348)	(813)	(1,161)		-	-	-		(348)	(813)	(1,161)
	Other operating expenses	4	(781)	-	(781)		-	-	-		(781)	-	(781)
Finance costs		5	(4,168)	-	(4,168)		(191)	-	(191)		(4,359)	-	(4,359)
Total expenses			(5,297)	(813)	(6,110)		(191)	-	(191)		(5,488)	(813)	(6,301)
Profit/(loss) before taxation			5,214	881	6,095		13	(13)	-  -		5,227	868	6,095
Taxation		6	(241)	343	102		-	-	-		(241)	343	102
Profit/(loss) attributable to equity shareholders of parent company			4,973	1,224	6,197		13	(13)	-  -		4,986	1,211	6,197
Earnings per ordinary share (pence)		7	10.92	2.68	13.60		0.03	(0.03)	)  -		10.95	2.65	13.60

22   Prior Year Adjustments (Continued)

Company Statement of Comprehensive Income for the Year ended 31 March 2019

			Original				Adjustments				Restated
			Revenue	Capital	Total		Revenue	Capital	Total		Revenue	Capital	Total
			'000	'000	'000		'000	'000	'000		'000	'000	'000
Income		Note
	Investment income		6,215	-	6,215		-	-	-		6,215	-	6,215
	Rental income		4,287	-	4,287		204	-	204		4,491	-	4,491
	Other income		9	-	9		-	-	-		9	-	9
		2	10,511	-	10,511		204	-	204		10,715	-	10,715
Gains and losses on investments
	Realised gains/(losses) on held-at-fair-value investments and investment properties	9	-	5,294	5,294		-	-	-		-	5,294	5,294
	Unrealised losses on held-at-fair-value investments and investment properties	9	-	(2,970)	(2,970)		-  -	(45)	(45)		-	(3,015)	(3,015)
Total income			10,511	2,324	12,835		204	(45)	159		10,715	2,279	12,994
Expenses
	Investment management fees	3	(348)	(813)	(1,161)		-	-	-		(348)	(813)	(1,161)
	Other operating expenses	4	(781)	-	(781)		-	-	-		(781)	-	(781)
Finance costs		5	(4,168)	-	(4,168)		(159)	-	(159)		(4,327)	-	(4,327)
Total expenses			(5,297)	(813)	(6,110)		(159)	-	(159)		(5,456)	(813)	(6,269)
Profit/(loss) before taxation			5,214	1,511	6,725		45	(45)	-		5,259	1,466	6,725
Taxation		6	(241)	343	102		-	-	-		(241)	343	102
Profit/(loss) attributable to equity shareholders of parent company			4,973	1,854	6,827		45	(45)	-		5,018	1,809	6,827
Earnings per ordinary share (pence)		7	10.92	4.07	14.99		0.09	(0.09)	-		11.01	3.98	14.99

22 Prior Year Adjustments (Continued)

Group Statement of Financial Position as at 31 March 2018

			Original			Adjustments			Restated
		Note	£'000	£'000		£'000	£'000		£'000	£'000
ASSETS
Non current assets
	Investments held at fair value through profit or loss	9		128,925		-	-			128,925
	Investment properties	9		68,700		4,287	-			72,987
				197,625		4,287	-			201,912
	Deferred tax asset	6		287		-	-			287
				197,912		4,287	-			202,199
Current assets
	Cash and cash equivalents		3,639			-	-		3,639
	Receivables	10	711			-	-		711
				4,350		-	-			4,350
TOTAL ASSETS				202,262		4,287	-			206,549
Current liabilities
	Payables	11		(1,845)		-	(15)			(1,860)
TOTAL ASSETS LESS CURRENT LIABILITIES				200,417		4,287	(15)			204,689
Non-current liabilities
	Borrowings	12		(49,898)		-	(4,272)			(54,170)
NET ASSETS				150,519		4,287	(4,287)			150,519
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
	Called up share capital	14		4,555		-	-			4,555
	Share premium	15		18,446		-	-			18,446
	Retained earnings	16		127,518						127,518
TOTAL EQUITY				150,519		-	-			150,519
Net Asset Value per ordinary share (pence)		17		330.45		0.00	0.00			330.45

22 Prior Year Adjustments (Continued)

Company Statement of Financial Position as at 31 March 2018

			Original			Adjustments			Restated
		Note	£'000	£'000		£'000	£'000		£'000	£'000
ASSETS
Non current assets
	Investments held at fair value through profit or loss	9		129,125		-	-			129,125
	Investment properties	9		68,700		5,581	-			74,281
				197,825		5,581	-			203,406
	Deferred tax asset	6		287		-	-			287
				198,112		5,581	-			203,693
Current assets
	Cash and cash equivalents		3,439			-	-		3,439
	Receivables	10	711			-	-		711
				4,150		-	-			4,150
TOTAL ASSETS				202,262		5,581	-			207,843
Current liabilities
	Payables	11		(1,845)		-	(49)			(1,894)
TOTAL ASSETS LESS CURRENT LIABILITIES				200,417		5,581	(49)			205,949
Non-current liabilities
	Borrowings	12		(51,791)		-	(5,532)			(57,323)
NET ASSETS				148,626		5,581	(5,581)			148,626
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
	Called up share capital	14		4,555		-	-			4,555
	Share premium	15		18,446		-	-			18,446
	Retained earnings	16		125,625		-	-			125,626
TOTAL EQUITY				148,626		-	-			148,626
Net Asset Value per ordinary share (pence)		17		326.29		0.00	0.00			326.29

22 Prior Year Adjustments (Continued)

Group Statement of Financial Position as at 31 March 2019

			Original			Adjustments			Restated
		Note	£'000	£'000		£'000	£'000		£'000	£'000
ASSETS
Non current assets
	Investments held at fair value through profit or loss	9		128,706		-	-			128,706
	Investment properties	9		68,800		4,274	-			73,074
				197,506		4,274	-			201,780
	Deferred tax asset	6		389		-	-			389
				197,895		4,274	-			202,169
Current assets
	Cash and cash equivalents		4,338			-	-		4,338
	Receivables	10	907			-	-		907
				5,245		-	-			5,245
TOTAL ASSETS				203,140		4,274	-			207,414
Current liabilities
	Payables	11		(1,794)		-	(15)			(1,809)
TOTAL ASSETS LESS CURRENT LIABILITIES				201,346		4,274	(15)			205,605
Non-current liabilities
	Borrowings	12		(49,913)		-	(4,259)			(54,172)
NET ASSETS				151,433		4,274	(4,274)			151,433
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
	Called up share capital	14		4,555		-	-			4,555
	Share premium	15		18,446		-	-			18,446
	Retained earnings	16		128,432						128,432
TOTAL EQUITY				151,433		-	-			151,433
Net Asset Value per ordinary share (pence)		17		332.45		0.00	0.00			332.45

22 Prior Year Adjustments (Continued)

Company Statement of Financial Position as at 31 March 2019

			Original			Adjustments			Restated
		Note	£'000	£'000		£'000	£'000		£'000	£'000
ASSETS
Non current assets
	Investments held at fair value through profit or loss	9		128,906		-	-			128,906
	Investment properties	9		68,800		5,536	-			74,336
				197,706		5,536	-			203,242
	Deferred tax asset	6		389		-	-			389
				198,095		5,536	-			203,631
Current assets
	Cash and cash equivalents		4,138			-	-		4,138
	Receivables	10	907			-	-		907
				5,045		-	-			5,045
TOTAL ASSETS				203,140		5,536	-			208,676
Current liabilities
	Payables	11		(1,794)		-	(49)			(1,843)
TOTAL ASSETS LESS CURRENT LIABILITIES				201,346		5,536	(49)			206,833
Non-current liabilities
	Borrowings	12		(51,176)		-	(5,487)			(56,663)
NET ASSETS				150,170		5,536	(5,536)			150,170
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
	Called up share capital	14		4,555		-	-			4,555
	Share premium	15		18,446		-	-			18,446
	Retained earnings	16		127,169		-	-			127,169
TOTAL EQUITY				150,170		-	-			150,170
Net Asset Value per ordinary share (pence)		17		329.68		0.00	0.00			329.68

22 Prior Year Adjustments (Continued)

Group Statement of Cash Flows for the Year ended 31 March 2019

			Original			Adjustments		Restated
		Note	£'000	£'000		£'000		£'000	£'000
Cash flows from operating activities
	Dividend income received			5,994		-			5,994
	Rental income received			4,295		204			4,499
	Interest received			8		-			8
	Operating expenses paid			(1,975)		-			(1,975)
NET CASH INFLOW FROM OPERATING ACTIVITIES		18		8,322					8,526
Cash flows from investing activities
	Purchase of investments held at fair value through profit or loss		(21,225)			-		(21,225)
	Purchase of investment properties		(9,409)			-		(9,409)
	Sale of investments held at fair value through profit or loss		22,269			-		22,269
	Sale of investment properties		10,178			-		10,178
NET CASH INFLOW FROM INVESTING ACTIVITIES				1,813					1,813
Cash flow from financing activities
	Interest paid on loans		(4,153)			-		(4,153)
	Finance cost of leases		-			(191)		(191)
	Payments of lease liabilities		-			(13)		(13)
	Dividends paid	8	(5,283)					(5,283)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES				(9,436)					(9,640)
NET INCREASE IN CASH AND CASH EQUIVALENTS				699					699
Cash and cash equivalents at 1 April 2018				3,639					3,639
CASH AND CASH EQUIVALENTS AT 31 MARCH 2019				4,338		-			4,338

22 Prior Year Adjustments (Continued)

Company Statement of Cash Flows for the Year ended 31 March 2019

			Original			Adjustments		Restated
			£'000	£'000		£'000		£'000	£'000
		Note
Cash flows from operating activities
	Dividend income received			5,994		-			5,994
	Rental income received			4,295		204			4,499
	Interest received			8		-			8
	Operating expenses paid			(1,975)		-			(1,975)
NET CASH INFLOW FROM OPERATING ACTIVITIES		18		8,322					8,526
Cash flows from investing activities
	Purchase of investments held at fair value through profit or loss		(21,225)			-		(21,225)
	Purchase of investment properties		(9,409)			-		(9,409)
	Sale of investments held at fair value through profit or loss		22,269			-		22,269
	Sale of investment properties		10,178			-		10,178
NET CASH INFLOW FROM INVESTING ACTIVITIES				1,813					1,813
Cash flow from financing activities
	Interest paid on loans		(4,153)					(4,153)
	Finance cost of leases		-			(159)		(159)
	Payment of lease liabilities		-			(45)		(45)
	Dividends paid	8	(5,283)					(5,283)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES				(9,436)					(9,640)
NET INCREASE IN CASH AND CASH EQUIVALENTS				699					699
Cash and cash equivalents at 1 April 2018				3,439					3,439
CASH AND CASH EQUIVALENTS AT 31 MARCH 2019				4,138		-			4,138

23  Capital management policies and procedures

The Group's capital management objectives are:

-  to ensure that the Group will be able to continue as a going concern;

-  to maximise the return to its equity shareholders in the form of long term real growth in dividends and capital value without undue risk through the optimisation of the debt and equity balance.

The capital of the Group consists of equity, comprising issued capital, reserves, borrowings and retained earnings.

The Board monitors and reviews the broad structure of the Group's capital. This review includes: 

-  the planned level of gearing which takes into account the Managers' views on the market and the extent to which revenue in excess of that which requires to be distributed should be retained.

The Group's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. 

Details of the Group's gearing and financial covenants are disclosed in Notes 11 and 12.

24  Events after the Statement of Financial Position Date

There are no significant subsequent events for the Group or the Company.

Additional Information

In accordance with section 435 of the Companies Act 2006, the Directors advise that the financial information set out in this announcement does not constitute the Group's statutory Financial Statements for the period ended 31 March 2020 but is derived from these Financial Statements. The statutory Financial Statements for the year ended 31 March 2019 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under S498(2) or S498(3) of the Companies Act 2006.

The Financial Statements for the period ended 31 March 2020 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The Financial Statements for the period ended 31 March 2020 will be forwarded to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on these Financial Statements; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

The Group and Company Statement of Financial Position at 31 March 2020 and the Group and Company Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended have been extracted from the Group's Financial Statements. Those Financial Statements have not yet been delivered to the Registrar.

The 2020 Annual Report and Financial Statements will be posted to Shareholders shortly and will contain the Notice of the Annual General Meeting of the Company to be held on Thursday, 3 September 2020 at 10.00am at the offices of Maven Capital Partners UK LLP, First Floor Kintyre House, 205 West George Street, Glasgow G2 2LW. As referred to in the Chairman's Statement, due to the Government advice against all non-essential travel and the rules on maintaining social distancing, Shareholders will be unable to attend the Annual General Meeting in person.

For Value and Income Trust PLC

Maven Capital Partners UK LLP

Company Secretary

29 July 2020

 

END

 

 

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