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A mixed year for Value and Income Trust

A mixed year for Value and Income Trust – In its final report to 31 March 2018, Value and Income Trust (VIN) stated that the NAV performance of the company was mixed. Its property portfolio had a good year.  However, the equity portfolio was less successful in a difficult year for income focused investors.  The NAV total return was -1.6% and the share price total return was 7.1%.

No performance fee is payable in respect of the year and it has been agreed that the performance fee element will be removed from the fee structure. The management fee has been reduced from 0.66% of total assets less current liabilities to 0.6% of gross assets.

Dividend

The board has recommending an increase in the final dividend which would make total dividends of 11.4p for the year to 31 March 2018 compared to 11p in the previous year, an increase of 3.6%.

At the year end the portfolio yield was 5.0%. The board recommend that a final dividend of 3.3p per Ordinary Share (2017: 3.2p) is paid on 27 July 2018 to Shareholders on the register on 29 June 2018. The ex-dividend date is 28 June 2018.

Performance

Equity portfolio

Performance was affected by the fall in the share price of Conviviality, the beverage wholesale retailer, which was 2.4% of our equity portfolio at the beginning of our year.  According to the investment manager, the holding was purchased “as a way of investing in the changing habits of consumer spending, as shoppers switched their bulk food and drink purchases from out of town superstores to on-line orders, with frequent local top ups at convenience stores. After the transformative acquisition of Matthew Clark, the financial system ultimately proved inadequate, credit insurance was withdrawn and administrators appointed.” The position in Conviviality in the portfolio detracted the portfolio’s performance by 3% relative to the FTSE All-Share Index. The total return on the company’s portfolio over the year was -1.7% compared to the index return of +1.3%.

From an asset allocation perspective, overweight positions in non-life insurance, electronics and chemicals contributed positivly to relative performance, as did the absence of tobacco holdings. These were counteracted by underweight positions in oils and overweight positions in utilities .

In stock selection, the portfolio’s best performing holdings were Beazley and chemicals company Croda, which returned 37% and 31%, respectivly. The engineering company Rotork (+19%) and Informa (+14%) also significantly outperformed. as well as Conviviality, negative relative performance came from Carillion (-44%% to the sale price), Babcock (-21%), which was affected by negative sentiment about outsourcing companies, and Marstons (-20%) which suffered from caution on consumer spending and snow-affected sales during the winter.

Property portfolio

VIT’s property portfolio produced a total return of 11% over the year to March, against 10% for the IPD Index.

Both of the property and equity portfolios continue to provide value when compared to the low yields available from UK gilts.

VIT : A mixed year for Value and Income Trust

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