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Proposed combination of Troy income and STS Global Income & Growth Trust

As noted on November 3, Troy Income (TIGT) has announced that terms have been agreed for a proposed combination of TIGT with the STS Global Income & Growth Trust (STS).

Following implementation of the proposals, the enlarged STS will continue to be managed, on the same basis as currently, by Troy Asset Management Limited with James Harries continuing as the lead portfolio manager, supported by Tomasz Boniek and the wider Troy investment team.

Chair, Bridget Guerin, commented on the announcement:

“The board is pleased to have reached an agreement with the board of STS over the proposed combination of the two companies. The combination will create a larger investment trust that is expected to be more liquid and have reduced overall costs, and will continue to follow Troy’s long term, quality focussed, conservative investment management style with a global opportunity set.”

The benefits of the proposal  with STS and further details provided by the company are outlined below:

Proposals provide continuity for TIGT Shareholders wishing to remain invested:

  • STS is also an equity income investment trust which targets a growing level of income and steady capital growth over the long term;
  • STS provides continued exposure to Troy’s investment ethos and process. STS is managed by Troy’s global income management team, led by James Harries who has managed global equity portfolios since 2002, following a quality focussed, long-term, conservative investment approach;
  • STS has a global approach to achieving its investment objective, providing enhanced opportunities to invest in the world’s highest quality companies and to diversify sources of income. However, STS has a similar view to TIGT that the UK is currently an undervalued market and STS currently has 32% of its gross portfolio invested in UK companies, and STS and TIGT currently have 15 stocks in common representing 49% of TIGT’s current gross portfolio; and
  • STS has operated a discount control mechanism since November 2020 which aims to ensure, in normal market conditions, that the shares trade consistently close to their net asset value, providing liquidity for all shareholders.

The Proposals include the following additional features which are expected to have a beneficial effect for TIGT Shareholders:

  • The proposed combination will result in reduced overall costs for TIGT Shareholders, supported by STS’s management fees being reduced following implementation of the proposals to align with TIGT’s;
  • TIGT Shareholders receiving New STS Shares will have exposure to a larger investment trust which is expected to be more liquid;
  • Significant cost contribution by Troy equivalent to an eighteen-month fee waiver on the assets transferred from TIGT to STS under the scheme which is expected to reduce TIGT shareholders’ exposure to costs in connection with the proposals;
  • TIGT Shareholders electing for the cash option will receive cash at a 2% discount to NAV and will therefore receive value equivalent to 98% of their TIGT NAV per share;
  • Due to the effect of the cost contribution, the 2% discount on the cash option, and the New STS Shares being issued on a nil-premium basis, TIGT Shareholders receiving New STS Shares are estimated to receive value equivalent to 99.7% of their TIGT NAV per share through their STS shareholding (based on current transaction assumptions including a 20% take up of the cash option); and
  • Assets to be transferred to STS from TIGT pursuant to the scheme are to be agreed by both parties prior to the transfer. Given there are a number of common holdings between the two companies, a material portion of the rollover assets is expected to consist of TIGT existing holdings.

TIGT : Proposed combination of Troy income and STS Global Income & Growth Trust

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