Here's a bit of a conundrum - or am I totally missing the point.

This investment company (biggest faller today) is proposing to wind up. So, seemingly nothing to be made here. But whenever I see a big one day fall in any company I'm always interested to know why. So I just read through their last few RNS announcements.

This was last Thursdays':

Income & Growth Trust PLC
16 March 2006


AMENDMENT TO ANNOUNCEMENT

This announcement replaces the earlier announcement (RNS No 8946Z) released at
09.09 this morning. The dividend declaration announced this morning was not
less than 2.49p per Income Share. This was incorrect and the correct dividend
declaration is not less than 2.50p which is shown below. Please see below the
correct announcement


The Income and Growth Trust PLC

Dividend Declaration

16 March 2006

Further to the announcement on 6 March 2006 of recommended proposals for the
voluntary winding-up of The Income & Growth Trust PLC and Income & Growth
Securities PLC, the Board has today declared a fifth interim dividend in respect
of the period ending 31 March 2006, estimated to be not less than 2.50p per
Income Share and not less than 1.60p per Ordinary Share. The dividends will
have a record date of 24 March 2006 and will be paid on 31 March 2006 to
Shareholders on the register on the record date.


Now am I missing something here.

If I understand this correctly, I have up until the record date (this Friday) to purchase ordinary shares that will entitle me to a dividend payment of not less than 1.6p. Considering that I can buy these shares at 0.75p (at the time of posting) it appears to be a case of money for old rope !!!

I just looked at today's trades and it seems that a few soles are buying in, but not too great a volume. Are they thinking the same as me.

I've probably misunderstood this completely, but can't seem to work out where. Anybody have any idea?

I don't hold this stock and I'm not going to leap in until this apparent discrepancy is explained to me.

The dividend will be taxable, for me that would lose 40%.

But apart from that, it SEEMS to be as you say, an easy profit for no work.

"There's no such thing as a free lunch" is the saying that springs to mind, bit I cannot see from the declaration above what can be wrong.

Anyone else have any ideas?

Strangely,

Despite virtually all buys today, the price actually dropped!

And someone sold?

There has to be a simple explanation, there were no trades at all on the 16th, and only sells on the 17th, so something just doesn't add up, although I admit to not being able to see what it is yet.

Andy
We all lose 10% withholding tax on dividends - you'd lose another 22.5% (or 25% of the 90% net) making 32.5% in total. If you've been paying 40% on dividends you've got the wrong accountant!

It depends whether you are liable to capital gains tax too - probably next year now. Since your purchase price of 0.75p seems set to fade to zero, HMCR will eventually allow it as a total loss. If you were due to pay CGT (this time 40% is the correct rate) then you could reduce your CGT bill:-

0.75p less 40% set off v. CGT = 0.45p net cost. 1.60 less 32.5% income tax = 1.08. Profit 140%. (Or (1.08 + CGT relief of .30p)/ gross cost of 0.75p = 84% profit, if you prefer.)

If you have no CGT to set off in the year the SP is declared nil value then your base cost remains as 0.75p and your 1.08 after tax divident is a 44% gain over 8 days - not bad!

Is record date the same as ex-dividend date, or a couple of days later - be careful of this and get expert advice or call the comany direct, especially if your broker takes a while to register the share purchase with the registrar for the company. Make sure you buy cum-dividend in any event.

Starfrog, I'd like you to do it to see who was right - if I'm right you can give me 25% of your profit for the helpful advice - lol! Whoops, now where is that FSA licence?

sd

stockdog,

A superb post, many thanks.

Some good points especially buying cum-dividend, as this simply looks too good to be true, and we know the rest of the saying!

Maybe the market really has missed something here, but it seems strange that there aren't more buys, as people involved with the company must know, and they have friends, relatives etc etc.

It does say "shareholders on the register on the record date" which implies to me that if you hold on the 24th, that being the recod date, you qualify for the dividend!

Interesting.

stockdog,

I may ring them in the morning.

I may ring the estate agent afterwards!

Andy, stockdog

Thanks for your tax analysis, but after having a think on this overnight I think that the answer may lie with the mysterious 'close period'. The record date may well be this Friday, but the close period may have started earlier this week which would mean that any purchases made during this period will be marked ex-dividend and the rights remain with the seller. I might still be wrong though.

I think I'll leave it alone, sd, on the basis that if I don't fully understand what's going on, I'm likely to get bugg***d up. ;-)