Source - RNS
RNS Number : 2564L
Dunedin Income Growth Inv Tst PLC
30 September 2016
 

DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

 

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 31 JULY 2016

 

 

INVESTMENT OBJECTIVE

 

The objective of Dunedin Income Growth Investment Trust PLC is to achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom.

 

 

INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT

 

Review of the Period

Following disappointing performance in the previous financial year, it is pleasing to report an improvement during the six month period ended 31 July 2016, with strong absolute and relative returns. The Company's net asset value ('NAV') increased by 15.6% on a total return basis, comparing favourably with a total return of 11.9% from the FTSE All-Share Index. The share price total return was 14.5% and the discount at which the Company's shares trade to the NAV widened slightly from 4.6% at the beginning of the period to 5.8% at 31 July 2016. The net revenue per share for the period was 7.67p, 0.8% lower than in the equivalent period last year.

 

Dividends

A first interim dividend in respect of the year ending 31 January 2017, of 2.575p per share, was paid on 26 August 2016 and the Board has declared a second interim dividend of 2.575p per share, which will be paid on 25 November 2016 to shareholders on the register on 4 November 2016. It is our intention to make a further distribution of 2.575p per share in February and to pay a final balancing dividend in May 2017. While we remain watchful, our income account is in reasonable shape, we retain revenue reserves in excess of three quarters of one year's distribution and it remains our aim to continue to grow the dividend in real terms.

 

Economic and Market Background

Much of the economic and market activity during the period was in direct contrast to that which we had experienced during the previous twelve months. We commented in our full year report that two of the main reasons behind the challenging investment performance in 2015/16 lay with our exposure to companies doing business in emerging markets and within extractive industries. As we entered 2016, signs began to emerge that after significant monetary and fiscal stimulus China's economy was finally stabilising. This led to a recovery in commodity prices and a resurgence of investor appetite for emerging market assets. Alongside this, the oil price, having hit $27 a barrel in February, began a gradual recovery as supply disruptions in key producing markets which, combined with reduced output in the United States, began the long process of rebalancing the market.

 

We witnessed a substantial period of market volatility following the UK referendum and the decision to leave the EU. Sterling dropped sharply, registering the largest one day fall against the US dollar in recent times while government bond yields contracted significantly with yields on 10 year gilts touching 50bps as overseas investors reduced exposure to the UK and domestic institutions sought safety assets.  The stock market produced significant declines in the immediate days following the vote, but performance was bifurcated between significant underperformance from companies exposed purely to the UK economy and hefty outperformance from those that would benefit from the diversity of overseas exposure and the translation of foreign currency denominated profits into Sterling. As a result the FTSE 100 Index, with its large weighting to international revenues, performed more robustly than the more domestically exposed small and mid-cap segments of the market.

 

That all being said, the UK stock market has recovered significantly following the vote and is now trading at levels above those reached prior to the referendum.  Intuitively this seems surprising but has been driven by three factors. Firstly, the decline in Sterling has a significant translational benefit for the c.70% of revenues that are achieved from outside the UK by companies within the FTSE-All Share Index; in other words, in Sterling terms, UK companies are on average making greater profits than they did previously.  Secondly, the substantial decline in longer dated bond yields has made the appeal of higher yielding equities even greater and has driven those looking for income to invest into those stocks. Thirdly, as economic data has emerged, it does not suggest that the UK economy has suffered the kind of disruption that many feared.  The most recent services and construction PMI surveys and house price data all suggest that, after an initial panic, the business environment has stabilised to a degree. Alongside this, the Bank of England has launched a number of supportive measures including the first cut in interest rates since 2008, a further extension of its quantitative easing programme, and significant liquidity and lending support to the banking sector.

 

Gearing

The Company's level of gearing reduced during the period as investment values increased. Valuing debt at par, potential gearing stood at 16.7% at 31 July 2016, down from 18.7% at 31 January 2016. On an equity gearing basis, taking debt at par and offsetting our cash and bond holdings, net gearing at the end of the period was 8.0%, down from 10.6% at the year end, reflecting higher cash balances and increased asset values. Towards the end of the period the Company switched a further part of its variable rate borrowings from Sterling into Euros, taking advantage of that currency's strength against Sterling and lower interest rates. We still consider it appropriate to maintain our modest level of equity gearing, although it is kept under regular review and is largely dependent on the opportunities that present themselves at the company level.

 

As a reminder to shareholders, in December 2015 we successfully completed the issue of £30 million of 30 year loan notes at a fixed rate of 3.99%. This enabled us to pre-finance the replacement of the existing debenture that matures in April 2019 and secure a low level of interest. The proceeds of the loan notes have been invested in a portfolio of investment grade bonds, broadly matching the duration of the 2019 debenture and largely offsetting the interest cost of the new issue while not increasing the Company's equity gearing.

 

Management Changes

I am delighted to report that Ben Ritchie is now assuming the role of lead manager to the Company. Alongside Jeremy Whitley, Ben has been co-manager for the past six years so this is a natural evolution of the investment management team. Ben will be assisted by Louise Kernohan, who is a Senior Investment Manager in Aberdeen's UK and European Equities Team and joined Aberdeen in 2005. As Aberdeen's investment approach is team-based we do not expect this change to result in a significantly different management style. At the same time, I would like to take this opportunity to thank Jeremy for all his efforts as the Company's lead manager through some challenging times and with an improved recent performance record.

 

Outlook

UK monetary policy continues to inflate asset prices at a time when economic growth remains questionable. While it is early days, it seems unlikely in the medium term that this period of exit from the EU will enhance the UK's economic prospects relative to the rest of the world. In contrast, we are starting to see some modest signs of stabilisation in parts of the emerging world such as China and Brazil which have struggled in recent years. Overall, there has so far been no negative impact on your Company from the EU vote. Your Manager will remain alert to opportunities within the domestic UK market caused by the current turmoil but the backdrop does little to change their view that it is likely that most of the better opportunities for long term growth lie in companies with activities that stretch well outside these shores. 

 

Rory Macnamara

Chairman

29 September 2016

 



 

INTERIM BOARD REPORT - OTHER

 

Directors' Responsibility Statement

The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations.  The Directors confirm that to the best of their knowledge:

-     the condensed set of financial statements has been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting';

-     the Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

-     the financial statements include a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

 

Principal Risks and Uncertainties

The Board regularly reviews the principal risks and uncertainties faced by the Company together with the mitigating actions it has established to manage the risks. These are set out within the Strategic Report contained within the Annual Report for the year ended 31 January 2016 and comprise the following risk categories:

-     Investment objectives

-     Investment strategies

-     Investment Manager

-     Income/dividends

-     Gearing

-     Regulatory

-     Operational

 

In addition to the risks outlined above, the Board considers that the United Kingdom's decision in the referendum held on 23 June 2016 to leave the European Union may affect the Company's risk profile by introducing potentially significant new uncertainties and instability in financial markets as the United Kingdom negotiates the terms of its exit from the EU. These uncertainties could have a material effect on the Company's business, financial condition and operations. Other than this additional risk, the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.

 

Going Concern

The Company's assets consist mainly of equity shares in companies listed on the London Stock Exchange and in most circumstances are realisable within a short timescale.  The Board has set limits for borrowing and derivative contract positions and regularly reviews actual exposures, cash flow projections and compliance with loan covenants.  The current bank loan expires in July 2018. The Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of this Report. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

On behalf of the Board

 

Rory Macnamara

Chairman

29 September 2016

 

 

INVESTMENT MANAGER'S REVIEW

 

It was a relatively busy period for portfolio activity during the period as we took advantage of market movements to recycle capital from some of the Company's higher yielding, lower growth investments into a number of interesting smaller companies with attractive prospects.

 

We initiated five new positions: Assura, BBA Aviation, Chesnara, Essentra and RPC. Each of these businesses has its own distinct attractions; however what they have in common is that they are small or mid-cap companies which add something different to the Company's mix of economic exposures whilst meeting our quality criteria and offering the potential for superior income and capital growth. In addition, we topped up the holdings in Provident Financial and Schroders following share price weakness in the aftermath of the vote to leave the EU. To fund the purchases we took profits from a number of companies that have performed relatively well recently such as British American Tobacco, Unilever, Compass and Berendsen.

 

The period saw a reversal of some of the trends that hurt performance last year. The outcome of the EU referendum and the subsequent heightening of uncertainty regarding the prospects for the UK led to an underperformance of companies dependent on the domestic economy versus those with greater international exposure. As a result, the Company's higher weighting to internationally exposed companies has been beneficial. Additionally we have seen some stabilisation in emerging markets and energy prices, dynamics that were unhelpful last year given the Company's exposure to these areas, whilst the value of overseas holdings has benefited from the weakness in Sterling.

 

Income generation has been in line with our expectations to date and during the period the Company benefited from special dividends from Prudential and Croda. We continue to monitor the companies where dividend cover is tight whilst remaining mindful that the total return opportunities for these holdings are in many cases substantial. Foreign exchange translation will prove helpful to income if exchange rates stay at the current level next year although at this stage that is not a certainty.

 

Whilst the stock market has recovered well from the result of the EU referendum and actual economic data has been surprisingly positive, the uncertainty regarding the UK's relationship with the EU remains and this builds on a challenging global macro-economic picture. In these difficult circumstances it is usually those companies with strong business models, diverse revenue streams and robust financial characteristics that can generate cash flow which in turn can be distributed to shareholders that perform best. We are committed to retaining this focus whilst endeavouring to use any market volatility to the Company's advantage by improving the portfolio's positioning and prospects.

 

Ben Ritchie & Louise Kernohan

Aberdeen Asset Managers Limited

29 September 2016

 

 



INDEPENDENT REVIEW REPORT TO DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

 

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the Half-Yearly Financial Report for the six months ended 31 July 2016 which comprises the Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the Half-Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules (the 'DTR') of the UK's Financial Conduct Authority (the 'UK FCA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

 

Directors' Responsibilities

The Half-Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with the DTR of the UK FCA. As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'.  The condensed set of financial statements included in this Half-Yearly Financial Report has been prepared in accordance with FRS 104 'Interim Financial Reporting'.

 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half-Yearly Financial Report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half-Yearly Financial Report for the six months ended 31 July 2016 is not prepared, in all material respects, in accordance with FRS 104 Interim Financial Reporting.

 

Philip Merchant

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

Saltire Court

20 Castle Terrace

Edinburgh EH1 2EG

29 September 2016

 



CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

 



Six months ended



31 July 2016



Revenue

Capital

Total


Note

£'000

£'000

£'000

Gains on investments


-

46,595

46,595

Income

3

13,174

-

13,174

Investment management fees


(301)

(452)

(753)

Administrative expenses


(517)

-

(517)

Exchange losses


-

(399)

(399)



_______

_______

_______

Net return before finance costs and taxation


12,356

45,744

58,100






Finance costs


(723)

(1,082)

(1,805)



_______

_______

_______

Net return on ordinary activities before tax


11,633

44,662

56,295






Tax on ordinary activities

2

(69)

-

(69)



_______

_______

_______

Net return attributable to equity shareholders


11,564

44,662

56,226



_______

_______

_______






Return per Ordinary share (pence)

5

7.67

29.63

37.30



_______

_______

_______






The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

 

 



CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

 



Six months ended



31 July 2015



Revenue

Capital

Total


Note

£'000

£'000

£'000

Losses on investments


-

(20,095)

(20,095)

Income

3

12,442

-

12,442

Investment management fees


(336)

(505)

(841)

Administrative expenses


(484)

-

(484)

Exchange gains


-

219

219



_______

_______

_______

Net return before finance costs and taxation


11,622

(20,381)

(8,759)






Finance costs


(490)

(735)

(1,225)



_______

_______

_______

Net return on ordinary activities before tax


11,132

(21,116)

(9,984)






Tax on ordinary activities

2

542

-

542



_______

_______

_______

Net return attributable to equity shareholders


11,674

(21,116)

(9,442)



_______

_______

_______






Return per Ordinary share (pence)

5

7.73

(13.98)

(6.25)



_______

_______

_______






The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

 

 



CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

 



As at

As at



31 July 2016

31 January 2016


Notes

£'000

£'000

Non-current assets




Equity securities


447,012

407,235

Fixed interest securities


29,738

28,777



_______

_______

Investments at fair value through profit or loss


476,750

436,012



_______

_______

Current assets




Loans and receivables


2,177

1,513

Cash and short-term deposits


5,730

568



_______

_______



7,907

2,081



_______

_______

Creditors: amounts falling due within one year




Bank loans


(11,033)

(10,653)

Traded options


(481)

-

Other creditors


(1,081)

(1,128)



_______

_______



(12,595)

(11,781)



_______

_______

Net current liabilities


(4,688)

(9,700)



_______

_______

Total assets less current liabilities


472,062

426,312





Creditors: amounts falling due after more than one year




Debenture stock 2019


(28,564)

(28,558)

Loan notes 2045


(29,718)

(29,713)



_______

_______



(58,282)

(58,271)



_______

_______

Net assets


413,780

368,041



_______

_______

Capital and reserves




Called-up share capital


38,419

38,419

Share premium account


4,619

4,619

Capital redemption reserve


1,606

1,606

Capital reserve

6

343,040

299,437

Revenue reserve


26,096

23,960



_______

_______

Equity shareholders' funds


413,780

368,041



_______

_______





Net asset value per Ordinary share (pence)

7

274.91

243.73



_______

_______

Adjusted net asset value per Ordinary share (pence)

7

274.70

243.51



_______

_______

 

 



CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

 

 

Six months ended 31 July 2016











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Note

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 January 2016


38,419

4,619

1,606

299,437

23,960

368,041

Return on ordinary activities after taxation


-

-

-

44,662

11,564

56,226

Dividends paid

4

-

-

-

-

(9,428)

(9,428)

Buyback of Ordinary shares for treasury


-

-

-

(1,059)

-

(1,059)



_______

_______

_______

______

_______

_______

Balance at 31 July 2016


38,419

4,619

1,606

343,040

26,096

413,780



_______

_______

_______

______

_______

_______









Six months ended 31 July 2015











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total



£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 January 2015


38,419

4,619

1,606

361,427

22,631

428,702

Return on ordinary activities after taxation


-

-

-

(21,116)

11,674

(9,442)

Dividends paid

4

-

-

-

-

(9,211)

(9,211)



_______

_______

_______

______

_______

_______

Balance  at 31 July 2015


38,419

4,619

1,606

340,311

25,094

410,049



_______

_______

_______

______

_______

_______

 

 



CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

 


Six months ended

Six months ended


31 July 2016

31 July 2015


£'000

£'000

Operating activities



Net return before finance costs and taxation

58,100

(8,759)

Adjustments for:



(Gains)/losses on investments

(46,595)

20,095

Exchange losses/(gains)

399

(219)

Increase in accrued dividend income

(556)

(507)

Increase in accrued interest income

(98)

-

Stock dividends included in dividend income

(1,002)

(1,461)

Amortisation of fixed income book cost

180

-

Decrease in other debtors

12

10

Increase in other creditors

440

249

Net tax (paid)/received

(91)

352


_______

_______

Net cash inflow from operating activities

10,789

9,760




Investing activities



Purchases of investments

(29,975)

(11,558)

Sales of investments

36,659

9,073


_______

_______

Net cash from/(used in) investing activities

6,684

(2,485)


_______

_______

Financing activities



Interest paid

(1,803)

(1,221)

Dividends paid

(9,428)

(9,211)

Buyback of Ordinary shares for treasury

(1,059)

-

Repayment of loan

(6,000)

-

Drawdown of loan

5,878

-


_______

_______

Net cash flow used in financing activities

(12,412)

(10,432)


_______

_______

Increase/(decrease) in cash and cash equivalents

5,061

(3,157)


_______

_______




Analysis of changes in cash and cash equivalents during the period



Opening balance

568

5,783

Effect of exchange rate fluctuations on cash held

101

(45)

Increase/(decrease) in cash above

5,061

(3,157)


_______

_______

Closing balance

5,730

2,581


_______

_______

 

 



NOTES TO THE FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED 31 JULY 2016

 

1.

Accounting policies


Basis of preparation


The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting' and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.




The interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements. The Company has early adopted Amendments to FRS 102 'Fair Value Hierarchy Disclosures', issued by the Financial Reporting Council in March 2016. 

 

2.

Taxation


The taxation expense reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The estimated annual corporation tax rate used for the year to 31 January 2017 is an effective rate of 20%. This is in line with the current corporation tax rate of 20%.




During the period the Company received £117,000 (2015 - £509,000) in respect of a reclaim of French withholding tax expensed in prior years. There was a foreign exchange gain of £18,000 (2015 - £nil) on an amount that was accrued at the previous year end and the Company suffered withholding tax on overseas income of £204,000 (2015 - £142,000). No further prior year reclaims of overseas tax have been identified as being recoverable and recognised in income (2015 - £175,000).

 



Six months ended

Six months ended



31 July 2016

31 July 2015

3.

Income

£'000

£'000


Income from investments




UK listed - franked

8,392

7,364


Overseas listed

2,510

2,916


Fixed income

691

-


Stock dividends

1,002

1,461



_______

_______



12,595

11,741



_______

_______


Other income




Deposit interest

53

55


Income on derivatives

525

646


Income from stock lending

1

-



_______

_______



579

701



_______

_______


Total income

13,174

12,442



_______

_______

 

 



Six months ended

Six months ended



31 July 2016

31 July 2015

4.

Ordinary dividends on equity shares

£'000

£'000


Third interim dividend 2016 of 2.575p (2015 - 2.575p)

3,888

3,888


Final dividend 2016 of 3.675p (2015 - 3.525p)

5,540

5,323



_______

_______



9,428

9,211



_______

_______






A first interim dividend for 2017 of 2.575p (2016 - 2.575p) was paid on 26 August 2016 to shareholders on the register on 5 August 2016. The ex-dividend date was 4 August 2016.

 



Six months ended

Six months ended



31 July 2016

31 July 2015

5.

 Returns per share

p

p


Revenue return

7.67

7.73


Capital return

29.63

(13.98)



_______

_______


Total return

37.30

(6.25)






The returns per share are based on the following:





Six months ended

Six months ended



31 July 2016

31 July 2015



£'000

£'000


Revenue return

11,564

11,674


Capital return

44,662

(21,116)



_______

_______


Total return

56,226

(9,442)



_______

_______


Weighted average number of Ordinary shares

150,730,739

151,006,187



_______

_______

 

6.

Capital reserves


The capital reserve reflected in the Condensed Statement of Financial Position at 31 July 2016 includes gains of £93,090,000 (31 January 2016 - gains of £58,940,000) which relate to the revaluation of investments held at the reporting date.

 

 

 

7.

Net asset value


Equity shareholders' funds have been calculated in accordance with the provisions of Financial Reporting Standard 102. The analysis of equity shareholders' funds on the face of the Condensed Statement of Financial Position does not reflect the rights under the Articles of Association of the Ordinary shareholders on a return of assets. These rights are reflected in the net asset value and the net asset value per share attributable to Ordinary shareholders at the period end, adjusted to reflect the deduction of the Debenture Stock and the Loan Notes at par. A reconciliation between the two sets of figures is given below:







As at

As at



31 July 2016

31 January 2016


Equity shareholders' funds

£413,780,000

£368,041,000


Adjusted net assetsA

£413,462,000

£367,712,000


Number of Ordinary shares in issue at the period endB

150,512,687

151,006,187






Equity shareholders' funds per share

274.91p

243.73p


Less: Unamortised Debenture Stock premium and issue expenses

(0.02p)

(0.03p)


Less: Unamortised Loan Notes issue expenses

(0.19p)

(0.19p)



_______

_______


Adjusted net asset value per share

274.70p

243.51p



_______

_______






A Adjusted for unamortised premium and issue expenses on Debenture Stock and Loan Notes.


B Excluding shares held in treasury.

 

8.

Transaction costs


During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains/(losses) on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:







Six months ended

Six months ended



31 July 2016

31 July 2015



£'000

£'000


Purchases

164

63


Sales

25

4



_______

_______



189

67



_______

_______

 

9.

Fair value hierarchy


FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The Company has early adopted Amendments to FRS 102 'Fair Value Hierarchy Disclosures' issued by the Financial Reporting Council in March 2016. This has not resulted in any reclassifications in levelling and the prior year comparative has been disclosed under the new hierarchy. The fair value hierarchy has the following classifications:




Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.


Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.


Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.




The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:






Level 1

Level 2

Level 3

Total


As at 31 July 2016

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

447,012

-

-

447,012


Quoted bonds

b)

-

29,738

-

29,738




_______

_______

_______

_______


Total


447,012

29,738

-

476,750




_______

_______

_______

_______








Financial liabilities at fair value through profit or loss






Derivatives

c)

(354)

-

(127)

(481)




_______

_______

_______

_______


Net fair value


446,658

29,738

(127)

476,269




_______

_______

_______

_______











Level 1

Level 2

Level 3

Total


As at 31 January 2016

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

407,235

-

-

407,235


Quoted bonds

b)

-

28,777

-

28,777




_______

_______

_______

_______


Total


407,235

28,777

-

436,012




_______

_______

_______

_______









Financial liabilities at fair value through profit or loss






Derivatives

c)

-

-

-

-




_______

_______

_______

_______


Net fair value


407,235

28,777

-

436,012




_______

_______

_______

_______









a)

Quoted equities








The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.





b)

Quoted bonds



The fair value of the Company's investments in quoted bonds has been determined by reference to their quoted bid prices at the reporting date. Quoted bonds included in Fair Value Level 2 are not actively traded on recognised stock exchanges.





c)

Derivatives



The fair value of the Company's investments in Exchange Traded Options has been determined using observable market inputs on an exchange traded basis and has been included in Fair Value Level 1.






The fair value of the Company's investments in Over The Counter Options (where the underlying equities are also held) has been determined using observable market inputs other than quoted prices of the underlying equities (which are included within Fair Value Level 1) and therefore determined as Fair Value Level 3.

 

10.

Transactions with the Manager


The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activity services.




The management fee is calculated, on a monthly basis, at 0.45% per annum on the first £225 million, 0.35% per annum on the next £200 million and 0.25% per annum on amounts over £425 million of the net assets of the Company, with debt at par and excluding commonly managed funds. The management fee is chargeable 40% to revenue and 60% to capital. During the period £753,000 (31 July 2015 - £841,000) of investment management fees were payable to the Manager, with a balance of £133,000 (31 July 2015 - £nil) being due at the period end. There were no commonly managed funds held in the portfolio during the six months to 31 July 2016 (2015 - none).




The management agreement may be terminated by either party on not less than six months' written notice. On termination by the Company on less than the agreed notice period the Manager would be entitled to receive fees which would otherwise have been due up to that date.




The promotional activities fee is based on a current annual amount of £372,000 payable quarterly in arrears. During the period £186,000 (31 July 2015 - £186,000) of fees were payable to the Manager, with a balance of £31,000 (31 July 2015 - £124,000) being due at the period end.

 

11.

Segmental information


The Company is engaged in a single segment of business, which is to invest mainly in equity securities. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

 

12.

The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 July 2016 and 31 July 2015 has not been audited.




The information for the year ended 31 January 2016 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditor on those accounts contained no qualification or statement under Section 498 of the Companies Act 2006.




The auditor has reviewed the financial information for the six months ended 31 July 2016 pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

 

13.

This Half-Yearly Financial Report was approved by the Board on 29 September 2016.

 

 

Please note that past performance is not necessarily a guide to the future and the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested

 

For further information, please contact:-

 

Andrew Leigh

Aberdeen Asset Managers Limited            0207 463 6312


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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