Annual Financial Report
DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2012
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.
Highlights
· Net asset value per share up by 2.9% in total return terms outperforming the Company's benchmark, the FTSE All-Share Index which decreased by -0.3% in total return terms.
· The Board is recommending an increased final dividend. The total dividend for the year will amount to 10.65p (2011 - 10.25p).
For further information, please contact:-
Jeremy Whitley
Aberdeen Asset Managers Limited 0131 528 4000
Ian Massie
Aberdeen Asset Managers Limited 0131 528 4000
Please note that past performance is not necessarily a guide to the future and that 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.
1. CHAIRMAN'S STATEMENT
The past year has seen further progress for your Company, amid challenging economic and market conditions. A positive total return has been delivered, reasonable outperformance of the FTSE All-Share Index was recorded and substantial improvements to the revenue account have been achieved. This has been done while enhancing the quantum, quality and diversity of the portfolio's income generating capacity. As a result the Company now finds itself in a position both to grow its dividend and to address its total return mandate.
2011/12 was a volatile period for equities and saw a wide range of specific challenges posed. These ranged from the impacts of the Japanese tsunami, the "Arab Spring" uprisings and the downgrading of the credit rating of the United States to the continued sovereign debt turmoil in the Eurozone. The second half of the year also saw a marked weakening in the global economy, driven in no small part by the problems in the periphery of Europe affecting confidence, combined with the impact of tightening measures to combat inflationary pressures in a number of fast growing emerging economies, particularly China. At the same time, within the UK, we witnessed the unprecedented phenomenon of interest rates near zero, while inflation exceeded 5%.
A great deal has been written about the challenges facing the developed world and the events of the past year but this is not the place to add to the lexicon. For much of the time policy makers and politicians seemed in a state of denial and unable even to address properly, let alone solve, the economic problems posed to them. We witnessed a series of European summits, each in turn billed as the "last chance to save the Euro", endless squabbling between Democrats and Republicans in the United States and continued politicisation of the economic problems here in the UK.
Government intervention was critical in successfully stabilising the financial sector in the wake of the Lehman's 2008 bankruptcy. Unfortunately the lack of appetite for further bold and decisive action since has contributed to the significant bouts of panic that have afflicted markets at regular intervals, especially with regard to events in the Eurozone. Many now recognise the long term tensions arising from the use of a single currency in countries which are widely divergent as to both their economic condition and their interpretations of the fiscal disciplines necessary for the Eurozone to survive. A combination of radical changes to those in charge of the governments of Spain, Italy and Greece and innovative and significant intervention from the new President of the ECB, in the form of the huge Long Term Refinancing Operations offered to the region's banks, has gone a significant way to calming financial markets that in the autumn of 2011 looked on the verge of collapse. But it remains to be seen whether the latest bail-out from Greece proves to be any more than a stop-gap solution aimed at buying time.
In the UK, the coalition government continues to pursue its strategy of favouring budget deficit reduction and public sector reform ahead of nearer term GDP growth. Despite the debate between the austerity and growth camps, if government spending equates to roughly half of UK GDP then keeping it flat in real terms is likely to prove a significant drag on real aggregate demand. The key remains both the quality of the spending and its longer term multiplier effects and the stability that can be delivered to the economy through maintaining the confidence of international credit markets and consequently low interest rates. While we welcome affordable reductions in taxation and supply side innovations, long term stability and sensible government spending must continue to come ahead of transient boosts to demand driven by short term policy making.
More pleasingly, the operating performance of most of our investee companies has continued to be robust during such a turbulent period. Many of these are excellent businesses with leading franchises in the markets in which they choose to compete; they all have good management teams and appropriately financed balance sheets. This gives them an inherent advantage when it comes to adapting their businesses for tough times. On the whole they have responded admirably to the challenges faced, cut costs, managed working capital and strategically allocated resources to the areas in which they believe they can make the best returns and deliver the most growth.
Your Manager conducts extensive due diligence on our existing and potential holdings and invest for the long term. When faced with difficult situations, they have demonstrated, based on an objective appraisal of the circumstances, a willingness to exit investments where the future challenges are believed to be too great, as well as maintaining or even increasing positions where the problems are believed to be more temporary and the potential rewards appropriately attractive.
Gearing
The Company believes that modest financial gearing, whilst amplifying market movements in the short term, will enhance returns of both capital and income to shareholders over the long term. To this end, we employ two sources of financial leverage, a core long term fixed rate debenture (issued in 1997 and repayable in 2019 ) with a nominal value of £28.6 million and a coupon of 7.875%; and a variable rate bank loan facility of £20 million of which £5 million was drawn. This quantum has remained unchanged over the course of the year, though we were able to negotiate more favourable terms on our variable bank finance, which now carries a margin of 1.10% over LIBOR.
With debt valued at par, potential gearing has slightly increased from 9.7% at the end of the last financial year to 9.8% as a result of a slight fall in the value of the Company's asset base. On a pure equity basis, netting off our cash and bonds, it has risen quite substantially from 2.7% to 8.7%, reflecting the sale of the bond portfolio and the use of the undrawn bank facility instead of cash to support our option writing programme.
Discount
Over the past year there was a slight widening in the discount to Net Asset Value at which the shares of your Company trade (from 2% to 4.5%), but this disguises the fact that for much of the year we were trading near - and at times at - a premium. Your Board interprets this as a sign, first, of the demand from investors for yield; and, secondly, of recognition in the market of the progress made by DIGIT. We did not undertake any share re-purchases during the year, but we are once again seeking shareholders' permission to do so and are prepared to use this measure in the light of both the Company's absolute level of discount and that relative to those of our peer group. At the date of this report, DIGIT's shares were trading close to par.
Dividend
I commented in last year's annual report that the outlook for income generation in 2011/12 was better than it had been for some considerable time and I am pleased to report that this has indeed turned out to be the case. As a result we are able to announce an increased final dividend of 6.90p making a total of 10.65p for the year, a 3.9% annual rise. This is the first increase we have been able to recommend since 2009 and, if approved by shareholders, will also allow us to add around 0.35p to our revenue reserves, a resource which we have needed to tap in recent years and which I am glad to be able to start re-building.
As announced with the interim results, we intend henceforth to pay dividends on a quarterly basis, with the first such payment being made in August 2012 and thereafter in November, February and May.
Outlook
Despite the strong market rally that has accompanied the start of 2012, we remain cautious. Last year we thought policy makers would face challenges in unwinding their interventions in what were fragile economies demonstrating some signs of recovery. In fact they ended the year having substantially deepened their involvement. As a result the global economy remains very much on economic life support, being kept alive with ever larger injections of liquidity and cheap money. Whilst this has most likely mitigated the worst case scenarios of an implosion in the European financial sector and a disorderly break-up of the Euro, it still leaves behind a global economy short on growth and long on structural challenges.
Following the sharp increase in markets in early 2012, equity valuations are now more demanding than they have been for some time. Investors have become more adventurous and risk appetite appears to have risen. While we have seen some signs of improving fundamentals in the United States economy, continued volatility should be expected.
The one pleasant surprise, as we have already begun to witness in this financial year, may come in the form of increased cash distributions from our investments. In the current market environment our investment strategy of concentrating our capital into a sensibly diversified portfolio of good quality companies with strong business models, sturdy balance sheets and talented management teams remains appropriate and will leave us well placed to grow our dividend.
The Board
The Directors have discussed succession planning for the Board and, following a process which used an external search consultant, we welcome Elisabeth Scott who joined the Board on 24 January 2012. Elisabeth brings to us many years of investment experience at a senior level and her contribution to our deliberations is already considerable. She will stand for election at the Annual General Meeting in May.
At the same time I am retiring from the Board and am therefore not offering myself for re-election at the Annual General Meeting. My successor as Chairman will be Rory Macnamara, who has served on the DIGIT Board since 2005 and who has ably chaired our Audit Committee in recent years.
I joined this Board in 2001 and became Chairman in 2006; from a shareholder's perspective there is much to remember about the past 11 years, notable moments of stress being the 9/11 atrocity and its aftermath, the Iraq War, the near-destruction of the UK banking sector, Lehman Brothers and the current Eurozone turmoil, not to mention ash clouds, oil well disasters, hurricanes and tsunamis. At the same time the London Stock Exchange has changed, on the one hand playing host to overseas mining companies with little connection to the domestic economy, yet forming a significant component of the FTSE All-Share Index against which DIGIT is benchmarked, but in which - given their yield and governance characteristics - we are reluctant to invest. Another feature of the London market is that, as compared with a decade ago, it now presents an increased concentration of value and dividends; neither of these helps the fund manager who is seeking to assemble a diversified portfolio of stocks capable of growing their distributable income and largely for that reason the investment mandate was broadened to allow up to 20% of assets to be in non-UK listed stocks; whilst our overall investment objective is broadly unchanged, our portfolio today looks very different from that of 2001.
During my time on this Board we have achieved little by way of capital growth, mirroring the pedestrian performance of UK equities in the past decade, but I am pleased that we have managed to increase our annual dividend by over 60%, a compound rate of 4.5% per annum, which compares to 3.0% for the Retail Price Index over the period. Despite widespread dividend cuts in the market, we were able to maintain our distribution levels through the depths of the financial crisis and (at the time of writing) we offer investors a yield of over 4%, derived from a high quality portfolio of diversified investments managed by a well-resourced and talented team, to whom I extend my thanks and my best wishes for the future of DIGIT.
Annual General Meeting
The Company's Annual General Meeting takes place in Dundee, on 23 May 2012, and I look forward to seeing as many of you there as possible.
John Scott
Chairman
23 March 2012
2. MANAGER'S REVIEW
As we enter 2012, we commence what will be the sixth year of the financial crisis and leave behind another twelve months of remarkable volatility. The key lesson as long term investors that we draw from this extraordinary period is that we are very much at the mercy of largely unpredictable external events. As equity market investors, the factors within our control are limited. We can choose the companies we invest in and we can choose the construction of the portfolio but, beyond that our power to influence events is strictly limited.
As a result we started 2011 with three ambitions that were largely divorced from the day-to-day gyrations of financial markets. First, we wanted to continue to improve the quality of the holdings within the portfolio. Second, we aimed to diversify sensibly those holdings and limit our capital and income exposure to individual companies and thematics. Third, we aspired to generate enough income to cover our expected dividend commitment.
Reviewing 2011/12 we are pleased that we have broadly managed to achieve those objectives. We have continued to improve the aggregate quality of the companies within the portfolio. Our forecast capital and income exposure to any one company within the portfolio is now not much more than 5% and we have managed to increase the revenue capacity of the portfolio to more than cover the full year dividend. As 2011/12 progressed, the environment for income generation improved ahead of our expectations and as a result we had some headroom to invest in some very good businesses with lower dividend yields but superior prospects for growth. We believe these changes leave the portfolio increasingly well positioned to handle the challenges that it may face in the years ahead.
Performance
Income account revenues increased by 13.4% over the period, rising to £19.2 million from £16.9 million a year earlier. Income received from dividends grew by 23% and within this, the contribution from overseas listed companies more than doubled to over £3 million. The option writing programme generated £1.7 million, an increase of over 30% on 2010/11. All of this led earnings per share on the income account to advance by 8.3% year on year to 11.0p. Stripping out the exceptional VAT related rebates from HMRC in 2010/11 underlying earnings per share rose by around 23%.
Total return performance on a net asset basis over the year saw the portfolio outperform the market delivering 2.9% against the FTSE All-Share's -0.3% return. Reflecting the volatile nature of the year under review it was very much a period in which classic defensive companies performed well and in which higher risk more cyclical businesses underperformed. It was also a year in which the robustness of companies' business models and balance sheets were put under scrutiny with higher quality operators managing to outperform their lower quality peers.
In terms of relative performance our limited exposure to the poorly performing mining and banks sectors boosted the return by over 3%. We continue to remain very cautious on the domestic UK banks and believe that investors should not underestimate the challenges that lie ahead for them. The mining sector also remains a challenging area for us to invest in with concern over the risk of investing in single country/single commodity companies often with weak standards of corporate governance.
We also benefitted from some robust individual company performances over the year. It was pleasing to see National Grid make a strong positive contribution to the portfolio after the furore surrounding its rights issue in 2010. The business made good progress on resolving some of the challenges it faces in its North American operations as well as moving towards what seems likely to be an acceptable regulatory settlement in the UK.
Pearson saw its share price continue to do well as the company was rewarded for expanding its educational services globally and deepening its digital content while delivering solid improvements in both the FT group and Penguin. It made a full priced disposal of its share in the FTSE group and has undertaken a series of bolt on acquisitions that have helped both to strengthen the company's strategic position as well as enhance profits.
John Wood Group also prospered as it benefitted from recovering investment trends in its core hydrocarbon and power markets. The group also gained from the disposal of its well support division to GE for what seemed to us a very full price and implementing a resulting return of capital to investors.
It was, though, a challenging year and the portfolio was not without its difficult situations. Mothercare produced a series of disappointing trading updates as, despite the rapid growth in its international units, its core UK business came under significant pressure. This was caused by tighter household budgets as well as more worrying structural concerns in the form of much more intense competition, especially in the online arena, where the company had failed to keep pace with the changes in consumer behaviour. After a series of meetings over the year with management and a good degree of soul searching we decided to exit our position given the risk posed to the whole business by the problems faced in the UK operations with its high operating leverage and large pension and lease base.
Tesco was another name that proved troubling in the latter part of the year as it announced lacklustre Christmas trading and the intention to expand investment in its UK store base which in turn would mean a flat outlook for group profits in the financial year ahead. UK retail is a competitive space but we believe that Tesco should be well placed to deal with the challenges it faces. Arguably it has been prioritising profits over market share and sales for too long to finance its international expansion. They start the recovery in a strong position with close to 30% market share which is nearly double their nearest competitor, a formidable store network and a strong balance sheet. It also has growth opportunities overseas and in UK financial services. It will not be a quick turnaround but we remain supportive shareholders and it seems the potential for success is not currently priced into the shares.
Portfolio Activity
After what one may term the "heavy lifting" of the last few years, 2011/12 saw a continuation of the efforts to focus on income generation, on improving the quality of our holdings and also an extra focus on diversifying the earnings streams of the Company. In the second half of the year we were able to focus new investment into companies that can offer significant future dividend and capital growth, as opposed to just high initial yields.
To this end we introduced four new companies Sage, Compass, Croda International and Experian. All are globally leading companies in their chosen markets, with high quality characteristics; all offer the portfolio something different in terms of economic exposure and we expect them to grow their dividends at double digit rates over the medium term. We also added to our holdings in Amec and John Wood Group. While neither is a high yielding company they are both excellent businesses and we expect to see strong dividend growth from them for the foreseeable future.
Further expanding our overseas exposure we introduced Unibail-Rodamco, the leading pan-European owner of top quality shopping malls, and exited our Land Securities position in the process. This both improved the quality of the portfolio's holdings and enhanced our income given Unibail's superior yield. In a similar vein we consolidated our mining exposure into a single holding by selling our holding in Rio Tinto and rolling the funds raised into BHP Billiton. This remains in our view the best quality global mining company with a diversified portfolio of world class resource assets and a significantly higher dividend yield.
A number of small legacy positions were exited as they continued to recover including Persimmon and Holidaybreak. As detailed above we also exited our holding in Mothercare. After strong absolute performance that had reduced yields to only modest levels we also sold the small bond portfolio that had been acquired to sterilise the impact of the debenture on the Company's gearing.
Reducing our income reliance on a number of companies was also an important part of our actions during the year. This included trimming on strength our holdings in National Grid and Provident Financial and making sure we capped our absolute exposure to single large holdings including British American Tobacco and Royal Dutch Shell. In contrast we added to holdings in a number of companies that underperformed over the year and where the quality, valuation and yield were increasingly attractive. This included adding to HSBC, Cobham, Tesco and Centrica.
Outlook
2012 has started with a sharp rise in global equity markets. Investors have taken heart from improved recent economic data in the United States and the more interventionist and proactive stances of central banks and policymakers around the world. However, the fiscal, growth and increasingly demographic challenges facing the developed world remain, not to mention any attempt at some point to unwind the vast monetary stimulus. Our planning assumption is that the financial year 2012/13 is likely to be yet another tough one for investors and the maintenance of capital value and modest growth in income will represent a meaningful achievement.
Fortunately the underlying picture at the companies in which we invest is brighter than that at the macro-economic level. We believe we now have a good quality portfolio of companies that are in rude financial health and where collectively the prospect for dividend distributions is reasonable. While times ahead may be difficult we feel the portfolio is well positioned to ride them out.
Jeremy Whitley
Aberdeen Asset Managers Limited
23 March 2012
3. BUSINESS REVIEW
The Board has prepared this Business Review in accordance with the requirements of Section 417 of the Companies Act 2006. A review of the Company's activities is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities, likely future developments of the business and recommended dividend. The Board has adopted a matrix of the key risks that affect its business. Like most other companies, the present economic conditions continue to represent the greatest challenge, and risk, to the Company. Beyond this, the major risks associated with the Company are detailed in note 19 to the Financial Statements. Other risks include:
• Performance risk: A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds. The NAV performance relative to the Index and the underlying stock weightings in the portfolio against the Index weightings are monitored closely by the Board.
• Discount volatility: The Company's share price can trade at a discount to its underlying net asset value. The Company operates a share buyback programme which is reviewed on a continuing basis.
• Regulatory risk: The Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Section 1158 of the Corporation Tax Act 2010, the UKLA Listing Rules and the Companies Act, could lead to a number of detrimental outcomes and reputational damage. The Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager.
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. Below are the main key performance indicators (KPIs) which have been identified by the Board for determining the progress of the Company:
- Net Asset Value
- Revenue Return per Ordinary share
- Share Price
- Discount
- FTSE All-Share Index
- Total Expense Ratio
In addition the Directors also consider net asset value total return, share price total return and dividend levels when reviewing KPIs.
Each Director confirms that, so far as he or she (hereinafter referred to as "he") is aware, there is no relevant audit information of which the Company's auditor is unaware, and he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information. Additionally there are no important events affecting the Company since the year end.
The Directors, as shown in the table opposite, held office throughout the whole year under review except Elisabeth Scott who joined the Board on 24 January 2012.
The Company makes no political donations or expenditures or donations for charitable purposes and, in common with most investment trusts, has no employees.
Dividends
The Directors recommend that a final dividend of 6.90p (2011 - 6.50p) per share be paid on 25 May 2012 to shareholders on the register at the close of business on 20 April 2012, making a total of 10.65p (2011 - 10.25p) per share for the year ended 31 January 2012. The ex-dividend date is 18 April 2012. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.
Status
The Company is registered as a public limited company. The Company's registration number is SC000881.
The Company carries on business as an investment trust for the purpose of Section 1158 of the Corporation Tax Act 2010 and has been approved as such by HM Revenue & Customs for the period ended 31 January 2011 although approval for that year would be subject to review were there to be any enquiry under the Corporate Tax Self Assessment regime. The Company has subsequently conducted its affairs so as to enable it to continue to seek such approval. The Company is an investment company, within the terms of Section 833 of the Companies Act 2006.
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 banking covenants. The current bank loan expires in July 2013. The Company's Directors believe that the Company has adequate resources to continue its operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the accounts.
4. STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the annual report & accounts 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 have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards 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 are sufficient to show and explain the Company's transactions and 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 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a 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 website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
• the Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
For Dunedin Income Growth Investment Trust PLC
Rory Macnamara
Audit Committee Chairman
23 March 2012
INCOME STATEMENT
|
|
|
Year ended 31 January 2012 |
Year ended 31 January 2011 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
(Losses)/gains on investments |
9 |
- |
(4,394) |
(4,394) |
- |
45,224 |
45,224 |
|
Currency losses |
|
- |
(84) |
(84) |
- |
(125) |
(125) |
|
Income |
2 |
19,173 |
- |
19,173 |
16,904 |
- |
16,904 |
|
Investment management fee |
3 |
(560) |
(840) |
(1,400) |
(522) |
(783) |
(1,305) |
|
VAT recovered on investment management fees |
3 |
- |
- |
- |
715 |
582 |
1,297 |
|
Administrative expenses |
4 |
(788) |
- |
(788) |
(740) |
(2) |
(742) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Net return before finance costs and taxation |
|
17,825 |
(5,318) |
12,507 |
16,357 |
44,896 |
61,253 |
|
|
|
|
|
|
|
|
|
|
Finance costs |
5 |
(980) |
(1,470) |
(2,450) |
(948) |
(1,423) |
(2,371) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Return on ordinary activities before taxation |
|
16,845 |
(6,788) |
10,057 |
15,409 |
43,473 |
58,882 |
|
|
|
|
|
|
|
|
|
|
Taxation |
6 |
(264) |
- |
(264) |
(118) |
- |
(118) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Return on ordinary activities after taxation |
|
16,581 |
(6,788) |
9,793 |
15,291 |
43,473 |
58,764 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
Return per Ordinary share (pence) |
8 |
11.00 |
(4.50) |
6.50 |
10.15 |
28.85 |
39.00 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
The column of this statement headed "Total" represents the profit and loss account of the Company. |
|||||||
|
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement. |
|||||||
|
All revenue and capital items in the above statement derive from continuing operations. |
|||||||
|
The accompanying notes are an integral part of the financial statements. |
|||||||
BALANCE SHEET
|
|
|
As at |
As at |
|
|
|
31 January 2012 |
31 January 2011 |
|
|
Notes |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
9 |
370,711 |
361,864 |
|
|
|
_________ |
_________ |
|
Current assets |
|
|
|
|
Loans and receivables |
10 |
2,887 |
2,098 |
|
Cash and short term deposits |
17 |
3,890 |
3,566 |
|
AAA Money Market funds |
17 |
- |
13,866 |
|
|
|
_________ |
_________ |
|
|
|
6,777 |
19,530 |
|
|
|
_________ |
_________ |
|
Creditors: amounts falling due within one year |
|
|
|
|
Bank loan |
11 |
(5,000) |
(5,000) |
|
Other creditors |
11 |
(2,702) |
(974) |
|
|
|
_________ |
_________ |
|
|
|
(7,702) |
(5,974) |
|
|
|
_________ |
_________ |
|
Net current (liabilities)/assets |
|
(925) |
13,556 |
|
|
|
_________ |
_________ |
|
Total assets less current liabilities |
|
369,786 |
375,420 |
|
|
|
|
|
|
Creditors: amounts falling due after more than one year |
12 |
(28,506) |
(28,493) |
|
|
|
_________ |
_________ |
|
Net assets |
|
341,280 |
346,927 |
|
|
|
_________ |
_________ |
|
Capital and reserves |
|
|
|
|
Called-up share capital |
13 |
38,419 |
38,419 |
|
Share premium account |
|
4,543 |
4,543 |
|
Capital redemption reserve |
|
1,606 |
1,606 |
|
Capital reserve |
14 |
275,129 |
281,917 |
|
Revenue reserve |
|
21,583 |
20,442 |
|
|
|
_________ |
_________ |
|
Equity shareholders' funds |
|
341,280 |
346,927 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
Adjusted net asset value per Ordinary share (pence) |
18 |
226.39 |
230.13 |
|
|
|
_________ |
_________ |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
|
For the year ended 31 January 2012 |
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 January 2011 |
|
38,419 |
4,543 |
1,606 |
281,917 |
20,442 |
346,927 |
|
Return on ordinary activities after taxation |
|
- |
- |
- |
(6,788) |
16,581 |
9,793 |
|
Dividends paid |
7 |
- |
- |
- |
- |
(15,440) |
(15,440) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Balance at 31 January 2012 |
|
38,419 |
4,543 |
1,606 |
275,129 |
21,583 |
341,280 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
For the year ended 31 January 2011 |
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 January 2010 |
|
38,419 |
4,543 |
1,606 |
238,444 |
20,591 |
303,603 |
|
Return on ordinary activities after taxation |
|
- |
- |
- |
43,473 |
15,291 |
58,764 |
|
Dividends paid |
7 |
- |
- |
- |
- |
(15,440) |
(15,440) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Balance at 31 January 2011 |
|
38,419 |
4,543 |
1,606 |
281,917 |
20,442 |
346,927 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. |
|||||||
|
The accompanying notes are an integral part of the financial statements. |
|||||||
CASH FLOW STATEMENT
|
|
|
Year ended |
Year ended |
||
|
|
|
31 January 2012 |
31 January 2011 |
||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Net cash inflow from operating activities |
15 |
|
17,969 |
|
16,737 |
|
|
|
|
|
|
|
|
Servicing of finance |
|
|
|
|
|
|
Interest paid |
|
|
(2,442) |
|
(2,362) |
|
|
|
|
|
|
|
|
Taxation |
|
|
|
|
|
|
Overseas withholding tax paid |
|
|
(264) |
|
(118) |
|
|
|
|
|
|
|
|
Financial investment |
|
|
|
|
|
|
Purchases of investments |
|
(67,638) |
|
(57,300) |
|
|
Sales of investments |
|
54,357 |
|
69,588 |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash (outflow)/inflow from financial investment |
|
|
(13,281) |
|
12,288 |
|
|
|
|
|
|
|
|
Equity dividends paid |
7 |
|
(15,440) |
|
(15,440) |
|
|
|
_______ |
|
_______ |
|
|
Net cash (outflow)/inflow before use of liquid resources and financing |
|
|
(13,458) |
|
11,105 |
|
|
|
|
|
|
|
|
Net cash inflow/(outflow) from management of liquid resources |
|
|
13,866 |
|
(11,480) |
|
|
|
|
_______ |
|
_______ |
|
Net cash inflow/(outflow) before financing |
|
|
408 |
|
(375) |
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
Repayment of loans |
|
- |
|
(1,500) |
|
|
Drawdown of loan |
|
- |
|
5,000 |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash inflow from financing |
|
|
- |
|
3,500 |
|
|
|
|
_______ |
|
_______ |
|
Increase in cash |
|
|
408 |
|
3,125 |
|
|
|
|
_______ |
|
_______ |
|
Reconciliation of net cash flow to movements in net debt |
|
|
|
|
|
|
Increase in cash as above |
|
|
408 |
|
3,125 |
|
Net change in liquid resources |
|
|
(13,866) |
|
11,480 |
|
Net change in financing |
|
|
- |
|
(3,500) |
|
Exchange movements |
|
|
(84) |
|
(125) |
|
Non-cash movements |
|
|
(13) |
|
(13) |
|
Movement in net debt in the period |
|
|
(13,555) |
|
10,967 |
|
Opening net debt |
|
|
(16,061) |
|
(27,028) |
|
|
|
|
_______ |
|
_______ |
|
Closing net debt |
|
|
(29,616) |
|
(16,061) |
|
|
|
|
_______ |
|
_______ |
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2012
|
1. |
Accounting policies |
|
|
|
(a) |
Basis of preparation and going concern |
|
|
|
The financial statements have been prepared under the historical cost convention, as modified to include the revaluation of investments and in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. The Directors believe this is appropriate for the reasons outlined in the Directors' Report. |
|
|
|
|
|
|
|
The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP). |
|
|
|
|
|
|
(b) |
Revenue, expenses and interest payable |
|
|
|
Income from equity investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to revenue or capital according to the circumstances. Foreign income is converted at the exchange rate applicable at the time of receipt. Interest receivable on AAA rated money market funds and short term deposits and expenses are accounted for on an accruals basis. Income from underwriting commission is recognised as earned. Interest payable is calculated on an effective yield basis. |
|
|
|
|
|
|
|
Expenses are charged to capital when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect, the investment management fee and relevant finance costs are allocated between revenue and capital in line with the Board's expectation of returns from the Company's investments over the long-term in the form of revenue and capital respectively (see note 3). |
|
|
|
|
|
|
(c) |
Investments |
|
|
|
Investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are recognised at fair value through profit or loss. For listed investments, this 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 All-Share and the most liquid AIM constituents. Gains or losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Income Statement. |
|
|
|
|
|
|
(d) |
Dividends payable |
|
|
|
Interim and final dividends are recognised in the period in which they are paid. |
|
|
|
|
|
|
(e) |
Capital reserves |
|
|
|
Gains or losses on disposal of investments and changes in fair values of investments are transferred to the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. |
|
|
|
|
|
|
|
The Ordinary share capital on the Balance Sheet relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, should a transfer be made to the capital redemption reserve. |
|
|
|
|
|
|
(f) |
Taxation |
|
|
|
Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the Balance Sheet date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Balance Sheet date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets being recognised only if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted. Temporary differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. |
|
|
|
|
|
|
|
Owing to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. |
|
|
|
|
|
|
(g) |
Foreign currency |
|
|
|
The Company receives a proportion of its investment income in foreign currency. These amounts are translated at the rate ruling on the date of receipt. Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Balance Sheet date. |
|
|
|
|
|
|
(h) |
Traded options |
|
|
|
The Company may enter into certain derivatives (e.g. options). Option contracts are accounted for as separate derivative contracts and are therefore shown in other assets or other liabilities at their fair value i.e. market value adjusted for the amortisation of transaction expenses. The premium received and fair value changes in the open position are recognised in the revenue column, losses realised on the exercise of the contracts are recorded in the capital column of the Income Statement. |
|
|
|
|
|
|
|
In addition, the Company may enter into derivative contracts to manage market risk and gains or losses arising on such contracts are recorded in the capital column of the Income Statement. |
|
|
|
2012 |
2011 |
|
2. |
Income |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
UK listed - franked |
13,693 |
11,964 |
|
|
UK listed - unfranked |
144 |
302 |
|
|
Overseas listed |
3,048 |
1,414 |
|
|
Bond interest listed |
273 |
502 |
|
|
Stock dividends |
195 |
182 |
|
|
|
_________ |
_________ |
|
|
|
17,353 |
14,364 |
|
|
|
_________ |
_________ |
|
|
Other income |
|
|
|
|
Interest from AAA rated money market funds |
14 |
40 |
|
|
Deposit interest |
2 |
- |
|
|
Interest on VAT recovered |
17 |
1,121 |
|
|
Income on derivatives |
1,723 |
1,277 |
|
|
Income from stock lending |
64 |
- |
|
|
Underwriting commission |
- |
102 |
|
|
|
_________ |
_________ |
|
|
|
1,820 |
2,540 |
|
|
|
_________ |
_________ |
|
|
Total income |
19,173 |
16,904 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
|
During the year, the Company was entitled to premiums totalling £1,723,000 (2011 - £1,277,000) in exchange for entering into derivative transactions. This figure includes a mark to market on derivative contracts open at each year end. Derivatives utilised were based on individual FTSE 100 stocks and FT 500 World's largest companies. At the year end there were 17 open positions, valued at a liability of £442,000 (2011 - £283,000) as disclosed in note 11. |
||
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
3. |
Investment management fee |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment management fee |
560 |
840 |
1,400 |
522 |
783 |
1,305 |
|
|
|
______ |
______ |
_____ |
______ |
______ |
_____ |
|
|
|
|
|
|
|
|
|
|
|
The management fee paid to Aberdeen Asset Managers Limited (the "Manager") for the year ended 31 January 2012 is calculated, on a monthly basis, at 0.45% on the first £225 million, 0.35% on the next £200 million and 0.25% on amounts over £425 million per annum 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. There were no commonly managed funds held in the portfolio during the year to 31 January 2012 (2011 - none). |
||||||
|
|
|
||||||
|
|
On 5 November 2007, the European Court of Justice ruled that management fees on investment trusts should be exempt from VAT. HMRC announced its intention not to appeal against this ruling to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company have now been processed by HMRC. |
||||||
|
|
|
||||||
|
|
The VAT charged on the investment management fees has been refunded in stages. An amount of £1,020,000 relating to the period 1 January 2004 to 31 October 2007 was recognised in the financial statements for the year ended 31 January 2009 and an amount of £573,000 relating to the period 1 January 2001 to 31 December 2003 was recognised in the financial statements for the year ended 31 January 2010. Further amounts of £1,095,000 representing all VAT charged on investment management fees for the period 1 January 1990 to 4 December 1996 and £202,000 for the period 1 January 2001 to 31 December 2003 were received and recognised in the prior year's financial statements. The refunds have been allocated to revenue and capital in line with the accounting policy of the Company for the periods in which the VAT was charged. |
||||||
|
|
|
||||||
|
|
In addition, an interest debtor of £1,121,000 relating to the above settled claims was recognised in the revenue column of the income statement in the financial statements for the year ended 31 January 2011 and £1,138,000 was received in the current year. |
||||||
|
|
|
2012 |
2011 |
|
4. |
Administrative expenses |
£'000 |
£'000 |
|
|
Directors' fees |
119 |
100 |
|
|
Auditor's remuneration (excluding irrecoverable VAT): |
|
|
|
|
fees payable to the Company's auditor for the audit of the annual accounts |
16 |
16 |
|
|
fees payable to the Company's auditor and its associates for other services: |
|
|
|
|
interim review |
6 |
6 |
|
|
Investor Relations/Marketing Initiative |
271 |
240 |
|
|
Registrar's fees |
104 |
101 |
|
|
Printing and postage |
42 |
54 |
|
|
Irrecoverable VAT |
75 |
69 |
|
|
Other expenses |
155 |
154 |
|
|
|
_______ |
_______ |
|
|
|
788 |
740 |
|
|
|
_______ |
_______ |
|
|
|
||
|
|
A payment of £271,000 (2011 - £240,000) was made to the Manager in respect of marketing and promotion of the Company. |
||
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
5. |
Finance costs |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Bank loan interest |
74 |
111 |
185 |
42 |
64 |
106 |
|
|
Debenture Stock - repayable after 5 years |
901 |
1,351 |
2,252 |
901 |
1,351 |
2,252 |
|
|
Amortised Debenture Stock premium and issue expenses |
5 |
8 |
13 |
5 |
8 |
13 |
|
|
|
_______ |
_______ |
_____ |
_______ |
______ |
_____ |
|
|
|
980 |
1,470 |
2,450 |
948 |
1,423 |
2,371 |
|
|
|
_______ |
_______ |
_____ |
_______ |
______ |
_____ |
|
|
|
2012 |
2011 |
|||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
6. |
Taxation |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
(a) |
Analysis of charge for the year |
|
|
|
|
|
|
|
|
|
Overseas tax suffered |
348 |
- |
348 |
154 |
- |
154 |
|
|
|
Overseas tax reclaimable |
(84) |
- |
(84) |
(36) |
- |
(36) |
|
|
|
|
_______ |
_______ |
_____ |
_______ |
______ |
_____ |
|
|
|
Current tax charge for the year |
264 |
- |
264 |
118 |
- |
118 |
|
|
|
|
_______ |
_______ |
_____ |
_______ |
______ |
_____ |
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
Factors affecting the tax charge for the year |
||||||
|
|
|
The UK Corporation tax rate was 28% until 31 March 2011 and 26% from 1 April 2011 giving an effective rate of 26.33% (2011 - effective rate of 28%). The tax assessed for the year is lower than the rate of corporation tax. The differences are explained below: |
||||||
|
|
|
|
||||||
|
|
|
|
2012 |
2011 |
||||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
Return on ordinary activities before taxation |
16,845 |
(6,788) |
10,057 |
15,409 |
43,473 |
58,882 |
|
|
|
|
_______ |
_______ |
_____ |
_______ |
______ |
_____ |
|
|
|
Corporation tax at 26.33% (2011 - 28%) |
4,435 |
(1,787) |
2,648 |
4,315 |
12,172 |
16,487 |
|
|
|
Effects of: |
|
|
|
|
|
|
|
|
|
Non-taxable UK dividends |
(3,606) |
- |
(3,606) |
(3,350) |
- |
(3,350) |
|
|
|
Non-taxable stock dividends |
(51) |
- |
(51) |
(51) |
- |
(51) |
|
|
|
Capital losses/(gains) on investments not taxable |
- |
1,157 |
1,157 |
- |
(12,663) |
(12,663) |
|
|
|
Overseas taxes |
264 |
- |
264 |
118 |
- |
118 |
|
|
|
Non-taxable overseas dividends |
(803) |
- |
(803) |
(377) |
- |
(377) |
|
|
|
Utilisation/(non-utilisation) of management expenses |
25 |
608 |
633 |
(537) |
456 |
(81) |
|
|
|
Capital loss on exchange movements not allowable |
- |
22 |
22 |
- |
35 |
35 |
|
|
|
|
_______ |
_______ |
_____ |
_______ |
______ |
_____ |
|
|
|
Current tax charge |
264 |
- |
264 |
118 |
- |
118 |
|
|
|
|
_______ |
_______ |
_____ |
_______ |
______ |
_____ |
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
Factors that may affect future tax charges |
||||||
|
|
|
At the year end, the Company has, for taxation purposes only, accumulated unrelieved management expenses and loan relationship deficits of £105,464,000 (2011 - £103,063,000). A deferred tax asset in respect of this has not been recognised and these expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. |
||||||
|
|
|
2012 |
2011 |
|
7. |
Dividends |
£'000 |
£'000 |
|
|
Amounts recognised as distributions to equity holders in the period: |
|
|
|
|
Final dividend for the year ended 31 January 2011 - 6.50p (2010 - 6.50p) paid 25 May 2011 |
9,796 |
9,796 |
|
|
Interim dividend for the year ended 31 January 2012 - 3.75p (2011 - 3.75p) paid 17 October 2011 |
5,651 |
5,651 |
|
|
Return of unclaimed dividends |
(7) |
(7) |
|
|
|
_______ |
_______ |
|
|
Dividends paid in the period |
15,440 |
15,440 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. |
||
|
|
|
||
|
|
The table below sets out the total dividends paid and proposed 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 revenue available for distribution by way of dividend for the year is £16,581,000 (2011 - £15,291,000). |
||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
£'000 |
£'000 |
|
|
Interim dividend for the year ended 31 January 2012 - 3.75p (2011 - 3.75p) |
5,651 |
5,651 |
|
|
Proposed final dividend for the year ended 31 January 2012 - 6.90p (2011 - 6.50p) |
10,399 |
9,796 |
|
|
|
_______ |
_______ |
|
|
|
16,050 |
15,447 |
|
|
|
_______ |
_______ |
|
|
There have been no shares bought back since the year end and the proposed final dividend for 2012 is based on the latest share capital of 150,706,187 Ordinary shares. |
||
|
|
|
2012 |
2011 |
||
|
8. |
Return per Ordinary share |
£'000 |
p |
£'000 |
p |
|
|
Revenue return |
16,581 |
11.00 |
15,291 |
10.15 |
|
|
Capital return |
(6,788) |
(4.50) |
43,473 |
28.85 |
|
|
|
_______ |
_______ |
______ |
_______ |
|
|
Total return |
9,793 |
6.50 |
58,764 |
39.00 |
|
|
|
_______ |
_______ |
______ |
_______ |
|
|
Weighted average number of Ordinary shares in issue |
|
150,706,187 |
|
150,706,187 |
|
|
|
|
__________ |
|
_________ |
|
|
|
Listed |
Listed |
|
|
|
2012 |
2011 |
|
9. |
Investments: listed at fair value through profit or loss |
£'000 |
£'000 |
|
|
Opening fair value |
361,864 |
328,928 |
|
|
Opening investment holding gains |
(66,528) |
(31,182) |
|
|
|
_______ |
_______ |
|
|
Opening book cost |
295,336 |
297,746 |
|
|
Purchases at cost |
69,183 |
57,300 |
|
|
Sales - proceeds |
(55,942) |
(69,588) |
|
|
Sales - realised gains |
7,487 |
10,116 |
|
|
Loss on traded index option contracts |
- |
(238) |
|
|
|
_______ |
_______ |
|
|
Closing book cost |
316,064 |
295,336 |
|
|
Closing investment holdings gains |
54,647 |
66,528 |
|
|
|
_______ |
_______ |
|
|
Closing fair value |
370,711 |
361,864 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
(Losses)/gains on investments |
£'000 |
£'000 |
|
|
Realised gains on sales |
7,487 |
10,116 |
|
|
Loss on traded index option contracts |
- |
(238) |
|
|
Change in investment holdings gains |
(11,881) |
35,346 |
|
|
|
_______ |
_______ |
|
|
|
(4,394) |
45,224 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
Transaction costs |
|
|
|
|
During the year 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 (losses)/gains on investments in the Income Statement. The total costs were as follows: |
||
|
|
|
||
|
|
|
2012 |
2011 |
|
|
|
£'000 |
£'000 |
|
|
Purchases |
281 |
248 |
|
|
Sales |
54 |
68 |
|
|
|
_______ |
_______ |
|
|
|
335 |
316 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
Stock lending |
£'000 |
£'000 |
|
|
Aggregate value of securities on loan at the year end |
17,543 |
- |
|
|
Maximum aggregate value of securities on loan during the year |
19,220 |
- |
|
|
Fee income (gross) from stock lending |
64 |
- |
|
|
|
|
|
|
|
All stocks lent under these arrangements are fully secured against collateral. The value of the collateral held at 31 January 2012 was £19,625,000 (2011 - nil) which comprised government stocks. |
||
|
|
|
2012 |
2011 |
|
10. |
Debtors: amounts falling due within one year |
£'000 |
£'000 |
|
|
Amounts due from stockbrokers |
1,585 |
- |
|
|
Net dividends and interest receivable |
1,098 |
746 |
|
|
Tax recoverable |
180 |
188 |
|
|
Interest on VAT recoverable |
- |
1,121 |
|
|
Other loans and receivables |
24 |
43 |
|
|
|
_______ |
_______ |
|
|
|
2,887 |
2,098 |
|
|
|
_______ |
_______ |
|
11. |
Creditors: amounts falling due within one year |
|||
|
|
(a) |
Bank loan |
||
|
|
|
The Company has an agreement (which expires 25 July 2013) with Royal Bank of Scotland to provide a loan facility for up to £20,000,000 (2011 - £5,000,000). At 31 January 2012 £5,000,000 (2011 - £5,000,000) was drawn down at a rate of 1.8763%. On 29 February 2012 the loan was rolled over at a rate of 1.84589%. The terms of the loan facility contain covenants that gross borrowings should not exceed 30% of adjusted assets and that the minimum net assets of the Company are £200,000,000. |
||
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
(b) |
Other creditors |
£'000 |
£'000 |
|
|
|
Amounts due to stockbrokers |
1,545 |
- |
|
|
|
Debenture Stock and bank loan interest |
569 |
574 |
|
|
|
Traded option contracts |
442 |
283 |
|
|
|
Sundry creditors |
146 |
117 |
|
|
|
|
_______ |
_______ |
|
|
|
|
2,702 |
974 |
|
|
|
|
_______ |
_______ |
|
|
|
2012 |
2011 |
|
12. |
Creditors: amounts falling due after more than one year |
£'000 |
£'000 |
|
|
7⅞% Debenture Stock 2019 (issued in 1997) |
28,600 |
28,600 |
|
|
Unamortised Debenture Stock premium and issue expenses |
(94) |
(107) |
|
|
|
_______ |
_______ |
|
|
Amortised cost of Debenture Stock |
28,506 |
28,493 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The 7⅞% Debenture Stock is due to be redeemed at par on 30 April 2019 and interest is payable in half-yearly instalments in April and October. The Debenture Stock is secured by a floating charge over the whole of the assets of the Company. The Company has complied with the Debenture Stock Trust Deed that total borrowings should not be greater than adjusted capital and reserves throughout the year and up to the date this report was signed. |
||
|
|
|
||
|
|
The market value of the Debenture Stock as at 31 January 2012 was £33,891,000 (2011 - £33,605,000), the value being calculated per the disclosure in note 19. The effect on the net asset value of deducting the Debenture Stock at market value rather than at par is disclosed in note 18. |
||
|
|
|
2012 |
2011 |
|
13. |
Called-up share capital |
£'000 |
£'000 |
|
|
Allotted, called up and fully paid: |
|
|
|
|
150,706,187 (2011 - 150,706,187) Ordinary shares of 25p each - equity |
37,676 |
37,676 |
|
|
|
|
|
|
|
Treasury shares: |
|
|
|
|
2,971,748 (2011 - 2,971,748) Ordinary shares of 25p each - equity |
743 |
743 |
|
|
|
_______ |
_______ |
|
|
|
38,419 |
38,419 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
During the year there were no Ordinary shares repurchased (2011 - nil), and no treasury shares cancelled (2011 - nil). |
||
|
|
|
2012 |
2011 |
|
14. |
Capital reserve |
£'000 |
£'000 |
|
|
At 31 January 2011 |
281,917 |
238,444 |
|
|
Net gains on sales of investments during the year |
7,487 |
10,116 |
|
|
Movement in investment holdings gains during the year |
(11,881) |
35,346 |
|
|
Loss on traded index option contracts |
- |
(238) |
|
|
Currency losses |
(84) |
(125) |
|
|
Finance costs of borrowings (note 5) |
(1,470) |
(1,423) |
|
|
Investment management fee |
(840) |
(783) |
|
|
VAT recoverable on management fees |
- |
582 |
|
|
Administrative expenses |
- |
(2) |
|
|
|
_______ |
_______ |
|
|
At 31 January 2012 |
275,129 |
281,917 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
Included in the total above are investment holdings gains at the year end of £54,647,000 (2011 - £66,528,000). |
||
|
15. |
Reconciliation of net return before finance costs and |
2012 |
2011 |
|
|
taxation to net cash inflow from operating activities |
£'000 |
£'000 |
|
|
Net return on ordinary activities before finance costs and taxation |
12,507 |
61,253 |
|
|
Adjustment for: |
|
|
|
|
Losses/(gains) on investments |
4,394 |
(45,224) |
|
|
Currency losses |
84 |
125 |
|
|
(Increase)/decrease in accrued income |
(352) |
14 |
|
|
Decrease in other debtors |
1,148 |
358 |
|
|
Increase in other creditors |
188 |
211 |
|
|
|
_______ |
_______ |
|
|
|
17,969 |
16,737 |
|
|
|
_______ |
_______ |
|
|
|
Equity |
|
Equity |
|
|
|
|
share capital |
|
share capital |
|
|
|
|
(including |
Debenture |
(including |
Debenture |
|
|
|
premium) |
stock |
premium) |
stock |
|
|
|
2012 |
2012 |
2011 |
2011 |
|
16. |
Analysis of changes in financing during the year |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Opening balance at 31 January 2011 |
42,962 |
28,493 |
42,962 |
28,480 |
|
|
Movement in unamortised Debenture Stock discount and issue expenses |
- |
13 |
- |
13 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Closing balance at 31 January 2012 |
42,962 |
28,506 |
42,962 |
28,493 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
The Ordinary share capital on the Balance Sheet relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, should a transfer be made to the capital redemption reserve. |
||||
|
|
|
|
|
Amortisation |
|
|
|
|
At |
|
of issue |
At |
|
|
|
31 January |
|
expenses |
31 January |
|
|
|
2011 |
Cash flow |
and premium |
2012 |
|
17. |
Analysis of changes in net debt |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash and short term deposits |
3,566 |
324 |
- |
3,890 |
|
|
AAA Money Market funds |
13,866 |
(13,866) |
- |
- |
|
|
Debt due within one year |
(5,000) |
- |
- |
(5,000) |
|
|
Debt due after more than one year |
(28,493) |
- |
(13) |
(28,506) |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Net debt |
(16,061) |
(13,542) |
(13) |
(29,616) |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
18. |
Net asset value per share |
||
|
|
Equity shareholders' funds have been calculated in accordance with the provisions of Financial Reporting Standard 4 'Capital Instruments'. The analysis of equity shareholders' funds on the face of the Balance Sheet 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 year end, adjusted to reflect the deduction of the Debenture Stock at par. A reconciliation between the two sets of figures is as follows: |
||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
Equity shareholders' funds |
£341,280,000 |
£346,927,000 |
|
|
Adjusted net assets |
£341,186,000 |
£346,820,000 |
|
|
Number of equity shares in issue at year end ª |
150,706,187 |
150,706,187 |
|
|
|
|
|
|
|
Equity shareholders' funds per share |
226.45p |
230.20p |
|
|
Less: unamortised Debenture Stock premium and issue expenses |
(0.06p) |
(0.07p) |
|
|
|
_______ |
_______ |
|
|
Adjusted net asset value per share |
226.39p |
230.13p |
|
|
|
_______ |
_______ |
|
|
ª excluding shares held in treasury |
|
|
|
|
|
|
|
|
|
The net asset value per share at 31 January 2012, adjusted to include the Debenture Stock at market value rather than at par is 222.88p (2011 - 226.81p). |
||
|
|
|
||
|
|
The movements during the year of the assets attributable to the Ordinary shares were as follows: |
||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
£'000 |
£'000 |
|
|
Opening adjusted net assets |
346,820 |
303,483 |
|
|
Capital return for the year |
(6,788) |
43,473 |
|
|
Revenue on ordinary activities after taxation |
16,581 |
15,291 |
|
|
Dividends appropriated in the year |
(15,440) |
(15,440) |
|
|
Movement in unamortised Debenture Stock premium and issue expenses |
13 |
13 |
|
|
|
_______ |
_______ |
|
|
Closing adjusted net assets |
341,186 |
346,820 |
|
|
|
_______ |
_______ |
|
19. |
Financial instruments |
|||||||||||
|
|
The Company's financial instruments comprise securities 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, and debtors for accrued income. The Company also has the ability to enter into derivative transactions in the form of forward foreign currency contracts and futures and options for the purpose of managing currency and market risks arising from the Company's activities. |
|||||||||||
|
|
|
|||||||||||
|
|
During the year, the Company entered into certain derivative contracts. Positions closed during the year realised a loss of £769,000 (2011 - £1,590,000). As disclosed in note 2, the premium received and fair value changes in respect of options written in the year was £1,723,000 (2011 - £1,277,000). The largest position in derivative contracts held during the year at any given time was £829,000 (2011 - £381,000). The Company had 17 open positions in derivative contracts at 31 January 2012 valued at a liability of £442,000 (2011 - £283,000) as disclosed in note 11. |
|||||||||||
|
|
|
|||||||||||
|
|
Risk management |
|||||||||||
|
|
The Manager has a dedicated investment management process, which ensures that the investment policy is followed. Stock selection procedures are in place based on active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a Senior Investment Manager and also by the Manager's Investment Committee. |
|||||||||||
|
|
|
|||||||||||
|
|
The Manager has an independent Investment Risk department for reviewing the investment risk parameters of the Company's portfolio on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models. |
|||||||||||
|
|
|
|||||||||||
|
|
Additionally, the Manager's Compliance department continually monitors the Company's investment and borrowing powers and reports to the Manager's Risk Management Committee. |
|||||||||||
|
|
|
|||||||||||
|
|
The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk. |
|||||||||||
|
|
|
|||||||||||
|
|
The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors, other than for currency disclosures. |
|||||||||||
|
|
|
|||||||||||
|
|
(i) |
Market risk |
||||||||||
|
|
|
Market risk comprises three elements - interest rate risk, currency risk and other price risk. |
||||||||||
|
|
|
Interest rate risk |
||||||||||
|
|
|
Interest rate movements may affect: |
||||||||||
|
|
|
- the fair value of the investments in fixed interest rate securities; |
||||||||||
|
|
|
- the level of income receivable on cash deposits; and |
||||||||||
|
|
|
- interest payable on the Company's variable rate 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. |
||||||||||
|
|
|
|
||||||||||
|
|
|
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 |
Weighted |
|
|
||||||
|
|
|
|
which |
average |
Fixed |
Floating |
||||||
|
|
|
|
rate is fixed |
interest rate |
rate |
rate |
||||||
|
|
|
At 31 January 2012 |
Years |
% |
£'000 |
£'000 |
||||||
|
|
|
Assets |
|
|
|
|
||||||
|
|
|
Sterling |
- |
- |
- |
3,890 |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
Total assets |
- |
- |
- |
3,890 |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
Liabilities |
|
|
|
|
||||||
|
|
|
Bank loans |
0.08 |
1.88 |
(5,000) |
- |
||||||
|
|
|
Debenture Stock |
7.25 |
7.87 |
(28,506) |
- |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
Total liabilities |
- |
- |
(33,506) |
- |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Weighted |
|
|
|
||||||
|
|
|
|
average |
|
|
|
||||||
|
|
|
|
period for |
Weighted |
|
|
||||||
|
|
|
|
which |
average |
Fixed |
Floating |
||||||
|
|
|
|
rate is fixed |
interest rate |
rate |
rate |
||||||
|
|
|
At 31 January 2011 |
Years |
% |
£'000 |
£'000 |
||||||
|
|
|
Assets |
|
|
|
|
||||||
|
|
|
Sterling |
10.49 |
2.65 |
5,742 |
17,432 |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
Total assets |
- |
- |
5,742 |
17,432 |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Weighted |
|
|
|
||||||
|
|
|
|
average |
|
|
|
||||||
|
|
|
|
period for |
Weighted |
|
|
||||||
|
|
|
|
which |
average |
Fixed |
Floating |
||||||
|
|
|
|
rate is fixed |
interest rate |
rate |
rate |
||||||
|
|
|
|
Years |
% |
£'000 |
£'000 |
||||||
|
|
|
Liabilities |
|
|
|
|
||||||
|
|
|
Bank loans |
0.19 |
2.17 |
(5,000) |
- |
||||||
|
|
|
Debenture Stock |
8.25 |
7.87 |
(28,493) |
- |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
Total liabilities |
- |
- |
(33,493) |
- |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
||||||||||
|
|
|
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. The maturity dates of the Company's borrowings are shown in notes 11 and 12 to the financial statements. |
||||||||||
|
|
|
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates. |
||||||||||
|
|
|
The Company's equity portfolio and short-term debtors and creditors (excluding bank loans) have been excluded from the above tables. All financial liabilities are measured at amortised cost. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Interest rate sensitivity |
||||||||||
|
|
|
The sensitivity analysis below has 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 50 basis points higher and all other variables were held constant, the Company's profit before tax for the year ended 31 January 2012 would increase by £19,000 (2011 - increase by £87,000) and had interest rates been 50 basis points lower the converse would apply. This is attributable to the Company's exposure to interest rates on its floating rate cash balances. The Company holds no financial instruments that will have an equity reserve impact. |
||||||||||
|
|
|
|
||||||||||
|
|
|
In the opinion of the Directors, the sensitivity analysis is 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 Company's objectives. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Foreign currency risk |
||||||||||
|
|
|
A proportion of the Company's investment portfolio is invested in overseas securities whose values are subject to fluctuation due to changes in foreign exchange rates. In addition, the impact of changes in foreign exchange rates upon the profits of investee companies can result, indirectly, in changes in their valuations. Consequently the Balance Sheet can be affected by movements in exchange rates and it is the Company's policy not to hedge this risk. |
||||||||||
|
|
|
|
||||||||||
|
|
|
The revenue account is subject to currency fluctuations arising on dividends paid in foreign currencies and, indirectly, due to the impact of foreign exchange rates upon the profits of investee companies. The Company does not hedge this currency risk. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Foreign currency risk exposure by currency of denomination: |
||||||||||
|
|
|
|
||||||||||
|
|
|
|
31 January 2012 |
31 January 2011 |
||||||||
|
|
|
|
|
Net |
Total |
|
Net |
Total |
||||
|
|
|
|
|
monetary |
currency |
|
monetary |
currency |
||||
|
|
|
|
Investments |
assets |
exposure |
Investments |
assets |
exposure |
||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||
|
|
|
Euro |
40,221 |
303 |
40,524 |
28,571 |
184 |
28,755 |
||||
|
|
|
Swiss Francs |
19,667 |
384 |
20,051 |
11,904 |
184 |
12,088 |
||||
|
|
|
Sterling |
310,823 |
(30,118) |
280,705 |
321,389 |
(15,305) |
306,084 |
||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||||
|
|
|
Total |
370,711 |
(29,431) |
341,280 |
361,864 |
(14,937) |
346,927 |
||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
The asset allocation between specific markets can vary from time to time based on the Manager's opinion of the attractiveness of the individual stocks in these markets. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Foreign currency sensitivity |
||||||||||
|
|
|
There is no sensitivity analysis included as the Board believes the amount exposed to foreign currency denominated monetary assets to be immaterial. Where the Company's equity investments (which are non-monetary items) are priced in a foreign currency, they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Other price risk |
||||||||||
|
|
|
Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted 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. Both the allocation of assets and the stock selection process 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 various stock exchanges in the UK and Europe. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Other price risk sensitivity |
||||||||||
|
|
|
If market prices at the Balance Sheet date had been 10% higher while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 January 2012 would have increased by £37,071,000 (2011 - increase of £36,186,000) and equity reserves would have increased by the same amount. Had market prices been 10% lower the converse would apply. |
||||||||||
|
|
|
|
||||||||||
|
|
(ii) |
Liquidity risk |
||||||||||
|
|
|
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. |
||||||||||
|
|
|
|
||||||||||
|
|
|
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 a revolving facility. The Debenture Stock provides secure long-term funding while short term flexibility is achieved through the borrowing facility. 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 less than 30% at all times. Details of borrowings at 31 January 2012 are shown in notes 11 and 12. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Liquidity risk is not considered to be significant as the Company's assets comprise mainly cash and listed securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of loan and overdraft facilities, details of which can be found in note 11. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis. Details of the Board's policy on gearing are shown in the interest rate risk section of this note. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Liquidity risk exposure |
||||||||||
|
|
|
At 31 January 2012 and 31 January 2011 the amortised cost of the Company's Debenture Stock was £28,506,000 and £28,493,000 respectively. This is due to be redeemed at par on 30 April 2019. At both 31 January 2012 and 31 January 2011 the Company's bank loans amounted to £5,000,000. The facility is committed until 25 July 2013. |
||||||||||
|
|
|
|
||||||||||
|
|
(iii) |
Credit risk |
||||||||||
|
|
|
This is failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. |
||||||||||
|
|
|
|
||||||||||
|
|
|
The Company considers credit risk not to be significant as it is actively managed as follows: |
||||||||||
|
|
|
- investment transactions are carried out with a large number of brokers, whose credit standing is reviewed periodically by the Manager, 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 Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the custodians' records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. The Manager's Compliance department carries out periodic reviews of the custodian's operations and reports its finding to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held; |
||||||||||
|
|
|
- the risk of counterparty exposure due to stock lending is mitigated by the review of collateral positions provided daily by the various counterparties involved; |
||||||||||
|
|
|
- cash is held only with reputable banks whose credit ratings are monitored on a regular basis. |
||||||||||
|
|
|
|
||||||||||
|
|
|
None of the Company's financial assets is secured by collateral or other credit enhancements. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Credit risk exposure |
||||||||||
|
|
|
In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 January was as follows: |
||||||||||
|
|
|
|
||||||||||
|
|
|
|
2012 |
2011 |
||||||||
|
|
|
|
Balance |
Maximum |
Balance |
Maximum |
||||||
|
|
|
|
Sheet |
exposure |
Sheet |
exposure |
||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||
|
|
|
Current assets |
|
|
|
|
||||||
|
|
|
Fixed interest securities |
- |
- |
5,742 |
5,742 |
||||||
|
|
|
Debtors and prepayments |
2,887 |
2,887 |
2,098 |
2,098 |
||||||
|
|
|
Cash and short term deposits |
3,890 |
3,890 |
17,432 |
17,432 |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
6,777 |
6,777 |
25,272 |
25,272 |
||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
||||||||||
|
|
|
None of the Company's financial assets is past due or impaired. |
||||||||||
|
|
|
|
||||||||||
|
|
|
Fair values of financial assets and financial liabilities |
||||||||||
|
|
|
The fair value of borrowings has been calculated at £38,891,000 as at 31 January 2012 (2011 - £38,605,000) compared to an accounts value in the financial statements of £33,600,000 (2011 - £33,600,000) (notes 11 and 12). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. All other assets and liabilities of the Company are included in the Balance Sheet at fair value. |
||||||||||
|
20. |
Fair value hierarchy |
||||||
|
|
FRS 29 'Financial Instruments: Disclosures' 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 fair value hierarchy has the following levels: |
||||||
|
|
|
||||||
|
|
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
||||||
|
|
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
||||||
|
|
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
||||||
|
|
|
||||||
|
|
The financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows: |
||||||
|
|
|
||||||
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
31 January 2012 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
Quoted equities |
a) |
370,711 |
- |
- |
370,711 |
|
|
|
Quoted bonds |
b) |
- |
- |
- |
- |
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
Total |
|
370,711 |
- |
- |
370,711 |
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
|
Derivatives |
c) |
(212) |
(230) |
- |
(442) |
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
370,499 |
(230) |
- |
370,269 |
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
31 January 2011 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
Quoted equities |
a) |
356,122 |
- |
- |
356,122 |
|
|
|
Quoted bonds |
b) |
5,742 |
- |
- |
5,742 |
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
Total |
|
361,864 |
- |
- |
361,864 |
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
|
Derivatives |
c) |
(257) |
(26) |
- |
(283) |
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
361,607 |
(26) |
- |
361,581 |
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|||||
|
|
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 corporate quoted bonds has been determined by reference to their quoted bid prices at the reporting date. |
|||||
|
|
|
|
|||||
|
|
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 therefore has been classed as Level 1. |
|||||
|
|
|
|
|||||
|
|
|
The fair value of the Company's investments in Over the Counter Options has been determined using observable market inputs other than quoted prices included within Level 1. |
|||||
|
21. |
Capital management policies and procedures |
|
|
The Company's capital management objectives are: |
|
|
- to ensure that the Company will be able to continue as a going concern; and |
|
|
- to maximise the return to its equity shareholders through an appropriate balance of equity capital and debt. |
|
|
|
|
|
The capital of the Company consists of equity, comprising issued capital, reserves and retained earnings. |
|
|
|
|
|
The Board monitors and reviews the broad structure of the Company's capital. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained. The Company is not subject to any externally imposed capital requirements. |
Additional Notes to Annual Financial Report
The Annual General Meeting will be held on 23 May 2012 at 12 noon at Discovery Point, Dundee, DD1 4XA.
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 January 2012 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2011 and 2012 statutory accounts received unqualified reports from the Company's auditor and did not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498 of the Companies Act 2006. The financial information for 2011 is derived from the statutory accounts for 2011 which have been delivered to the Registrar of Companies. The 2012 accounts will be filed with the Registrar of Companies in due course.
The Annual Report and Accounts will be posted to shareholders mid April 2012 and copies will be available from the registered office of the Manager and on the Company's website, www.dunedinincomegrowth.co.uk.*
Please note that past performance is not necessarily a guide to the future and that 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.
* Neither the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
This information is provided by RNS
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