Annual Financial Report
DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2014
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 8.7% in total return terms. The Company's benchmark, the FTSE All-Share Index increased by 10.1% in total return terms.
· The Board is recommending a final dividend of 3.375p, which will make for a total of 11.10p for the full year (2013 - 10.75p).
For further information, please contact:-
Jeremy Whitley
Aberdeen Asset Managers Limited 0131 528 4000
Andrew Leigh
Aberdeen Asset Managers Limited 0207 463 6312
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.
STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS
The Company
The Company is an investment trust and its Ordinary shares are listed on the premium segment of the London Stock Exchange. An investment trust is a way to make a single investment that gives you a share in a much larger portfolio.
Investment Objective
To achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom.
Company Benchmark
In assessing its performance, the Company compares its return with the return of the FTSE All-Share Index. It is measured on a net asset value total return basis over the long-term.
Manager
The Company is managed by Aberdeen Asset Managers Ltd ("AAM" or the "Manager") - Lead Manager, Jeremy Whitley.
Website
Up-to-date information can be found on the Company's website - www.dunedinincomegrowth.co.uk
Financial Highlights
|
|
2014 |
2013 |
|
Net asset value total return ^ |
+8.7% |
+18.8% |
|
Share price total return |
+8.6% |
+27.6% |
|
Earnings per share (revenue) |
11.89p |
10.77p |
|
Dividend per share ∞ |
11.10p |
10.75p |
|
^ With debt at market value (dividends reinvested). |
||
|
∞ Relating to the financial year. |
||
STRATEGIC REPORT - OVERVIEW OF STRATEGY
Introduction
The purpose of this report is to provide shareholders with details of the Company's strategy and business model as well as the principal risks and challenges it faces.
The business of the Company is that of an investment trust and the Directors do not envisage any change in this activity in the foreseeable future.
Objective
The Company's objective is to achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom.
Business Model - Investment Policy and Approach
In pursuit of its objective, the Company's policy is to invest in high quality companies with strong income potential, while at the same time providing an above-average portfolio yield. The Company maintains a diversified portfolio consisting, substantially, of equity or equity-related securities, and it can invest in other financial instruments. Whilst the Company is invested mainly in companies listed or quoted in the United Kingdom it has the freedom to invest up to 20% of its gross assets overseas.
It is the policy of the Company to invest no more than 15% of its gross assets in other listed investment companies.
It is the policy of the Company to invest no more than 15% of its gross assets in any one company.
Investment Process
Day-to-day management of the Company's assets has been delegated to Aberdeen Asset Managers Limited. The Manager believes that, over the long-term, share prices reflect the underlying business fundamentals of companies and hence investments are made based on research undertaken on individual companies. This is known as a "bottom up" investment process. This process involves a disciplined evaluation of potential investments through meeting investee companies. New investments are not made without the Manager having first met the management of the investee company, undertaken further analysis and written detailed notes to outline the underlying investment merits. A company's value is estimated in two stages, quality then price. Quality is defined by reference to management, business focus, balance sheet and corporate governance. Price is assessed relative to key financial ratios and business prospects.
The Manager's portfolios are generally run conservatively, with an emphasis on traditional buy-and-hold, top-slicing/topping up and this approach results in low turnover within portfolios.
Portfolios are managed by the Manager on a team basis, with individual investment managers carrying out their own research and analysis. All ideas are shared via formal committees and common databases, with desk heads and the Chief Investment Officer ensuring consistency.
Principal Risks and Uncertainties
The principal risks facing the Company relate to the Company's investment activities and include market risk (comprising foreign currency risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is contained in note 19 to the financial statements. The Board has adopted a matrix of the key risks that affect its business.
i. 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 FTSE All-Share Index ("the Index") and the underlying stock weightings in the portfolio against the Index weightings are monitored closely by the Board.
ii. Investment Risk: Investment risk within the portfolio is managed in three ways:
· Adherence to the Investment Process (described below) in order to minimise investments in poor quality companies and/or overpaying.
· Diversification of investment - seeking to invest in a wide variety of companies with strong balance sheets and the earnings power to pay increasing dividends. In addition investments are diversified by sector in order to reduce the risk of a single large exposure. The Manager believes that diversification should be looked at in absolute terms rather than relative to a benchmark. At the year end the Company's portfolio consisted of 40 holdings.
· The Board has laid down absolute limits on maximum holdings and exposures in the portfolio at the time of acquisition. These can only be over-ridden with Board approval. These include the following:
a) Not more than 10% of gross assets to be invested in any single stock;
b) Top five holdings should not account for more than 40% of gross assets; and
c) Holdings other than equities and cash (or cash equivalents) should not exceed 10% of gross assets.
iii. Discount volatility: The Company's share price can trade at a discount to its underlying net asset value. The Company operates a premium/discount programme to manage this volatility.
iv. Regulatory risk: The Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Sections 1158-1159 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.
v. Gearing risk: The Company has the ability to utilise gearing in the form of a two year multi-currency revolving credit facility of £30.0 million. The Company also has long-term borrowing of a £28.6 million 7 ⅞% Debenture Stock 2019. Gearing has the effect of accentuating market falls and market gains. The Board is responsible for determining the gearing strategy for the Company, with day-to-day gearing decisions being made by the Manager within the remit set by the Board. Gearing is used selectively to leverage the Company's portfolio in order to enhance long term returns. Borrowings, other than the debenture stock are short term and particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy. The Board monitors gearing with debt measured both at par and market value and has agreed various gearing restrictions which are incorporated in guidelines for the Manager and in the Articles of Association of the Company.
These gearing restrictions are set out below:
a. Gearing should not exceed 30% of the net asset value at the time of draw down (with debt at market value).
b. Per the Articles of Association, total amounts borrowed shall not at any time exceed the aggregate amount of the issued and paid up share capital and reserves (as per the last published balance sheet of the Company).
vi. Scottish Independence Referendum: Ahead of the referendum on Scottish independence, to be held on 18 September 2014, the Board has noted the uncertainty resulting from it. In the event that the Scottish electorate vote in favour of independence the Board believes that this period of uncertainty will continue for the Company until its future operating environment is clearer, especially with regard to the legislative, economic and regulatory backdrop. Like others, we shall keep under review options to mitigate any foreseen adverse consequences of a separation from the rest of the UK.
Performance and Outlook
The strategic direction and development of the Company is regularly discussed as part of Board meeting agendas. At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. The Board also considers the efficacy of marketing and promotion of the Company, including communications with shareholders.
A review of the Company's activities and performance during the year to 31 January 2014 and future developments is detailed in the Chairman's Statement and the Manager's Review. This covers market background, investment activity, portfolio strategy, dividend and gearing policy and investment outlook.
Key Performance Indicators (KPIs)
The Directors consider net asset value total return, share price total return and dividend levels when reviewing KPIs.
The main KPIs used by the Board in assessing the Company's performance include:
- Net Asset Value
- Revenue Return per Ordinary Shares
- Share Price
- Discount
- Performance relative to FTSE All-Share Index
- Performance relative to peer group
- Ongoing Charges
Board Diversity
The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge in order to allow it to fulfill its obligations. At 31 January 2014, there were three male and two female Directors. The Company has no employees.
Employee and Socially Responsible Policies
As the Company has delegated the management of the portfolio, it has no employees and therefore has no requirement for disclosures in this area. The Company's socially responsible investment policy is set out in the Statement of Corporate Governance.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.
The Manager's corporate socially responsible investment policy including environmental policy can be found on http://www.aberdeen-asset.com/aam.nsf/groupCsr/home.
Rory Macnamara
Chairman, 21 March 2014
STRATEGIC REPORT - CHAIRMAN'S STATEMENT
I am pleased to report that 2013/14 was another year of good positive returns for your Company which achieved a net asset value total return of 8.7%. The shares have continued to provide a very attractive yield - at the time of writing close to a 20% premium to the FTSE All-Share and a 50% premium over UK government 10 year securities. Moreover, helped by portfolio re-positioning in prior periods, underlying earnings grew by 10.4%. This allowed us to deliver real growth in the dividend with a proposed increase of over 3% for the full year. Yet, it is disappointing to have to report that for the first year since 2008/09 we have failed to outperform our benchmark - with the FTSE All-Share Index achieving a return of 10.1%. Strategic choices and the Manager's own style and stock decisions are each partly responsible.
Our strategic ambitions for your Company are to achieve total returns in excess of the FTSE All-Share while delivering a solidly underpinned yield that is attractive compared to other asset classes and to grow the dividend in real terms. Ideally, over time, we will achieve all three objectives. However, we would not necessarily expect, in any single year to achieve all of these goals. In recent years, as we have strived to maintain and secure our relatively high dividend yield, we have delivered capital growth substantially in excess of the benchmark but struggled to grow the pay-out in excess of inflation - this year it was the other way round. Nevertheless, over the last 10 years the dividend has increased comfortably in excess of inflation.
2013/14 was a year when investors pursued the promise of growth. Technology stocks were back in vogue in a way not seen since the heady days of 2000; Ocado was the best performing company in the FTSE 350 with a total return of 394% despite being neither profitable nor paying a dividend. Mid cap and small cap companies delivered extraordinarily high total returns with the FTSE 250 up 23.5% and the FTSE SmallCap (excluding Investment Companies) up 40.3%; at the same time the larger cap FTSE 100 rose a more modest 7.6%.
The Company's portfolio is more heavily tilted towards larger, dividend generating companies that can help us meet our income commitments. (By way of illustration, the FTSE 100 currently yields 3.8% as opposed to just 2.2% from the FTSE SmallCap Index). This positioning dates back to the time immediately following the 2008 financial crisis when the Board, after consultation with shareholders, decided to prioritise maintaining the dividend, despite the lack of cover. Since 2009, we have endeavoured not only to cover the pay-out but also to orientate the portfolio towards companies with faster earnings growth that will help the Company to achieve real growth in dividends. This process is only partially complete, hindered by both the need to manage the income account and the price that has been demanded in recent times for shares in companies with the kind of consistent growth characteristics which the Manager seeks.
The Manager's investment style, with an emphasis on good quality businesses, conservative balance sheets and with a prudent focus on valuations was not ideally suited to a market focused on growth. In addition, the second half of the year saw a number of companies in the portfolio suffer from specific issues upon which the Manager reflects at greater length in its report.
The UK economy has recovered more dramatically than we anticipated this time last year when the general mood was bleak and the talk of triple dip recessions. Today we are currently enjoying one of the fastest rates of growth in the developed world, with the consensus forecast for GDP expansion in 2014 of close to 3%. The portfolio, with its bias towards larger and more internationally diverse companies, has not benefitted as much as it might have done from this domestic recovery. Last year we highlighted as a long-term positive the diversity of currencies in which your Company's holdings earn their revenues. However, in concert with the strong performance of the UK economy has been the strong performance of sterling, especially against the US dollar and many emerging market currencies. Thus we expect for DIGIT that, at current rates of translation, currency movements will be adverse in 2014/15 - negatively affecting companies that make profits outside the UK and also those dividends that are declared directly in overseas currencies. Over the medium-term we still consider that a portfolio of businesses that have the option to make money in a wide range of different geographies will be an enduring advantage in helping to achieve diversification and to ensure a healthy range of growth opportunities.
Gearing
We continue to believe that sensible use of modest financial gearing, whilst amplifying market movements in the short-term, will enhance both capital and income returns for shareholders over the long-term. To this end we employ two sources of financial leverage, a core long-term fixed rate debenture (repayable in 2019) with a nominal value of £28.6 million and a variable rate bank loan facility of £30 million of which £5 million was drawn at the year end. The quantum of gross debt has remained unchanged over the course of the year.
With debt valued at par, potential gearing has decreased from 8.7% at the end of the last financial year to 8.0% as a result of the increase in value of the Company's asset base. On a pure equity basis, netting off our cash, net gearing has declined from 7.9% to 6.7%.
As it considers the appropriate long-term capital structure for the Company and bears in mind the repayment date of the debenture, your Board is keeping a close watch on opportunities to take advantage of the current very low financing rates on long-term fixed rate debt.
The variable rate bank loan facility was renewed in July on more favourable terms and with an increase in size from £20 million to £30 million. This reflects both the increased value of the Company's assets and recognition that much of the previous facility was being used to provide liquidity support for our option writing programme. The new arrangements provide increased headroom for capital deployment in the event that attractive opportunities present themselves. After the year end we took the advantage of the multi-currency nature of the bank facility agreement to switch the currency of the drawn part of the facility into euros - achieving both a modest reduction in funding costs and also providing a degree of hedging for our currency exposures.
Corporate Governance and Regulation
The Board fully endorses the UK Corporate Governance Code and takes action to ensure that we meet all aspects relevant to Investment Companies by complying with the AIC's Code of Corporate Governance. The Directors (each of us being non-executive) are independent of the Company and, of course, of the Manager and any other significant service provider. Notwithstanding that the Code provision relating to external evaluation of the Directors does not apply to the Company, we have decided to implement this aspect and a review was carried out in 2013. Following from this we have created a Management Engagement Committee to give additional focus to the performance and engagement terms of the Manager. We believe that the existing Audit and Nomination & Remuneration Committees are operating effectively with appropriate Terms of Reference, the latter including active consideration of succession planning.
We make sure that at appropriate intervals we make time to consider strategic issues, for example the appropriateness of the Company's performance benchmark, Board guidelines on diversification of investments and income, gearing and other issues relating to the way the portfolio is managed and risks controlled.
In each of our regular Board meetings we review any issues raised by shareholders and seek to ensure that these have been satisfactorily dealt with through the Company's administrative procedures. I believe we have an effective system for resolving any problems but if any shareholder does have further concerns, administrative or otherwise, both I and John Carson, the Senior Independent Director, can be contacted through the Manager.
One of the Board's most important duties is to consider whether the Manager is appropriate in terms of experience, breadth and depth of resources and consistency of investment process and to ensure that its services are provided to the Company on a competitive basis. We review these through the Management Engagement Committee as well as an extensive range of absolute and relative performance statistics and look at these indicators over a range of time periods to ensure that the Company adopts a long-term rather than short-term view.
A significant proportion of the Company's costs are represented by the fees paid to the Manager. We consider that our overall costs are reasonable compared with the Company's peer group and equivalent Open Ended Equity Income Funds and that, within the total, the Manager's services (which cover not only portfolio management but also administrative and company secretarial matters) are currently provided at a competitive rate. We do not consider that we should seek to amend the fee basis to include a performance related element as this would introduce complexity and the evidence indicates that such arrangements tend, in general, to operate against shareholder interests.
Alternative Investment Fund Managers Directive
Shareholders may be aware of the Alternative Investment Fund Managers Directive (the "AIFMD"), which creates a European-wide framework for regulating managers of alternative investment funds ("AIF"s). Listed investment companies such as DIGIT are caught within the definition of an AIF. The AIFMD is intended to reduce systemic risk created by the financial sector and aims to improve regulation, enhance transparency and investor protection, develop a single EU market for AIFs and implement effective mechanisms for micro- and macro-prudential oversight. The AIFMD came into force in July 2013 but a transitional period means that investment companies have until July 2014 to comply with the relevant regulations. We have agreed to appoint a subsidiary of Aberdeen Asset Management PLC to act as our AIFM and are currently in the process of finalising the appointment of a Depositary as well as revising our investment management agreement to be consistent with the new regulatory regime.
Premium/Discount
Over the past year the price relative to the net asset value at which the shares of your Company trade moved slightly from a premium of 1.4% to a premium of 1.6%. In recent months the Company has traded consistently at a very tight discount to its net asset value and occasionally, just as it finished the financial year, at a premium. Your Company issued, at a premium, 300,000 shares from treasury during the year, which will help to dilute the operating costs and improve NAV per share.
In contrast we did not undertake any share re-purchases during the year, but we are once again seeking shareholders' permission to do so and, while it seems unlikely at the current moment, are prepared to use this power if we deem it sensible in the light of DIGIT's level of discount in both absolute terms and relative to those of our peer group.
Dividend
As I wrote last year, much of the work undertaken by the Manager since 2009 has been about initially repairing, then stabilising and finally looking to grow the revenue generating capability of your Company. We find ourselves in the latter part of that process. Ultimately we want to see the income growth of the Company aligned with the dividend growth of its underlying investments. As we expected, the year 2013/14 has seen a pleasing acceleration in income and we have continued the process of looking to enhance the diversity of our income streams and to increase their long-term growth potential.
When it comes to setting dividend distributions, as a Board we take a long-term assessment of the income generating capability of the portfolio. As a result we have announced a final dividend of 3.375p which will make a total of 11.1p for the full year, an increase of just over 3%. Subject to approval from shareholders at the Annual General Meeting, this will be paid on 30 May 2014 to shareholders on the register on 9 May 2014. The Board continues to aspire to a dividend that grows in real terms, while building a level of dividend cover, taking a prudent view on the cyclicality of earnings and being underpinned by a sensibly diversified and high quality portfolio of investments.
Outlook
After two successive years where equity market performance has substantially exceeded our expectations it may seem somewhat churlish again to sound a note of caution on the outlook, especially given the improvement in economic conditions in the UK and the newfound relative stability that seems to be developing across Europe. However, despite positive macro economic indicators, earnings conditions in aggregate remain challenging. The strength of sterling is posing translational headwinds to earnings from overseas, while emerging markets are experiencing some significant growing pains and developing some potentially substantial economic and political challenges. This is made all the more pressing now that the US Federal Reserve has begun its unwind, the so called "tapering", of the huge monetary stimulus that it deployed during the financial crisis. The emerging markets have fuelled a great deal of global growth in recent years and it is far from certain that the developed world will fill the resultant demand slack. Meanwhile investors' appetite for risk, judging by the recent acceleration in initial public offerings and the uptick in M&A activity, appears to be increasing. With valuations at reasonably full levels and aggregate earnings struggling to make much headway we believe we should maintain a cautious stance.
Given adverse currency movements, the high level of option income achieved in the past and some portfolio effects, we do not expect to see the level of underlying earnings growth in 2014/15 that we achieved this year but we still hope to make modest progress and at current rates of inflation to continue to grow the dividend in real terms.
From the Board's perspective we do not expect outperformance in all market conditions but we do expect performance consistent with strategy. The Manager will continue to focus on good quality companies with dividend paying capacity, strong management and robust balance sheets. With the renewed bank facility offering increased financial resources, your Manager will continue to look for opportunities to tilt the portfolio towards companies with faster growth potential, whilst a close eye will still be kept on both the income account and the valuations on which portfolio additions are made. Over the longer term, your Board believes a focus on fundamentals will ultimately prove beneficial and we remain supportive of the Manager's focus on achieving that critical triumvirate of capital outperformance, attractive yield and real growth in income.
Annual General Meeting
The Company's Annual General Meeting will take place in London this year (AAM's offices, Bow Bells House, 1 Bread Street, EC4M 9HH), on 22 May 2014, and I look forward to seeing as many of you there as possible.
Rory Macnamara
Chairman
21 March 2014
STRATEGIC REPORT - MANAGER'S REVIEW
After a good first half to the year unfortunately we did not manage to outperform our benchmark on a total return basis in 2013/14. Stylistically, with our conservative, long-term investment philosophy and emphasis on income generation, this was not a year when we would have expected to deliver exceptional outperformance. Stocks have risen substantially over the past five years, (the FTSE All-Share is up close to 150% since the market's nadir in March 2009) and for much of the period once again moved ahead at a rapid pace, with the year 2013 being the best year for UK equities since 2009. Mid, small and technology companies in particular led the charge with some truly spectacular returns, only really giving up some gains in the final month of the financial year. Yet against this unfavourable backdrop what particularly held us back in the year was experiencing at the company level a number of specific issues in the second half.
In more pleasing fashion the portfolio did make progress in other avenues with a much improved revenue performance and continued development in diversifying our sources of income and capital growth. Nonetheless we are more than a little frustrated, believing that the portfolio's relative total return in the year does not reflect its inherent potential. We enter 2014/15 therefore with substantial latent performance potential within the Company that is largely uncorrelated to events in the wider market. In simple terms, while we cannot predict the timing we think there is the opportunity for good returns going forward from the companies we hold.
Warren Buffet, in his annual letter this year, outlined his expectations for Berkshire Hathaway to outperform the S&P 500 "in years where the market is down or modestly up" and to "expect to fall short…. in years where the market is strong". In a far more modest way that is exactly what we aspire to achieve for DIGIT. With a focus on good quality businesses that can preserve capital value in tough times and participate in, though probably not exceed, the bounties that are available in strong markets, which over the cycle leads to good levels of capital outperformance married with delivering real growth in dividend distributions.
Readers of our reports over the last few years will note that we have a struck a cautious tone driven by what we perceived to be a lack of fundamental value open to us. For the first time in over two years the flip side of some weak performance in the portfolio is that we finally see real value again amongst our existing holdings.
Performance
As we had anticipated 2013/14 was a much stronger period for income generation than the twelve months before with revenue rising 10.0% year on year. This though did benefit from a one off special dividend from Sage. Excluding exceptional gains income rose a healthy 7.6% driven by option income increasing 28%, benefitting from some attractive underwriting opportunities and a reversal of fair value impacts, and most importantly a 5.9% increase in income from dividends from the portfolio. Underlying income per share also rose 7.6% to 11.59p. Notably income from stock dividends increased over the year as we opted to take a number of dividends as scrip due to the attractive discounts being offered to the prevailing share prices. Income from overseas holdings rose by 13.9% and in total represented 22% of our dividend income and continues to play an important role in helping to broaden the opportunity set and to diversify our revenue streams.
In terms of capital performance we commented last year that we were surprised by the lack of problems at the company level. The gods of investor irony were reading that report and the second half of 2013 certainly more than compensated. Pearson, Standard Chartered, Centrica, Tesco, HSBC, Wood Group, and Royal Dutch Shell all queued up to give us bad news from the summer months onwards. Meanwhile, companies such as Unilever and British American Tobacco also delivered rather lacklustre share price performance on account of their exposure to weaker currency and demand trends in emerging markets.
To give you some idea of the effort that goes in at Aberdeen in terms of due diligence and research, we have met with those nine companies over 240 times in the last five years. That does not insulate us from external shocks, political interventions or indeed the general cut and thrust of trading and the economy but it does give us a great platform of understanding and confidence in the longer term prospects of those companies and their ability to withstand the challenges they face. We still consider them to be good businesses with strong balance sheets, respectable prospects for long-term growth and with very capable management teams.
One of the factors that gives us confidence is that the linkages between these holdings are virtually non-existent. They have all suffered from largely independent events be that a slow-down in US College enrollments for Pearson, reduction in Oil & Gas capital spending for Wood Group or weaker economic conditions in Asia for Standard Chartered, meaning that this is unlikely to be some kind of systemic effect. Therefore we regard these impacts as somewhat temporary in nature and while they may not reverse quickly we do expect trading dynamics to stabilise and perhaps improve as we move through into 2015.
The one company that perhaps worries us most out of those listed above is Tesco where we do have concerns over the company's ability to respond effectively to the structural pressures that they face from discount retailers and online general merchandising and that is one company where we will be keeping a close watching brief in the months ahead, being particularly judicious in the deployment of any additional capital.
The year, though difficult, was not without success stories. Sage, Associated British Foods, Prudential, Berendsen, Vodafone, AstraZeneca and GKN all registered some very pleasing share price performances, rewarded by and large for successful execution of strategy and in Vodafone's case for a substantial crystalisation of value. We remain optimistic on these companies' prospects for 2014 and well beyond.
Portfolio Activity
Portfolio turnover was once again characteristically modest at well under 10% in keeping with our long term buy and hold approach. In the first half of the year we sold out of Aviva, Morrisons and Whitbread and introduced a new holding in Inmarsat. The second half of the year was somewhat quieter with no new companies being bought or positions entirely exited.
The sale of the holdings in Aviva and Morrisons continued the process of concentrating the portfolio further. Morrisons was sold as we already have plenty of exposure to food retailing in Tesco and Casino. While the company faces a number of strategic challenges ultimately we did not feel that it added anything meaningfully different to the portfolio, nor did we consider the end markets or the valuation to be sufficiently compelling. We also disposed of our position in Aviva, where once again we did not consider it to add something significantly different to our existing holdings in Zurich Insurance Group and Prudential, while containing added complexity, arguably an inferior franchise and a dividend that we did not consider sustainable. In contrast Whitbread was exited after very strong absolute and relative performance which stretched the valuation and dividend yield beyond a level we felt likely to offer us an acceptable return over the longer term.
We also reduced our holding in Vodafone on relative strength as the company benefitted from the sale of its holding in Verizon Wireless and the return to shareholders of a large percentage of those proceeds, crystalising much of the latent value we felt lay within the company. Profits were taken in Associated British Foods which delivered spectacular returns as investors began to get very excited about the potential for their Primark brand to become the next Inditex (Zara). Once again while we retain a modest holding the valuation is increasingly reflecting significant success in the development of this strategy and recycling some capital seemed a prudent course of action.
Inmarsat was the one new company that was added to the portfolio during the year. An owner and operator of satellites they have a very strong position in serving maritime markets and are looking to grow their exposure to land and air based customers. While not trading on an inherently cheap multiple the business offers something quite different to the portfolio, pays an above market dividend yield and offers attractive long term growth prospects as they enter new markets and leverage the transition to more demand for data based services.
Our positions in the French and emerging market supermarket Casino and in speciality chemicals company Croda were both bulked up taking them to more meaningful weightings following initial positions being established the year before. We also took advantage of market weakness in June to add to National Grid and Sage and added further to positions in Centrica, Pearson and Standard Chartered as these companies encountered various difficulties over the year. We also increased our holding in Italian oil company ENI on relative weakness and added further to our holding in GDF Suez as the business showed signs of having reached an earnings trough in the very challenging European power markets. Both these companies offer substantial dividend yields combined with attractive levels of potential capital growth given very modest valuations.
Outlook
We expect revenue growth to be a little slower in the year ahead than we experienced in 2013/14 as we are unlikely to see much growth in option writing, while the strength of sterling is likely to prove a near term headwind if current rates of exchange prevail, especially against the US dollar. That being said we will continue to look for opportunities to invest in companies that can raise our longer term rate of revenue growth and keep a close eye on continuing to manage the diversity of capital and income.
We are though more optimistic on the prospects for capital growth within our own portfolio and we see substantial long term upside in a number of companies for the first time in a significant while. While there can be no guarantees on the timing of that delivery we do believe that there are real opportunities there which should, barring continued very strong equity markets, bring some helpful relative benefits.
With regard to the wider market we observe once again that in general earnings multiples are towards the upper end of historic ranges, that earnings growth remains under pressure and that small and mid-cap companies are enjoying close to record premium valuations relative to the FTSE 100. We also see a significant pick up in the type of market behaviour associated with an increase in animal spirits; namely a raft of initial public offerings and an increase in M&A activity.
Once again we must caveat that against very strong market conditions we will struggle to keep up in the year ahead. However, we believe that our focus on good quality businesses with strong balance sheets, excellent management teams and the capacity to pay and grow dividends should continue to deliver good returns and real dividend growth to our investors over the long-term.
Jeremy Whitley
and Ben Ritchie
Aberdeen Asset Managers Limited
21 March 2014
STRATEGIC REPORT - RESULTS
Financial Highlights
|
|
31 January 2014 |
31 January 2013 |
% |
|
Total assets |
£437,058,000 |
£419,124,000 |
+4.3 |
|
Equity shareholders' funds ^ |
£396,154,000 |
£379,000,000 |
+4.5 |
|
Equity shareholders' funds with debt valued at par |
£403,526,000 |
£385,605,000 |
+4.6 |
|
Market capitalisation |
£392,239,000 |
£375,454,000 |
+4.5 |
|
Share price (mid) |
259.75p |
249.13p |
+4.3 |
|
Net asset value per share ^ |
262.34p |
251.48p |
+4.3 |
|
Net asset value per share with debt valued at par |
267.17p |
255.82p |
+4.4 |
|
FTSE All-Share Index |
3,496.51 |
3,287.38 |
+6.4 |
|
|
|
|
|
|
Premium/(discount) * (difference between share price and net asset value) |
|
|
|
|
Premium where borrowings are deducted at market value |
1.6% |
1.4% |
|
|
|
|
|
|
|
Gearing |
|
|
|
|
Net gearing ∞ |
6.73% |
7.89% |
|
|
|
|
|
|
|
Dividends and earnings |
|
|
|
|
Total return per share |
22.24p |
41.30p |
|
|
Revenue return per share |
11.89p |
10.77p |
|
|
Total dividend per share for the year |
11.10p |
10.75p |
|
|
Dividend cover |
1.07 |
1.00 |
|
|
Revenue reserves: |
|
|
|
|
Prior to payment of third interim dividend declared and proposed final dividend |
14.17p |
13.20p |
|
|
After payment of third interim dividend declared and proposed final dividend |
8.22p |
7.45p |
|
|
|
|
|
|
|
Operating costs |
|
|
|
|
Ongoing charges ° |
0.59% |
0.62% |
|
|
|
|
|
|
|
^ Calculated by valuing the Company's debt at its market value. |
|||
|
* These premiums are based on capital only NAV's, calculated in accordance with AIC guidelines. Using the NAV's that derive from figures in the statutory accounts would generate a discount. |
|||
|
∞ Calculated in accordance with AIC guidance "Gearing Disclosures post RDR" |
|||
|
° The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses divided by the average cum income net asset value throughout the year. |
|||
Performance
|
|
1 year |
3 year |
5 year |
|
|
% return |
% return |
% return |
|
Capital return |
|
|
|
|
Net asset value |
+4.3% |
+15.7% |
+67.2% |
|
FTSE All-Share Index |
+6.4% |
+14.9% |
+68.2% |
|
Share price |
+4.3% |
+20.3% |
+83.9% |
|
|
|
|
|
|
Total return (Capital return plus net dividends reinvested) |
|
|
|
|
Net asset value |
+8.7% |
+32.9% |
+114.3% |
|
FTSE All-Share Index |
+10.1% |
+27.7% |
+100.9% |
|
Share price |
+8.6% |
+38.5% |
+137.8% |
|
Source: Aberdeen, Factset & Morningstar |
|
|
|
Ten Year Financial Record
|
Year ended 31 January |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
|
Total revenue (£'000) |
15,526 |
17,314 |
17,988 |
18,717 |
19,998 |
14,251 |
16,904 |
19,173 |
18,866 |
20,750 |
|
Per share (p) |
|
|
|
|
|
|
|
|
|
|
|
Revenue return ^ |
7.77 |
9.20 |
10.04 |
10.58 |
11.72 |
7.99 |
10.15 |
11.00 |
10.77 |
11.89 |
|
Dividends paid/proposed |
7.55 |
8.20 |
9.00 |
10.00 |
10.25 |
10.25 |
10.25 |
10.65 |
10.75 |
11.10 |
|
Revenue reserve * |
4.76 |
5.82 |
7.09 |
7.85 |
9.41 |
7.16 |
7.06 |
7.42 |
7.45 |
8.22 |
|
Net asset value ∞ |
233.17 |
253.24 |
296.10 |
254.74 |
160.45 |
201.37 |
230.13 |
226.39 |
255.82 |
267.17 |
|
Total return |
35.15 |
27.63 |
50.75 |
(32.16) |
(84.12) |
51.15 |
39.00 |
6.50 |
41.30 |
22.24 |
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
Shareholders' funds (£'000) |
368,840 |
398,267 |
456,067 |
386,680 |
241,944 |
303,603 |
346,927 |
341,280 |
385,605 |
403,526 |
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
|
|
|
|
|
|
|
|
|
|
|
|
The figures for 2005 for net asset value and shareholders' funds have been restated to reflect the changes in accounting policies (FRS 26 - Financial Instruments: Recognition and Measurement; FRS 21- Events after the Balance Sheet Date). The figures for dividends have not been restated and still reflect the dividends for the years in which they were earned. |
||||||||||
|
^ The revenue return for 2011 includes 0.47p attributable to a refund of VAT in respect of the periods 1 January 1990 - 4 December 1996 and 1 January 2001 to 31 December 2003 and 0.74p attributable to interest due on all VAT recovered. |
||||||||||
|
^ The revenue return for 2010 includes 0.11p attributable to a refund of VAT in respect of the period 1 January 2001 - 31 December 2003. |
||||||||||
|
^ The revenue return for 2009 includes 0.20p attributable to a refund of VAT in respect of the period 1 January 2004 - 31 October 2007. |
||||||||||
|
* After payment of third interim and final dividends. |
||||||||||
|
∞ With debt at par. |
||||||||||
DIRECTORS' REPORT
Introduction
The Board of Directors, Rory Macnamara (Chairman), John Carson, Catherine Claydon, Elisabeth Scott and Peter Wolton held office throughout the year under review. The Directors present their report and audited financial statements for the year ended 31 January 2014.
The Company and its Objective
The Company is an investment trust and its Ordinary shares are listed on the premium segment of the London Stock Exchange. The Company's objective is to achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom. In pursuit of the Company's objective, the Company's investment policy is to invest in high quality companies with strong income potential, while at the same time providing an above-average portfolio yield. A review of the Company's activities is given in the Strategic Report. This includes the overall strategy of the business of the Company and its principal activities, main risks faced by the Company, likely future developments of the business, the recommended dividend and any changes to its issued share capital.
Status
The Company is an investment company, within the terms of Section 833 of the Companies Act 2006 and carries on business as an investment trust. The Company is registered as a public limited company. The Company's registration number is SC000881. The Company has no employees and the Company makes no political donations.
The Company has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the on-going requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 February 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 January 2014 so as to enable it to comply with the on-going requirements for investment trust status.
The affairs of the Company were conducted in such a way as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner in the future.
Results and Dividends
The first, second and third interim dividends for the year ended 31 January 2014 of 2.575p per Ordinary share each were paid on 30 August 2013, 29 November 2013 and 28 February 2014 respectively.
The Directors now recommend a final dividend of 3.375p per Ordinary share payable on 30 May 2014 to holders of Ordinary shares on the register on 9 May 2014. The relevant ex-dividend date is 7 May 2014. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting ("AGM").
Investment Management Agreement
The Company has an agreement with Aberdeen Asset Managers Ltd ("AAM") for the provision of investment management, administrative and secretarial services.
The investment management fee for the year ended 31 January 2014 was 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 calculated with debt at par and excluding commonly managed funds ("net assets"). The fee for the year ended 31 January 2014 amounted to 0.41% of average monthly net assets. The Investment Management Agreement is currently terminable on not less than six months' notice. Details of the fee can be found in note 3 to the financial statements. The terms and conditions of the Manager's appointment, including an evaluation of performance and fees, are reviewed by the Management Engagement Committee on an annual basis.
Directors' Liability Insurance
The Company maintains insurance in respect of directors' and officers' liabilities in relation to their acts on behalf of the Company. Each Director of the Company shall be entitled to be indemnified out of the assets of the Company to the extent permitted by law against any loss or liability incurred by him in the execution of his duties in relation to the affairs of the Company. These rights are included in the Articles of Association of the Company.
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 2015. 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.
Accountability and Audit
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.
Independent Auditor
Following their intention to gradually wind down the activity in their registered firm, KPMG Audit Plc, KPMG have proposed that an alternative entity, KPMG LLP, become the Company's auditor. The change is purely administrative and there will be no adverse impact on investors' interests as a result.
Accordingly, KPMG have notified the Company that KPMG Audit Plc is not seeking reappointment and have provided a statutory statement of circumstances upon ceasing to hold office pursuant to section 519 of the Companies Act 2006. In accordance with section 520 of the 2006 Act, a copy of this statement is enclosed with the report and accounts. The Board has decided to put KPMG LLP forward to be appointed as auditor and a resolution concerning its appointment will be put to the forthcoming AGM of the Company. There is no impact on the terms in which the auditor will be retained.
The Directors have reviewed the level of non-audit services provided by the auditor during the year, together with the auditor's procedures in connection with the provision of such services, and remain satisfied that KPMG Audit Plc's objectivity and independence is being safeguarded.
By order of the Board
Aberdeen Asset Management PLC
Secretary
Edinburgh
21 March 2014
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.
The financial statements are required by law to 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 proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its 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 Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance 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
- that in the opinion of the Directors, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and
- the Strategic Report and Directors' Report include 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 and on behalf of Dunedin Income Growth Investment Trust PLC
John Carson
Audit Committee Chairman
21 March 2014
INCOME STATEMENT
|
|
|
Year ended 31 January 2014 |
Year ended 31 January 2013 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Gains on investments |
9 |
- |
18,040 |
18,040 |
- |
48,196 |
48,196 |
|
Currency gains |
|
- |
- |
- |
- |
115 |
115 |
|
Income |
2 |
20,750 |
- |
20,750 |
18,866 |
- |
18,866 |
|
Investment management fee |
3 |
(647) |
(971) |
(1,618) |
(565) |
(848) |
(1,413) |
|
Administrative expenses |
4 |
(787) |
- |
(787) |
(757) |
- |
(757) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Net return before finance costs and taxation |
|
19,316 |
17,069 |
36,385 |
17,544 |
47,463 |
65,007 |
|
|
|
|
|
|
|
|
|
|
Finance costs |
5 |
(972) |
(1,457) |
(2,429) |
(969) |
(1,450) |
(2,419) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Return on ordinary activities before taxation |
|
18,344 |
15,612 |
33,956 |
16,575 |
46,013 |
62,588 |
|
|
|
|
|
|
|
|
|
|
Taxation |
6 |
(411) |
- |
(411) |
(341) |
- |
(341) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Return on ordinary activities after taxation |
|
17,933 |
15,612 |
33,545 |
16,234 |
46,013 |
62,247 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
Return per Ordinary share (pence) |
8 |
11.89 |
10.35 |
22.24 |
10.77 |
30.53 |
41.30 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
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 2014 |
31 January 2013 |
|
|
Notes |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
9 |
431,223 |
416,868 |
|
|
|
_________ |
_________ |
|
Current assets |
|
|
|
|
Loans and receivables |
10 |
763 |
866 |
|
Cash and short term deposits |
17 |
6,377 |
3,102 |
|
|
|
_________ |
_________ |
|
|
|
7,140 |
3,968 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
Creditors: amounts falling due within one year |
|
|
|
|
Bank loan |
11 |
(5,000) |
(5,000) |
|
Other creditors |
11 |
(1,305) |
(1,712) |
|
|
|
_________ |
_________ |
|
|
|
(6,305) |
(6,712) |
|
|
|
_________ |
_________ |
|
Net current assets/(liabilities) |
|
835 |
(2,744) |
|
|
|
_________ |
_________ |
|
Total assets less current liabilities |
|
432,058 |
414,124 |
|
|
|
|
|
|
Creditors: amounts falling due after more than one year |
12 |
(28,532) |
(28,519) |
|
|
|
_________ |
_________ |
|
Net assets |
|
403,526 |
385,605 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
Called-up share capital |
13 |
38,419 |
38,419 |
|
Share premium account |
|
4,619 |
4,543 |
|
Capital redemption reserve |
|
1,606 |
1,606 |
|
Capital reserve |
14 |
337,491 |
321,142 |
|
Revenue reserve |
|
21,391 |
19,895 |
|
|
|
_________ |
_________ |
|
Equity shareholders' funds |
|
403,526 |
385,605 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
Adjusted net asset value per Ordinary share (pence) |
18 |
267.17 |
255.82 |
|
|
|
_________ |
_________ |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
|
For the year ended 31 January 2014 |
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 January 2013 |
|
38,419 |
4,543 |
1,606 |
321,142 |
19,895 |
385,605 |
|
Return on ordinary activities after taxation |
|
- |
- |
- |
15,612 |
17,933 |
33,545 |
|
Issue of Ordinary shares |
|
- |
76 |
- |
737 |
- |
813 |
|
Dividends paid |
7 |
- |
- |
- |
- |
(16,437) |
(16,437) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Balance at 31 January 2014 |
|
38,419 |
4,619 |
1,606 |
337,491 |
21,391 |
403,526 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
For the year ended 31 January 2013 |
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 January 2012 |
|
38,419 |
4,543 |
1,606 |
275,129 |
21,583 |
341,280 |
|
Return on ordinary activities after taxation |
|
- |
- |
- |
46,013 |
16,234 |
62,247 |
|
Dividends paid |
7 |
- |
- |
- |
- |
(17,922) |
(17,922) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Balance at 31 January 2013 |
|
38,419 |
4,543 |
1,606 |
321,142 |
19,895 |
385,605 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
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 2014 |
31 January 2013 |
||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Net cash inflow from operating activities |
15 |
|
18,054 |
|
17,654 |
|
|
|
|
|
|
|
|
Servicing of finance |
|
|
|
|
|
|
Interest paid |
|
|
(2,429) |
|
(2,373) |
|
|
|
|
|
|
|
|
Taxation |
|
|
|
|
|
|
Overseas withholding tax paid |
|
|
(411) |
|
(341) |
|
|
|
|
|
|
|
|
Financial investment |
|
|
|
|
|
|
Purchases of investments |
|
(31,472) |
|
(44,388) |
|
|
Sales of investments |
|
35,157 |
|
46,467 |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash inflow from financial investment |
|
|
3,685 |
|
2,079 |
|
|
|
|
|
|
|
|
Equity dividends paid |
7 |
|
(16,437) |
|
(17,922) |
|
|
|
|
_______ |
|
_______ |
|
Net cash inflow/(outflow) before financing |
|
|
2,462 |
|
(903) |
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
Issue of Ordinary shares |
|
|
813 |
|
- |
|
|
|
|
_______ |
|
_______ |
|
Net cash inflow from financing |
|
|
813 |
|
- |
|
|
|
|
_______ |
|
_______ |
|
Increase/(decrease) in cash |
|
|
3,275 |
|
(903) |
|
|
|
|
_______ |
|
_______ |
|
|
|
|
|
|
|
|
Reconciliation of net cash flow to movements in net debt |
|
|
|
|
|
|
Increase/(decrease) in cash as above |
|
|
3,275 |
|
(903) |
|
Exchange movements |
|
|
- |
|
115 |
|
Non-cash movements |
|
|
(13) |
|
(13) |
|
|
|
|
_______ |
|
_______ |
|
Movement in net debt in the period |
|
|
3,262 |
|
(801) |
|
Opening net debt |
|
|
(30,417) |
|
(29,616) |
|
|
|
|
_______ |
|
_______ |
|
Closing net debt |
|
|
(27,155) |
|
(30,417) |
|
|
|
|
_______ |
|
_______ |
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2014
|
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 traded options, 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 Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. |
|
|
|
|
|
|
|
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 including the amortisation of expenses and premium related to the debenture issue 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). |
|
|
|
|
|
|
|
Stock lending income is recognised on an accruals basis. |
|
|
|
|
|
|
(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, is a transfer made to the capital redemption reserve. |
|
|
|
|
|
|
(f) |
Taxation |
|
|
|
The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. |
|
|
|
|
|
|
|
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. The initial fair value is based on the initial premium, which is recognised upfront. The premium received and fair value changes in the open position which occur due to the movement in underlying securites 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. |
|
|
|
|
|
|
(i) |
Borrowings |
|
|
|
Immediately after issue, debt is stated at the fair value of the consideration received on the issue of the capital instrument after deduction of issue costs. The finance cost of the debt is allocated to periods over the term of the debt at a constant rate on the carrying amount. |
|
|
|
2014 |
2013 |
|
2. |
Income |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
UK listed - franked |
13,038 |
12,708 |
|
|
Overseas listed |
4,146 |
3,641 |
|
|
Stock dividends |
1,607 |
966 |
|
|
|
_______ |
_______ |
|
|
|
18,791 |
17,315 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
Other income |
|
|
|
|
Deposit interest |
1 |
1 |
|
|
Income on derivatives |
1,934 |
1,508 |
|
|
Income from stock lending |
24 |
42 |
|
|
|
_______ |
_______ |
|
|
|
1,959 |
1,551 |
|
|
|
_______ |
|
|
|
Total income |
20,750 |
18,866 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
During the year, the Company was entitled to premiums totalling £1,934,000 (2013 - £1,508,000) 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 7 open positions, valued at a liability of £321,000 (2013 - liability of £810,000) as disclosed in note 11. Losses realised on the exercise of derivative transactions are disclosed in note 9. |
||
|
|
|
2014 |
2013 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
3. |
Investment management fee |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment management fee |
647 |
971 |
1,618 |
565 |
848 |
1,413 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
The management fee paid to Aberdeen Asset Managers Limited (the "Manager") for the year ended 31 January 2014 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 2014 (2013 - none). |
||||||
|
|
|
2014 |
2013 |
|
|
4. |
Administrative expenses |
£'000 |
£'000 |
|
|
|
Directors' fees |
112 |
119 |
|
|
|
Auditor's remuneration (excluding irrecoverable VAT): |
|
|
|
|
|
fees payable to the Company's auditor for the audit of the Company's annual accounts |
17 |
16 |
|
|
|
fees payable to the Company's auditor for other services |
|
|
|
|
|
|
interim review |
5 |
5 |
|
|
|
other services |
1 |
1 |
|
|
Investor Relations/Marketing |
346 |
313 |
|
|
|
Registrar's fees |
42 |
41 |
|
|
|
Share plan fees |
57 |
48 |
|
|
|
Printing and postage |
47 |
44 |
|
|
|
Other expenses |
160 |
170 |
|
|
|
|
_______ |
_______ |
|
|
|
|
787 |
757 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
A payment of £346,000 (2013 - £313,000) was made to the Manager in respect of marketing and promotion of the Company. |
|||
|
|
|
|||
|
|
All of the expenses above, with the exception of auditor's remuneration, include irrecoverable VAT where applicable. The VAT charged on the auditor's remuneration is disclosed within other expenses |
|||
|
|
|
2014 |
2013 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
5. |
Finance costs |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Bank loan interest |
66 |
98 |
164 |
61 |
91 |
152 |
|
|
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 |
|
|
Bank overdraft interest |
- |
- |
- |
2 |
- |
2 |
|
|
|
______ |
_______ |
______ |
______ |
______ |
______ |
|
|
|
972 |
1,457 |
2,429 |
969 |
1,450 |
2,419 |
|
|
|
______ |
_______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
Finance costs are chargeable 40% to revenue and 60% to capital. |
||||||
|
|
|
2014 |
2013 |
|||||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|||
|
6. |
Taxation |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
|
(a) |
Analysis of charge for the year |
|
|
|
|
|
|
||
|
|
|
Overseas tax suffered |
537 |
- |
537 |
452 |
- |
452 |
||
|
|
|
Overseas tax reclaimable |
(126) |
- |
(126) |
(111) |
- |
(111) |
||
|
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
||
|
|
|
Current tax charge for the year |
411 |
- |
411 |
341 |
- |
341 |
||
|
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
||
|
|
|
|
|
|
|
|
|
|
||
|
|
(b) |
Factors affecting the tax charge for the year |
||||||||
|
|
|
The UK corporation tax rate was 24% until 31 March 2013 and 23% from 1 April 2013, giving an effective rate for the year 23.17% (2013 - effective rate of 24.33%). The tax assessed for the year is lower than the rate of corporation tax. The differences are explained below: |
||||||||
|
|
|
|
||||||||
|
|
|
|
2014 |
2013 |
||||||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
|
Return on ordinary activities before taxation |
18,344 |
15,612 |
33,956 |
16,575 |
46,013 |
62,588 |
||
|
|
|
|
|
|
|
|
|
|
||
|
|
|
Corporation tax at 23.17% (2013 - 24.33%) |
4,250 |
3,617 |
7,867 |
4,033 |
11,195 |
15,228 |
||
|
|
|
Effects of: |
|
|
|
|
|
|
||
|
|
|
Non-taxable UK dividends |
(3,021) |
- |
(3,021) |
(3,092) |
- |
(3,092) |
||
|
|
|
Non-taxable stock dividends |
(372) |
- |
(372) |
(235) |
- |
(235) |
||
|
|
|
Capital gains on investments not taxable |
- |
(4,180) |
(4,180) |
- |
(11,726) |
(11,726) |
||
|
|
|
Overseas taxes |
411 |
- |
411 |
341 |
- |
341 |
||
|
|
|
Non-taxable overseas dividends |
(885) |
- |
(885) |
(760) |
- |
(760) |
||
|
|
|
Excess management expenses |
28 |
563 |
591 |
54 |
559 |
613 |
||
|
|
|
Capital gain on exchange movements not allowable |
- |
- |
- |
- |
(28) |
(28) |
||
|
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
||
|
|
|
Current tax charge |
411 |
- |
411 |
341 |
- |
341 |
||
|
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
||
|
|
|
|
|
|
|
|
|
|
||
|
|
(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 £110,499,000 (2013 - £107,987,000). 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. |
||||||||
|
|
|
2014 |
2013 |
|
7. |
Dividends |
£'000 |
£'000 |
|
|
Amounts recognised as distributions to equity holders in the period: |
|
|
|
|
Third interim dividend for the year ended 31 January 2013 - 2.50p (2013 - nil) paid 28 February 2013 |
3,767 |
- |
|
|
Final dividend for the year ended 31 January 2013 - 2.50p (2013 - 6.90p) paid 31 May 2013 |
4,898 |
10,399 |
|
|
First interim dividend for the year ended 31 January 2014 - 2.575p (2013 - 2.50p) paid 30 August 2013 |
3,886 |
3,768 |
|
|
Second interim dividend for the year ended 31 January 2014 - 2.575p (2013 - 2.50p) paid 29 November 2013 |
3,886 |
3,768 |
|
|
Return of unclaimed dividends |
- |
(13) |
|
|
|
_______ |
______ |
|
|
Dividends paid in the period |
16,437 |
17,922 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
A third interim dividend was declared on 14 January 2014 with an ex date of 5 February 2014. This dividend of 2.575p was paid on 28 February 2014 and has not been included as a liability in these financial statements. |
||
|
|
|
||
|
|
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 £17,933,000 (2013 - £16,234,000). |
||
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
£'000 |
£'000 |
|
|
First interim dividend for the year ended 31 January 2014 - 2.575p (2013 - 2.50p) |
3,886 |
3,768 |
|
|
Second interim dividend for the year ended 31 January 2014 - 2.575p (2013 - 2.50p) |
3,886 |
3,768 |
|
|
Third interim dividend for the year ended 31 January 2014 - 2.575p (2013 - 2.50p) |
3,888 |
3,768 |
|
|
Proposed final dividend for the year ended 31 January 2014 - 3.375p (2013 - 3.25p) |
5,096 |
4,898 |
|
|
|
_______ |
______ |
|
|
|
16,756 |
16,202 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
There have been no shares issued or bought back since the year end and the proposed final dividend for 2014 is based on the latest share capital of 151,006,187 Ordinary shares. |
||
|
|
|
2014 |
2013 |
||
|
8. |
Return per Ordinary share |
£'000 |
p |
£'000 |
p |
|
|
Revenue return |
17,933 |
11.89 |
16,234 |
10.77 |
|
|
Capital return |
15,612 |
10.35 |
46,013 |
30.53 |
|
|
|
_______ |
______ |
______ |
_______ |
|
|
Total return |
33,545 |
22.24 |
62,247 |
41.30 |
|
|
|
_______ |
______ |
______ |
_______ |
|
|
Weighted average number of Ordinary shares in issue |
|
150,867,283 |
|
150,706,187 |
|
|
|
|
________ |
|
________ |
|
|
|
Listed |
Listed |
|
|
|
2014 |
2013 |
|
9. |
Investments: listed at fair value through profit or loss |
£'000 |
£'000 |
|
|
Opening fair value |
416,868 |
370,711 |
|
|
Opening investment holding gains |
(96,437) |
(54,647) |
|
|
Opening book cost |
320,431 |
316,064 |
|
|
Purchases at cost |
31,472 |
42,843 |
|
|
Sales - proceeds |
(35,157) |
(44,882) |
|
|
Sales - realised gains ^ |
5,864 |
6,406 |
|
|
Closing book cost |
322,610 |
320,431 |
|
|
Closing investment holdings gains |
108,613 |
96,437 |
|
|
|
_______ |
______ |
|
|
Closing fair value |
431,223 |
416,868 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
Gains on investments |
£'000 |
£'000 |
|
|
Realised gains on sales ^ |
5,864 |
6,406 |
|
|
Change in investment holdings gains |
12,176 |
41,790 |
|
|
|
_______ |
______ |
|
|
|
18,040 |
48,196 |
|
|
|
_______ |
______ |
|
|
|
||
|
|
^ Includes losses realised on the exercise of traded options of £2,184,000 (2013 - £1,456,000) offset by premium received of £1,934,000 (2013 - £1,508,000) per note 2. |
||
|
|
|
||
|
|
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 gains on investments in the Income Statement. The total costs were as follows: |
||
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
£'000 |
£'000 |
|
|
Purchases |
137 |
152 |
|
|
Sales |
34 |
49 |
|
|
|
_______ |
______ |
|
|
|
171 |
201 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
Stock lending |
£'000 |
£'000 |
|
|
Aggregate value of securities on loan at the year end |
9,880 |
9,298 |
|
|
Maximum aggregate value of securities on loan during the year |
16,032 |
24,786 |
|
|
|
_______ |
______ |
|
|
Fee income from stock lending |
24 |
42 |
|
|
|
_______ |
______ |
|
|
Stock lending is the temporary transfer of securities by a lender to a borrower, with an agreement by the borrower to return equivalent securities to the lender at an agreed date. Fee income is received for making the investments available to the borrower. The principal risks and rewards, namely the market movements in share prices and associated dividend income are retained by the Company. In all cases the securities lent continue to be recognised on the Balance Sheet. |
||
|
|
|
||
|
|
All stocks lent under these arrangements are fully secured against collateral. The value of the collateral held at 31 January 2014 was £10,692,000 (2013 - £9,771,000) which comprised government stocks. |
||
|
|
|
2014 |
2013 |
|
10. |
Debtors: amounts falling due within one year |
£'000 |
£'000 |
|
|
Net dividends and interest receivable |
589 |
570 |
|
|
Tax recoverable |
153 |
263 |
|
|
Other loans and receivables |
21 |
33 |
|
|
|
_______ |
______ |
|
|
|
763 |
866 |
|
|
|
_______ |
______ |
|
11. |
Creditors: amounts falling due within one year |
|||
|
|
(a) |
Bank loan |
||
|
|
|
The Company has an agreement (which expires 17 July 2015) with Royal Bank of Scotland to provide a loan facility for up to £30,000,000 (2013 - £20,000,000). At 31 January 2014 £5,000,000 (2013 - £5,000,000) was drawn down at a rate of 1.43188%. On 21 February 2014 the £5,000,000 drawn down was repaid in full and €6,100,000 was drawn down until 21 March 2014 at a rate of 1.14714%. 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. |
||
|
|
|
|
||
|
|
|
|
2014 |
2013 |
|
|
(b) |
Other creditors |
£'000 |
£'000 |
|
|
|
Debenture Stock and bank loan interest |
589 |
602 |
|
|
|
Traded option contracts |
321 |
810 |
|
|
|
Sundry creditors |
395 |
300 |
|
|
|
|
_______ |
______ |
|
|
|
|
1,305 |
1,712 |
|
|
|
|
_______ |
______ |
|
|
|
2014 |
2013 |
|
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 |
(68) |
(81) |
|
|
|
_______ |
______ |
|
|
Amortised cost of Debenture Stock |
28,532 |
28,519 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
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 2014 was £35,904,000 (2013 - £35,124,000), 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. |
||
|
|
|
2014 |
2013 |
|
13. |
Called-up share capital |
£'000 |
£'000 |
|
|
Allotted, called up and fully paid: |
|
|
|
|
151,006,187 (2013 - 150,706,187) Ordinary shares of 25p each - equity |
37,751 |
37,676 |
|
|
Treasury shares: |
|
|
|
|
2,671,748 (2013 - 2,971,748) Ordinary shares of 25p each - equity |
668 |
743 |
|
|
|
_______ |
______ |
|
|
|
38,419 |
38,419 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
During the year 300,000 Ordinary shares were sold from the Treasury account (2013 - nil). All of these shares were sold at a premium to net asset value. The issue price ranged from 270.0p to 273.3p and raised £813,000 net of expenses. |
||
|
|
|
2014 |
2013 |
|
14. |
Capital reserve |
£'000 |
£'000 |
|
|
At 31 January 2013 |
321,142 |
275,129 |
|
|
Net gains on sales of investments during the year |
5,864 |
6,406 |
|
|
Movement in investment holdings gains during the year |
12,176 |
41,790 |
|
|
Currency gains |
- |
115 |
|
|
Issue of Ordinary shares |
737 |
- |
|
|
Finance costs of borrowings (note 5) |
(1,457) |
(1,450) |
|
|
Investment management fee |
(971) |
(848) |
|
|
|
_______ |
______ |
|
|
At 31 January 2014 |
337,491 |
321,142 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
Included in the total above are investment holdings gains at the year end of £108,613,000 (2013 - £96,437,000). |
||
|
15. |
Reconciliation of net return before finance costs and |
2014 |
2013 |
|
|
taxation to net cash inflow from operating activities |
£'000 |
£'000 |
|
|
Net return on ordinary activities before finance costs and taxation |
36,385 |
65,007 |
|
|
Adjustment for: |
|
|
|
|
Gains on investments |
(18,040) |
(48,196) |
|
|
Currency gains |
- |
(115) |
|
|
(Increase)/decrease in accrued income |
(19) |
528 |
|
|
Decrease/(increase) in other debtors |
122 |
(92) |
|
|
(Decrease)/increase in other creditors |
(394) |
522 |
|
|
|
_______ |
______ |
|
|
|
18,054 |
17,654 |
|
|
|
_______ |
______ |
|
|
|
Equity |
|
Equity |
|
|
|
|
share capital |
|
share capital |
|
|
|
|
(including |
Debenture |
(including |
Debenture |
|
|
|
premium) |
stock |
premium) |
stock |
|
|
|
2014 |
2014 |
2013 |
2013 |
|
16. |
Analysis of changes in financing during the year |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Opening balance at 31 January 2013 |
42,962 |
28,519 |
42,962 |
28,506 |
|
|
Share Premium on treasury share issues |
76 |
- |
- |
- |
|
|
Movement in unamortised Debenture Stock discount and issue expenses |
- |
13 |
- |
13 |
|
|
|
_______ |
______ |
______ |
_______ |
|
|
Closing balance at 31 January 2014 |
43,038 |
28,532 |
42,962 |
28,519 |
|
|
|
_______ |
______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
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 |
|
|
|
2013 |
Cash flow |
and premium |
2014 |
|
17. |
Analysis of changes in net debt |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash and short term deposits |
3,102 |
3,275 |
- |
6,377 |
|
|
Debt due within one year |
(5,000) |
- |
- |
(5,000) |
|
|
Debt due after more than one year |
(28,519) |
- |
(13) |
(28,532) |
|
|
|
_______ |
______ |
______ |
_______ |
|
|
Net debt |
(30,417) |
3,275 |
(13) |
(27,155) |
|
|
|
_______ |
______ |
______ |
_______ |
|
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: |
|
||
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
Equity shareholders' funds |
£403,526,000 |
£385,605,000 |
|
|
|
Adjusted net assets |
£403,458,000 |
£385,524,000 |
|
|
|
Number of equity shares in issue at year end ^ |
151,006,187 |
150,706,187 |
|
|
|
^ Excluding shares held in treasury. |
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
Equity shareholders' funds per share |
267.22p |
255.87p |
|
|
|
Less: unamortised Debenture Stock premium and issue expenses |
(0.05p) |
(0.05p) |
|
|
|
|
_______ |
______ |
|
|
|
Adjusted net asset value per share |
267.17p |
255.82p |
|
|
|
|
_______ |
______ |
|
|
|
The net asset value per share at 31 January 2014, adjusted to include the Debenture Stock at market value rather than at par is 262.34p (2013 - 251.48p). |
|
||
|
|
|
|||
|
|
The movements during the year of the assets attributable to the Ordinary shares were as follows: |
|||
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
|
£'000 |
£'000 |
|
|
|
Opening adjusted net assets |
385,524 |
341,186 |
|
|
|
Capital return for the year |
15,612 |
46,013 |
|
|
|
Revenue on ordinary activities after taxation |
17,933 |
16,234 |
|
|
|
Dividends appropriated in the year |
(16,437) |
(17,922) |
|
|
|
Issue of Ordinary shares |
813 |
- |
|
|
|
Movement in unamortised Debenture Stock premium and issue expenses |
13 |
13 |
|
|
|
|
_______ |
______ |
|
|
|
Closing adjusted net assets |
403,458 |
385,524 |
|
|
|
|
_______ |
______ |
|
|
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 £2,184,000 (2013 - £1,456,000). As disclosed in note 2, the premium received and fair value changes in respect of options written in the year was £1,934,000 (2013 - £1,508,000). The largest position in derivative contracts held during the year at any given time was £993,000 (2013 - £1,426,000). The Company had 7 open positions in derivative contracts at 31 January 2014 valued at a liability of £321,000 (2013 - £810,000) 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 daily basis by a Senior Investment Manager and regularly 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 |
Weighted |
|
|
||||||||||
|
|
|
|
period for |
average |
|
|
||||||||||
|
|
|
|
which |
interest |
Fixed |
Floating |
||||||||||
|
|
|
|
rate is fixed |
rate |
rate |
rate |
||||||||||
|
|
|
At 31 January 2014 |
Years |
% |
£'000 |
£'000 |
||||||||||
|
|
|
Assets |
|
|
|
|
||||||||||
|
|
|
Sterling |
- |
- |
- |
6,377 |
||||||||||
|
|
|
|
_______ |
______ |
______ |
_______ |
||||||||||
|
|
|
Total assets |
- |
- |
- |
6,377 |
||||||||||
|
|
|
|
_______ |
______ |
______ |
_______ |
||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
Liabilities |
|
|
|
|
||||||||||
|
|
|
Bank loans |
0.08 |
1.43 |
(5,000) |
- |
||||||||||
|
|
|
Debenture Stock |
5.25 |
7.87 |
(28,532) |
- |
||||||||||
|
|
|
|
_______ |
______ |
______ |
_______ |
||||||||||
|
|
|
Total liabilities |
- |
- |
(33,532) |
- |
||||||||||
|
|
|
|
_______ |
______ |
______ |
_______ |
||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
Weighted |
|
|
|
||||||||||
|
|
|
|
average |
Weighted |
|
|
||||||||||
|
|
|
|
period for |
average |
|
|
||||||||||
|
|
|
|
which |
interest |
Fixed |
Floating |
||||||||||
|
|
|
|
rate is fixed |
rate |
rate |
rate |
||||||||||
|
|
|
At 31 January 2013 |
Years |
% |
£'000 |
£'000 |
||||||||||
|
|
|
Assets |
|
|
|
|
||||||||||
|
|
|
Sterling |
- |
- |
- |
3,103 |
||||||||||
|
|
|
|
_______ |
______ |
______ |
_______ |
||||||||||
|
|
|
Total assets |
- |
- |
- |
3,103 |
||||||||||
|
|
|
|
_______ |
______ |
______ |
_______ |
||||||||||
|
|
|
Liabilities |
|
|
|
|
||||||||||
|
|
|
Bank loans |
0.08 |
1.60 |
(5,000) |
- |
||||||||||
|
|
|
Debenture Stock |
6.25 |
7.87 |
(28,519) |
- |
||||||||||
|
|
|
|
_______ |
______ |
______ |
_______ |
||||||||||
|
|
|
Total liabilities |
- |
- |
(33,519) |
- |
||||||||||
|
|
|
|
_______ |
______ |
______ |
_______ |
||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
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 |
||||||||||||||
|
|
|
Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit. |
||||||||||||||
|
|
|
|
||||||||||||||
|
|
|
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 received 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 2014 |
31 January 2013 |
||||||||||||
|
|
|
|
|
Net |
Total |
|
Net |
Total |
||||||||
|
|
|
|
|
monetary |
currency |
|
monetary |
currency |
||||||||
|
|
|
|
Investments |
assets |
exposure |
Investments |
assets |
exposure |
||||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||||
|
|
|
Euro |
50,713 |
203 |
50,916 |
48,550 |
334 |
48,884 |
||||||||
|
|
|
Swiss Francs |
29,141 |
95 |
29,236 |
26,725 |
98 |
26,823 |
||||||||
|
|
|
US Dollar |
- |
2 |
2 |
- |
2 |
2 |
||||||||
|
|
|
Sterling |
351,369 |
(27,997) |
323,372 |
341,593 |
(31,697) |
309,896 |
||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||||||||
|
|
|
Total |
431,223 |
(27,697) |
403,526 |
416,868 |
(31,263) |
385,605 |
||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
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 and traded options. |
||||||||||||||
|
|
|
|
||||||||||||||
|
|
|
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 2014 would have increased by £43,122,000 (2013 - increase of £41,686,000) 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 2014 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 2014 and 31 January 2013 the amortised cost of the Company's Debenture Stock was £28,532,000 and £28,519,000 respectively. This is due to be redeemed at par on 30 April 2019. At both 31 January 2014 and 31 January 2013 the Company's bank loans amounted to £5,000,000. The facility is committed until 17 July 2015. |
||||||||||||||
|
|
|
|
||||||||||||||
|
|
(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. |
||||||||||||||
|
|
|
|
||||||||||||||
|
|
|
The Company participates in stock lending activities. |
||||||||||||||
|
|
|
|
||||||||||||||
|
|
|
There are internal exposure limits to cash balances placed with counterparties. The credit worthiness of counterparties is also reviewed on a regular basis. |
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|
|
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Under the terms of the stock lending agreement, all loans are backed by collateral (cash, near cash, government and public securities, certificates of deposit, letter of credit and UK equities) equal to or greater than 105% of the market value (as calculated daily on each business day) of the securities on loan. |
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|
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|
With the exception of securities on loan referred to in note 9, none of the Company's financial assets are secured by collateral or other credit enhancements. |
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|
|
||||||||||||||
|
|
|
Credit risk exposure |
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|
|
|
In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 January was as follows: |
||||||||||||||
|
|
|
|
2014 |
2013 |
||||||||||||
|
|
|
|
Balance |
Maximum |
Balance |
Maximum |
||||||||||
|
|
|
|
Sheet |
exposure |
Sheet |
exposure |
||||||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||
|
|
|
Current assets |
|
|
|
|
||||||||||
|
|
|
Debtors and prepayments |
763 |
763 |
866 |
866 |
||||||||||
|
|
|
Cash and short term deposits |
6,377 |
6,377 |
3,102 |
3,102 |
||||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||||
|
|
|
|
7,140 |
7,140 |
3,968 |
3,968 |
||||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
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|
|
|
|
|
|
|
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|
|
|
None of the Company's financial assets is past due or impaired. |
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|
|
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|
|
|
Fair values of financial assets and financial liabilities |
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|
|
|
The fair value of borrowings has been calculated at £40,904,000 as at 31 January 2014 (2013 - £40,124,000) compared to an accounts value in the financial statements of £33,600,000 (2013 - £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. |
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|
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: |
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|
|
|
|||||||
|
|
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
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|
|
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 |
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|
|
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
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|
|
|
|||||||
|
|
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 |
|
|
|
|
As at 31 January 2014 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
Quoted equities |
a) |
431,223 |
- |
- |
431,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
Derivatives |
b) |
(288) |
(33) |
- |
(321) |
|
|
|
|
|
|
_______ |
_______ |
_______ |
______ |
|
|
|
|
|
|
430,935 |
(33) |
- |
430,902 |
|
|
|
|
|
|
_______ |
_______ |
_______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
|
As at 31 January 2013 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
Quoted equities |
a) |
416,868 |
- |
- |
416,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
Derivatives |
b) |
(771) |
(39) |
- |
(810) |
|
|
|
|
|
|
_______ |
_______ |
_______ |
______ |
|
|
|
|
|
|
416,097 |
(39) |
- |
416,058 |
|
|
|
|
|
|
_______ |
_______ |
_______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
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 (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 Level 1) and therefore determined as Level 2. |
|
|||||
|
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 22 May 2014 at 12 noon at Bow Bells House, 1 Bread Street, London EC4M 9HH.
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 January 2014 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2013 and 2014 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 2013 is derived from the statutory accounts for 2013 which have been delivered to the Registrar of Companies. The 2014 accounts will be filed with the Registrar of Companies in due course.
The Annual Report and Accounts will be posted to shareholders mid April 2014 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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