Half Yearly Report

RNS Number : 0754T

Dunedin Income Growth Inv Tst PLC

22 September 2010

 



DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 31 JULY 2010

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

Highlights

·     Maintained interim dividend of 3.75p declared.

·     Net asset value per share up by 3.4% in total return terms and the Company's benchmark, the FTSE All-Share Index increased by 4.0% in total return terms. 

·     Share price increased by 12.1% on a total return basis.

For further information, please contact:-

Jeremy Whitley

Aberdeen Asset Managers Limited            0131 528 4000

Ian Massie

Aberdeen Asset Managers Limited            0131 528 4000

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

CHAIRMAN'S STATEMENT

After the strong recovery in stock markets during most of 2009, the first half of the financial year to 31 January 2011 has been a period of considerable volatility. Investor focus has swung between deep concern over the state of sovereign finances, especially in Southern Europe, and markedly improving corporate profit performances and generally positive economic data. Against this challenging backdrop, the Company broadly matched the small rise in the FTSE All-Share on a gross assets basis, but slightly lagged on a net asset basis. The discount on the Company's shares narrowed from 9.0% at 31 January 2010 to just 1.1% at 31 July 2010, contributing to a total return to shareholders of 12.1% over the period.

As the global economy has recovered, so has corporate profitability and with it the confidence and ability of companies to pay dividends. This has been the main factor that has driven revenue per share up by 3% year on year, from 5.16p to 5.33p pence per share. This increase would have been closer to 6% had BP not been forced to cancel its first quarter dividend as a result of the Macondo well disaster. As stated in the Annual Report, the Board intends to maintain its dividend for the financial year to 31 January 2011 at a level of 10.25p per share, assuming no further significant changes to circumstances, and plans to use revenue reserves to make up any shortfall in earnings. To this end the Board is declaring an unchanged interim dividend payment of 3.75p.

Economic and Market Background

The period under review was a turbulent one with stock markets struggling for direction as surging corporate profits met rising concerns over the sustainability of the underlying global economic recovery. The principal volatility was driven during April and early May by heightened worries over the state of sovereign finances in a number of European states, especially Greece. The bonds of many Southern European countries saw their spreads expand significantly over German bunds, the Euro weakened sharply against major currencies and tensions rose in the already fragile Eurozone interbank market. The IMF and ECB announced a €110bn rescue plan for the Greek economy followed a week later by a further substantial €720bn intervention providing support for Eurozone government debt issuance, bank refinancing and providing dollar denominated liquidity. This package, combined with government commitments to deficit reduction, has so far been successful in offering some stability to financial markets. During much of this time the UK, despite the uncertainty provided by the general election and subsequent formation of a coalition government, was seen as a relative safe haven with its flexible currency and better than expected GDP performance in the second quarter. The picture, though, remains very mixed and towards the end of the period signs began to emerge that the US recovery may be running out of steam as car and home subsidies expire and that Chinese growth might be beginning to slow as the government withdraws its exceptional stimulus measures.

At a company level there has generally been a strong rebound in profitability driven by rising revenues and the benefits of the extensive cost cutting and balance sheet strengthening undertaken during the crisis period. Some companies have increased their dividends, whilst others that had passed them during the depths of the recession have now returned to the dividend list. As corporate confidence has begun to recover we have also started to witness an increased appetite for M&A with the Company benefiting from approaches for a number of its holdings including Chloride and Arriva.

The disaster at BP's Macondo well has been extensively covered and the impact on Dunedin Income Growth Investment Trust ("DIGIT") has been material, resulting in a significant capital loss and the disappearance of around £750,000 of revenue (equivalent to 0.5p per share) in this financial year. This is despite the fact that steps were taken to reduce our exposure to both BP and Royal Dutch Shell, whose weightings within our benchmark index, the FTSE All-Share Index, had risen to some 8% apiece; BP alone contributed 13% of the income in this index prior to the disaster.  In 2006 the Company amended its investment policy to hold in its portfolio up to 10% of shares listed outside the UK.  This allowed the Manager to reduce our holdings in the two UK oil majors.  The Company maintained its exposure to the oil sector by initiating investments in Total (France) and ENI (Italy).  Without such action the impact on DIGIT of the Macondo disaster would have been significantly greater.

The Board has recently been discussing the merits of further increasing the non UK limit to 20% and intends to put an appropriate resolution to shareholders in the near future.

Treasury Shares

The discount to NAV at which our shares trade narrowed during the period, from 9.0% to 1.1%. We have not bought back any shares during the period, as the discount has been sufficiently narrow as not to offer tangible benefit for continuing shareholders. Shares bought back in previous years are initially held in treasury and the level of this treasury shareholding is reviewed annually.

Gearing

The Company's gearing has increased slightly over the period as a result of the Manager drawing down the outstanding £3.5m of our bank facility, offset slightly by the modest rise in net asset value. The rationale was driven by a reluctance to sell stocks at a weak moment in markets in order to pay the final dividend. Valuing debt at par, gearing stood at 11.0% at 31 July 2010, up from 9.9% at 31 January 2010 though on an equity gearing basis taking debt at par and offsetting our holdings of bonds and cash, net indebtedness stood at 4.5%, down from 6.2% at the year end. Given relatively low equity valuations and the Company's need for income we still consider it appropriate to maintain our modest level of gearing, though it is kept under close review.

Over the period the Company negotiated a new and improved bank facility with Abbey National Treasury Services plc.

Outlook

The global economy faces some significant challenges. In the United States the recovery remains fragile and unconvincing, while the sheer quantum of debt has yet to be addressed.  In much of Europe, while disaster may have been averted for now, the painful and politically unpalatable reality of fiscal responsibility must now be undertaken and countries which have been living beyond their means for many years must now adjust to the new reality of economic austerity. The outlook is undoubtedly brighter in many emerging markets, but question marks still linger over the solidity of the Chinese economic engine that underpins much of their growth. Amidst the global turbulence, the UK economy has recovered more strongly than expected but now faces the impact of the new government's substantial budget reductions which are certain to put pressure on near term economic forecasts.  However, it is to be hoped in the longer term these may do much to enhance both our fiscal credibility and capacity for future growth.

As investors in companies rather than economies, we believe that the Manager has assembled a portfolio of good quality companies that have substantial international breadth to their revenues. We expect that the most likely outcome is neither inflationary overshoot nor a deflationary downward spiral but that we will continue to travel down the bumpy middle road of muted growth interspersed by the occasional setback. In this environment we expect that the kind of businesses that our Company owns, namely having strong market positions, access to structural rather than cyclical growth and with robust balance sheets and cash flows, will be relatively well positioned. 

The trend for dividend growth from our holdings has so far been stronger than we expected (BP aside) and the Company retains a useful level of revenue reserves. The Manager has continued to take steps to enhance the quality and breadth of the Company's income generating capacity, expanding our international holdings and increasing our use of option writing.  The Board will comment on dividend policy for 2011/12 when it releases the results for the current financial year.  This will depend on the outturn for income generation from our investments over the second half of this year and their prospects thereafter.

John Scott

Chairman

21 September 2010

INCOME STATEMENT

	Six months ended
	31 July 2010
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	3,934	3,934
Currency (losses)/gains	-	(65)	(65)
Income (note 2)	9,216	-	9,216
Investment management fee	(255)	(383)	(638)
VAT recoverable on investment management fees	-	-	-
Administrative expenses	(391)	-	(391)
	_______	_______	_______
Net return before finance costs and taxation	8,570	3,486	12,056
Finance costs	(475)	(713)	(1,188)
	_______	_______	_______
Return on ordinary activities before taxation	8,095	2,773	10,868
Taxation (note 3)	(57)	-	(57)
	_______	_______	_______
Return on ordinary activities after taxation	8,038	2,773	10,811
	_______	_______	_______
Return per Ordinary share (pence)(note 5)	5.33	1.84	7.17
	_______	_______	_______

The total column of this statement 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 have been reflected in the Income Statement.

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

INCOME STATEMENT

	Six months ended
	31 July 2009
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	23,543	23,543
Currency (losses)/gains	-	31	31
Income (note 2)	8,937	-	8,937
Investment management fee	(203)	(305)	(508)
VAT recoverable on investment management fees	-	-	-
Administrative expenses	(439)	-	(439)
	_______	_______	_______
Net return before finance costs and taxation	8,295	23,269	31,564
Finance costs	(468)	(703)	(1,171)
	_______	_______	_______
Return on ordinary activities before taxation	7,827	22,566	30,393
Taxation (note 3)	(55)	-	(55)
	_______	_______	_______
Return on ordinary activities after taxation	7,772	22,566	30,338
	_______	_______	_______
Return per Ordinary share (pence)(note 5)	5.16	14.97	20.13
	_______	_______	_______

The total column of this statement 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 have been reflected in the Income Statement.

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

INCOME STATEMENT

	Year ended
	31 January 2010
	(audited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	66,718	66,718
Currency (losses)/gains	-	31	31
Income (note 2)	14,251	-	14,251
Investment management fee	(447)	(671)	(1,118)
VAT recoverable on investment management fees	172	401	573
Administrative expenses	(893)	-	(893)
	_______	_______	_______
Net return before finance costs and taxation	13,083	66,479	79,562
Finance costs	(955)	(1,433)	(2,388)
	_______	_______	_______
Return on ordinary activities before taxation	12,128	65,046	77,174
Taxation (note 3)	(83)	-	(83)
	_______	_______	_______
Return on ordinary activities after taxation	12,045	65,046	77,091
	_______	_______	_______
Return per Ordinary share (pence)(note 5)	7.99	43.16	51.15
	_______	_______	_______

The total column of this statement 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 have been reflected in the Income Statement.

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

BALANCE SHEET

		As at	As at	As at
		31 July 2010	31 July 2009	31 January 2010
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		325,797	285,430	328,928
		__________	__________	__________
Current assets
Loans and receivables		1,952	4,501	2,470
AAA Money Market funds		5,137	-	2,386
Cash and short term deposits		6,048	3,250	566
		__________	__________	__________
		13,137	7,751	5,422
		__________	__________	__________
Creditors: amounts falling due within one year
Bank loan		(5,000)	(1,500)	(1,500)
Other creditors		(829)	(710)	(767)
		__________	__________	__________
		(5,829)	(2,210)	(2,267)
		__________	__________	__________
Net current assets		7,308	5,541	3,155
		__________	__________	__________
Total assets less current liabilities		333,105	290,971	332,083
Creditors: amounts falling due after more than one year
Debenture stock		(28,487)	(28,474)	(28,480)
		__________	__________	__________
Net assets		304,618	262,497	303,603
		__________	__________	__________
Capital and reserves
Called-up share capital		38,419	38,419	38,419
Share premium account		4,543	4,543	4,543
Capital redemption reserve		1,606	1,606	1,606
Capital reserve	7	241,217	195,964	238,444
Revenue reserve		18,833	21,965	20,591
		__________	__________	__________
Equity shareholders' funds		304,618	262,497	303,603
		__________	__________	__________
Adjusted net asset value per Ordinary share (pence)	8	202.06	174.10	201.37
		__________	__________	__________

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Six months ended 31 July 2010 (unaudited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2010		38,419	4,543	1,606	238,444	20,591	303,603
Return on ordinary activities after taxation		-	-	-	2,773	8,038	10,811
Dividends paid	4	-	-	-	-	(9,796)	(9,796)
		_______	_______	_______	_______	_______	_______
Balance at 31 July 2010		38,419	4,543	1,606	241,217	18,833	304,618
		_______	_______	_______	_______	_______	_______
Six months ended 31 July 2009 (unaudited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2009		38,419	4,543	1,606	173,398	23,978	241,944
Return on ordinary activities after taxation		-	-	-	22,566	7,772	30,338
Dividends paid	4	-	-	-	-	(9,785)	(9,785)
		_______	_______	_______	_______	_______	_______
Balance at 31 July 2009		38,419	4,543	1,606	195,964	21,965	262,497
		_______	_______	_______	_______	_______	_______
Year ended 31 January 2010 (audited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2009		38,419	4,543	1,606	173,398	23,978	241,944
Return on ordinary activities after taxation		-	-	-	65,046	12,045	77,091
Dividends paid	4	-	-	-	-	(15,432)	(15,432)
		_______	_______	_______	_______	_______	_______
Balance at 31 January 2010		38,419	4,543	1,606	238,444	20,591	303,603
		_______	_______	_______	_______	_______	_______

CASHFLOW STATEMENT

		Six months ended	Six months ended	Year ended
		31 July 2010	31 July 2009	31 January 2010
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Net return on ordinary activities before finance costs and taxation		12,056	31,564	79,562
Adjustment for:
Gains on investments		(3,934)	(23,543)	(66,718)
Currency losses/(gains)		65	(31)	(31)
(Increase)/decrease in accrued income		(1,010)	(551)	260
Decrease/(increase) in other debtors		1,528	(48)	(542)
Increase/(decrease) in other debtors		71	(74)	14
		__________	__________	__________
Net cash inflow from operating activities		8,776	7,317	12,545
Servicing of finance
Interest paid		(1,190)	(1,157)	(2,366)
Taxation
Overseas withholding tax paid		(57)	(55)	(83)
Financial investment
Purchases of investments		(32,309)	(31,027)	(56,446)
Sales of investments		39,374	43,227	70,004
		__________	__________	__________
Net cash inflow from financial investment		7,065	12,200	13,558
Equity dividends paid	4	(9,796)	(9,785)	(15,432)
		__________	__________	__________
Net cash inflow before use of liquid resources and financing		4,798	8,520	8,222
Net cash outflow from management of liquid resources		(2,751)	-	(2,386)
		__________	__________	__________
Net cash inflow before financing		2,047	8,520	5,836
Financing
Drawdown of loans		5,000	-	-
Repayment of loans		(1,500)	(10,500)	(10,500)
		__________	__________	__________
Net cash inflow/(outflow) from financing		3,500	(10,500)	(10,500)
		__________	__________	__________
Increase/(decrease) in cash		5,547	(1,980)	(4,664)
		__________	__________	__________
Reconciliation of net cash flow to movements in net funds
Increase/(decrease) in cash as above		5,547	(1,980)	(4,664)
Net change in liquid resources		2,751	-	2,386
Exchange movements		(65)	31	31
		__________	__________	__________
Movement in net funds in the period		8,233	(1,949)	(2,247)
Net funds at 1 February 2010		2,952	5,199	5,199
		__________	__________	__________
Net funds at 31 July 2010		11,185	3,250	2,952
		__________	__________	__________

Notes to the Financial Statements

For the six months ended 31 July 2010

1.	Accounting policies
	(a)	Basis of accounting
		The accounts have been prepared in accordance with applicable UK Accounting Standards, with pronouncements on half-yearly reporting issued by the Accounting Standards Board and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in January 2009. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis.
		The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP).
		The half yearly financial statements have been prepared using the same accounting policies as the preceding annual accounts.
	(b)	Dividends payable
		Dividends are recognised in the period in which they are paid.
	(c)	Investments
		Investments have been designated upon initial recognition at fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under 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 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)	Capital reserves
		Gains or losses on the realisation 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.
	(e)	Allocation of expenses
		Expenses are charged to capital when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect the investment management fee and relevant finance costs are allocated between revenue and capital in line with the Board's expectation of returns from the Company's investments over the long term in the form of revenue and capital respectively.
	(f)	Traded Options
		The company may enter into certain derivatives (e.g. options). Option contracts are accounted for as separate derivative contracts and are therefore shown in other assets or other liabilities at their fair value i.e. market value adjusted for the amortisation of transaction expenses. The premium received and fair value changes in the open position are recognised in the revenue column, losses realised on the exercise of the contracts are recorded in the capital column of the Income Statement.
		In addition, the Company may enter into derivative contracts to manage market risk and gains or losses arising on such contracts are recorded in the capital column of the Income Statement.

		Six months ended	Six months ended	Year ended
		31 July 2010	31 July 2009	31 January 2010
2.	Income	£'000	£'000	£'000
	Income from investments
	UK listed - franked	7,455	7,288	11,622
	UK listed - unfranked	146	188	300
	Overseas listed	727	657	1,060
	Bond interest listed	289	222	513
	Scrip dividends	106	123	205
		__________	__________	__________
		8,723	8,478	13,700
		__________	__________	__________
	Other income
	Interest from AAA rated money market funds	11	-	-
	Deposit interest	-	3	3
	Income on derivatives	444	320	409
	Income from stocklending	-	-	(3)
	Underwriting commission	38	136	142
		__________	__________	__________
		493	459	551
		__________	__________	__________
	Total income	9,216	8,937	14,251
		__________	__________	__________

		Six months ended	Six months ended	Year ended
		31 July 2010	31 July 2009	31 January 2010
3.	Taxation	£'000	£'000	£'000
	Withholding tax on income from foreign investments	57	55	83
		__________	__________	__________

		Six months ended	Six months ended	Year ended
		31 July 2010	31 July 2009	31 January 2010
4.	Dividends	£'000	£'000	£'000
	Interim dividend of 3.75p per share	-	-	5,651
	Final dividend of 6.50p (2009 - 6.50p) per share paid on 21 May 2010	9,796	9,796	9,796
	Refund of unclaimed dividends from previous periods	-	(11)	(15)
		__________	__________	__________
		9,796	9,785	15,432
		__________	__________	__________
	An interim dividend of 3.75p (2009 - 3.75p) will be paid on 8 October 2010 to shareholders on the register on 1 October 2010. The ex dividend date is 29 September 2010.

		Six months ended	Six months ended	Year ended
		31 July 2010	31 July 2009	31 January 2010
5.	Return per Ordinary share	p	p	p
	Revenue return	5.33	5.16	7.99
	Capital return	1.84	14.97	43.16
		__________	__________	__________
	Total return	7.17	20.13	51.15
		__________	__________	__________
	The returns per share figures are based on the following:
		Six months ended	Six months ended	Year ended
		31 July 2010	31 July 2009	31 January 2010
		£'000	£'000	£'000
	Revenue return	8,038	7,772	12,045
	Capital return	2,773	22,566	65,046
		__________	__________	__________
	Total return	10,811	30,338	77,091
		__________	__________	__________
	Weighted average number of Ordinary shares in issue	150,706,187	150,706,187	150,706,187
		__________	__________	__________

6.	Transaction costs
	During the period, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:-
		Six months ended	Six months ended	Year ended
		31 July 2010	31 July 2009	31 January 2010
		£'000	£'000	£'000
	Purchases	151	89	241
	Sales	50	43	73
		__________	__________	__________
		201	132	314
		__________	__________	__________

7.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 31 July 2010 includes gains of £34,617,000 (31 July 2009 - losses of £15,054,000; 31 January 2010 - gains of £31,182,000) which relate to the revaluation of investments held at the reporting date.

8.	Net asset value
	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 period end, adjusted to reflect the deduction of the Debenture Stock at par. A reconciliation between the two sets of figures is given below:
		As at	As at	As at
		31 July 2010	31 July 2009	31 January 2010
	Equity shareholders' funds	£304,618,000	£262,497,000	£303,603,000
	Adjusted net assets	£304,505,000	£262,371,000	£303,483,000
	Number of Ordinary shares in issue at the period end	150,706,187	150,706,187	150,706,187
	Equity shareholders' funds per share	202.13p	174.18p	201.45p
	Less: Unamortised Debenture Stock premium and issue expenses	(0.07p)	(0.08p)	(0.08p)
		__________	__________	__________
	Adjusted net asset value per share	202.06p	174.10p	201.37p
		__________	__________	__________

9.	Contingencies, commitments and post Balance Sheet events
	On 5 November 2007, the European Court of Justice ruled that management fees should be exempt from VAT.
	The Manager is at present awaiting HMRC's confirmation of the amounts to be received for the period from 1990 to 2007. In light of this, the Manager has refunded £1,020,000 to the Company for VAT charged on investment management fees for the period 1 January 2004 to 31 October 2007 and this was included in the financial statements for the year to 31 January 2009.
	The Manager has also refunded £573,000 for VAT charged on investment management fees for the period 1 January 2001 to 31 December 2003 and this amount was included in the financial statements for the year ended 31 January 2010. These repayments, which exclude interest, were allocated to revenue and capital in line with the accounting policy of the Company for the periods in which the VAT was charged.
	The timing of the outstanding repayments plus interest is not yet certain and once determined, will be split in accordance with the prevailing accounting policy, including any adjustments required for the payments made to account by the Manager for the periods 2001 to 2007.
	There are no material commitments or post Balance Sheet events which require disclosure.

10.	Called-up share capital
	During the six months ended 31 July 2010 the Company did not repurchase any Ordinary shares (31 July 2009 - nil; year ended 31 January 2010 - nil).

11.	Half Yearly Report
	The financial information contained in this Half Yearly Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 July 2010 and 31 July 2009 has not been audited.
	The information for the year ended 31 January 2010 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.
	The auditors have reviewed the financial information for the six months ended 31 July 2010 pursuant to the International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

12.	This Half Yearly Report was approved by the Board on 21 September 2010.

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

Independent Review Report to Dunedin Income Growth Investment Trust PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2010 which comprises the Income Statement, Balance Sheet, the Reconciliation of Movements in Shareholders' Funds, the Cash Flow Statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the Statement Half-Yearly Financial Reports as issued by the UK Accounting Standards Board.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the halfyearly financial report based on our review.

Scope of Review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2010 is not prepared, in all material respects, in accordance with the Statement Half-Yearly Financial Reports as issued by the UK Accounting Standards Board and the DTR of the UK FSA.

Gareth Horner

For and on behalf of KPMG Audit Plc

Chartered accountants

Edinburgh

21 September 2010

 

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