Half Yearly Report

RNS Number : 7728S

Dunedin Income Growth Inv Tst PLC

29 September 2014

 



DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 31 JULY 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 6.9% in total return terms and the Company's benchmark, the FTSE All-Share Index increased by 4.5% in total return terms. 

·     Total return to shareholders up 6.1%.

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 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

Review of the Period

Over the half year, the Company's net asset value ("NAV") per share rose 6.9% on a total return basis and the FTSE All-Share rose 4.5% also on a total return basis. The Company's shares ended the period at a slightly reduced premium to NAV of 1.1% compared to 1.6% in January resulting in a total return to shareholders over the period of 6.1%.

The Company's shares have traded at a modest discount for most of the period.  We remain watchful for the opportunity to issue more shares at an appropriate premium should the chance arise.

At a headline level, total revenue declined by 1.6% year-on-year due to the lower level of option income generated in the period. We still expect to derive a similar annual level of income from option writing which will be more weighted to the second half.  Dividend income from investments actually rose 3.3%, a respectable performance against a backdrop of strong sterling. With close to half our income being earned in overseas currencies this is a significant headwind, magnified by the impact on the reported profits of many of the companies in the portfolio that pay sterling dividends yet have substantial operations overseas.

Dividends

It is our intention to make three equal distributions of 2.575p in August and November 2014 and February 2015 and to pay a final balancing dividend in May next year. It remains our ambition to continue to grow the dividend in real terms.

Economic and Market Background

Over the half year, the UK equity market reversed many of the trends experienced during 2013/14 with large cap stocks outperforming small caps by around five percentage points and many of the darling technology and recovery oriented companies declining more substantially as investors called their valuations into question. In a global context, emerging market stocks recovered some of their poise to outperform developed markets. Oil prices were relatively buoyant during much of the first half of the year as geopolitical tensions sharpened with the annexation of Crimea by Russia and the march of ISIS rebels through much of northern Iraq; though they later slipped back as supply from Libya recovered and domestic production in the United States increased.

The UK economic recovery continues to outpace much of the rest of the world with particularly strong housing and employment data. Despite some confusion over the Bank of England's policy of forward guidance the UK still seems likely to be the first of the developed nations to raise short term interest rates. The lack of real income growth though continues to put pressure on household budgets and has impacted the Chancellor's revenue expectations as tax receipts continue to disappoint.

In the United States, recovery is progressing at a more measured pace and the Federal Reserve continues to slowly reduce the rate at which they are expanding their balance sheet. In the emerging world, expectations for Chinese growth seem to have stabilised; while in India we have seen some more encouraging signs of structural reform following the election of Narendra Modi. In Brazil there is mounting optimism over the prospects for a change of government in the upcoming elections following several years of economic drift.

Contrasting sharply with this, continental European economies have struggled to maintain the apparent momentum that they had achieved in 2013 with Italy slipping back into recession in the second quarter, France registering no growth in the first half and even Germany struggling to report positive growth. With the Euro bloc moving closer to outright deflation, attention has once again turned to the ECB and its President Mario Draghi, for signs that they are prepared to launch full scale quantitative easing.

Bond yields across the developed world declined significantly over the six months; even in economies that are performing relatively well such as the US and the UK (where yields tumbled); in Europe the yield on ten year German bunds nearly halved to 0.9%. This may be reflective of reduced inflationary expectations or anticipation of more, or extended, quantitative easing. But whatever the reason, long term interest rates at such low levels make us increasingly uncomfortable.

Gearing

The Company's gearing position increased slightly during the period as we drew down a further £6m of our revolving facility. Valuing debt at par, potential gearing stood at 9.3% at 31 July 2014, up from 8.3% at 31 January 2014. On an equity gearing basis, taking debt at par and offsetting our cash holdings, net indebtedness was 7.6% up from 6.7% at the year end. During the first half we switched the currency of £5m of our drawn bank facility from sterling into euros, achieving a reduction in borrowing costs and better matching our assets. We still consider it appropriate to maintain our modest level of gearing, which is kept under review and is largely dependent on the opportunities that present themselves at an investment level.

Directors' Responsibility Statement

The Directors are responsible for preparing the half yearly financial report in accordance with applicable law and regulations.  The Directors confirm that to the best of their knowledge:

· the condensed set of financial statements within the half yearly financial report has been prepared in accordance with the statement "Half Yearly Financial Reports" issued by the UK Accounting Standards Board;

· the Chairman's Statement (constituting the interim management report) includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last annual report that could so do).

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.  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 compared to 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.

· 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 premium or discount to its underlying net asset value.  The Company has a policy of issuing or buying back shares to help 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 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).

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 covenants. 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.

Alternative Investment Fund Managers Directive

The Alternative Investment Fund Managers Directive (the "Directive"), proposed by the EU to enhance shareholder protection, was fully implemented in the UK on 22 July 2014.  This Directive required the Company to appoint an authorised Alternative Investment Fund Manager and a depositary, the latter overlaying the current custody arrangements.

The Company has now appointed Aberdeen Fund Managers Limited ("AFML"), following its authorisation by the FCA, to act as the Company's Alternative Investment Fund Manager, entering a new management agreement with AFML on 15 July 2014. Under this agreement the AFML delegates portfolio management services to Aberdeen Asset Managers Limited, which continues to act as the Company's Investment Manager. There is no change in the commercial arrangements from the previous investment management agreement.

In addition, the Company entered into a depositary agreement with AFML and BNY Mellon Trust & Depositary (UK) Limited on 15 July 2014. The appointment of a depositary is a new requirement under the Directive and as previously reported this will increase costs over and above the previous custody arrangements.

Outlook

The bull market for equities has lasted since the spring of 2009 and financial markets seem to have adopted an increasingly optimistic view of the world. If economies weaken this is deemed to be good news as central banks will extend quantitative easing.  If economies remain relatively stagnant this is also good news as stimulus will not be withdrawn any time soon, and if economies begin to grow then this is once again good news because growth is returning. In our experience these win/win/win type perceptions usually end unhappily. Against this challenging backdrop your manager will continue to remain focussed on fundamentals, keeping a close eye on achieving both real growth in income and preservation of capital.

Rory Macnamara

Chairman

26 September 2014

Manager's Portfolio Review

This was a reasonably brisk period for portfolio activity as we responded to the share price weakness in a number of holdings in the latter part of the previous financial year by increasing positions at more attractive prices.  As a result, we added to British American Tobacco, Standard Chartered, Pearson, Experian and Unilever.  We also participated in Cobham's placing to fund the acquisition of Aeroflex, this was a strategically important deal as it continues to shift the business away from its previous reliance on US defence spending.

Positions were initiated in two new companies, both of which we have followed for many years. The first of these is Inchcape, known simply as a car retailer here in the UK but actually operating globally representing a powerful selection of premium automotive brands with a particularly strong position in emerging markets and often carrying exclusive distribution rights in its chosen territories. The second Ultra Electronics, famous for being the world's leading manufacturer of sonar buoys, but today a much more diverse technology company that serves both defence and commercial markets worldwide. Both of these are smaller sized businesses that offer reasonable value, robust balance sheets and the potential for strong growth in cash distributions to shareholders.

We sold out of Amec, due to concerns over their acquisition of Foster Wheeler and the potential risk to the balance sheet from the associated increase in leverage, and we reduced our position in Tesco, given ongoing industry challenges.  We also sold the Verizon shares that we received as part of the Verizon Wireless disposal by Vodafone and reinvested part of the proceeds back into Vodafone.

At the full year we commented that we felt a number of our holdings had been somewhat harshly treated. Since then we have seen a reasonable rebound in the share prices of a number of those companies. By and large though these developments have more or less played out now and, with wider equity markets continuing to make progress during the half, we once again find valuations relatively unappealing, and the earnings environment challenging. Our priorities are to make sure that the businesses we have in the portfolio would not find themselves operationally compromised by a return to more normal monetary policy, and to ensure that we do not justify excessive valuations on the basis of historically low discount rates. In the meantime we will look to use any substantial weakness in share prices to add to companies that we favour while remaining judicious on both their value and quality.

Jeremy Whitley & Ben Ritchie

Aberdeen Asset Managers Limited

26 September 2014

INCOME STATEMENT

	Six months ended
	31 July 2014
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	15,885	15,885
Currency gains	-	196	196
Income (note 2)	13,307	-	13,307
Investment management fee	(336)	(504)	(840)
Administrative expenses	(472)	-	(472)
	_______	_______	_______
Net return before finance costs and taxation	12,499	15,577	28,076
Finance costs	(484)	(726)	(1,210)
	_______	_______	_______
Return on ordinary activities before taxation	12,015	14,851	26,866
Taxation (note 3)	(302)	-	(302)
	_______	_______	_______
Return on ordinary activities after taxation	11,713	14,851	26,564
	_______	_______	_______
Return per Ordinary share (pence)(note 5)	7.76	9.83	17.59
	_______	_______	_______
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 2013
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	33,339	33,339
Currency gains	-	38	38
Income (note 2)	13,520	-	13,520
Investment management fee	(318)	(477)	(795)
Administrative expenses	(420)	-	(420)
	_______	_______	_______
Net return before finance costs and taxation	12,782	32,900	45,682
Finance costs	(490)	(736)	(1,226)
	_______	_______	_______
Return on ordinary activities before taxation	12,292	32,164	44,456
Taxation (note 3)	(298)	-	(298)
	_______	_______	_______
Return on ordinary activities after taxation	11,994	32,164	44,158
	_______	_______	_______
Return per Ordinary share (pence)(note 5)	7.95	21.33	29.28
	_______	_______	_______

INCOME STATEMENT

	Year ended
	31 January 2014
	(audited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	18,040	18,040
Currency gains	-	-	-
Income (note 2)	20,750	-	20,750
Investment management fee	(647)	(971)	(1,618)
Administrative expenses	(787)	-	(787)
	_______	_______	_______
Net return before finance costs and taxation	19,316	17,069	36,385
Finance costs	(972)	(1,457)	(2,429)
	_______	_______	_______
Return on ordinary activities before taxation	18,344	15,612	33,956
Taxation (note 3)	(411)	-	(411)
	_______	_______	_______
Return on ordinary activities after taxation	17,933	15,612	33,545
	_______	_______	_______
Return per Ordinary share (pence)(note 5)	11.89	10.35	22.24
	_______	_______	_______

BALANCE SHEET

		As at	As at	As at
		31 July 2014	31 July 2013	31 January 2014
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		453,123	445,375	431,223
		_______	_______	_______
Current assets
Loans and receivables		1,109	1,568	763
Cash and short term deposits		7,268	9,437	6,377
		_______	_______	_______
		8,377	11,005	7,140
		_______	_______	_______
Creditors: amounts falling due within one year
Bank loan		(10,834)	(5,000)	(5,000)
Other creditors		(1,010)	(1,214)	(1,305)
		_______	_______	_______
		(11,844)	(6,214)	(6,305)
		_______	_______	_______
Net current (liabilities)/assets		(3,467)	4,791	835
		_______	_______	_______
Total assets less current liabilities		449,656	450,166	432,058
Creditors: amounts falling due after more than one year
Debenture stock		(28,538)	(28,526)	(28,532)
		_______	_______	_______
Net assets		421,118	421,640	403,526
		_______	_______	_______
Capital and reserves
Called-up share capital		38,419	38,419	38,419
Share premium account		4,619	4,595	4,619
Capital redemption reserve		1,606	1,606	1,606
Capital reserve	7	352,342	353,797	337,491
Revenue reserve		24,132	23,223	21,391
		_______	_______	_______
Equity shareholders' funds		421,118	421,640	403,526
		_______	_______	_______
Adjusted net asset value per Ordinary share (pence)	8	278.83	279.36	267.17
		_______	_______	_______

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Six months ended 31 July 2014 (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 2014		38,419	4,619	1,606	337,491	21,391	403,526
Return on ordinary activities after taxation		-	-	-	14,851	11,713	26,564
Dividends paid	4	-	-	-	-	(8,972)	(8,972)
		_______	_______	_______	______	_______	_______
Balance at 31 July 2014		38,419	4,619	1,606	352,342	24,132	421,118
		_______	_______	_______	______	_______	_______
Six months ended 31 July 2013 (unaudited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
		£'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		-	-	-	32,164	11,994	44,158
Issue of ordinary shares		-	52	-	491	-	543
Dividends paid	4	-	-	-	-	(8,666)	(8,666)
		_______	_______	_______	______	_______	_______
Balance at 31 July 2013		38,419	4,595	1,606	353,797	23,223	421,640
		_______	_______	_______	______	_______	_______
Year ended 31 January 2014 (audited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
		£'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	4	-	-	-	-	(16,437)	(16,437)
		_______	_______	_______	______	_______	_______
Balance at 31 January 2014		38,419	4,619	1,606	337,491	21,391	403,526
		_______	_______	_______	______	_______	_______

CASH FLOW STATEMENT

		Six months ended	Six months ended	Year ended
		31 July 2014	31 July 2013	31 January 2014
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Net return on ordinary activities before finance costs and taxation		28,076	45,682	36,385
Adjustment for:
Gains on investments		(15,885)	(33,339)	(18,040)
Currency gains		(196)	(38)	-
Increase in accrued income		(327)	(772)	(19)
(Increase)/decrease in other debtors		(19)	71	122
Decrease in other creditors		(293)	(475)	(394)
		__________	__________	__________
Net cash inflow from operating activities		11,356	11,129	18,054
Servicing of finance
Interest paid		(1,206)	(1,242)	(2,429)
Taxation
Overseas withholding tax paid		(302)	(298)	(411)
Financial investment
Purchases of investments		(23,792)	(20,359)	(31,472)
Sales of investments		17,777	25,190	35,157
		__________	__________	__________
Net cash (outflow)/inflow from financial investment		(6,015)	4,831	3,685
Equity dividends paid	4	(8,972)	(8,666)	(16,437)
		__________	__________	__________
Net cash (outflow)/inflow before financing		(5,139)	5,754	2,462
Financing
Issue of Ordinary shares		-	543	813
Drawdown of loan		5,834	-	-
		__________	__________	__________
Net cash inflow from financing		5,834	543	813
		__________	__________	__________
Increase in cash		695	6,297	3,275
		__________	__________	__________
Reconciliation of net cash flow to movements in net debt
Increase in cash as above		695	6,297	3,275
Drawdown of loan		(5,834)	-	-
Exchange movements		196	38	-
Non-cash movements		(6)	(7)	(13)
		__________	__________	__________
Movement in net debt in the period		(4,949)	6,328	3,262
Opening net debt		(27,155)	(30,417)	(30,417)
		__________	__________	__________
Closing net debt		(32,104)	(24,089)	(27,155)
		__________	__________	__________

Notes to the Financial Statements

For the six months ended 31 July 2014

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'. 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 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 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 2014	31 July 2013	31 January 2014
2.	Income	£'000	£'000	£'000
	Income from investments
	UK listed - franked	7,820	8,321	13,038
	Overseas listed	3,273	2,984	4,146
	Scrip dividends	1,443	826	1,607
		__________	__________	__________
		12,536	12,131	18,791
		__________	__________	__________
	Other income
	Deposit interest	3	-	1
	Income on derivatives	762	1,371	1,934
	Income from stock lending	6	18	24
		__________	__________	__________
		771	1,389	1,959
		__________	__________	__________
	Total income	13,307	13,520	20,750
		__________	__________	__________

		Six months ended	Six months ended	Year ended
		31 July 2014	31 July 2013	31 January 2014
3.	Taxation	£'000	£'000	£'000
	Withholding tax on income from foreign investments	427	436	537
	Overseas tax reclaimable	(125)	(138)	(126)
		__________	__________	__________
		302	298	411
		__________	__________	__________

		Six months ended	Six months ended	Year ended
		31 July 2014	31 July 2013	31 January 2014
4.	Dividends	£'000	£'000	£'000
	Third interim dividend for the year ended 31 January 2013 - 2.50p paid on 28 February 2013	-	3,768	3,767
	Final dividend for the year ended 31 January 2013 - 3.25p paid on 31 May 2013	-	4,898	4,898
	First interim dividend for the year ended 31 January 2014 - 2.575p paid on 31 August 2013	-	-	3,886
	Second interim dividend for the year ended 31 January 2014 - 2.575p paid 30 November 2013	-	-	3,886
	Third interim dividend for the year ended 31 January 2014 - 2.575p paid on 28 February 2014	3,888	-	-
	Final dividend for the year ended 31 January 2014 - 3.375p (2013 - 3.25p) paid on 31 May 2014	5,096	-	-
	Refund of unclaimed dividends from previous periods	(12)	-	-
		__________	__________	__________
		8,972	8,666	16,437
		__________	__________	__________
	A first interim dividend for the year to 31 January 2015 of 2.575p per share was paid on 29 August 2014 to shareholders on the register on 8 August 2014. The ex-dividend date was 6 August 2014.

		Six months ended	Six months ended	Year ended
		31 July 2014	31 July 2013	31 January 2014
5.	Return per Ordinary share	p	p	p
	Revenue return	7.76	7.95	11.89
	Capital return	9.83	21.33	10.35
		__________	__________	__________
	Total return	17.59	29.28	22.24
		__________	__________	__________
	The returns per share figures are based on the following:
		Six months ended	Six months ended	Year ended
		31 July 2014	31 July 2013	31 January 2014
		£'000	£'000	£'000
	Revenue return	11,713	11,994	17,933
	Capital return	14,851	32,164	15,612
		__________	__________	__________
	Total return	26,564	44,158	33,545
		__________	__________	__________
	Weighted average number of Ordinary shares in issue	151,006,187	150,803,425	150,867,283
		__________	__________	__________

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 2014	31 July 2013	31 January 2014
		£'000	£'000	£'000
	Purchases	116	90	137
	Sales	16	25	34
		__________	__________	__________
		132	115	171
		__________	__________	__________

7.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 31 July 2014 includes gains of £118,348,000 (31 July 2013 - gains of £126,043,000; 31 January 2013 - gains of £108,613,000) 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 2014	31 July 2013	31 January 2014
	Equity shareholders' funds	£421,118,000	£421,640,000	£403,526,000
	Adjusted net assets	£421,056,000	£421,566,000	£403,458,000
	Number of Ordinary shares in issue at the period end	151,006,187	150,906,187	151,006,187
	Equity shareholders' funds per share	278.87p	279.41p	267.22p
	Less: Unamortised Debenture Stock premium and issue expenses	(0.04p)	(0.05p)	(0.05p)
		__________	__________	__________
	Adjusted net asset value per share	278.83p	279.36p	267.17p
		__________	__________	__________

		Six months ended	Six months ended	Year ended
		31 July 2014	31 July 2013	31 January 2014
9.	Stock lending	£'000	£'000	£'000
	Aggregate value of securities on loan at the period end	-	4,544	9,880
	Maximum aggregate value of securities on loan during the period	5,071	16,032	16,032
	Fee income from stock lending during the period	6	18	24
	All stocks lent under these arrangements are fully secured against collateral. The value of the collateral held at 31 July 2014 was nil (31 July 2013 - £4,779,000; 31 January 2014 - £10,692,000).
	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. Revenue is received for making the investments available to the borrower. In all cases the securities lent continue to be recognised on the Balance Sheet.

10.	Called-up share capital
	During the six months ended 31 July 2014 no Ordinary shares were issued from Treasury (31 July 2013 - 200,000 Ordinary shares with proceeds of £543,000; year ended 31 January 2014 - 300,000 Ordinary shares with proceeds of £813,000).

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 2014 and 31 July 2013 has not been audited.
	The information for the year ended 31 January 2014 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditor on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.
	The auditor has reviewed the financial information for the six months ended 31 July 2014 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. The report of the auditor is on page 15.

12.	This Half Yearly Report was approved by the Board on 26 September 2014 and the Half Yearly Report will be posted to shareholders at the beginning of October 2014 and copies will be available from the Manager or the Company's website, www.dunedinincomegrowth.co.uk.

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

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 2014 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 Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' Responsibilities

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

As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). 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 half yearly financial report based on our review.

Scope of Review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 31 July 2014 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 FCA.

Philip Merchant

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

Edinburgh

26 September 2014

 

END

 

 

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