Final Results

RNS Number : 5513I

Lowland Investment Co PLC

09 December 2015

 



LOWLAND INVESTMENT COMPANY PLC

Annual Report for the year ended 30 September 2015

This announcement contains regulated information

Performance Highlights	30 September 2015	Change since 30 September 2014
Net Asset Value Total Return per share1	1,356.2p	+0.8%
Share Price Total Return	2,581.6p	-2.2%
FTSE All-Share Index Total Return	1,554.9	-2.3%
Revenue Return per share	46.4p	+17.8%
Dividend for year	41.0p	+10.8%
	30 September 2015	30 September 2014
Dividend Yield 2	3.2%	2.6%
Gearing	16.8%	13.3%
(Discount)/Premium3	(2.4%)	0.7%
Ongoing charge     - excluding the performance fee	0.60%	0.56%
- including the performance fee	0.85%	0.85%

¹  Net asset value per share total return (including dividends reinvested).

²  Based on the share price using mid-market closing prices at the year end.

³ Calculated using year end audited NAVs including current year revenue.

Sources: Morningstar for the AIC, Henderson, Datastream.

______________________________________________________________________________

MANAGEMENT  REPORT

Commenting on the results Chairman, Peter Troughton, said:

Performance

In a difficult year Net Asset Value ("NAV") total return rose 0.8%, while the FTSE All-Share Index, the Company's benchmark, fell 2.3%. The share price opened the year at a small premium, but closed at a modest discount, declining by 2.2%.

The Company's strong medium and long-term performance is shown in the table below:

Total Return Performance Comparison to 30 September 2015	3 years %	5 years %	10 years %
NAV	41.9	98.9	128.8
Share Price	41.0	114.7	130.8
AIC UK Equity Income Sector NAV1	42.1	73.5	102.9
FTSE All-Share Index	23.3	38.2	72.3

¹ Size weighted average

Source: Morningstar for the AIC

Dividends

As our Fund Manager anticipated, many companies in the portfolio delivered robust dividend growth over the year. Revenue earnings per share for the year are 46.4p, against 39.4p last year, an increase of 17.8%, compared with the underlying dividend growth in the Company's benchmark of 4.6%. This has allowed us to pay an increased dividend to our shareholders. Subject to shareholders approving the final dividend, the total dividend for the year will be 41p, which compares with 37p last year; an increase of 10.8%. £1,465,000 will be transferred to the revenue reserve.

Revenue earnings for the year were boosted by special dividends which amounted to £1.7m, representing 13.6% of the total earnings.

Over the past five years dividends have grown at a compound rate of 8.5%. The five year record is set out below.

Total of dividend percentage increase per year

Year	2010	2011	2012	2013	2014	2015
Dividend per year	27.0p	28.0p	30.5p	34.0p	37.0p	41.0p
Percentage Increase	-	3.7%	8.9%	11.5%	8.8%	10.8%

Source: Henderson

Investment Approach

The Board believes that in order to provide reliable long-term dividend growth we must grow the underlying capital value of the Company. Sometimes this will be achieved by buying shares which, at the time of purchase, are not paying a dividend. The Company's dividend income may be boosted when these investments start to pay dividends, or, as the market recognises the prospective dividend-paying capacity of such investments, we may be rewarded with healthy capital gains. These capital gains can be recycled into existing dividend-paying investments.

This approach has helped the Company to increase dividends by 5.3 times over the last 25 years: annualised average growth of 6.9%.

Some of the recent purchases have been in companies that will not pay dividends in the immediate future, but are such compelling long-term capital growth stories that they have an important role to play in the Company's portfolio. One example would be Oxford Sciences Innovation, a company recently established to invest in research at Oxford University with commercial potential. It is an unlisted investment, which is unusual for Lowland, but this structure is suitable for a long-term commitment to emerging new companies.

The Board monitors the portfolio to ensure that it remains a broad mix of companies that can be expected to produce both capital and dividend growth.

Ongoing Charge and Fees

A performance fee of £0.9m is payable in respect of the year to 30 September 2015 (2014: £1.1m). This reflects the growth in NAV total return of 41.9% over the last three years compared with the FTSE All-Share return of 23.3%. The performance fee, and the basic management fee of 0.5% of net chargeable assets, are capped at a total of 0.75% of net chargeable assets. The cap has reduced the performance fee payable by £21.3m, since the performance fee was introduced in October 2010. A description of how the performance fee is calculated can be found in the Annual Report.

The total ongoing charge, (the management fee and other non-interest expenses) was 0.60% (2014: 0.56%) of average shareholders' funds excluding the performance fee, and 0.85% (2014: 0.85%) including the performance fee.

Investment Review

The level of debt in listed companies has fallen to historically low levels. This has not been recognised fully by the market, because macro-economic worries abound. Our Fund Manager also believes that the specific commercial strengths of companies we hold have not been fully reflected in their valuations.

The most pressing macroeconomic concern has been about the extent of the slowdown in China, and its effects on the rest of Asia. We believe successful and consistent portfolio management requires a genuinely diverse mix of companies that can weather a variety of storms coming from Asia or elsewhere. Some of the holdings may suffer from reduced Chinese demand, but many will not. Many of the companies in the portfolio exercise a good deal of control over their destiny by producing excellent competitive products.

Gearing

The Board increased the level of borrowings during the year from £50 million to £62 million, which represents gearing of 16.8%. The gearing in a relatively flat year held only marginal benefit as regards capital returns, but it did have the benefit of improving the earnings, as the borrowing costs are around 1.5% while the portfolio yield is 3.5%. The shape of the borrowings can be seen in the Annual Report. The gearing over the long-term has added to both the capital and income return of the Company and is expected to do so in the future.

Share Issuance 

During the year there was no share issuance or share buy-backs.

The Board

Rupert Barclay has decided to stand down at the Annual General Meeting. He joined the Board in February 2000. His broad commercial experience has been a very real help to the Fund Manager, particularly during difficult periods. The Board is grateful to him for his long service, not least his time as Chairman of the Audit Committee when he brought great insight to the issues facing the Company.

Annual General Meeting

The Annual General Meeting will be held at the offices of Henderson on 20 January 2016 at 12:30pm. Full details of the business to be conducted at the meeting are set out in the Notice of Meeting which will be sent to shareholders with the Annual Report. As usual our Fund Manager, James Henderson and his deputy Laura Foll, will be making a presentation and all shareholders are most welcome to attend.

Outlook

Interest rates and inflation are likely to head upwards during the current year but perhaps by not very much. Companies that can produce solid profit and dividend growth should attract good support. It is this sort of company that is the focus of the portfolio. The ability of your Company to hold large, medium and small companies allows the Fund Manager freedom to find companies that will produce strong long-term growth in a challenging economic environment.

Principal Risks and Uncertainties and Viability Statement

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity. The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified, and the steps taken by the Board to mitigate these as far as possible, and whether the Board considers the impact of such risks has changed over the past year, are as follows:

Risk	Controls and Mitigation
Investment and Strategy Risk An inappropriate investment strategy or poor execution, for example, in terms of asset allocation or level of gearing, may result in underperformance against the Company's benchmark index and the companies in its peer group, and also in the Company's shares trading on a wider discount.	The Board manages these risks by ensuring a diversification of investments and a regular review of the extent of borrowings. Henderson operates in accordance with investment limits and restrictions and policy determined by the Board, which includes limits on the extent to which borrowings may be employed. The Board reviews the limits and restrictions on a regular basis and Henderson confirms adherence to them every month. Henderson provides the Board with management information, including performance data and reports and shareholder analyses. The Directors monitor the implementation and results of the investment process with the Fund Manager at each Board meeting and monitor risk factors in respect of the portfolio. Investment strategy is reviewed at each meeting.
Market Risk Market risk arises from uncertainty about the future prices of the Company's investments. Although the Company invests almost entirely in securities that are listed on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely.	The Fund Manager seeks to maintain a diversified portfolio to mitigate against this risk. The Board regularly reviews the portfolio, activities and performance. An analysis of the Company's portfolio is shown in the Annual Report.
Financial Risk The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk, currency risk and credit and counterparty risk.	The Company minimises the risk of a counterparty failing to deliver securities or cash by dealing through organisations that have undergone rigorous due diligence by Henderson. The Company holds its liquid funds, almost entirely in interest bearing bank accounts in the UK or on short-term deposit. This, together with a diversified portfolio which comprises mainly investments in large and medium-sized companies mitigates the Company's exposure to liquidity risk.

Risk	Controls and Mitigation
Gearing Risk The Company has the ability under existing covenants to gear up to 29.99% of the equity shareholder's funds other than in exceptional circumstances. In the event of a significant or prolonged fall in equity markets gearing would exacerbate the effect of the falling market on the Company's NAV per share and, consequently its share price.	The Company minimises the risk by the regular monitoring of the levels of the Company's borrowings in accordance with the agreed limits. The Company confirms adherence to the covenants of the loan facilities on a monthly basis.
Operational Risk Disruption to, or the failure of, Henderson's accounting, dealing or payment systems or the Custodian's records could prevent the accurate reporting or monitoring of the Company's financial position. Henderson contracts some of the operational functions (principally those relating to trade processing, investment administration and accounting), to BNP Paribas Securities Services.	Details of how the Board monitors the services provided by Henderson and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal controls section of the Annual Report.
Accounting, Legal and Regulatory Risk In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010. A breach of Section 1158 could result in the Company losing investment trust status and, as a consequence, realised gains in the Company's portfolio would be subject to Corporation Tax. Compliance with the requirements of Section 1158 are monitored by Henderson and the results are reported at each Board meeting. The Company must comply with the provisions of the Companies Act and, since its shares are listed on the London Stock Exchange, the UKLA's Listing and Disclosure and Transparency Rules ("UKLA Rules"). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. A breach of the UKLA Rules could result in the suspension of the Company's shares; which in turn would breach Section 1158.	Henderson has contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal control reports produced by Henderson on a quarterly basis, which confirm regulatory compliance.

The Board considers these risks to have remained unchanged throughout the year under review.

Viability Statement

The Company is a long-term investor; we believe it is appropriate to assess the Company's viability over a five year period in recognition of our long-term horizon and what we believe to be investors' horizons, taking account of the Company's current position and the potential impact of the principal risks and uncertainties as documented above.

The assessment has considered the impact of the likelihood of the principal risks and uncertainties facing the Company, in particular Investment and Strategy, Market, Financial and Gearing risks, in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

The Directors took into account the liquidity of the portfolio and the gearing in place when considering the viability of the Company over the next five years and its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's loan facilities and how a breach of the loan facility covenants could impact on the Company's liquidity, net asset value and share price.

The Directors do not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place. Also the Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period as the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. Only a substantial financial crisis affecting the global economy could have an impact on this assessment.

Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five year period.

Statement under DTR 4.1.12

Each of the Directors confirms that, to the best of his knowledge:

• the Company's financial statements, which have been prepared in accordance with UK Accounting Standards and applicable law give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

• the Strategic Report and financial statements 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 it faces.

For and on behalf of the Board

Peter Troughton CBE

Chairman

9 December 2015

Fund Manager's Report

Investment Review

It has been a frustrating year for investors in that a favourable operating background in the UK has not resulted in the progress that might have been expected in capital values. Currently the domestic economy has virtually no inflation and reasonable economic growth. Wages in real terms are rising and the consumer is benefiting from increasing spending power which has been further boosted by the fall in petrol prices.

This benign backdrop has meant some of the domestic orientated companies have experienced very strong share price appreciation. However, this good work has been undone for investors by the falls in commodity orientated companies and those that are exposed to slowing emerging market growth which includes many manufacturing businesses.

This has generally made investors nervous about the outlook for equities. It is hard to always fully understand these concerns. As income focused managers we pay attention to cash generation. It is cash that pays dividends. The story cash generation is telling is a positive one. Debt levels have fallen further with many of the companies held now having net cash. This has resulted in good dividend growth and special dividends. The dividend growth has been best from the smaller and medium sized dividend paying companies in the portfolio.

3 year average dividend growth

FTSE 100	FTSE 250	FTSE Small-Cap
3.2%	11.2%	11.0%

Source: Henderson

Performance Attribution

Top five contributors to relative performance	12 month absolute return %	Relative contribution %
Amlin	64.6	1.08
Hiscox	43.6	0.96
Provident Financial	52.5	0.89
Royal Dutch Shell (underweight)	-31.9	0.81
Novae	71.4	0.59

Bottom five detractors from relative performance	12 month absolute return %	Relative contribution %
Velocys	-72.2	-2.05
FBD	-55.8	-0.86
Gibson Energy	-54.8	-0.67
Weir	-52.2	-0.64
Circle Oil	-80.4	-0.58

Source: Henderson

Among the strongest contributors to performance during the year were non-life insurers Hiscox, Amlin and Novae. These have been an enduring feature of the portfolio as a result of their disciplined underwriting and ability to generate high returns over the cycle. Given the significant position the Company has in the industrials sector they have also provided diversification, with performance more determined by the underwriting cycle rather than economic activity. Towards the end of the year Mitsui made a cash bid for Amlin at £6.70 per share and we have since reduced our holding.

The largest individual detractor from performance was gas-to-liquids technology provider Velocys. Having been the top contributor to performance last year, the decline in the oil price meant that securing financing for their gas-to-liquids projects became more difficult. They also saw the departure of their long standing Chief Executive. It remains our view that the technology has significant potential even if the current oil price persists, for example to provide an alternative to flaring. While these early-stage companies such as Velocys, IP Group and 4D Pharma are likely to be volatile performers, what attracts us is their ability to disrupt large-end markets which suggests substantial potential upside if they get it right.

Investment Disciplines

The portfolio consists of a relatively long list of holdings. This allows early stage companies, recovery situations, large major companies and strongly growing medium sized companies to all feature. The one characteristic they have in common is they are good, if not, excellent at what they do. The list has been built up by paying attention and following companies. The top down factors about cycles and economic theories play little part.

It is very difficult to have insights about the economy that can consistently be translated into buying the stocks that will benefit. By the time economic patterns have been recognised, they have a way of having already changed or dispersed. It is much better to focus on management teams, products and valuation to find worthwhile equity investments. A good management team can navigate through a difficult economic background, while a poor one can get it wrong in a strong economy. The life cycles of products, and therefore sometimes the companies that produce them, are getting shorter. It is therefore important to keep paying attention; the strongest management teams can become complacent. The stock picking methods that worked yesterday need to be re-examined for relevance today. However, the approach of investing in companies where the management team is determined to be competitive through investing and re-examining their businesses is the one that is most likely to succeed.

Investment Activity

Our transactions were primarily reducing positions that had performed well, such as Hill & Smith and Bellway, while adding to areas that had performed poorly such as mining. While this has detracted from performance during the year, the Company aims to be mildly contrarian in its outlook and take advantage of value opportunities where they arise. Taking Glencore as an example, supply is being withdrawn in the copper market while demand continues to grow, which over time should drive higher copper prices. We have been adding to Glencore at a discount to book value, while reducing housebuilders such as Bellway on a substantial premium to book value.

We also added to higher yielding smaller companies that have good capacity to grow dividends over time. This provides a diversification of income for the Company away from the larger dividend payers in the UK. A good example of this would be commercial property owner Palace Capital, where we participated in a placing to finance further acquisitions. We also added a position in DFS during the IPO, which is highly free cash flow generative and this should result in good cash returns to shareholders over time.

Outlook

We are positive on the prospects of our holdings in the industrial sector, where our overweight position was detrimental to performance last year, having been a substantial contributor in the years after the 2008 downturn. We retain our position in the sector because of the strengths of the individual holdings rather than a macroeconomic based conviction. These companies are generating cash and debt is low. They have excellent products and they are genuinely competitive in the global market. For instance the civil aviation industry is growing strongly and the companies held which supply this industry are world leaders. The earnings outlook is relatively visible given the strong order books and the satisfactory margin positions. The share price weakness in the area is the result of concerns about global economic problems. However, such an approach to investment management is too broad brush and as the real picture develops the share prices will rise.

The holdings in early stage companies make up 6% of the portfolio. Their share price performance will be determined not by economic trends but by whether their product has real advantages over the current ones in the market. The returns from this area will be volatile but the opportunities are large. The insurance sector has been a relatively big position since Lloyds of London was bailed out by corporate capital in 1992. The exposure has added considerable value but the size of the position will now fall as result of cash takeovers. Some of the proceeds will be reinvested in further purchases of resource related companies which offer long-term value at current prices. Overall as a result of disciplined and talented management in stocks held it is expected the companies will grow their businesses in spite of a challenging economic backdrop.

James Henderson

Fund Manager

Laura Foll

Deputy Fund Manager

9 December 2015

Audited Income Statement

	Year ended 30 September 2015			Year ended 30 September 2014
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
(Losses)/gains on investments held at fair value through profit or loss	-	(8,387)	(8,387)	-	10,172	10,172
Income from investments	15,542	-	15,542	13,495	-	13,495
Other interest receivable and similar income	105	-	105	173	-	173
	---------	---------	---------	---------	---------	---------
Gross revenue and capital gains/(losses)	15,647	(8,387)	7,260	13,668	10,172	23,840
Management fee	(1,819)	-	(1,819)	(1,668)	-	(1,668)
Performance fee	-	(908)	(908)	-	(1,073)	(1,073)
Other administrative expenses	(484)	-	(484)	(513)	-	(513)
	---------	---------	---------	---------	---------	---------
Net return/(loss) on ordinary activities before finance charges and taxation	13,344	(9,295)	4,049	11,487	9,099	20,586
Finance charges	(806)	-	(806)	(845)	-	(845)
	---------	---------	---------	---------	---------	---------
Net return/(loss) on ordinary activities before taxation	12,538	(9,295)	3,243	10,642	9,099	19,741
Taxation on net return on ordinary activities	(48)	-	(48)	(49)	-	(49)
	---------	---------	---------	---------	---------	---------
Net return/(loss) on ordinary activities after taxation	12,490	(9,295)	3,195	10,593	9,099	19,692
	=====	=====	=====	=====	=====	=====
Return/(loss) per ordinary share  -  basic and diluted (note 4)	46.4p	(34.6p)	11.8p	39.4p	33.9p	73.3p
	=====	=====	=====	=====	=====	=====

The total columns of this statement represent the Profit and Loss Account of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. The Company had no recognised gains or losses other than those disclosed in the Income Statement. There is no material difference between the net return on ordinary activities before taxation and the net return for the financial years stated above and their historical cost equivalents.

Reconciliation of Movements in Shareholders' Funds

Year ended 30 September 2015	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 1 October 2014	6,723	59,923	1,007	284,563	9,640	361,856
Net return/(loss) on ordinary activities after taxation	-	-	-	(9,295)	12,490	3,195
Third interim dividend (9.0p) for the year ended 30 September 2014 paid 31 October 2014	-	-	-	-	(2,421)	(2,421)
Final dividend (10.0p) for the year ended 30 September 2014 paid 30 January 2015	-	-	-	-	(2,689)	(2,689)
First interim dividend (10.0p) for the year ended 30 September 2015 paid 30 April 2015	-	-	-	-	(2,689)	(2,689)
Second interim dividend (10.0p) for the year ended 30 September 2015 paid 31 July 2015	-	-	-	-	(2,689)	(2,689)
	---------	----------	----------	-----------	----------	-----------
At 30 September 2015	6,723	59,923	1,007	275,268	11,642	354,563
	=====	=====	=====	======	=====	======
Year ended 30 September 2014	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 1 October 2013	6,642	55,514	1,007	275,464	8,575	347,202
Net return on ordinary activities after taxation	-	-	-	9,099	10,593	19,692
Share issue proceeds	81	4,409	-	-	-	4,490
Third interim dividend (8.5p) for the year ended 30 September 2013 paid 31 October 2013	-	-	-	-	(2,268)	(2,268)
Final dividend (9.0p) for the year ended 30 September 2013 paid 31 January 2014	-	-	-	-	(2,420)	(2,420)
First interim dividend (9.0p) for the year ended 30 September 2014 paid 30 April 2014	-	-	-	-	(2,420)	(2,420)
Second interim dividend (9.0p) for the year ended 30 September 2014 paid 31 July 2014	-	-	-	-	(2,420)	(2,420)
	---------	----------	----------	-----------	----------	-----------
At 30 September 2014	6,723	59,923	1,007	284,563	9,640	361,856
	=====	=====	=====	======	=====	======

Audited Balance Sheet at 30 September	2015 £'000	2014 £'000
Investments held at fair value through profit or loss
Listed at market value in the United Kingdom	328,949	334,223
Listed at market value on AIM	56,011	52,380
Listed at market value overseas	26,993	22,604
Unlisted	2,179	846
	-----------	-----------
	414,132	410,053
	-----------	-----------
Current assets
Debtors	3,589	1,839
Cash at bank	669	1,756
	-----------	-----------
	4,258	3,595
Creditors: amounts falling due within one year	(63,827)	(51,792)
	-----------	-----------
Net current liabilities	(59,569)	(48,197)
	-----------	-----------
Net assets	354,563	361,856
	=======	=======
Capital and reserves
Called up share capital	6,723	6,723
Share premium account	59,923	59,923
Capital redemption reserve	1,007	1,007
Other capital reserves	275,268	284,563
Revenue reserve	11,642	9,640
	-----------	-----------
Total shareholders' funds	354,563	361,856
	=======	=======
Net asset value per ordinary share - basic and diluted	1,318.4p	1,345.6p
	=======	=======

The Company does not have any dilutive securities; therefore the basic and diluted returns per share are the same.

Audited Cash Flow Statement

for the year ended 30 September

	2015 £'000	2015 £'000	2014 £'000	2014 £'000
Net cash inflow from operating activities		12,331		10,368
Servicing of finance
Interest paid	(809)		(821)
	----------		----------
Net cash outflow from servicing of finance		(809)		(821)
Taxation
Tax recovered	-		23
	----------		----------
Net tax recovered		-		23
Financial investment
Purchases of investments	(68,100)		(50,392)
Sales of investments	53,569		46,154
	-----------		-----------
Net cash outflow from financial investment		(14,531)		(4,238)
Equity dividends paid		(10,488)		(9,528)
		----------		----------
Net cash outflow before financing activities		(13,497)		(4,196)
Financing
Proceeds from issue of ordinary shares	-		4,490
Net loans drawn down	12,408		163
	----------		----------
		12,408		4,653
		----------		----------
(Decrease)/increase in cash		(1,089)		457
		======		======
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash as above		(1,089)		457
Net cash inflow from movement in loans		(12,408)		(163)
Exchange movements		2		(11)
		----------		----------
Movement in net debt		(13,495)		283
Net debt at 1 October		(48,151)		(48,434)
		----------		----------
Net debt at 30 September		(61,646)		(48,151)
		=======		=======

Notes to the Financial Statements:

1.

Accounting policies

The financial statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to include the revaluation of investments at fair value. The financial statements have been prepared in accordance with the Companies Act 2006 and United Kingdom Generally Accepted Accounting Practice and with the Statement of Recommended Practice ("the SORP") for investment trusts issued by the Association of Investment Companies ("the AIC") in January 2009. The Company's accounting policies are consistent with the prior year. Having assessed the principal risks and the other matters discussed in connection with the viability statement, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

2.	Income from investments	2015 £'000	2014 £'000
	UK dividends:
	Listed investments	11,814	10,633
	Unlisted	53	40
	Property income dividends	210	204
		---------	---------
	UK dividends	12,077	10,877
		---------	---------
	Non UK dividends:
	Overseas dividend income	3,465	2,618
		---------	---------
	Non UK dividends	3,465	2,618
		---------	---------
		15,542	13,495
		=====	=====

3.	Other interest receivable and similar income	2015 £'000	2014 £'000
	Stock lending commission	61	80
	Income from underwriting	44	93
		---------	---------
		105	173
		=====	=====

At 30 September 2015 the total value of securities on loan by the Company for stock lending purposes was £5,024,000 (2014: £4,920,000). The maximum aggregate value of securities on loan at any time during the year ended 30 September 2015 was £20,742,000 (2014: £42,756,000). The Company's agent holds collateral comprising FTSE 100 stocks, Gilts and a German government bond with a collateral value of £5,821,000 (2014: £5,984,000) amounting to a minimum of 116% (2014: minimum 122%) of the market value of any securities on loan. Stock lending commission has been shown net of brokerage fees of £66,000 (2014: £34,000).

Notes to the Financial Statements (continued):

4.	Return per ordinary share - basic and diluted
	The return per ordinary share is based on the net return attributable to the ordinary shares of £3,195,000 (2014: £19,692,000) and on 26,892,427 ordinary shares (2014: 26,875,852) being the weighted average number of ordinary shares in issue during the year. The return per ordinary share can be further analysed between revenue and capital, as below.
		2015 £'000	2014 £'000
	Net revenue return	12,490	10,593
	Net capital (loss)/return	(9,295)	9,099
		---------	---------
	Net total return	3,195	19,692
		=====	=====
	Weighted average number of ordinary shares in issue during the year	26,892,427	26,875,852
	Revenue return per ordinary share	46.4p	39.4p
	Capital(loss)/ return per ordinary share	(34.6)p	33.9p
		-----------	-----------
	Total return per ordinary share	11.8p	73.3p
		======	======
	The Company does not have any dilutive securities; therefore the basic and diluted returns per share are the same.

5.	Dividends paid and payable on the ordinary shares
	Dividends on ordinary shares	Record Date	Payment Date	2015 £'000	2014 £'000
	Third interim dividend (8.5p) for the year ended 30 September 2013	11 October 2013	31 October 2013	-	2,268
	Final dividend (9.0p) for the year ended  30 September 2013	10 January 2014	31 January 2014	-	2,420
	First interim dividend (9.0p)  for the year ended 30 September 2014	4 April 2014	30 April 2014	-	2,420
	Second interim dividend (9.0p) for the year ended 30 September 2014	4 July 2014	31 July 2014	-	2,420
	Third interim dividend (9.0p) for the year ended 30 September 2014	10 October 2014	31 October 2014	2,421	-
	Final dividend (10.0p) for the year ended 30 September 2014	9 January 2015	30 January 2015	2,689	-
	First interim dividend (10.0p)  for the year ended 30 September 2015	7 April 2015	30 April 2015	2,689	-
	Second interim dividend (10.0p) for the year ended 30 September 2015	3 July 2015	31 July 2015	2,689	-
				---------	---------
				10,488	9,528
				=====	=====

Notes to the Financial Statements (continued):

The third interim dividend and the final dividend for the year ended 30 September 2015 have not been included as a liability in these financial statements.  The total dividends payable in respect of the financial year, which form the basis of the retention test under Section 1158 of the Corporation Tax Act 2010, are set out below.
			2015 £'000
	Revenue available for distribution by way of dividend for the year		12,490
	First interim dividend (10.0p) for the year ended 30 September 2015		(2,689)
	Second interim dividend (10.0p) for the year ended 30 September 2015		(2,689)
	Third interim dividend (10.0p) for the year ended 30 September 2015		(2,689)
	Final dividend (11.0p) for the year ended 30 September 2015 (based on 26,892,427 ordinary shares in issue at 9 December 2015)		(2,689)
			----------
	Revenue Surplus		1,465
			=====
		For section 1158 purposes the Company's undistributed revenue represents 9.4% of the income from investments.

6.	Called up share capital
				Number of shares entitled  to dividend	Total number of shares	Nominal value of shares £'000
	At 30 September 2014			26,892,427	26,892,427	6,723
	At 30 September 2015			26,892,427	26,892,427	6,723
During the year, the Company did not issue any ordinary shares (2014: issued 325,000 ordinary shares for total proceeds of £4,490,000).

7.	Net asset value per ordinary share
	The net asset value per ordinary share of 1,318.4p (2014: 1,345.6p) is based on the net assets attributable to the ordinary shares of £354,563,000 (2014: £361,856,000) and on 26,892,427 (2014: 26,892,427) shares in issue on 30 September 2015. The movements during the year of the assets attributable to the ordinary shares were as follows:

			2015 £'000	2014 £'000
	Total net assets at 1 October		361,856	347,202
	Total net return on ordinary activities after taxation		3,195	19,692
	Share issue proceeds		-	4,490
	Net dividends paid in the year:
	Ordinary shares		(10,488)	(9,528)
			------------	-----------
	Net assets attributable to the ordinary shares at 30 September		354,563	361,856
			======	======
8.		Related Party Transactions
		The Company's transactions with related parties in the year were with the Directors and Henderson. There have been no material transactions between the Company and its Directors during the year and the only amounts paid to them were in respect of Directors' remuneration for which there were no outstanding amounts payable at the year end. In relation to the provision of services by Henderson, other than fees payable by the Company in the ordinary course of business and the provision of sales and marketing services, there have been no material transactions with Henderson affecting the financial position of the Company during the year under review.

9.

2015 Annual Report

The figures and financial information for the year ended 30 September 2015 are extracted from the Company's annual financial statements for that period and do not constitute statutory accounts.  The Company's annual financial statements for the year to 30 September 2015 have been audited but have not yet been delivered to the Registrar of Companies.  The Auditors' Report on the 2015 annual financial statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under section 498 of the Companies Act 2006.

10.

2014 Financial Information

The figures and financial information for the year ended 30 September 2014 are compiled from an extract of the published accounts for that year and do not constitute statutory accounts.  Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

11.	Dividend
	The final dividend, if approved by the shareholders at the Annual General Meeting, of 11.0p per ordinary share will be paid on 29 January 2016 to shareholders on the register of members at the close of business on 8 January 2016. This will take the total dividends for the year to 41.0p (2014: 37.0p). The Company's shares will be traded ex-dividend on 7 January 2016.

12.	Annual Report
	The Annual Report will be posted to shareholders in December 2015 and will be available on the Company's website (www.lowlandinvestment.com) or in hard copy format from the Company's Registered Office, 201 Bishopsgate, London, EC2M 3AE.

13.	Annual General Meeting
	The Annual General Meeting will be held on Wednesday, 20 January 2016 at 12.30 pm at 201 Bishopsgate, London, EC2M 3AE.

Twenty Largest Holdings as at 30 September 2015

Rank 2015	Rank (2014)	Company	Valuation 2014 £'000	Purchases £'000	Sales £'000	Appreciation / (depreciation) £'000	Valuation 2015 £'000
1	(2)	Senior	14,483	-	(1,345)	(578)	12,560
2	(5)	Hiscox	8,887	-	-	2,807	11,694
3	(1)	Royal Dutch Shell	15,231	1,007	-	(5,692)	10,546
4	(14)	Provident Financial	6,942	-	-	3,263	10,205
5	(6)	Phoenix	8,480	-	-	1,043	9,523
6	(13)	HSBC	7,044	4,096	-	(1,789)	9,351
7	(10)	Hill & Smith	7,385	-	(268)	1,857	8,974
8	(16)	Scapa¹	6,837	-	(662)	2,515	8,690
9	(4)	BP	9,976	-	-	(2,628)	7,348
10	*	Irish Continental	2,151	3,553	-	1,533	7,237
11	*	RPC	4,751	-	-	2,429	7,180
12	*	Renold	5,561	-	-	1,526	7,087
13	(11)	GKN	7,310	738	-	(1,241)	6,807
14	(9)	Rio Tinto	7,579	1,340	-	(2,289)	6,630
15	*	Avon Rubber	4,309	-	-	2,089	6,398
16	*	Johnson Service¹	4,067	-	-	1,931	5,998
17	*	DS Smith	3,995	-	-	1,913	5,908
18	*	Low & Bonar	3,013	2,121	-	726	5,860
19	(15)	International Personal Finance	6,903	-	-	(1,417)	5,486
20	*	Croda	4,106	-	-	1,312	5,418
			-----------	------------	----------	------------	------------
			139,010	12,855	(2,275)	9,310	158,900
			======	======	=====	======	======

At 30 September 2015 these investments totalled £158,900,000 or 38.4% of the portfolio.

* Not in the top 20 largest investments last year.

¹ AIM Stocks

For further information please contact:
James H Henderson	James de Sausmarez
Fund Manager	Head of Investment Trusts
Lowland Investment Company plc	Henderson Investment Funds Limited
Telephone: [phone]	Telephone: [phone]
Sarah Gibbons-Cook
Investor Relations and PR Manager
Henderson Global Investors Limited
Telephone: [phone]

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

_______________________

 

END

 

 

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