Half-year Report

RNS Number : 3849P

Shires Income PLC

17 November 2016

 

SHIRES INCOME PLC

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016

INVESTMENT OBJECTIVE

The objective of Shires Income PLC is to provide shareholders with a high level of income, together with growth of both income and capital from a portfolio substantially invested in UK equities.

HIGHLIGHTS

	30 September 2016	31 March 2016	% change
Equity shareholders' funds (£'000)	77,637	68,802	+12.8
Net asset value per share	258.81p	229.36p	+12.8
Share price (mid-market)	228.00p	202.00p	+12.9
Discount to net asset value	11.90%	11.93%
Dividend yield	5.37%	6.06%

PERFORMANCE (TOTAL RETURN)

	6 months ended	1 year ended	3 years ended	5 years ended
	30 September	30 September	30 September	30 September
	2016	2016	2016	2016
Net asset value	+15.9%	+16.8%	+27.4%	+95.1%
Share price	+16.4%	+7.6%	+15.1%	+71.3%
FTSE All-Share Index	+12.9%	+16.8%	+21.1%	+68.9%
All figures are for total return and assume re-investment of net dividends excluding transaction costs.

For further information, please contact:-

Ed Beal, Kenny Harper                                                                         0131 528 4000

Aberdeen Asset Managers Limited

Karen Drayton                                                                                      020 7463 6000

Aberdeen Asset Managers Limited

INTERIM BOARD REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016

INTERIM  BOARD REPORT - CHAIRMAN'S STATEMENT

Background

Markets have enjoyed a good six months.  Oil and other commodity prices increased and this was a significant driver of returns during the early part of the period under review.  In general, developed economies continued with their recoveries and a number of emerging markets showed clear signs of exiting from recession, aided by the moves in commodity prices.  Importantly, China's economy was also stabilising albeit aided more by fiscal intervention than policy reform. The first quarter GDP reading for the UK showed solid growth of 2%, though inflation remained very weak.  Despite the strength of the Dollar and the still subdued environment for spending amongst oil and gas producers, the initially disappointing numbers from the US were subsequently revised upwards.  Investors' attention was focussed on the interest rate cycle.  An increase appeared likely on both sides of the Atlantic.

By the early summer it was the UK's impending referendum on its membership of the European Union that was influencing investor sentiment.  Initial uncertainty surrounding the plebiscite gave way to a belief that the UK would vote to remain.  Equities and Sterling strengthened in response.  Consequently markets suffered a significant negative reaction as a result of the surprise news that the result was in fact in favour of leaving the EU.  However, although this meant that there was material uncertainty regarding the prospects for the UK economy, one immediate outcome was a substantial weakening of the currency.  Many UK companies, particularly larger ones, derive the greater proportion of their revenues and profits from overseas and will therefore receive a boost to profitability as a result.  This caused the FTSE 100 Index to stage a recovery that meant it ended June above its pre referendum level.  The immediate aftermath was characterised by high levels of political change.  In the end the rapid replacement of David Cameron as Prime Minister by Theresa May served to reduce the political uncertainty that was worrying investors.

The market's upward path continued throughout the remainder of the period under review, with September marking nine consecutive months of gains, partly driven by the fall in Sterling.  One other factor supporting these moves was the action taken by the Bank of England.  Having initially bided its time as it sought to understand the full implications of the vote to leave, the Bank then announced a significant package of monetary stimulus to support the domestic economy.  It was now very clear that the earlier expectations of domestic interest rate increases had been mistaken and a further period of very low interest rates would be required.

Investment Performance

In the half year ended 30 September 2016, the Company's net asset value per share increased by 12.8% from 229.36p to 258.81p.  The total return on net assets, including dividends paid, was 15.9%, which during the period was an outperformance of our benchmark, the FTSE All-Share Index, which reported a total return of 12.9%.  The total return of the Company's share price was 16.4% and the discount was unchanged at 11.9%.

Portfolio Profile

Two new holdings were introduced during the period.  BBA Aviation provides fixed base operations for private planes, mainly in the US.  The business has recently bought an additional portfolio of assets, strengthening its market leading position in an industry where network density brings a competitive advantage.  Flight volumes are increasing as the US economy recovers.  The business generates solid cash flows that support an attractive yield.  Essentra manufacture and distribute healthcare and personal goods packaging, specialist cigarette filters and a very broad array of niche specialist components across a number of industries.  The low cost but critical nature of the business's products allows them to make attractive margins and these have manifested themselves in growth in the dividend in excess of 15% over the medium term.  One holding was exited during the period.  Cobham is a business involved in the Aerospace and Defence industries.  The company's balance sheet had become uncomfortably stretched following the acquisition of Aeroflex.  Indeed, subsequent to the disposal from the portfolio they announced a rights issue to seek to repair their finances.

Changes were not made to the investments in the portfolio in anticipation of the outcome of the EU referendum.  However, many of the companies that the Manager invests in have broad diversified international revenue streams.  Conversely there is less exposure to the more cyclical and domestically orientated areas of the market.  These factors were beneficial to performance during the six months under discussion.

Gearing decreased during the period from 24.9% to 22.1%.  The primary cause of this has been the increase in net assets since the year end.  There has been no significant change to the overall allocations in the portfolio.  Equites have moved up slightly and now represent 71% of total assets.  The equivalent figure at the year end was 69%.  There have been two factors causing this shift.  Firstly the Premier Farnell convertible was redeemed in April.  Secondly the equity holdings have outperformed the fixed interest portfolio post the Brexit referendum.  No new investments were made in preference shares or convertibles during the period.

Investment Income

There have been several pleasing increases in the dividends received during the period.  Some companies that received mention in last year's Half Yearly Report have again provided significant uplifts this year.  These include; Aveva, Provident Financial and Wood Group which raised their final payments by 20%, 26% and 10% respectively.  Croda, the speciality chemicals company, announced a special dividend.  Of course there were companies that performed less well.  Having cut its dividend in the 2016 financial year, Standard Chartered then passed it altogether this year. A similar dynamic will be evident with Rolls Royce which halved their interim distribution.  Lastly, BHP Billiton's dividend cut resulted in a sizable decrease in the dividend received in the period.  The impact should be much more muted in the next six months.  Given the weakness of Sterling, foreign exchange has unsurprisingly had a material impact on some of the payments the Company has received.  BP, Elementis and Unilever are examples where currencies have helped them to register uplifts of between 15% and 27% to the payouts they made.

Dividends

A first interim dividend of 3.0p per share in respect of the year ending 31 March 2017 was paid on 28 October 2016. The Board declares a second interim dividend of 3.0p per share, payable on 27 January 2017 to shareholders on the register at close of business on 6 January 2017. Subject to unforeseen circumstances, it is proposed to pay a further interim dividend of 3.0p per share prior to the Board deciding on the rate of the final dividend at the time of reviewing the full year results.

The current annual rate of dividend is 12.25p per share, representing a dividend yield of 5.4% based on the share price of 228.0p at 30 September 2016. The Board considers that one of the key attractions of the Company is its high level of income and recognises that, in the current economic environment, there is likely to be a continuing demand for an attractive and reliable level of income. Whilst the Company aims to cover its annual dividend cost with net income, the Board is conscious of the significant revenue reserves, which amounted to 1.3 times the annual dividend cost as at 30 September 2016 after deducting the first and second interim dividends.

Board Composition

Having been a Director since 2007 and Chairman for the past eight years I plan to step down from the Board at the conclusion of the Company's Annual General Meeting in July 2017. This is in line with good corporate governance. It has been agreed that Robert Talbut, who was appointed to the Board in April 2015, will succeed me as Chairman. We also expect to appoint a new Director in the foreseeable future as part of our succession planning.

Outlook

It is not only investors that don't know what the post Brexit landscape will look like, company management teams and consumers are equally unsure.  A period of slower activity is therefore to be expected and some of the economic and confidence surveys that have been released since the vote support this.  Companies that have actually traded quite well in the first half of 2016 find themselves having to inject caution into their outlook statements as a result of this uncertainty.  However, that does not mean that the long term prospects for the economy have been irretrievably damaged.  After initially keeping interest rates on hold the Bank of England responded to signs of a slowdown in the UK economy with interest rates being reduced to 0.25%.  A Term Funding Scheme has been created to encourage banks to lend, the existing asset purchase programme for gilts has been increased by £60 billion to £435 billion and a small programme of corporate bond purchases has been introduced.  In the meantime the weakness of Sterling is providing a boost to UK plc profitability.  Whilst earnings expectations have declined slightly compared to forecasts before the vote, they have not declined by anything like as much as the more negative commentary of the outlook for the economy as a whole would suggest.

Global growth looks set to improve next year aided by an on-going recovery in the US, Russia and Brazil exiting recession and a Chinese economy that increasingly looks to have stabilised, albeit at levels of expansion below those enjoyed previously.  However, the risks posed by Brexit, the fragility of the European banking system and US Presidential elections mean that there are significant uncertainties facing investors, companies and consumers.

OPEC has announced that it intends to reduce supply for the first time since 2008.  The news has been positive for oil producers and those businesses with direct and indirect exposure to oil and gas production.  The oil price has bounced strongly on the back of the news.  However, history shows that compliance with quotas is often weak and it will be sometime before we know if this will genuinely lead to a structural re-balancing between supply and demand.  Sterling has weakened as markets have focussed on the risks of a so called hard Brexit. It remains much too early to tell what the ramifications of leaving the EU will be though it is notable that as more data has become available some of the more downbeat commentators have been forced to shift to a less extreme position.  In the meantime Sterling weakness is being regarded as a positive for the profitability of many UK companies, especially larger ones and this has benefited equity markets.  That holds true to a point but devaluing the currency is not a panacea and brings with it the risk of future inflation at a time when the availability of the tools conventionally used to control rising prices is limited.

Anthony B Davidson

Chairman

17 November 2016

INTERIM BOARD REPORT - OTHER MATTERS

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 IAS 34 'Interim Financial Reporting'; and

-      the Interim Board Report (constituting the Interim Management Report) includes a fair review of the information required by rules 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 Board regularly reviews the principal risks and uncertainties faced by the Company together with the mitigating actions it has established to manage the risks. These are set out within the Strategic Report contained within the Annual Report for the year ended 31 March 2016 and comprise the following risk headings:

-      Investment management

-      Failure to meet the dividend growth objective

-      Widening of discount

-      Financial

-      Gearing

-      Regulatory

-      Operational

In addition to the risks outlined above, the Board considers that the United Kingdom's decision in the referendum held on 23 June 2016 to leave the European Union may affect the Company's risk profile by introducing potentially significant new uncertainties and instability in financial markets as the United Kingdom negotiates the terms of its exit from the EU. These uncertainties could have a material effect on the Company's business, financial condition and operations. Other than this additional risk and the matters highlighted in the Outlook paragraph of the Chairman's Statement, the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.

Going Concern

The Company's assets comprise mainly readily realisable securities which can be sold to meet funding commitments if necessary. The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants. Borrowings of £20 million are committed to the Company until 19 December 2017. The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of this Report. For these reasons, they continue to adopt the going concern basis of accounting in preparing the financial statements.

On behalf of the Board

Anthony B Davidson

Chairman

17 November 2016

DISTRIBUTION OF ASSETS AND LIABILITIES

	Valuation at		Movement during the period				Valuation at
	31 March 2016		Purchases	Sales	Other	Gains	30 September 2016
	£'000	%	£'000	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	60,717	88.2	5,468	(4,313)	-	6,426	68,298	88.0
Convertibles	1,330	1.9	-	(826)	(8)	64	560	0.7
Preference shares	23,102	33.6	-	-	(41)	2,335	25,396	32.7
	______	______	______	______	______	______	______	______
Total investments	85,149	123.7	5,468	(5,139)	(49)	8,825	94,254	121.4
Current assets	2,877	4.2					2,606	3.4
Current liabilities	(9,224)	(13.4)					(9,223)	(11.9)
Non-current liabilities	(10,000)	(14.5)					(10,000)	(12.9)
	______	______					______	______
Net assets	68,802	100.0					77,637	100.0
	______	______					______	______
Net asset value per Ordinary share	229.36p						258.81p
	______						______

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

		30 September 2016
		(unaudited)
		Revenue	Capital	Total
	Note	£'000	£'000	£'000
Gains/(losses) on investments at fair value		-	8,822	8,822
Currency gains		-	2	2
Investment income
Dividend income		1,928	-	1,928
Interest income/(expense)		287	(49)	238
Stock dividends		171	-	171
Traded option premiums		91	-	91
Money market interest		3	-	3
Underwriting commission		-	-	-
		_______	_______	_______
		2,480	8,775	11,255
		_______	_______	_______
Expenses
Management fee		(97)	(97)	(194)
Other administrative expenses		(189)	-	(189)
Finance costs of borrowings		(84)	(84)	(168)
		_______	_______	_______
		(370)	(181)	(551)
		_______	_______	_______
Profit/(loss) before taxation		2,110	8,594	10,704
Taxation	2	(3)	3	-
		_______	_______	_______
Profit/(loss) attributable to equity holders	4	2,107	8,597	10,704
		_______	_______	_______
Earnings per Ordinary share (pence)	4	7.02	28.66	35.68
		_______	_______	_______
The Company does not have any income or expense that is not included in profit/(loss) for the period, and therefore the profit/(loss) for the period is also the "Total comprehensive income for the period", as defined in IAS 1 (revised).
The total column of this statement represents the Condensed Statement of Comprehensive Income of the Company, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

		30 September 2015
		(unaudited)
		Revenue	Capital	Total
	Note	£'000	£'000	£'000
Gains/(losses) on investments at fair value		-	(7,552)	(7,552)
Currency gains		-	-	-
Investment income
Dividend income		1,694	-	1,694
Interest income/(expense)		285	(47)	238
Stock dividends		230	-	230
Traded option premiums		101	-	101
Money market interest		4	-	4
Underwriting commission		-	-	-
		_______	_______	_______
		2,314	(7,599)	(5,285)
		_______	_______	_______
Expenses
Management fee		(98)	(98)	(196)
Other administrative expenses		(184)	-	(184)
Finance costs of borrowings		(84)	(84)	(168)
		_______	_______	_______
		(366)	(182)	(548)
		_______	_______	_______
Profit/(loss) before taxation		1,948	(7,781)	(5,833)
Taxation	2	(8)	8	-
		_______	_______	_______
Profit/(loss) attributable to equity holders	4	1,940	(7,773)	(5,833)
		_______	_______	_______
Earnings per Ordinary share (pence)	4	6.47	(25.91)	(19.44)
		_______	_______	_______

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

		31 March 2016
		(audited)
		Revenue	Capital	Total
	Note	£'000	£'000	£'000
Gains/(losses) on investments at fair value		-	(8,533)	(8,533)
Currency gains		-	-	-
Investment income
Dividend income		3,422	-	3,422
Interest income/(expense)		588	(93)	495
Stock dividends		153	-	153
Traded option premiums		186	-	186
Money market interest		7	-	7
Underwriting commission		5	-	5
		_______	_______	_______
		4,361	(8,626)	(4,265)
		_______	_______	_______
Expenses
Management fee		(190)	(190)	(380)
Other administrative expenses		(370)	-	(370)
Finance costs of borrowings		(169)	(169)	(338)
		_______	_______	_______
		(729)	(359)	(1,088)
		_______	_______	_______
Profit/(loss) before taxation		3,632	(8,985)	(5,353)
Taxation	2	(15)	15	-
		_______	_______	_______
Profit/(loss) attributable to equity holders	4	3,617	(8,970)	(5,353)
		_______	_______	_______
Earnings per Ordinary share (pence)	4	12.06	(29.90)	(17.84)
		_______	_______	_______

CONDENSED BALANCE SHEET

		As at	As at	As at
		30 September	30 September	31 March
		2016	2015	2016
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Non-current assets
Ordinary shares		68,298	61,911	60,717
Convertibles		560	1,324	1,330
Other fixed interest		25,396	23,395	23,102
		_______	_______	_______
Securities at fair value		94,254	86,630	85,149
		_______	_______	_______
Current assets
Trade and other receivables		20	21	19
Accrued income and prepayments		765	760	985
Cash and cash equivalents		1,821	2,107	1,873
		_______	_______	_______
		2,606	2,888	2,877
		_______	_______	_______
Total assets		96,860	89,518	88,026
Creditors: amounts falling due within one year
Trade and other payables		(223)	(395)	(224)
Short-term borrowings		(9,000)	(9,000)	(9,000)
		_______	_______	_______
		(9,223)	(9,395)	(9,224)
		_______	_______	_______
Net current liabilities		(6,617)	(6,507)	(6,347)
		_______	_______	_______
Total assets less current liabilities		87,637	80,123	78,802
Non-current liabilities
Long-term borrowings		(10,000)	(10,000)	(10,000)
		_______	_______	_______
Net assets		77,637	70,123	68,802
		_______	_______	_______
Share capital and reserves
Called-up share capital		15,049	15,049	15,049
Share premium account		19,308	19,308	19,308
Capital reserve	5	36,789	29,389	28,192
Revenue reserve		6,491	6,377	6,253
		_______	_______	_______
Equity shareholders' funds		77,637	70,123	68,802
		_______	_______	_______
Net asset value per Ordinary share (pence)	4	258.81	233.76	229.36
		_______	_______	_______

CONDENSED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 September 2016 (unaudited)
		Share		Retained
	Share	premium	Capital	revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2016	15,049	19,308	28,192	6,253	68,802
Revenue profit for the period	-	-	-	2,107	2,107
Capital profit for the period	-	-	8,597	-	8,597
Equity dividends	-	-	-	(1,869)	(1,869)
	_______	_______	_______	_______	_______
As at 30 September 2016	15,049	19,308	36,789	6,491	77,637
	_______	_______	_______	_______	_______
Six months ended 30 September 2015 (unaudited)
		Share		Retained
	Share	premium	Capital	revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2015	15,049	19,308	37,162	6,313	77,832
Revenue profit for the period	-	-	-	1,940	1,940
Capital loss for the period	-	-	(7,773)	-	(7,773)
Equity dividends	-	-	-	(1,876)	(1,876)
	_______	_______	_______	_______	_______
As at 30 September 2015	15,049	19,308	29,389	6,377	70,123
	_______	_______	_______	_______	_______
Year ended 31 March 2016 (audited)
		Share		Retained
	Share	premium	Capital	revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2015	15,049	19,308	37,162	6,313	77,832
Revenue profit for the year	-	-	-	3,617	3,617
Capital loss for the year	-	-	(8,970)	-	(8,970)
Equity dividends	-	-	-	(3,677)	(3,677)
	_______	_______	_______	_______	_______
As at 31 March 2016	15,049	19,308	28,192	6,253	68,802
	_______	_______	_______	_______	_______

CONDENSED CASH FLOW STATEMENT

	Six months ended	Six months ended	Year ended
	30 September 2016	30 September 2015	31 March 2016
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Net cash inflow from operating activities
Investment income received	2,222	2,262	3,907
Stock dividends	171	97	153
Traded option premiums	80	114	194
Money market interest received	3	5	7
Underwriting commission	-	-	5
Management fee paid	(185)	(203)	(390)
Other cash expenses	(151)	(202)	(391)
	__________	__________	__________
Cash generated from operations	2,140	2,073	3,485
Interest paid	(168)	(171)	(342)
Taxation	-	-	(1)
	__________	__________	__________
Net cash inflow from operating activities	1,972	1,902	3,142
	__________	__________	__________
Cash flows from investing activities
Purchases of investments	(5,468)	(3,746)	(6,526)
Sales of investments	5,313	1,925	5,032
	__________	__________	__________
Net cash outflow from investing activities	(155)	(1,821)	(1,494)
	__________	__________	__________
Cash flows from financing activities
Equity dividends paid	(1,869)	(1,876)	(3,677)
	__________	__________	__________
Net cash outflow from financing activities	(1,869)	(1,876)	(3,677)
	__________	__________	__________
Net decrease in cash and cash equivalents	(52)	(1,795)	(2,029)
	__________	__________	__________
Reconciliation of net cash flow to movements in cash and cash equivalents
Decrease in cash and cash equivalents as above	(52)	(1,795)	(2,029)
Net cash and cash equivalents at start of period	(7,127)	(5,098)	(5,098)
	__________	__________	__________
Cash and cash equivalents at end of period	(7,179)	(6,893)	(7,127)
	__________	__________	__________
Net cash and cash equivalents comprise:
Cash and cash equivalents	1,821	2,107	1,873
Short-term borrowings	(9,000)	(9,000)	(9,000)
	__________	__________	__________
	(7,179)	(6,893)	(7,127)
	__________	__________	__________

Notes to the Financial Statements

For the six months ended 30 September 2016

1.	Accounting policies
	Basis of accounting
	The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) 34 'Interim Financial Reporting', as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). They have also been prepared using the same accounting policies applied for the year ended 31 March 2016 financial statements, which received an unqualified audit report.
	The financial statements have been prepared on a going concern basis. In accordance with the Financial Reporting Council's guidance on 'Going Concern and Liquidity Risk' the Directors have undertaken a review of the Company's assets which primarily consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale.
	During the period the Company adopted the following amendments to standards:
	IAS 1 'Presentation of Financial Statements - Amendment for Disclosure Initiative' (effective for accounting periods beginning on or after 1 January 2016) covering (i) clarification on materiality (ii) permitting disaggregation of certain items in statements of profit or loss, other comprehensive income and balance sheet (iii) structure of the notes to the financial statements (iv) accounting policies disclosure that are significant and (v) equity accounted items in other comprehensive income.
	Annual Improvements to IFRSs 2012 - 2014 Cycle (effective for accounting periods beginning on or after 1 January 2016) covering (i) IAS 34 'Interim Financial Reporting' clarifying what is disclosed in the notes if not disclosed elsewhere in the interim report and (ii) IFRS 7 'Financial instruments: Disclosures' regarding the applicability of the amendments to condensed interim financial statements.

2.	Taxation
	The taxation expense reflected in the Condensed Statement of Comprehensive Income is calculated at a rate of 20%, which is based on management's best estimate of the weighted average annual corporation tax rate expected for the full financial year.

3.	Dividends
	The following table shows the revenue for each period less the dividends declared in respect of the financial period to which they relate.
		Six months ended	Six months ended	Year ended
		30 September 2016	30 September 2015	31 March 2016
		£'000	£'000	£'000
	Revenue	2,107	1,940	3,617
	Dividends declared	(1,800)A	(1,800)B	(3,675)C
		__________	__________	__________
		307	140	(58)
		__________	__________	__________
	A           Dividends declared relate to first two interim dividends (both 3.00p each) in respect of the financial year 2016/17.
	B        Dividends declared relate to first two interim dividends (both 3.00p each) in respect of the financial year 2015/16.
	C        First three interim dividends (each 3.00p) and the final dividend (3.25p) declared in respect of the financial year 2015/16.

		Six months ended	Six months ended	Year ended
		30 September 2016	30 September 2015	31 March 2016
4.	Return and net asset value per share	£'000	£'000	£'000
	Returns are based on the following figures:
	Revenue return	2,107	1,940	3,617
	Capital return	8,597	(7,773)	(8,970)
		__________	__________	__________
	Total return	10,704	(5,833)	(5,353)
		__________	__________	__________
	Weighted average number of Ordinary shares in issue	29,997,580	29,997,580	29,997,580
		__________	__________	__________
	The net asset value per Ordinary share is based on net assets attributable to Ordinary shareholders of £77,637,000 (30 September 2015 - £70,123,000; 31 March 2016 - £68,802,000) and on 29,997,580 (30 September 2015 - 29,997,580; 31 March 2016 - 29,997,580) Ordinary shares in issue at the period end.

5.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 30 September 2016 includes gains of £16,409,000 (30 September 2015 - gains of £10,071,000; 31 March 2016 - gains of £8,501,000) which relate to the revaluation of investments held at the reporting date.

6.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified as fair value though profit or loss. These have been expensed through capital and are included within gains/(losses) on investments at fair value in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended	Year ended
		30 September 2016	30 September 2015	31 March 2016
		£'000	£'000	£'000
	Purchases	29	16	26
	Sales	3	2	4
		__________	__________	__________
		32	18	30
		__________	__________	__________

7.	Transactions with the Manager
	The Company has an agreement with Aberdeen Fund Managers Limited ("AFML") for the provision of management, secretarial, accounting and administration services and for the carrying out of promotional activities in relation to the Company.
	The management fee is based on 0.45% per annum up to £100 million and 0.40% per annum over £100 million, by reference to the net assets of the Company and any borrowings with a maturity of one year or more, and excluding commonly managed funds, calculated monthly and paid quarterly. The fee is allocated 50% to revenue and 50% to capital. The agreement is terminable on not less than six months' notice. The total of the fees paid and payable during the period to 30 September 2016 was £194,000 (30 September 2015 - £196,000; 31 March 2016 - £380,000) and the balance due to AFML at the period end was £100,000 (30 September 2015 - £94,000; 31 March 2016 - £91,000). The Company held an interest in a commonly managed fund Aberdeen Smaller Companies Income Trust PLC in the portfolio during the period to 30 September 2016 (30 September 2015 and 31 March 2016  - same). The value attributable to this holding is excluded from the calculation of the management fee payable by the Company.
	The total fees paid and payable under the management agreement in relation to promotional activities were £43,000 (30 September 2015 - £44,000; 31 March 2016 - £89,000) and the balance due to AFML at the period end was £20,000 (30 September 2015 - £23,000; 31 March 2016 - £23,000). The Company's management agreement with AFML also provides for the provision of company secretarial and administration services to the Company; no separate fee is charged to the Company in respect of these services, which have been delegated to Aberdeen Asset Management PLC.

8.

Segmental information

For management purposes, the Company is organised into one main operating segment, which invests in equity securities and debt instruments. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole.

9.	Fair value hierarchy
	IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
	Level 1:     quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2:     inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and
	Level 3:     inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	The financial assets and liabilities measured at fair value in the Condensed Balance Sheet are grouped into the fair value hierarchy as follows:
				Level 1	Level 2	Level 3	Total
	At 30 September 2016		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments		a)	94,254	-	-	94,254
	Financial liabilities at fair value through profit or loss
	Derivatives		b)	(22)	-	-	(22)
				_______	_______	_______	_______
	Net fair value			94,232	-	-	94,232
				_______	_______	_______	_______
				Level 1	Level 2	Level 3	Total
	At 30 September 2015		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments		a)	86,630	-	-	86,630
	Financial liabilities at fair value through profit or loss
	Derivatives		b)	(29)	(56)	-	(85)
				_______	_______	_______	_______
	Net fair value			86,601	(56)	-	86,545
				_______	_______	_______	_______
				Level 1	Level 2	Level 3	Total
	As at 31 March 2016		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments		a)	85,149	-	-	85,149
	Financial liabilities at fair value through profit or loss
	Derivatives		b)	(18)	(1)	-	(19)
				_______	_______	_______	_______
	Net fair value			85,131	(1)	-	85,130
				_______	_______	_______	_______
	a)	Quoted investments
		The fair value of the Company's quoted investments has been determined by reference to their quoted bid prices at the reporting date. Quoted investments included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b)	Derivatives
		The fair value of the Company's investments in Exchange Traded Options has been determined using observable market inputs on an exchange traded basis and therefore has been classed as Level 1.
		The fair value of the Company's investments in Over the Counter Options has been determined using observable market inputs other than quoted prices included within Level 2.

10.	The financial information contained in this Half Yearly Financial 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 30 September 2016 and 30 September 2015 has not been reviewed or audited by the Company's independent auditor.
	The information for the year ended 31 March 2016 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the independent auditor on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.

11.	This Half Yearly Financial Report was approved by the Board on 17 November 2016.

 12.      The Half Yearly Financial Report will shortly be available on the Company's website, www.shiresincome.co.uk and will be posted to shareholders in November 2016.

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

 

END

 

 

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