Doc re. Half Yearly Report Announcement

RNS Number : 5519Z

Dunedin Income Growth Inv Tst PLC

21 September 2015

 

DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 31 JULY 2015

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.

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 under review the FTSE All Share rose 2.8% on a total return basis. On this same basis, including dividends paid out, the Company's net asset value (NAV) per share fell 2.1%. The Company's shares also saw the discount to NAV widen from where they stood at the full year from 2.5% to 7.0% at 31 July 2015 resulting in a total return to shareholders over the period of -4.7%. Since the end of the half year, the discount to NAV that the Company's shares trade has narrowed.

Revenue per share was more or less flat year on year as we benefitted from a refund of withholding tax from the French Government that had been expensed in prior periods. Headline revenue declined by 6.5% and, while Tesco and Centrica announced cuts to their dividends, this fall was largely due to the non-recurrence of a special dividend from Compass Group, a lower level of option income and a weaker Euro.

Dividends

It is our intention to make three equal distributions of 2.575p in August, November and February and to pay a final balancing dividend in May next year. We retain revenue reserves in excess of three quarters of one year's pay out and it remains our aim to continue to grow the dividend in real terms.

Economic and Market Background

This was an eventful six months with investors' attention occupied to varying degrees by collapsing government bond yields in Europe, the UK general election, the ongoing discussions over a third bail-out package for Greece, the long running debate over the timing of the first interest rate rises by the United States' Federal Reserve, the continuing decline in commodity prices and in more recent months increasing concerns over the health of the Chinese economy and their devaluation of the Yuan.

Broadly speaking, economic conditions are becoming increasingly divergent between developed and emerging markets. The former, particularly the United States and the UK, are continuing to deliver quite reasonable levels of economic growth while many emerging markets, and those countries that supply them with commodities such as Australia and Canada, are increasingly struggling to sustain the expansionary rates of recent years. This is a stark reversal of the main trends of the last ten years.

The slow-down in the Chinese economy, exemplified by the need to devalue the Yuan against the US Dollar for the first time since 1994, has particularly unnerved investors in recent months given the country's importance to global growth.

Within the 2.8% rise in the FTSE All Share, smaller companies outperformed their larger brethren with the FTSE 250 rising 10% and the FTSE Small Cap ex IT index increasing by 12.4% set against the 1.2% return from the FTSE 100.  At the company level, earnings trends remained mixed over the period with companies with significant UK operations by and large prospering while those exposed to emerging markets generally finding trading more difficult and those exposed to commodities particularly hard hit. Currency trends also proved to be something of a double edged sword with some helpful tailwinds for those with US Dollar exposures, while those exposed to developing market currencies or euros found these to be a headwind to financial performance once translated back into sterling.

Gearing

The Company's gearing position increased slightly from the year end as investment asset values declined. Valuing debt at par, potential gearing stood at 9.5% at 31 July 2015, up from 9.1% at 31 January 2015. On an equity gearing basis, taking debt at par and offsetting our cash holdings, net indebtedness was 8.9% up from 7.8% at the year end, reflecting lower cash balances and lower asset values. During the period the Company renewed its three year multi-currency revolving credit facility of £25.0 million with Scotia Bank achieving improved terms on the previous arrangements. Given the Company's need for income we still consider it appropriate to maintain our modest level of gearing, though it is kept under review and largely dependent on the opportunities that present themselves at the company level. We are also continuing to monitor opportunities to access longer term funding markets. 

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 has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting); 

• the Chairman's Statement (constituting the interim management report) includes a fair review of the information required by DTR 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;
  
•  the Statement of Principal Risks and Uncertainties which follows is a fair review of the information required by DTR 4.2.7R being a description of the principal risks and uncertainties for the remaining six months of the year; and
   
• the financial statements include a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last annual report that could do so.

Principal Risks and Uncertainties

The Board has adopted a matrix of the key risks that affect its business. 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.

Performance risk:  A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds.  The NAV performance relative to the FTSE All-Share Index ("the Index") and the underlying stock weightings in the portfolio against the Index weightings are monitored closely by the Board.

Investment risk: Investment risk within the portfolio is managed in three ways:

-      Adherence to the Investment Process 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)    The 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.

Share price discount to net asset value (NAV) risk: The Company's shares may trade at a discount to the underlying NAV per share. The discount (or premium) at which the Company's shares may trade is influenced by the supply of shares and the number of buyers and sellers of the Company's shares in the market. Therefore, the Board seeks to influence the level of discount or premium by operating a share buyback programme and also issuing further shares where appropriate. Any shares which are bought back are either cancelled or held in treasury. The Board keeps its share buyback policy under review.

Income/dividend risk: The level of the Company's dividends and future dividend growth will depend on the performance of the underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company (including as a result of withholding taxes or exchange controls) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting.

Regulatory risk:  The Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Section 1158 of the Corporation Tax Act 2010, the UK Listing Rules, the Disclosure and Transparency Rules, the Companies Act 2006 and Alternative Investment Fund Managers Directive, could lead to a number of detrimental outcomes and reputational damage including additional tax obligations. The Board and Manager monitor changes in government policy and legislation which may have an impact on the Company and the Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager.

Gearing risk: The Company has the ability to utilise gearing in the form of a three year multi-currency revolving credit facility of £25.0 million. The Company also has long-term borrowing in the form 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:

-      Gearing should not exceed 30% of the net asset value at the time of draw down (with debt at market value).

-      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).

Operational risk: In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Manager, BNY Mellon Trust & Depositary (UK) Limited (the Depositary), Equiniti Limited (the registrar) and BNP Paribas, who maintain the Company's accounting records. The security of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are reported on by their reporting accountants and regularly tested and monitored throughout the year. This is evidenced by the Board through regular reporting by the Manager.

The overall performance of the Manager in particular, to whom responsibility for the management of the Company has been delegated under a management agreement, is regularly reviewed by the Board and its compliance with the management agreement formally on an annual basis.

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014, the Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's assets consist almost entirely of equity shares in listed companies which are, in most circumstances, realisable within a short timescale.

Outlook

As readers of our commentaries will know we have been quite cautious on the outlook for equity market returns for some time. This is based on our view that valuations are stretched, corporate earnings growth has been hard to come by and that trading conditions in many parts of the world are increasingly difficult.

At the time of writing investors have taken fright at events in China. This combined with wider fears over weakening emerging market growth and continued concerns over the impact of potential increases in US interest rates has led to some significant volatility in global equity and commodity markets and consequent hefty falls in prices. The FTSE 100 has dipped below the 6000 level and reached its lowest point for nearly three years and oil prices have retreated to around $40 a barrel, a level not seen since the depths of the financial crisis in 2008/09. 

The dilemma remains in balancing income against capital value as many valuations in these segments do appear to be reaching quite distressed levels despite the likely threat of some further dividend cuts. We entered this year with both healthy dividend cover and substantial revenue reserves. Your managers will continue to monitor holdings closely and look to take action where appropriate to both support and enhance our income generation.

At this stage it is difficult to tell whether this current stock market malaise will prove to be a sharp sell off with a rapid rebound as we witnessed during the so called "taper tantrum" of 2013 or something much more serious and prolonged. While these markets pose a number of challenges, particularly for income generation, they do also present potential opportunities. Current conditions are revealing some of the most interesting signs of value that we have seen for three or four years which may present your managers with the chance to make investments in high quality businesses at attractive prices.

Rory Macnamara

Chairman

18 September 2015

INVESTMENT MANAGER'S PORTFOLIO REVIEW

Manager's Portfolio Review

This was a period of relatively modest activity as we continued to look to recycle capital away from some of our higher yielding, lower growth investments into companies with lower yields but better prospects for earnings and dividend growth.

One new position was established during the half in speciality chemicals manufacturer Elementis where we see good long term opportunities for the company to build out its consumer care and coatings franchises supported by a strong net cash balance sheet. We added to our holdings in Ultra Electronics, Inchcape and Berendsen and subscribed to GKN's placing to buy Fokker Aerospace. 

We exited South 32, the spin off from BHP Billiton, and reinvested the proceeds into the parent company. Given the current challenging environment for commodity producers we felt that the prospects of the parent outweighed those of the subsidiary while also providing us with a dividend yield on reinvestment of close to 6%. Some small amounts of Compass, Sage and Provident Financial were also sold as valuations became stretched given strong share price performances.

This has undoubtedly been a difficult short period. We suffered from our relative lack of small and mid-cap companies, euro weakness affecting the value of our overseas holdings and a number of large positions such as Cobham, Compass, AstraZeneca and Pearson reversing strong share price performances in the prior period with limited justification. We don't see at this stage any fundamental reason why we should not benefit from some significant recovery from these companies in the future.

Overall while we face a tough investing environment this does leave us, we believe, with value evident in a number of our existing holdings. The wider market is also providing some interesting opportunities for new investments in good quality companies at more appealing valuations and with more yield available. We see the chance to accelerate the refocusing of the portfolio towards more medium sized and faster growing businesses as a result.

Jeremy Whitley & Ben Ritchie

Aberdeen Asset Managers Limited

18 September 2015

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

		Six months ended
		31 July 2015
		Revenue	Capital	Total
	Note	£'000	£'000	£'000
(Losses)/gains on investments		-	(20,095)	(20,095)
Income	3	12,442	-	12,442
Investment management fees		(336)	(505)	(841)
Other expenses		(484)	-	(484)
Currency gains		-	219	219
		_______	_______	_______
Net return before finance costs and taxation		11,622	(20,381)	(8,759)
Finance costs		(490)	(735)	(1,225)
		_______	_______	_______
Return on ordinary activities before taxation		11,132	(21,116)	(9,984)
Taxation on ordinary activities	2	542	-	542
		_______	_______	_______
Return for the period, being the total comprehensive income for the period		11,674	(21,116)	(9,442)
		_______	_______	_______
Return per Ordinary share (pence) (note 5)	5	7.73	(13.98)	(6.25)
		_______	_______	_______
The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

		Six months ended
		31 July 2014
		Revenue	Capital	Total
	Note	£'000	£'000	£'000
(Losses)/gains on investments		-	15,885	15,885
Income	3	13,307	-	13,307
Investment management fees		(336)	(504)	(840)
Other expenses		(472)	-	(472)
Currency gains		-	196	196
		_______	_______	_______
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 on ordinary activities	2	(302)	-	(302)
		_______	_______	_______
Return for the period, being the total comprehensive income for the period		11,713	14,851	26,564
		_______	_______	_______
Return per Ordinary share (pence) (note 5)	5	7.76	9.83	17.59
		_______	_______	_______

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

		As at	As at
		31 July 2015	31 January 2015
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	9	446,295	462,444
		_______	_______
Current assets
Debtors		1,290	603
Cash and short-term deposits		2,581	5,783
		_______	_______
		3,871	6,386
		_______	_______
Creditors: amounts falling due within one year
Bank loan		(10,319)	(10,583)
Other creditors		(1,247)	(1,000)
		_______	_______
		(11,566)	(11,583)
		_______	_______
Net current liabilities		(7,695)	(5,197)
		_______	_______
Total assets less current liabilities		438,600	457,247
Creditors: amounts falling due after more than one year
Debenture		(28,551)	(28,545)
		_______	_______
Net assets		410,049	428,702
		_______	_______
Capital and reserves
Called-up share capital		38,419	38,419
Share premium account		4,619	4,619
Capital redemption reserve		1,606	1,606
Capital reserve	6	340,311	361,427
Revenue reserve		25,094	22,631
		_______	_______
Equity shareholders' funds		410,049	428,702
		_______	_______
Adjusted net asset value per Ordinary share (pence)	7	271.51	283.86
		_______	_______

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Six months ended 31 July 2015
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2015	38,419	4,619	1,606	361,427	22,631	428,702
Return on ordinary activities after taxation	-	-	-	(21,116)	11,674	(9,442)
Dividends paid (see note 4)	-	-	-	-	(9,211)	(9,211)
	_______	_______	_______	______	_______	_______
Balance at 31 July 2015	38,419	4,619	1,606	340,311	25,094	410,049
	_______	_______	_______	______	_______	_______
Six months ended 31 July 2014
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'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 (see note 4)	-	-	-	-	(8,972)	(8,972)
	_______	_______	_______	______	_______	_______
Balance  at 31 July 2014	38,419	4,619	1,606	352,342	24,132	421,118
	_______	_______	_______	______	_______	_______

CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

	Six months ended	Six months ended
	31 July 2015	31 July 2014
	£'000	£'000
Operating activities
Net return before finance costs and taxation	(8,759)	28,076
Adjustments for:
Losses/(gains) on investments	20,095	(15,885)
Currency gains	(219)	(196)
Increase in accrued income	(507)	(327)
Increase in other debtors	(180)	(19)
Increase/(decrease) in other creditors	249	(293)
	_______	_______
Cash inflow from operations	10,679	11,356
Interest paid	(1,221)	(1,206)
Overseas withholding tax recovered/(paid)	542	(302)
	_______	_______
Net cash inflow from operating activities	10,000	9,848
Investing activities
Purchases of investments	(13,019)	(23,792)
Sales of investments	9,073	17,777
	_______	_______
Net cash outflow from investing activities	(3,946)	(6,015)
	_______	_______
Net cash inflow before financing	6,054	3,833
Financing activities
Drawdown of loan	-	5,834
Equity dividends paid	(9,211)	(8,972)
	_______	_______
Net cash outflow from financing activities	(9,211)	(3,138)
	_______	_______
(Decrease)/increase in cash	(3,157)	695
	_______	_______
Reconciliation of net cash flow to movements in net debt
Opening net debt	(33,345)	(27,155)
(Decrease)/increase in cash as above	(3,157)	695
Currency gains	219	196
Drawdown of loan	-	(5,834)
Non-cash movements	(6)	(6)
	_______	_______
Closing net debt	(36,289)	(32,104)
	_______	_______

Notes to the Financial Statements

For the six months ended 31 July 2015

1.	Accounting policies
	Basis of preparation
	The condensed financial statements for the six months to 31 July 2015 comprise the statements set out above together with these related notes. The Company applies UK Generally Accepted Accounting Principles ('UK GAAP') in its annual financial statements, and is intending to adopt FRS 102 and the AIC's 'Statement of Recommended Practice' issued in November 2014 for its financial year ending 31 January 2016. The condensed financial statements for the six months to 31 July 2015 have therefore been prepared in accordance with FRS 104 'Interim Financial Reporting'. The Directors do not expect any significant changes to the Company's accounting policies as a result of the adoption of FRS 102. The accounts have therefore been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements for the year ended 31 January 2015. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.
	The comparative figures for the financial year ended 31 January 2015 are not the Company's statutory accounts for that financial year, but are based on those accounts, represented as necessary to comply with FRS 102. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

2.	Taxation
	The taxation expense reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The estimated annual corporation tax rate used for the year to 31 January 2016 is an effective rate of 20.17%. This is above the current corporation tax rate of 20% because prior to 1 April 2015 the prevailing corporation tax rate was 21%.
	During the period the Company received £509,000 (2014 -£nil) in respect of a reclaim of French withholding tax expensed in prior years and a further £175,000 has been identified as being recoverable and recognised in income (2014 - £nil). During the period the Company suffered withholding tax on overseas income of £142,000 (2014 - £302,000).

		Six months ended	Six months ended
		31 July 2015	31 July 2014
3.	Income	£'000	£'000
	Income from investments
	UK dividends	7,364	7,820
	Overseas dividends	2,916	3,273
	Stock dividends	1,461	1,443
		_______	_______
		11,741	12,536
		_______	_______
	Other income
	Deposit interest	55	3
	Income on derivatives	646	762
	Income from stock lending	-	6
		_______	_______
		701	771
		_______	_______
	Total income	12,442	13,307
		_______	_______

		Six months ended	Six months ended
		31 July 2015	31 July 2014
4.	Ordinary dividends on equity shares	£'000	£'000
	Third interim dividend 2015 of 2.575p (2014 - 2.575p)	3,888	3,888
	Final dividend 2015 of 3.525p (2014 - 3.375p)	5,323	5,096
	Refund of unclaimed dividends	-	(12)
		_______	_______
		9,211	8,972
		_______	_______
	A first interim dividend for 2016 of 2.575p per share (2015 - 2.575p), amounting to £3,888,000 (2015 - £3,888,000), was paid on 28 August 2015 to shareholders on the register on 8 August 2015. The ex-dividend date was 6 August 2015.

		Six months ended	Six months ended
		31 July 2015	31 July 2014
5.	Returns per share	p	p
	Revenue return	7.73	7.76
	Capital return	(13.98)	9.83
		_______	_______
	Total return	(6.25)	17.59
		_______	_______
	The returns per share are based on the following:
		Six months ended	Six months ended
		31 July 2015	31 July 2014
		£'000	£'000
	Revenue return	11,674	11,713
	Capital return	(21,116)	14,851
		_______	_______
	Total return	(9,442)	26,564
		_______	_______
	Weighted average number of Ordinary shares	151,006,187	151,006,187
		___________	___________

6.	Capital reserves
	The capital reserve reflected in the Statement of Financial Position at 31 July 2015 includes gains of £99,415,000 (31 January 2015 - gains of £123,861,000) which relate to the revaluation of investments held at the reporting date.

7.	Net asset value
	Equity shareholders' funds have been calculated in accordance with the provisions of Financial Reporting Standard 102. 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
		31 July 2015	31 January 2015
	Equity shareholders' funds	£410,049,000	£428,702,000
	Adjusted net assets	£410,000,000	£428,647,000
	Number of Ordinary shares in issue at the period end	151,006,187	151,006,187
	Equity shareholders' funds per share	271.54p	283.90p
	Less: Unamortised Debenture Stock premium and issue expenses	(0.03p)	(0.04p)
		_______	_______
	Adjusted net asset value per share	271.51	283.86
		_______	_______

8.	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 (losses)/gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		31 July 2015	31 July 2014
		£'000	£'000
	Purchases	63	116
	Sales	4	16
		_______	_______
		67	132
		_______	_______

9.	Fair value hierarchy
	FRS 102 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 shall have the following classifications:
	Class A: quoted prices for identical instruments in active markets;
	Class B: prices of recent transactions for identical instruments; and
	Class C: valuation techniques using observable and unobservable market data.
	The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
						Class C
						Observable	Unobservable
				Class A	Class B	Inputs	Inputs	Total
	As at 31 July 2015		Note	£'000	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	446,295	-	-	-	446,295
	Financial liabilities at fair value through profit or loss
	Derivatives		b)	(305)	-	(96)	-	(401)
				_____	_______	_______	______	_____
	Net fair value			445,990	-	(96)	-	445,894
				_____	_______	_______	______	_____
						Class C
						Observable	Unobservable
				Class A	Class B	Inputs	Inputs	Total
	As at 31 January 2015		Note	£'000	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	462,444	-	-	-	462,444
	Financial liabilities at fair value through profit or loss
	Derivatives		b)	-	-	-	-	-
				_____	_______	_______	______	_____
	Net fair value			462,444	-	-	-	462,444
				_____	_______	_______	______	_____
	a)	Quoted equities and preference shares
		The fair value of the Company's investments in quoted equities and preference shares has been determined by reference to their quoted bid prices at the reporting date. Quoted equities and preference shares included in Fair Value Class A 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 included in Fair Value Class A.
		The fair value of the Company's investments in Over the Counter Options (where the underlying equities are also held) has been determined using observable market inputs other than quoted prices of the underlying equities (which are included within Fair Value Class A) and therefore determined as Fair Value Class C.
	There has been no significant change in the risk analysis as disclosed in the Company's Annual Report.

10.	Transactions with the Manager
	The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activity services.
	The management fee for the six months ended 31 July 2015 is calculated, on a monthly basis, at 0.45% on the first £225 million, 0.35% on the next £200 million and 0.25% on amounts over £425 million per annum of the net assets of the Company, with debt at par and excluding commonly managed funds. The management fee is chargeable 40% to revenue and 60% to capital. During the period £841,000 (31 July 2014 - £840,000) of investment management fees were earned by the Manager, with a balance of £nil (31 July 2014 - £nil) being payable to AFML at the period end. There were no commonly managed funds held in the portfolio during the 6 months to 31 July 2015 (2014 - none).
	No fees are charged in the case of investments managed or advised by the Aberdeen Asset Management Group. The management agreement may be terminated by either party on the expiry of 6 months written notice. On termination the Manager would be entitled to receive fees which would otherwise have been due up to that date.
	The promotional activities fee is based on a current annual amount of £372,000, payable quarterly in arrears. During the period £186,000 (31 July 2014 - £192,000) of fees were expensed, with a balance of £124,000 (31 July 2014 - £31,000) being payable to AFML at the period end.

11.	Segmental information
	The Company is engaged in a single segment of business, which is to invest in equity securities. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

12.	This Half-Yearly Financial Report was approved by the Board on 18 September 2015.

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 2015 which comprises the Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, the Statement of cash flows 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), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with FRS 104 Interim Financial Reporting.

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 2015 is not prepared, in all material respects, in accordance with FRS 104 Interim Financial Reporting.

Philip Merchant

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

Edinburgh

18 September 2015

 

END

 

 

IR KMGMLZRRGKZM