MIDAS INCOME & GROWTH TRUST PLC
HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 OCTOBER 2011
Highlights
· Net asset value total return of -3.9%
· Share price total return of -4.5%
· Quarterly dividends of 1.63p
· Share price discount to net asset value of 10.4% (averaged 8.8% over period)
Market Background and Performance
The period has been difficult for markets as concerns surrounding the European sovereign debt crisis and the potential knock on effects dominated investor sentiment. Political brinkmanship in the United States and a subsequent debt downgrade further undermined confidence. This uncertainty, together with political and social upheaval in the Middle East, generally slowing economic conditions in the major developed economies, and rising interest rates to control inflation in Asia, all combined to produce a sell-off in equity and corporate bond markets in August and September.
The FTSE All Share fell by 14.3% in the third quarter, the worst outturn since the same quarter in 2002. Volatility returned to levels not seen since the height of the credit crunch in late 2008. Whilst equity markets recovered some lost ground in October, corporate bond markets showed only passing interest in joining the rally. Meanwhile investors continued to seek a 'safe-haven' in gilts and US Treasuries, pushing yields ever lower. The period ended with a hint that better economic data may be beginning to emerge in the United States, although this improvement may yet prove fragile unless policy makers can demonstrate more substantive policies over the coming months.
Against this volatile background the Company's net asset value total return for the period (including dividends) was -3.9%. The Company's share price fell by 7.2%, which, with dividends reinvested, produced a return of -4.5%. This compares with the Company's absolute return benchmark for the period of 4% (8% per annum) and the total return of the FTSE All Share Index of -7.6%.
The discount at which the Company's shares traded to net asset value widened over the period, averaging 8.8% and ending October at 10.4%. 150,000 shares were repurchased and cancelled in May 2011. Your Board and Manager remain committed to improving the rating at which the shares trade. To this end the renewal of the Company's buyback facility was approved by shareholders at the AGM in August 2011.
Gearing
The Company's short term rolling debt facility of £7 million was successfully renegotiated in July and on significantly improved terms over the previous agreement. The facility has been fully drawn over the period. Gearing (pre cash) at the end of October was 14.6% of net assets, slightly higher than at 30 April 2010. Gearing has remained comfortably within the Board's stated maximum of 25% of net assets throughout the period.
Dividends
A first interim dividend of 1.63p was declared on 24 August 2011. This matched the quarterly dividend rate paid in the previous financial year. On 23 November 2011 a second interim dividend of 1.63p (2010 1.63p) was declared which is payable on 15 December 2011.
Changes to investment policies rebasing level of dividend payments and related matters
The Board recognises the importance of income to investors in the current environment. Whilst the Company has maintained the current level of dividend payments for the past three years, this has required dividends to be paid, in part, from revenue reserves. Although the revenue account position has improved in the current year, if the current level of dividend payments is maintained, dividends paid in respect of this year will again be uncovered.
Having regard to the challenging economic environment and, following discussions with your Manager, your Board has concluded that dividend growth from the current level is unlikely for several years. Furthermore, your Board believes that the constraints imposed on investment to maintain the current relatively high level of dividends has been, and will continue to be, detrimental to the total return to Shareholders. Accordingly, following a fundamental review of the Company's strategy undertaken with the assistance of the Manager and the Company's financial adviser, the Board is proposing a number of changes, which should increase investment flexibility and offer the prospect of enhanced long term returns, whilst still recognising the importance of income to investors. The main changes that are being proposed are summarised below:
· Core allocation to overseas equities to be increased from 15% to 25% to allow further investment in stronger economic conditions in developing markets and wider opportunities for dividend growth.
· Core allocation to fixed income to be reduced by 10% to allow for higher allocation to overseas equities.
· Widening of asset allocation ranges to increase flexibility to take advantage of opportunities.
· Changing the Company's objective to seeking to outperform 3-month LIBOR plus 3.0 per cent. over the longer term, with low volatility and the prospect of capital and income growth, through investment in a multi asset portfolio.
· Replacing the existing benchmark of an absolute return of 8% per annum to 3-month LIBOR plus 3.0 per cent. over a rolling three year period.
· Dividend to be rebased to 5.2p per annum (from current level of 6.52p), with effect from the next (third) interim dividend.
The changes to asset allocation described above constitute a material change to the Company's investment objective and policy and, as a result, require shareholder approval. This will be sought at the general meeting referred to below. Directors will also seek shareholder approval at the general meeting for the proposed change to the Company's investment objective.
Management fees
The Board has agreed to changes to the management fee arrangements with the Manager, which simplify the arrangements and more closely align the Manager's interests with shareholder returns. Accordingly, with effect from 1 January 2012, the Manager will no longer have the potential of earning a performance related fee and the annual basic fee will be reduced to 0.9% and will be charged based on the Company's market capitalisation rather than its net asset value as at present. Your Board and Manager believe that these new arrangements are in line with best practice in the investment trust industry.
Company's rating
Whilst the Company has generally traded at a single figure discount to net asset value, there have been periods when low double digit discounts have developed. The Board and Manager remain committed to improving the rating of the Company and, to further this commitment, it is proposed that the Company should move to annual continuation votes, starting at the AGM in September 2013. This will require an amendment to the Company's articles of association, which will also be sought at the general meeting referred to below. The Company's existing share buy-back facility will continue to be implemented at the Board's discretion.
Shareholder Circular and General Meeting
Further details of the proposed changes to the Company's investment objective and policy, benchmark, dividend policy and articles of association will be set out in a separate circular to shareholders, which will also include a notice convening a general meeting of the Company at 4.00pm on 18 January 2012 at which the necessary resolutions will be proposed.
Annual General Meeting
The Company's Annual General Meeting will be held at 12.30pm on 4 September 2012 in Liverpool.
Outlook
The investment outlook remains very challenging, with the biggest obstacle remaining being the sovereign debt crisis in Europe. Whilst policy makers stumble to reach agreement on an effective response, the risk of policy mistakes remains heightened. Bank and public sector deleveraging will continue to suppress growth for many years to come, an unhappy reminder of previous over indulgence. However, the picture in developing economies is more encouraging and offers opportunities for investment both through UK companies selling into these markets and also for specialist managers with the necessary skills to find ways of exploiting the further development of capital flows and structural improvements within these regions.
Your Board believe the changes detailed will allow the Manager the flexibility to deliver better overall returns to shareholders, whilst still providing an attractive level of dividends and maintaining a very positive and progressive dividend policy from the proposed new base.
Principal Risks and Uncertainties
Investment and Market Risks: Managing a portfolio of shares and debt security investments necessarily involves certain risks, in the Annual Report for the year ended 30 April 2011. A significant proportion of the assets of the Company may be invested in debt security investments and overseas equities. Whilst this broader spread of investments is intended to reduce the volatility and risk profile of the Company's portfolio this cannot be assured.
Shares: The market value of the Ordinary shares, as well as being affected by the net asset value, also takes into account their supply and demand. The market value of an Ordinary share can fluctuate and may not always reflect its underlying net asset value. Investment in the Company should be regarded as long term in nature. There can be no guarantee that appreciation in the value of the Company's investments will occur and investors may not get back the full value of their original investment.
Investment Objective: There is no guarantee that the investment policy adopted by the Company will provide the returns sought by the Company.
Borrowings: The Company currently utilises gearing in the form of bank borrowings. Gearing has the effect of exacerbating market falls and market gains.
Currency: A proportion of the Company's portfolio may be invested in assets denominated in currencies other than sterling. This will increase the currency risk that the Company is exposed to as a result in fluctuations in the exchange rate between the denomination of the investments and the sterling denomination of the Company's base currency.
Dividends: The ability of the Company to pay dividends in respect of the Ordinary shares and any future dividend growth will depend on the level of income received from its investments. Accordingly, the amount of dividends paid to shareholders may fluctuate.
Discount: While the Board intends to implement an active discount management policy, the ability to implement such a policy is dependent on a number of factors including the ability to buy back shares in the market, the ability to fund share buybacks, the authority to buy back shares being renewed annually and the Board's discretion over the making and timing of any buybacks.
Key Individuals: The Company is substantially dependent on the services of key individuals working for its Manager, namely Alan Borrows and Simon Callow. The loss of either or both of these individuals could have an adverse effect on the Company's performance.
Taxation: Any change in the Company's tax status or in taxation legislation (including the tax treatment of dividends or other investment income received by the Company) or failure to satisfy the conditions of Sections 1158 - 1159 of the Corporation Tax Act 2010 (including the requirement for a listing) could affect the value of the investments held by the Company, affect the Company's ability to provide returns to shareholders or alter the post tax returns to shareholders.
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 contained within the half-yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half Yearly Financial Reports'; and,
· the Chairman's Statement and Manager's Review (together constituting the interim management report) include a fair review of the information required by rules 4.2.7R of the UK Listing Authority's 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).
Hubert Reid
Chairman
13 December 2011
Manager's Review
Market and Economic Commentary
Financial markets have experienced a very difficult period with the main focus of attention being the unravelling picture on the sovereign debt crisis in Europe. Whilst this has certainly been the most serious challenge to sentiment there have been others. Amongst these are numbered the slow-down in world economic growth and volatile political situation in the Middle East, which have also added to investor uncertainty. Throw into the mix the hangover from natural disasters in Japan and New Zealand and a debt downgrade in the United States, demonstrating that political paralysis was not confined to Europe, and it is not surprising that there was also a significant pick up in market volatility.
Corporate bond markets had begun to flag a deteriorating appetite for risk in early July, with a flight to perceived 'safe haven' areas such as US treasuries and gilts already under way. As the period unwound, this trend accelerated with equity markets experiencing one of their worst reversals for many years in the third quarter. Amongst the worst hit were emerging markets where falls of over 20% were common, whilst European markets also fared badly. Even gold, previously seen as a shelter in times of stress, came under pressure, peaking at $1,900 per ounce in early September, before plummeting to just over $1,600 by the end of the month, albeit still at a higher level than at the end of June.
One beneficial aspect of slower global growth has been the impact on inflationary expectations, stemming from the decline in commodity prices. The S&P GSCI Commodity Index fell by over 30% from its peak in April to its low point in early October.
October saw a rally in equity markets, recouping around half of the losses seen earlier. The rise partly reflected hopes that the growing crisis in Europe would force decisive action from policymakers. However, perhaps of greater significance was the steady improvement in economic indicators in the United States, which went some way to restore investors' risk appetite.
Investment Report
The returns from the portfolio over this period have been affected by the sell-off in risk assets. Moves in late 2010 and earlier this year to reduce risk proved opportune, however the net asset value total return was still -3.9%. The share price total return was lower at -4.5% due to a slight widening in the discount at which the Company's shares traded over the period. Whilst this outturn was slightly disappointing, it was achieved against a very difficult background and much of the portfolio performed in line with expectations.
UK equity positions were maintained early in the period with emphasis remaining on large, cash generative companies boasting strong balance sheets. However, equity market falls in August were used as an opportunity to increase positions and widen the breadth of holdings. New positions in Intermediate Capital, W S Atkins and GKN were bought (although GKN was subsequently sold following a strong bounce). Oil & Gas exposure was reduced with reductions in both BP and Royal Dutch Shell, as we took a more cautious view on the political environment and risks within the industry. Whilst overall performance was mixed the clear emphasis on companies with strong business models helped avoid more serious falls. Dividend income is likely to be crucial to returns in this challenging economic environment and it has been pleasing that holdings have generally been demonstrating solid dividend growth over the period.
Overseas equity holdings have, in general, performed satisfactorily compared to local indices, with the more defensive positioning adopted earlier in the year proving beneficial. There has been little turnover in the portfolio over the period with a small addition to Asian equity exposure in early October. This was achieved by adding to the Newton Asian Equity Income Fund, representing the only change of any significance. Currency hedging made a small negative contribution to performance, with Yen hedging in particular being detrimental over the period.
Fixed interest positions were cut, with reductions in City Merchants High Yield Trust (later completely sold), M&G European Loan Fund and AXA US Short Duration High Yield Fund. These sales and those of several of the holdings in preference shares were effectively used to purchase UK equities and to build cash balances. The portfolio has not held any gilts over the period as we continue to see little value and, at best, little reward for the inflation risk being taken with yields at such low levels. The emphasis on corporate bonds within Company holdings has been a drag on performance this period.
Alternative asset positions have demonstrated mixed fortunes with private equity performing well. The carried value of the Company's holding in A J Bell Holdings was increased to 500p (from 400p) in early June, following an excellent set of interim results and a third party transaction at this level. Elsewhere, hedge fund holdings, which are exposed to fixed interest markets, proved less resilient. Overall alternative positions have been reduced, with the Liontrust European Absolute Return Fund being sold and structured product exposure reduced to limit counterparty risk.
Property holdings gave mixed returns with the emphasis on Asian property proving beneficial and UK commercial property at least 'washed its face'. Less positive were the residual holdings in European property vehicles, which again suffered in the risk-off market environment. On a more positive note, the Company's infrastructure holding performed well. This was also the case with the Duet Real Estate Finance Fund, which continues to take advantage of mezzanine finance opportunities in high quality commercial market deals.
The revenue generated from the portfolio has continued to improve over the period fuelled by dividend growth from equities and maiden dividends from Phaunos Timber and Duet Real Estate Finance. The portfolio emphasis on high quality equities will be crucial in the difficult times that lie ahead as dividend growth is likely to be much sought after by investors, particularly should inflation continue to prove sticky.
Asset Allocation
The asset allocation across the portfolioat 31 October 2011 is shown in the table below.
Asset Class |
Portfolio Weight |
Core Allocation |
Allocation Range |
UK Equities |
29.3 |
35 |
20-55 |
Overseas Equities |
17.3 |
15 |
10-25 |
Total Equities |
46.6 |
50 |
30-80 |
Fixed Interest (inc Cash) |
21.6 |
25 |
15-45 |
Alternative Assets |
22.2 |
15 |
10-25 |
Property |
9.6 |
10 |
0-25 |
All figures are expressed as a percentage of Gross assets.
Note: Certain core allocations/allocation ranges will be changed if shareholders approve the relevant resolution at the general meeting.
Summary
Uncertainties surrounding the solvency of European sovereign nations and indeed the survival of the Euro are likely to test investor confidence for some time. Even if this issue is resolved many developed nations face severe headwinds to economic progress against a background of further bank deleveraging and austerity. However, in the developing world there remain strong secular growth prospects, which can benefit the profitability not only of their domestic companies, but also international businesses able to build new, exciting profit drivers.
We believe that the proposed changes put forward following the strategic investment review involving your Board and the Company's financial adviser, have been very constructive. Implementation of the proposals will enable your Manager to fully take advantage of these long term opportunities to grow capital, whilst continuing to focus on the enhancement of dividends from the proposed rebased level.
Alan Borrows
Simon Callow
Midas Capital Partners Limited
13 December 2011
Income Statement
|
|
Six months ended 31 October 2011 |
Six months ended 31 October 2010 |
||||
|
Notes |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
Gains on investments |
|
- |
(2,960) |
(2,960) |
- |
518 |
518 |
Income |
2 |
1,554 |
2 |
1,556 |
1,227 |
13 |
1,240 |
Investment management fee |
|
(124) |
(124) |
(248) |
(115) |
(115) |
(230) |
VAT recovered on investment management fees |
|
- |
- |
- |
25 |
25 |
50 |
Administration expenses |
|
(180) |
- |
(180) |
(175) |
- |
(175) |
Exchange losses |
|
- |
(1) |
(1) |
- |
(11) |
(11) |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
Net return before finance costs and taxation |
|
1,250 |
(3,083) |
(1,833) |
962 |
430 |
1,392 |
|
|
|
|
|
|
|
|
Finance costs |
|
(76) |
(76) |
(152) |
(60) |
(60) |
(120) |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
Net return on ordinary activities before taxation |
|
1,174 |
(3,159) |
(1,985) |
902 |
370 |
1,272 |
|
|
|
|
|
|
|
|
Taxation on ordinary activities |
3 |
- |
- |
- |
(3) |
- |
(3) |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
Return on ordinary activities after taxation |
|
1,174 |
(3,159) |
(1,985) |
899 |
370 |
1,269 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
Return per share (pence): |
4 |
2.94 |
(7.91) |
(4.97) |
2.32 |
0.95 |
3.27 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
The total column of this statement represents the profit and loss account of the Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.
All revenue and capital items in the above statement derive from continuing operations.
Income Statement (Cont'd)
|
|
Year ended 30 April 2011 |
||
|
Notes |
Revenue |
Capital |
Total |
Gains on investments |
|
- |
2,597 |
2,597 |
Income |
2 |
2,796 |
50 |
2,846 |
Investment management fee |
|
(240) |
(240) |
(480) |
VAT recovered on investment management fees |
|
25 |
25 |
50 |
Administration expenses |
|
(344) |
- |
(344) |
Exchange losses |
|
- |
14 |
14 |
|
|
______ |
______ |
______ |
Net return before finance costs and taxation |
|
2,237 |
2,446 |
4,683 |
|
|
|
|
|
Finance costs |
|
(119) |
(119) |
(238) |
|
|
______ |
______ |
______ |
Net return on ordinary activities before taxation |
|
2,118 |
2,327 |
4,445 |
|
|
|
|
|
Taxation on ordinary activities |
3 |
(3) |
- |
(3) |
|
|
______ |
______ |
______ |
Return on ordinary activities after taxation |
|
2,115 |
2,327 |
4,442 |
|
|
______ |
______ |
______ |
Return per share (pence): |
4 |
5.37 |
5.91 |
11.28 |
|
|
______ |
______ |
______ |
Balance Sheet
|
Notes |
As at |
As at |
As at |
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
|
52,487 |
54,906 |
57,966 |
|
|
________ |
________ |
________ |
Current assets |
|
|
|
|
Debtors and prepayments |
|
225 |
527 |
551 |
Cash and short term deposits |
|
2,432 |
1,114 |
472 |
|
|
________ |
________ |
________ |
|
|
2,657 |
1,641 |
1,023 |
|
|
________ |
________ |
________ |
Creditors: |
|
|
|
|
Bank loan |
|
(7,000) |
(7,000) |
(7,000) |
Other creditors |
|
(293) |
(107) |
(682) |
|
|
________ |
________ |
________ |
|
|
(7,293) |
(7,107) |
(7,682) |
|
|
________ |
________ |
________ |
Net current liabilities |
|
(4,636) |
(5,466) |
(6,659) |
|
|
________ |
________ |
________ |
Net assets |
|
47,851 |
49,440 |
51,307 |
|
|
________ |
________ |
________ |
Capital and reserves |
|
|
|
|
Called-up share capital |
|
9,974 |
10,012 |
10,012 |
Share premium account |
|
1,445 |
1,445 |
1,445 |
Special reserve |
|
41,783 |
41,954 |
41,954 |
Capital redemption reserve |
|
2,099 |
2,061 |
2,061 |
Capital reserve |
6 |
(8,114) |
(6,912) |
(4,955) |
Revenue reserve |
|
664 |
880 |
790 |
|
|
________ |
________ |
________ |
Equity shareholders' funds |
|
47,851 |
49,440 |
51,307 |
|
|
________ |
________ |
________ |
Net asset value per Ordinary share (pence): |
8 |
119.94 |
123.46 |
128.12 |
Reconciliation of Movements in Shareholders' Funds
Six months ended 31 October 2011 (unaudited)
|
Notes |
Share |
Share premium |
Special |
Warrant |
Capital |
Capital |
Revenue |
Total |
Balance at |
|
10,012 |
1,445 |
41,954 |
- |
2,061 |
(4,955) |
790 |
51,307 |
Purchase of Ordinary shares for cancellation |
|
(38) |
- |
(171) |
- |
38 |
- |
- |
(171) |
Return on ordinary activites after taxation |
|
- |
- |
- |
- |
- |
(3,159) |
1,174 |
(1,985) |
Dividends paid |
5 |
- |
- |
- |
- |
- |
- |
(1,300) |
(1,300) |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
Balance at |
|
9,974 |
1,445 |
41,783 |
- |
2,099 |
(8,114) |
664 |
47,851 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
Six months ended 31 October 2010 (unaudited)
|
Notes |
Share |
Share premium |
Special |
Warrant |
Capital |
Capital |
Revenue |
Total |
Balance at |
|
9,528 |
- |
41,954 |
616 |
2,061 |
(7,898) |
1,223 |
47,484 |
Exercise of warrants |
|
484 |
1,445 |
- |
(616) |
- |
616 |
- |
1,929 |
Return on ordinary activites after taxation |
|
- |
- |
- |
- |
- |
370 |
899 |
1,269 |
Dividends paid |
5 |
- |
- |
- |
- |
- |
- |
(1,242) |
(1,242) |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
Balance at |
|
10,012 |
1,445 |
41,954 |
- |
2,061 |
(6,912) |
880 |
49,440 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
Year ended 30 April 2011 (audited)
|
Notes |
Share |
Share premium |
Special |
Warrant |
Capital |
Capital |
Revenue |
Total |
Balance at |
|
9,528 |
- |
41,954 |
616 |
2,061 |
(7,898) |
1,223 |
47,484 |
Exercise of Warrants |
|
484 |
1,445 |
- |
(616) |
- |
616 |
- |
1,929 |
Return on ordinary activities after taxation |
|
- |
- |
- |
- |
- |
2,327 |
2,115 |
4,442 |
Dividends paid |
5 |
- |
|
- |
- |
- |
- |
(2,548) |
(2,548) |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
Balance at |
|
10,012 |
1,445 |
41,954 |
- |
2,061 |
(4,955) |
790 |
51,307 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
Cash Flow Statement
|
Notes |
Six months ended |
Six months ended |
Year |
Net (loss)/return on ordinary activities before finance costs and taxation |
|
(1,833) |
1,392 |
4,683 |
Adjustments for: |
|
|
|
|
Losses/(gains) on investments |
|
2,960 |
(518) |
(2,597) |
Exchange losses/(gains) |
|
1 |
11 |
(14) |
Decrease/(increase) in accrued income |
|
232 |
83 |
(103) |
(Increase)/decrease in other debtors |
|
(14) |
(58) |
7 |
(Decrease)/increase in creditors |
|
(6) |
15 |
21 |
|
|
________ |
________ |
________ |
Net cash inflow from operating activities |
|
1,340 |
925 |
1,997 |
Net cash outflow from servicing of finance |
|
(152) |
(123) |
(219) |
Tax refund on non UK income |
|
- |
- |
(3) |
Net cash inflow/(outflow) from financial investment |
|
2,243 |
(1,441) |
(1,775) |
Equity dividends paid |
5 |
(1,300) |
(1,242) |
(2,548) |
|
|
________ |
________ |
________ |
Net cash inflow/(outflow) before financing |
|
2,131 |
(1,881) |
(2,548) |
Net cash (outflow)/inflow from financing |
|
(170) |
1,929 |
1,929 |
|
|
________ |
________ |
________ |
Increase/(decrease) in cash |
|
1,961 |
48 |
(619) |
|
|
________ |
________ |
________ |
Reconciliation of net cash flow to movement in net debt |
|
|
|
|
Increase/(decrease) in cash as above |
|
1,961 |
48 |
(619) |
Foreign exchange movements |
|
(1) |
(11) |
14 |
|
|
________ |
________ |
________ |
Movement in net debt in the period |
|
1,960 |
37 |
(605) |
Opening net debt |
|
(6,528) |
(5,923) |
(5,923) |
|
|
________ |
________ |
________ |
Closing net debt |
|
(4,568) |
(5,886) |
(6,528) |
|
|
________ |
________ |
________ |
Represented by: |
|
|
|
|
Cash at bank and in hand |
|
2,432 |
1,114 |
472 |
Debt falling due within one year |
|
(7,000) |
(7,000) |
(7,000) |
|
|
________ |
________ |
________ |
|
|
(4,568) |
(5,886) |
(6,528) |
|
|
________ |
________ |
________ |
Notes to the Accounts
1 Accounting policies
(a) Basis of accounting
The accounts have been prepared in accordance with applicable UK Accounting Standards, with pronouncements on half-yearly reporting issued by the Accounting Standards Board and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (issued in January 2009). They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis.
The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP).
The half yearly financial statements have been prepared using the same accounting policies as the preceding annual accounts.
(b) Dividends payable
Dividends are recognised in the period in which they are approved by shareholders.
2 |
Income |
Six months ended |
Six months ended |
Year ended |
|
Income from investments |
|
|
|
|
UK franked income |
750 |
677 |
1,354 |
|
UK unfranked dividend income |
224 |
181 |
400 |
|
UK unfranked interest income |
154 |
41 |
291 |
|
Overseas dividends |
400 |
335 |
700 |
|
Stock Dividends |
22 |
- |
- |
|
|
________ |
________ |
________ |
|
|
1,550 |
1,234 |
2,745 |
|
|
________ |
________ |
________ |
|
Other income |
|
|
|
|
Deposit interest |
4 |
2 |
3 |
|
Interest from HMRC |
2 |
- |
50 |
|
Other commission |
- |
- |
48 |
|
Other income |
- |
4 |
- |
|
|
________ |
________ |
________ |
|
|
6 |
6 |
101 |
|
|
________ |
________ |
________ |
|
Total income |
1,556 |
1,240 |
2,846 |
|
|
________
|
________
|
________
|
3 Taxation
The taxation expense reflected in the Income Statement represents withholding tax suffered on overseas dividend income and estimated mainstream UK corporation tax charge for the half year to 31 October 2011, based on a rate of 26%.
4 Return per share
The revenue return of 2.94 pence (31 October 2010 - 2.32 pence; 30 April 2011 - 5.37 pence) per Ordinary share is calculated on net revenue on ordinary activities after taxation for the year of £1,174,000 (31st October 2010 - £899,000; 30 April 2011 - £2,115,000) and on 39,911,035 (31 October 2010 - 38,753,249; 30 April 2011 - 39,394,491) Ordinary shares being the weighted average number of Ordinary shares in issue during the period.
The capital loss of 7.91 pence (31 October 2010 - gain - 0.95 pence; 30 April 2011 - gain - 5.91 pence) per Ordinary share is calculated on net capital losses for the period of £3,159,000 (31 October 2010 - gains - £370,000; 30 April 2011 - gains - £2,327,000) and on 39,911,035 (31 October 2010 - 38,753,249; 30 April 2011 - 39,394,491) Ordinary shares being the weighted average number of Ordinary shares in issue during the period.
The total loss of 4.97 pence (31 October 2010 - gain - 3.27 pence; 30 April 2011 - gain - 11.28 pence) per Ordinary share is calculated on the total losses for the period of £1,985,000 (31 October 2010 - gains - £1,269,000; 30 April 2011 - gains - £4,442,000) and on 39,911,035 (31 October 2010 - 38,753,249; 30 April 2011 - 39,394,491) Ordinary shares being the weighted average number of Ordinary shares in issue during the period.
During the period 150,000 Ordinary shares of 25p were bought back for a total cost of £170,000 before deduction of costs of £1,000. There were no potentially dilutive shares in issue during
the period.
5 Dividends
Ordinary dividends on equity shares deducted from reserves are analysed below:
|
Six months ended |
Six months ended |
Year ended |
2010 fourth interim dividend - 1.63p |
- |
621 |
621 |
2011 first interim dividend - 1.63p |
- |
621 |
621 |
2011 second interim dividend - 1.63p |
- |
- |
653 |
2011 third interim dividend - 1.63p |
- |
- |
653 |
2011 fourth interim dividend - 1.63p |
650 |
- |
- |
2012 first interim dividend - 1.63p |
650 |
- |
- |
|
__________ |
__________ |
__________ |
|
1,300 |
1,242 |
2,548 |
|
__________
|
__________
|
__________
|
The Company has declared a second interim dividend in respect of the year ending 30 April 2012 of 1.63p net (2011 - 1.63p) per Ordinary 25p share which was paid on 15 December 2011 to Ordinary shareholders on the register on 25 November 2011.
6 Analysis of capital reserve
The capital reserve reflected in the Balance Sheet at 31 October 2011 includes losses of £4,077,000 (31 October 2010 - losses of £2,798,000; 30 April 2011 - losses of £1,559,000) which relate to the revaluation of investments held at the reporting date.
7 Transaction costs
During the six months ended 31 October 2011 expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:
|
Six months ended |
Six months ended |
Year ended |
Purchases |
25 |
4 |
24 |
Sales |
9 |
6 |
20 |
|
__________ |
__________ |
__________ |
|
34 |
10 |
44 |
|
__________ |
__________ |
__________ |
8 |
Net asset value per share |
As at |
As at |
As at |
|
Attributable net assets (£'000) |
47,851 |
49,440 |
51,307 |
|
Number of Ordinary shares in issue |
39,896,361 |
40,046,361 |
40,046,361 |
|
Net asset value per Ordinary share (p) |
119.94 |
123.46 |
128.12 |
9 Half-Yearly Financial Report
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 year ended 30 April 2011 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2),(3) or (4) of the Companies Act 2006.
10 This Half Yearly Report was approved by the Board on 13 December 2011.
The Half-Yearly Financial Report will be posted to shareholders on in December 2011 and available thereafter from the Manager's website (www.midascapital.co.uk*).
* Neither the content of the Manager's website nor the content of any website accessible from hyperlinks on the Manager's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
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 and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.
Aberdeen Asset Management PLC
Secretaries
13 December 2011
Independent Review Report to the Members of Midas Income & Growth 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 October 2011 which comprises the Income Statement, Balance Sheet, Reconciliation of Movements in Shareholders' Funds, Cash Flow Statement and the related notes 1 to 10. 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 guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
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 Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with United Kingdom Generally Accepted Accounting Practice. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the Accounting Standards Board Statement "Half-Yearly Financial Reports".
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 United Kingdom. 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 October 2011 is not prepared, in all material respects, in accordance with the Accounting Standards Board Statement "Half-Yearly Financial Reports" and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Ernst & Young LLP
13 December 2011 London
INVESTMENT PORTFOLIO
As at 31 October 2011
Company |
Sector |
Asset class |
Valuation |
Total assets |
Bell AJB |
Special & Other Finance |
Alternative Assets |
3,250 |
5.93 |
Partners Group Global OpportunitiesC |
Unit Trusts & OEICS |
Alternative Assets |
2,553 |
4.65 |
Celsius Fund Asian Real Estate IncomeC |
Unit Trusts & OEICS |
Property |
1,481 |
2.70 |
Royal London Sterling Extra Yld Bond A AccC |
Unit Trusts & OEICS |
Fixed Interest |
1,447 |
2.64 |
GlaxoSmithKline |
Pharmaceuticals |
UK Equities |
1,260 |
2.30 |
Harewood Structured Inv US Enhanced Hedge Pref Cls 'A' |
Investment Companies |
Overseas Equities |
1,244 |
2.27 |
Reckitt Benckiser Group |
Household Goods |
UK Equities |
1,199 |
2.19 |
Legal & General Group |
Life Insurance |
UK Equities |
1,188 |
2.17 |
Ecclesiastical Insurance Office 8 5/8% Net Cum Irred Pref |
Fixed Interest |
Preference shares |
1,156 |
2.11 |
Unilever |
Food Producers |
UK Equities |
1,147 |
2.09 |
Top ten investments |
|
|
15,925 |
29.05 |
BNY Mellon Fund Manager Newton Asian Income InstitutionalC |
Unit Trusts & OEICS |
Overseas Equities |
1,139 |
2.08 |
Symphony Structured Products Jersey 0% 20/12/13 GBP |
Structured Product |
Alternative Assets |
1,077 |
1.96 |
Signet Global Fixed Income Fund |
Investment Companies |
Alternative Assets |
1,073 |
1.96 |
AstraZeneca |
Pharmaceuticals & Biotechnology |
UK Equities |
1,045 |
1.91 |
Vodafone Group |
Mobile Telecommunications |
UK Equities |
1,037 |
1.89 |
AXA Investment Managers US Short Duration High Yield |
Unit Trusts & OEICS |
Fixed Interest |
1,022 |
1.86 |
Policy Selection Assured GBPC |
Unit Trusts & OEICS |
Alternative Assets |
1,020 |
1.86 |
Tesco |
Food & Drug Retailer |
UK Equities |
1,004 |
1.83 |
Ashmore Group |
Financial Services |
UK Equities |
1,001 |
1.82 |
Duet Real Estate Finance |
Investment Companies |
Property |
985 |
1.80 |
Top twenty investments |
|
|
26,328 |
48.02 |
Merrill Lynch 2.2% 16/05/13 |
Structured Product |
Alternative Assets |
956 |
1.74 |
Elders Investment 17A Merrill Lynch Japan High IncomeC |
Structured Product |
Overseas Equities |
907 |
1.65 |
LBG Capital No.1 7.975% 15/09/24 |
Fixed Interest |
UK Preference Share |
900 |
1.64 |
Scottish & Southern Energy |
Gas Water & Multiutilities |
UK Equities |
874 |
1.59 |
Macau Property Opportunities |
Investment Companies |
Property |
872 |
1.59 |
Schroder Unit Trusts Asian Income MaximiserC |
Unit Trusts & OEICS |
Overseas Equities |
872 |
1.59 |
Invesco Leveraged High Yield Fund |
Investment Companies |
Fixed Interest |
869 |
1.58 |
Somerset Capital Emerging Markets Dividend GrowthC |
Unit Trusts & OEICS |
Overseas Equities |
858 |
1.56 |
Royal Dutch Shell EUR0.07 'B' |
Oil & Gas Producers |
UK Equities |
844 |
1.54 |
HSBC Holdings |
Banks |
UK Equities |
817 |
1.49 |
Top thirty investments |
|
|
35,097 |
63.99 |
Atkins WS |
Support Services |
UK Equities |
802 |
1.46 |
General Accident 8.875% Cum Pref |
Fixed Interest |
Preference shares |
780 |
1.42 |
Royal Sun Alliance Insurance Group 7.375% Cum Pref |
Fixed Interest |
Preference shares |
776 |
1.41 |
Acencia Debt Strategies |
Investment Companies |
Alternative Assets |
765 |
1.39 |
Phaunos Timber Fund |
Investment Companies |
Alternative Assets |
757 |
1.38 |
Thames River Traditional High Income FundC |
Unit Trusts & OEICS |
Fixed Interest |
745 |
1.36 |
BHP Billiton |
Mining |
UK Equities |
738 |
1.35 |
HICL Infrastructure |
Investment Companies |
Property |
738 |
1.35 |
Intermediate Capital |
Financial Services |
UK Equities |
734 |
1.34 |
Ignis AM Argonaut European Enhanced Income Fund C |
Unit Trusts & OEICS |
Overseas Equities |
732 |
1.34 |
Top forty investments |
|
|
42,664 |
77.79 |
Lindsell Train Japanese Equity 'B'C |
Unit Trusts & OEICS |
Overseas Equities |
726 |
1.32 |
Threadneedle Property FundC |
Unit Trusts & OEICS |
Property |
719 |
1.31 |
Hill (William) |
Travel & Leisure |
UK Equities |
707 |
1.29 |
Ignis Enhanced Argonaut European Income FundC |
Unit Trusts & OEICS |
Overseas Equities |
706 |
1.29 |
Schroder Oriental Income Fund |
Investment Companies |
Overseas Equities |
703 |
1.28 |
BP |
Oil & Gas Producers |
UK Equities |
692 |
1.26 |
Blackrock Commodities |
Investment Companies |
Overseas Equities |
622 |
1.13 |
Ecofin Water & Power Opportunities |
Investment Companies |
Overseas Equities |
555 |
1.01 |
Harbourvest Senior Loans Europe C |
Investment Companies |
Fixed Interest |
553 |
1.01 |
M&G European LoanC |
Unit Trusts & OEICS |
Fixed Interest |
539 |
0.99 |
Top fifty investments |
|
|
49,186 |
89.68 |
Aviva |
Life Insurance |
UK Equities |
460 |
0.84 |
Man Group |
Financial Services |
UK Equities |
450 |
0.82 |
Standard Life European Private Equity Trust |
Investment Companies |
Alternative Assets |
409 |
0.75 |
Canyon Resources 10% 31/12/13C |
Fixed Interest |
Fixed Interest |
348 |
0.63 |
Harewood Structured Inv US High Sterling Hedge Fund 'A' |
Investment Companies |
Overseas Equities |
344 |
0.63 |
Harbourvest Senior Loans Europe |
Special & Other Finance |
Fixed Interest |
331 |
0.60 |
Dolphin Capital Investors |
Real Estate |
Property |
315 |
0.57 |
Source Structured Debt |
Investment Companies |
Alternative Assets |
244 |
0.44 |
Hotel Corp |
Travel & Leisure |
UK Equities |
137 |
0.25 |
Battersea Power StationB |
Warrants |
Property |
77 |
0.14 |
ZKB Gold ETF - 'A'C |
Commodities |
Alternative Assets |
53 |
0.10 |
Altus Capital Japan Opportunities II BB |
Investment Companies |
Property |
52 |
0.09 |
Speymill Deutsche Immobilien |
Real Estate |
Property |
49 |
0.09 |
Aberdeen Development Capital |
Investment Companies |
Alternative Assets |
26 |
0.05 |
Real Estate Opportunities 7.5% Cnv 31/05/11 |
Fixed Interest |
Convertible Bonds |
5 |
0.01 |
Battersea Power StationC |
Warrants |
Property |
1 |
0.00 |
Total fixed asset investments |
|
|
52,487 |
95.69 |
Net current assets |
|
|
2,364 |
4.31 |
Total assetsA |
|
|
54,851 |
100.00 |
With the exception of those marked all investments are in the ordinary shares of the investee company.
A Excluding total bank loans of £7,000,000
B Unquoted
C Unlisted