Half Yearly Report

RNS Number : 6164O

Dunedin Income Growth Inv Tst PLC

21 September 2011

 



DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 31 JULY 2011

The objective of Dunedin Income Growth Investment Trust PLC is to achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom.

Highlights

·     Maintained interim dividend of 3.75p declared.

·     Net asset value per share up by 4.1% in total return terms and the Company's benchmark, the FTSE All-Share Index increased by 1.2% in total return terms. 

·     Share price increased by 6.0% on a total return basis.

For further information, please contact:-

Jeremy Whitley

Aberdeen Asset Managers Limited            0131 528 4000

Ian Massie

Aberdeen Asset Managers Limited            0131 528 4000

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

The first half of our current financial year has been a challenging and turbulent one exacerbated by a series of violent events including the tragic Japanese tsunami and the uprisings of the "Arab Spring". As I commented in the latest Annual Report we suspected that this would be a year in which it would be harder for investors to make money and so it has proved to be, with the FTSE All-Share rising only slightly during the period to the end of July, up 1.2% on a total return basis. On this same (total return basis), which includes dividends paid out, the Company's NAV rose 4.1%. The discount on the Company's shares narrowed further from 2.0% at the beginning of the period, to 0.4% at the end of the period, resulting in a total return to shareholders over the period of 6.0%.  At various points the shares have traded at a premium to NAV.

This report deals with the period to the end of July but shareholders will no doubt be aware that in the first week of August (and thus falling outwith our half year results) there was a major sell-off in all stock markets, to which your Company was not immune, with the share price falling at one point to 187.5p compared to the end July share price of 222.5p and the share price at the date of this report of 206p.  Cash

returns to shareholders from companies tend to lag operational performance and we have seen an encouraging trend over the period by way of increased dividends.  This partly reflects companies starting to repatriate proceeds from the sharp rebound in profitability following the 2008 credit crisis. The Company's recurring revenue has increased by 18.9%, year on year, also supplemented by a modest increase in our option writing programme. We have also seen the income generated from overseas listed holdings more than double, largely as a result of shareholders agreeing to the widening of the Company's investment remit.

Notwithstanding the satisfactory growth in our income, the Board has chosen to maintain the interim dividend at 3.75p. With a significant amount of the expected income already booked for the current financial year we expect that underlying earnings will at least support the 10.25p dividend per share that was paid last year.  In making its decision on the final dividend for this year, the Board will focus on the longer term outlook and what we consider to be a prudent and sustainable level of income generation that can be achieved from the Company's portfolio.  Reflecting the demands from our shareholders for a more regular flow of income, we are examining the possibility of changing the cycle of dividend payments from the current semi-annual basis to more evenly spread quarterly distributions and we hope to introduce this for the forthcoming financial year following the payment of this year's final dividend on the existing basis.

Economic and Market Background

In economic terms in developed markets, the six months under review saw generally weak growth, continued high unemployment and elevated levels of inflation.  As the half year progressed economic growth figures became progressively weaker, held back by a combination of turmoil in the Eurozone, disruption to global production caused by the Japanese tsunami and continued restrictions on availability of bank finance for trading companies.

Concern over the creditworthiness of European sovereigns grew. While the problems facing the likes of Ireland, Greece and Portugal - all relatively small economies - are well known, doubts started to emerge over the standing of some of the largest European economies, such as Italy and Spain.  Recently, investors have begun to question the creditworthiness of the likes of Belgium and even France.

Policymakers struggled to get ahead of the problems in both the Eurozone and the United States. EU-wide bank stress tests conducted by the European Banking Authority were dismissed as largely irrelevant, given the modest write-downs applied.  In July, the second Greek bailout, to the tune of €109 billion accompanied by private sector write-downs, failed to stem concerns as investors fretted that the European Financial Stability Fund was simply not big enough to cope with the potential problems.  In the United States we witnessed an extended battle on Capitol Hill as the Democrats and Republicans dramatically failed to build a consensus behind deficit reduction measures and agreed to raise the federal debt ceiling only at the last feasible moment.  Nonetheless, this agreement failed to prevent the United States losing its long held AAA status under Standard and Poor's.   

Emerging markets continued to deliver relatively robust growth figures but are now struggling to manage the consequences of ultra loose monetary policy in the West, namely significant inflationary pressures and currency volatility.  China also faces having to backtrack on some of its own substantial stimulus measures. Commodity prices soared in the earlier part of the period, with Brent Crude approaching the record prices of 2008, driven in part by the disruption in North Africa, but also by expectations of higher demand in emerging markets. Towards the end of the half year, though, these prices (with the exception of gold) began to fall as growth concerns emerged.  

In the UK, growth remained weak, with second quarter GDP expanding just 0.2%, and inflation hovering stubbornly at almost double the Bank of England's target level. The coalition government has maintained its chosen path of prioritising spending cuts to reduce the budget deficit. As a result, growth is likely to be weak for some time but sterling and government borrowing capacity should be more robust than for many other western countries.

The principal area of positive news since the initial post-recession bounce in economic data has come from corporate performance. Profits have rebounded sharply, driven by aggressive cost cutting and some top line recovery. However, as we move through 2011, earnings growth momentum has begun to stall, with margins close to peak levels, weakening demand from governments and consumers, and rising inflationary cost pressures. Expectations from investors have also increased over the year and any disappointments in corporate performance have been treated harshly.

Gearing

The Company's potential gearing has decreased slightly over the period as a result of the increase in net assets. Valuing debt at par, potential gearing stood at 9.6% at 31 July 2011, down from 9.7% at 31 January 2011. On an equity gearing basis, taking debt at par and offsetting our holdings of bonds and cash, net indebtedness stood at 6.9%, up from 2.7% at the year end. This was due to both our disposal of some of the lower yielding bonds and the decision to use undrawn bank facilities, rather than cash, to back our option writing activities. Given undemanding equity valuations, the low cost of debt and the Company's need for income we still consider it appropriate to maintain our modest level of gearing, though it is kept under close review. At the period end we negotiated a new and improved 2-year bank facility from the Royal Bank of Scotland for £20 million which replaces our previous facility of the same size provided by Abbey National.

Directors' Responsibility Statement

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

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

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

Risk and Uncertainties

The Board has adopted a matrix of the key risks that affect its business. Like most other companies, the present economic conditions continue to represent the greatest challenge, and risk, to the Company.   The principal risks associated with the Company are:

-    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 Index and the underlying stock weightings in the portfolio against the Index weightings are monitored closely by the Board.

-    Discount volatility:  The Company's share price can trade at a discount to its underlying net asset value.  The Company operates a share buyback programme which is reviewed on a continuing basis. 

-    Regulatory risk:  The Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Sections 1158 to 1159 of the Corporation Tax Act 2010, the UKLA Listing Rules and the Companies Act, could lead to a number of detrimental outcomes and reputational damage. The Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager.

Going Concern

The Company's assets consist mainly of equity shares in companies listed on the London Stock Exchange and other leading international exchanges and in most circumstances are realisable within a short timescale.  The Board has set limits for borrowing and derivative contract positions and regularly reviews actual exposures, cash flow projections and compliance with banking covenants.   The Company's Directors believe that the Company has adequate resources to continue its operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the accounts.

Outlook

It seems likely that investors face a very difficult environment, characterised by weak economic growth in the Western world and periods of extreme volatility.  In the corporate world we have already started to see performance come under more pressure from input cost increases, currency fluctuations and weak demand from Western consumers.  But, while there is much to concern us and potential problems abound, we do take heart from our investee companies, which are generally performing strongly at an operating level and whose valuations are modest and dividend yields attractive.

Much progress has been made over the past 18 months, not least in re-building our income account and we believe that, if we are entering yet another period of sustained market turbulence, then we do so in significantly better shape than we did in 2007/08. Volatile market conditions can provide opportunities to invest in very good companies at low valuations and to diversify income, thereby further improving the quality of the portfolio. Our Manager remains alert to such situations and has the liquidity available to allow further investment.

We continue to believe in the current market that our Manager's investment process, focusing on owning good quality companies with strong business models and robust balance sheets that can make progress and pay sustainable and growing dividends, remains the best way of both investing for the long term and generating a secure and growing dividend for our shareholders. Based on the current level of dividend and the share price at the time of writing, our shares offer a yield of 5%. It is noteworthy that the historic discount on the Company's shares has now narrowed to the point where they frequently trade at a premium, in part a reflection of the demand from investors for quality sources of income, but also a recognition of the solid progress which has been made by the Manager.

John Scott

Chairman

20 September 2011

INCOME STATEMENT

	Six months ended
	31 July 2011
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	5,535	5,535
Currency losses	-	(7)	(7)
Income (note 2)	10,977	-	10,977
Investment management fee	(288)	(432)	(720)
VAT recoverable on investment management fees (note 3)	-	-	-
Administrative expenses	(410)	(2)	(412)
	_______	_______	_______
Net return before finance costs and taxation	10,279	5,094	15,373
Finance costs	(495)	(742)	(1,237)
	_______	_______	_______
Return on ordinary activities before taxation	9,784	4,352	14,136
Taxation (note 4)	(172)	-	(172)
	_______	_______	_______
Return on ordinary activities after taxation	9,612	4,352	13,964
	_______	_______	_______
Return per Ordinary share (pence)(note 6)	6.38	2.89	9.27
	_______	_______	_______

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 have been reflected in the Income Statement.

All revenue and capital items in the above statement derive from continuing operations.

INCOME STATEMENT

	Six months ended
	31 July 2010
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	3,934	3,934
Currency losses	-	(65)	(65)
Income (note 2)	9,216	-	9,216
Investment management fee	(255)	(383)	(638)
VAT recoverable on investment management fees (note 3)	-	-	-
Administrative expenses	(391)	-	(391)
	_______	_______	_______
Net return before finance costs and taxation	8,570	3,486	12,056
Finance costs	(475)	(713)	(1,188)
	_______	_______	_______
Return on ordinary activities before taxation	8,095	2,773	10,868
Taxation (note 4)	(57)	-	(57)
	_______	_______	_______
Return on ordinary activities after taxation	8,038	2,773	10,811
	_______	_______	_______
Return per Ordinary share (pence)(note 6)	5.33	1.84	7.17
	_______	_______	_______
The total column of this statement represents the profit and loss account of the Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses have been reflected in the Income Statement.
All revenue and capital items in the above statement derive from continuing operations.

INCOME STATEMENT

	Year ended
	31 January 2011
	(audited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	45,224	45,224
Currency losses	-	(125)	(125)
Income (note 2)	16,904	-	16,904
Investment management fee	(522)	(783)	(1,305)
VAT recoverable on investment management fees (note 3)	715	582	1,297
Administrative expenses	(740)	(2)	(742)
	_______	_______	_______
Net return before finance costs and taxation	16,357	44,896	61,253
Finance costs	(948)	(1,423)	(2,371)
	_______	_______	_______
Return on ordinary activities before taxation	15,409	43,473	58,882
Taxation (note 4)	(118)	-	(118)
	_______	_______	_______
Return on ordinary activities after taxation	15,291	43,473	58,764
	_______	_______	_______
Return per Ordinary share (pence)(note 6)	10.15	28.85	39.00
	_______	_______	_______
The total column of this statement represents the profit and loss account of the Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses have been reflected in the Income Statement.
All revenue and capital items in the above statement derive from continuing operations.

BALANCE SHEET

		As at	As at	As at
		31 July 2011	31 July 2010	31 January 2011
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		378,691	325,797	361,864
		_______	_______	_______
Current assets
Loans and receivables		1,834	1,952	2,098
AAA Money Market funds		-	5,137	13,866
Cash and short term deposits		6,058	6,048	3,566
		_______	_______	_______
		7,892	13,137	19,530
		_______	_______	_______
Creditors: amounts falling due within one year
Bank loan		(5,000)	(5,000)	(5,000)
Other creditors		(1,988)	(829)	(974)
		_______	_______	_______
		(6,988)	(5,829)	(5,974)
		_______	_______	_______
Net current assets		904	7,308	13,556
		_______	_______	_______
Total assets less current liabilities		379,595	333,105	375,420
Creditors: amounts falling due after more than one year
Debenture stock		(28,500)	(28,487)	(28,493)
		_______	_______	_______
Net assets		351,095	304,618	346,927
		_______	_______	_______
Capital and reserves
Called-up share capital		38,419	38,419	38,419
Share premium account		4,543	4,543	4,543
Capital redemption reserve		1,606	1,606	1,606
Capital reserve	8	286,269	241,217	281,917
Revenue reserve		20,258	18,833	20,442
		_______	_______	_______
Equity shareholders' funds		351,095	304,618	346,927
		_______	_______	_______
Adjusted net asset value per Ordinary share (pence)	9	232.90	202.06	230.13
		_______	_______	_______

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Six months ended 31 July 2011 (unaudited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2011		38,419	4,543	1,606	281,917	20,442	346,927
Return on ordinary activities after taxation		-	-	-	4,352	9,612	13,964
Dividends paid	5	-	-	-	-	(9,796)	(9,796)
		_______	_______	_______	_______	_______	_______
Balance at 31 July 2011		38,419	4,543	1,606	286,269	20,258	351,095
		_______	_______	_______	_______	_______	_______
Six months ended 31 July 2010 (unaudited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2010		38,419	4,543	1,606	238,444	20,591	303,603
Return on ordinary activities after taxation		-	-	-	2,773	8,038	10,811
Dividends paid	5	-	-	-	-	(9,796)	(9,796)
		_______	_______	_______	_______	_______	_______
Balance at 31 July 2010		38,419	4,543	1,606	241,217	18,833	304,618
		_______	_______	_______	_______	_______	_______
Year ended 31 January 2011 (audited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2010		38,419	4,543	1,606	238,444	20,591	303,603
Return on ordinary activities after taxation		-	-	-	43,473	15,291	58,764
Dividends paid	5	-	-	-	-	(15,440)	(15,440)
		_______	_______	_______	_______	_______	_______
Balance at 31 January 2011		38,419	4,543	1,606	281,917	20,442	346,927
		_______	_______	_______	_______	_______	_______

CASHFLOW STATEMENT

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Net return on ordinary activities before finance costs and taxation		15,373	12,056	61,253
Adjustment for:
Gains on investments		(5,535)	(3,934)	(45,224)
Currency losses		7	65	125
(Increase)/decrease in accrued income		(825)	(1,010)	14
Decrease in other debtors		1,089	1,528	358
Increase in other creditors		647	71	211
		__________	__________	__________
Net cash inflow from operating activities		10,756	8,776	16,737
Servicing of finance
Interest paid		(1,213)	(1,190)	(2,362)
Taxation
Overseas withholding tax paid		(172)	(57)	(118)
Financial investment
Purchases of investments		(30,313)	(32,309)	(57,300)
Sales of investments		19,371	39,374	69,588
		__________	__________	__________
Net cash (outflow)/inflow from financial investment		(10,942)	7,065	12,288
Equity dividends paid	5	(9,796)	(9,796)	(15,440)
		__________	__________	__________
Net cash (outflow)/inflow before use of liquid resources and financing		(11,367)	4,798	11,105
Net cash inflow/(outflow) from management of liquid resources		13,866	(2,751)	(11,480)
		__________	__________	__________
Net cash inflow/(outflow) before financing		2,499	2,047	(375)
Financing
Drawdown of loans		5,000	5,000	5,000
Repayment of loans		(5,000)	(1,500)	(1,500)
		__________	__________	__________
Net cash inflow from financing		-	3,500	3,500
		__________	__________	__________
Increase in cash		2,499	5,547	3,125
		__________	__________	__________
Reconciliation of net cash flow to movements in net funds
Increase in cash as above		2,499	5,547	3,125
Net change in liquid resources		(13,866)	2,751	11,480
Exchange movements		(7)	(65)	(125)
		__________	__________	__________
Movement in net funds in the period		(11,374)	8,233	14,480
Net funds at 1 February 2011		17,432	2,952	2,952
		__________	__________	__________
Net funds at 31 July 2011		6,058	11,185	17,432
		__________	__________	__________

Notes to the Financial Statements

For the six months ended 31 July 2011

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 paid.
	(c)	Investments
		Investments have been designated upon initial recognition at fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are recognised at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE All-Share and most liquid AIM constituents. Gains or losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Income Statement.
	(d)	Capital reserves
		Gains or losses on the realisation of investments and changes in fair values of investments are transferred to the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve.
	(e)	Allocation of expenses
		Expenses are charged to capital when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect the investment management fee and relevant finance costs are allocated between revenue and capital in line with the Board's expectation of returns from the Company's investments over the long term in the form of revenue and capital respectively.
	(f)	Traded Options
		The Company may enter into certain derivatives (e.g. options). Option contracts are accounted for as separate derivative contracts and are therefore shown in other assets or other liabilities at their fair value i.e. market value adjusted for the amortisation of transaction expenses. The premium received and fair value changes in the open position are recognised in the revenue column, losses realised on the exercise of the contracts are recorded in the capital column of the Income Statement.
		In addition, the Company may enter into derivative contracts to manage market risk and gains or losses arising on such contracts are recorded in the capital column of the Income Statement.

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
2.	Income	£'000	£'000	£'000
	Income from investments
	UK listed - franked	7,953	7,455	11,964
	UK listed - unfranked	134	146	302
	Overseas listed	2,083	727	1,414
	Bond interest listed	199	289	502
	Scrip dividends	113	106	182
		__________	__________	__________
		10,482	8,723	14,364
		__________	__________	__________
	Other income
	Interest from AAA rated money market funds	14	11	40
	Interest on VAT recovered	17	-	1,121
	Income on derivatives	464	444	1,277
	Underwriting commission	-	38	102
		__________	__________	__________
		495	493	2,540
		__________	__________	__________
	Total income	10,977	9,216	16,904
		__________	__________	__________

3.	VAT on investment management fees
	On 5 November 2007, the European Court of Justice ruled that management fees on investment trusts should be exempt from VAT.  HMRC announced its intention not to appeal against this ruling to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company have now been processed by HMRC.
	The VAT charged on the investment management fees has been refunded in stages. An amount of £1,020,000 relating to the period 1 January 2004 to 31 October 2007 was recognised in the financial statements for the year ended 31 January 2009 and an amount of £573,000 relating to the period 1 January 2001 to 31 December 2003 was recognised in the financial statements for the year ended 31 January 2010. Further amounts of £1,095,000 representing all VAT charged on investment management fees for the period 1 January 1990 to 4 December 1996 and £202,000 for the period 1 January 2001 to 31 December 2003 were received and reflected in the financial statements for the year ended 31 January 2011. The refunds have been allocated to revenue and capital in line with the accounting policy of the Company for the periods in which the VAT was charged.
	In addition, an amount of £1,121,000 in respect of interest on the above settled claims was included in the financial statements for the year ended 31 January 2011. A further £17,000 of interest has been received in the current period. Both amounts were credited wholly to revenue.

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
4.	Taxation	£'000	£'000	£'000
	Withholding tax on income from foreign investments	172	57	118
		__________	__________	__________

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
5.	Dividends	£'000	£'000	£'000
	Interim dividend of 3.75p per share paid on 8 October 2010	-	-	5,651
	Final dividend of 6.50p (2010 - 6.50p) per share paid on 25 May 2011	9,796	9,796	9,796
	Refund of unclaimed dividends from previous periods	-	-	(7)
		__________	__________	__________
		9,796	9,796	15,440
		__________	__________	__________
	An interim dividend of 3.75p (2010 - 3.75p) will be paid on 17 October 2011 to shareholders on the register on 30 September 2011. The ex dividend date is 28 September 2011.

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
6.	Return per Ordinary share	p	p	p
	Revenue return	6.38	5.33	10.15
	Capital return	2.89	1.84	28.85
		__________	__________	__________
	Total return	9.27	7.17	39.00
		__________	__________	__________
	The returns per share figures are based on the following:
		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
		£'000	£'000	£'000
	Revenue return	9,612	8,038	15,291
	Capital return	4,352	2,773	43,473
		__________	__________	__________
	Total return	13,964	10,811	58,764
		__________	__________	__________
	Weighted average number of Ordinary shares in issue	150,706,187	150,706,187	150,706,187
		__________	__________	__________

7.	Transaction costs
	During the period, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows :
		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
		£'000	£'000	£'000
	Purchases	91	151	248
	Sales	22	50	68
		__________	__________	__________
		113	201	316
		__________	__________	__________

8.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 31 July 2011 includes gains of £69,183,000 (31 July 2010 - gains of £34,617,000; 31 January 2011 - gains of £66,528,000) which relate to the revaluation of investments held at the reporting date.

9.	Net asset value
	Equity shareholders' funds have been calculated in accordance with the provisions of Financial Reporting Standard 4 'Capital Instruments'. The analysis of equity shareholders' funds on the face of the Balance Sheet does not reflect the rights under the Articles of Association of the Ordinary shareholders on a return of assets. These rights are reflected in the net asset value and the net asset value per share attributable to Ordinary shareholders at the period end, adjusted to reflect the deduction of the Debenture Stock at par. A reconciliation between the two sets of figures is given below:
		As at	As at	As at
		31 July 2011	31 July 2010	31 January 2011
	Equity shareholders' funds	£351,095,000	£304,618,000	£346,927,000
	Adjusted net assets	£350,995,000	£304,505,000	£346,820,000
	Number of Ordinary shares in issue at the period end	150,706,187	150,706,187	150,706,187
	Equity shareholders' funds per share	232.97p	202.13p	230.20p
	Less: Unamortised Debenture Stock premium and issue expenses	(0.07p)	(0.07p)	(0.07p)
		__________	__________	__________
	Adjusted net asset value per share	232.90p	202.06p	230.13p
		__________	__________	__________

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
10.	Stock lending	£'000	£'000	£'000
	Aggregate value of securities on loan at the period end	7,196	-	-
		__________	__________	__________
	Maximum aggregate value of securities on loan during the period	7,196	-	-
		__________	__________	__________
	Fee income(gross) from stock lending during the period	-	-	-
		__________	__________	__________
	All stocks lent under these arrangements are fully secured against collateral. The value of the collateral held at 31 July 2011 was £7,569,000 (31 July 2010 - nil; 31 January 2011 - nil).

11.	Called-up share capital
	During the six months ended 31 July 2011 the Company did not repurchase any Ordinary shares (31 July 2010 - nil; year ended 31 January 2011 - nil).
12.	Subsequent events
		Since the period end, equity markets have fallen, with share prices in the UK and Europe being particularly affected. On a total return basis the NAV (with debt at fair value) has fallen by 9.49% and the FTSE All-Share Index has fallen by 9.15% in the period 31 July 2011 to 19 September 2011.
13.		Half Yearly Report
		The financial information contained in this Half Yearly Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 July 2011 and 31 July 2010 has not been audited.
		The information for the year ended 31 January 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.
		The auditors have reviewed the financial information for the six months ended 31 July 2011 pursuant to the International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

14.	This Half-Yearly Report was approved by the Board on 20 September 2011.

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 2011 which comprises the Income Statement, Balance Sheet, the Reconciliation of Movements in Shareholders' Funds, the Cash Flow Statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). 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 FSA.

As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the Statement Half-Yearly Financial Reports as issued by the UK Accounting Standards Board.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2011 is not prepared, in all material respects, in accordance with the Statement Half-Yearly Financial Reports as issued by the UK Accounting Standards Board and the DTR of the UK FSA.

Gareth Horner

For and on behalf of KPMG Audit Plc

Chartered Accountants

Edinburgh

20 September 2011

 

END

 

 

IR BLGDCUSDBGBG