Highlights for the Six Months to 31 December 2017
· Net asset value total return of 3.92%.
· Ordinary share price total return of 2.70%.
· Dividend yield of 7.1%, based on dividends at an annualised rate of 4.42 pence and a share price of 62.00 pence at 31 December 2017.
· Ordinary share price at a premium of 5.84% to net asset value at 31 December 2017.
· £9.0m of equity raised during the period.
Investment and Share Price Performance
The Company's net asset value total return was 3.92% for the six months to 31 December 2017. The share price total return for the same period was 2.70%, the premium to net asset value at which the Company's shares trade narrowed a little to 5.8%. The average premium over the six months to 31 December 2017 was 5.81% and over three years 3.87%.
It was always unlikely that last year's very strong returns would be repeated, but the markets have digested political change in the United States, Europe and the United Kingdom. Ian Francis, your investment manager, discusses the period under review in his review.
Earnings and Dividends
The Company declared two dividends of 0.99 pence in respect of the period, an increase of 1.0% on those declared in respect of the same period last year. In the absence of unforeseen circumstances, the Board expects to follow the same pattern of dividend payments as declared in the last two years and, based on a maintained annualised rate of 4.42 pence and a share price of 60.20 pence at the time of writing, this represents a dividend yield of 7.3%.
Gearing
The Company renewed its existing £30m loan facility with Scotiabank in December 2017 at a current all-in rate of 1.47%. The new facility is on comparable terms with the one that it replaced. £28m was drawn down at 31 December 2017 and the Company had an effective gearing rate of 11.6%.
Rating and Fund Raising
The market continued to attach a premium rating to the shares of your Company throughout the period under review. Taking advantage of this, the Company raised £9.0m from new and existing shareholders during the six months to 31 December 2017, selling the shares out of treasury. A further £3.1m has been raised since the period end and a balance of 7.4m shares remain in treasury. As well as a modest increase in net asset value from any issue of shares, existing shareholders can look to benefit from a lower ongoing charges ratio and greater liquidity in the Company's shares.
Board
I am delighted to welcome Caroline Hitch, who joined us on 15 March 2018, to the Board. After a number of years with James Capel and Standard Chartered, Caroline worked for 24 years at HSBC, where she had an investment focus on multi asset portfolios and a strong interest in transparency and governance. These are skills that complement and deepen the Board's resources and I am delighted that she has chosen to join us.
I recorded our thanks to Adrian Collins, who retired at the AGM, and welcomed John Newlands when I wrote to you in October. The number of Directors is now six, five of whom have been appointed within the last three years.
Outlook
I said above that markets have digested a considerable amount of political change, but it is politics that continue to give us most cause for concern. Since the period end, equity markets which had looked to a robust United States' economy and a Eurozone that continues to recover strongly have begun to see increased volatility in the face of talk of a trade war. Bond markets, too, reflect some of the risks, with global bond yields and spreads rising.
Portfolio diversification remains our watchword as we look for opportunities in a world where, in the view of the Federal Reserve at least, a turning point has been reached in the interest rate cycle.
James G West
Chairman
23 March 2018