Inspiredissue9

ISSUE 9 MARCH 2016

2016 cash in or cash out?

STRUCTURED PRODUCTS UNDER THE MICROSCOPE

BRITAIN’S FIRST ELECTRIC SUPER CAR: LIGHTNING GT

TOP TIPS FOR IPO INVESTORS

10 THINGS YOU NEED TO KNOW ABOUT ISAS

10 SHARES FOR A £10,000 INCOME IN 2016

SIX TIPS FOR BUYING CHEAP AIM SHARES

SCOTTISH MORTGAGE INVESTMENT TRUST

SCOTTISH MORTGAGE WAS ORIGINALLY LAUNCHED TO PROVIDE LOANS TO RUBBER GROWERS IN MALAYSIA IN THE EARLY 20TH CENTURY.

TIME JUST MAKES IT TASTIER. Scottish Mortgage Investment Trust believes in investment not speculation. We painstakingly identify those companies that we believe will deliver long-term growth and then we stick with them through thick and thin, providing our investment case remains valid. In fact we like to think of ourselves as ‘owners not renters’, which is why we don’t get side-tracked by short-term share price movements.

But don’t just take our word for it. Over the last five years Scottish Mortgage, managed by Baillie Gifford, has delivered a total return of 112.1%* compared to 46.7%* for the index. And Scottish Mortgage is low-cost with an ongoing charges figure of just 0. 48%.† Standardised past performance to 31 December each year*: 2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

Scottish Mortgage

-15.2%

30.1%

39.8%

21.4%

13.3%

FTSE All-World Index

-6.6%

12.0%

21.0%

11.3%

4.0%

Past performance is not a guide to future returns.

Please remember that changing stock market conditions and currency exchange rates will affect the value of your investment in the fund and any income from it.

You may not get back the amount invested.

For a free-thinking investment approach call 0800 917 2112 or visit www.scottishmortgageit.com

Long-term investment partners

*Source: Morningstar, share price, total return as at 31.12.15. †Ongoing charges as at 31.03.15. Your call may be recorded for training or monitoring purposes. Scottish Mortgage Investment Trust PLC is available through the Baillie Gifford Investment Trust Share Plan and the Investment Trust ISA, which are managed by Baillie Gifford Savings Management Limited (BGSM). BGSM is an affiliate of Baillie Gifford & Co Limited, which is the manager and secretary of Scottish Mortgage Investment Trust PLC.

CONTENTS Uncertainty is the watchword of the moment, should you take flight from the markets or view current volatility as a great opportunity to buy cheap shares in high quality companies? Our Companies Analyst Richard Beddard is very much in the second camp and takes time out to explain his unique approach to picking stocks.

Generating income is the key goal of many investors, our team set out to establish just how much you need to invest in a portfolio of dividend heroes to generate an annual income of £10,000.

The Tax Year end is fast approaching and our 10 ISA tips serve as a reminder of the opportunities that ISA investment can bring and what you’ll miss out on if you don’t make use of this year’s allowance.

Our Connoisseur section includes a look back at how the first electric supercar emerged, it’s British, it’s sleek and it leads the world.

ISSUE 9 MARCH 2016 PUBLISHER: Jeremy King

COMPANY NEWS AND FEATURES EDITOR

Lee Wild

CONTRIBUTORS: Ruth Jackson, Andrew Hore, Tom Wilson, Richard Beddard DESIGN: Yin Su

SALES:

Iain Adams, Dan Jefferson

PUBLISHED BY:

Moneywise Publishing Limited 2016 Interactive Investor plc, registered number: 5034730 You should remember that the value of shares can fall as well as rise. The information contained in Inspired is not intended to be a personal recommendation and you should always speak to your financial adviser before investing

FEATURES 4

10 THINGS YOU NEED TO KNOW ABOUT ISAS

6

SIX TIPS FOR BUYING CHEAP AIM SHARES

10 STRUCTURED PRODUCTS UNDER THE MICROSCOPE 16 JANUARY’S 10 MOST-BOUGHT TRUSTS 18 TOP TIPS FOR IPO INVESTORS 20 17 SHARES FOR THE FUTURE 23 WINTER PORTFOLIOS MAULED IN JANUARY

CONNOISSEUR 32 BRITAIN’S FIRST ELECTRIC SUPER CAR: LIGHTNING GT

26 ETF SECURITIES: ETPEDIA IN 7 SHORT VIDEOS

36 WATCHLIST: AUDEMARS PIGUET MILLENARY MC12

28 10 SHARES FOR A £10,000 INCOME IN 2016

38 A DISTILLED HISTORY OF GIN

Issue 9 March 2016

3

10 Things You Need to Know About Isas Ruth Jackson

Have you started the new year with renewed determination to save better? Here’s everything you need to know about Individual Savings Accounts (Isas), and why they are the best home for your savings.

4

Issue 9 March 2016

1. You can deposit over £15,000 a year

6. Your money will grow tax-free

2. The sooner you invest the better

7. You can only pay into one cash Isa per year

There is a limit on how much you can put into Isas each tax year, but it is a generous £15,240. Most of us don’t ever hit that limit – stats from Halifax show that the average opening balance of Isas is £10,299.

Many of us wait until the last minute to invest our Isa allowance with banks and investment firms doing a roaring trade in March as we all rush to use our allowance before we lose it.

If you started using your Isa allowance from the moment it renews at the start of April you will make more money.

Research by online wealth manager, Nutmeg, found that someone who invested £10,000 into a medium-risk portfolio at the start of the tax year each year for a decade would be £8,000 better off than someone who waited until the last day of the tax year.

Any money you hold within an Isa can grow without incurring a tax bill. That means you don’t have to pay income tax on interest earned, there’s no capital gains tax on profits you make on stock market investments, and tax on dividends is capped at 10%.

Every tax year you can open only one cash Isa. But, if you’ve opened yours and see a better rate elsewhere you can transfer to it. Just make sure that you comply with transfer rules – tell the new account provider that you want to transfer an existing Isa and they will go about moving the money and closing the old account. You have to move all the money and close the old Isa. Isas you’ve held from previous tax years can be transferred without your having to move all the cash or close the old Isa.

3. What to put in your Isa

8. Kids can have their own Isas

4. Teenagers can have two Isas

9. New withdrawal rules are coming

5. Peer-to-peer lending coming to Isas

10. Free money for house savers

If you are looking for a new cash Isa then the best rate out there is 2.6% on State Bank of India’s five-year bond. On two year deals the best offers are via Nottingham Building Society or Kent Reliance, which pay 1.85% on over £500 and £1,000 respectively.

If you need instant access the Post Office pays 1.45% on balances over £1100 with no upper limit. The rate includes a 0.8% bonus so put a note in your diary to switch in a year.

Children who are 16 or 17 are allowed to have an adult cash Isa as well as a Junior Isa. This means this age group has a bigger Isa allowance than anyone else. This tax year they would be able to put £19,320 beyond the reach of the taxman.

From 6 April 2016 there will be another new Isa on the block. The ‘Innovative Finance Isa’ will cover peer-to-peer lending. You will be able to lend money via platforms such as Zopa and Ratesetter without being taxed on the interest you earn.

Everyone is allowed to have an Isa but children have different entitlements. Up to the age of 16 a child can have one cash Junior Isa and/or one investment Junior Isa. Throughout that time they can only have one of each, so if you see a better rate for your child’s Junior Isa you will have to transfer the whole balance and close the old account. Children can put a lot less into their Junior Isas than adult Isas. The limit for the current tax year is £4,080.

From the new tax year, which starts on 6 April, if you withdraw cash from your Isa it won’t still count as part of your allowance. For example, at present if I deposited £5,240 into an Isa I would only be able to add a further £10,000 over the tax year, regardless of if I withdrew any of that initial deposit.

A new form of Isa has just launched, the Help to Buy Isa. This is designed to help first-time buyers save up a deposit for a home. You can put up to £3,400 into this kind of Isa in the first year (up to £1,200 opening balance then a maximum of £200 a month thereafter) then £2,400 in the years after that.

Issue 9 March 2016

5

Six tips for buying cheap AIM shares Andrew Hore Small companies, AIM shares in particular, appeared to hold up reasonably well in the first few days of this year, despite the general collapse in share prices around the world. However, their performance worsened as January progressed.

L

arger, more liquid shares tend to fall first and their smaller counterparts can lag this decline, but they do normally catch up. Over a longer period, they can fall even further than larger companies. I remember looking at share prices in the Financial Times after Black Monday in October 1987 - there was no internet then and most of the shares I owned were not on Ceefax - and feeling smug that they had hardly fallen in comparison with larger companies. Of course, it was not long before they started doing even worse.

The FTSE 100 (UKX) index fell by 4.6% in the first week of 2015, whereas the FTSE AIM All-Share (AXX) was only 2% lower over the same period. The following week, the FTSE 100 fell a further 1.8%, while AIM slumped by 3.8%.

The 7.5% decline in the FTSE 100 so far this month is already one of the worst performances for January in more than three decades. At one point, the index was down 9%, which meant that it was heading towards being the thirdworst performance.

In nearly half the years where January has been in negative territory, the FTSE 100 has ended the year higher. Even in 2000, when January was down 9.6%, the year as a whole was only 10% lower.

6

Issue 9 March 2016

Potential dilution should be taken into account when decisions are made to invest in some small companies that will undoubtedly need additional cash to achieve their aims.

AIM is just over 8% lower so far this year, whereas the FTSE All-Share (ASX) index, which includes the FTSE 100 companies, is 7.8% adrift.

The size factor also appears true for AIM. The FTSE AIM 50 index is more than 10% lower, while the FTSE AIM 100 index is 9% lower. This is probably due to the more liquid, larger AIM companies being hit by selling first. Both the AIM 50 and AIM 100 significantly outperformed AIM as a whole last year.

It is noticeable how floorcoverings supplier James Halstead (JHD), soft drinks maker Nichols (NICL) and light fittings supplier FW Thorpe (TFW), among others, have fallen more sharply than the AIM 50. That’s despite them being steadier long-term performers on AIM whose share prices have more than doubled over a five-year period. These are easier to sell and there are profits to bank.

There are specific examples of companies where good news has meant that the share price has not fallen, such as Majestic Wine’s (MJW) Christmas trading statement.

There are six things to consider when thinking about existing or potential investments.

Risk

The first thing to remember is that the company needs to still be around to benefit from any recovery. This is not a good time to be investing in highly risky companies with

weak balance sheets. If you want to take a chance on a highrisk company, there is nothing stopping you and there will probably be plenty of willing sellers.

This is doubly true of resources companies, where falling commodities prices are providing even more problems and making potential projects uneconomic.

Dilution

A company short of cash is not attractive at the moment, even if they can get additional funding. This is because any company that needs to raise money when share prices have slumped is going to have to endure heavy dilution, unless they have a good enough deal to persuade investors to buy additional shares at a premium to what is still likely to be a depressed price.

Potential dilution should be taken into account when decisions are made to invest in some small companies that will undoubtedly need additional cash to achieve their aims.

This is effectively reducing the value of the existing shares.

A company with a strong balance sheet and no requirement for funding is a better bet.

Liquidity

Poor liquidity is a double-edged sword. When there is demand, the share price can be pushed up to ridiculous levels.

Issue 9 March 2016

7

However, limited liquidity can make it difficult to sell shares - and that is not just a problem for the sellers, it is also a problem for the holders when share prices dive on minimal trading activity.

The prices of these shares may barely change while larger, more liquid shares plummet, because there is no trading activity - but when someone does try to sell a few hundred shares, the price could slump. This happens in times of stronger stockmarkets and it is even more likely to happen in poor markets.

The trouble is that it will be difficult for existing shareholders to sell their shares unless they are willing to take a hit in terms of price.

recognise that there could be a lot to lose as well if you go for higher risk companies.

Prospects

It is fair enough to invest on the back of the prospects for a company, but this is not a market that is going to give a heady valuation for potential in three or four years’ time. If there is little or no profit at the moment, there is nothing to hold up a share price. It is different if a company has a track record of growing profit and that is set to continue.

This was not a good time for estate agency services provider Purplebricks (PURP) to float when it has little in the way of revenues and makes significant losses. That is why the share price has fallen by more than one quarter from its 100p placing price at the end of 2015. Even at 74p a share, the company is valued at £178 million and the shares are trading on more than 10 times prospective earnings for the year to April 2018 - a forecast that appears optimistic.

Good quality companies that may have been looking a bit toppy in the short-to-medium-term could fall back to more attractive levels. An example is transport optimisation software and services provider Tracsis (TRCS), although the 2015-16 prospective multiple is still around 25.

High ratings

Even when companies are making profits, high ratings are unlikely to be maintained and there is more scope for their share prices to decline.

In a recent trading statement by EMIS (EMIS), the healthcare IT provider admitted that the secondary care division had not done as well as expected, which led to a share price decline of nearly 16% in one day, even though overall trading was as expected. The shares are still trading on 18 times 2016 prospective earnings.

Even after its share price fall James Halstead is trading on 24 times prospective 2015-16 earnings.

The Fevertree Drinks (FEVR) share price continues to defy gravity, having dipped by a couple of percentage points so far this year. Fevertree has decent trading volumes and, while there have certainly been sellers, there have also been buyers to mop up the shares.

This shows that a lot of investors have a strong belief in the company, but any signs that the business is not going as well as expected could lead to a hit on the share price particularly as the prospective profit multiple for 2016 is in the fourties.

Track record

In these times it is even more important to concentrate on companies that have a track record of performing to expectations. Anyone disappointing in these markets will be in trouble and the market will be slow to forgive them.

It is not a time to be investing in companies with “optimistic” management who are enthusiastic about their business, but rarely achieve expectations.

Two to consider

The flipside of these negatives is that they provide opportunities as well - but you have to be brave and

8

Issue 9 March 2016

Motor dealer Vertu Motors (VTU) has fallen by around 14% and it is trading on less than 12 times prospective 2015-16 earnings falling to just over ten in 2016-17.

There is net cash in the balance sheet even after recent acquisitions. The car market remains strong and Vertu is growing organically as well as through acquisitions.

One thing for sure is that you will not predict the exact day that the bottom of the market happens - unless you are very lucky. Once a market recovery does take hold, it will be the larger companies whose share prices tend to recover first. Currently, focusing on quality companies that are profitable and cash generative is the most important thing.

If a company is a good quality investment, its qualities will eventually be recognised.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

JPMorgan Indian Investment Trust

Not all emerging markets are equal.

India is the world’s fastest growing major economy (International Monetary Fund, July 2015). The JPMorgan Indian Investment Trust is the largest Indian trust to focus purely on Indian companies (Association of Investment Companies, as at 31/12/15), providing access to India’s long-term growth potential through locally based investment expertise.

Please note investments carry risk to capital and investments in emerging markets may involve a higher element of risk. This trust may utilise gearing (borrowing) which will exaggerate market movements both up and down. Ensure you fully understand the risks before investing.

For details including product specific risks and charges, refer to our website.

12 MONTH QUARTERLY ROLLING PERFORMANCE AS AT 31 DECEMBER 2015 %

2014/15

2013/14

2012/13

2011/12

2010/11

Share Price

1.2

49.9

-10.5

16.4

-33.8

Net Asset Value

3.6

43.7

-6.4

18.9

-32.3

Benchmark

-0.7

31.6

-5.6

20.4

-36.7

Past performance is not a guide to the future. Benchmark: MSCI India (in GBP). Source: J.P. Morgan/Morningstar as at 31/12/15. Performance data has been calculated on NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested in GBP. For details, see the Trust’s latest Report & Accounts.

Find out more at www.jpmindian.co.uk Copyright © 2016 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this. This material should not be considered as a recommendation relating to the acquisition or disposal of investments. Investment is subject to documentation which is comprised of the Investment Trust Profiles and Key Features and Terms and Conditions, copies of which can be obtained free of charge from J.P. Morgan Asset Management Marketing Limited. Issued by J.P. Morgan Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No. 288553. Registered address: LV-JPM26498 | 07/15 25 Bank St, Canary Wharf, London E14 5JP. 4d03c02a80029983

Structured products under the microscope Tom Wilson

Investors will be pleased with 7 per cent returns from structured products. So why are there so many critics? We take a close look at the sector.

10

Issue 9 March 2016

W

here can you go to get a decent return? If you lock your money in a top savings account for a year, you’ll get 2% if you’re lucky. With these paltry rates on offer, it’s not hard to understand why savers and investors would want to look elsewhere to see what’s available.

Structured products can potentially do much better. The average return on products maturing between June and November 2015 was a chunky 7% per year, according to analysis of 500 FTSE-100-linked investments by comparestructuredproducts.com.

However, critics call them complex instruments and cite products sold by Lehman Brothers that failed to deliver when the bank collapsed after the financial crash, or the mis-selling scandals that surrounded poor-value products that used to be pushed hard by high street lenders.

So where does the truth lie? Here’s a look at how they work, the risks, and the potential rewards on offer.

What are structured products?

Essentially, structured products are agreements between you and a bank (‘the counterparty’), that it will pay you a certain amount of money if some conditions are met, perhaps that the FTSE 100 index, or selection of shares in a few companies increase in a given period of time.

There are two main types: deposit based and capital at risk.

Deposit based accounts are similar to savings accounts. The amount you invest won’t fall, so you’ll get back what you put in. As with savings, your first £75,000 is protected by law under the Financial Services Compensation Scheme (FSCS).

However, the interest or growth you’ll receive depends on certain conditions being met, for example, if the FTSE 100 holds its value over an agreed timeframe. The risk is you’ll get no interest if it doesn’t.

With capital at risk products, you could lose some or all of your investment, but potential returns are higher. A capital at risk product that’s linked to the FTSE 100 might pay 10% interest if the index is the same or higher in one year’s time.

But it might also include a clause that if, after 12 months, the FTSE was at least 40% lower, the loss would be crystalised, with your investment’s value falling by the same percentage as the index.

These capital at risk products are investments, not savings, but there’s still a degree of protection from the FSCS in the event that the issuing bank can’t pay you at maturity, up to £50,000. That doesn’t cover any potential losses in the terms

of the contract though.

Of the 500 funds analysed by CompareStructuredProducts. com, while average returns were high, almost a fifth of them returned only the original capital, so investors missed out on any interest or dividends their money would have earned elsewhere. While none of these investments lost money, that’s not to say they couldn’t in future.

How complicated are they?

Structured products are sometimes criticised for their complexity, as they’re built around complicated derivative contracts between banks.

Is this fair? Arguably it’s not the right way to look at it.

Consider toasters. For the user, a toaster is easy. Bread goes in, toast comes out. Set the dial too high and your breakfast gets burned. But if you were to look at what’s inside the modest appliance, you’d find a tangled mess. Thomas Thwaites tried to build one from scratch, starting by disassembling a £3.99 device. Inside he found 100 different materials and 400 parts.

It took him nine months to make his own.

Similarly, Ian Lowes, financial adviser and founder of comparestructuredproducts.com says: “People criticise [structured products] for being complicated, but that’s a bit of a red herring.

“It should be complexity of outcomes that should be a red flag, not complexity of construction,” Generally, we don’t care if our toasters work as long as they do. And people don’t worry about how insurance companies work, as long as they pay out if we make a claim.

We should look at structured products the same way, argues Lowes. On this basis, he says, the possible outcomes of investing in structured products are clearer than most investments, except bonds.

With a fund, it’s impossible to gauge what it will be worth in a year’s time. With a structured product, the possibilities are clearly defined – if the conditions are met, you get a fixed amount, and if not, the other possible outcomes are also laid out.

The key is to understand what those conditions are, how likely they are to happen, and whether you can tolerate the risk.

Lowes adds that even though he’s a strong advocate of structured products (he says they account for half his own portfolio), they’re better suited as a diversifier for a typical investor. He estimates around 15% of his clients’ money is held in structured products.

Issue 9 March 2016

11

Questions to ask when choosing a structured product Whenever you buy anything, investments or otherwise, it’s important to make sure you understand the deal you’re agreeing to. It’s vital with structured products, as each is unique.

1. Is my capital protected?

Some products will guarantee you won’t lose your initial deposit, others won’t. In exchange for the extra protections of a depositbased investment, the potential gains are usually lower.

2. What are the payout conditions based on?

Lowes advises all but the most experienced investors should stick to simple products that are linked to the FTSE 100. Some more exotic structured products could be linked to other indices, or individual share performances, which is very risky unless you know what you’re doing.

3. Am I happy to lock my money away?

You shouldn’t invest in structured products unless you’re willing to invest for the full term, which could be anything up to ten years.

You may be able to sell a structured product back if you need to get out early, but the price you’ll be offered could be less than its maturity value. Additionally, early exit fees of around £150 to £200 could apply.

4. Who is the counterparty?

Fundamentally, structured products are a contract you make with a bank, so you need to be confident they’re going to be able to pay you at maturity. Most are issued by solid banks, and it’s very unlikely that they’ll fail. Not impossible though.

As with anything, if you’re not confident in what you’re buying, don’t buy it. Read the full literature, and if you use an adviser, they’ll be able to help explain the possible outcomes of a structured product.

The key is to understand what those conditions are, how likely they are to happen, and whether you can tolerate the risk.

12

Issue 9 March 2016

Advertisement Feature

Three reasons to consider The City of London Investment Trust The City of London Investment Trust – launched in 1891 – is a portfolio with assets of over £1bn in large blue-chip UK equities. Job Curtis, manager of the Trust for 25 years, applies a disciplined and conservative approach to stockpicking’. Taking into account capital is at risk, why might you invest?

An investment trust advantage

One of the Trust’s strategic aims is to provide a growing stream of income for its investors by investing in companies that are well financed, offer a strong competitive advantage and demonstrate a history of stable cash-flows and rising dividends.

The investment trust structure helps to achieve this aim: unlike open-ended vehicles which must pay out all of the income they receive from underlying holdings, a UK-domiciled investment trust is permitted to retain up to 15% of its annual income and pay it into a reserve account. This means that during more plentiful years a small percentage of the dividend payments can be put aside, so that during lacklustre years, for example in an economic downturn, the fund manager is able to use the reserve to top-up the dividend it pays investors and smooth the income stream over time.

While not a guide to the future, this has enabled City of London to grow its dividend every year since 1966 - the longest record of any investment trust! Job Curtis has been managing the Trust since 1991.

Henderson: The City of London Investment Trust

Click to watch this video A good investment for the long term?

We believe investing over the longer term serves to mitigate some of the shortterm risks and volatility inherent in equity markets, and can maximise your potential returns. The City of London Investment Trust aims to unlock value in equities on a medium to long-term basis, and may be of interest to investors looking to gain UK

Issue 9 March 2016

13

stock market exposure through a broad, conservatively managed portfolio of bluechip investments.

Looking back over the past 50 years, short term investors may have been unnerved by any number of macroeconomic events: the 73/74 bear market, the winter of discontent, severe unemployment, interest rates hikes to 15%, ‘Black Monday’, ‘Black Wednesday’, The Asian Financial Crisis, the dotcom crash, or the Global Financial Crisis; all potentially leading to performance damaging withdrawals in the process.

Let’s look at the scenario of investing £100 in various assets, including The City of London,

50 years ago and run through to the present day.

Adjusted for inflation, £100 in cash would be worth £1662 today; with income reinvested, £100 put into gilts would have handed back just under £7k; a broad basket of UK equities would have earned you nearly £27k; and £100 into the City of London would have earned just over £56k.

Whatever your investment, you would have achieved the best outcome with a long term approach. However, please consider that past performance should not be used as a guide to future performance.

CITY OF LONDON DISCRETE PERFORMANCE DEC 2014 DEC 2015

DEC 2013 DEC 2014

DEC 2012 DEC 2013

DEC 2011 DEC 2012

DEC 2010 DEC 2011

NAV

5.80%

5.10%

26.10%

16.20%

3.20%

PRICE

6.10%

4.40%

24.10%

16.60%

2.10%

PERFORMANCE

14

Issue 9 March 2016

Low charges

Charges can be a significant drag on performance, a fact sometimes ignored by investors. For example, using a simple mathematical model, a £10,000 investment growing at 6% for 30 years would be worth around £51,000 in a fund charging 0.4%, but only £42,500 in an identical fund charging 1%.

Due to its size and its ability to spread its costs among a large base of investors, City of London’s ongoing charge is the lowest in its sector, at just 0.43% per year.

Risks

The value of an investment may go down as well as up, and you may lose the amount originally invested. Where the trust invests in assets which are denominated in currencies other than the base currency then currency exchange rate movements may cause the

value of investments to fall as well as rise.

The trust may use gearing as part of its investment strategy. Gearing is the investment company’s ability to borrow extra funds for investment purposes and represents its financial leverage. If the trust utilises its ability gear, the profits and losses incurred by the trust can be greater than those of a trust that does not use gearing.

If a fund is a specialist country-specific or geographic regional fund, the investment carries greater risk than a more internationally diversified portfolio.

Click here to buy City of London Trust on Interactive Investor

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser.

The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Issued in the UK by Henderson Global Investors. Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Fund Management Limited (reg. no. 2607112), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services.

Issue 9 March 2016

15

January’s 10 most-bought trusts Marina Gerner

G

lobal equity investment trust Scottish Mortgage was the most-bought trust on Interactive Investor in January, reigning largely uninterrupted over the top spot for almost two years.

Money Observer Rated Fund Scottish Mortgage has been unseated only once since February 2014. This was in April last year, when it was trumped by Woodford Patient Capital during the latter’s record breaking launch onto the UK stock market with £800 million of assets under management.

Since then Woodford Patient Capital has tended to be the second most-bought trust among Interactive Investor clients, and this remained the case in January.

Despite the continuing popularity of its star manager Neil Woodford, however, the trust has underperformed since launch, shedding 23 per cent in share price terms and 16 per cent of its net asset value (NAV)

16

Issue 9 March 2016

over six months to 4 February.

Underperformance

The trust’s underperformance is due mainly to its large exposure to biotechnology companies, which have suffered a volatile period.

Woodford’s significant stake in beleaguered US firm Northwest Biotherapeutics has weighed particularly on the portfolio as allegations of poor governance and financial impropriety have seen the company’s share price plummet.

Money Observer Rated Fund Finsbury Growth and Income remained firmly in fourth place in January, as the Biotech Growth Trust also held onto fifth place.

City of London - another Money Observer Rated Fund - climbed three places since December to fifth most-bought trust in January. The trust is a popular income choice, having grown its dividend every

year for the past 49 years - the longest record of any UK-listed investment trust.

BlackRock World Mining descended one place to be the seventh most-bought trust in January amid losses caused by persistent declines in global commodity prices.

The trust has made a loss in both share price and NAV terms over most time periods to 4 February, however its 12 per cent yield means it remains attractive for contrarian income seekers.

Income Play

Murray International was the eighth mostbought trust last month, making its first appearance in the top 10 since August. The trust is another to have suffered steep losses in recent years, in this case due to a high weighting in emerging markets.

Over three years to 4 February, Murray International has shed 18.1 per cent in share price terms compared to a 12 per cent gain from the Association of Investment Companies’ (AIC’s) global equity income sector.

Like BlackRock World Mining, however, the trust pays a substantial yield - 6 per cent

RANK

- while its share price to NAV discount has widened significantly over the past year to 5.2 per cent. This marks an attractive entry point for investors interested in building emerging market exposure while taking a dividend.

Money Observer Rated Fund RIT Capital Partners was the 10th most-bought trust in January. This is the first time that the £2.5 billion Rothschild family investment vehicle has made the top 10 mostbought list and reflects a strong period of performance.

Over the past three years RIT Capital Partners has delivered 43.4 per cent in share price terms compared to just 20.5 per cent from the AIC’s global sector, while over one year it has returned 11.1 per cent compared to an average loss of 2.6 per cent from the sector.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise.

The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

NAME

AIC SECTOR

CHANGE SINCE DECEMBER

1M SP RETURN TO 4 FEB (%)

3YR SP RETURN TO 4 FEB (%)

1

SCOTTISH MORTGAGE

GLOBAL

--

-10.7

51.5

2

WOODFORD PATIENT CAPITAL

UK ALL COMPANIES

--

-9.9

N/A

3

FINSBURY GROWTH & INCOME

UK EQUITY INCOME

--

-1.6

42.2

4

BIOTECH GROWTH

BIOTECHNOLOGY AND HEALTHCARE

--

-15.2

87.3

5

CITY OF LONDON

UK EQUITY INCOME

3

-2.1

25.4

6

WITAN

GLOBAL

1

-5.5

39

7

BLACKROCK WORLD MINING

COMMODITIES AND NATURAL RESOURCES

-1

-0.6

-65.6

8

MURRAY INTERNATIONAL

GLOBAL EQUITY INCOME

4

-2.2

-18.1

9

JUPITER EUROPEAN OPPORTUNITIES

EUROPE

1

-5

52.8

10

RIT CAPITAL PARTNERS

GLOBAL

8

-4.4

43.4

Issue 9 March 2016

17

Top tips for IPO investors Andrew Hore

T

here tends to be a disappointing lack of information available to investors prior to a company joining AIM. Estate agency Purplebricks (PURP) is a good example of this. There was no mention of the monetary level of revenues in the pre-admission announcement last December. This may possibly be because it would have highlighted how high the valuation was.

This did Purplebricks no favours, because the share price fell by one quarter in the first month, although it has recovered since then.

It does provide a warning to investors when it comes to making investment decisions without the appropriate information.

It should be remembered that these pre-admission and intention to float announcements are effectively marketing and should be viewed as such. Unlike results announcements, there is no set information that has to be included in these announcements.

No realistic judgement can be made about a company based on these announcements. Individual investors can rarely get hold of shares in flotations and they tend to be keen to know if a company is worth investing in prior to when the shares start trading. However, it is rare that a quality judgement can be made at that point.

It can be argued that, these days, the prospectus is available on the company’s website. However, it is not usually available before trading in the shares commences. Even a scanning of the prospectus takes time.

Telltale signs

One telltale sign in an intention to float announcement is the lack of information about revenues or profit. If they are nowhere to be found, you can pretty much bet that they are low or non-existent, or at the very least they are meagre when compared with the valuation being put on the company.

An even bigger giveaway that there is little in the way of revenues is when no monetary figure is mentioned, but a large rate of increase is highlighted. This suggests a low starting base of revenues.

Purplebricks stated in its pre-admission announcement that September 2015 revenues were ten times the level in September

18

Issue 9 March 2016

2014.

In the year to April 2015, Purplebricks revenues were £3.4 million, which was slightly lower than the sales and marketing costs in the period. Over the previous three years, the company lost a total of £8.3 million.

Yet, the valuation at the time of the flotation last December was £240.3 million - admittedly after raising £25 million (£22.8 million net) of new money.

Existing shareholders took the opportunity to raise £32.2 million after expenses as part of the placing. That is more cash than had been previously raised by the company. Following the interim figures, Michael Bruce bought 320,000 shares at 78p each and this appeared to help the share price recover. However, he sold 10.6 million shares in the placing, generating £10.6 million, so he has reinvested less than 2.5% of the cash raised at a higher price.

No guarantees

The argument for the high valuation is that the business is going to grow rapidly. That is all very well, but there is no guarantee that trading will go as expected and forecasts two or three years ahead are rarely correct.

Hardman published research on the day the shares commenced trading and the forecasts appear optimistic. If things go to forecast, Hardman expects revenues of £71.2 million and pre-tax profit of £18.9 million in the year to April 2018. That equates to a multiple of 14 times prospective 2017-18 earnings, although the earnings figure is boosted by the use of tax losses to reduce the tax charge.

The interim figures did show revenues growing from £819,000 to £7.18 million, so this suggests that the full year forecast revenues of £17.8 million are possible.

Purplebricks argues that the estate agency market is worth around £4 billion a year. However, Purplebricks also says that the average charge for its service is £1,080. That is around one-quarter of the average cost of the services of ordinary estate agents. So, in effect, the potential market Purplebricks can address is likely to be nearer to £1 billion.

Do not get sucked into a company just because it has a high profile or a well-known brand name. Also, do not make investment decisions when there is a lack of information. It is tempting to think that you have to buy immediately or miss out, but there are so many investment opportunities that it does not matter if some are missed.

New admissions on AIM can tend to be a mixed bag and that was true of last year. There were a number of strong performers and the average performance of all new admissions was positive, according to Allenby. Some of the best performers and other companies that have not risen significantly are still attractive. Here are three examples:

Stride Gaming

Stride Gaming (STR) was no bargain when it floated, but it has a clear strategy of buying online bingo operators and the high share price helped it to make the significant and earnings-enhancing acquisition of InfiApp, which added social gaming to the group. The business is highly profitable and there is plenty of opportunity to acquire more bingo operators.

The larger online gaming companies are more interested in highermargin poker and casino games. On top of this, the 15% point of consumption tax brought in by the UK government has increased costs and makes it more difficult for some of the smaller bingo operators to make money. Stride can make acquisitions, add the brands to its own software platform and reduce costs.

One of the attractions of Stride is that it has an experienced management team that has built online bingo operations in the past.

Chief executive Eitan Boyd built up bingo network GlobalCom and Wink Bingo prior to their sales to 888 (888) and chief operating officer Darren Sims was also involved with 888’s bingo business.

A profit of £10.3 million is forecast for 2015-16, rising to £11.6 million in 2016-17. The shares are trading on 15 times prospective 2015-16 earnings, falling to 13 the following year. The business is cash generative and, despite a significant rise in the share price, Stride is still an attractive investment.

Bilby

Bilby (BILB) joined AIM last March in order to build a business focused on gas installation, maintenance, electrical, water and building services for local authorities and social housing organisations in London and the south east. Two acquisitions were made last year.

Bilby has won preferred bidder status for gas support work for the South East Consortium, which is a group of housing associations

that manage more than 140,000 residential properties. This framework agreement starts in 2016 and lasts for four years.

House broker Panmure Gordon predicts that this framework will contribute £7 million to revenues in 2016-17. New contracts with Greenwich and Hackney will also contribute to revenues, which are expected to grow by more than 50% in 2016-17.

Panmure forecasts a 2015-16 profit of £3.1 million, rising to £4.9 million the following year. A total full year dividend of 2.75p a share is forecast and annual dividend growth of up to 10% is expected.

The shares are trading on more than 20 times prospective 2015-16 earnings, falling to 13 in 2016-17. The shares appear fairly valued in the short-term, but they are attractive as a long-term investment with the prospect of more earnings-enhancing acquisitions to come.

Orchard Funding

Finance provider Orchard Finance (ORCH) raised £10 million at 96p a share prior to joining AIM on 1 July and this valued the company at £20.5 million. The maiden figures, published for the year to July 2015, were ahead of expectations. Orchard offers a combination of growth and income.

Orchard provides loans to cover insurance premiums or professional fees and this loan is typically for ten months. There is limited competition in these areas. The cash raised provides plenty of scope for growing the business. The lending book is expected to grow from £43.6 million at the end of July 2015 to £64.8 million in July 2017. As the lending portfolio grows, the cost income ratio will decline from the current level of 37%, as operating costs are relatively fixed.

Panmure Gordon expects pre-tax profit to more-than-double from £1.29 million to £2.73 million in the year to July 2016, helped by paying off higher cost debt from flotation funds, but earnings per share (EPS) growth will be held back by the additional shares in issue partly offset by a lower tax charge.

Even so, 2015-16 EPS of 10.2p and a dividend of 3.07p a share are forecast. Dividend cover is likely to stay above three times, but earnings growth will enable the dividend to grow. Orchard is trading on less than eleven times prospective 2015-16 earnings, falling to just over eight times the following year.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Issue 9 March 2016

19

17 shares for the future Richard Beddard

J

anuary is, in one respect, the slackest month in my investing year. Although many companies’ financial years coincide with the calendar year, few of them have pulled all the information together and published their results by the end of the following

month.

In at least two other respects, it’s been busy. The stockmarket suffered a reversal. I know when the market sinks because colleagues tell me, and the decision engine takes on a different complexion.

Unlike the red I imagine on most investors’ screens, the decision engine turns a calming shade of green as more of the stable, financially strong companies I favour trade at attractive valuations. I created the decision engine to make it easier for myself to add shares to the Share Sleuth portfolio when they are cheap, and remove them when they are expensive.

This is not easy when you are surrounded by cues to do the opposite, panic-sell, for example, when red arrows light up on portfolios and watchlists, and alarmist stories about falling prices make the headlines. The two can combine to shake investors out of good companies, which is unhelpful if you planned to invest for the long-term and the shares remain good long-term prospects.

Sell-offs create opportunities, which is why the decision engine has turned green and one reason why I have been busy. The best opportunities, the shares for the future, are the shares ranked most highly. This month there are 17 out of the 49 shares I currently follow. If I were to start a new portfolio today, a portfolio I wouldn’t expect to cash in for a decade or more, I would consider first the companies from the top of

You can make better trades without ever knowing the share price, argues forensic analyst Richard Beddard. His equity portfolio has doubled in value over five years. Here’s how he does it. Click to watch to the video.

20

Issue 9 March 2016

this list, and work down.

I’ve also been busy, because time saved making sense of new company results is time gained to investigate companies more thoroughly, to look back into the past, and imagine the future.

I chose to focus on Victrex, the highest-ranked share covered by the decision engine that is not represented in the Share Sleuth portfolio, ITE, Dewhurst and Treatt. Although I have yet to write up my notes, I also attended AGMs at ITE and Dewhurst.

Victrex has shifted strategy because it is in danger of outgrowing its existing market. It manufactures high performance thermoplastics, polymers strong, durable and light enough to replace metal in aeroplanes, subsea pipes, human surgical implants and many other applications. To grow, Victrex must develop new products itself, as well as supplying other manufacturers with polymer as it has done, largely, in the past. Although a change of strategy is risky, Victrex has considerable experience and a market leading position to build on. It’s no longer unrepresented in the Share Sleuth portfolio, I added the shares on 26 January.

It may be churlish comparing ITE to a cockroach, because cockroaches have an unpleasant reputation, but ITE is attracted to dark places - the bulk of the trade shows it puts on are in Russia and Central Asia and, while sales in those oil-dependent and geopolitically sensitive economies have fallen dramatically, the company is surviving, perhaps cockroach-like.

Its finances are more stressed than they were before, but profitability is holding up and, through the acquisition of trade shows in other emerging markets as well as the decline

NAME

YEAR END

COMPANY DESCRIPTION

GOODWIN

JUL-15

MANUFACTURES VALVES, PUMPS AND OTHER LARGE COMPONENTS FOR THE OIL AND GAS, CONSTRUCTION AND DEFENCE SECTORS. ALSO PROCESSES MINERALS USED TO MAKE MOULDS FOR JEWELLERY AND TYRES, AND FIRE RESISTANT MINERALS

DEWHURST

SEP-14

MANUFACTURES COMPONENTS FOR LIFTS, KEYPADS AND RAILWAY ROLLING-STOCK (E.G. PUSHBUTTONS, SIGNALS)

SCIENCE

DEC-14

DOES RESEARCH AND PRODUCT DEVELOPMENT FOR CUSTOMERS IN MEDICAL, INDUSTRIAL, CONSUMER AND ENERGY INDUSTRIES, ADVISES

CASTINGS

MAR-15

MANUFACTURES CAST IRON PARTS FOR COMMERCIAL VEHICLES: EXHAUSTS, TRANSMISSIONS AND GEARBOXES FOR EXAMPLE

BRAINJUICER

DEC-14

USES HOME-GROWN MARKET RESEARCH TECHNIQUES TO TEST PEOPLES’ EMOTIONAL RESPONSE TO ADVERTISEMENTS AND CONCEPTS

RENSIHAW

MAR-15

MANUFACTURES PROBES, SENSORS, GAUGES AND FIXTURES ENABLING OTHER MANUFACTURERS TO CALIBRATE, TEST, AND CONTROL THE PERFORMANCE OF THEIR MACHINES

VICTREX

SEP-14

MANUFACTURES AND DEVELOPS APPLICATIONS FOR PEEK, A KIND OF SUPER-PLASTIC OFTEN IN PLACE OF METAL WHERE DURABILITY AND LIGHTNESS ARE PARAMOUNT

COLEFAX

APR-15

DESIGNS AND DISTRIBUTES WALLPAPER AND FABRIC TO DECORATORS AND STORES. ALSO DECORATES HOUSES, SELLS ANTIQUES AND MANUFACTURES FURNITURE

JAMES LATHAM

MAR-15

IMPORTS AND DISTRIBUTES PANEL PRODUCTS (MDF, PLYWOOD ETC.), ENGINEERED WOOD, AND TIMBER

TREATT

SEP-14

SOURCES AND PROCESSES ESSENTIAL OILS, WHICH ARE INGREDIENTS USED IN FLAVOURS, FRAGRANCES AND COSMETICS. DEVELOPS FLAVOURS

VP

MAR-15

RENTS OUT SPECIALIST EQUIPMENT AND TOOLS TO CONSTRUCTION, ENGINEERING, TRANSPORT, OIL AND GAS AND EVENTS BUSINESSES, AND INDIVIDUALS

ANIMALCARE

JUN-15

SUPPLIES GENERIC AND ENHANCED PET MEDICINES. ALSO SUPPLIES PET IDENTIFICATION AND VETERINARY PRODUCTS

PORTMEIRION

DEC-14

MANUFACTURES TABLEWARE. OWNS PORTMEIRION, SPODE AND ROYAL WORCESTER BRANDS

COHORT

APR-15

SUPPLIES TECHNOLOGY, SERVICES AND CONSULTANCY TO GOVERNMENTS AND DEFENCE CONTRACTORS

DUNELM

JUL-14

SELLS HOMEWARES: CURTAINS, BEDDING, KITCHEN/DININGWARE, FURNITURE ETC., MOSTLY THROUGH OUT OF TOWN STORES

ITE

SEP-15

ORGANISES TRADE EXHIBITIONS AND CONFERENCES, ESPECIALLY IN RUSSIA, EASTERN EUROPE, CENTRAL ASIA AND OTHER EMERGING REGIONS

RR.

DEC-14

DESIGNS, MANUFACTURES AND SERVICES POWER SYSTEMS FOR PLANES, TRAINS, BOATS, SUBS AND POWER GENERATION

of its own, it’s less dependent on Russia than it was.

Dewhurst warned profit in 2016 will be significantly below 2015 on the morning of its AGM, making a mockery of my headline: “fundamentals of stability”. Analysing a decade of segmental data failed to unravel the mystery of Dewhurst’s decline in profitability from very good to good. Maybe it’s just cyclical.

Flavour processor and supplier Treatt, like Victrex, is getting closer to its end customers by inventing novel flavours for the drinks industry. I think its recent results show the strategy is paying off.

Last month, I anticipated reappraising Goodwin. Like ITE, sales at Goodwin have fallen sharply due to the decline of the oil price, and it’s diversifying. Unlike ITE, at Goodwin, which manufactures check valves used in pipelines, the impact on return on capital is greater.

While ITE is reducing the size of some of its exhibitions, Goodwin has relatively high fixed costs (factories and machines), and it’s still investing in them. Even so, the company remained profitable at its half-year in December and

22

Issue 9 March 2016

I have considerable faith in management. Meanwhile, a low market valuation has sent Goodwin to the top of the decision engine’s ranking.

The decision engine is a giant collection of spreadsheets that spew out financial ratios, incorporate my own judgements and rank the companies I follow. I’ve added five companies since the last update, although none of them are currently ranked highly enough to join the shares for the future mostly because, despite the sell off, they still trade on high market valuations.

They are: Topps Tiles, Porvair, SThree, Unilever and RWS. Mid-ranked Games Workshop continues to baffle me. Halfyear results gave no adequate explanation for a big decline in sales of fantasy miniatures. I’m afraid the company isn’t facing up to intensifying competition, at least publicly.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Winter Portfolios

mauled in January Lee Wild

S

easonal investing is nothing new. Statistics going back 20 years show that share prices do best during the long winter months. This anomaly has made smart investors substantial profits for two decades, and last year we launched our own model portfolios based on the simple trading strategy. They were so successful we’ve done it again. Known as the six-month strategy, all investors need do is buy a basket of shares on 1 November and sell on 30 April. Investing in the market between these dates only for the past 20 years would have turned £100 into £316. Over 10 years, it would have made twice as much profit as staying invested all year round.

A year ago, we screened the FTSE 350 for the five stocks with the best record of returns between November and April over the past decade - the Interactive Investor Consistent Winter Portfolio. Last year it made a 14% profit compared with 8.7% for the FTSE 350 benchmark index.

We also relaxed the rules slightly to include companies with a track record of at least nine years, but which must have risen at least three-quarters of the time over the past 10 years - our higher risk Aggressive Winter Portfolio. Last year, it returned an impressive 16.9%.

Investing in this year’s Consistent portfolio every winter for the past decade would have generated an average gain of 24% (excluding dividends) compared with an average of 5.4% for the FTSE 350.

Gains for the Aggressive portfolio wold have averaged over 35%, seven times more than the benchmark.

Here’s a round-up of the highlights and lowlights from the third month of this six-month strategy.

Another “difficult” January

History seems to be repeating itself where our seasonal portfolios are concerned. After a stunning first couple of months, we had what might politely be described as a “difficult” January.

Global stockmarkets had already shown what volatility can do to share prices, with the crash in August and further wild gyrations for much of the rest of 2015. And the panic spilled over into 2016. In fact, it was the worst ever start to a year for equities, tipping many markets into “bear” territory. A rebound toward the end of the month narrowed losses for the FTSE 350 to a respectable 3.1%, but our portfolios were left bearing the scars.

Our Aggressive Winter Portfolio rose almost 4% over November and December compared with a 1.2% decline for the FTSE 350 benchmark index. But it fell 6.7% in January. Last year, the portfolio rallied over 12% in two months before falling 4.5% at the start of the year.

It was similar, but slightly less dramatic, for our Consistent Winter portfolio. Up nearly 6% in the first two months of this year’s strategy, it tumbled 10.6% last month. A year ago, a 1% gain turned to a 2% loss between the start and end of January.

When the dust settled, the consistent portfolio is currently down 5.4% since the end of October, the aggressive portfolio is down 3.3% and the FTSE 350 4.3%. Here’s how it happened.

Consistent Winter Portfolio

Without doubt, the biggest shock for both of this year’s winter portfolios was the demise of equipment rental company Ashtead (AHT). It had been a star performer, ending December up 12%, but investors took fright after US peer United Rentals (URI) issued a more cautious outlook for 2016.

Fourth-quarter revenue at the American firm, the largest equipment rental company in the world, fell 13%, much more than Wall Street had expected. However, United does a lot of work for the Canadian oil industry where conditions are tough.

Ashtead does not, yet its share price still fell 20% in January. “We believe this is overdone,” says Numis Securities analyst Steve Woolf.

We hope so, too. Ashtead trades on just 10 times earnings estimates for 2016, so Woolf says ‘buy’ up to 1,150p.

Regus (RGU), another company which appears in both the consistent and aggressive portfolios, had another stinker, too. To be fair, though, the shares have failed to spark so far this winter.

Down 4.9% in December, the workspace provider fell 10.7% last month despite a lack of news. It has done incredibly well over the past few years, outperforming the FTSE All-Share (ASX) by miles.

This could just be a case of profit taking, especially as the shares typically trade on high price/earnings (PE) multiples. Even now, the forward PE is still 19.7 times, reward for rapid profit growth.

Having been up as much as 10% in December, catalytic convertor maker Johnson Matthey (JMAT) fell over 7% in January and is now in negative territory overall. Third-quarter sales were ahead of last year, but Matthey admits times are tough, especially at the Process Technologies and Precious Metal Products divisions.

Normally reliable speciality chemicals high-flyer Croda (CRDA) came off the boil on no specific news. Irish building materials firm CRH (CRH) got a bloody nose, too, down 8.5%. But it’s still a City favourite and there are plenty of benefits to come from the acquisition of Lafarge-Holcim.

Aggressive Winter Portfolio

Our aggressive portfolio outperformed its historically more consistent cousin in January, despite also harbouring performance bad boys Ashtead and Regus. That’s down almost entirely to high street tracksuits and trainers chain JD Sports (JD.).

After rocketing 7.2% in December following a profit upgrade, the retailer raised earnings estimates again just six weeks later. Investec Securities now thinks the shares are worth 1,280p.

Elsewhere, housebuilder Taylor Wimpey (TW.) lost 5% last month, although its attractive dividend yield and strong residential housing market continue to underpin the current share price.

We’ve saved the worst till last in terms of three-month performance.

Gaming software giant Playtech (PTEC) is yet to find its feet.

Despite rising 3% in December, it fell 7.7% last month and has been underwater since mid-November.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

24

Issue 9 March 2016

MONEY OBSERVER RATED FUNDS NOW UPDATED FOR 2016 CHOOSING THE RIGHT FUND

and investment trusts for your portfolio is no simple exercise with more than 2,800 funds and 300 trusts competing for your cash.

MONEY OBSERVER RATED FUNDS

are presented in easy-to-understand asset groups – narrowing down the field to help you decide which might be best suited to your investment aims.

OUR TEAM OF EXPERTS

have rated funds and trusts that have consistently outperformed their peer groups, or are well-suited to current market conditions. However, you should be aware that there is no guarantee this performance will be repeated.

DON’T MISS THIS MONTH’S SUPPLEMENT, OR VISIT

MONEYOBSERVER.COM/RATEDFUNDS TO BROWSE OUR RATED FUNDS FOR 2016

ETPedia in 7 short videos. Back to basics.

ETF Securities provides accessible investment solutions, enabling investors to intelligently diversify their portfolios beyond traditional asset classes and strategies.

Pioneers in specialist investments, having developed the world’s first gold exchange traded commodity.

ETF Securities believes investors should always understand and fully appreciate the risks involved in their investments. In light of this, ETF have produced ETPedia, which aims to provide investors with an unbiased reference to Exchange Traded Products (ETPs).

Investors can watch the series of short animated videos for an overview of ETPs. You can also visit the ETF Securities page on Interactive Investor by clicking here.

26

Issue 9 March 2016

1. ETPedia: Intro to ETPedia Watch this video

2. ETPedia: ETPs at a glance Watch this video

3. ETPedia: Structure Watch this video

4. ETPedia: Facts and risks Watch this video

5. ETPedia: Creation and redemption Watch this video

6. ETPedia: Cost and performance Watch this video

7. ETPedia: Active and Passive Watch this video

Issue 9 March 2016

27

10 shares for a £10,000 income in 2016 Lee Wild

Savers gave up on current accounts for generating income years ago, ever since the financial crash triggered a plunge in interest rates to just 0.5% in 2009.

D

ividend-paying equities emerged as a favoured alternative, supported by rule changes in 2014 that made investing in an ISA more attractive.

This got us thinking about how much an investor would need to generate an income of £10,000 a year from an equity portfolio. A year ago, to maximise certainty and limit risk, we picked eight blue-chips with a track record of regular and sustainable dividends.

A pair of speculative high-yielding shares completed a basket of 10 shares, beefing up potential returns in exchange for a little extra risk. We found that an investment of just over £182,000 would produce the required income.

Last year’s performance

Despite frightening volatility and various threats to company earnings in 2015, we did pretty well. Of the £10,000 income we wanted, we generated £9,788.

However, one of our picks has yet to pay the final dividend to be factored into our calculations; once

28

Issue 9 March 2016

that is included, the total is £9,914.

Of our 10 constituents, most fulfilled their dividend promise. Shell (RDSB), HSBC (HSBA) and BHP Billiton (BLT) all pay dividends in dollars and these were lower than expected, partly because we converted the dollar dividend estimates to sterling in January 2015 when the exchange rate was about $1.51 to the pound. Over the summer, it nudged $1.59.

Imperial Tobacco (IMT) was the outstanding performer, in terms of both income and capital return. Admittedly, we had some help, as Imperial began paying quarterly dividends in 2015. That meant we benefited from a third-quarter dividend of 49.1p.

Previously, this would have been included in a final payout that historically went ex-dividend in midJanuary. The share price rocketed by 24% too.

Manchester-based Entu (ENTU) (UK), a supplier of windows, doors, solar panels and energy efficiency products, also did well. It announced a special dividend of 1.5p followed by an interim dividend of 2.67p in August. Unfortunately, problems at the solar division triggered a profits warning, and the 8p

Interest rates may be on the way up, and equities are not obviously cheap, yet companies are handing more of their profits to shareholders via dividends than at any time in the past few decades.

Oil prices may have fallen again to below $35 a barrel now, but the oil major is selling assets, and cost cuts are being tipped to exceed targets.

a share annual ordinary dividend promised at IPO in late 2014 will now be more like 5.34p. Assuming that’s confirmed in full-year results due at the end of January, the yield is still a respectable 6.5%.

Long-term commitment

True, our portfolio lost almost £14,000, or 7.6% of its capital value, but the FTSE 100 (UKX) index is down more than 9% over the year to 7 January*.

Remember, too, that buying an income portfolio is typically a long-term commitment, and this oneyear experiment is unlikely to be indicative of future performance. Adding the income received back to the remaining capital leaves us down around £4,000, but with the objective of income generation intact.

However, looking at prospects for 2016, the hunt for yield is at a pivotal point. The risk to both dividends and capital is greater now than a year ago. A marked economic slowdown in China has already caused markets to tumble in 2016, and tension in the Middle East is always a worry.

Interest rates may be on the way up, and equities are not obviously cheap, yet companies are handing more of their profits to shareholders via dividends than at any time in the past few decades. Indeed, dividend cover - the number of times a company can pay the dividend out of annual earnings - currently stands at just 1.6 times.

Struggling miners Glencore (GLEN) and Anglo American (AAL), supermarkets Tesco (TSCO) and Morrisons (MRW), and more recently Standard

Chartered Bank (STAN), have all either cut their dividend or scrapped it entirely. Suddenly there’s a dearth of reliable high-yield stocks, although the fall in share prices means the average yield is higher now.

Picking 10 companies certain enough to deliver annual dividend income of £10,000 is less straightforward in 2016, but we can build the portfolio with just over £176,000 this year - £6,000 less than in 2015.

Portfolio tweaks

The first holding to be jettisoned from the portfolio is BHP Billiton. Profits are already tipped to more than halve this year, and the miner faces possible fines of billions of dollars after a tailings dam at one of its mines in Brazil collapsed, killing at least 17 people. Optimistic management increased the interim dividend by 5%, then kept the final dividend flat. BHP remains committed to a “progressive dividend policy through the cycle”, but a dividend yield of more than 10% suggests it is only a matter of time before the payout disappears, possibly in its half-year results in February.

There’s no place for water utility Severn Trent (SVT) this year, either. It was forced to drop its commitment to above-inflation dividend increases following regulator Ofwat’s latest pricing review, and the annual dividend will now grow at no less than the retail prices index (RPI) until 2020.

Yes, a prospective yield of around 3.8% is decent enough, but it is less than the current FTSE 100 yield,

Issue 9 March 2016

29

Notes: All figures as at 7 January 2016. *Exchange rate £1 = $1.463. Source: SharePad

and we can do better.

Housebuilder Barratt Developments (BDEV) currently offers a forward yield of 5.2% covered 1.8 times by forecast earnings. The share has been a solid performer for a number of years, and the housing boom, the government’s Help to Buy scheme and the ongoing housing shortage should continue to underpin reasonable growth. A forward price/ earnings (PE) ratio of 11 times is largely in line with the sector.

Political and economic instability in South Africa rule out Old Mutual (OML) as a new holding, but rival life insurer Legal & General (LGEN) is likely to cause fewer sleepless nights and yields a healthy 5.4%.

This impressive asset management business, the 15th largest in the world, should continue to drive strong earnings growth this year.

We’ve found a company able to fill the void left by both last year’s speculative income plays. Entu’s decision to cut its dividend created too much uncertainty around future payouts.

Meanwhile, online gaming firm GVC Holdings’ (GVC) bid for bwin.party digital entertainment (BPTY) is sound, but a condition of the €400 million (£277 million) of debt financing needed to pull off the deal is a suspension of the dividend for 2016.

As a reliable replacement, we need look no further than support services and construction firm Interserve (IRV).

It works for the government, London Underground, Middle East oil companies and on huge infrastructure projects here and abroad. It has been making big profits, and has increased its dividend every year since at least 2003. Despite sub-contractor insolvencies hitting the UK construction division, full-year results should still meet expectations. A dividend more than twice covered by profits generates a yield of 4.8%, and a p/e ratio of just eight times earnings looks cheap.

Solid stock picks

Of the 10 companies we picked last year, six make it into the 2016 portfolio. How could we leave out our best performer in 2015 - Imperial Tobacco?

Despite a massive surge in the share price, the tobacco major still offers a prospective yield of 4.4%, and persistent speculation about a possible bid from British American Tobacco (BATS) or Japan Tobacco

30

Issue 9 March 2016

(JAPAF) should support the current valuation.

Perhaps surprisingly, Shell is also in the portfolio. Oil prices may have fallen again to below $35 a barrel now, but the oil major is selling assets, and cost cuts are being tipped to exceed targets. The acquisition of BG (BG.) should underpin the payout over the longer term, but Shell has already promised to pay $1.88 a share for 2015 and 2016. That gives a yield of almost 9%.

GlaxoSmithKline (GSK) still expects to pay an annual ordinary dividend of 80p until 2017. And there will be a special dividend in 2016 as the drug giant hands back £1 billion following the asset swap with Switzerland’s Novartis (NVS). It originally planned to return £4 billion, but investors owning Glaxo shares on 18 February will still get 20p a share.

Elsewhere, an improving outlook for defence spending is great news for BAE Systems (BA.).

There are uncertainties around Eurofighter orders from Saudi Arabia, but the company will get a piece of the massive US military budget and work from the Ministry of Defence. BAE shares trade at a big discount to the sector and pay twice the average dividend.

HSBC has been through the mill, and Far East and emerging markets business will likely remain tough.

The bank will have to keep cutting costs to offset pressure on the top line, but the dividend is safe for now.

Growing the dividend “at least” in line with RPI inflation “for the foreseeable future” gets National Grid (NG.) the nod. That promise will be backed by cash from the sale of most of its UK gas distribution business, which looks after 82,000 miles of pipeline and delivers gas to around 11 million customers.

Halfords (HFD) has had a rough ride since last summer. Wet weather hit bike sales, forcing a profits warning. Still, its shares, at their lowest since 2013, look cheap. Heavy spending on a new customerfocused strategy will limit short-term growth, but the dividend is generous and twice covered by earnings.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

CONNOISSEUR Lightning GT: An Electric Supercar p32 Watchlist: Audemars Piguet Millenary MC12 p36 Distilled History of Gin p38 Issue 9 March 2016

31

Lightning GT:

An Electric Supercar with Style and Performance

32

Issue 9 March 2016

The Lightning Car Company arrives at 2016 in fine fettle with the car now performing at a higher level than ever before and attaining the performance levels we always sought. The Magtec drive train delivers huge yet manageable power and gets the pulse racing from the off, a remarkable unit.

An inspiration for the project came from a headline in The Standard about the poor quality of air in the suburb of Putney.

Roll forwards 7 years and those headlines haven’t changed, Putney still exceeds EU emission levels for the year by the end of January, a shocking statistic for a supposed modern society.

The Lightning was created to give opinion leaders everything they seek in a car, performance, looks and style yet emission free at point of use. That message rings truer now than ever before and as electric vehicles emerge as mainstream alternatives to conventional fuel power so the Lightning’s case grows ever stronger. Britain has had an automotive gem in it’s midsts for a while now, it’s time has arrived in 2016.

Issue 9 March 2016

33

T

he Lightning Car Co ( TLCC) was formed in early 2007. The mission was simple; to create the world’s first 100% electric supercar and give discerning drivers’ what they want in a car; performance looks and style but emission free at point of use.

The starting point has to be is there demand for such a car, now and in the future, or are we creating a car simply to satisfy our own whims. The team all felt that a key part of the future of motoring would be electric as emission free at point of use is becoming more and more of an issue. This is not just with EU politicians but the facts, over 4000 people in the South East are estimated to die each year from lung issues caused directly or indirectly from transport pollution, especially the mighty diesel with its zillions of particulates.To see what i mean,simply floor your derv from the lights in a built up area and watch the mirror, there’s a cloud left behind. Out in the countryside this blows away..in towns it blows into lungs.

But are we green shoe types who like skimmed water and hugging trees at weekends?

To create change in any marketplace the best place to commence is at the top, especially where technology is involved. Shoe horning expensive technology into low cost vehicles will never work for long, it isn’t sustainable as major shareholders will eventually revolt. A business model is required which creates the premium positioning, draws in the demand and then enables the product to be profitably built. We followed the ‘AT Kearney’ approach, leveraging others investment but paying a higher piece cost for components. This also enables the smaller players to keep up with the majors, we can switch or adapt to new inventions far more quickly than the big manufacturers.

The Lightning GT was also set up to be as British as possible, the only foreign components are the Lithium Titanate cells, even the battery packs are British. This means we are 90% British, I believe we are THE most British car made as even the Morgan’s, Radicals, Astons of this world run foreign drivetrains or have a majority overseas shareholder base. So what is a good response here, but i do believe that sometimes old Bristol type owners and more forget their cars are overseas powered and not as home grown as they fondly imagine.

The Lightning was built in a small workshop in Peterborough where the team normally built Ronart kit cars or Vanwall replicas. Does this make it a Garagistas type operation, the term given to the British by Enzo Ferrari when he was dismissing our F1 attempts? To a degree yes, but Vanwall won the first ever official f1 championship in ’58 and established Britain forever as one of the world’s centres of Formula One car creation, a legacy which is stronger than ever .

We set out to create a superb platform upon which a range

34

Issue 9 March 2016

of future EV’s could be built. The honeycomb aluminium chassis actually contains the battery packs so they add tortional and beam stiffness. The bodywork is of a very strong carbon fibre construction. The Lightning is a very stiff, strong and hence stable car.

The Lightning GT was launched at the last British Motor Show which was held at Excel in July 2008. The car literally blew everyone away, we received 24% of an online vote of 7000 for ‘most impressive car of the show’, an amazing achievement as we were up against the world’s best and won.

This included the launch of the new Lotus Evora, which was announced with much fanfare but as we all know hasn’t lived up to expectations but is still a very fine car.

We immediately attracted a raft of funding options to enable the car to go into low volume of up to 250 units per annum production. We actively pursued one of these all the way through due diligence and to final agreements.

Then lehmanns went bust in September 2008 and with that our funders, of middle eastern origin, pulled all overseas investment whilst they counted their huge losses which also soon tunred out to be of Madoff origin too.

The Lightning Car Company persevered with it’s major backer selling assets left right and centre to keep the vision alive. In addition to the 2008 Show car a road going vehicle was produced with some government support to showcase electric cars as a viable future form of road transport. The ‘Technology Strategy Board’ ran a 12 month data logged program and the Lightning excelled amassing a greater mileage than all other combined in its ‘cell’. This included over 20,000 miles of faultless running in temperatures as low as -15C and high as +37C. The Lithium Titanate batteries behaved impeccably with not a single issue, our only glitch in all this time was a broken shock absorber replaced free of charge by it’s maker under warranty.

The Lightning GT has been a major star wherever it’s appeared, to this day it’s graceful looks and elegant lines stop traffic and reduce middle aged men to stares and happily ladies to admiring glances, well they’re certainly not for the owner! It’s been feted by royalty, drooled over by stars and photographed millions of times.

The Lightning has now had it’s long awaited drive train upgrade to a full power over 400bhp equivalent twin motor unit from a Sheffield based company called Magtec, probably Britain’s leading electric motor creator. The new drivetrain features the highly proven ‘Magtec Motors’ and an adaptation of existing proven gearboxes to create an almost perfect combination of smoothness and robustness. There are no gears, they’re not needed, the immense torque is instant.

The Lightning Gt is a car which the world has waited long enough for. It’s going back on the road this Spring to undertake a series of tests. These include some serious speed testing with early indications for an extraordinary level of acceleration, sufficient to perhaps even nab a couple of records. The proof of the proverbial is in the eating, we await.

Issue 9 March 2016

35

A watch to appreciate.

T

he Audemars Piguet Millenary MC12 is not a piece for the faint of heart, that’s for sure. It makes for a big, brawny and dominant presence on your wrist, and okay—with an RRP of £250,000, there’s no doubt that this watch comes squarely under the ‘luxury item’ category.

But if you’re going to buy a watch like this one, the collaborative genius of two class-leading luxury brands is probably a good reason why.

The history behind this limited edition certainly adds to the allure. Created in celebration of the Maserati MC12 hypercar, it’s a one-of-a-kind no longer in production. But to really understand the watch, we’ve got to take a closer look at the car.

Back in 2004, Maserati—under new management

by Ferrari—was clawing its way back into the ranks of elite sportscar manufacturers after a period of decidedly middle-of-the-pack creations, not to mention coming uncomfortably close to bankruptcy. Making its return to racing after 37 years, the company released the MC12—originally a race car closely based on the much loved Ferrari Enzo. The road legal version was developed to homologate the racing model, and was limited to a production of an exceedingly small run of 50. If that wasn’t exclusive enough, Maserati also handselected the would-be owners of each vehicle.

36

Issue 9 March 2016

Enter Audemars Piguet. Premium watchmaking has always had strong ties to the world of racing, and in 2005, the renowned watchmaker established a relationship with Maserati.

Audemars Piguet knows a thing or two about how to make a watch desirable. It’s a brand regarded by collectors as one of the ‘top three’ in haute horlogerie—and that’s not just because of the superb quality of its timepieces. Founded in 1875, the company has cultivated a reputation as traditionalists. Everything about it speaks to the heritage of fine watchmaking; after all, it’s the oldest manufacturer still owned by its founding families.

Much in the same way that the MC12 signalled Maserati’s return to exceptional sportscar design, Audemars Piguet managed to avoid disaster and keep itself afloat throughout the quartz crisis with the development of the revolutionary Royal Oak. The manufacturer has been responsible for a number of watchmaking world firsts, in fact—it lays claim to the minute repeater and jumping seconds, to name just a few examples.

It’s a brand comfortable with getting creative, and you can see this in the Millenary MC12. So inspired was Audemars Piguet by Maserati’s vision, that several distinct homages were included in the timepiece’s design, becoming clearer the closer you compare watch to car.

For example, the signature elliptical case of

the Millenary collection, in this instance in reassuringly durable platinum, creates the illusion of a streamlined chassis. A blue and white colour combination mimics the car’s distinctive paint job, while subtle louvres sit under the Maserati trident logo. It’s a sharp and sporty watch, but with a refinement that is unmistakably Audemars Piguet.

But what’s going on under the hood, I hear you ask? The watch’s twin barrel mainspring provides a massive power reserve, keeping the tourbillon ticking for ten days—the horological equivalent of the 624 bhp, 6 litre, V-12 engine of the MC12. The car is capable of a reaching 205mph, and accelerates from 0 to 60 in 3.8 seconds. In honour of this high-speed heritage, the Millenary’s chronograph complication allows the wearer to measure periods of time—the tachymeter bezel, meanwhile, is in the style of a speedometer.

The watch, like the car, is a numbered model—there were a total of only 150 made, so it’s phenomenally hard to come by. It all makes for a winning combination; a rare watch, in tribute to a coveted supercar, created by a highly acclaimed watch brand.

But the similarities don’t end with the design alone.

The MC12 is big, as sports cars go; a hulking beast nearly 17 feet long, built over the Enzo’s monocoque carbon fibre tub. It received a mixed reception at the time of its debut—greeted by some as overpriced and hard to drive because of its race-car setup—but

in the years since its release, car enthusiasts have come to appreciate the MC12 for all its foibles.

When models have come up for sale over the last ten years, the price tag has only seen an increase.

As for the Millenary, the initial reaction to its debut was similarly diverse—with its striking and ultra-modern look, it was a piece perhaps ahead of its time. Now pre-owned, and with its history and exclusivity working in its favour, opinion has matured and the watch has the potential to follow in the triumphal tracks of its vehicular cousin— especially as more people become aware of the advantages of pre-owned timepieces.

But that’s not why you should buy it. Owners of the MC12 aren’t racing drivers, or solely on the hunt for a canny investment—they bought the car because it’s an outstanding machine from an iconic manufacturer, and driving it is a pleasure.

It’s same for the Millenary. It’s a watch that needs to be appreciated for what it is: a mesmerising piece of mechanical mastery—one that only a few people in the world can say they own. It works great, it looks great, and you feel great wearing it—and who can put a price on that?

To find out more about the Audemars Piguet Millenary MC12, or for more information on luxury pre-owned watches, visit watchfinder.co.uk

Issue 9 March 2016

37

Distilled History of Gin In recent years we have seen gin rise in popularity at an astounding rate, the drink that looked to have lost its place to vodka in the white spirits stakes is now reasserting itself. A quick look at its history, however, shows that gin’s progress has not always been smooth.

Gin, or the idea that was to become the drink that we know today, originated in Holland. The name comes from the Dutch word for juniper (jenever) which is this principal and only compulsory botanical used in the production of gin. Gin is simply a clear spirit normally distilled from grain which is then flavoured with botanicals – derived from plants and including arrowroot, cinnamon, rosemary, orange peel and fennel.

Gin in England Gin was already well established in England before the Glorious Revolution of 1688, although it’s difficult to say exactly when. English protestant soldiers fighting in Flanders were served gin. Gin was traded to London during the Great Plague of 1665-66 and this is where the expression ‘Dutch Courage’ comes from, as the Dutch were the only nation brave enough to continue trading in English ports. But towards the end of the Seventeenth Century it was the Coronation of William and Mary which established Gin as England’s national drink.

Gin in Daily Life Alcohol was a part of daily life in a way that would seem strange to us now: it was everywhere and consumed by everyone – men, women and children.

Although no one knew why, it was known that drinking water was risky (we now know that this

38

Issue 9 March 2016

was because of the low level of sanitation and the opportunities this gave waterborne diseases to flourish.) What was known was that if water was mixed with alcohol whether that was beer, wine or gin, then it became a much safer drink. We now know that this is because alcohol is an antiseptic.

The Gin Craze Gin’s popularity surged and then became a public health crisis following increased taxation on beer. As a way to get their hands on an affordable source of alcohol, the population of England turned to the bath tub and began distilling gins. This period is illustrated

by Hogarth, most famously in ‘Gin Lane.’ Unsafe and unregulated gins were becoming a scourge.

The area around Tottenham Court Road was the scene of Gin Alleys. Dingy streets lined with Gin Palaces. This is the period which gives the shading to gin’s otherwise bright history.

Empire By the time Queen Victoria came to the throne, however, much of the debauchery had subsided and the fruits of empire and foreign trade were being seen increasingly in England’s ports. Many of these exotic ingredients found their way into the gin distillery.

Citrus fruit, cassia bark, coriander, cardamom were all warehoused in wharfs and distilleries began to appear close by on rivers such as the Thames and the Tamar.

Gin became more sophisticated and more useful, English ships travelling out to the far-flung ports of empire needed ballast and so gin was shipped as a makeweight. The lawns of India were graced with gentlemen sipping gin with quinine laced tonic water

which served as an anti-malarial.

Modern Period From the birth of empire until well after the Second World War, Gin was the world’s most popular white spirit. It was the principal ingredient used in classic cocktails and was considered to be the Royalty of the drinks rail.

It lost its place in the 1960s to vodka, which was championed by slick marketing which focussed on the fact that it didn’t have any flavour. This meant that the taste of cocktails wouldn’t be marred by the more complex notes that gin could introduce.

Modern drinkers, it would now seem, are a more interested in finding unusual, distinctive drinks and so are turning to gin.

So it is, that gin, particularly English gin is experiencing a renaissance. The number of craft distilleries making their own unique, regional gins is mushrooming and showing no signs of slowing.

This boom was fuelled by a change in legislation effected by HMRC only a couple of years ago which removed the requirement that commercially produced spirits had to be distilled in stills of 1800 litres or bigger. That legislation had been in place for various reasons, mostly connected to the hazards of boiling a flammable liquid at pressure in a metal container and the likelihood that these stills could either be turned into bombs in the wrong hands or be stolen if they were too small.

No such restrictions now apply and we are seeing a return to the domestic distilling of old. The quality, however is very different with small distillers being capable of producing some excellent, unique, individual gins.

Issue 9 March 2016

39

2016