Annual Financial Report
MURRAY INCOME TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009
-
Total Dividend increased by 2.8% to 27.75p
-
Net Asset Value Total Return -22.1%
-
Share Price Total Return -14.0%
1. CHAIRMAN'S STATEMENT
Performance
It is salutary to re-read my statement in last year's annual report. There I suggested that 2009, economically, would be likely to be another difficult year, and that it was not clear how unloved markets would respond to continued bad news. The collapse of Lehman Brothers shortly after the statement was written ensured that the immediate news was much worse than anything that I had anticipated. It caused a period of acute instability in the global financial system, which for a time almost froze up, and subsequently led to a further sharp contraction in economic activity, caused both by fear and the unavailability of even the most conventional finance. This combination in turn resulted in unprecedented action by authorities around the world in the form of both fiscal and monetary policy responses. Despite this action the overall impact has clearly been severe on both companies and consumers alike. Companies have been affected by rapidly falling demand and restricted credit while consumers have witnessed rising unemployment and diminishing housing wealth.
The overall effect was that the Company's Net Asset Value in total return terms fell by 22.1% compared with a fall in the FTSE-All Share Index of 20.5%. The share price fell by 14.0% in total returns terms as the discount narrowed substantially over the year. The low point was reached on 3 March, with the index 36% down since the Company's year end at a time when it appeared that government action was having no effect. Since then markets have improved considerably by 43% at the time of writing, of which 15% has happened since the Company's year end.
We have witnessed unparalleled attempts to revive the global economy. The full impact of quantitative easing is, as yet, unclear. However, as a signal that authorities are willing to take whatever action is necessary, it has been a successful experiment. Policy actions do, of course, take time to work their way through the system. However, recent economic data in the UK, which has now demonstrated falls in GDP for five successive quarters, does suggest that conditions have been slowly improving since the Spring, helped in part by the weakness of Sterling. In spite of this, the recovery in the UK appears to lag behind most of the developed world, perhaps because of the relative importance of financial services to the UK economy. Although it is likely that activity is now improving it remains at low levels compared to the past and there is a risk that indebtedness, both of consumers and governments will hamper growth considerably.
Across the market, earnings declined by approximately 20% over the Company's financial year with the Banks, Oil & Gas and Mining sectors suffering worst. This translated into dividend falls of around 15% across the market, with the most pronounced impact among financial companies. Unsurprisingly, the more defensive areas of the market, such as Tobacco and Pharmaceuticals outperformed, particularly in the first nine months of the Company's year. The Company's underweight position in the Mining sector that had hurt performance relative to the Index last year, helped this year as commodity prices fell sharply. Companies with weaker balance sheets, opaque business models or more generally exposed to global economic activity performed very poorly. Numerous companies have had rights issues, nearly all to shore up weak balance sheets. The recovery since March has been led by the worst-performing, generally cyclical or financial, companies of the previous nine months. This was the result of the realisation that they were still going concerns and need not be priced for bankruptcy and that business had stabilised and might even be improving.
Dividends
As economic conditions deteriorated, company cashflows have come under significant pressure and dividend growth across the market has turned negative. Consensus dividend expectations for calendar 2009 are for a fall of around 5% for the market as a whole, although predictions are more severe for small and mid cap companies. Income generation within the portfolio, over the past year, has benefited from the weakness of Sterling, due to the number of companies that now pay dividends in US dollars, as well as a lower interest charge relating to the Company's debt. The Directors are therefore proposing a final dividend of 11.25 pence per share payable on 28 October 2009 to Shareholders on the register on 25 September 2009, making total dividends for the year of 27.75 pence. This represents an overall increase for the year of 2.8%, the twenty-fourth consecutive year in which the dividend has increased.
Looking forward, however, the Company will need to refinance its borrowings during the remainder of 2009 and this is likely to lead to a higher interest charge. In addition, the appreciation of Sterling against the dollar over the last quarter has had a detrimental effect on our expectations for income generation. These two factors, coupled with consensus expectations for zero dividend growth over this financial year have resulted in the Directors deciding to maintain the level of interim dividend payments at 5.5 pence. The rate of the final dividend will be decided when the results for the year are known. However, the Directors currently expect total dividends for this year to be at least equal to those paid for the year ending 30 June 2009, although this is likely to mean that the Company has to draw on its revenue reserves.
Board changes
During the year, David Woods was appointed to the Board, and will seek re-election at the Annual General Meeting. He has had a long career in the life assurance and investment management industries, latterly as Group Managing Director of The Scottish Provident Group, and I am confident that his experience will be useful to the Board's deliberations.
After ten years on the Board, Adrian Coats will not be seeking re-election at the Annual General Meeting. He has been a very effective member of the Board, and we have derived great benefit from his chairmanship of the Audit Committee. He will be succeeded in that role by Humphrey van der Klugt, who will also succeed him as Senior Independent Director.
VAT on management fees
It was noted in the previous Annual Report that HM Revenue & Customs had accepted the European Court of Justice ruling regarding VAT on management fees paid by investment trusts. In the last Half-Yearly Report, we reported that the trust had received a repayment of £1,555,612, representing the VAT charged on our management fees between 2004 and 2007. In accordance with the Company's accounting policy, this sum has been credited 50% to revenue and 50% to capital. In due course, we expect to be able to recognise further sums, once there is greater certainty over the amounts recoverable by the Manager in respect of the VAT incurred on management fees for the periods 2001 to 2003 and 1990 to 1996 and interest for all of these periods.
Annual General Meeting
The Annual General Meeting will be held at the Glasgow Royal Concert Hall, 2 Sauchiehall Street, Glasgow G2 3NY on Tuesday, 27 October 2009 at 12.30 p.m.
As at previous AGMs, there will be a presentation by the Managers and an opportunity to meet the Directors over lunch following the AGM.
Outlook
Since the financial year end we have seen a strong rise in the market. There are undoubtedly good reasons for this; valuations are at least reasonable; macroeconomic data has improved (albeit from very low levels); and the narrowing of spreads and the fall in the absolute level of corporate bond yields have reflected a more healthy credit market.
However, there are still reasons to be cautious and it would not be surprising to see a period of consolidation given the recent market gains. At some stage the extraordinary measures that we have seen to prop up the economy will need to end. Interest rates are currently at exceptionally low levels. Public sector debt has soared, and the requirement for fiscal tightening will act as a significant drag on economic activity as taxes rise, and the growth in public spending is reduced. For companies, the shortage of reasonably priced, long-term bank finance will also act as a drag on growth.
Global imbalances add to the uncertainties in the medium term. Although disparities in current account positions have narrowed, this represents a change in demand for consumer and capital goods. Surplus countries will need to increase private domestic consumption and deficit countries need to save more on an endurable basis, otherwise significant asset price corrections will remain a risk. It is not yet clear whether the Chinese will react with the same enthusiasm to credit cards as shown by British or American consumers.
This all leads me to suspect that we will witness a relatively mild and slow rather than sharp recovery. Under these circumstances, the outlook for earnings growth and thus dividends is likely to remain difficult, with consequent pressure on overall index levels and potential rewards to stock selection. Although the ability to write options (for which the premia can be accounted for as income) provides an additional method to increase income, the Company's revenue account is likely to remain under pressure. However, the Company maintains a substantial revenue reserve that should provide a source of support in these challenging times.
Patrick Gifford
Chairman
15 September 2009
2. MANAGER'S REVIEW
Background
The deterioration in the global economy led to the UK equity market performing very poorly during the year to the end of June 2009. The FTSE All Share Index fell by 20.5%, with the environment being exceptionally challenging for income-seeking investors. At the beginning of the period, fading economic growth and the delayed impact of elevated commodity and energy prices were magnified by the fall of Lehman Brothers. These combined factors contributed to the threat of a systemic collapse of the global financial order. Since the nadir in risk appetite last autumn, the unprecedented efforts by authorities on a global basis, in relation to both fiscal and monetary policy stimulus, look to have avoided the most severe outcomes. However, the consequences of the 'credit crunch' are unlikely to dissipate quickly.
The financial year started with escalating energy prices, and, with oil reaching over $140 a barrel, concerns over the consequent impact on inflation. With CPI reaching 4.4% in both July and August (hitting a high watermark of 5.2% in September), the significant challenges faced by the MPC were highlighted by the three way split during both meetings.
Against a backdrop of financial fragility and deleveraging of the banking system, the global economy deteriorated. By the early autumn, the worst fears of the market were beginning to materialise. In the United States, Fannie Mae and Freddie Mac were taken under government control. Then Lehman Brothers collapsed, followed soon after by the Bank of America purchasing Merrill Lynch and the bail-out of AIG with an $85bn loan. In the UK, with Libor increasing, credit default swap spreads widened, particularly for banks whose business models were reliant on short-term wholesale funding. This rapidly culminated in the announcement that LloydsTSB would purchase HBoS, with concerns over competition set aside.
By the end of September, the market was feeding on the uncertainty regarding the approval of a US government rescue package, leading to sharp declines in share prices. During October, there were a host of bank bail-outs around the world, including Bradford & Bingley and Fortis. In the UK, the government took action to secure the banking system by guaranteeing bank deposits and debts, coupled with the injection of £50bn of capital.
In parallel with the declining equity market, the drumbeat of negative domestic economic newsflow grew louder over the second half of 2008. The Manufacturing and Services Purchasing Managers' Indices (PMI) highlighted a pattern of dramatically weakening activity, reflected by a fall in GDP of 1.6%, over the fourth quarter of 2008. In tandem with this, unemployment increased to the highest level in over 10 years, and house prices continued to decline, with Nationwide Building Society reporting a fall in house prices of 15.8% during calendar 2008. The MPC abandoned their policy of incrementalism, comforted by falling commodity prices, reducing base rates from 5.0% at the start of September to 2.0% by December, and then to 0.5% by March 2009. In sympathy with the deterioration in the economy and lower interest rates, sterling weakened considerably, falling against the dollar, from just under $2 at the start of June to a low of $1.37 in March (although it had recovered to $1.65 by the end of the period).
The market continued to be weak for the first two months of 2009, as concerns regarding the fragility of the banking system resurfaced. Authorities in the United Kingdom and the United States were prompted into a further round of bank bail-outs, while the Bank of England embarked on its programme of quantitative easing. However, the market rallied from the start of March, as more benign economic data (despite a fall of 2.4% in first quarter GDP), and a belief that the worst was behind us, resulted in an increased appetite for risk assets. During the last quarter of the period, recovering economic newsflow manifested itself in signs of improvement in conditions in the domestic housing market and the slow return of consumer confidence, coupled with readings, ahead of expectations, for the Manufacturing and Services PMI surveys.
Two noteworthy aspects of the period have been the rise (and subsequent fall) in volatility and the evaporation of corporate activity. Volatility reached unprecedented levels during October and November, the corollary of this being a collapse in risk appetite. Corporate activity diminished as access to capital was restricted. However, the Company benefited from an approach by Centrica for its shareholding in Venture Production. The pace of equity issuance increased, from approximately £15bn in the first half of the Company's financial year, to over £50bn in the second half, as companies sought to repair or secure their balance sheets, with the recapitalisation of parts of the Bank sector being a contributing factor.
Over the first half of the period, the FTSE 100 Index outperformed both the Small and Mid Cap Indices, which were suffering from their greater domestic exposure and generally weaker balance sheets of constituent companies. However, during the second half of the year, this reversed sharply as risk appetite and the prospects of recovery returned.
Performance
The Company generated a negative total return of 22.1% in the 12 months to 30 June 2009, compared to a fall in the FTSE All Share Index of 20.5%, a disappointing result on an absolute and relative basis. Although on a gross assets basis the portfolio performed broadly in line with the index, the gearing effect detracted from performance on a net asset basis. During the period, the Company reduced its borrowings from £40m to £35m, given the Board's desire to maintain the gearing level below 115%. We started the year with a degree of put protection that helped to protect the portfolio, albeit to a limited extent, from the significant fall in the market.
As the economic environment deteriorated, the market sought solace in more defensive companies and those with strong cashflows. As a consequence, across the market, of the larger sectors, Tobacco, Beverages and Pharmaceuticals outperformed, with the latter two generating a positive absolute return over the year. In contrast, the majority of financial-related companies or those exposed to the global growth dynamic or international trade performed poorly. In particular, the Mining, Banks and Real Estate sectors lost over 35% of their value.
The Company benefited from its underweight position in both Oil & Gas and Mining as commodity and hydrocarbon prices fell dramatically. Both of these areas of the market had significantly detracted from performance during the prior year.
The performance of Mothercare was particularly strong, taking advantage over the period of its acquisition of the Early Learning Centre and international growth. AstraZeneca also performed well, a function of its defensive profile, and its efforts to address patent challenges.
Unfortunately, there were a number of holdings that performed very poorly over the year, including Premier Foods, SEGRO and Wolseley, where the build-up of financial leverage amplified the effects of the economic slowdown. The performance of BT was also disappointing, a function of its relatively high gearing, pension deficit and issues in its Global Services division. Amongst the Banks, both Barclays and Royal Bank of Scotland were sold down heavily as the credit crisis deteriorated.
Performance Attribution for the year to 30 June 2009
|
|
2009 |
|
|
% |
|
Net asset value total return for year per Ordinary share |
(22.1) |
|
FTSE All Share Index total return |
(20.5) |
|
|
__________ |
|
Relative return |
(1.6) |
|
|
__________ |
|
Contribution to relative return |
2009 |
|
Stock selection (equities) |
% |
|
Oil & Gas |
0.8 |
|
Basic Materials |
(0.6) |
|
Industrials |
0.4 |
|
Consumer Goods |
(0.6) |
|
Health Care |
0.3 |
|
Consumer Services |
(0.8) |
|
Telecommunications |
(0.4) |
|
Utilities |
0.1 |
|
Technology |
- |
|
Financials |
(0.1) |
|
|
__________ |
|
Total stock selection (equities) |
(0.8) |
|
|
__________ |
|
Asset allocation (equities) |
|
|
Oil & Gas |
(0.3) |
|
Basic Materials |
2.8 |
|
Industrials |
(0.3) |
|
Consumer Goods |
(0.3) |
|
Health Care |
- |
|
Consumer Services |
0.3 |
|
Telecommunications |
(0.4) |
|
Utilities |
(0.1) |
|
Technology |
(0.3) |
|
Financials |
(0.4) |
|
|
__________ |
|
Total asset allocation (equities) |
1.0 |
|
|
__________ |
|
Non-equity Investments & Options |
0.5 |
|
Gearing/cash effect |
(2.5) |
|
Management fees & other expenses |
(0.3) |
|
Residual effect |
0.4 |
|
|
__________ |
|
Total |
(1.6) |
|
|
__________ |
Sources : Aberdeen Asset Management, Mellon & Factset
Notes: Stock Selection - measures the effect of equity selection relative to the benchmark. Asset Allocation - measures the impact of over or underweighting each industry basket in the equity portfolio, relative to the benchmark weights. Non-equity Investments & Options effect - measures the impact on relative returns of the two asset categories. Gearing / cash effect - measures the impact on relative returns of net borrowings. Management fees & other expenses - these reduce total assets and therefore reduce performance. The effect is calculated by dividing expenses incurred during the year by average total assets less current liabilities. Residual effect - this arises as a result of the different methodologies of calculating performance between the NAV total return, the benchmark provider Factset and the performance attribution system.
Portfolio Activity and Structure
Over the period, we have added a number of new holdings to the portfolio. These new holdings share the distinguishing features of having strong competitive positions and robust balance sheets, which we believe will outperform in a challenging economic environment characterised by restricted access to credit.
We introduced a position in Rolls Royce, given its growth opportunities, long order book and particularly strong balance sheet. In addition, we purchased a small holding in Persimmon, where we felt that the shares had been oversold, as, despite the current weak operating environment, the experienced management team and long land bank positioned the company well for the future. These purchases were partly funded through the sale of retailers HMV and Kesa, and Aga Rangemaster, due to concerns over the outlook for consumer spending. We also added a holding in BHP Billiton, a diversified resources company with a strong balance sheet, to the portfolio. It has high quality iron ore and oil assets, coupled with attractive expansion opportunities. To fund the purchase, we sold the holding in Anglo American, due to concerns over the company's high debt level and its exposure to a relatively limited range of commodities.
Concerns over the risk reward profile of the Bank sector led us to make a number of changes. We sold LloydsTSB in view of our apprehension over the proposed takeover of HBoS. Later in the period, we also sold the holding in Barclays due to balance sheet concerns that had led to the decision to withhold dividend payments, and the opacity of capital markets profits. Furthermore, we sold the position in the Royal Bank of Scotland, following a very poor trading update that highlighted a far weaker capital position than our expectations. We felt that our exposure to the sector through HSBC and Standard Chartered offered less risk and a more secure dividend stream, and we took up the rights issues of both of these companies. In addition, we purchased a new holding in insurance company Prudential that provides access to an appealing Asian growth dynamic. We believe that insurance provides attractive financial exposure, without the liquidity and wholesale financing issues of certain banks.
The sales of SEGRO, Premier Foods and Wolseley were driven by concerns over the balance sheets and potential covenant breaches for these three companies. These sales helped to fund the purchase of a holding in Pearson. The company has a leadership position in education, particularly in the United States, in school textbooks and higher education. There are excellent prospects to expand this business on an international basis. We were approached by Centrica for our holding in Venture Production and following a period of negotiation we decided to sell our shares for an appealing price. Over the year, we added to holdings that we believed were attractively valued, including National Grid, Tesco, Unilever and Vodafone.
A number of holdings in the portfolio had rights issues, including HSBC and Standard Chartered, both mentioned above, as well as Centrica, GKN, Land Securities and Rio Tinto. We participated in these, as we believe the companies have sound underlying businesses and would benefit from being on a more stable financial footing.
During the period, we purchased reverse convertibles in BP and HSBC, which help to generate additional income for the Company, and we also rolled forward the British American Tobacco reverse convertible.
The result of the actions above has marginally altered the sector positioning of the Trust. The weighting in the Oil & Gas sector has reduced slightly over the period, mainly due to the sale of Venture Production. The exposure to both the Healthcare and Utilities sectors has increased, due, for the most part, to the strong relative performance of these sectors as a whole.
The weight in Financials has fallen due to the underperformance of the sector. In addition, the purchases of Prudential and the HSBC and Standard Chartered rights issues only partly offset the sales of SEGRO, Barclays and Royal Bank of Scotland.
Income
It has been a very difficult year for income investors. The combination of financial leverage, restricted access to credit and recessionary conditions have led to a significant deterioration in dividend payments by companies across the market. These effects may not have fully worked through, with dividends in aggregate expected to fall by 5% for the calendar year 2009, following a decline of 14% in the calendar year 2008. As the number of rights issues has increased, the stigma associated with a dividend cut has lessened, and a number of companies have used the difficult environment as a reason for rebasing their payouts to shareholders.
For the financial year ended 30 June 2009, the Company, in tandem with the market, has witnessed a fall in the level of income generated, with the revenue return per share declining from 29.3p to 28.1p, or by 3.9%. The reduction in interest payments on the Company's floating rate debt has been a significant factor in lessening the impact, compared to the fall in the market level of income.
From an income perspective, Sterling's weakness has been one of the few positive factors over the year. Within the portfolio, there have been a number of disappointments, with holdings cutting their dividends, for example, Rio Tinto, GKN and BT. As well as continuing to use reverse convertibles, we have started to write shorter-dated options to enhance and diversify the Company's revenue account. Although we only expect these options to provide a small percentage of the Company's total income, they provide a useful additional benefit. We continue to keep a very close watch on the revenue account, and to model our forecasts on a conservative basis. We remain broadly comfortable with the income characteristics of the underlying portfolio.
Outlook
At the time of writing, the market has recovered sharply from its March lows. We have witnessed increasing signs of stabilisation in the global economy, as the unprecedented monetary and fiscal policy actions have begun to take effect. Valuations, on most absolute and relative measures, still look attractive on a longer-term basis. However, we believe that for a sustained recovery we need to see, amongst other factors, a durable rebound in business investment and consumer confidence. The former is complicated by high levels of spare capacity and the difficulty in securing longer-term bank finance, while the latter is hampered by rising unemployment, tight credit and falling housing wealth. This leads us to express some caution about the pace of the recovery. In these circumstances, we would expect good-quality companies, with strong competitive positions and robust balance sheets, to perform well, and this is how the portfolio is positioned.
Charles Luke & Anne Richards
Aberdeen Asset Managers Limited
Investment Manager
15 September 2009
3. BUSINESS REVIEW
A review of the Company's activities is given in the Chairman's Statement and the Manager's Review.
Investment Objective
The Company aims to achieve a high and growing income combined with capital growth through investment in a portfolio of UK equities.
Benchmark
The Company's benchmark is the FTSE All-Share Index.
Investment Policy
The Company pursues a policy of investing in shares of United Kingdom companies that have potential for real earnings and dividend growth, while at the same time providing an above-average portfolio yield. The emphasis is on the management of risk and on the absolute return from the portfolio, which is achieved by ensuring an appropriate diversification of stocks and sectors, with a high proportion of its assets in strong, well-known companies. The Company makes use of low-cost, flexible borrowing facilities to enhance shareholder returns when appropriate.
The Company maintains a highly-diversified portfolio of investments, typically comprising in the region of 30 to 70 holdings (but without restricting the Company from holding a more or less concentrated portfolio from time to time). The Company is unconstrained as to the market sectors in which it may invest.
The Company invests primarily in the equity securities of large, well-known UK companies with an emphasis on investing in quality companies with good management, strong cash flow and a sound balance sheet, and which are generating a reliable earnings stream.
The Company may use derivatives for the purpose of enhancing portfolio returns and for hedging purposes in a manner consistent with the Company's broader investment policy.
It is the Company's policy to invest no more than 15 per cent of its gross assets in other listed investment companies (including investment trusts). The Company complies with section 842 of the Income and Corporation Taxes Act 1988 and does not invest more than 15% of its assets in the shares of any one company.
The Board is responsible for setting the gearing policy of the Company and for the limits on gearing. The Manager is responsible for gearing within the limits set by the Board. The Board has set its gearing limit at a maximum of 25%. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. Particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy.
Significant changes to gearing levels will be communicated to Shareholders.
The Directors are responsible for determining the investment policy and the investment objective of the Company, while day-to-day management of the Company's assets has been delegated to Aberdeen Asset Managers Limited. The Manager invests in a diversified range of UK companies, following a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value, concentrating on quality first, then price. Top-down investment factors are secondary in the Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights. The Manager is authorised to invest up to 15% of the Company's gross assets in any single stock. Currently, the top five holdings may not exceed 40% of the total value of the portfolio, and the top three sectors represented in the portfolio may not exceed 50%. The Manager is permitted to invest in options and in structured products, provided that any structured product issued in the form of a note or bond has a minimum credit rating of 'A'.
Capital Structure
The Company's issued share capital as at 30 June 2009 consisted of 64,689,458 Ordinary shares of 25p and 1,727,000 Ordinary shares held in treasury. At 11 September 2009, these numbers were unchanged.
Total Assets and Net Asset Value
At 30 June 2009, the Company had Total Assets of £329.6m and a Net Asset Value per Ordinary share of 455.4p.
Borrowings
The borrowings at 30 June 2009 of £35 million represent 12% of Net Assets. Borrowing facilities of £60 million are committed to the Company, of which £35 million is committed until 1 October 2009, and £25 million until 13 November 2009. Financial covenants contained within the loan agreements provide, inter alia, that borrowings shall at no time exceed 45% of Net Assets, and that the Net Assets must exceed £200 million. The Net Assets were £294.8 million at 30 June 2009. If any of the financial covenants are breached, the Lenders are entitled, following the serving of notice to the Company, to declare the loans and all accrued interest, fees and other sums owed under the agreements to be immediately due and repayable.
Duration
The Company does not have a fixed life.
Risk
The UK equity market is volatile, and short-term movements may therefore be greater than justified by longer-term trends. The use of gearing is likely to lead to an increase in the volatility of the Company's Net Asset Value. Currently, 50% of the investment management fees and interest costs are charged to capital. This increases distributable income at the expense of capital growth, which will be reduced to the same extent. The policy of investing in higher-yielding shares may also diminish capital growth. There is no guarantee that the market price of investment trust shares will accurately reflect their underlying Net Asset Value or move in line with it.
Management of Risk
The Board regularly reviews the major strategic risks that the Board and the Manager have identified, and against these the Board sets out the delegated controls designed to manage those risks. The principal risks facing the Company relate to the Company's investment activities and include market price, interest rate, liquidity and credit risk. An explanation of these risks and how they are managed is contained in Note 18. Such key risks relating to investment and strategy as, for example, inappropriate asset allocation or gearing, are managed through investment policy guidelines and restrictions, and by the process of oversight at each Board meeting outlined above. Operational disruption, accounting and legal risks are also covered annually, and regulatory compliance is reviewed at each Board meeting. The major risks associated with the Company are:
- Resource risk - like most other investment trusts, the Company has no employees. The Company therefore relies on services provided by third parties, including, in particular, the Manager, to whom responsibility for the management of the Company has been delegated under an investment management agreement (the 'Agreement'). The terms of the Agreement cover the necessary duties and conditions expected of the Manager. The Board reviews the performance of the Manager on a regular basis, and their compliance with the Agreement formally on an annual basis.
- Investment objective - the objective of the Company is to achieve a high and growing income combined with capital growth. As a consequence, the investment portfolio may not always match that of the stock market as a whole, with a consequential impact on Shareholder returns. The Board's aim is to maximise absolute returns to Shareholders while managing risk by ensuring an appropriate diversification of stocks and sectors.
- Investment policy and gearing - a major risk affecting the Company is inappropriate sector and stock selection leading to under-performance relative to the Company's benchmark index and peer group. In addition, the use of borrowing facilities to invest in markets may have a negative impact if markets fall. To mitigate these risks, the Manager operates within investment guidelines and agreed levels of borrowing. Performance against the benchmark index and the peer group is regularly monitored. During the year, an element of portfolio protection was put in place by the purchase of put options.
- Discount volatility - investment trust shares tend to trade at discounts to their underlying net asset values, although they can also trade at premia. Discounts and premia can fluctuate considerably. In order to seek to minimise the impact of such fluctuations, where the shares are trading at a discount, the Company has operated a share buy-back programme for a number of years. If the shares trade at a premium the Company has the authority to issue new shares or re-issue shares from treasury. Whilst these measures seek to minimise volatility it cannot be guaranteed that they will do so.
- Regulatory risk - the Company operates in a complex regulatory environment and faces a number of related risks. A breach of Section 842 of the Income and Corporation Taxes Act 1988 could result in the Company being subject to capital gains tax on the sale of its investments. Serious breach of other regulations, such as the UKLA Listing Rules and the Companies Act, could lead to suspension from the Stock Exchange and reputational damage. The Board receives monthly compliance reports from the Manager to monitor compliance with regulations.
4. STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law).
The Directors are required to prepare financial statements for each financial year which present fairly the financial position of the Company and the financial performance and cash flows of the Company for that period. In preparing those financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent; and
- state that the Company has complied with applicable UK accounting standards, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The financial statements are published on www.murray-income.co.uk, which is a website maintained by the Company's Manager. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors confirms that to the best of their knowledge:
- the financial statements, prepared in accordance with the applicable UK accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
- the Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.
For and on behalf of the Board of Murray Income Trust PLC
Adrian Coats
Chairman of the Audit Committee
15 September 2009
5. RESULTS
|
|
30 June 2009 |
30 June 2008 |
% change |
|
Total assets (£'000) |
329,570 |
440,536 |
-25.2 |
|
Equity shareholders' interest (£'000) |
294,570 |
400,536 |
-26.5 |
|
Net asset value per Ordinary share |
455.4p |
619.9p |
-26.5 |
|
Share price of Ordinary share (mid) |
441.0p |
544.0p |
-18.9 |
|
(Premium)/discount to net asset value on Ordinary shares{A} |
-0.6% |
9.5% |
|
|
|
|
|
|
|
Gearing (ratio of borrowing to shareholders' funds) |
|
|
|
|
Actual gearing ratio |
6.7% |
8.4% |
|
|
Potential gearing ratio |
0.0% |
10.0% |
|
|
|
|
|
|
|
Dividends and earnings |
|
|
|
|
Revenue return per share |
28.1p |
29.3p |
-3.9 |
|
Dividends per share{B} |
27.75p |
27.00p |
+2.8 |
|
Dividend cover |
1.00 times |
1.09 times |
|
|
Revenue reserves (£'000) {C} |
26,300 |
25,782 |
|
|
|
|
|
|
|
Operating costs |
|
|
|
|
Total expense ratio |
0.8% |
0.8% |
|
|
{A} These discounts are lower than the numbers that appear in the statutory accounts because they are calculated using capital only net asset values. |
|||
|
{B} The figures for dividends per share reflect the years in which they were earned (see note 6). |
|||
|
{C} The revenue reserve figure does not take account of the proposed third interim and final dividends amounting to £3,558,000 and £7,278,000 respectively (2008 - third interim and final dividends amounting to £3,397,000 and £7,266,000 respectively). |
|||
Performance (total return)
|
|
1 year |
3 year |
5 year return |
|
|
% |
% |
% |
|
Share price |
-14.0 |
-21.8 |
+22.4 |
|
Net asset value per Ordinary share |
-22.1 |
-26.3 |
+16.3 |
|
Source: Aberdeen Asset Management/Fundamental Data |
|||
Dividends
|
|
Rate |
xd date |
Record date |
Payment date |
|
1st interim 2009 |
5.50p |
17 December 2008 |
19 December 2008 |
16 January 2009 |
|
2nd interim 2009 |
5.50p |
11 March 2009 |
13 March 2009 |
17 April 2009 |
|
3rd interim 2009 |
5.50p |
10 June 2009 |
12 June 2009 |
17 July 2009 |
|
Proposed final 2009 |
11.25p |
23 September 2009 |
25 September 2009 |
28 October 2009 |
|
Total dividends 2009 |
27.75p |
|
|
|
Ten Year Financial Record
|
Year end |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
|
Total revenue (£'000) |
15,210 |
16,808 |
15,384 |
16,041 |
16,827 |
16,533 |
17,237 |
19,251 |
22,390 |
19,790 |
|
Per Ordinary share |
|
|
|
|
|
|
|
|
|
|
|
Net revenue return (p) |
14.7 |
17.4 |
18.0 |
18.7 |
19.6 |
20.0 |
21.8 |
24.7 |
29.3 |
28.1 |
|
Dividends (p) |
15.75 |
16.20 |
17.00 |
17.75 |
18.25 |
19.15 |
21.60 |
24.25 |
27.00 |
27.75 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Net asset value per Ordinary/B Ordinary share (p){A} |
567.0 |
611.9 |
541.3 |
433.8 |
496.2 |
603.3 |
699.7 |
802.3 |
619.9 |
455.4 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Shareholders' funds (£'000) |
442,282 |
435,145 |
380,035 |
304,529 |
345,138 |
404,601 |
456,714 |
522,617 |
400,536 |
294,570 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
{A} All B Ordinary shares were converted to Ordinary shares during the year ended 30 June 2002. |
|
Total revenue returns per Ordinary share have been based on the average number of Ordinary shares in issue during each year (see note 8). |
|
Net Asset Values per Ordinary and B Ordinary share have been calculated after deducting prior capital at nominal values and have been adjusted for the annual B Ordinary scrip issues. |
|
The 1999 dividend per share does not include the special component of 0.75p to compensate for lack of tax credit on the first interim dividend. |
|
The Net Asset Value figure for 2005 has been restated to reflect the changes in accounting policies (FRS 26 - 'Financial Instruments: Recognition and Measurement'; FRS 21 - 'Events after the Balance Sheet Date'). |
|
The figures for dividends reflect the dividends for the years in which they were earned. |
|
Please note that past performance is not a guide to future performance. |
MURRAY INCOME TRUST PLC
INCOME STATEMENT
|
|
|
Year ended 30 June 2009 |
Year ended 30 June 2008 |
|||||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
Losses on investments |
9 |
- |
(105,973) |
(105,973) |
- |
(119,233) |
(119,233) |
|||
|
Income |
2 |
19,790 |
- |
19,790 |
22,390 |
- |
22,390 |
|||
|
Investment management fees |
3 |
(870) |
(870) |
(1,740) |
(1,291) |
(1,291) |
(2,582) |
|||
|
Administrative expenses |
4 |
(866) |
- |
(866) |
(976) |
- |
(976) |
|||
|
VAT recoverable on investment management fee |
3 |
778 |
778 |
1,556 |
- |
- |
- |
|||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||
|
Net return before finance costs and taxation |
|
18,832 |
(106,065) |
(87,233) |
20,123 |
(120,524) |
(100,401) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Finance costs of borrowing |
5 |
(682) |
(682) |
(1,364) |
(1,143) |
(1,146) |
(2,289) |
|||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||
|
Return on ordinary activities before and after taxation |
|
18,150 |
(106,747) |
(88,597) |
18,980 |
(121,670) |
(102,690) |
|||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||
|
Return per Ordinary share (pence) |
8 |
28.1 |
(165.2) |
(137.1) |
29.3 |
(187.6) |
(158.3) |
|||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||
|
|
||||||||||
|
The total column of this statement represents the profit and loss account of the Company. |
||||||||||
|
The Company had no recognised gains or losses other than those recognised in the Income Statement. |
||||||||||
|
No operations were acquired or discontinued in the year. |
||||||||||
|
All revenue and capital items in the above statement derive from continuing operations. |
||||||||||
|
The accompanying notes are an integral part of the financial statements. |
||||||||||
|
|
|
|
|
|||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
Ordinary dividends on equity shares |
6 |
17,632 |
- |
17,632 |
16,082 |
- |
16,082 |
|||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||
|
|
||||||||||
|
The above dividend information does not form part of the Income Statement. |
||||||||||
MURRAY INCOME TRUST PLC
Balance Sheet
|
|
|
As at |
As at |
|
|
|
30 June 2009 |
30 June 2008 |
|
|
Notes |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
9 |
313,384 |
433,825 |
|
|
|
___________ |
___________ |
|
Current assets |
|
|
|
|
Loans and receivables |
10 |
2,915 |
3,080 |
|
Cash and short term deposits |
|
13,528 |
6,390 |
|
|
|
___________ |
___________ |
|
|
|
16,443 |
9,470 |
|
|
|
___________ |
___________ |
|
Creditors: amounts falling due within one year |
|
|
|
|
Other payables |
11 |
(257) |
(2,759) |
|
Bank loans |
11 |
(35,000) |
- |
|
|
|
___________ |
___________ |
|
Net current assets |
|
(18,814) |
6,711 |
|
|
|
___________ |
___________ |
|
Total assets less current liabilities |
|
294,570 |
440,536 |
|
|
|
|
|
|
Creditors: amounts falling due after more than one year |
|||
|
Bank loans |
12 |
- |
(40,000) |
|
|
|
___________ |
___________ |
|
Net assets |
|
294,570 |
400,536 |
|
|
|
___________ |
___________ |
|
Share capital and reserves |
|
|
|
|
Called-up share capital |
13 |
16,604 |
16,604 |
|
Share premium account |
|
7,955 |
7,955 |
|
Capital redemption reserve |
|
4,997 |
4,997 |
|
Capital reserve |
14 |
238,714 |
345,198 |
|
Revenue reserve |
14 |
26,300 |
25,782 |
|
|
|
___________ |
___________ |
|
Total equity |
|
294,570 |
400,536 |
|
|
|
___________ |
___________ |
|
Net asset value per Ordinary share (pence): |
15 |
455.4 |
619.9 |
|
|
|
___________ |
___________ |
|
|
|
|
|
|
The financial statements were approved by the Board of Directors and authorised for issue on 15 September 2009 and were signed on its behalf by: |
|||
|
|
|||
|
PAF Gifford Chairman |
|||
|
|
|||
|
The accompanying notes are an integral part of the financial statements. |
|||
MURRAY INCOME TRUST PLC
Reconciliation of Movements in Shareholders' funds
|
For the year ended 30 June 2009 |
||||||
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 30 June 2008 |
16,604 |
7,955 |
4,997 |
345,198 |
25,782 |
400,536 |
|
Return on ordinary activities after taxation |
- |
- |
- |
(106,747) |
18,150 |
(88,597) |
|
Repurchase of own shares |
- |
- |
- |
(154) |
- |
(154) |
|
Issue of shares from Treasury |
- |
- |
- |
417 |
- |
417 |
|
Dividends paid (see note 6) |
- |
- |
- |
- |
(17,632) |
(17,632) |
|
|
________ |
________ |
________ |
________ |
________ |
________ |
|
Balance at 30 June 2009 |
16,604 |
7,955 |
4,997 |
238,714 |
26,300 |
294,570 |
|
|
________ |
________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
For the year ended 30 June 2008 |
||||||
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 30 June 2007 |
16,604 |
7,955 |
4,997 |
470,177 |
22,884 |
522,617 |
|
Return on ordinary activities after taxation |
- |
- |
- |
(121,670) |
18,980 |
(102,690) |
|
Repurchase of own shares |
- |
- |
- |
(3,309) |
- |
(3,309) |
|
Dividends paid (see note 6) |
- |
- |
- |
- |
(16,082) |
(16,082) |
|
|
________ |
________ |
________ |
________ |
________ |
________ |
|
Balance at 30 June 2008 |
16,604 |
7,955 |
4,997 |
345,198 |
25,782 |
400,536 |
|
|
________ |
________ |
________ |
________ |
________ |
________ |
|
|
||||||
|
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. |
||||||
|
The accompanying notes are an integral part of the financial statements. |
||||||
MURRAY INCOME TRUST PLC
Cash Flow Statement
|
|
|
Year ended 30 June 2009 |
Year ended 30 June 2008 |
||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Net cash inflow from operating activities |
16 |
|
18,278 |
|
18,541 |
|
|
|
|
|
|
|
|
Servicing of finance |
|
|
|
|
|
|
Interest paid |
|
(1,377) |
|
(2,274) |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash outflow from servicing of finance |
|
|
(1,377) |
|
(2,274) |
|
|
|
|
|
|
|
|
Financial investment |
|
|
|
|
|
|
Purchases of investments |
|
(60,264) |
|
(132,881) |
|
|
Sales of investments |
|
73,273 |
|
129,919 |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash inflow/(outflow) from financial investment |
|
|
13,009 |
|
(2,962) |
|
|
|
|
|
|
|
|
Equity dividends paid |
|
|
(17,632) |
|
(16,082) |
|
|
|
|
|
|
|
|
Management of liquid resources |
|
|
|
|
|
|
Cash drawn/(placed) on money market deposits |
|
|
5,000 |
|
(3,400) |
|
|
|
|
_______ |
|
_______ |
|
Net cash inflow/(outflow) before financing |
|
|
17,278 |
|
(6,177) |
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
(Repayment)/drawdown of loans |
|
(5,000) |
|
10,000 |
|
|
Issue of shares from treasury |
|
417 |
|
- |
|
|
Purchase of own shares |
|
(557) |
|
(2,906) |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash (outflow)/inflow from financing |
|
|
(5,140) |
|
7,094 |
|
|
|
|
_______ |
|
_______ |
|
Increase in cash |
17 |
|
12,138 |
|
917 |
|
|
|
|
_______ |
|
_______ |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements. |
|||||
MURRAY INCOME TRUST PLC
YEAR ENDED 30 JUNE 2009
|
1. |
Accounting policies |
|
|
|
(a) |
Basis of preparation |
|
|
|
The financial statements have been prepared in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (issued in January 2009 and adopted early). The early adoption of the January 2009 SORP had no effect on the financial statements of the Company, other than: |
|
|
|
- the requirement to disclose separately capital reserves that relate to the revaluation of investments held at the reporting date. These are disclosed in note 14. This new requirement replaces the previous requirement to disclose the value of the capital reserve that was unrealised. |
|
|
|
- the requirement to present tax reconciliations based on the total column of the Income Statement rather than the revenue column as was previously recommended. The reconciliation is disclosed in note 7. |
|
|
|
They have also been prepared on the assumption that approval as an investment trust will continue to be granted. |
|
|
|
|
|
|
(b) |
Income |
|
|
|
Dividends receivable on equity shares (other than special dividends) and convertibles are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends not expected to be received. Special dividends are credited to capital or revenue, according to the circumstances. |
|
|
|
|
|
|
|
The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities and shares. |
|
|
|
|
|
|
|
Interest receivable from cash and short-term deposits and interest payable is accrued to the end of the year. |
|
|
|
|
|
|
(c) |
Expenses |
|
|
|
All expenses are accounted for on an accruals basis. All expenses are charged through the revenue column of the Income Statement except as follows: |
|
|
|
- transaction costs on the acquisition or disposal of investments are recognised as a capital item in the Income Statement. |
|
|
|
- expenses are charged to the capital reserve where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 50% to revenue and 50% to the capital reserve to reflect the Company's investment policy and prospective income and capital growth. |
|
|
|
|
|
|
(d) |
Taxation |
|
|
|
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Balance Sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Balance Sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods. Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the Balance Sheet date. |
|
|
|
|
|
|
|
Due to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. |
|
|
|
|
|
|
|
The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and the revenue account on the same basis as the particular item to which it relates using the Company's effective rate of tax for the year. |
|
|
|
|
|
|
(e) |
Valuation of Investments |
|
|
|
Investments have been designated upon initial recognition at fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are valued at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange. Gains and losses arising from changes in fair value are included in the net return for the period as a capital item in the Income Statement and are ultimately recognised in the capital reserve. The valuation of reverse convertibles is carried out by the respective counterparty and is modelled on a long stock and short call basis taking account of implied volatility and including an accrual for yield. |
|
|
|
|
|
|
(f) |
Borrowings |
|
|
|
Interest-bearing bank loans and overdrafts are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. Finance charges are accounted for on an accruals basis using the effective interest rate method and are charged 50% to revenue and 50% to the capital reserve to reflect the Company's investment policy and prospective income and capital growth. |
|
|
|
|
|
|
(g) |
Traded options |
|
|
|
The Company may enter into certain derivatives (eg options) to gain exposure to the market. The option contracts are accounted for as separate derivative contracts and are therefore shown in other assets or other liabilities at their fair value ie market value adjusted for the amortisation of transaction expenses. The premium received and fair value changes in the open position are normally recognised in the revenue column of the Income Statement, however, where the option is written for the maintenance or enhancement of the Company's investments then the change in fair value is recognised in the capital column of the Income Statement. |
|
|
|
2009 |
2008 |
|
2. |
Income |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
UK dividends (all listed) |
17,404 |
21,101 |
|
|
Bond interest |
1,519 |
943 |
|
|
Stock dividends |
522 |
- |
|
|
|
_____________ |
_____________ |
|
|
|
19,445 |
22,044 |
|
|
|
_____________ |
_____________ |
|
|
Other income |
|
|
|
|
Deposit interest |
42 |
246 |
|
|
Money market interest |
39 |
45 |
|
|
Traded option premiums |
117 |
- |
|
|
Underwriting commission |
147 |
55 |
|
|
|
_____________ |
_____________ |
|
|
|
345 |
346 |
|
|
|
_____________ |
_____________ |
|
|
Total income |
19,790 |
22,390 |
|
|
|
_____________ |
_____________ |
|
|
|
|
|
|
|
During the year, the Company received premiums totalling £117,000 (2008 - £nil) in exchange for entering into derivative transactions. This includes a mark to market on derivative contracts. At the year end there was one open position, valued at £82,000 (2008 - £nil) and securities with a value of £3,345,000 were pledged as collateral against this. |
||
|
|
|
2009 |
2008 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
3. |
Investment management fees |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment management fees |
870 |
870 |
1,740 |
1,253 |
1,253 |
2,506 |
|
|
VAT paid |
- |
- |
- |
38 |
38 |
76 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
870 |
870 |
1,740 |
1,291 |
1,291 |
2,582 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
Details of the fee basis are contained in the Directors' Report in the Annual Report. |
||||||
|
|
|
||||||
|
|
The Company has not been charged VAT in the current period and has recovered £1,556,000 of VAT charged in previous periods. For further details see note 19. |
||||||
|
|
|
2009 |
2008 |
|
4. |
Administrative expenses |
£'000 |
£'000 |
|
|
Shareholders' services{A} |
363 |
460 |
|
|
Irrecoverable VAT |
90 |
111 |
|
|
Directors' remuneration |
110 |
100 |
|
|
Secretarial fees |
75 |
75 |
|
|
Auditors' remuneration: |
|
|
|
|
Fees payable to the Company's auditor for the audit of the Company's annual accounts |
19 |
18 |
|
|
Other expenses |
209 |
212 |
|
|
|
_______ |
_______ |
|
|
|
866 |
976 |
|
|
|
_______ |
_______ |
|
|
|
||
|
|
{A} Includes registration, savings scheme and other wrapper administration and promotion expenses, of which £298,000 (2008 - £407,000) was paid to Aberdeen Asset Managers Limited (AAM) to cover marketing activities during the year. There were no sums due to AAM at the year end (2008 - £nil). |
||
|
|
|
2009 |
2008 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
5. |
Finance costs of borrowing |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Bank loans and overdrafts |
682 |
682 |
1,364 |
1,143 |
1,146 |
2,289 |
|
|
|
2009 |
2008 |
|
6. |
Ordinary dividends on equity shares |
£'000 |
£'000 |
|
|
Third interim 2008 of 5.25p (2007 - 5.00p) |
3,396 |
3,257 |
|
|
Final 2008 of 11.25p (2007 - 9.25p) |
7,266 |
6,015 |
|
|
First interim 2009 of 5.50p (2008 - 5.25p) |
3,552 |
3,414 |
|
|
Second interim 2009 of 5.50p (2008 - 5.25p) |
3,555 |
3,396 |
|
|
Return of unclaimed dividends |
(137) |
- |
|
|
|
_________ |
_________ |
|
|
|
17,632 |
16,082 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
|
The third interim and proposed final dividends for 2009 have not been included as a liability in these financial statements. The proposed final dividend for 2009 is subject to approval by Shareholders at the Annual General Meeting. |
||
|
|
|
||
|
|
We set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Section 842 of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of dividend for the year is £17,958,000 (2008 - £18,980,000). |
||
|
|
|
|
|
|
|
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
|
Three interim dividends of 5.50p (2008 - 5.25p) |
10,665 |
10,202 |
|
|
Proposed final dividend of 11.25p (2008 - 11.25p) |
7,278 |
7,266 |
|
|
|
_________ |
_________ |
|
|
|
17,943 |
17,468 |
|
|
|
_________ |
_________ |
|
7. |
Taxation |
||||||
|
|
There is no taxation charge for the year. Approved investment trusts are exempt from tax on gains made by the Company. The tax assessed for the period is lower than the standard rate of corporation tax in the UK of 28% (2008 - 29.5%). The differences are explained below: |
||||||
|
|
|
2009 |
2008 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Net profit on ordinary activities before taxation |
18,150 |
(106,747) |
(88,597) |
18,980 |
(121,670) |
(102,690) |
|
|
|
|
|
|
|
|
|
|
|
Return on ordinary activities multiplied by the applicable rate of corporation tax of 28% (2008 - 29.5%) |
5,082 |
(29,889) |
(24,807) |
5,599 |
(35,893) |
(30,294) |
|
|
Effects of: |
|
|
|
|
|
|
|
|
Non-taxable UK dividends |
(4,711) |
- |
(4,711) |
(6,041) |
- |
(6,041) |
|
|
Non-taxable stock dividends |
(146) |
- |
(146) |
- |
- |
- |
|
|
Movement in income accruals taxable on receipt |
9 |
- |
9 |
(32) |
- |
(32) |
|
|
Movement in unutilised loan relationships |
(66) |
- |
(66) |
(26) |
- |
(26) |
|
|
Movement in unutilised management expenses |
(168) |
- |
(168) |
500 |
- |
500 |
|
|
Other capital returns |
- |
29,889 |
29,889 |
- |
35,893 |
35,893 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
- |
- |
- |
- |
- |
- |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
||||||
|
|
No provision for deferred tax has been made in the current or prior accounting period. |
||||||
|
|
|
||||||
|
|
The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust company. |
||||||
|
|
|
||||||
|
|
The Company has not recognised a deferred tax asset of £13,961,000 (2008 - £13,977,000) arising as a result of unutilised management expenses and loan relationship deficits. Any excess management expenses will be utilised against any taxable income that may arise. |
||||||
|
|
|
2009 |
2008 |
||
|
8. |
Return per Ordinary share |
£'000 |
p |
£'000 |
p |
|
|
Returns are based on the following figures: |
||||
|
|
Revenue return |
18,150 |
28.1 |
18,980 |
29.3 |
|
|
Capital return |
(106,747) |
(165.2) |
(121,670) |
(187.6) |
|
|
|
_________ |
_________ |
_________ |
_________ |
|
|
Total return |
(88,597) |
(137.1) |
(102,690) |
(158.3) |
|
|
|
_________ |
_________ |
_________ |
_________ |
|
|
Weighted average number of Ordinary shares in issue |
|
64,624,625 |
|
64,869,985 |
|
|
|
2009 |
2008 |
|
|
9. |
Investments |
£'000 |
£'000 |
|
|
|
Held at fair value through profit or loss: |
|
|
|
|
|
Opening valuation |
433,825 |
543,269 |
|
|
|
Opening investment holdings losses/(gains) |
717 |
(149,536) |
|
|
|
|
_________ |
_________ |
|
|
|
Opening book cost |
434,542 |
393,733 |
|
|
|
Movements during the year: |
|
|
|
|
|
Purchases at cost |
58,758 |
134,398 |
|
|
|
Sales |
- proceeds |
(73,226) |
(124,609) |
|
|
|
- (losses)/gains |
(81,489) |
31,020 |
|
|
|
_________ |
_________ |
|
|
|
Closing book cost |
338,585 |
434,542 |
|
|
|
Closing investment holdings losses |
(25,201) |
(717) |
|
|
|
|
_________ |
_________ |
|
|
|
Closing valuation |
313,384 |
433,825 |
|
|
|
|
_________ |
_________ |
|
|
|
|
|
|
|
|
|
|
2009 |
2008 |
|
|
|
|
£'000 |
£'000 |
|
|
|
The portfolio valuation: |
|
|
|
|
|
UK equities |
299,914 |
427,617 |
|
|
|
UK convertible securities |
11,654 |
5,272 |
|
|
|
Fixed interest |
1,816 |
- |
|
|
|
Traded options |
- |
936 |
|
|
|
|
_________ |
_________ |
|
|
|
Total |
313,384 |
433,825 |
|
|
|
|
_________ |
_________ |
|
|
|
Losses on investments |
|
|
|
|
|
(Losses)/gains based on book cost |
(81,489) |
31,020 |
|
|
|
Net movement in investment holdings losses |
(24,484) |
(150,253) |
|
|
|
|
_________ |
_________ |
|
|
|
|
(105,973) |
(119,233) |
|
|
|
|
_________ |
_________ |
|
|
|
|
|
|
|
|
|
As at 30 June 2009, the Company had pledged collateral greater than the market value of the traded options in accordance with standard commercial practice. The carrying amount of financial assets pledged equated to £3,345,000 all in the form of securities. The collateral position is monitored on a daily basis, which then determines if further assets are required to be pledged over and above those already pledged. |
|||
|
|
|
|||
|
|
Transaction costs |
|||
|
|
During the year expenses were incurred in acquiring or disposing of investments classified at fair value through profit or loss. These have been expensed through capital and are included within (losses)/gains on investments in the Income Statement. The total costs were as follows: |
|||
|
|
|
2009 |
2008 |
|
|
|
|
£'000 |
£'000 |
|
|
|
Purchases |
219 |
736 |
|
|
|
Sales |
61 |
113 |
|
|
|
|
_________ |
_________ |
|
|
|
|
280 |
849 |
|
|
|
|
_________ |
_________ |
|
|
|
|
2009 |
2008 |
|
10. |
Loans and receivables |
£'000 |
£'000 |
|
|
Prepayments and accrued income |
2,915 |
3,031 |
|
|
Amounts due from brokers |
- |
49 |
|
|
|
_________ |
_________ |
|
|
|
2,915 |
3,080 |
|
|
|
_________ |
_________ |
|
|
|
2009 |
2008 |
|
11. |
Creditors: amounts falling due within one year |
£'000 |
£'000 |
|
|
Amounts due to brokers |
- |
2,431 |
|
|
Accruals |
257 |
328 |
|
|
Bank loans |
35,000 |
- |
|
|
|
_________ |
_________ |
|
|
|
35,257 |
2,759 |
|
|
|
_________ |
_________ |
|
|
|
||
|
|
Accruals include £135,000 (2008 - £184,000 plus VAT) of management fees and secretarial fees due to Aberdeen Asset Managers Limited, the investment manager. |
||
|
|
|
||
|
|
At 30 June 2009 the Company had a £35,000,000 (30 June 2008: £45,000,000) revolving bank credit facility with ING. Under the terms of the agreement, advances from the facility may be made for periods of up to six months or for such longer periods agreed by the lender. Interest is charged at a variable rate based on LIBOR plus a margin of 0.4% for the relevant period of the advance. As at 30 June 2009 this rate was 0.9988% (30 June 2008 - 5.5663%). The facility expires on 1 October 2009 by which time all advances must be repaid. |
||
|
|
|
||
|
|
The additional revolving bank credit facility with ING of £30,000,000 expired on 13 September 2008. During the year the Company committed itself to an additional revolving bank credit facility of £25,000,000 with Lloyds. Interest is charged at a variable rate based on LIBOR and a margin of 0.42% for the relevant period of the facility. This facility expires on 13 November 2009. |
||
|
|
|
2009 |
2008 |
|
12. |
Creditors: amounts falling due after more than one year |
£'000 |
£'000 |
|
|
£60,000,000 committed revolving bank credit facilities |
- |
40,000 |
|
|
|
2009 |
2008 |
||
|
13. |
Called-up share capital |
Shares |
£'000 |
Shares |
£'000 |
|
|
Authorised |
|
|
|
|
|
|
Ordinary shares of 25p each |
102,842,000 |
25,710 |
102,842,000 |
25,710 |
|
|
|
__________ |
______ |
__________ |
______ |
|
|
Allotted, called-up and fully-paid |
|
|
|
|
|
|
Ordinary shares of 25p each: publicly held |
64,689,458 |
16,172 |
64,617,458 |
16,154 |
|
|
Ordinary shares of 25p each: held in treasury |
1,727,000 |
432 |
1,799,000 |
450 |
|
|
|
__________ |
______ |
__________ |
______ |
|
|
|
66,416,458 |
16,604 |
66,416,458 |
16,604 |
|
|
|
__________ |
______ |
__________ |
______ |
|
|
|
||||
|
|
Of the above shares in issue the movements in the Ordinary shares held in treasury are as follows: |
||||
|
|
|
|
|
|
|
|
|
Balance brought forward |
1,799,000 |
450 |
1,277,550 |
320 |
|
|
Purchased during the year |
28,000 |
7 |
521,450 |
130 |
|
|
Sold during the year |
(100,000) |
(25) |
- |
- |
|
|
|
__________ |
______ |
__________ |
______ |
|
|
Balance carried forward |
1,727,000 |
432 |
1,799,000 |
450 |
|
|
|
__________ |
______ |
__________ |
______ |
|
|
|
||||
|
|
During the year 28,000 (2008 - 521,450) Ordinary shares of 25p each were repurchased by the Company at a total cost, including transaction costs, of £154,000 (2008 - £3,309,000) of which £nil (2008 - £403,000) is brokers' fees. In the year all of these shares were placed in treasury (2008 - 521,450). In the year 100,000 shares were sold from its Treasury account for proceeds of £417,000 (2008 - nil). No shares were purchased for cancellation during the year (2008 - nil). Further details of the share repurchases are contained in the Directors' Report. |
||||
|
|
|
2009 |
2008 |
|
14. |
Retained earnings |
£'000 |
£'000 |
|
|
Capital reserve |
|
|
|
|
At 30 June 2008 |
345,198 |
470,177 |
|
|
Movement in investment holdings |
(24,484) |
(150,253) |
|
|
(Losses)/gains on realisation of investments at fair value |
(81,489) |
31,020 |
|
|
Repurchase of own shares |
(154) |
(3,309) |
|
|
Finance costs of bank loan |
(682) |
(1,146) |
|
|
Issue of shares from treasury |
417 |
- |
|
|
Investment management fees |
(870) |
(1,291) |
|
|
VAT recoverable on investment management fees |
778 |
- |
|
|
|
_________ |
_________ |
|
|
At 30 June 2009 |
238,714 |
345,198 |
|
|
|
_________ |
_________ |
|
|
Revenue reserve |
|
|
|
|
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
|
At 30 June 2008 |
25,782 |
22,884 |
|
|
Revenue |
18,150 |
18,980 |
|
|
Dividends paid |
(17,632) |
(16,082) |
|
|
|
_________ |
_________ |
|
|
At 30 June 2009 |
26,300 |
25,782 |
|
|
|
_________ |
_________ |
|
15. |
Net asset value per share |
||
|
|
The net asset value per Ordinary share and the net asset value attributable to the Ordinary shares at the year end calculated in accordance with the Articles of Association were as follows: |
||
|
|
|
|
|
|
|
|
2009 |
2008 |
|
|
Net asset value attributable (£'000) |
294,570 |
400,536 |
|
|
Number of Ordinary shares in issue (note 13) |
64,689,458 |
64,617,458 |
|
|
Net asset value per share (p) |
455.4 |
619.9 |
|
16. |
Reconciliation of net return before finance costs and |
2009 |
2008 |
|
|
taxation to net cash inflow from operating activities |
£'000 |
£'000 |
|
|
Net return before finance costs and taxation |
(87,233) |
(100,401) |
|
|
Adjustments for: |
|
|
|
|
Losses on investments |
105,973 |
119,233 |
|
|
Non cash stock dividend |
(522) |
- |
|
|
Increase in accrued income |
86 |
(57) |
|
|
Increase in prepayments |
30 |
(41) |
|
|
Decrease in accruals |
(56) |
(193) |
|
|
|
_________ |
_________ |
|
|
Net cash inflow from operating activities |
18,278 |
18,541 |
|
|
|
_________ |
_________ |
|
|
|
At |
|
At |
|
|
|
1 July 2008 |
Cash flows |
30 June 2009 |
|
17. |
Analysis of changes in net debt |
£'000 |
£'000 |
£'000 |
|
|
Net cash: |
|
|
|
|
|
Cash |
1,390 |
12,138 |
13,528 |
|
|
Short term deposits* |
5,000 |
(5,000) |
- |
|
|
|
_________ |
_________ |
_________ |
|
|
|
1,390 |
12,138 |
13,528 |
|
|
Debt: |
_________ |
_________ |
_________ |
|
|
Debt due after more than one year |
(40,000) |
5,000 |
(35,000) |
|
|
|
_________ |
_________ |
_________ |
|
|
|
(38,610) |
17,138 |
(21,472) |
|
|
|
|
|
|
|
|
* Money market deposits are included within cash and short term deposits in the balance sheet. |
|||
|
18. |
Derivatives and other financial instruments |
|||||||||
|
|
The Company's financial instruments, other than derivatives, comprise securities and other investments, cash balances, liquid resources, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company also has the ability to enter into derivative transactions in the form of forward foreign currency contracts, futures and options, subject to Board approval, for the purpose of managing currency and market risk arising from the Company's activities. During the year the Company entered into three yield-enhanced securities, details of which are provided in the Portfolio of Investments table. |
|||||||||
|
|
|
|||||||||
|
|
The main risks the Company faces from these financial instruments are (i) market risk (comprising interest rate and other price risk), (ii) liquidity risk and (iii) credit risk. In line with the Company's investment objective, the portfolio comprises UK securities and therefore has no direct capital exposure to foreign currency risk. |
|||||||||
|
|
|
|||||||||
|
|
In order to mitigate risk, the investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. The Attribution Analysis, detailing the allocation of assets and the stock selection, is shown in the Sector Allocations table. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy. Current strategy is detailed in the Chairman's Statement (in the sections headed 'Performance', 'Dividends' and 'Outlook') and in the Investment Manager's Review (in the sections headed 'Background', 'Performance', 'Portfolio Activity' and 'Structure', 'Income' and 'Outlook'). The Board regularly reviews and agrees policies for managing each of the risks. The Board has agreed the level of gearing, which was 11.9% of net assets as at 30 June 2009 (2008 - 10.0%). The Manager's policies for managing these risks are summarised below and have been applied throughout the current and previous year. The numerical disclosures in the table listed below exclude short-term debtors and creditors. |
|||||||||
|
|
|
|||||||||
|
|
Market price risk |
|||||||||
|
|
The Company's investment portfolio is exposed to market price fluctuations, which are monitored by the Manager in pursuance of the investment objective as set out in the Corporate Summary. Adherence to investment guidelines and to investment and borrowing powers set out in the management agreement mitigates the risk of exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the Investment Manager's Review. |
|||||||||
|
|
|
|||||||||
|
|
Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Company's operations. It represents the potential loss the Company might suffer through holding market positions as a consequence of price movements. It is the Board's policy to hold equity investments in the portfolio in a broad spread of sectors in order to reduce the risk arising from factors specific to a particular sector. A summary of investment changes during the year under review appears below and an analysis of the equity portfolio by industrial classification also appears in the Annual Report (the twenty largest portfolio holdings are shown below). |
|||||||||
|
|
|
|||||||||
|
|
Interest rate risk |
|||||||||
|
|
Interest rate movements may affect: |
|||||||||
|
|
- |
the fair value of the investments in fixed interest rate securities; |
||||||||
|
|
- |
the level of income receivable on cash deposits; |
||||||||
|
|
- |
interest payable on the Company's variable rate borrowings. |
||||||||
|
|
|
|||||||||
|
|
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. |
|||||||||
|
|
|
|||||||||
|
|
Financial assets |
|||||||||
|
|
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Interest rate risk is the risk of movements in the value of financial instruments as a result of fluctuations in interest rates. |
|||||||||
|
|
|
|||||||||
|
|
The interest rate risk of the portfolio of financial assets at the Balance Sheet date was as follows: |
|||||||||
|
|
|
|||||||||
|
|
|
Floating rate |
Fixed rate |
Non-interest bearing |
||||||
|
|
|
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
|||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
|
Sterling |
13,528 |
6,390 |
13,470 |
5,272 |
299,914 |
428,553 |
|||
|
|
|
_________ |
________ |
_________ |
________ |
________ |
_________ |
|||
|
|
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates. |
|||||||||
|
|
|
|||||||||
|
|
The interest bearing assets represent the equity linked notes and corporate bonds, amounting to £13,470,000 (2008 - £5,272,000). Their weighted average interest rate, based on current yield of the underlying equity, plus a fixed rate of interest on the nominal amount notes held, was 14.86% (2008 - 11.24%). |
|||||||||
|
|
|
|||||||||
|
|
The non-interest bearing assets represent the equity element of the portfolio. |
|||||||||
|
|
|
|||||||||
|
|
Financial liabilities |
|||||||||
|
|
The Company has borrowings by way of a loan facility, details of which are in note 12. The fair value of this loan has been calculated at £35,000,000 as at 30 June 2009 (2008 - value £40,000,000; fair value £40,000,000). The fair value of the loan equates to the cost as the loans are rolled on a monthly basis. All other financial assets and liabilities of the Company are included in the Balance Sheet at fair value. |
|||||||||
|
|
|
|||||||||
|
|
Maturity profile |
|||||||||
|
|
The maturity profile of the Company's financial assets and liabilities at 30 June was as follows: |
|||||||||
|
|
|
Within |
Within |
|||||||
|
|
|
1 year |
1 year |
|||||||
|
|
|
2009 |
2008 |
|||||||
|
|
Assets |
£'000 |
£'000 |
|||||||
|
|
Fixed rate |
|
|
|||||||
|
|
Equity linked notes |
11,654 |
5,272 |
|||||||
|
|
|
________ |
________ |
|||||||
|
|
Floating rate |
|
|
|||||||
|
|
Cash |
13,528 |
6,390 |
|||||||
|
|
|
________ |
________ |
|||||||
|
|
|
|
|
|||||||
|
|
|
More than |
More than |
|||||||
|
|
|
5 years |
5 years |
|||||||
|
|
|
2009 |
2008 |
|||||||
|
|
Assets |
£'000 |
£'000 |
|||||||
|
|
Fixed rate |
|
|
|||||||
|
|
Corporate Bonds |
1,816 |
- |
|||||||
|
|
|
________ |
________ |
|||||||
|
|
|
|
|
|||||||
|
|
|
Within |
Within |
|||||||
|
|
|
1 year |
1 year |
|||||||
|
|
|
2009 |
2008 |
|||||||
|
|
Liabilities |
£'000 |
£'000 |
|||||||
|
|
Floating rate |
|
|
|||||||
|
|
Revolving bank credit facility |
35,000 |
- |
|||||||
|
|
|
________ |
________ |
|||||||
|
|
|
|
|
|||||||
|
|
|
Between |
Between |
|||||||
|
|
|
1 and 2 years |
1 and 2 |
|||||||
|
|
|
2009 |
2008 |
|||||||
|
|
Liabilities |
£'000 |
£'000 |
|||||||
|
|
Floating rate |
|
|
|||||||
|
|
Revolving bank credit facility |
- |
40,000 |
|||||||
|
|
|
________ |
________ |
|||||||
|
|
|
|
|
|||||||
|
|
All the other financial assets and liabilities do not have a maturity date. |
|||||||||
|
|
|
|||||||||
|
|
Interest rate sensitivity |
|||||||||
|
|
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the Balance Sheet date and the stipulated change taking place at the beginning of the financial year and held constant in the case of instruments that have floating rates. |
|||||||||
|
|
|
|||||||||
|
|
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's : |
|||||||||
|
|
- |
profit before tax for the year ended 30 June 2009 would increase/decrease by £135,000 (2008 - increase/decrease by £64,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances. |
||||||||
|
|
- |
equity reserves would not be materially affected as the fixed interest holdings held are linked to an underlying equity, and therefore covered under the other price risk section. |
||||||||
|
|
|
|||||||||
|
|
Other price risk |
|||||||||
|
|
Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments. |
|||||||||
|
|
|
|||||||||
|
|
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process, as detailed in the section 'Investment Policy', both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. |
|||||||||
|
|
|
|||||||||
|
|
Other price risk sensitivity |
|||||||||
|
|
If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary Shareholders and equity for the year ended 30 June 2009 would have increased/decreased by £31,338,000 (2008 - £43,382,000). |
|||||||||
|
|
|
|||||||||
|
|
Liquidity risk |
|||||||||
|
|
The Company's assets comprise readily realisable securities which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of committed loan and overdraft facilities. |
|||||||||
|
|
|
|||||||||
|
|
As at 30 June 2009 the Company utilised £35,000,000 of a £60,000,000 revolving bank credit facility. Interest is charged at a variable rate based on LIBOR plus a margin of 0.40% for the relevant period of the advance. As at 30 June 2009 this rate was 0.9988%. The facility expires on 1 October 2009 by which time all advances must be paid. The aggregate of all future interest payments at the rate ruling at 30 June 2009 and the redemption of the loan amounts to £35,088,000. |
|||||||||
|
|
|
|||||||||
|
|
Credit risk |
|||||||||
|
|
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. This is mitigated by the Investment Manager reviewing the credit ratings of broker counterparties. The risk attached to dividend flows is mitigated by the Investment Manager's research of potential investee companies. The Company's custodian bank is responsible for the collection of income on behalf of the Company and their performance is reviewed by the Board on a regular basis and reports its finding to the Manager's Risk Management Committee. It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties. The maximum credit risk at 30 June 2009 is £29,865,000 (30 June 2008 - £14,534,000) consisting of £11,654,000 (2008 - £5,272,000) equity linked notes, £1,816,000 (2008 - £nil) corporate bonds, £2,867,000 (2008 - £2,823,000) of dividends receivable from equity shares, £13,528,000 (2008 - £6,390,000) in cash held and £nil (2008 - £49,000) due from brokers for outstanding trades. |
|||||||||
|
|
|
|||||||||
|
|
None of the Company's financial assets is past due or impaired. |
|||||||||
|
|
|
|||||||||
|
|
Capital management policies and procedures |
|||||||||
|
|
The investment objective of the Company is to achieve a high and growing income combined with capital growth through investment in a portfolio of UK equities. |
|||||||||
|
|
|
|||||||||
|
|
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to Shareholders through the optimisation of the debt and equity balance. |
|||||||||
|
|
|
|||||||||
|
|
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes: |
|||||||||
|
|
- |
the planned level of gearing which takes into account the Investment Manager's views on the market; |
||||||||
|
|
- |
the level of equity shares in issue; |
||||||||
|
|
- |
the extent to which revenue in excess of that which is required to be distributed should be retained. |
||||||||
|
|
|
|||||||||
|
|
The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. |
|||||||||
|
|
|
|||||||||
|
|
At the year end financial covenants contained within the loan agreements provide, inter alia, that borrowings shall at no time exceed 45% of net assets and that the net assets must exceed £225 million. At 30 June 2009 net gearing was 11.9% and the net assets were £294.5 million. |
|||||||||
|
19. |
Contingent assets |
|
|
On 5 November 2007, the European Court of Justice ruled that management fees on investment trusts should be exempt from VAT. HMRC has announced its intention not to appeal against this ruling to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company will be processed by HMRC in due course. |
|
|
|
|
|
The Company has accepted the Manager's offer to refund £1,556,000 to the Company, representing all VAT charged on investment management fees for the period 1 January 2004 to 31 August 2007; this has been received in the year and has been allocated to revenue and capital respectively, in accordance with the accounting policy of the Company for the periods in which the VAT was charged. The amount of any interest due on recoverable amounts and the timescale for receipt are at present uncertain and the Company has therefore taken no account in these financial statements of any such repayment. |
|
|
|
|
|
The Company has not been charged VAT on its investment management fees since 1 September 2007. |
20. If approved, the proposed final dividend of 11.25p per share will be paid on 28 October 2009 to holders of Ordinary shares on the register at the close of business on 25 September 2009. In respect of the year ending 30 June 2010, three interim dividends of 5.5p per share will be paid on 15 January 2010, 16 April 2010 and 16 July 2010 to holders of Ordinary shares on the register at the close of business on 18 December 2009, 12 March 2010 and 11 June 2010 respectively.
21. The Annual General Meeting will be held on 27 October 2009 at the Strathclyde Suite, Glasgow Royal Concert Hall, 2 Sauchiehall Street, Glasgow, G2 3NY.
22. Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.
The figures and financial information for the year ended 30 June 2009 are compiled from an extract of the latest accounts of the Company and do not constitute the statutory accounts for that year. Those accounts included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or (3) of the Companies Act 2006. They have not yet been delivered to the Registrar of Companies. The figures and financial information for the year ended 30 June 2008 are compiled from an extract of the latest published accounts of the Company and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985. The 2009 accounts will be filed with the Registrar of Companies in due course.
The annual results will be circulated to shareholders in the form of an Annual Report, copies of which will be available at the Company's registered office, 40 Princes Street, Edinburgh EH2 2BY and which will be filed with the Registrar of Companies.
By Order of the Board
ABERDEEN ASSET MANAGEMENT PLC
Secretary
15 September 2009
Copies of this announcement will be available to the public from the Company Secretary, Aberdeen Asset Management PLC, 40 Princes Street, Edinburgh EH2 2BY.
MURRAY INCOME TRUST PLC
SUMMARY OF INVESTMENT CHANGES DURING THE YEAR TO 30 JUNE 2008
|
|
Valuation |
|
Appreciation/ |
Valuation |
||
|
|
30 June 2008 |
Transactions |
(depreciation) |
30 June 2009 |
||
|
|
£'000 |
% |
£'000 |
£'000 |
£'000 |
% |
|
United Kingdom |
|
|
|
|
|
|
|
Equities |
427,617 |
97.1 |
(21,418) |
(106,285) |
299,914 |
91.0 |
|
Convertible securities/fixed interest |
5,272 |
1.2 |
9,842 |
(1,644) |
13,470 |
4.1 |
|
FTSE options |
936 |
0.2 |
(2,892) |
1,956 |
- |
- |
|
|
________ |
______ |
__________ |
___________ |
_______ |
_______ |
|
Total investments |
433,825 |
98.5 |
(14,468) |
(105,973) |
313,384 |
95.1 |
|
|
________ |
______ |
__________ |
___________ |
_______ |
_______ |
|
Other net assets |
6,711 |
1.5 |
9,475 |
- |
16,186 |
4.9 |
|
|
________ |
______ |
__________ |
___________ |
_______ |
_______ |
|
Total assets less current liabilities |
440,536 |
100.0 |
(4,993) |
(105,973) |
329,570 |
100.0 |
|
|
________ |
______ |
__________ |
___________ |
_______ |
_______ |
SUMMARY OF NET ASSETS
|
|
Valuation |
|
|
|
30 June 2009 |
|
|
|
£'000 |
|
|
Equities |
299,914 |
101.8 |
|
Convertible securities/fixed interest |
13,470 |
4.6 |
|
Other net assets |
16,186 |
5.5 |
|
Borrowings |
(35,000) |
(11.9) |
|
|
_________ |
_________ |
|
Equity Shareholders' interest |
294,570 |
100.0 |
|
|
_________ |
_________ |
MURRAY INCOME TRUST PLC
Twenty Largest Investments
As at 30 June 2009
|
|
Valuation |
Total |
Valuation |
|
|
2009 |
assets |
2008 |
|
Investment |
£'000 |
% |
£'000 |
|
1 (2) BP {A} |
|
|
|
|
BP is one of the world's largest petroleum and petrochemicals groups. Its main activities are: exploration and production of crude oil and natural gas; refining, marketing, supply and transportation of petroleum products. |
19,825 |
6.0 |
23,913 |
|
|
|
|
|
|
2 (1) Royal Dutch Shell |
|
|
|
|
Royal Dutch Shell is engaged in all phases of the petroleum industry, from exploration to processing and distribution. It has strong positions in oil products marketing and LNG, globally. The group operates in over 130 countries. |
18,312 |
5.6 |
26,462 |
|
|
|
|
|
|
3 (7) AstraZeneca |
|
|
|
|
AstraZeneca researches, develops, produces and markets pharmaceutical products. The company's operations are focused on six therapeutic areas: Cardiovascular, Oncology, Respiratory, Neuroscience, Inflammation and Infection. The company's product pipeline offers a number of interesting opportunities. |
16,824 |
5.1 |
13,494 |
|
|
|
|
|
|
4 (4) HSBC Holdings {A} |
|
|
|
|
HSBC group is one of the world's largest banking and financial services institutions. Its international network comprises more than 5,000 offices in 80 countries and territories, operating in the Asia Pacific region, Europe, the Americas, the Middle East and Africa. The diversity of HSBC's business and exposure to faster growing regions of the world should enable it to deliver superior long-term growth. |
15,367 |
4.7 |
17,338 |
|
|
|
|
|
|
5 (3) British American Tobacco{B} |
|
|
|
|
British American Tobacco manufactures and markets cigarettes and other tobacco products, including cigars and roll-your-own tobacco. The group sells over 200 brands in approximately 180 countries. Key brands include: Dunhill, Kent, Pall Mall and Lucky Strike. Strong cashflow is an attractive characteristic of the tobacco industry. |
14,763 |
4.5 |
17,758 |
|
|
|
|
|
|
6 (5) Vodafone Group{A} |
|
|
|
|
Vodafone is one of the world's largest mobile phone companies, with a significant position in major economies including Germany, Italy, France, the UK and the US, as well as many emerging markets. The group generates a significant amount of free cashflow. |
14,550 |
4.4 |
15,810 |
|
|
|
|
|
|
7 (6) GlaxoSmithKline |
|
|
|
|
GlaxoSmithKline is a research-based pharmaceutical group that also develops, manufactures and markets vaccines, prescription and over-the-counter medicines, as well as health-related consumer products. The group specialises in treatments for respiratory, central nervous system, gastro-intestinal and genetic disorders. |
13,891 |
4.2 |
14,469 |
|
|
|
|
|
|
8 (9) Centrica |
|
|
|
|
Centrica provides gas, electricity and energy-related products and services to business and residential customers in the UK and USA. It also provides central heating and gas appliance installation and maintenance services. The company enjoys a strong competitive position in the UK market, which provides a solid platform from which to generate long-term value. |
12,510 |
3.8 |
13,124 |
|
|
|
|
|
|
9 (11) National Grid |
|
|
|
|
National Grid owns and operates electricity and gas networks throughout the UK and in the US. It will benefit from the requirement to increase energy infrastructure spend over the long term. The company offers a generous dividend yield. |
11,497 |
3.5 |
12,021 |
|
|
|
|
|
|
10 (-) Tesco |
|
|
|
|
Tesco is one of the world's largest food retailers, with operations around the world. Its international operations provide a platform for growth, coupled with non-food sales and financial services. The company benefits from significant property asset-backing. |
9,547 |
2.9 |
7,571 |
|
Top ten investments |
147,086 |
44.7 |
|
|
|
|
|
|
|
11 (-) Unilever |
|
|
|
|
Unilever is a global consumer goods company supplying food, home and personal care products. The company has a portfolio of strong brands including: Dove, Knorr, Axe and Persil. Over half of the company's sales are to developing and emerging markets. |
8,402 |
2.5 |
7,631 |
|
|
|
|
|
|
12 (15) Imperial Tobacco |
|
|
|
|
Imperial Tobacco is one of the world's largest tobacco companies. Its acquisition of Altadis provides a platform for further market share growth and cost efficiencies. The company's key brands are Davidoff, West, Gauloises and Golden Virginia. |
8048 |
2.4 |
9,542 |
|
|
|
|
|
|
13 (-) Associated British Foods |
|
|
|
|
Associated British Foods is a global diversified business which is divided into four segments: Grocery; Sugar & Agriculture; Ingredients and Retail. It should benefit from a more benign sugar environment and the continued growth of Primark. |
7,724 |
2.3 |
7,684 |
|
|
|
|
|
|
14 (17) Morrison (Wm) Supermarkets |
|
|
|
|
Morrisons is one of the UK's largest supermarket chains. With an emphasis on good value, the company's vertically-integrated model means that it manages most of its operations in-house. There remains substantial opportunity for the company to expand its footprint in the UK through smaller stores. |
7,450 |
2.3 |
9,052 |
|
|
|
|
|
|
15 (18) AMEC |
|
|
|
|
AMEC is a leading supplier of high-value consultancy, engineering and project management services to the world's energy, power and process industries. The company employs over 20,000 people in more than 30 countries. |
7,039 |
2.1 |
8,900 |
|
|
|
|
|
|
16 (-) Mothercare |
|
|
|
|
Mothercare is a children's clothing and products retailer. International expansion opportunities, coupled with the integration of the Early Learning Centre and the development of its website, provide scope for significant earnings growth. The company has net cash on its balance sheet. |
7,008 |
2.1 |
5,440 |
|
|
|
|
|
|
17 (20) Whitbread |
|
|
|
|
Whitbread is the UK's largest hotel company focusing on the budget sector with its Premier Inn brand. The company also runs pub restaurants and owns the Costa Coffee chain. Both Costa Coffee and Premier Inn have attractive international growth opportunities. |
6,712 |
2.0 |
8,624 |
|
|
|
|
|
|
18 (-) Aberforth Smaller Companies Trust |
|
|
|
|
Aberforth Smaller Companies is an investment trust that invests in smaller UK quoted companies with an investment policy similar to Aberdeen's. It provides the Trust with diversified exposure to a range of good-quality smaller companies with the benefits of investment trust status. |
6,678 |
2.0 |
6,408 |
|
|
|
|
|
|
19 (16) Aviva |
|
|
|
|
Aviva is an international insurance company which provides a broad variety of classes of general and life assurance, including fire, motor, marine, aviation and transport insurance. |
6,601 |
2.0 |
9,269 |
|
|
|
|
|
|
20 (12) Arriva |
|
|
|
|
Arriva is one of the largest transport groups in Europe, with a significant presence in over 10 countries. Growth has been driven by deregulation and the company's success in providing efficient bus and rail transport. |
6,430 |
2.0 |
10,617 |
|
Top twenty investments |
219,178 |
66.4 |
|
|
|
|||
|
{A} Valuation for 2009 includes holdings in equities and reverse convertibles. At 30 June 2008 only equities were held. |
|||
|
{B} Valuation for both 2009 and 2008 includes holdings in equities and reverse convertibles. |
|||
|
The value of the 20 largest investments represents 66.4% (2008 - 60.1%) of total assets. |
|||
|
The figures in brackets denote the position at the previous year end. (-) not previously in 20 largest investments. |
|||
This information is provided by RNS
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