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Murray Intnl Trust (MYI)

  Print      Mail a friend       Annual reports

Wednesday 25 February, 2009

Murray Intnl Trust

Annual Financial Report Annou

RNS Number : 8336N
Murray International Trust PLC
25 February 2009
 



MURRAY INTERNATIONAL TRUST PLC


ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2008


1.    CHAIRMAN' STATEMENT


Highlights

-    Net Asset Value Total Return of -12.3%;

-    Benchmark Total Return of -21.7%;

-    Total proposed dividend increased by 10.5% versus 2007;

-    Shares trading at a premium to net asset value per Ordinary share for most of the year;

-    £20m of new shares issued at a premium during the year.


Performance

The total return on net asset value during the year was -12.3%, significantly ahead of the return on the benchmark index of -21.7%. The share price total return was -8.1% reflecting a move in the share price from trading at a discount of 10.2% to net asset value at the end of 2007 to a discount of 5.9% at the end of 2008. The Investment Manager's Review in the Annual Report contains an attribution analysis which shows the factors affecting net asset performance. Overall, although any capital loss is unwelcome, the Board believes that the performance was encouraging bearing in mind the considerably higher falls which occurred in many of the World markets in which we invest.


Background

2008 will be remembered as one of the most eventful years in modern financial history. Seldom has such economic adversity and financial pain been felt by so many countries simultaneously. What had begun as a sub-prime property collapse in the United States in 2007 escalated to a worldwide credit crisis as trust in financial institutions declined. In the second half of the year recessionary conditions affected the Western world as banks denied heavily indebted consumers further credit. Structurally leveraged businesses and financial products dependent on borrowed money suffered particularly under the pressure of relentless selling. In the UK, the banking system came close to insolvency as public mistrust and a run on deposits emphasised its fragile state. The Government ultimately intervened by guaranteeing savings and semi-nationalising the most vulnerable institutions, but not before substantial systemic damage had been done. Europe also suffered from the shift in global attitude towards credit, but the impact was less than in the UK as current indebtedness in most countries in Europe is running at a lower percentage of GDP in both public and private sectors. Although Asia and Latin America continued to expand domestically, without reducing savings ratios, little attention was paid to such economic progress. Regional stockmarkets declined in line with most international bourses as risk aversion took precedence over fundamentals. The long-awaited decoupling of emerging markets from developed markets clearly failed to materialise, but last year's events added to the economic power shift from West to East. Given prevailing economic conditions, market declines were not unexpected, but the severity and volatility of these declines surpassed anything witnessed for a long time. Weakness in Sterling, however, helped soften the blow given the Trust's broad international exposure.


Dividends

I am pleased to report that revenue generation from the Company's portfolio remained strong during the year and we have been able to increase the level of the three interim dividends that have been paid to 4.8p (2007: 4.3p). Your Board is now recommending a final dividend of 8.8p (2007: 8.1p) which, subject to the approval of shareholders at the Annual General Meeting, will be paid on 15 May 2009 to shareholders on the register on 3 April 2009. The smaller percentage increase in the recommended final dividend continues the policy of reducing the disparity between the interim and final dividends. If approved, the total dividend for the year will amount to 23.2p, an increase of 10.5% from last year (2007: 21.0p). B Ordinary shares now receive their capitalisation issue of B Ordinary shares at the same time as each dividend is paid. Accordingly, subject to approval at the Annual General Meeting, B Ordinary shareholders will be issued on 15 May 2009 with new B Ordinary shares equivalent in Net Asset Value to the recommended final dividend for the year just ended.


VAT on Management Fees Update

Shareholders will be aware from my previous statements that HM Revenue & Customs have agreed that VAT on management fees should not have been incurred by UK investment trusts. The Board is pleased to be able to report that our income this time includes a sum of £1,337,190, representing the VAT charged on our management fees between 2004 and 2007 (exclusive of interest thereon) which has not been offset previously by the Company. This repayment has been split in accordance with the Company's accounting policy, with £1,027,064 being credited to capital and £310,126 being credited to revenue. We expect, in due course, to be able to recognise further sums, once there is more certainty as to the amounts recoverable by the Manager in respect of the VAT incurred on management fees in prior periods.


Gearing

The Company's gearing with cash netted against borrowings was 11.1% as at 31 December 2008. During the year the Board negotiated a new £40,000,000 multi currency facility with Barclays Bank plc. 4.15 billion yen (approximately £20.2 million) under this facility was used to repay expiring yen facilities and the remaining 4.1 billion yen (approximately £19.8 million) was new borrowing. The Board believes that the low level of confidence that currently exists will provide attractive opportunities for profitable investment. A small part of this gearing was invested in November and December but the bulk is still held in cash awaiting investment. We have continued the policy of eliminating the currency risk on these borrowings by covering the yen exposure back into sterling.


Issue of New Shares

At the Annual General Meeting held in April 2008 shareholders authorised Directors to issue up to 5% of the Company's issued share capital for cash at a premium to the prevailing asset value at the time of each issue. During the year 3.16 million new Ordinary shares or approximately 3.5% of our capital were issued under this authority at a weighted average premium of approximately 2.5%, resulting in a modest enhancement to net asset value for existing shareholders. Given the continuing demand for the Company's shares the Board will be seeking approval from shareholders to increase the level of this authority for 2009 to 10% of the issued share capital. As in previous years, new shares will only be issued at a premium to net asset value in order to avoid diluting the assets of the Company. Resolutions to this effect will be proposed at the Annual General Meeting and the Directors strongly encourage shareholders to support this proposal.


Directorate

Mr Benson has served on the Board since October 1999 and has now decided to retire as a Director of the Company at the forthcoming Annual General Meeting. I would like to take this opportunity to thank David both personally and on behalf of the Board for the service that he has provided to the Company over the years. We shall miss his wise counsel.


Annual General Meeting

As shareholders will be aware, from time to time the Company holds its Annual General Meeting in London in order to allow the considerable number of shareholders based in the South East to meet the Directors. This year's Annual General Meeting has therefore been convened for Wednesday 22 April 2009 at 12.30 p.m. in the Capital Suite at the London Chamber of Commerce and Industry, 33 Queen StreetLondon EC4R 1AP. As at previous AGMs, there will be a presentation from the Manager and an opportunity to meet the Directors and Manager and ask questions. I would be grateful if you would confirm your attendance by completing the notice that will accompany the Annual Report and returning it together with an indication of any particular questions that you would like to ask.


Outlook

There has been no respite for global equity markets since the year end. High volatility and widespread selling pressure has continued to push markets lower. There can be no denying that countries such as the US and UK face deep economic recessions that will be painful to endure. However the indiscriminate nature of global equity market declines is uncovering numerous valuation anomalies. When at last stability returns to the global financial system, many companies in the developed world should be well placed to capitalise on recovery given the demise of worldwide competitors whilst the developed world, unburdened by debt and the structural weakness that accompanies it, can look forward to reaping the rewards of earlier saving and investing in an increasingly competitive world. It is the Board and Manager's belief that with many high quality, financially strong companies now yielding over twice the level of Government Bonds, the case for equities is improving. With its liquidity position still high, the Trust remains well positioned to capitalise on further opportunities as they arise.  



J F H Trott

Chairman

24 February 2009


2.    MANAGER'S REVIEW


Background

The past twelve months will be remembered for delivering the worst global equity returns since the Great Depression. Against a backdrop of deteriorating economic fundamentals and outright seizure of credit markets, the history books will show just how close the world came to systemic financial collapse. Banks in the United States and the UK buckled under the burden of escalating bad debts and deteriorating capital structures, leaving respective Governments with no option but to quasi-nationalise domestic banking systems. Billions of pounds of taxpayers' money was used in attempts to restore confidence. As financial panic spread around the world, Central Banks began co-ordinated monetary easing in order to provide debt service relief and tempt individuals to spend. Interest rates were slashed to extremely low levels, but persistently rising unemployment, multiple corporate bankruptcies and collapsing confidence prevented any meaningful response from consumers. Recession gripped the debt-laden Anglo Saxon world with policymakers virtually impotent to respond. Not that they did not try. In what will likely turnout to be the largest fiscal stimulus the world has ever seen, the United States and the UK more than tripled their respective budget deficits in pursuit of financing insolvent institutions and stimulating demand. New debt was piled upon existing debt with scant regard to future financing requirements or eventual repayments. Alas, in the hostile uncharted economic territory that evolved in 2008, populist policies prevailed over the need for more pragmatic longer-term solutions. The structural imbalances of the debt ridden world that dominated and destroyed the economic landscape last year need time to unwind. Unfortunately time is the one thing impatient capital markets and nervous investors cannot seem to give. As if to compound the economic misery of 2008, spectacular declines in commodity prices adversely affected many exporting countries of the emerging world, further correlating the general contraction. High savings rates and low capital requirements in Asia and Latin America counted for nothing in a year totally dominated by negative investment sentiment.


Stockmarket returns over the year were universally negative with relatively low variance. The collapse in Sterling against most leading currencies, however, had a material impact on cushioning declines. The devaluation of Sterling, which had begun to take hold last year, gained momentum as investors watched Base Rates collapse and the UK budget deficit balloon to record levels. Against the Yen, US Dollar and Euro, Sterling lost 40%, 27% and 23% respectively of its value. Nor did Sterling fare much better against most other global currencies. This greatly enhanced relative performance for the portfolio, as did the low exposure to UK equities and high exposure to cash and government fixed income securities.


Performance

The Net Asset Value Total Return for the year to 31 December 2008 with net dividends reinvested was -12.3% compared with a negative return on the benchmark of -21.7%. A full attribution analysis is given in the Annual Report which details the various influences on portfolio performance. In summary, of the 1170 basis points (before expenses) of performance above the index, asset allocation contributed 110 basis points and stock selection 740 basis points. Structural effects relating to the fixed income portfolio, net of borrowing and hedging costs, added a further 320 basis points of positive relative performance, a reflection of the out-performance of bonds relative to equities. Within the equity asset allocation, positive contributions came from the underweighting of the UK and overweighting towards Asia and Japan, but the majority of out-performance can be attributed to superior stock selection in Europe, North America, Asia and Latin America.


USA

The United States endured horrendous economic conditions in 2008. Financial deleveraging throughout the economy gathered momentum causing widespread corporate and individual distress. Access to capital came to an abrupt end. Numerous irregularities were uncovered as some of the leading protagonists in the structured financing industry - underwriters, rating agencies, bankers and hedge funds - were exposed as unscrupulous practitioners, having profited from positions of trust and the ignorance of others. As fears of economic depression intensified, policymakers pledged hundreds of billions of dollars in mortgage debt relief, banking sector bailouts and corporate support programs. Unfortunately this witnessed the socialisation of bad debts, with imprudent private sector practices being bailed out by the public purse. Many argued the Government had no option but to follow such quasi nationalisation of the financial sector but in reality such practices merely prolong the agony. Until such times that distressed assets are properly priced and unsustainable businesses are allowed to go bust, true recovery of the US economy cannot begin. Indeed the most worrying aspect of the current crisis is that, despite the deluge of deteriorating economic data reported over the past eighteen months, there remain no signs of stabilisation. Property prices continue to plummet, consumer spending contracts, unemployment is rising sharply and confidence is evaporating. Against this backdrop it would be premature to predict an end to the credit crunch. This suggests another very tough year ahead for the US economy and those companies that derive most of their profits from it. This keeps us very cautious on the prospects for the US market and the US dollar, especially if the relentless expansion of the budget deficit continues. There was very little portfolio activity over the period, with a new position in leading global household product company Procter & Gamble being the most notable addition. 


UK

Frightening is not an adjective commonly used to describe an economy, but the language required to accurately describe the unfolding economic malaise in the UK required such brutal honesty in 2008. For in no uncertain terms, the UK economy hit the proverbial wall. Political rhetoric claimed the nation had never been in better shape heading into a downturn - in reality it was the complete opposite. The banking sector was the first major casualty. Tightening credit conditions exposed gross mismanagement of balance sheets where insufficient deposits and over-dependency on wholesale funding quickly led to financial collapse. In Scotland three hundred years of hard earned respect and reputation was destroyed in three months as the leading commercial banks went caps in hand to the Government. As trust evaporated from the banking system, so too did consumer confidence. Property prices sharply declined and retail sales severely contracted as economic activity ground to a halt. In response policymakers outwardly delivered assurances whilst internally they panicked. Interest rates were slashed to historical lows whilst simultaneously fiscal pledges and spending rocketed. The effects of such drastic measures have yet to be felt, but given the chronic state of the banking system and the sheer scale of debt outstanding, the UK economy is likely to suffer the worst recession of all G7 countries. Then there is Sterling. Sharply lower interest rates, heavily indebted public and private sectors, large fiscal and current account deficits, recessionary conditions and a structurally flawed banking system are characteristics historically consistent with a weak currency. Not surprising then that Sterling sharply devalued against its major trading partners last year. Unfortunately in the absence of any economic improvement whatsoever, the pressure on Sterling is unlikely to abate. It was against this backdrop that further reduction to UK exposure occurred last year although this was entirely related to divestment of the large holding in Resolution Life in April. A new holding in international mining company Rio Tinto was established towards year end, but general concerns over domestic profitability and dividend growth from UK companies kept the overall exposure low. This is likely to continue over the medium term.


Europe

For much of the year Europe coped relatively well with the capital dislocations associated with the global financial crisis. The banking sectors in ItalyFrance and Germany acted promptly and transparently to declare bad debt exposure. Write-downs and credit-losses associated with structured finance loans were identified and capital raising measures promptly embarked upon. The European Central Bank provided liquidity when necessary and for the most part deleveraging was systematic and orderly. Unfortunately this came to an abrupt end in September and October with the collapse of Lehman Brothers Investment Bank in the United States and the subsequent panic that ensued. Exaggerated weaknesses were suddenly exposed at both country and corporate level. The IMF was hastily called into IcelandHungary and the Ukraine to provide emergency funding as bank deposits poured out of these countries. The worldwide collapse of oil and commodity prices was perceived as being particularly negative for Russia, causing rapid capital flight and a 67% decline in the equity market. And the Baltic States, relatively new to the world of international capitalism, were badly affected as trust in fledgling banking systems evaporated. This prompted the European Central Bank to embark on its boldest ever series of interest rate cuts which in turn were replicated around all other European countries. By year end, the Region was mired in recessionary fears. What now then for a united Europe in an increasingly despondent world? Declining demand from export markets and falling consumer activity will constrain growth in Europe over the coming year but the downturn will be more cyclical. With the exception of perhaps Spain and Ireland, most Europeans are not overleveraged and hence unshackled by the need to repay punitive amounts of debt. This leaves more potential scope for recovery when it comes. Corporates in Europe have also profited from implementing strict capital discipline during the previous seven years of plenty. They remain well placed to manage through any impending famine. As valuations declined dramatically last year, additional funds were added to existing positions in companies such as E.On, ENI, Mapfre, Nordea and Total, and a new position was established in Schneider Electric, a leading global manufacturer of power distribution systems based in France. The long term profit outlook for these and many other European companies remain good despite the complete lack of near term transparency. 


Japan

The developed world's credit crunch, debt deflation, property collapse and recessionary contraction was nothing new for Japan. The country has experienced nearly every negative economic condition imaginable over the past twenty years due to widely recognised policy mistakes that accompanied financial meltdown in the early 1990's. As the world grappled to avoid debilitating deflation, the 'Japanese case' was constantly quoted as what not to do. Such hindsight is always so clear. Of more relevance was how the evolving global economic landscape was impacting Japan now. The sharp worldwide slowdown in capital expenditure experienced in 2008 significantly hurt Japanese exports of machine tools and industrial products to Europe and Asia. The nascent recovery in domestic loan growth was halted prematurely by falling confidence and GDP growth turned negative for the sixth time this decade. The response from policymakers was muted, but then Japan used up all its monetary and fiscal initiatives many years ago. This left corporate Japan with no option but to deal with the hostile conditions itself. Fortunately Japanese companies have become very adept at operating in deflationary conditions where volumes and prices are falling. Core portfolio holdings such as Takeda Pharmaceutical and Astellas Pharmaceutical both delivered solid earnings and double digit dividend growth last year. Early indications suggest this can be repeated again this year. Indeed with both companies now yielding close to 4% their global attractiveness is rising. New money was added to existing positions in Canon, one of the worlds leading manufacturers of imaging products and Parco, a domestic operator of retail shopping centres. Such companies have consistently delivered for shareholders during all stages of the business cycle and provide important diversification in a global portfolio. Somewhat ironically, Yen strength against Sterling resulted in the Japanese portfolio declining the least in 2008, a feat which was most welcome. 


Asia and Emerging Markets

The shockwaves from economic contraction in the Western world rippled into Asia in varying degrees throughout the year. Those countries heavily reliant on exports suffered most with China topping the list of worst affected. This prompted aggressive policy responses from the Chinese Monetary and Fiscal Authorities, although it remains to be seen just how effective such measures will be. What is clearly less ambiguous is that China, and indeed Asia, faces distinctly different macro-economic conditions than those prevailing elsewhere. Unlike the developed world, which faces a structural debt-deflation bust manifested in a vicious cycle of deleveraging, Asia must confront a severe cyclical shock. This will force the Orient to further pursue domestic-led growth initiatives. The relative lack of financial leverage in the region plus the strength of domestic banking systems can facilitate this. When it will occur is more difficult to predict, but history will show the financial crisis of 2008 as being another step in the movement of economic power from West to East. Unfortunately, this structural/cyclical distinction emerging in the world remained of only academic relevance in terms of market performance last year, which became almost completely Wall Street correlated. The index correlation between the S&P500 Composite and the MSCI AC Asia ex Japan indices soared from 0.6 in 2007 to 0.97 in 2008. So much for market decoupling! Such irrational selling was unwelcome, but it did provide some excellent long term buying opportunities. Money was added to existing positions in Taiwan Mobile, PTT Exploration, the leading oil and gas company in Thailand, and QBE Insurance, one of the world's leading insurance companies based in Australia. With strong balance sheets, powerful free cash flows and competitive positions within their respective markets, such companies continue to form the bedrock of our Asian and Emerging market exposure. In a world of slowing economic activity, relatively superior profitability and dividend growth must at some point be recognised by the market place in the future. 


Outlook

For the second consecutive year our global economic and market review does not make positive reading. We make no apologies for this. Prevailing financial conditions dictated the narrative's content and these were overwhelmingly negative. Unfortunately, as the private sector intensifies its deleveraging, the economic backdrop is likely to get worse before it gets better. This is primarily because in the stampede towards reducing debt, as dictated by higher unemployment and collapsing consumer confidence, rising savings provide the power to actually intensify the recession. This paradox of thrift represents a real danger to economic stability in 2009. Should everyone save money during times of recession, then aggregate demand falls further, compounding declines in economic growth. In this form, a prisoner's dilemma arises, since saving is beneficial to each individual yet in total, harmful to everyone. This is a paradox because it runs contrary to common intuition. With Governments in the Western World well aware of such private sector risks, they have no alternative but to further expand public sector debt in an attempt to offset declining demand. Just how much further the United States and the UK can increase already mountainous budget deficits without inflicting irrevocable damage to their respective currencies remains our major economic concern for the year ahead.


Turning to the outlook for global equity markets, arguably another paradox arises. We cannot and will not make the case that equity markets will not go lower, but we have seen more value opportunities emerge over the past three months than we can remember for quite some time. Earnings expectations are declining faster than actual profits bringing much needed realism to the market place. Companies are going bust, thereby removing over-capacity from a wide range of industries, leaving the survivors much more operationally geared into recovery when it comes. Common intuition might again deduce that such near term economic and financial uncertainty is no backdrop to be investing in equities but, taking a longer term view, we are becoming more optimistic that decent returns can be made in selective opportunities from current levels, especially given the flexibility a global mandate provides.


Bruce Stout

Investment Manager

24 February 2009


3.    BUSINESS REVIEW

A review of the Company's operations is given in the Chairman's Statement and the Manager's Report. This includes a review of the business of the Company and its principal activities, likely future developments of the business, recommended final dividend and details of the issue of new shares during the year by the Company. The major risks associated with the Company are detailed below and in Note 19 to the Financial Statements. 


Principal Risks and Uncertainties

Many of the stocks in which the Company invests are exposed to the risk of political change, exchange controls, tax or other regulations which may affect their value and marketability. Currency fluctuations may also affect the value of the Company's investments and the income derived therefrom. Companies in emerging markets are not always subject to the equivalent accounting, auditing and financial standards of those in the United Kingdom. There may therefore be less supervision and regulation in this respect.


Currently 70% of the investment management fee and finance costs and 100% of the performance fee are taken out of capital. This increases distributable income at the expense of capital growth, which will either be eroded or constrained. Maintaining a high level of dividend may also diminish capital value. In common with most investment trusts, Murray International Trust is able to borrow for investment purposes. The use of gearing is likely to lead to volatility in the Net Asset Value (NAV), meaning that a relatively small movement either down or up in value of the Company's total assets will result in a magnified movement in the same direction of that NAV. There is no guarantee that the market price of shares in investment trusts will fully reflect their underlying NAV.


The market prices of fixed interest stocks and, to a lesser extent, convertibles may be affected by changes in interest rates.



  

4.    STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and Accounts and the financial statements, in accordance with applicable law and regulations.


Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards.


The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.


In preparing these financial statements, the Directors are required to:


-    select suitable accounting policies and then apply them consistently;  

-    make judgments and estimates that are reasonable and prudent; and,

-    state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements.


The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 1985 and Companies Act 2006, where applicable. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.


Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.


The financial statements are published on www.murray-intl.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.


The Directors confirm that to the best of our 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 the Company faces.


For Murray International Trust PLC


J F H Trott

Chairman

24 February 2009



  5 INCOME STATEMENT 


For the year ended 31 December 2008 


 

 

 Year ended 31 December 2008 

 Year ended 31 December 2007 

 


Revenue

 Capital 

 Total 

Revenue 

 Capital 

 Total 

 

 Notes

 £'000

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

(Losses)/gains on investments

10

-

(93,840)

(93,840)

-

68,348

68,348

Income

2

32,242

8

32,250 

26,776

-

26,776

Investment management fees

3

(1,018)

(2,374)

(3,392)

(966)

(2,253)

(3,219)

Performance fees

4

-

(2,269)

(2,269)

-

(2,151)

(2,151)

VAT recoverable on investment management and performance fees

20

310

1,027

1,337 

-

-

-

Currency losses


-

(2,200)

(2,200)

-

(3,550)

(3,550)

Other expenses

5

(1,469)

-

(1,469)

(1,251)

-

(1,251)


_______

_______

_______

_______

_______

_______

Net return/(loss) before finance costs and taxation

30,065

(99,648)

(69,583)

24,559

60,394

84,953

 







 

Finance costs

6

(885)

(2,066)

(2,951)

(609)

(1,422)

(2,031)



_______

_______

_______

_______

_______

_______

Return/(loss) on ordinary activities before tax


29,180

(101,714)

(72,534)

23,950

58,972

82,922

 







 

Tax on ordinary activities

7

(7,282)

1,619

(5,663)

(5,550)

3,625

(1,925)



_______

_______

_______

_______

_______

_______

Return/(loss) attributable to equity shareholders

 

21,898

(100,095)

(78,197)

18,400 

62,597 

80,997

 


_______

_______

_______

_______

_______

_______

 







 

Return/(loss) per Ordinary share (pence)  

9

25.0

(114.4)

(89.4)

21.2 

72.3

93.5



_______

_______

_______

_______

_______

_______

Return/(loss) per Ordinary share assuming full conversion of the B Ordinary shares (pence)

9

24.7 

(113.0)

(88.3)

21.0

71.4

92.4

 


_______

_______

_______

_______

_______

_______


The total column of this statement represents the profit and loss account of the Company.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

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

No operations were acquired or discontinued in the year. 

The accompanying notes are an integral part of these financial statements. 


Ordinary dividends on equity shares (£'000)

8

19,148

-

19,148

14,028

-

14,028



_______

_______

_______

_______

_______

_______


The above dividend information does not form part of the Income Statement.

  6. BALANCE SHEET 

As at 31 December 2008 


 

 

As at

As at

 


31 December 2008

31 December 2007

 

 Notes 

 £'000 

 £'000 

 £'000 

 £'000 

Non-current assets





 

Investments listed at fair value through profit or loss

10


618,212


679,577

 





 

Current assets





 

Debtors

11

22,202


4,376

 

Cash and short term deposits

 

99,301

 

44,687

 



________


________


 

 

121,503

 

49,063

 

 


________


________

 

Creditors: amounts falling due within one year





 

Bank loans

12/13

-


(18,662)

 

Other creditors

12

(8,233)


(3,213)

 



________


________


 

 

(8,233)

 

(21,875)

 



________


________


Net current assets

 

 

113,270

 

27,188




________


________

Total assets less current liabilities



731,482


706,765

 





 

Creditors: amounts falling due after more than one year





 

Bank loans and debentures

12/13

(159,107)


(56,931)

 

Other creditors

12

(3,548)


(3,597)

 



________


________


 

 

 

(162,655)

 

(60,528)




________


________

Net assets

 

 

568,827

 

646,237

 



________


________

 





 

Capital and reserves





 

Called-up share capital

14


22,725


21,926

Share premium account



19,167


22

Capital redemption reserve



8,230


8,230

Capital reserve

15


477,931 


578,035

Revenue reserve



40,774


38,024




________


________

Equity shareholders' funds

 

 

568,827

 

646,237

 



________


________

 





 

Net Asset Value per Ordinary and B Ordinary share (pence)

16

 

625.8

 

736.8




________


________



  7 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 

For the year ended 31 December 2008


 

 

 

 Share

 Capital

 

 

 

 


 Share

 Premium

 Redemption

 Capital

Revenue

 

 


 Capital

 Account

 Reserve

 Reserve

 Reserve

 Total

 

 Note 

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

Balance at 31 December 2007


21,926 

22 

8,230 

578,035 

38,024 

646,237 

Return on ordinary activities after taxation


-

-

-

(100,095)

21,898 

(78,197)

Dividends paid

-

-

-

-

(19,148)

(19,148)

Issue of new shares


799 

19,145 

-

(9)

-

19,935 



_______

________

_________

_______

_______

_______

Balance at 31 December 2008

 

22,725 

19,167 

8,230 

477,931 

40,774 

568,827 

 


_______

________

_________

_______

_______

_______

 







 

For the year ended 31 December 2007



 



 Share

 Capital



 

 


 Share

 Premium

 Redemption

 Capital

Revenue

 

 


 Capital

 Account

 Reserve

 Reserve

 Reserve

 Total

 

 

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

Balance at 31 December 2006


21,919 

22 

8,230 

515,445 

33,652 

579,268 

Return on ordinary activities after taxation


-

-

-

62,597 

18,400 

80,997 

Dividends paid

-

-

-

-

(14,028)

(14,028)

Issue of new shares


-

-

(7)

-

-



_______

________

_________

_______

_______

_______

Balance at 31 December 2007

 

21,926 

22 

8,230 

578,035 

38,024 

646,237 



_______

________

_________

_______

_______

_______




  8 CASH FLOW STATEMENT 


For the year ended 31 December 2008 


 

 

 Year ended 

 Year ended 

 


 31 December 2008 

 31 December 2007 

 

 Notes 

 £'000 

 £'000 

 £'000 

 £'000 

Net cash inflow from operating activities 

17 


24,172


19,666

 





 

Returns on investments and servicing of finance 





 

Interest paid 

 

(2,646)

 

(1,998)

 



_________


_________


Net cash outflow from servicing of finance 



(2,646)


(1,998)

 





 

Corporation tax paid 



(1,751)


(414)






 

Financial investment 





 

Purchases of investments 


(202,651)


(135,699)

 

Sales of investments 

 

169,789

 

179,642

 



_________


_________


Net cash (outflow)/inflow from financial investment 



(32,862)


43,943

 





 

Equity dividends paid 

 

 

(19,148)

 

(17,317)




_________


_________

Net cash (outflow)/inflow before financing 



(32,235)


43,880

 





 

Financing 





 

Share Issue 


19,935


-

 

Loans repaid 


(19,850)


-

 

Loans drawn down 


38,915


-

 



_________


_________


Net cash inflow from financing 

 

 

39,000

 

-




_________


_________

Increase in cash 

18

 

6,765

 

43,880



   9 NOTES:


For the year ended 31 December 2008



1. 

 Accounting policies

 

(a)

Basis of preparation

 


The financial statements have been prepared in accordance with applicable UK Law and Accounting Standards (UK Generally Accepted Accounting Practice) and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (issued in January 2009). They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis.

 


 


(b)

Income

Dividends receivable on equity shares (other than special dividends) are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available dividends are recognised on their due date. Provision is made for any dividends not expected to be received. Special dividends are credited to capital or revenue, according to their 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 and are charged to the Income Statement. Expenses are charged against revenue except as follows:

 transaction costs on the acquisition or disposal of investments are charged to the capital account in the Income Statement;

- expenses are charged to realised capital reserves 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 30 per cent to revenue and 70 per cent to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth. The performance fee has been charged 100% to realised capital reserves, as the fee will have arisen wholly or predominantly by virtue of the capital performance of the investments.

 


 

 

(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 and revenue within the Income Statement on the same basis as the particular item to which it relates using the Company's effective rate of tax for the year, based on the marginal basis.

 


 

 

(e)

Investments



All investments have been designated upon initial recognition as fair value through profit or loss. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis.

 

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 net profit or loss for the period as a capital item in the Income Statement and are ultimately recognised in the unrealised capital reserve.

 


 

 

(f)

Borrowings

 


Monies borrowed to finance the investment objectives of the Company are stated at the amount of the net proceeds immediately after issue plus cumulative finance costs less cumulative payments made in respect of the debt. The finance costs of such borrowings are allocated to years over the term of the debt at a constant rate on the carrying amount and are charged 30 per cent to revenue and 70 per cent to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.  

 


 

 

(g)

Exchange rates

 


Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction.

 


 

 


Translation of all other foreign currency balances including foreign assets and foreign liabilities is at the middle rates of exchange at the year end. Differences arising from translation are treated as capital gain or loss to capital or revenue within the Income Statement depending upon the nature of the gain or loss.

 


 

 

(h)

Derivative financial instruments

 

 

Financial derivatives are measured at fair value. Changes in the fair value of derivative financial instruments are recognised in the Income Statement. If capital in nature, the associated change in value is presented as a capital item in the Income Statement.


 

 

 2008

 2007

2. 

Income

 £'000

 £'000

 

Income from investments:


 

 

UK dividends

3,982

5,679

 

UK unfranked investment income

1,879

2,815

 

Overseas dividends

20,695

15,009

 

Overseas interest

2,966

2,660



__________

__________

 


29,522

26,163

 

Interest:

__________

__________

 

Deposit interest

1,208

613

 

Money market interest

1,512

-



__________

__________

 


2,720

613



__________

__________

 

Total income

32,242

26,776

 


__________

__________

 

Income from investments comprises: 


 

 

Listed UK 

5,861

8,494

 

Listed overseas 

23,661

17,669



__________

__________

 

 

29,522

26,163



__________

__________




2008

2007

 


Revenue

 Capital

 Total

Revenue

Capital

 Total

3. 

Investment management fees

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 

Investment management fees

1,018

2,374

3,392

902

2,104

3,006

 

VAT paid

-

-

-

64

149

213



_______

_______

_____

_______

______

_____

 


1,018

2,374

3,392

966

2,253

3,219

 


_______

_______

_____

_______

______

_____



 

Details of the fee basis are contained in the Annual Report (Directors' Report).

 

 

 

The VAT paid charged during the current and previous year has been affected as a consequence of the ruling highlighted in note 20. The Company was charged VAT on fees for the period 1 January to 30 September 2007, though no VAT was charged after these dates.


 

 

2008

2007

 


 Revenue

 Capital

 Total

 Revenue

 Capital

 Total

4. 

Performance fees 

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 

Performance fees 

-

2,269

2,269

-

2,523

2,523 

 

VAT paid 

-

-

-

-

(372)

(372)



_______

_______

______

_______

_______

_______

 


-

2,269

2,269 

-

2,151

2,151

 


_______

_______

______

_______

_______

_______










Details of the fee basis are contained in the Annual Report (Directors' Report)

 

As a consequence of the VAT ruling detailed in note 20, there has been no VAT charged for the 2008 performance fee and for any elements of previous year's fees still outstanding. VAT previously accrued was written off during the year ended 31 December 2007.


 


 2008

2007 

 


Revenue

Capital

Total

Revenue

Capital

Total

5. 

Other expenses 

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 

Shareholders' services{A} 

668

-

668

592

-

592

 

Directors' remuneration  

111

-

111

99

-

99

 

Irrecoverable VAT 

102

-

102

71

-

71

 

Secretarial fees 

100

-

100

100


100 

 

 Auditors fees: 






-

 

 - fees payable to the Company's auditors for the audit of the annual accounts 

21

-

21

20

-

20

 

 - fees payable to the Company's auditors for the review of the interim accounts 

8

-

8

5

-

5

 

 - fees payable to the Company's auditors for other services 

2

-

2

-

-

-

 

 Other expenses 

457

-

457

364

-

364



_______

_______

_______

_______

______

_______

 


1,469

-

1,469

1,251

-

1,251



_______

_______

_______

_______

______

_______



 

{A} Includes registration, savings scheme and other wrapper administration and promotion expenses, of which £518,000 (2007 - £474,000) 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 (2007 - £nil). 


 

 

 2008 

 2007 

 


 Revenue 

 Capital

 Total

 Revenue

 Capital

 Total 

6. 

Finance costs 

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 

Bank loans and overdrafts 

866

2,020

2,886

590

1,376

1,966

 

Debenture Stock 

19

46

65

19

46

 65



_______

_______

_____

_______

______

_____

 

 

885

2,066

2,951

609

1,422

2,031 



_______

_______

_____

_______

______

_____


 


2008

2007

 


 Revenue

 Capital

 Total

 Revenue

 Capital

 Total

7. 

Taxation 

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000

 

(a) 

Tax charge 






 

 


The tax charge comprises: 





 

 


Current UK tax 

7,039

(1,619)

5,420

5,247

(1,559)

3,688

 


Overseas tax 

1,813

-

1,813

1,316

-

1,316

 


Double taxation relief 

(1,669)

-

(1,669)

 (1,230)

(2,066)

(3,296)

 


Prior year adjustment 

19

-

19

-

-

-




_______

_______

_____

_______

______

_____

 


Current tax charge 

7,202

(1,619)

5,583

5,333

(3,625)

1,708

 


Deferred tax 

80

-

80

217

-

217




_______

_______

_____

_______

______

_____

 


Total tax 

7,282

(1,619)

5,663

5,550

(3,625)

1,925

 



_______

_______

_____

_______

______

_____




 

 

(b) 

Factors affecting the tax charge for the year 

The tax assessed for the year is lower than the effective rate of corporation tax rate of 28.5% (2007 - 30%). The effective rate for 2008 was calculated using a rate of 30% until 31 March 2008 and 28% from 1 April 2008. The differences are explained below:

 



2008

2007

 



Revenue

Revenue

 



£'000

£'000

 


Revenue on ordinary activities before taxation

29,180

23,950

 



_________

_________

 


Revenue on ordinary activities multiplied by the applicable rate of corporation tax of 28.5% (2007 - 30%)

8,316

7,185

 


Effects of:


 

 


Non taxable UK dividends

(1,135)

(1,704)

 


Double tax relief

(1,669)

(1,227)

 


Irrecoverable overseas tax suffered

1,813

1,293

 


Movement in overseas income accruals

(142)

(214)

 


Prior year adjustment

19

-




_________

_________

 


Current tax charge

7,202

 5,333

 



_________

_________



 

Deferred tax is assessed at a rate of 28% due to a change in the expected tax rate when the liability is due to be settled.


 

 

 2008

 2007

8. 

Ordinary dividends on equity shares

 £'000

 £'000

 

Third interim for 2007 of 4.30p

3,724

-

 

Final dividend for 2007 of 8.10p (2006 - 7.60p)

7,016

6,580

 

First interim for 2008 of 4.80p (2007 - 4.30p)

4,173

3,724

 

Second interim for 2008 of 4.80p (2007 - 4.30p)

4,235

3,724



_________

_________

 


19,148

14,028

 


_________

_________




In accordance with UK GAAP the third interim and proposed final dividend for 2008 have not been included as liabilities in these financial statements. The proposed final dividend for 2008 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 £21,898,000 (2007 - £18,400,000).

 



 

 


2008

2007

 


 £'000 

 £'000 

 

Three interim dividends for 2008 of 4.80p (2007 - 4.30p)

12,718

11,173

 

Proposed final dividend for 2008 of 8.80p (2007 - 8.10p)

7,901

7,016



_________

_________

 

 

20,619

18,189



_________

_________


9. 

Returns per share 

 2008 

 2007 

 

Returns have been based on the following figures: 


 

 

Weighted average number of Ordinary shares 

87,497,567

86,598,500

 

Weighted average number of B Ordinary shares 

1,101,541

1,089,525



_________

_________

 

Weighted average number of Ordinary shares assuming conversion of B Ordinary shares 

88,599,108

87,688,025



_________

_________

 



 

 


 £'000 

 £'000 

 

Revenue return attributable to equity shareholders 

21,898

18,400

 

Capital return attributable to equity shareholders 

(100,095)

62,597



_________

_________

 

Total return attributable to equity shareholders 

(78,197)

80,997



_________

_________


 


 2008

 2007

10. 

Investments listed at fair value through profit or loss

 £'000

 £'000

 

Opening valuation

679,577

655,634

 

Opening investment holdings gains

(195,023)

(199,310)



_________

_________

 

Opening book cost

484,554

456,324

 

Movements during the year:


 

 

Purchases

202,651

135,699

 

Sales

 - proceeds 

(169,789)

(179,642)

 


 - realised gains 

22,737

72,635

 

Amortisation of fixed income book cost

(387)

(462)



_________

_________

 

Closing book cost

539,766

484,554 

 

Closing investment holdings gains

78,446

195,023



_________

_________

 

Closing valuation

618,212

679,577



_________

_________

 



 

 


 2008 

 2007 

 

The portfolio valuation

 £'000 

 £'000 

 

Listed on stock exchanges at market valuation:


 

 

United Kingdom:


 

 

-

equities 

78,075

119,845

 

-

fixed income 

31,384

67,122

 

Overseas:


 

 

-

equities 

472,976

452,747

 

-

fixed income 

35,777

39,863




_________

_________

 

Total


618,212

679,577




_________

_________

 




 

 



 2008

 2007 

 

(Losses)/gains on investments

 £'000

 £'000

 

Realised gains based on book cost

22,737

 72,635

 

Net movement in investment holdings gains

(116,577)

(4,287)



_________

_________

 


(93,840)

68,348



_________

_________

 



 

 

All investments are categorised as held at fair value through profit and loss and were designated as such upon initial recognition. 

 

 


Transaction costs

During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within (losses)/gains on investments in the Income Statement. The total costs were as follows:





 


 2008

 2007

 


 £'000

 £'000

 

Purchases

344

318

 

Sales

99

257



_________

_________

 


443

575



_________

_________


 

 

 2008 

 2007 

11. 

Debtors: amounts falling due within one year

 £'000 

 £'000 

 

Current taxation

335

172

 

Other debtors

-

141

 

Forward contracts

16,619

508

 

VAT recoverable (see note 20){A}

1,325

-

 

Prepayments and accrued income

3,923

3,555



_________

_________

 


22,202

4,376



_________

_________

 

{A} Net of irrecoverable VAT of £12,000. 


 

 



 

 

None of the above amounts is overdue.

 

 


 

 

 2008

 2007

12.

Creditors

 £'000

 £'000

 

Amounts falling due within one year:


 

 

Bank loans (note 13)

-

18,662

 

Other creditors

8

8

 

Swap contracts

1,711

-

 

Corporation tax payable

2,019

-

 

Provision for deferred tax

297

217

 

Accruals

4,198

2,988



_________

_________

 


8,233

21,875



_________

_________

 



 

 


 2008

 2007

 


 £'000

 £'000

 

Amounts falling due after more than one year:


 

 

Bank loans and debentures (note 13)

159,107

56,931

 

Accruals

3,548

3,597



_________

_________

 


162,655

60,528



_________

_________

 



 

 

 Management fees of £861,000 were outstanding at the year end to AAM. (2007 - £nil) 

 

 

 

A performance fee of £5,865,000 is outstanding at the year end to AAM (2007 - £5,775,000). Of this amount £3,548,000 (2007 - £3,597,000) falls due after more than one year. No VAT has been accrued due to the changes in the treatment of VAT on performance fees as detailed in note 20.

 

 

 

All financial liabilities are included at amortised cost.


 


 2008

 2007

13. 

Bank loans and Debentures 

 £'000

 £'000

 

Secured by floating charge and repayable other than by instalments within five years or at the Company's option: 


 

 

 4% Debenture Stock 

1,620

1,620

 




 

 

Unsecured bank loans repayable: 


 

 

within one year 


 

 

 Yen 1,900,000,000 at 2.48% - 30 June 2008 

-

8,544

 

 Yen 2,250,000,000 at 2.40% - 30 June 2008 

-

10,118

 




 

 

 in more than one year but no more than five years 


 

 

 - 

 Yen 8,400,000,000 at 2.97% - 10 March 2010 

64,451

37,773

 




 

 

 in more than five years 


 

 

 - 

 Yen 1,900,000,000 at 1.53% - 4 June 2013 

14,578

-

 

 - 

 Yen 6,325,000,000 at 1.53% - 4 June 2013 

48,535

-

 

 - 

 Yen 2,300,000,000 at 2.03% - 16 February 2014 

17,647

10,343

 

 - 

 Yen 1,600,000,000 at 2.82% - 15 May 2016 

12,276

7,195




_________

_________

 



159,107

75,593




_________

_________

 




 

 

The terms of these loans permit early repayment at the borrower's option which may give rise to additional amounts being either payable or repayable in respect of fluctuations in interest rates since drawdown. Since the Directors, currently, have no intention of repaying the loans early, they have been included in the accounts to 31 December 2008 at their principal amounts.

 

 

 

The Company currently has a fixed rate term loan facility with ING Bank N.V., which is fully drawn down and has a maturity date of 15 May 2016.

 

 

 

The Company currently has two loan facilities with Barclays Bank, which are fully drawn down and have maturity dates of 4 June 2013. The rates for these loans have been fixed for 5 years through a swap. The swap is separate from the loan and under this the borrower either pays or receives the difference between LIBOR and the swap rate so that the actual rate paid is always the same. The interest charged on the loan is at LIBOR plus the margin. For Yen the LIBOR is re-set every 6 months and the LIBOR rate under the loan and as reset under the swap should be identical to each other at every 6 month interval to preserve the 'fixed' nature of the overall interest costs.

 

 

 

The Company currently has a fixed rate term loan facility with Royal Bank of Scotland plc, which is fully drawn down and has a maturity date of 16 February 2014.

 

 

 

The Company also has an additional JPY8,400,000,000 term loan facility with The Royal Bank of Scotland plc which expires on 10 March 2010 and an uncommitted facility of £25,000,000. The full JPY8,400,000,000 facility (approx £64,451,000) has been drawn down. None of the £25,000,000 facility has been drawn down.

 

 

 

Financial covenants contained within the relevant loan agreements provide, inter alia, that borrowings shall at no time exceed 50% of Net Assets and that the net assets must exceed £250 million. The net assets were £568.8 million at 31 December 2008.


 

 

 2008 

 2007 

14. 

Share capital 

 Number

 £'000

 Number

 £'000

 

Allotted, called up and fully paid: 




 

 

Ordinary shares of 25p each 

89,788,992

22,447

86,612,772

21,653

 

B Ordinary shares of 25p each 

1,111,928

278

1,090,350

273



_________

_______

_________

_______

 


90,900,920

22,725

87,703,122

21,926

 





 

 

Unissued: 




 

 

Unclassified shares of 25p each 

53,225,080

13,306

56,422,878

14,105



_________

_______

_________

_______

 

Authorised 

144,126,000

36,032

144,126,000 

36,031



_________

_______

_________

_______

 





 

 

During the year 3,176,220 Ordinary shares were issued pursuant to the Company's block listing facility. All of these shares were issued at a premium to net asset value, enhancing net assets per share for existing shareholders. The issue prices range from 510p to 751p and raised a total of £19,935,000, net of expenses. These expenses have been offset against the share premium account

 

In accordance with Article 131 of the Company's Articles of Association, 6,724 B Ordinary shares, 12,264 B Ordinary shares, 7,696 B Ordinary shares, and 7,664 B Ordinary shares were allotted by way of capitalisation of reserves on 14 February, 16 May, 11 August and 14 November 2008 respectively.

 

 

 

On 30 June 2008, 12,770 B Ordinary shares were converted into a like number of Ordinary shares of 25p in accordance with Article 47 of the Company's Articles of Association. When the nominal value of the allotted and fully paid B Ordinary shares is less than £100,000 the Directors may, under the terms of Article 47(B), require the conversion of such shares into Ordinary shares. The net asset value at the conversion date of 30 June 2007 was 699.5 pence per share.

 

 

 

On a winding up of the Company, any surplus assets available after payment of all debts and satisfaction of all liabilities of the Company shall be applied in repaying the Ordinary and B Ordinary shareholders the amounts paid up on such shares. Any surplus shall be divided among the holders of Ordinary and B Ordinary shares pari passu according to the amount paid up on such shares respectively.

 

 

 

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 capital structure of the Company consists of debt, cash and cash equivalents and equity, comprising issued capital, reserves and retained earnings.

 

 

 

The Board reviews the capital structure on an annual basis. As a part of this review the Board considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the committee the Company will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

 

 

 

The Company's overall strategy remains unchanged from 2007.

 

 

 

Voting rights

 

In accordance with the Articles of Association of the Company, on a show of hands, every member (or duly appointed proxy) present at a general meeting of the Company has one vote; and, on a poll, every member present in person or by proxy shall have 89 votes for every 25p nominal amount of Ordinary or B Ordinary shares held.


 



2008

2007

15.

Capital reserve


£'000

£'000

 

At 31 December 2007


578,035

515,445

 

Movement in fair value gains


(93,840)

68,348

 

Capitalised expenses


(5,090)

(2,201)

 

VAT on investment management and performance fees recoverable


1,027

-

 

Issue of shares


(9)

(7)

 

Stock dividends


8

-

 

Currency gains/(losses)


(2,200)

(3,550)




_________

_________

 

At 31 December 2008


477,931

578,035

 



_________

_________




Included within the total above are investment holdings gains at the year end of £78,446,000 (2007 - £195,023).


16. 

Diluted Net Asset Value per share 

 

The diluted Net Asset Value per share and the net asset value attributable to the Ordinary shares (including conversion of the B Ordinary shares), at the year end calculated in accordance with the Articles of Association were as follows: 

 

 

 


  Net Asset Value 

  Net Asset Value 

 


 per share 

  attributable 

 


 2008

 2007

 2008

 2007

 


 p

 p

 £'000

 £'000

 

Basic 




 

 

Ordinary and B Ordinary shares (note 14) 

625.8 

736.8 

568,827 

646,237 

 

Diluted 




 

 

Ordinary and B Ordinary shares (note 14) 

625.8 

736.8 

568,827 

646,237 


17.

Reconciliation of net return before finance costs and

 2008

 2007

 

taxation to net cash inflow from operating activities

 £'000

 £'000

 

Net (loss)/return before finance costs and taxation

(69,583)

84,953

 

Add: losses/(gains) on investments

93,840

(68,348)

 

Add: currency losses 

2,200

3,550

 

Amortisation of fixed income book cost

387

462

 

Increase in accrued income

(368)

(172)

 

Decrease in prepayments

-

15

 

Increase in other debtors

(1,184)

(102)

 

Increase in accruals

857

517

 

Tax on unfranked income - overseas

(1,977)

(1,209)



________

________

 

 

24,172

19,666



________

________


 

 

 At 

 

 

 

At

 


 31 December 

 
Currency 


Cash


Non-cash

31 December

 


 2007 

 differences 

flows

movements

2008

18. 

Analysis of changes in net debt 

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

 

Cash and short term deposits 

44,687 

47,849 

6,765 

-

99,301 

 

Forward contracts 

508 

16,111 

-

-

16,619 

 

Swap 

-

(1,711)

-

-

(1,711)

 

Debt due within one year 

(18,662)

(1,188)

19,850 

-

-

 

Debt due after more than one year 

(56,931)

(63,261)

(38,915)

-

(159,107)



_________

_________

________

_________

_________

 


(30,398)

(2,200)

(12,300)

-

 (44,898)



_________

_________

________

_________

_________

 






 

 


 At




 At

 


 31 December

 
Currency


Cash


Non-cash

 31 December

 


 2006

 Differences

flows

movements

 2007

 


 £'000

 £'000

 £'000

 £'000

 £'000

 

Cash and short term deposits 

3,870

(3,063)

43,880

-

44,687

 

Forward contracts 

(2,439)

2,947

-

-

508

 

Debt due within one year 

-

(867)

-

(17,795)

(18,662)

 

Debt due after more than one year 

(72,159)

(2,567)

-

17,795 

(56,931)



_________

_________

________

_________

_________

 


(70,728)

(3,550)

43,880 

-

(30,398)



_________

_________

________

_________

_________

 






 

 

A statement reconciling the movement in net funds to the net cash flow has not been presented as there are no differences from the above analysis.


19.

Derivatives and other financial instruments

 

Risk management

 

The Company's financial instruments, other than derivatives, comprise securities and other investments, cash balances, loans and debentures 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, for the purpose of managing currency and market risks arising from the Company's activities.

 

 

 

The Manager has a dedicated investment management process, which ensures that the investment policy is achieved. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a Senior Investment Manager and also by the Manager's Investment Committee.

 

 

 

The Company's Manager has an independent Investment Risk department for reviewing the investment risk parameters of all core equity, fixed income and alternative asset classes on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models.

 

 

 

Additionally, the Manager's Compliance department continually monitors the trust's investment and borrowing powers and reports to the Manager's Risk Management Committee.

 

 

 

The main risks the Company faces from its financial instruments are (i) market price risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk.

 

 

 

The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors, other than for currency disclosures.

 

 

 

(i)

Market price risk

 


The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.  

 


 

 


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.

 


 

 


The Board reviews on a regular basis the values of the fixed interest rate securities.

 


 

 


The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. The fixed rate Yen facilities are used to finance opportunities at low rates and, the revolving and uncommitted facilities to provide flexibility in the short-term. Current guidelines state that the total borrowings will not exceed 30 per cent of the net assets of the Company. The Company currently has two loan facilities with Barclays Bank, which are fully drawn down and have maturity dates of 4 June 2013. The rates for these loans have been fixed for 5 years through a swap. The swap is separate from the loan and under this the borrower either pays or receives the difference between LIBOR and the swap rate so that the actual rate paid is always the same. The interest charged on the loan is at LIBOR plus the margin. For JPY, the LIBOR is re-set every 6 months and the LIBOR rate under the loan and as reset under the swap should be identical to each other at every 6 month interval to preserve the 'fixed' nature of the overall interest costs. Details of borrowings at 31 December 2008 are shown in note 13.

 


 

 


Interest risk profile

 


The interest rate risk profile of the portfolio of financial assets and liabilities at the Balance Sheet date was as follows:


 



Weighted average





 



period for which 

Weighted
average


Fixed


Floating

Non
interest

 



rate is fixed

interest rate

rate

rate

bearing

 


At 31 December 2008

Years

%

£'000

£'000

£'000

 


Assets





 

 


Sterling

6.17

5.52

31,384

54,667

78,075

 


US Dollar

30.62

8.72

14,532

-

122,422

 


Euro

-

-

-

24,170

107,114

 


Other

4.99

9.66

21,245

20,464

243,440




_________

_________

________

_______

_________

 


Total assets

-

-

67,161

99,301

551,051




_________

_________

________

_______

_________

 







 

 


Liabilities





 

 


Bank loans - Japanese Yen

3.41

2.28

(157,487)

-

-

 


Debenture Stock

-

-

(1,620)

-

-

 


Accruals

-

-

-


(3,548)




_________

_________

________

_______

_________

 


Total liabilities

-

-

(159,107)

-

(3,548)

 



_________

_________

________

_______

_________









 



Weighted average





 



period for which 

Weighted
average


Fixed


Floating

Non
interest

 



rate is fixed

interest rate

rate

rate

bearing

 


At 31 December 2007

Years

%

£'000

£'000

£'000

 


Assets





 

 


Sterling

3.95

5.59

67,122

39,615

119,845

 


US Dollar

23.81

7.05

19,820

-

108,819

 


Euro

-

-

-

-

95,644

 


Other

3.66

8.96

20,043

5,072

248,284




_________

_________

________

_______

_________

 


Total assets

-

-

106,985

44,687

572,592




_________

_________

________

_______

_________

 







 

 


Liabilities





 

 


Bank loans - Japanese Yen

2.91

2.63

(73,973)

-

-

 


Debenture Stock

-

-

(1,620)

-

-

 


Accruals

-

-

-

-

(3,597)




_________

_________

________

_______

_________

 


Total liabilities

-

-

(75,593)

-

(3,597)




_________

_________

________

_______

_________



The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. The maturity dates of the Company's loans are shown in note 13 to the financial statements.

 

The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.

 

The non-interest bearing assets represent the equity element of the portfolio.

 

Short-term debtors and creditors have been excluded from the above tables.

 

All financial liabilities are measured at amortised cost.


Maturity profile

The table below shows the timing of cash outflows to settle the Company's financial liabilities at the Balance Sheet date.







More

 


Within 

Within 

Within 

Within 

Within 

than

 


1 year

1-2 years

2-3 years

3-4 years

4-5 years

5 years

Total

At 31 December 2008

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Bank loans

-

64,451

-

-

63,113

29,923

157,487

Debenture Stock

-

-

-

-

-

1,620

1,620

Interest cash flows on bank loans and Debenture Stock

3,294

1,742

1,380

1,380

1,029

1,063

9,888

Interest cash flows on swaps

355

355

355

355

151

-

1,571

Cash flows on other creditors

3,431

1,784

1,198

567

-

-

6,980


______

_______

________

_______

_________

_______

________


7,080

68,332

2,933

2,302

64,293

32,606

177,546


______

_______

________

_______

_________

_______

________










Within 

Within 

Within 

Within 

Within 

than

 


1 year

1-2 years

2-3 years

3-4 years

4-5 years

5 years

Total

At 31 December 2007

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Bank loans

18,662

-

37,773

-

-

17,538

73,973

Debenture Stock

-

-

-

-

-

1,620

1,620

Interest cash flows on bank loans and Debenture Stock

1,815

1,604

690

478

478

768

5,768

Cash flows on other creditors

2,525

1,750

1,216

631

-

-

6,122


______

_______

________

_______

_________

_______

________


23,002

3,354

39,679

1,109

478

19,926

87,483


______

_______

________

_______

_________

_______

________


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 throughout the reporting period in the case of instruments that have floating rates.


If interest rates had been 100 basis points higher or lower (based on current parameter used by Manager's Investment Risk Department on risk assessment) and all other variables were held constant, the Company's:


 -     profit for the year ended 31 December 2008 would increase/decrease by 
        £993,000 (2007 - increase/decrease by £447,000). This is mainly attributable to 
        the Company's exposure to interest rates on its floating rate cash balances. These
        figures have been calculated based on cash positions at each year end.

 

       -        equity reserves would increase/decrease by £1,107,000 (2007 - increase/
                decrease by £725,000). This is also mainly attributable to the Company's 
                exposure to interest rates on cash balances and its fixed interest portfolio. These 
                figures have been calculated based on cash and fixed interest portfolio positions 
                at each year end.


In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. The risk parameters used will also fluctuate depending on the current market perception.


Foreign currency risk

A significant proportion of the Company's investment portfolio is invested in overseas securities and the Balance Sheet can be significantly affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. A significant proportion of the Company's borrowings, as detailed in note 13, are in foreign currency as at 31 December 2008. The Manager seeks, when deemed appropriate, to manage exposure to currency movements on borrowings by using forward foreign currency contracts as a hedge against potential foreign currency movements. At 31 December 2008 the Company had a foreign currency contract, details of which are listed below. During the year a gain of £42,509,000 (2006 - loss of £4,242,000) was realised.


The revenue account is subject to currency fluctuation arising on overseas income. The Company does not hedge this currency risk.


Foreign currency risk exposure by currency of denomination:



 31 December 2008 

 31 December 2007 


 UK and



 UK and


 


Overseas

Net

Total

Overseas

Net

Total


Equity

Monetary

currency

Equity

Monetary

currency


Investments

Assets

exposure

Investments

Assets

exposure


£'000

£'000

£'000

£'000

£'000

£'000

US Dollar

122,422

-

122,422

104,106

20,702

124,808

Canadian Dollar

-

-

-

4,713

-

4,713

Euro

107,114

24,170

131,284

95,644

130

95,774

Japanese Yen

72,193

-

72,193

68,137

(18,563)

49,574 

Hong Kong Dollar

26,932

-

26,932

27,618

(7)

27,611

Korean Won

3,562

-

3,562

5,729

-

5,729

Indian Rupee

-

-

-

7,860

-

7,860

Taiwan Dollar

20,351

63

20,414

13,943

5,165

19,108

Swiss Franc

11,412

-

11,412

8,404

40

8,444

Norwegian Krone

-

20,401

20,401

-

-

-

Hungarian Forint

-

-

-

-

5,369

5,369

Australian Dollar

14,304

-

14,304

7,296

4,876

12,172

Malaysian Ringgit

19,503

-

19,503

21,349

82

21,431

Swedish Krone

7,938

-

7,938

6,923

-

6,923

Singapore Dollar

9,759

-

9,759

11,391

-

11,391

Brazilian Real

14,074

-

14,074

12,923

27

12,950

Thailand Baht

12,840

-

12,840

13,370

-

13,370

Mexican Peso

12,287

-

12,287

30,084

6,249

36,333

Indonesian Rupiah

15,927

-

15,927

9,026

4,137

13,163

New Zealand Dollar

2,358

-

2,358

4,231

-

4,231

Sterling

78,075

135,797

213,872

119,845

105,966

225,811


__________

_________

_________

__________

_________

__________

Total

551,051

180,431

731,482

 572,592

134,173

706,765


__________

_________

_________

__________

_________

__________


The asset allocation between specific markets can vary from time to time based on the Investment Manager's opinion of the attractiveness of the individual markets.

 

Foreign currency sensitivity

 

The following table details the Company's sensitivity to a 10% increase and decrease in sterling against the major foreign currencies in which the Company has exposure (based on exposure >5% of total exposure). The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. 






 


2008

2008

2007

2007


Profit


Profit

 


& loss

Equity

& loss

Equity


£'000

£'000

£'000

£'000

Euro

631 

10,711 

374 

9,564 

US Dollar

173 

12,243 

219 

12,481 

Japanese Yen

182 

7,219 

101 

4,957 

Brazilian Real

-

-

228 

1,295 


__________

_________

_________

__________

Total

986 

30,173 

 922 

28,298 


__________

_________

_________

__________


Foreign exchange contracts

The following Japanese Yen forward contracts were outstanding at the Balance Sheet date:






Unrealised gain at



Settlement

Amount
JPY


Contracted

31 December 2008

Date of contract

date

'000

rate

 £'000 

3 December 2008

6 March 2009

20,251,060 

145.49

16,619 



_________

_________

__________


The fair value of forward foreign currency contracts is based on forward exchange rates at the Balance Sheet date.

 

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, 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. The investments held by the Company are listed on various stock exchanges worldwide.

 

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 for the year ended 31 December 2008 would have increased/decreased by £7,808,000 (2007 - increase/decrease of £11,984,000) and equity reserves would have increased / decreased by the same amount.

 


 

(ii)

Liquidity risk

 


This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.  

 



 


Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of loan and overdraft facilities (note 13).

 



 

(iii)

Credit risk

 


This is failure of the counter party to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

 



 


The risk is not significant, and is managed as follows:

 


    where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default;

 


    investments in quoted bonds are made across a variety of industry sectors and geographic markets so as to avoid concentrations of credit risk;

 


    transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Company of default;

 


    investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker;

 


    the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the Custodian carries out a stock reconciliation to third party administrators' records on a monthly basis to ensure discrepancies are picked up on a timely basis. The Manager's Compliance department carries out periodic reviews of the Custodian's operations and reports its finding to the Manager's Risk Management Committee.

 


    cash is held only with reputable banks with high quality external credit enhancements. 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.

 



 


Credit risk exposure

 


In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 December 2008 was as follows:


 



2008

2007

 



Balance

Maximum

Balance

Maximum

 



Sheet

exposure

Sheet

exposure

 



£'000

£'000

£'000

£'000

 


Non-current assets




 

 


Securities at fair value through profit or loss

67,161

67,161

106,985

106,985

 






 

 


Current assets


-


 

 


Current taxation

335

335

172

172

 


Other debtors

-

-

141

141

 


Forward contracts

16,619

16,619

508

508

 


VAT recoverable (see note 20)

1,325

1,325

-

-

 


Accrued income

3,879

3,879

3,511

3,511




__________

_________

_________

__________

 



89,319

89,319

111,317

111,317

 



__________

_________

_________

__________



 

None of the Company's financial assets are secured by collateral or other credit enhancements.

  

Fair values of financial assets and financial liabilities

The fair value of borrowings has been calculated at £167,570,000 as at 31 December 2008 (2007 - £76,808,000) compared to an accounts value in the financial statements of £159,107,000 (2007 - £75,593,000) (note 13). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. All other assets and liabilities of the Company are included in the Balance Sheet at fair value.



20.

 

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 not been charged VAT on its investment management fees from 1 October 2007.

 

 

 

The Manager has agreed to refund £1,337,000 to the Company for VAT charged on investment management fees for the period 1 January 2004 to 30 September 2007 and this has been included in these financial statements. This repayment has been allocated to revenue and capital in line with the accounting policy of the Company for the periods in which the VAT was charged. The reclaim for previous periods and the timescale for receipt are at present uncertain and the Company has taken no account in these financial statements of any such repayment.


21.    Subsequent EventsSince the year end, equity markets have fallen, and the Company's net asset value per share (including income) as at 23 February 2009 was 527.3p per share, a decrease of 15.7% from the net asset value per share as at the balance sheet date.

 

22.    The figures and financial information for the year ended 31 December 2008 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 237(2) or section 237(3) of the Companies Act 1985. They have not yet been delivered to the Registrar of Companies. The figures and financial information for the year ended 31 December 2007 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.

 

23.    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 StreetEdinburgh EH2 2BY and on the Company's website www.murray-intl.co.uk


24.    The Annual General Meeting will be held on 22 April 2009 at The London Chamber of Commerce and Industry33 Queen StreetLondon.


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.


For Murray International Trust PLC

Aberdeen Asset Management PLC, Secretaries

24 February 2009





  10 SUMMARY OF INVESTMENT CHANGES


 

Valuation

Appreciation/

 

Valuation

 

31 December 2008

(depreciation)

Transactions

31 December 2007

 

£'000

%

£'000

£'000

£'000

%

Equities






 

United Kingdom

78,075

10.7

(32,337)

(9,433)

119,845

16.5

North America

68,624

9.3

576

12,990

55,058

7.6

Europe ex UK

126,463

17.3

(31,974)

47,467

110,970

15.3

Japan

72,194

9.9

(4,664)

8,721

68,137

9.4

Asia Pacific ex Japan

125,534

17.2

(9,370)

13,091

121,813

16.8

Latin America

80,161

10.9

(21,252)

4,644

96,769

13.4


________

________

__________

__________

_______

_______

 

551,051

75.3

(99,021)

77,480

572,592

79.0


________

________

__________

__________

_______

_______








Fixed income






 

United Kingdom

31,384

4.2

(754)

(34,984)

67,122

9.3

North America

23,201

3.3

3,674

(293)

19,820

2.7

Europe ex UK

-

-

734

(5,970)

5,236

0.7

Asia Pacific ex Japan

6,379

0.9

1,202

(3,631)

8,808

1.2

Latin America

6,197

0.8

325

(127)

5,999

0.8


________

________

__________

__________

_______

_______

 

67,161

9.2

5,181

(45,005)

106,985

14.7


________

________

__________

__________

_______

_______

Other net (liabilities)/assets{A}

113,270

15.5

62,249

5,171

45,850

6.3


________

________

__________

__________

_______

_______

Total assets

731,482

100.0

(31,591)

37,646

725,427

100.0


________

________

__________

__________

_______

_______


{A} Figure for 2008 has £nil bank loans. The figure for 2007 has bank loans of £18,662,000 which were shown as a current liability.

 



  11 TWENTY LARGEST INVESTMENTS

As at 31 December 2008



 

Valuation

Total

 Valuation  

 


2008

assets{D}

 2007 

Company 

Country

£'000

%

 £'000 

1 (1) 

Petrobras ADR{A} 




 

PetrobrasBrazil's leading energy group, produces oil and gas from extensive reserves throughout the country. It also produces a wide range of derivative products, petrochemicals and fuel alcohol. 

Brazil

22,168

3.0

36,822







2 (4) 

British American Tobacco{B} 




 

British American Tobacco is the holding company for a group of companies that manufacture, market and sell cigarettes and other tobacco products. The group sells over 300 brands in approximately 180 markets around the world. 

UK & Malaysia

21,664

3.0

17,534







3 (17) 

Unilever Indonesia 




 

Unilever Indonesia, the majority owned subsidiary of Unilever NV, manufactures soaps, detergents, margarine, oil and cosmetics. The company also produces dairy based foods, ice cream and tea beverages. 

Indonesia

15,927

2.2

9,026







4 (-) 

Rio Tinto{C} 




 

Rio Tinto is an International mining company. The company has interests in a broad range of mineral assets including aluminium, coal, copper, gold, silver, lead and iron-ore. The company's mining operations are located throughout the world. 

UK & USA

14,331

2.0

-







5 (-) 

QBE Insurance Group 




 

QBE Insurance Group is an Australian based insurance company which underwrites most types of commercial and industrial insurance policies. The company provides its services both domestically and internationally. 

Australia

14,304

2.0

7,296







6 (6) 

Souza Cruz 




 

Souza Cruz produces and sells cigarettes and other tobacco products in Latin America. Brand names include Lucky Strike, CarltonDerby, and Hollywood. The company also manufactures paper for cigarettes and packaging. 

Brazil

14,074

1.9

12,923







7 (9) 

ENI 




 

Based in Italy, ENI is a truly global energy company with hydrocarbon production in Africa, the North Sea, the Gulf of Mexico and Kazakhstan. The company owns and operates gas pipelines, and also has a network of gasoline service stations. 

Italy

13,192

1.8

10,750







8 (3) 

Tenaris ADR 




 

Tenaris manufactures, markets and distributes welded and seamless pipe. The company produces casing, tubing, pipeline and mechanical tubes for the oil and gas and energy industries and for mechanical applications and distributes its products worldwide. 

Mexico

13,114

1.8

17,928







9 (-) 

Procter & Gamble 




 

Procter & Gamble is one of the world's leading household and consumer products manufacturers. The company provides products in the laundry and cleaning, paper, beauty care, food and beverage, and health care markets. 

USA

12,895

1.8

-







10 (5) 

PTT Exploration 




 

PTT Exploration is a subsidiary of the Petroleum Authority of Thailand. The company produces oil and natural gas, and also explores and develops new crude oil and gas prospects. 

Thailand

12,839

1.8

13,370






Top ten investments 

 

154,508

21.3

 

{A} Holding comprises equity and fixed income securities, split £18,455,000 (2007 - £33,833,000)and £3,713,000 (2007 - £2,989,000) respectively.  


{B} Valuation comprises equity holdings in both UK and Malaysia split £9,900,000 (2007 - £10,808,000) and £11,764,000 (2007 - £6,726,000) respectively. 


{C} Holding comprises equity and fixed income securities, split £5,662,000 (2007 - nil) and £8,669,000 (2007 - nil) respectively.  







11 (-) 

Standard Chartered 




 

Standard Chartered is an international banking group operating principally in Asia, Africa, Latin America and the Middle East. The company offers its products and services to a wide range of customers in over fifty countries worldwide. 

UK

12,026

1.6

5,062







12 (-) 

Taiwan Mobile 





Taiwan Mobile is the leading provider of cellular telecommunications services in Taiwan. Although predominately a wireless network operator, the company also sells and leases cellular telephony equipment. 

Taiwan

11,838

1.6

6,722







13 (-) 

Telecomunicacoes de Sao Paulo  





Telesp provides local telecommunication services throughout the Brazilian State of Sao Paulo. The company provides voice, data, broadband and digital video services to consumers, business and government entities. 

Brazil

11,831

1.6

7,653







14 (-) 

Philip Morris International 





Spun out from the Altria Group in 2008, Philip Morris International is one of the world's leading global tobacco companies. It manufactures and sells leading recognisable brands such as Marlboro, Parliament and Virginia Slims. 

USA

11,800

1.6

-







15 (8) 

Total Fina 





Total is a fully integrated global energy company. In addition to exploring for, producing, refining and marketing oil and natural gas, the company also operates a chemical division which produces polyethylene, polyotyrene, paint, adhesives and resins. 

France

11,662

1.6

11,046







16 (10) 

E.ON 





E.ON is a leading global utility company. The company generates, distributes and trades electricity and distributes gas and drinking water to industrial, commercial and residential customers. E.ON operates in Europe, the Americas and Asia

Germany

11,519

1.6

10,687

17 (20) 

Zurich Financial Services 





Based in Switzerland, Zurich Financial Services provides insurance based financial services. The company offers general and life insurance products and services for private individuals, corporations and multinational organisations. 

Switzerland

11,412

1.6

8,404







18 (-) 

Belgacom 





Belgacom provides communication services and products to residential, business and corporate customers both domestically and Internationally. Through its subsidiaries Belgacom Mobile and Belgacom Skynet the company further offers mobile phone and Internet services.

Belgium

10,833

1.5

8,299







19 (-) 

Takeda Chemical 





Takeda Pharmaceutical Company mainly manufactures and sells pharmaceuticals, food supplements and chemical products like polyurethane. Takeda researches, develops and promotes its products through its related companies and distribution networks in the United States, Europe and Asia.

Japan

10,634

1.5

3,976







20 (19) 

Centrica 




 

Centrica, through various subsidiaries provides gas and energy related products and services to residential and business customers throughout the UK. Spun off from British Gas in 1997, the company also offers indirect telecom services. 

 UK 

10,607

1.5

8,610






Top twenty investments 

 

268,670

37.0

 










 


The value of the 20 largest investments represents 37.0% (2007 - 35.9%) of total assets. The figures in brackets denote the position at the previous year end. (-) denotes not previously in 20 largest investments. 


  12 FINANCIAL HIGHLIGHTS










 

31 December 2008

31 December 2007

% change

Total assets less current liabilities (before deducting prior charges)

£731,482,000

£725,427,000

 

Equity shareholders' funds (Net Assets)

£568,827,000

£646,237,000

 

Share price - Ordinary share (mid market)

589.0p

662.0p

-11.0

Share price - B Ordinary share (mid market)

527.0p

660.9p

-20.3

Net Asset Value per Ordinary and B Ordinary share

625.8p

736.8p

-15.1

Discount to Net Asset Value on Ordinary shares

5.9%

10.2%

 

 



 

Gearing (ratio of borrowing to shareholders' funds)



 

Actual gearing ratio

11.1%

5.3%

 

Potential gearing ratio

28.0%

11.7%

 

 



 

Dividends and earnings per Ordinary share



 

Revenue return per share

25.0p

21.2p

+17.9

Dividends per share{A}

23.2p

21.0p

+10.5

Dividend cover (including proposed final dividend)

1.08

1.01

 

Revenue reserves{B}

£40,774,000

£38,024,000

 

 



 

Operating costs



 

Total expense ratio

0.82%

0.74%

 

{A} The figure for dividends per share reflect the years in which they were earned (see note 8).

{B} The revenue reserve figure does not take account of the proposed third interim and final dividends amounting to £4,287,000 and £7,901,000 respectively (2007 - £3,724,000 and £7,016,000).



This information is provided by RNS
The company news service from the London Stock Exchange
 
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