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Murray Inc Trust PLC (MUT)

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Friday 11 September, 2015

Murray Inc Trust PLC

Annual Financial Report

RNS Number : 7420Y
Murray Income Trust PLC
11 September 2015
 

MURRAY INCOME TRUST PLC

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2015

 

 

STRATEGIC REPORT - COMPANY SUMMARY, FINANCIAL HIGHLIGHTS AND FINANCIAL CALENDAR

 

COMPANY SUMMARY

The Company

The Company is an investment trust company and its Ordinary shares are listed on the premium segment of the London Stock Exchange.

 

What is an Investment Trust?

An investment trust is a closed end fund which allows its shareholders to make a single investment which gives them access to a much larger portfolio of shares. A type of collective investment, investment trusts allow shareholders to spread their risk and benefit from investment opportunities which shareholders may not be able to identify on their own.

 

Investment Objective

The achievement of a high and growing income combined with capital growth through investment in a portfolio principally of UK equities.

 

Company Benchmark

FTSE All-Share Index

 

Alternative Investment Fund Manager

The Company is managed by Aberdeen Fund Managers Limited ("AFML" or the "Manager").

 

Investment Manager

The Company's investment assets are managed by Aberdeen Asset Managers Ltd ("AAML" or the "Investment Manager").

 

Website

Up-to-date information can be found on the Company's website - www.murray-income.co.uk

 

Pre-investment Disclosure Document

The Alternative Investment Fund Manager Directive ("AIFMD") requires Aberdeen Fund Managers Limited, as the alternative investment fund manager of Murray Income Trust PLC, to make available to investors certain information prior to such investors' investment in the Company.

 

The AIFMD is intended to offer increased protection to investors in investment products that do not fall under the existing European Union regime for regulation of investment products known as the UCITS regime.

 

The Company's Pre-Investment Disclosure Document is available for viewing on the Company's website.

 

 

Financial Highlights

 


2015

2014

Net asset value per Ordinary share total return

-2.2%

+14.0%

Share price total return

-5.7%

+9.4%

Benchmark total return

+2.6%

+13.1%

Earnings per share (revenue)

33.1p

30.5p

Dividend per share{A}

32.00p

31.25p


{A} Final dividend of 11.00p per Ordinary share is subject to shareholder approval at the Annual General Meeting.

 

 

Financial Calendar

 

25 September 2015

Record date of proposed final dividend for year ended 30 June 2015

28 October 2015

Annual General Meeting, Glasgow Royal Concert Hall (12.30pm)

30 October 2015

Payment date of proposed final dividend for year ended 30 June 2015

18 December 2015, 4 March and 3 June 2016

Record dates of interim dividends for year to 30 June 2016

15 January, 1 April and
1 July 2016

Payment dates of interim dividends for year to 30 June 2016

February 2016

Half-Yearly results announcement for 6 months to 31 December 2015

September 2016

Final results announcement for year to 30 June 2016

 

 

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Introduction

The purpose of this Strategic Report is to provide shareholders with details of the Company's investment strategy and business model as well as identifying the principal risks and uncertainties faced by the Company.

 

Investment Strategy

In pursuit of the Company's investment objective, the Company's investment strategy is to invest in the shares of companies that have potential for real earnings and dividend growth, while at the same time providing an above-average portfolio yield. The emphasis is on the management of risk and on the absolute return from the portfolio, which is achieved by ensuring an appropriate diversification of stocks and sectors, with a high proportion of assets in strong, well-known companies. The Company makes use of borrowing facilities to enhance shareholder returns when appropriate.

 

Investment Policy

The Company maintains a highly-diversified portfolio of investments, typically comprising between 30 and 70 holdings (but without restricting the Company from holding a more or less concentrated portfolio from time to time). The Company is unconstrained as to the market sectors in which it may invest.

 

The Company may invest up to 100% of its gross assets in UK-listed equities and other securities and is permitted to invest up to 20% of its gross assets in other overseas listed equities and securities. The Company invests primarily in the equity securities of large, well-known UK and overseas companies with an emphasis on investing in quality companies with good management, strong cash flow and a sound balance sheet, and which are generating a reliable earnings stream.

 

The Company may use derivatives for the purpose of enhancing portfolio returns and for hedging purposes in a manner consistent with the Company's broader investment policy. The Company complies with the investment policy test in Section 1158 of the Corporation Tax Act 2010.

 

It is the Company's policy to invest no more than 15 per cent of its gross assets in other listed investment companies (including investment trusts).

 

Business Model

The Board is responsible for determining the investment objective and investment policy of the Company while day-to-day management of the Company has been delegated to Aberdeen Fund Managers Limited ("AFML" or "the Manager"). AFML has appointed Aberdeen Asset Managers Limited (the "Investment Manager") to manage the Company's assets. The Investment Manager invests in a diversified range of UK and overseas companies, following a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value, concentrating on quality first, then price. Top-down investment factors are secondary in the Investment Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights. The Investment Manager is authorised to invest up to 15% of the Company's gross assets in any single stock. Currently, the top five holdings may not exceed 40% of the total value of the portfolio, and the top three sectors represented in the portfolio may not exceed 50%. The Investment Manager is permitted to invest in options and in structured products, provided that any structured product issued in the form of a note or bond has a minimum credit rating of "A".

 

The Board is responsible for setting the gearing policy of the Company and for the limits on gearing. The Manager is responsible for gearing within the limits set by the Board. The Board has set its gearing limit at a maximum of 25% of Net Asset Value at the time of draw down. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate. Particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy. Significant changes to gearing levels will be communicated to shareholders.

 

Principal Risks and Uncertainties

The Board regularly reviews the principal risks and uncertainties which it has identified together with the delegated controls it has established to manage the risks and address the uncertainties:

 

-      Investment strategy risk

The Company's investment strategy requires investment in equity stockmarkets, which may lead to loss of capital. Separately, the choice of asset allocation or level of gearing, as part of the investment strategy adopted by the Company, may result in underperformance against either the Company's benchmark index and/or its peer group, leading to a widening of the discount at which the Company's shares trade.

 

-      The Board seeks to manage these risks by diversifying its investments, as set out in the investment restrictions and guidelines agreed with the Manager, and on which the Company receives regular monitoring reports from the Manager. At each Board meeting, the Directors review the investment process with the Manager by assessing relevant management information including revenue forecasts, absolute/relative performance data, attribution analysis and liquidity/risk reports. The Board holds a separate, annual meeting devoted to investment strategy, the most recent being in February 2015.

 

-      Income and dividend risk

There is a risk that the Company fails to generate sufficient income from its investment portfolio, particularly in periods of weak equity markets, to meet its operational expenses which results in it drawing upon, rather than replenishing, its revenue reserves. This might hamper the Board's capacity to maintain dividends to shareholders. The Board monitors this risk through the review of income forecasts, provided by the Manager, at each Board meeting.

 

-      Discount volatility

Investment trust shares tend to trade at discounts to their underlying net asset values, although they can also trade at premia. Discounts and premia can fluctuate considerably. In order to seek to minimise the impact of such fluctuations, where the shares are trading at a significant discount, the Company has operated a share buy-back programme for a number of years. If the shares trade at a premium, the Company has the authority to issue new shares or re-issue shares from treasury. Whilst these measures seek to minimise volatility, it cannot be guaranteed that they will do so.

 

-      Foreign currency risk

A proportion of the Company's investment portfolio is invested in overseas securities and the value of the Company's investments and the income derived from them can, therefore, be affected by movements in foreign exchange rates. In addition, the earnings of the Company's other investments may also be affected by currency movements which, indirectly, could have an impact on the Company's performance. The Company does not currently hedge its foreign currency exposure.

 

-      Operational risk

In common with most other investment trusts, the Company has no employees. The Company therefore relies on services provided by third parties, including the Manager in particular, to whom responsibility for the management of the Company has been delegated under a management agreement (the "Agreement") (further details of which are set out in the Directors' Report). The terms of the Agreement cover the necessary duties and responsibilities expected of the Manager. The Board reviews the overall performance of the Manager on a regular basis and their compliance with the Agreement formally on an annual basis.

 

Contracts with other third party providers, including share registrar and depositary services, are entered into after appropriate due diligence. Thereafter, each contract, and the performance of the provider, is subject to formal annual review. The security of the Company's assets was the responsibility of the custodian, JPMorgan Chase until 15 July 2014, and thereafter, the responsibility of BNP Paribas Securities Services, London Branch, as depositary. The effectiveness of the internal controls at both the custodian and depositary is subject to review and regular reporting to the Audit Committee.

 

-      Regulatory risk

The Company operates in a complex regulatory environment and faces a number of related risks. A breach of Section 1158 of the Corporation Tax Act 2010 could result in the Company being subject to capital gains tax on the sale of its investments. Serious breach of other regulations, such as the UKLA Listing Rules, the Companies Act, Accounting Standards or Alternative Investment Fund Managers Directive, could lead to suspension from the London Stock Exchange and reputational damage. The Board receives monthly compliance reports from the Manager to monitor compliance with regulations.

 

An explanation of other risks relating to the Company's investment activities, specifically market price, interest rate, liquidity and credit risk, and a note of how these risks are managed, are contained in note 17 to the Financial Statements.

 

Performance and Outlook

At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives.  The Board also considers the Investment Manager's promotional strategy for the Company, including effective communications with shareholders. The future strategic direction and development of the Company is regularly discussed as part of Board meeting agendas.

 

A review of the Company's activities and performance during the year ended 30 June 2015, including future developments, is detailed in the Chairman's Statement and the Investment Manager's Report. This covers market background, investment activity, portfolio strategy, dividend and gearing policy and investment outlook. A comprehensive analysis of the portfolio is provided in the published Annual Report while the full portfolio of investments is published quarterly on the Company's website.

 

Key Performance Indicators ("KPIs")

At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives.  Below are the main KPIs which have been identified by the Board for determining the progress of the Company:

 

-     Net asset value (total return) relative to the Company's benchmark;

-     Share price (total return);

-     Discount/premium to net asset value;

-     Performance attribution;

-     Earnings and dividends per share; and

-     Ongoing charges.

 

A record of these measures is disclosed in the Investment Manager's Report and in Results.

 

Environmental, Social and Human Rights Issues

The Company has no employees, as Aberdeen Fund Managers Limited has been appointed Manager, and there are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined on page 29 of the published Annual Report.

 

Board Diversity

The Board recognises the importance of having a range of skilled and experienced individuals with the right knowledge in order to allow the Board to fulfill its obligations.  At 30 June 2015, there were four male Directors and one female Director.

 

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

 

Duration

The Company does not have a fixed life.

 

N A Honebon

Chairman

 

10 September 2015

 

 

STRATEGIC REPORT - CHAIRMAN'S STATEMENT

 

Highlights

-   Net Asset Value Total Return -2.2%

-   Share Price Total Return -5.7%

-   Total Dividends per share increased by 2.4% to 32p

 

This is the first annual report since I succeeded Patrick Gifford as Chairman at the 2014 AGM.

 

Performance

After several years of good gains in real terms for equity markets, they stalled somewhat in the year under review: the FTSE All-Share Index rose only 2.6% on a total return basis. The performance of the Company was disappointing, with comparable net asset value per share falling 2.2%.

 

While in Europe the protracted struggle to achieve any significant real economic growth was punctuated by episodes of heightened concern over the events in Greece, this was of minor global economic impact compared to the deceleration of China and other emerging economies, to the dramatic falls in oil and commodity prices associated with this slowdown and with US energy self-sufficiency as domestic shale oil came on stream.  Governments continued to run very easy monetary policies while attempting fiscal austerity, not always with much success.

 

Company profits generally did well from the first part of the economic recovery following the financial crisis, but more recently have failed to make any progress in the UK in aggregate. Nonetheless, dividend payments have continued to show modest growth, with the result that the overall payout ratio in the UK is now over 60%. This is historically high and its potentially constraining impact on capital spending by companies is attracting the attention of policymakers such as Andrew Haldane, Chief Economist at the Bank of England. Moreover, current areas of particular strain include energy and other basic material companies, which collectively generate 22% of UK dividends.

 

Against this background, prices of large cap, high yield shares underperformed the overall UK stockmarket, and investment companies - such as Murray Income - which focus on high yield, became less sought-after as evidenced by wider discounts of share prices to underlying net asset values.

 

Scottish Referendum

Shareholders will no doubt recall the Referendum in September 2014. At the time of the interim results in February we commented that the "No" vote had removed the main immediate risks, particularly those relating to currency and taxation. Draft legislation devolving additional powers to Scotland is underway in the UK Parliament. The Board continues to monitor relevant political developments closely.

 

Dividend

The Board is recommending a final dividend of 11 pence, which makes a total for the year of 32 pence, an increase of 2.4%. If approved, this will continue the over forty year record of consecutive dividend increases.

 

At the start of the financial year under review, conservative forecasts of net income for the Company suggested that the previous year's dividend level would not be covered. In the event, income receipts improved such that the proposed increase will have been marginally exceeded by net income. It should be noted that some of the income receipts were exceptional - we had several special dividends from companies we hold; we received a refund of French withholding tax paid in earlier years; several dividends in overseas currencies translated to Sterling at more favourable rates than those prevailing at the start of the year. Clearly it would not be prudent to anticipate exceptional items. However, next year we currently expect the level of underlying dividends from the portfolio to be broadly similar to this year, and shareholders may take comfort from knowing that we have revenue reserves equivalent to approximately 95% of one year's dividend supporting us.

 

Share Capital

The discount of the Company's share price to the net asset value per share widened to 6.9% from 3.2% during the year, but had narrowed to 3.7% at the time of writing.  The Board continues to monitor the level of discount and will consider selective buybacks of shares where to do so would be in the interest of shareholders.

 

Annual General Meeting

The Annual General Meeting will be held at 12.30 pm on Wednesday 28 October 2015 in the Strathclyde Suite, Glasgow Royal Concert Hall, 2 Sauchiehall Street, Glasgow, G2 3NY. The Notice of Annual General Meeting is included in the published Annual Report. It is the Board's intention to hold the 2016 Annual General Meeting in London.

 

AIFMD

The Alternative Investment Fund Managers Directive (the "Directive"), introduced by the EU to enhance shareholder protection, was fully implemented in the UK on 22 July 2014. This Directive required the Company to appoint an authorised Alternative Investment Fund Manager ("AIFM") and a depositary, the latter overlaying the pre-existing custody arrangements. In July 2014, Aberdeen Fund Managers Limited ("AFML"), was appointed AIFM while BNP Paribas Securities Services, London Branch, was appointed depositary.

 

Outlook

Slow recovery in economic activity in the developed economies of the US and UK now seems to have arrived in parts of Europe, but it is hard to see any immediate improvements in China and other emerging areas. Indeed, things may get worse before they get better. This seems likely to provide episodes of instability and heightened risk through political upheaval and disturbance in international markets such as currencies. Almost by definition we must also now be closer to the moment when interest rates in the West rise from current near zero levels, with some of the quantitative easing which pushed up asset prices already withdrawn. Much-discussed and much-postponed, when rates do eventually rise, it will hardly come as a surprise, but overall levels of borrowing remain high and some casualties should be expected.

 

The good news is that lower oil and commodity prices generally are feeding through to lower inflation and boosting real incomes for consumers, whose wages are now also beginning to rise. Perhaps we will also see at last some gains in Western productivity, the absence of which has been such a puzzle for economists.

 

In such an environment it seems right to continue to construct a portfolio of companies with strong franchises and balance sheets, with visible (and repeatable) profit prospects and to avoid high valuations. Because pay-out ratios are high, the penalty for misjudgement in selection is perhaps even more likely to manifest itself in passed or cut dividends in portfolio companies. However, as some of the recent additions to the portfolio show, there is still scope to identify companies which can do well even in these difficult conditions.

 

 

N A Honebon

Chairman

 

10 September 2015

 

 

STRATEGIC REPORT - INVESTMENT MANAGER'S REPORT

Background

The UK equity market finished the year to the end of June 2015 marginally higher but unable to repeat the strong performance of the prior two years.  The FTSE All-Share Index increased by 2.6% on a total return basis (that is with dividends reinvested) with the limited progress framed by periods of substantial volatility.  This volatility was caused by concerns over the prospects for earnings growth that in turn were a function of a variety of different factors including; economic weakness in the Eurozone and emerging markets; the end to quantitative easing ("QE") in the United States; geopolitical and domestic political risk, the effects of the strength of sterling; and the weakness of oil and commodity prices on the resource companies.  Investor confidence improved a little during the second half of the year, despite growing concerns over Greece's debt position, as the European Central Bank began its QE programme and the Conservative Party won an unlikely majority in the general election.

 

A sharp fall in the price of oil provided the accompaniment to developments throughout the financial year. Brent crude, having traded at $112 per barrel at the start of the period, dropped precipitously throughout the first half of the financial year to end the calendar year at less than half this level.  Having staged a partial recovery over the Spring, the oil price has subsequently fallen back to its lows.  This weakness has been caused by OPEC's desire, led by Saudi Arabia, to maintain market share as demand has weakened and non-OPEC supply (particularly from US shale assets and Russia) has increased.

 

In the United Kingdom, domestic economic data bore evidence of the continued recovery in the economy. UK GDP increased by 2.6% over the Company's financial year and is now estimated to be 5.2% higher than the pre-economic downturn peak in 2008 (although only broadly equal on a per capita basis).  The recovery has been led by services with the strength of sterling affecting the manufacturing sector's export competitiveness.  Inflation has been tame and remained below the government's target level of 2% for the whole period (it turned negative for the first time in 50 years during April).  Conditions allowed the Monetary Policy Committee to leave interest rates unchanged throughout the year although towards the end of the period initial signs that domestic cost growth was recovering had started to make this decision more difficult despite the appreciation of sterling pushing down on inflation. Although partly dependent on the trajectory of demand growth overseas, expectations for UK GDP growth in calendar 2016 remain robust with the Bank of England forecasting 2.6% growth.

 

Globally, the composition of growth has gently pivoted from emerging to advanced economies.  In the United States the path of recovery was interrupted by a weak first quarter of 2015, mostly due to temporary factors. More recent data has suggested that growth has subsequently recovered, aided by stronger consumer spending which suggests that the Federal Reserve, having announced the end of its asset purchase programme last October, is likely to start to raise interest rates towards the end of this year.  In the Eurozone, on the one hand, the real economy has demonstrated signs of improvement helped by falling energy prices, the weakness of the euro (caused in part by QE) and more beneficial credit market conditions.  Conversely, questions over the integrity of the euro resurfaced with Greece's difficult negotiations over its debt position.  It appears that Greece is likely to receive a third bailout that should help to restore stability for the short term at least. Growth in China has slowed leading the authorities to ease monetary policy.  In India, the economy has performed relatively strongly helped by manufacturing and services.   The remaining two "BRIC" countries have not fared well with Brazil suffering from lower commodity prices, high inflation and elevated consumer debt while Russia's economy has been pressured by sanctions and the lower oil price. However, it should be remembered that growth rates in emerging markets are still stronger than the developed world and many developing economies have appealing long term characteristics.

 

Performance

The Company generated a negative net asset value per share total return of 2.2% in the year ended 30 June 2015, compared to a rise in the FTSE All-Share Index of 2.6%.  The underperformance of 4.8% was disappointing following five consecutive years of positive relative performance. On a total return basis, the Company's share price fell by 5.7%, which reflected a widening of the discount to Net Asset Value at which the shares traded compared to the previous year end.  This has been a challenging year on both an absolute and relative basis.  The Company's focus on large, well-known companies with above average yields coupled with the aim of providing a diversified portfolio has not positioned it well given the significant underperformance of large and higher yielding companies in the market over the past year.  This combined with the stock specific issues below and the adverse currency translation impact of the overseas holdings has negatively impacted returns.

 

On a gross assets basis, the equity portfolio underperformed the benchmark by 3.6%.  Gearing reduced returns by 0.2%.  The translation impact of our overseas holdings, given the strength of sterling, reduced performance by 0.9%.   The level of gearing was increased by £10m to £55m during the market fall in October with the actual level of gearing maintained in a relatively narrow range between 5%-8% during the year. 

 

Over the year, the poorest performing areas of the market were those exposed to commodity prices.  The oil & gas and mining sectors both fell over 20% during the period.  Second order effects also caused earnings weakness in a number of sectors that supply into these industries as the oil and mining companies cut their capital expenditure budgets in response to falling commodity prices.  For the listed supermarket companies, trading has continued to be very tough given intense competition and changing customer behaviour.  Conversely, areas of the market that performed well included the real estate, house-building, telecoms and technology sectors.

 

From a size perspective, the FTSE 100 Index again significantly lagged both the Mid 250 and Small Cap indices, a function of its higher commodity and lower domestic exposures as those companies focused on the UK economy performed more strongly.  Indeed, there was an almost 15% difference in performance between the FTSE 100 and Mid 250 Indices over the period. Reflecting steady risk appetite, the level of initial public offerings has remained high.  Similarly, corporate activity has also remained relatively strong with companies keen to take advantage of cheap financing and tax differentials.

 

Looking specifically at the Company's portfolio, both stock selection and asset allocation were negative.  The returns from the holdings in the industrials and consumer services sectors comprised the main areas of underperformance.  Within industrials, the overweight exposure to the aerospace and defence sector and poor stock selection within this sector coupled with an underweight position in support services led to underperformance.  In consumer services, the holdings in the food retail sector hurt performance.  Poor stock selection in the utilities and banks sectors also impacted performance.  By contrast, the underweight positions in both oil & gas producers and mining, and the overweight position in software & computer services benefited performance.

 

Turning to the individual holdings, there were a number of disappointing returns that detracted from performance.  BHP Billiton underperformed given its exposure to both declining oil and commodity (particularly iron ore) prices.  The company has taken action to mitigate the lower income by reducing its cost base and cutting capital expenditure.  Oil major ENI also performed poorly due to weaker oil prices with the company deciding to reduce its dividend following a strategic review of operations.  Utility companies Centrica and GDF Suez also performed poorly due to strategic and competitive issues coupled with lower income from their oil and gas assets. Finally, supermarket holdings Tesco and Casino underperformed as both companies suffered from competitive pressures and Casino was particularly affected by a slowdown in emerging markets.

 

 

Performance Attribution for the year ended 30 June 2015




2015


%

Net Asset Value total return for year per Ordinary share

-2.2

FTSE All Share Index total return

2.6


______

Relative return

-4.8


______



Relative return

%

Stock selection (equities)


Oil & Gas

0.0

Basic Materials

-0.5

Industrials

-1.1

Consumer Goods

0.3

Health Care

-0.1

Consumer Services

-1.1

Telecommunications

-0.1

Utilities

-0.8

Technology

-0.1

Financials

-0.1


______

Total stock selection (equities)

-3.6


______

Asset allocation (equities)


Oil & Gas

0.8

Basic Materials

0.6

Industrials

-0.8

Consumer Goods

-0.8

Health Care

-0.3

Consumer Services

-0.8

Telecommunications

0.1

Utilities

-0.1

Technology

0.7

Financials

0.1


______

Total asset allocation (equities)

-0.5


______

Cash and options

0.4

Gearing

-0.2

Administrative expenses

-0.2

Management fees

-0.6

Tax charge

-0.1


______

Total

-4.8


______

Sources : Aberdeen Asset Management, Mellon & Lipper

Notes: Stock Selection - measures the effect of equity selection relative to the benchmark. Asset Allocation - measures the impact of over or underweighting each industry basket in the equity portfolio, relative to the benchmark weights. Gearing effect - measures the impact on relative returns of net borrowings. Management fees & other expenses - these reduce total assets and therefore reduce performance. The effect is calculated by dividing expenses incurred during the year by average total assets less current liabilities.

 

More positively, there were a number of holdings that significantly outperformed.  These included Sage where the market welcomed increasing organic revenue growth and improved margins.  Close Brothers performed strongly given benign conditions in its lending operations and a gradual turnaround in its asset management division.  The strong returns from smaller companies were reflected in the performance of Aberforth Smaller Companies Investment Trust. The small holding in BG benefited from an agreed takeover approach from Royal Dutch Shell.  Finally, Provident Financial also performed strongly as its competitors suffered under tighter regulatory scrutiny and it introduced new products that should provide attractive growth opportunities.

 

Portfolio Activity and Structure

In keeping with our patient, buy and hold approach, turnover was characteristically modest during the period.  However, we introduced two new companies and a third company, South32 which was spun out from BHP Billiton in May was sold just before the period end.  The holding in the Royal Dutch Shell A shares was sold and the B shares were purchased as this is more tax efficient from a dividend perspective.

 

The first new holding added during the period was Schroders.  The fund management company benefits from a number of attractive attributes including a well-known brand, a broad and diversified fund offering, good distribution and a net cash balance sheet.  The second company introduced was Elementis, a chemicals company. The business has two divisions: firstly, a chromium division which is the dominant player in the United States supplying, for example, chromic acid and chrome sulphate and secondly, a specialty chemicals division which serves end-markets in the personal care, decorative, industrial and oil industries. Elementis has a net cash balance sheet which has previously been used to pay a small special dividend in addition to the regular dividend.

 

We increased exposure to a number of holdings including Ultra Electronics, given the potential growth opportunities from its niche defence programmes and civil aerospace projects, and Nordea, where we believe the dividend has scope for significant growth.  Furthermore we increased the holding in Microsoft following a relatively weak trading statement on the basis that the shares had been oversold and a positive meeting with the CEO of Vodafone led us to increase our exposure to that company.

 

In contrast we reduced our exposure to Tesco and ENI given concerns over the outlook for both companies - a challenging competitive environment and lower oil prices, respectively.  A number of call options were assigned in companies that had performed strongly including Roche, Sage, Associated British Foods, National Grid, Compass and Land Securities leading to a reduction in our exposure to these names. 

 

We continued to write options gently to increase and diversify the income available to the Company.  The income from writing options remained steady in percentage terms accounting for 5.8% of total income compared to 5.7% of total income during the prior year.  We continue to feel that the option writing strategy has been of benefit to the Company by increasing the level of income generated and providing a good discipline for optimising our exposure to individual holdings.

 

Our aspiration in terms of portfolio construction has not changed. Our aim is to build a sensibly diversified portfolio that is not dependent on any one particular economic scenario but provides broad exposure to the market as a whole while generating an above average dividend yield. The portfolio currently comprises 47 holdings with the overseas exposure representing 16.5% of gross assets at the year-end (compared to 18.3% at the end of the prior period).

 

Given the relatively low turnover over the period, changes to the sector positioning of the Company compared to the prior year have been modest.  However, the weighting in the oil & gas sector has reduced given the underperformance of the sector as a whole and a partial sale of the holding in ENI. Conversely, the exposure to the financials sector, which is broad in its scope, has increased given the introduction of Schroders and strong performances from a number of holdings in the sector.

 

Income

For the financial year ended 30 June 2015, the Company witnessed an increase in the level of income generated overall leading to an increase in the revenue return per share of 8.5% to 33.1p.  Income from investments increased by 6.0% aided by the recognition of five special dividends (from Compass, Hiscox, Svenska Handelsbanken, Elementis and Schneider Electric) as revenue items.  We believe that this recognition is appropriate given that the return of cash was from a build-up of profits generated by ongoing operations rather than a sale of assets. In addition, the Company benefited from a one-off reclaim of French withholding tax amounting to £512,000 which improved the revenue account.  The income derived from writing options increased marginally compared to the previous year.  Revenue reserves now stand at £28.3m.

 

Although the relative weakness in sterling compared to the US dollar (for which around a quarter of the dividend income is denominated) has been helpful over the year, the underlying picture for dividend growth remains difficult.  Given the strong dividend culture of the UK equity market, companies, particularly in the resources space, have continued to increase or maintain their dividends at a time where earnings expectations have reduced or stayed flat which has led to a reduction in dividend cover.  Unless we witness a recovery in earnings growth the outlook for income generation is likely to remain more challenging.

 

Outlook

As we suggested in last year's Report, the UK equity market has struggled to deliver the generous levels of returns that it generated in the two prior years.  Given the strength of the recovery in share prices, aided by the policies of central banks, and the lack of aggregate earnings growth, it is still very difficult to argue that valuations in absolute terms look attractive.  Furthermore, the prospect of rising interest rates in the United States may well present further challenges for equities.  We remain watchful of slowing growth in emerging markets and China in particular. The Conservative majority at the general election has removed concerns over a number of potentially less business-friendly policies although the market will, at some point, need to consider the prospects for a referendum on the United Kingdom's membership of the European Union.

 

Although the short term outlook for equity returns is likely to stay difficult, we remain sanguine about the medium to long term opportunities for the companies in the portfolio.  We believe that globally competitive businesses with strong balance sheets will prosper over the long term and ultimately offer the best earnings and dividend growth prospects.

 

 

Charles Luke

Aberdeen Asset Managers Limited

Investment Manager

 

10 September 2015

 

 

DIRECTORS' REPORT

Status

The Company, which was incorporated in 1923, is registered as a public limited company in Scotland under number SC012725 and is an investment company within the meaning of Section 833 of the Companies Act 2006.

 

The Company has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 July 2012.  The Directors are of the opinion that the Company has conducted its affairs for the year ended 30 June 2015 so as to enable it to comply with the ongoing requirements for investment trust status.

 

The Company has conducted its affairs so as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.

 

Capital Structure

At 30 June 2015, the Company had 68,142,458 fully paid Ordinary shares of 25p each (2014 - 68,017,458 Ordinary shares) with voting rights in issue and an additional 451,000 (2014 - 451,000) shares in treasury. During the year ended 30 June 2015, 125,000 new Ordinary shares were issued for cash. There have been no changes in the Company's issued share capital subsequent to the year end and up to the date of this Report.

 

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares, excluding treasury shares, carry a right to receive dividends.  On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

 

There are no restrictions on the transfer of Ordinary shares in the Company other than certain restrictions which may be applied from time to time by law (for example, insider trading law).

 

Results and Dividends

The financial statements for the year ended 30 June 2015 indicate a total loss attributable to equity shareholders for the year of £11,474,000 (2014 - gain of £68,356,000).

 

The final dividend for the year ended 30 June 2014, of 10.25p per Ordinary share, was paid to shareholders on 31 October 2014. The first, second and third interim dividends, each of 7.0p per Ordinary share, for the year ended 30 June 2015, were paid to shareholders on 16 January 2015, 2 April 2015 and 3 July 2015, respectively.

 

The Directors now recommend a final dividend for the year ended 30 June 2015 of 11.00p per Ordinary share, payable to shareholders on 30 October 2015, making a total distribution to Ordinary shareholders of £21,806,000 (2014 - £21,255,000) relating to the year ended 30 June 2015, as shown in note 6 to the financial statements. The ex-dividend date is 24 September 2015 and the record date is 25 September 2015. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.

 

Dividends are paid by means of three interim dividends, normally in January, April, July, and a final dividend in October, after the Annual General Meeting. Further information on dividends is contained in the Chairman's Statement.

 

Directors

Biographies of the current Directors may be found in the published Annual Report. Neil Honebon, David Woods, Jean Park, Donald Cameron and Neil Rogan held office as Directors throughout the year ended 30 June 2015 and shall retire and seek re-election as Directors at the AGM. Patrick Gifford retired as a Director on 29 October 2014. The Board supports the candidature of the Directors for re-election for the reasons described in the Statement of Corporate Governance.

 

There were no contracts during, or at the end of the year, in which any Director was materially interested. No Director had a material interest in any investment in which the Company itself had a material interest.

 

Directors' Insurance and Indemnities

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. Furthermore, each Director of the Company is entitled to be indemnified out of the assets of the Company to the extent permitted by law against all costs, charges, losses, expenses and liabilities incurred by them in the actual or purported execution and/or discharge of their duties and/or the exercise or purported exercise of their powers and/or otherwise in relation to or in connection with their duties, powers or office. These rights are included in the Articles of Association of the Company and the Company has granted indemnities to each Director on this basis.

 

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014, the Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate.  The Company's assets consist of a diverse portfolio of listed equity shares which in most circumstances are realisable within a very short timescale. The Directors are mindful of the principal risks and uncertainties disclosed above and have reviewed forecasts detailing revenue and liabilities and they believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of this Annual Report.

 

The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants. On 26 September 2013, the Company entered into a two-year multi-currency revolving loan facility ("the Facility") with Scotiabank (Ireland) Limited for up to £80m. As at 30 June 2015, £55m had been drawn down under the Facility. The Company is in negotiation with its bankers in advance of renewal but at this stage has not received confirmation that the Facility will be renewed. If acceptable terms are available from the existing bankers, or any alternative, the Company would expect to continue to access the facility. However, should these terms not be forthcoming, any outstanding borrowing would be repaid through the proceeds of equity sales.

 

Substantial Interests

At 10 September 2015, the following interests over 3% in the issued Ordinary share capital of the Company have been disclosed in accordance with the requirements of the UK Listing Authority's Disclosure and Transparency Rules:

 

Shareholder

Number of shares held

% held

Aberdeen Asset Managers Limited Retail Plans

12,312,667

18.1

Speirs & Jeffrey

5,078,316

7.5

Rathbone Brothers

4,516,222

6.6

Alliance Trust Savings

3,296,924

4.8

Brewin Dolphin

2,712,455

4.0

Hargreaves Lansdown (execution only)

2,500,015

3.7

 

As at the date of approval of this Report, no changes to the above interests had been notified to the Company.

 

Manager and Company Secretary

The Company's investment management arrangements with the Aberdeen Asset Management Group were reorganised during the year and the Company appointed Aberdeen Fund Managers Limited ("AFML"), a wholly owned subsidiary of Aberdeen Asset Management PLC, as its alternative investment fund manager ("AIFM" or "Manager") with effect from 16 July 2014. In order to facilitate this appointment, the Company terminated its existing investment management agreement with Aberdeen Asset Managers Limited ("AAML"), which was effective for the early part of the Company's year ended 30 June 2015, and entered into a new management agreement with AFML. The new management agreement with AFML is made on the same commercial terms as the previous agreement with AAML and is also compliant with the new regulatory regime under the AIFMD. Under the new arrangements, the Company's portfolio will continue to be managed by AAML by way of a group delegation agreement in place between AFML and AAML.

 

Company secretarial, accounting and administrative services are provided by Aberdeen Asset Management PLC.

 

For the period from 1 July 2014 to 15 July 2014, the management, secretarial and marketing fees payable by the Company to Aberdeen Group were calculated and charged on the following basis, which, in relation to management and secretarial fees, is unchanged under the new management agreement entered into with AFML from 16 July 2014 onwards:

 

A monthly fee is payable to AAML at the rate of one-twelfth of 0.55% on the first £400 million of net assets, 0.45% on the next £150 million of net assets and 0.25% on the excess over £550 million. The value of any investments in unit trusts, open ended and closed ended investment companies and investment trusts of which the Manager, or another company within the Aberdeen Asset Management Group is the operator, manager or investment adviser, is deducted from net assets when calculating the fee. The investment management fee is chargeable 50% to revenue and 50% to capital. There is no performance fee. A secretarial fee of £75,000 per annum (plus applicable VAT) is payable to Aberdeen Asset Management PLC, which is chargeable 100% to revenue.  An annual fee equivalent to 0.075% of gross assets (calculated at 30 September each year) is paid to AAML to cover promotional activities undertaken on behalf of the Company. The management, secretarial and promotional activity fees paid to Aberdeen Group during the year ended 30 June 2015 are shown in notes 3 and 4 to the financial statements.

 

The management agreement may be terminated by either the Company or the Manager on the expiry of three months' written notice. On termination, the Manager would be entitled to receive fees which would otherwise have been due to that date.

 

In monitoring the performance of the Manager, the Board considers the investment record of the Company over the short term and longer term, taking into account both its performance against the benchmark index and peer group investment trusts. The Board also reviews the management processes, risk control mechanisms and marketing activities of the Manager. As a result of these reviews, the Board considers the continuing appointment of the Manager to be in the interests of shareholders because the Aberdeen Group has the investment management, marketing and associated secretarial and administrative skills required for the effective operation of the Company. The Board continues to keep this matter under review.

 

Auditor

The Directors confirm that, so far as each of the Directors is aware, there is no relevant audit information of which the Company's independent auditor is unaware and that the Directors have taken all steps that they reasonably could be expected to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's independent auditor is aware of that information.

 

Annual General Meeting

Among the resolutions being put at the Annual General Meeting of the Company to be held on 28 October 2015, the following resolutions will be proposed:

 

Authority to allot shares and disapply pre-emption rights

Ordinary Resolution No. 11 in the Notice of Annual General Meeting will renew the authority to allot the unissued share capital up to an aggregate nominal amount of £851,780 (equivalent to approximately 3.4m Ordinary shares, or 5 per cent of the Company's existing issued share capital on the date of approval of this Report (excluding treasury shares)). Such authority will expire on the date of the next Annual General Meeting or on 31 December 2016, whichever is earlier. This means that the authority will require to be renewed at the next Annual General Meeting.

 

When shares are to be allotted for cash, Section 561 of the Companies Act 2006 (the "Act") provides that existing shareholders have pre-emption rights and that the new shares to be issued, or sold from treasury, must be offered first to such shareholders in proportion to their existing holding of shares. However, shareholders can, by special resolution, authorise the Directors to allot shares or sell from treasury otherwise than by a pro rata issue to existing shareholders. Special Resolution No. 12 will, if passed, give the Directors power to allot for cash or sell from treasury equity securities up to an aggregate nominal amount of £1,703,561 (equivalent to approximately 6.8m Ordinary shares, or 10 per cent of the Company's existing issued share capital on the date of approval of this Report, as if Section 561 of the Act does not apply). This authority will also expire on the date of the next Annual General Meeting or on 31 December 2016, whichever is earlier. This authority will not be used in connection with a rights issue by the Company.

 

The Directors intend to use the authority given by Resolutions 11 and 12 to allot shares or sell shares from treasury and disapply pre-emption rights only in circumstances where this will be clearly beneficial to shareholders as a whole. The issue proceeds would be available for investment in line with the Company's investment policy. No issue of shares will be made which would effectively alter the control of the Company without the prior approval of shareholders in general meeting. It is the intention of the Board that any issue of shares or any re-sale of treasury shares would only take place at a price not less than 0.5% above the net asset value per share prevailing at the date of sale. It is also the intention of the Board that sales from treasury would only take place when the Board believes that to do so would assist in the provision of liquidity to the market. The Directors recommend that shareholders vote in favour of Resolutions 11 and 12.

 

Purchase of the Company's own Ordinary Shares

At the Annual General Meeting held on 29 October 2014, shareholders approved the renewal of the authority permitting the Company to repurchase its Ordinary shares.

 

The Directors wish to renew the authority given by shareholders at the previous Annual General Meeting. A share buy-back facility enhances shareholder value by acquiring shares at a discount to net asset value, as and when the Directors consider this to be appropriate. The purchase of shares, when they are trading at a discount to net asset value per share, should result in an increase in the net asset value per share for the remaining shareholders. This authority, if conferred, will only be exercised if to do so would result in an increase in the net asset value per share for the remaining shareholders and if it is in the best interests of shareholders generally. Any purchase of shares will be made within guidelines established from time to time by the Board. It is proposed to seek shareholder authority to renew this facility for another year at the Annual General Meeting.

 

Under the current Listing Rules, the maximum price that may be paid on the exercise of this authority must not exceed the higher of (i) 105% of the average of the middle market quotations for the shares over the five business days immediately preceding the date of purchase and (ii) the higher of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out. The minimum price which may be paid is 25p per share. Shares which are purchased under this authority will either be cancelled or held as treasury shares. Special Resolution No. 13 in the Notice of Annual General Meeting will renew the authority to purchase in the market a maximum of 14.99% of shares in issue at the date of signing this Report (amounting to 10,214,554 Ordinary shares). Such authority will expire on the date of the next Annual General Meeting, or on 31 December 2016, whichever is earlier. This means in effect that the authority will have to be renewed at the next Annual General Meeting, or earlier, if the authority has been exhausted. The Directors recommend that shareholders vote in favour of Resolution No. 13. No dividends may be paid on any shares held in treasury and no voting rights will attach to such shares. The benefit of the ability to hold treasury shares is that such shares may be resold. This should give the Company greater flexibility in managing its share capital, and improve liquidity in its shares.

 

Recommendation

The Directors believe that the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and its shareholders as a whole, and recommend that shareholders vote in favour of the resolutions, as the Directors intend to do in respect of their own beneficial shareholdings totalling 43,874 Ordinary shares, representing 0.1% of the issued Ordinary share capital of the Company.

 

Additional Information

Where not provided elsewhere in the Directors' Report, the following provides the additional information required to be disclosed by The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

 

The rules governing the appointment of Directors are set out in the Statement of Corporate Governance. The Company's Articles of Association may only be amended by a special resolution at a general meeting of shareholders.

 

The Company is not aware of any significant agreements to which it is a party, apart from the Management Agreement ("MA") with the Manager, that take effect, alter or terminate upon a change of control of the Company following a takeover. Other than the MA, further details of which are set out above, the Company is not aware of any contractual or other agreements which are essential to its business which might reasonably be expected to have to been disclosed in the Directors' Report.

 

By Order of the Board

 

N A Honebon

Chairman

 

10 September 2015

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report 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 the law they 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 2006. 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 Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

 

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.

 

We confirm that to the best of our knowledge:

 

-    the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

-    that in the opinion of the Directors, the Annual Report and financial statements taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and

-    the Strategic Report and Directors' Report include 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 and on behalf of the Board of Murray Income Trust PLC

 

N A Honebon

Chairman

 

10 September 2015

 

 

STRATEGIC REPORT - RESULTS

 

 

Financial Highlights

 


30 June 2015

30 June 2014

% change

Total assets (£'000)

570,888

592,652

-3.7

Equity shareholders' funds (£'000)

515,888

547,652

-5.8

Net asset value per Ordinary share

757.1p

805.2p

-6.0

Market capitalisation (£'000)

480,404

529,856

-9.3

Share price of Ordinary share (mid-market)

705.0p

779.0p

-9.5

Discount to net asset value on Ordinary shares

(6.9%)

(3.2%)


Gearing (ratio of borrowing to shareholders' funds)




Net gearing {A}

7.2%

5.9%


Dividends and earnings




Revenue return per share

33.1p

30.5p

+8.5

Dividends per share{B}

32.00p

31.25p

+2.4

Dividend cover

1.03 times

0.98 times


Revenue reserves (£'000){C}

28,340

27,008


Operating costs




Ongoing charges ratio{D}

0.74%

0.73%



{A}      Calculated in accordance with AIC guidance "Gearing Disclosures post RDR".

{B}      The figures for dividends per share reflect the years in which they were earned (see note 6).

{C}      The revenue reserve figure does not take account of the proposed third interim and final dividends amounting to £4,770,000 and £7,496,000 respectively (2014 - third interim and final dividends amounting to £4,761,000 and £6,972,000 respectively).

{D}      Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses divided by the average cum income net asset value throughout the year.

 

 

Performance (total return)

 


 1 year return

3 year return

5 year return


%

%

%

Share price

-5.7

+25.3

+64.9

Net asset value per Ordinary share

-2.2

+32.5

+72.1

Source: Aberdeen Asset Managers/Morningstar




 

 

Dividends

 


Rate

xd date

Record date

Payment date

1st interim 2015

7.00p

18 December 2014

19 December 2014

16 January 2015

2nd interim 2015

7.00p

5 March 2015

6 March 2015

2 April 2015

3rd interim 2015

7.00p

4 June 2015

5 June 2015

3 July 2015

Proposed final 2015

11.00p

24 September 2015

25 September 2015

30 October 2015

Total dividends 2015

32.00p




 

 

Ten Year Financial Record

 

Year end 30 June

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Revenue (£'000)

17,237

19,251

22,390

19,790

18,257

21,844

22,688

23,566

23,926

25,476

Per Ordinary share (p)











Net revenue return

21.8

24.7

29.3

28.1

25.4

30.9

30.6

31.1

30.5

33.1

Dividends

21.60

24.25

27.00

27.75

28.00

28.75

29.75

30.75

31.25

32.00

Net asset value

699.7

802.3

619.9

455.4

547.9

671.5

649.6

734.6

805.2

757.1


______

______

______

______

______

______

______

______

______

______

Shareholders' funds (£'000)

456,714

522,617

400,536

294,570

354,425

434,406

425,458

492,878

547,652

515,888


______

______

______

______

______

______

______

______

______

______









The figures for dividends reflect the dividends for the years in which they were earned.

Please note that past performance is not a guide to future performance.

 

 



MURRAY INCOME TRUST PLC

 

Income Statement

 



Year ended 30 June 2015

Year ended 30 June 2014



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

(Losses)/gains on investments

9

-

(32,303)

(32,303)

-

49,520

49,520

Currency gains/(losses)


-

33

33

-

(105)

(105)

Income

2

25,476

-

25,476

23,926

-

23,926

Investment management fees

3

(1,396)

(1,396)

(2,792)

(1,386)

(1,386)

(2,772)

Administrative expenses

4

(1,183)

-

(1,183)

(1,079)

-

(1,079)



_______

_______

_______

_______

_______

_______

Net return before finance costs and taxation


22,897

(33,666)

(10,769)

21,461

48,029

69,490









Finance costs of borrowing

5

(380)

(380)

(760)

(362)

(362)

(724)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities before taxation


22,517

(34,046)

(11,529)

21,099

47,667

68,766









Taxation on ordinary activities

7

55

-

55

(410)

-

(410)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities after taxation


22,572

(34,046)

(11,474)

20,689

47,667

68,356



_______

_______

_______

_______

_______

_______









Return per Ordinary share (pence)

8

33.1

(50.0)

(16.9)

30.5

70.2

100.7



_______

_______

_______

_______

_______

_______









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

The Company had no recognised gains or losses other than those recognised in the Income Statement.

No operations were acquired or discontinued in the year.

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

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




£'000

£'000

£'000

£'000

£'000

£'000

Ordinary dividends on equity shares

6

21,240

-

21,240

20,712

-

20,712



_______

_______

_______

_______

_______

_______









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

 

 



MURRAY INCOME TRUST PLC

 

Balance Sheet

 



As at

As at



30 June 2015

30 June 2014


Notes

£'000

£'000

Non-current assets




Investments at fair value through profit or loss

9

547,339

578,506



___________

___________





Current assets




Other debtors and receivables

10

7,148

2,414

Cash and short term deposits


17,874

12,643



___________

___________



25,022

15,057



___________

___________





Creditors: amounts falling due within one year




Other payables

11

(1,473)

(911)

Bank loans

11

(55,000)

(45,000)



___________

___________

Net current liabilities


(31,451)

(30,854)



___________

___________

Net assets


515,888

547,652



___________

___________





Share capital and reserves




Called-up share capital

12

17,148

17,117

Share premium account


24,020

23,101

Capital redemption reserve


4,997

4,997

Capital reserve

13

441,383

475,429

Revenue reserve

13

28,340

27,008



___________

___________

Total equity shareholders' funds


515,888

547,652



___________

___________





Net asset value per Ordinary share (pence)

14

757.1

805.2



___________

___________

 

 



MURRAY INCOME TRUST PLC

 

Reconciliation of Movements in Shareholders' funds

 

For the year ended
30 June 2015











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2014


17,117

23,101

4,997

475,429

27,008

547,652

Return on ordinary activities after taxation


-

-

-

(34,046)

22,572

(11,474)

Issue of Ordinary shares


31

919

-

-

-

950

Dividends paid

6

-

-

-

-

(21,240)

(21,240)



______

______

______

______

______

______

Balance at 30 June 2015


17,148

24,020

4,997

441,383

28,340

515,888



______

______

______

______

______

______









For the year ended
30 June 2014











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total



£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2013


16,886

16,202

4,997

427,762

27,031

492,878

Return on ordinary activities after taxation


-

-

-

47,667

20,689

68,356

Issue of Ordinary shares


231

6,899

-

-

-

7,130

Dividends paid

6

-

-

-

-

(20,712)

(20,712)



______

______

______

______

______

______

Balance at 30 June 2014


17,117

23,101

4,997

475,429

27,008

547,652



______

______

______

______

______

______

 

 


MURRAY INCOME TRUST PLC

 

Cash Flow Statement

 



Year ended

Year ended



30 June 2015

30 June 2014


Notes

£'000

£'000

£'000

£'000

Net cash inflow from operating activities

15


15,121


18,334







Servicing of finance






Interest paid



(769)


(722)







Taxation






Net tax paid



(240)


(416)







Financial investment






Purchases of investments


(53,436)


(39,256)


Sales of investments


54,812


30,485




_______


_______


Net cash inflow/(outflow) from financial investment



1,376


(8,771)







Equity dividends paid

6


(21,240)


(20,712)




_______


_______

Net cash outflow before financing



(5,752)


(12,287)







Financing






Issue of Ordinary shares

12

950


7,496


Drawdown of loan


10,000


5,000




_______


_______


Net cash inflow from financing



10,950


12,496



_______

Increase in cash   

16

209



_______

 

 



MURRAY INCOME TRUST PLC

 

Notes to the Financial Statements

Year Ended 30 June 2015

 

1.

Accounting policies


(a)

Basis of preparation



The financial statements have been prepared in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014.






The financial statements have been prepared on a going concern basis. They have also been prepared on the assumption that approval as an investment trust will continue to be granted.





(b)

Income

 

 


Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available dividends receivable on or before the year end are treated as revenue for the year. Where the Company has elected to receive dividends in the form of additional shares rather than cash, the amount of the cash dividend foregone is recognised as revenue and any residual amount is recognised as capital. Provision is made for any dividends not expected to be received. Special dividends are credited to capital or revenue, according to the circumstances. Dividend revenue is presented gross of any non-recoverable withholding taxes, which are disclosed separately within the Income Statement.






The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities and shares.






Interest receivable from cash and short-term deposits and interest payable is accrued to the end of the year.





(c)

Expenses



All expenses are accounted for on an accruals basis. All expenses are charged through the revenue column of the Income Statement except as follows:



-     transaction costs on the acquisition or disposal of investments are recognised as a capital item in the Income Statement.



-     expenses are charged as a capital item in the Income Statement where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 50% to revenue and 50% to capital to reflect the Company's investment policy and prospective income and capital growth.





(d)

Taxation



The tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The tax effect of different items of income/gain and expenditure/loss is allocated between the capital and revenue accounts on the same basis as the particular item to which it relates using the Company's effective rate of tax for the year.






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 taxable 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. 





(e)

Valuation of investments



Investments have been designated upon initial recognition at 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 the net return for the period as a capital item in the Income Statement and are ultimately recognised in the capital reserve.





(f)

Cash and cash equivalents



Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to insignificant risk of change in value.





(g)

Borrowings



Short-term borrowings, which comprise interest bearing bank loans and overdrafts are recognised initially at the fair value of the consideration received, net of any issue expenses, and subsequently at amortised cost. The finance costs, being the difference between the net proceeds of borrowings and the total amount of payments that require to be made in respect of those borrowings, accrue evenly over the life of the borrowings and are allocated 50% to revenue and 50% to capital.





(h)

Traded options



The Company may enter into certain derivative contracts (eg options) to gain exposure to the market. The option contracts are accounted for as separate derivative contracts and are therefore shown in other assets or other liabilities at their fair value ie market value. The premium received on the open position is recognised over the life of the option in the revenue column of the Income Statement. Where the option is written for the maintenance or enhancement of the Company's investments then the change in fair value is recognised in the capital column of the Income Statement.





(i)

Segmental reporting



The Directors are of the opinion that the Company is engaged in a single segment of business activity, being investment business. Consequently, no business segmental analysis is provided.





(j)

Treasury shares



When the Company purchases the Company's equity share capital as treasury shares, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects, and is recognised as a deduction from equity. When these shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to or from the capital reserve.





(k)

Dividends payable



Dividends are recognised in the financial statements in the period in which they are paid.

 



2015

2014

2.

Income

£'000

£'000


Income from investments




UK dividends (all listed)

16,471

14,855


Overseas dividends (all listed)

5,838

5,078


Stock dividends

1,576

2,596



_______

_______



23,885

22,529



_______

_______


Other income




Deposit interest

103

29


Traded option premiums

1,488

1,368



_______

_______



1,591

1,397



_______

_______


Total income

25,476

23,926



_______

_______






During the year, the Company received premiums totalling £1,488,000 (2014 - £1,368,000) in exchange for entering into derivative transactions. At the year end there was 1 open position (2014 - 9), valued at a liability position of £34,000 (2014 - £156,000) and securities held by the Company with a value of £3,743,000 (2014 - £3,198,000) were pledged as collateral against this.

 



2015

2014



Revenue

Capital

Total

Revenue

Capital

Total

3.

Management fee

£'000

£'000

£'000

£'000

£'000

£'000


Management fee

1,396

1,396

2,792

1,386

1,386

2,772



_______

_______

_______

_______

_______

_______




For the year ended 30 June 2015 management and secretarial services were provided by Aberdeen Asset Managers Limited ("AAM") until 15 July 2014 and thereafter by Aberdeen Fund Managers Limited ("AFML"). There were no changes to the commercial arrangements. Under the terms of an agreement effective from 16 July 2014 (which replaced the existing arrangements with AAM), the Company has appointed AFML to provide management, accounting, administrative and secretarial duties.




The management fee is based on 0.55% for net assets up to £400 million, 0.45% on the next £150 million of net assets and 0.25% for funds over £550 million, calculated and paid monthly. The fee is allocated 50% to revenue and 50% to capital. The agreement is terminable on three months' notice. The total of the fees paid and payable during the year to 30 June 2015 was £2,792,000 (2014 - £2,772,000) and the balance due to AFML at the year end was £225,000 (2014 - £478,000).

 



2015

2014

4.

Administrative expenses

£'000

£'000


Shareholders' services{A}

569

557


Directors' remuneration

133

146


Secretarial fees{B}

90

90


Auditor's remuneration




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

21

21


-      non-audit services




-      fees payable to the Company's auditor and its associates for iXBRL tagging services

2

2


-      fees payable to the Company's auditor and its associates for French WHT reclaims

21

-


Other expenses

347

263



_______

_______



1,183

1,079



_______

_______




{A}        Includes registration, savings scheme and other wrapper administration and promotion expenses, of which £489,000 (2014 - £479,000) was paid to Aberdeen Asset Managers Limited ("AAML") under a delegation agreement with AFML to cover promotional activities during the year. There was £121,000 (2014 - £125,000) due to AAML in respect of these promotional activities at the year end.


{B}        Payable to AFML, balance outstanding £23,000 (2014 - £15,000) at the year end.




With the exception of Auditor's remuneration for the statutory audit, all of the expenses above, including fees for non-audit services, include irrecoverable VAT where applicable.  For the Auditor's remuneration for the statutory audit irrecoverable VAT amounted to £4,000 (2014 - £4,000).

 



2015

2014



Revenue

Capital

Total

Revenue

Capital

Total

5.

Finance costs of borrowing

£'000

£'000

£'000

£'000

£'000

£'000


Bank loans and overdrafts

380

380

760

362

362

724



_______

_______

_______

_______

_______

_______

 



2015

2014

6.

Ordinary dividends on equity shares

£'000

£'000


Third interim 2014 of 7.00p (2013 - 7.00p)

4,761

4,676


Final 2014 of 10.25p (2013 - 9.75p)

6,972

6,590


First interim 2015 of 7.00p (2014 - 7.00p)

4,770

4,761


Second interim 2015 of 7.00p (2014 - 7.00p)

4,770

4,761


Return of unclaimed dividends

(33)

(76)



_______

_______



21,240

20,712



_______

_______




The third interim and proposed final dividends for 2015 have not been included as a liability in these financial statements as they were not payable until after the Balance Sheet date. The proposed final dividend for 2015 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 1158-1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £22,572,000 (2014 - £20,689,000).







2015

2014



£'000

£'000


Three interim dividends of 7.00p each (2014 - 7.00p)

14,310

14,283


Proposed final dividend of 11.00p (2014 - 10.25p)

7,496

6,972



_______

_______



21,806

21,255



_______

_______






The amount reflected above for the cost of the proposed final dividend for 2015 is based on 68,142,458 Ordinary shares, being the number of Ordinary shares in issue at the date of this Report.

 



2015

2014



Revenue

Capital

Total

Revenue

Capital

Total

7.

Taxation

£'000

£'000

£'000

£'000

£'000

£'000


(a)

Analysis of charge for the year









Overseas tax suffered

763

-

763

610

-

610



French WHT reclaimed

(512)

-

(512)

-

-

-



Overseas tax reclaimable

(306)

-

(306)

(200)

-

(200)




_______

_______

_____

_______

_______

_____



Current tax charge for the year

(55)

-

(55)

410

-

410




_______

_______

_____

_______

_______

_____











(b)

Factors affecting the tax charge for the year



The tax assessed for the year is lower than the standard rate of corporation tax rate of 20.75% (2014 - 22.5%). The differences are explained as follows:







2015

2014




Revenue

Capital

Total

Revenue

Capital

Total




£'000

£'000

£'000

£'000

£'000

£'000



Net profit on ordinary activities before taxation

22,517

(34,046)

(11,529)

21,099

47,667

68,766




_______

_______

_____

_______

_______

_____



Return on ordinary activities multiplied by the standard rate of corporation tax of 20.75% (2014 - 22.5%)

4,672

(7,065)

(2,393)

4,747

10,725

15,472



Effects of:









Non-taxable UK dividends

(3,418)

-

(3,418)

(3,342)

-

(3,342)



Non-taxable stock dividends

(327)

-

(327)

(584)

-

(584)



Non-taxable overseas dividends

(1,161)

-

(1,161)

(1,084)

-

(1,084)



Movement in unutilised loan relationships

137

79

216

157

81

238



Movement in unutilised management expenses

97

290

387

106

312

418



Other capital returns

-

6,696

6,696

-

(11,118)

(11,118)



Overseas tax recoverable

(55)

-

(55)

410

-

410




_______

_______

_____

_______

_______

_____



Current tax charge

(55)

-

(55)

410

-

410




_______

_______

_____

_______

_______

_____





(c)

Factors that may affect future tax charges



No provision for deferred tax has been made in the current or prior accounting period.






The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust company.






At the year end, the Company has, for taxation purposes only, accumulated unrelieved management expenses and loan relationship deficits of £56,816,000 (2014 - £53,831,000). A deferred tax asset in respect of this has not been recognised and these expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. It is considered too uncertain that the Company will generate such profits and therefore no deferred tax asset has been recognised.

 



2015

2014

8.

Return per Ordinary share

£'000

p

£'000

p


Returns are based on the following figures:






Revenue return

22,572

33.1

20,689

30.5


Capital return

(34,046)

(50.0)

47,667

70.2



_______

_______

_____

_______


Total return

(11,474)

(16.9)

68,356

100.7



_______

_______

_____

_______


Weighted average number of Ordinary shares in issue


68,100,677


67,868,896




_________


_________

 



 2015

 2014

9.

Investments

 £'000

 £'000


Held at fair value through profit or loss:




Opening valuation

578,506

517,619


Opening investment holdings gains

(170,702)

(132,716)



_______

_______


Opening book cost

407,804

384,903


Movements during the year:




Purchases at cost

55,948

41,852


Sales - proceeds

(54,812)

(30,485)


Sales - gains

5,300

11,534



_______

_______


Closing book cost

414,240

407,804


Closing investment holdings gains

133,099

170,702



_______

_______


Closing valuation

547,339

578,506



_______

_______







2015

2014


The portfolio valuation:

£'000

£'000


UK equities

453,091

469,936


Overseas equities

94,248

108,570



_______

_______


Total

547,339

578,506



_______

_______







2015

2014


(Losses)/gains on investments

£'000

£'000


Gains based on book cost

5,300

11,534


Net movement in investment holdings gains

(37,603)

37,986



_______

_______



(32,303)

49,520



_______

_______






As at 30 June 2015, the Company had pledged collateral greater than the market value of the traded options in accordance with standard commercial practice. The carrying amount of financial assets pledged equated to £3,743,000 (2014 - £3,198,000), all in the form of securities. The collateral position is monitored on a daily basis, which then determines if further assets are required to be pledged over and above those already pledged.




Transaction costs


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







2015

2014



£'000

£'000


Purchases

285

155


Sales

30

40



_______

_______



315

195



_______

_______

 



2015

2014

10.

Other debtors and receivables

£'000

£'000


Prepayments and accrued income

7,148

2,414



_______

_______

 



2015

2014

11.

Creditors: amounts falling due within one year

£'000

£'000


Accruals

503

755


Amounts due to brokers

936

-


Amounts due on derivative contracts

34

156


Bank loans

55,000

45,000



_______

_______



56,473

45,911



_______

_______






At the Balance Sheet date there was one (2014 - nine) open option position with counterparty, Credit Suisse, having a value of £34,000 (2014 - £156,000).




At 30 June 2015 the Company had drawn down £55,000,000 (30 June 2014 - £45,000,000) of an £80,000,000 unsecured revolving bank credit facility with Scotiabank (Ireland) Limited. Under the terms of the agreement, advances from the facility may be made for periods of up to six months or for such longer periods agreed by the lender. Interest is charged at a variable rate based on LIBOR plus a margin of 0.85% for the relevant period of the advance. As at 30 June 2015 this rate was 1.36256% (30 June 2014 - 1.34469%) and the loan rolled over on 29 July 2015.




On 28 August 2015 the Company had drawn down £55,000,000 of the facility, at an all-in interest rate of 1.35251% until maturity on 23 September 2015. Borrowing facilities of £80 million are committed to the Company until 23 September 2015.




Financial covenants contained within the loan agreement provide, inter alia, that the net assets to borrowings must exceed 3.5 to 1 (30 June 2015 - 9.4; 30 June 2014 - 12.2) and that net assets must exceed £185 million (30 June 2015 - £515.9 million; 30 June 2014 - £547.7 million). All financial covenants were met during the year and also during the period from the year end to the date of this report.

 



2015

2014

12.

Called-up share capital

Shares

£'000

Shares

£'000


Allotted, called-up and fully-paid






Ordinary shares of 25p each: publicly held

68,142,458

17,035

68,017,458

17,004


Ordinary shares of 25p each: held in treasury

451,000

113

451,000

113



_________

_______

_________

_______



68,593,458

17,148

68,468,458

17,117



_________

_______

_________

_______








During the year there were no Ordinary shares repurchased (2014 - nil). No Ordinary shares were sold from the Treasury account (2014 - nil) and 125,000 (2014 - 925,000) new shares were allotted. All of these shares were sold at a premium to net asset value. The issue prices ranged from 748.0p to 774.0p and raised £950,000 (2014 - £7,130,000) net of expenses.

 



2015

2014

13.

Retained earnings

£'000

£'000


Capital reserve




At 1 July 2014

475,429

427,762


Movement in investment holding gains

(37,603)

37,986


Gains on realisation of investments at fair value

5,300

11,534


Currency gains/(losses)

33

(105)


Finance costs of bank loan

(380)

(362)


Investment management fees

(1,396)

(1,386)



_______

_______


At 30 June 2015

441,383

475,429



_______

_______







2015

2014


Revenue reserve

£'000

£'000


At 1 July 2014

27,008

27,031


Revenue

22,572

20,689


Dividends paid

(21,240)

(20,712)



_______

_______


At 30 June 2015

28,340

27,008



_______

_______

 

14.

Net asset value per share


The net asset value per Ordinary share and the net asset value attributable to the Ordinary shares at the year end were as follows:







 2015

 2014


Net asset value attributable (£'000)

515,888

547,652


Number of Ordinary shares in issue (note 12)

68,142,458

68,017,458


Net asset value per share (p)

757.1

805.2

 

15.

Reconciliation of net return before finance costs and

 2015

 2014


taxation to net cash inflow from operating activities

 £'000

 £'000


Net return before finance costs and taxation

(10,769)

69,490


Adjustments for:




Losses/(gains) on investments

32,303

(49,520)


Currency (gains)/losses

(33)

105


Non cash stock dividend

(1,576)

(2,596)


Decrease in accrued income

335

651


(Increase)/decrease in other debtors

(4,774)

21


(Decrease)/increase in accruals

(365)

183



_______

_______


Net cash inflow from operating activities

15,121

18,334



_______

_______

 



 At



 At



 1 July 2014

 Cash
flows

Currency gains

 30 June 2015

16.

Analysis of changes in net debt

 £'000

 £'000

 £'000

 £'000


Net cash:






Cash

12,643

5,198

33

17,874


Debt:






Debt due within one year

(45,000)

(10,000)

-

(55,000)



_______

_______

_______

_______


Net debt

(32,357)

(4,802)

33

(37,126)



_______

_______

_______

_______

 

17.

Financial instruments


Risk management


The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments, other than derivatives, comprise securities and other investments, cash balances, liquid resources, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company also has the ability to enter into derivative transactions in the form of forward foreign currency contracts, futures and options, subject to Board approval, for the purpose of enhancing portfolio returns and for hedging purposes in a manner consistent with the Company's broader investment policy.




The following table shows the fair values of open positions in options at the year end, all recorded as liabilities in note 11, together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative's underlying asset and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the year end and are indicative of neither the market risk nor the credit risk.





2015



Liabilities

Gross



£'000

£'000


British American Tobacco (Put)

34

1,878



_______

_______


Total

34

1,878



_______

_______







2014



Liabilities

Gross



£'000

£'000


Associated British Foods (call)

26

1,616


AstraZeneca (call)

21

1,606


Close Brothers (call)

4

1,431


Inmarsat (put)

3

1,429


National Grid (call)

2

1,411


Nestle (call)

35

1,450


Standard Chartered (put)

55

1,325


Ultra Electronics (put)

-

3,133


Vodafone (put)

10

1,305



_______

_______


Total

156

14,706



_______

_______






The Board has delegated the risk management function to Aberdeen Fund Managers Limited ("AFML") under the terms of its management agreement with AFML (further details of which are included under note 3 and in the Directors' Report) however, it remains responsible for the risk and control framework and operation of third parties. The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors.




Risk management framework


The directors of Aberdeen Fund Managers Limited collectively assume responsibility for AFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.




AFML is a fully integrated member of the Aberdeen Group, which provides a variety of services and support to AFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Asset Managers Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.




The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.




The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Chief Executive Officer of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SWORD").




The Group's corporate governance structure is supported by several committees to assist the board of directors of Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described in the committees' terms of reference.




Risk management


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




In order to mitigate risk, the investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. The Attribution Analysis, detailing the allocation of assets and the stock selection, is shown in the Performance Attribution table in the Investment Manager's Report. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy. Current strategy is detailed in the Chairman's Statement in the sections headed "Performance", "Dividend" and "Outlook" and in the Investment Manager's Report in the sections headed "Background", "Performance", "Portfolio Activity and Structure", "Income" and "Outlook".




The Board has agreed the parameters for gearing, which was 7.2% of net assets as at 30 June 2015 (2014 - 5.9%). The Manager's policies for managing these risks are summarised below and have been applied throughout the current and previous year. The numerical disclosures in the tables listed below exclude short-term debtors and creditors.




Market risk


The Company's investment portfolio is exposed to market price fluctuations, which are monitored by the Manager in pursuance of the investment objective as set out in the Company Summary. Adherence to investment guidelines and to investment and borrowing powers set out in the management agreement mitigates the risk of exposure to any particular security or issuer. Further information on the investment portfolio is set out in the Investment Manager's Report.




Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Company's operations. It represents the potential loss the Company might suffer through holding market positions as a consequence of price movements. It is the Board's policy to hold equity investments in the portfolio in a broad spread of sectors in order to reduce the risk arising from factors specific to a particular sector. A summary of investment changes during the year under review is shown below.




Interest rate risk


Interest rate movements may affect:


-    the level of income receivable on cash deposits;


-    interest payable on the Company's variable rate borrowings; and


-    the fair value of any investments in fixed interest rate securities.




Management of the risk


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 imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Interest rate risk is the risk of movements in the value of financial instruments as a result of fluctuations in interest rates.




Financial assets


The interest rate risk of the portfolio of financial assets at the Statement of Final Position date was as follows:





Floating rate

Non-interest bearing



2015

2014

2015

2014



£'000

£'000

£'000

£'000


Euro

29

75

30,471

49,221


Sterling

17,815

12,440

453,091

469,936


Swedish Krona

-

75

20,538

18,138


Swiss Francs

20

53

26,087

27,380


US Dollars

10

-

17,152

13,831



_______

_______

_______

_______


Total

17,874

12,643

547,339

578,506



_______

_______

_______

_______








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.




Financial liabilities


The Company has borrowings by way of a loan facility, details of which are in note 11. The fair value of this loan has been calculated at £55,000,000 as at 30 June 2015 (2014 - £45,000,000). The fair value of the loan equates to the cost as the loans are rolled over on a regular basis.




All other financial assets and liabilities of the Company are included in the Balance Sheet at their book value which in the opinion of the Directors is not materially different from their fair value.




Maturity profile


The maturity profile of the Company's financial assets and liabilities at 30 June was as follows:





Within

Within



1 year

1 year



2015

2014


Assets

£'000

£'000


Floating rate




Cash

17,874

12,643



_______

_______







Within

Within



1 year

1 year



2015

2014


Liabilities

£'000

£'000


Floating rate




Revolving bank credit facility

55,000

45,000



_______

_______






All the other financial assets and liabilities do not have a maturity date.




Interest rate sensitivity


The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the Balance Sheet date and the stipulated change taking place at the beginning of the financial year and held constant in the case of instruments that have floating rates.




If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's profit before tax for the year ended 30 June 2015 and net assets would decrease/increase by £371,000 (2014 -  decrease/increase by £324,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances and borrowings.




Foreign currency risk


A proportion of the Company's investment portfolio is invested in overseas securities whose values are subject to fluctuation due to changes in foreign exchange rates. In addition, the impact of changes in foreign exchange rates upon the profits of investee companies can result, indirectly, in changes in their valuations. Consequently the Balance Sheet can be affected by movements in exchange rates.




Management of the risk


The revenue account is subject to currency fluctuations arising on dividends receivable in foreign currencies and, indirectly, due to the impact of foreign exchange rates upon the profits of investee companies. The Company does not hedge this currency risk.




Foreign currency risk exposure by currency of denomination excluding other debtors and receivables and other payables falling due within one year:





 30 June 2015

 30 June 2014




Net

Total


Net

Total




monetary

currency


monetary

Currency



Investments

liabilities

exposure

Investments

liabilities

Exposure



£'000

£'000

£'000

£'000

£'000

£'000


Euro

30,471

29

30,500

49,221

75

49,296


Sterling

453,091

(37,185)

415,906

469,936

(32,560)

437,376


Swedish Krona

20,538

-

20,538

18,138

75

18,213


Swiss Francs

26,087

20

26,107

27,380

53

27,433


US Dollars

17,152

10

17,162

13,831

-

13,831



_______

_______

_______

_______

_______

_______


Total

547,339

(37,126)

510,213

578,506

(32,357)

546,149



_______

_______

_______

_______

_______

_______










Foreign currency sensitivity


No sensitivity analysis has been included. Where the Company's equity investments (which are non-monetary items) are priced in a foreign currency, they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.




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.




Management of the risk


It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process, as detailed in the section "Investment Policy" in Company Summary, both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy.




Other price risk sensitivity


If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders and equity for the year ended 30 June 2015 would have increased/decreased by £54,734,000 (2014 - £57,851,000).




Liquidity risk 


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




Management of the risk 


The Company's assets comprise readily realisable securities which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of committed loan and overdraft facilities.




As at 30 June 2015 the Company utilised £55,000,000 of a £80,000,000 (2014 - £45,000,000) revolving bank credit facility, which is committed until 23 September 2015. Interest is charged at a variable rate based on LIBOR plus a margin of 0.85% (2014 - margin 0.85%) for the relevant period of the advance. As at 30 June 2015 this rate was 1.36256% (2014 - 1.34469%) and the loan rolled over on 29 July 2015 (2014 - rolled on 31 July 2014). The aggregate of all future interest payments at the rate ruling at 30 June 2015 and the redemption of the loan amounted to £55,062,000 (2014 - £45,051,000).




Credit risk


This is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.




Management of the risk


The risk is mitigated by the Investment Manager reviewing the credit ratings of broker counterparties. The risk attached to dividend flows is mitigated by the Investment Manager's research of potential investee companies. The Company's custodian bank is responsible for the collection of income on behalf of the Company and its performance is reviewed by the Board on a regular basis. It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties. The maximum credit risk at 30 June 2015 is £19,735,000 (30 June 2014 - £14,839,000) consisting of £1,861,000 (2014 - £2,196,000) of dividends receivable from equity shares and £17,874,000 (2014 - £12,643,000) in cash held.




None of the Company's financial assets are past due or impaired (2014 - £nil).

 

18.

Fair value hierarchy


FRS 29 'Financial Instruments: Disclosures' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:




Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;


Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and


Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).




The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at the Balance Sheet date as follows:




For the year ended 30 June 2015







Level 1

Level 2

Level 3

Total



Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss




Quoted equities

a)

547,339

-

-

547,339









Financial liabilities at fair value through profit or loss




Derivatives

b)

(34)

-

-

(34)




_______

_______

_______

_______


Net fair value


547,305

-

-

547,305




_______

_______

_______

_______









For the year ended 30 June 2014







Level 1

Level 2

Level 3

Total



Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss




Quoted equities

a)

578,506

-

-

578,506









Financial liabilities at fair value through profit or loss




Derivatives

b)

(156)

-

-

(156)




_______

_______

_______

_______


Net fair value


578,350

-

-

578,350




_______

_______

_______

_______









a) Quoted equities






The fair value of the Company's investments in quoted equities have been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.




b) Derivatives 


The fair value of the Company's investments in exchange traded options has been determined using quoted prices on an exchange traded basis and therefore have been classed as Level 1.

 

Related party transactions and transactions with the Manager


Fees payable during the year to the Directors and their interests in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report within the published Annual Report.  The balance of fees due to Directors at the year end was £11,000 (2014 - £12,000).



The Company has agreements with Aberdeen Fund Managers Limited for the provision of management, secretarial, accounting and administration services and promotional activities. Details of transactions during the year and balances outstanding at the year end disclosed in notes 3 and 4.

 

20.

Capital management policies and procedures


The investment objective of the Company is to achieve a high and growing income combined with capital growth through investment in a portfolio of UK and overseas equities.




The capital of the Company consists of debt, comprising bank loans, and equity, comprising issued capital, reserves and retained earnings. The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.




The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:


-      the planned level of gearing which takes into account the Investment Manager's views on the market;


-      the level of equity shares in issue;


-      the extent to which revenue in excess of that which is required to be distributed should be retained.




The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.




At the year end financial covenants contained within the loan agreement provide, inter alia, that the net assets to bank borrowings ratio must exceed 3.5 to 1 and that the net assets must exceed £185 million. As noted in greater detail in note 11 all financial covenants were met during the year and also during the period from the year end to the date of this report.

 

21.     Final dividend

If approved, the proposed final dividend of 11p per share will be paid on 30 October 2015 to holders of Ordinary shares on the register at the close of business on 25 September 2015. The relevant ex-dividend date is 24 September 2015.

 

22.     Annual General Meeting

The Annual General Meeting will be held on 28 October 2015 at 12.30 pm at The Glasgow Royal Concert Hall, Glasgow G2 3NY.

 

The figures and financial information for the year ended 30 June 2015 are compiled from an extract of the latest financial statements of the Company and do not constitute the statutory financial statements for that year. Those accounts included the report of the Auditor which was unqualified, did not contain a statement under either section 498(2) or (3) of the Companies Act 2006 and have not yet been delivered to the Registrar of Companies. The figures and financial information for the year ended 30 June 2014 are compiled from an extract of the latest published financial statements of the Company and do not constitute the statutory financial statements for that year; those financial statements have been delivered to the Registrar of Companies and included the report of the Auditor which was unqualified and did not contain a statement under either section 498(2) or (3) of the Companies Act 2006. The 30 June 2015 accounts will be filed with the Registrar of Companies in due course.

 

The annual results will be circulated to shareholders in the form of an Annual Report, copies of which will be available shortly from the Company's registered office, 7th Floor, 40 Princes Street, Edinburgh EH2 2BY and from the Company's website (www.murray-income.co.uk*).

 

*Neither the Company's website nor the content of any website accessible from hyperlinks on that website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

 

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.

 

 

By Order of the Board

 

ABERDEEN ASSET MANAGEMENT PLC

Secretaries

 

10 September 2015



MURRAY INCOME TRUST PLC

 

Summary of Investment Changes during the year

 


Valuation



Valuation


30 June 2014

Transactions

Gains/(losses)

30 June 2015


£'000

%

£'000

£'000

£'000

%

Equities







United Kingdom

469,936

79.3

4,863

(21,708)

453,091

79.4

France

27,500

4.7

-

(7,479)

20,021

3.5

Germany

5,730

0.9

-

(175)

5,555

1.0

Italy

15,991

2.7

(7,174)

(3,922)

4,895

0.8

Sweden

18,138

3.1

2,852

(452)

20,538

3.6

Switzerland

27,380

4.6

(1,875)

582

26,087

4.6

United States

13,831

2.3

2,101

1,220

17,152

3.0


_______

_______

_______

_______

_______

_______

Total investments

578,506

97.6

767

(31,934)

547,339

95.9


_______

_______

_______

_______

_______

_______

Other net assets

14,146

2.4

9,403

-

23,549

4.1


_______

_______

_______

_______

_______

_______

Total assets less current liabilities (excluding bank loan)

592,652

100.0

10,170

(31,934)

570,888

100.0


_______

_______

_______

_______

_______

_______

 

 

Summary of Net Assets

 


As at

As at


30 June 2015

30 June 2014


£'000

%

£'000

%

Equities

547,339

106.1

578,506

105.6

Other net assets

23,549

4.6

14,146

2.6

Borrowings

(55,000)

(10.7)

(45,000)

(8.2)


_______

_______

_______

_______

Equity shareholders' funds

515,888

100.0

547,652

100.0


_______

_______

_______

_______

 

 



MURRAY INCOME TRUST PLC

 

Twenty Largest Investments

As at 30 June 2015

 


Valuation

Total

Valuation


2015

assets

2014

Investment

£'000

%

£'000

1 (3) Unilever




Unilever is a global consumer goods company supplying food, home and personal care products. The company has a portfolio of strong brands including: Dove, Knorr, Axe and Persil. Over half of the company's sales are to developing and emerging markets.

25,444

4.5

24,707

2 (4) British American Tobacco




British American Tobacco manufactures and markets cigarettes and other tobacco products, including cigars and roll-your-own tobacco. The group sells over 200 brands in approximately 180 countries. Key brands include: Dunhill, Kent, Pall Mall and Lucky Strike. Strong cashflow is an attractive characteristic of the tobacco industry.

24,076

4.2

24,520

3 (5) AstraZeneca




AstraZeneca researches, develops, produces and markets pharmaceutical products. The company's operations are focused on six therapeutic areas: Cardiovascular, Oncology, Respiratory, Neuroscience, Inflammation and Infection. The company's product pipeline offers a number of interesting opportunities.

22,546

3.9

24,350

4 (2) GlaxoSmithKline




GlaxoSmithKline is a research-based pharmaceutical group that also develops, manufactures and markets vaccines, prescription and over-the-counter medicines, as well as health-related consumer products. The group specialises in treatments for respiratory, central nervous system, gastro-intestinal and genetic disorders.

22,350

3.8

26,432

5 (10) Pearson




Pearson is one of the world's leading education companies. From pre-school to professional certification, the company's curriculum materials, multimedia learning tools and testing programmes help to educate more than 100m people worldwide. The company offers access to long-term structural growth.

19,738

3.5

18,337

6 (11) Prudential




Prudential is an insurance company with substantial operations in the UK, USA and across Asia.  Early mover advantage in Asia has provided the company with a number of market leading positions giving the opportunity to capitalise on a fast growing market.

19,693

3.4

17,232

7 (8) Roche Holdings




Listed in Switzerland, Roche develops and manufactures pharmaceutical and diagnostic products with particular strengths in the areas of oncology, cardiovascular and respiratory diseases. The company benefits from a strong product pipeline and limited near-term patent exposure.

19,198

3.4

20,584

8 (9) HSBC Holdings




HSBC group is one of the world's largest banking and financial services institutions. Its international network comprises more than 5,000 offices in 80 countries worldwide. The diversity of HSBC's business and exposure to faster growing regions of the world should enable it to deliver superior long-term growth.

19,108

3.3

19,416

9 (7) Centrica




Centrica provides gas, electricity and energy-related products and services to business and residential customers in the UK and USA. It also provides central heating and gas appliance installation and maintenance services. The company enjoys a strong competitive position in the UK market, which provides a solid platform from which to generate long-term value.

18,934

3.3

21,726

10 (1) Royal Dutch Shell




Royal Dutch Shell is engaged in all phases of the petroleum industry, from exploration to processing and distribution. It has strong positions in oil products marketing and LNG, globally. The group operates in over 130 countries.

18,797

3.3

26,777


_______

_______


Top ten investments

209,884

36.6


11 (6) BHP Billiton




BHP Billiton is the world's largest diversified resources group with a global portfolio of high quality assets. Core activities comprise the production and distribution of minerals, mineral products and petroleum.

17,736

3.1

23,694

12 (15) Aberforth Smaller Companies




Aberforth Smaller Companies is an investment trust with a diversified portfolio of small UK quoted companies. The trust has an above average sector yield and benefits from substantial revenue reserves.

17,031

3.0

14,958

13 (-) Nordea Bank




Nordea is a Scandinavian financial services group. The company is active within corporate and institutional banking as well as retail and private banking, with a broad offering of life and pension products. Nordea is the largest financial services company in the Nordic and Baltic region holding a broad range of leading positions.

15,602

2.7

11,648

14 (-) Vodafone




Vodafone is an international mobile telecommunications company providing mobile voice, data and fixed line communications. The group has around 450m customers and operates in more than 30 countries worldwide including an extensive emerging markets portfolio.

14,487

2.5

11,120

15 (20) Sage Group




Sage Group is a software publishing business which develops, publishes and distributes accounting and payroll software. It also maintains a registered user database which provides a market for their related products and services, including computer forms, software support contracts, program upgrades and training.

13,443

2.4

12,522

16 (19) Close Brothers




Close Brothers is a specialist financial services group which makes loans, trades securities and provides advice and investment management solutions to a wide range of clients.

13,339

2.3

12,524

17 (16) Compass Group




Compass is a leading contract catering and food service company.  The company benefits from underlying growth in outsourcing, together with the potential for further margin improvement and growth from its emerging markets operations.  The company demonstrates strong cashflow characteristics.

12,965

2.3

14,828

18 (14) BP




BP is one of the world's largest petroleum and petrochemicals groups. Its main activities are: exploration and production of crude oil and natural gas; refining, marketing, supply and transportation of petroleum products.

12,917

2.3

15,831

19 (-) Imperial Tobacco




Imperial Tobacco is an international tobacco company that manufactures and markets a range of cigarettes, tobacco, rolling papers and cigars.  The company's recent transaction to acquire certain assets of Lorillard and Reynolds in the United States provides an additional avenue for growth over the long term.

12,728

2.2

10,915

20 (17) National Grid




National Grid owns and operates electricity and gas networks throughout the UK and in the US. It will benefit from the requirement to increase energy infrastructure spend over the long term. The company offers a generous dividend yield.

12,642

2.2

14,641


_______

_______


Top twenty investments

352,774

61.6



The value of the 20 largest investments represents 61.6% (2014 - 63.8%) of total assets.

The figures in brackets denote the position at the previous year end. (-) not previously in 20 largest investments.

 


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