Source - RNS
RNS Number : 3765J
Murray Income Trust PLC
09 September 2016
 

MURRAY INCOME TRUST PLC

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2016

 

 

FINANCIAL HIGHLIGHTS

 

Net asset value total return



Share price total return


+5.9%



+0.1%


2015

-2.2%


2015

-5.7%

 

Benchmark total return



 

Ongoing charges


+2.2%



0.76%


2015

+2.6%


2015

0.74%

 

Earnings per share (revenue)



 

Dividend per share {A}


32.0p



32.25p


2015

33.1p


2015

32.0p

 

 

Discount to net asset value



{A} Final dividend of 11.25p per Ordinary share is subject to shareholder approval at the Annual General Meeting.

-12.3%




2015

-6.9%



 

 

FINANCIAL CALENDAR

 

9 September 2016

Annual Financial Report announced for year ended 30 June 2016

29 September 2016

Ex-dividend date of proposed final dividend for year ended 30 June 2016

30 September 2016

Record date of proposed final dividend for year ended 30 June 2016

1 November 2016

Annual General Meeting, London (12.30pm)

3 November 2016

Payment date of proposed final dividend for year ended 30 June 2016

15 December 2016, 3 March and 2 June 2017

Record dates of interim dividends for year to 30 June 2017

13 January, 31 March 
and 30 June 2017

Payment dates of interim dividends for year to 30 June 2017

February 2017

Half-Yearly results announcement for 6 months to 31 December 2016

September 2017

Annual Financial Report announcement for year to 30 June 2017

 

 

CHAIRMAN'S STATEMENT

 

Highlights

-     Net Asset Value Total Return +5.9%

-     FTSE All-Share Index Total Return +2.2%

-     Total Dividends per share increased to 32.25p (the 43rd year of consecutive increase)

 

Performance

The year under review was the second successive one in which equity markets generally struggled to record positive performance, although since our year end several major markets have risen sharply. The investment performance of the Company was good, with net asset value on a total return basis rising by 5.9%, compared to 2.2% for the FTSE All-Share Index.

 

The economic background was one of slowing growth, particularly in China and other emerging markets for which energy and commodity exports are important, notably Russia and Brazil. In Europe, political consequences of inward immigration replaced economic crises in dominating the newsflow. For the earlier part of the year at least, the US and UK seemed relatively stable, until the EU referendum here and the Presidential election in America added to the world supply of uncertainty. As economic activity tailed off, monetary policy eased or tightened less than previously expected: in the UK, post the referendum the Bank of England cut interest rates again and introduced other monetary measures to ease conditions further and our new Chancellor looks set to relax the previous fiscal policy as well.

 

Expectations for company profits in the UK in aggregate fell throughout the year, caused by weaker growth and by tough conditions in the oil and mining sectors reflecting sharply reduced product prices. In my Chairman's Statement last year, the high dividend payout ratio was emphasised: overall, it got worse and there were corresponding dividend cuts in mining, banking and elsewhere, although the big oil companies BP and Shell were able to hold their dividends through the trough in oil prices. In the portfolio, five companies were sold and five new ones added. The new ones were generally mid-sized companies whose businesses are in specialist products or markets. In addition to these transactions, the portfolio benefited from the reversal of previous market patterns in which large, high yield companies had done relatively badly. The weakness of Sterling after the EU referendum also boosted the value of overseas assets and dividends.

 

EU referendum

The unexpected referendum result towards the end of our financial year has already had a significant impact on financial markets, of which the currency and related effects have probably been the most important. Unfolding negotiations to leave the EU and reconfigure trading relationships and investment flows will need to be monitored closely, as will UK political and constitutional developments relevant to the Company. Last year, I noted the introduction of new arrangements to comply with the EU Alternative Investment Fund Managers Directive. It is not likely that these arrangements will require change in the immediately foreseeable future.

 

Dividend

The Board is recommending a final dividend of 11.25p, which makes a total for the year of 32.25p, an increase of 0.8%. If approved, this will continue the forty-three year record of consecutive dividend increases. Income revenue in the year fell marginally to 32.0p per share, reflecting primarily the absence of exceptional receipts, such as overseas tax reclaims, and fewer special dividends than in the previous year. For the current year, there seems likely to be a benefit from dividends paid in overseas currencies, especially the US dollar, but the economic and corporate profit background is sluggish and uncertain, and UK dividend payouts are already high. Shareholders may, however, take comfort from knowing that we are supported by revenue reserves equivalent to approximately one year's dividend.

 

Share Capital

The discount of the Company's share price to its net asset value per share widened to 12.3% from 6.9% during the year, but had narrowed to 6.5% at the time of writing. The higher discount than usual at the year end was partially the result of the initial negative market reaction to the EU referendum result only six days previously.

 

The Company bought back into treasury 950,000 Ordinary shares during the year. The Board continues to monitor the level of discount and will continue selective buybacks of shares where to do so would be in the interest of shareholders.

 

Borrowings

Immediately prior to the date of this Chairman's Statement, the Company switched its borrowings under our facility with The Royal Bank of Scotland from Sterling into a mix of currencies broadly similar to our overseas holdings.

 

Directors

Mike Balfour joined the Board on 11 February 2016 following a recruitment exercise undertaken with an independent search consultancy. Mike brings to the Board extensive investment management expertise as well as knowledge of investment trusts. Mike will seek formal election as a Director at the AGM and I encourage shareholders to support the resolution for his appointment.

 

Annual General Meeting

The Annual General Meeting will be held at 12.30 pm on Tuesday 1 November 2016 at the Mermaid Conference Centre, Puddle Dock, Blackfriars, London EC4V 3DB.  It is the Board's intention to hold the 2017 Annual General Meeting in Glasgow.

 

Outlook

It is difficult to see what will significantly improve the economic growth environment in the immediate future. Hard-to-predict political change is afoot in a coming year with important general elections in the US, Germany, France - and the start of the Brexit process. The massive experiment of very easy monetary policy looks increasingly like pushing on a string for the real economy, and although it has been good for financial asset prices, near zero (or negative) interest rates are a severe problem not only for risk-averse savers but also for the business model of much of the financial sector, banks and insurance companies. Benefits to consumers from lower oil and commodities prices are falling out of the comparisons, and productivity improvements which would support higher real incomes are hard to identify as a general trend. But for the UK the biggest change is lower Sterling - bad for inflation and consumers, but good for exporters and for companies with strong overseas businesses. The search for sustainable and growing income is ever more key and precision of selection essential. Our latest financial year showed the virtue of constructing a portfolio of companies with strong franchises and balance sheets and with visible profit prospects.

 

N A Honebon

Chairman

8 September 2016

 

 

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Murray Income Trust PLC (the "Company") is an approved investment trust whose Ordinary shares are listed on the premium segment of the London Stock Exchange.

 

Business Model

The Company is governed by a Board of Directors ("the Board"), all of whom are independent, and has no employees. The Board is responsible for determining the Company's investment objective and investment policy. Like other investment companies, the day-to-day investment management and administration of the Company are outsourced by the Board to an investment management group, the Aberdeen Asset Management group of companies ("Aberdeen Group"), and other third party providers. The Company has appointed Aberdeen Fund Managers Limited ("AFML", " Manager", or "AIFM") as its alternative investment fund manager, which has in turn delegated certain responsibilities, including investment management, to Aberdeen Asset Management Limited ("AAML" or "Investment Manager"). The Company complies with the investment policy test in Section 1158 of the Corporation Tax Act 2010 which permits the Company to operate as an investment trust.

 

Investment Objective

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

 

Investment Policy and Risk Diversification

In pursuit of the Company's investment objective, the Company's investment policy 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.

 

Delivering the Investment Policy

 

The Company maintains a highly-diversified portfolio of the equity securities of large 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 Investment Manager follows 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 Board sets investment guidelines within which the Investment Manager must operate. The portfolio typically comprises between 30 and 70 holdings (but without restricting the Company from holding a more or less concentrated portfolio from time to time).  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 Investment Manager is unconstrained as to the market sectors in which the Company may invest however 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 Company invests no more than 15 per cent of its gross assets in other listed investment companies (including investment trusts).

 

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 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".

 

Gearing

 

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 - borrowing money - 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

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial position, performance and prospects. The Board has carried out a robust assessment of these risks, which include those that would threaten its business model, future performance and solvency and identified the delegated controls it has established to manage the risks and address the uncertainties:

 

Description

Mitigating Action

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.

 

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 in respect of the year under review being  held in February 2015.

 

Income and dividend risk

There is a risk that the Company fails to generate sufficient income from its investment portfolio 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 or increase dividends to shareholders.

 

The Board monitors this risk through the review of income forecasts, provided by the Manager, at each Board meeting.

Discount

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.

 

The Board monitors the discount at which the Company's shares trade.

 

In order to seek to manage the impact of such discount fluctuations, where the shares are trading at a significant discount, the Company operates a programme of buying back shares into treasury. If the shares trade at a premium, the Company has the authority to issue new shares or sell shares from treasury. Whilst these measures seek to reduce 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.

 

During the year, the Company did not hedge its foreign currency exposure. The Board keeps under review the currency impacts on both capital and income.

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 by the Audit Committee. The security and custody of the Company's assets is the responsibility of BNP Paribas Securities Services, London Branch as depositary. The effectiveness of the internal controls at the depositary, incorporating its custodian obligations, is subject to regular reporting to the Audit Committee and the depositary presents at least annually on the Company's compliance with AIFMD. The Manager also separately monitors the depositary and provides reports to the Audit Committee.

 

Global assurance reports are obtained from certain third parties, including from the registrar, which are reviewed by the Audit Committee. These reports include an independent assessment of the effectiveness of risks and internal controls at the service-provider incorporating their planning for business continuity and disaster recovery scenarios, together with their policies and procedures designed to address the risks posed to the Company's operations by cyber-crime. Further details of the internal controls which are in place are set out in the Audit Committee's Report.

 

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 EU Alternative Investment Fund Managers Directive, could lead to suspension from the London Stock Exchange and reputational damage.

The Board receives compliance reports from the Manager to monitor compliance with regulations.

 

 

 

The result of the UK's referendum on membership of the EU in June 2016 may affect the Company's risk profile by introducing new uncertainties and instability in financial markets as the United Kingdom negotiates its exit from the EU. These uncertainties could have a direct or indirect effect on the Company, its financial condition and operations although the extent is not quantifiable at this time.

 

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, is contained in note 15 to the Financial Statements.

 

The principal risks associated with an investment in the Company's shares are also published monthly in the Company's factsheet or they can be found in the pre-investment disclosure document ("PIDD") published by the AIFM, both of which are available from the Company's website: murray-income.co.uk.

 

Performance, Outlook and Key Performance Indicators

A review of the Company's activities and performance during the year ended 30 June 2016, including future developments, is set out in the Chairman's Statement and the Investment Manager's Report. These cover market background, investment activity, portfolio strategy, dividend policy, gearing and investment outlook.  A comprehensive analysis of the portfolio is provided at the end of this announcement while the full portfolio of investments is published monthly on the Company's website. The future strategic direction and development of the Company is regularly discussed as part of Board meeting agendas. The Board also considers the Investment Manager's promotional strategy for the Company, including effective communications with shareholders. At each Board meeting, the Directors consider a number of Key Performance Indicators ("KPIs") to assess the Company's success in achieving its objectives, and these are described below:

 

KPI

Description

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

 

The Board considers the Company's NAV (total return), relative to the FTSE All-Share Index, to be the best indicator of performance over different time periods.  A graph showing NAV total return performance against the FTSE All-Share Index over the past 5 years is shown in the Annual Report.

 

Share price (total return)

The figures for share price (total return) for this year and for the past three and five years, as well as for the NAV per share, are shown in the Annual Report. A graph showing share price total return performance against the FTSE All-Share Index over the past 5 years is shown on in the Annual Report. The Board also monitors share price performance relative to open-ended and closed-ended competitor products, taking account of differing investment objectives and policies pursued by those products.

 

Discount/premium to NAV

The discount/premium at which the Company's share price trades relative to the NAV per share is closely monitored by the Board. A graph showing the discount/premium over the last five years is shown in the Annual Report.

 

Earnings and dividends per share

 

The Board aims to meet the 'high and growing' element of the Company's investment objective by developing revenue reserves sufficient to support the payment of a growing dividend; figures may be found in Results in respect of earnings and dividends per share, together with the level of revenue reserves, for the current year and previous year

 

Ongoing charges

The Board regularly monitors the Company's operating costs and their composition with a view to limiting increases wherever possible. Ongoing charges for this year and the previous year are disclosed 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 in the Annual Report. Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement.

 

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 2016, there were five 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

8 September 2016

 

 

STRATEGIC REPORT - INVESTMENT MANAGER'S REPORT

Background

The UK equity market finished the year to the end of June 2016 marginally higher mirroring the lacklustre performance of the prior year.  The FTSE All-Share Index increased by 2.2% on a total return basis (that is with dividends reinvested) with the limited progress bracketed by periods of substantial volatility.  From the start of the financial year until the middle of February the index fell by 15% as the decline in oil and commodity prices coupled with weakness in emerging market economies, and China in particular, impacted sentiment.  Investor confidence improved over the remainder of the year, despite growing concerns over the uncertainty caused by the EU referendum, as commodity prices recovered and global macro-economic conditions stabilised. However, the final week of the period was particularly eventful with the EU referendum result initially leading to a sharp fall in the market to be replaced rapidly by an equally swift recovery as investors weighed the prospects of a further easing of monetary policy, fiscal support and the beneficial translation effect of weaker Sterling on corporate earnings.

 

UK macro-economic data releases for most of the period suggested a mild slowdown in activity compared to the last couple of years.  The continued expansion of the service sector helped UK GDP to increase by 2.2% over the Company's financial year.  However, this compares to 2.6% in the year before and 3.1% in the year before that. Consumer price inflation changed little ending the period 0.5% higher in June than a year earlier. Weak inflation coupled with concerns over global economic conditions led the Monetary Policy Committee to leave interest rates unchanged.  The MPC has subsequently lowered interest rates to 0.25% as they seek to support activity in the wake of the EU referendum decision.  Sterling depreciated against all major currencies over the year as rate rises were delayed and uncertainty over the EU referendum remained elevated.  It then fell sharply following news of the referendum result ending the period at $1.33, the lowest level since 1985.  Performance of the UK economy over the next 18 months is subject to an unusually broad range of uncertainties.  However, as a result of the referendum, expectations have been significantly downgraded with the Bank of England, for example, now forecasting GDP growth of 0.8% compared to its pre-referendum estimate of 2.3% for 2017. In addition, weak sterling is likely to push up CPI leading to a fall in real incomes.  We will be watching very closely to see how developments affect corporate and consumer behaviour.

 

The international economic picture remained mixed.  In the United States GDP demonstrated generally anaemic growth as household spending and business investment slowed.  However, the strength of the labour market resulted in the Federal Reserve taking the decision to raise the Fed funds rate for the first time in nine years in December. In the Eurozone, the European Central Bank provided further policy support to the economy but this appears to have had relatively limited impact on growth with the region's economy expanding by just 0.3% in the second quarter of 2016, representing an increase of 1.6% of year on year.  Although the recovery in countries such as Spain has been strong, it has been held back by weak growth in France where the public sector remains bloated and the labour market is inefficient. Emerging markets faced a variety of headwinds centred on depressed commodity prices and slowing growth in China.  However, government support for the Chinese economy, a target of 6.5%-7.0% GDP growth for 2016 and improving economic data assuaged concerns.  In addition, the oil price which having dipped below $30 a barrel in January embarked on a recovery as demand remained robust and supply became more constrained.  This recovery, which was mirrored by other commodities, aided those countries such as Brazil and Russia that benefit from raw material exports.

 

Performance

The Company generated a positive net asset value per share total return of 5.9% in the year to 30 June 2016, compared to a rise in the FTSE All-Share Index of 2.2%.  The positive relative return of 3.7% represents the sixth year of outperformance on a Net Asset Value basis in the last seven years.  The Company's shares produced a total return of 0.1% which reflected a widening of the discount to Net Asset Value at which the shares traded compared to the previous year end.  In light of the widening discount, the Company bought back 950,000 shares to be held in Treasury during the year. Many of the factors that had led to underperformance in the previous financial year reversed in the year under review with larger, higher yielding companies outperforming and better stock selection coupled with the beneficial translation effect on the overseas holdings positively impacting returns.

 

On a gross assets basis, the equity portfolio outperformed the benchmark by 3.6%.  Gearing increased returns by 0.5%.  The translation impact of our overseas holdings, given the strength of sterling, aided performance by 2.2%.   The level of gearing was flat at £55m with the actual level of gearing maintained in a relatively narrow range between 6%-10% during the year. 

 

Over the year, the poorest performing area of the market was the bank sector.  A mixture of tough regulation, increased compliance costs, lower investment banking revenues, weak loan demand and low interest rates led the sector to fall by more than 25% during the period.  The mining sector, following a number of years of weak performance, kept up its poor track record as falling commodity prices and oversupply impacted earnings.  Those sectors exposed to the domestic economy also struggled, particularly at the end of the period given concerns over the impact of the EU referendum decision.  Conversely, the tobacco sector performed very strongly, returning over 40%, helped by the translation benefit of overseas earnings and the market seeking out 'bond proxies'.  Perhaps surprisingly, the oil majors also performed well as the oil price recovered and the companies continued to reduce their cost bases with the maintenance of BP and Royal Dutch Shell's dividends helping performance on a total return basis.

 

From a size perspective, in a reversal of fortune, the FTSE 100 Index outperformed the Mid 250 and Small Cap indices, a function of its higher overseas exposure and its tobacco and oil constituents. Apart from a couple of exceptions, corporate activity has been subdued but as we have started to see, the weakness of sterling provides a window of opportunity for overseas companies.

 

Looking specifically at the Company's portfolio, both stock selection and asset allocation were positive.  The returns from the holdings in the consumer goods, health care, consumer services and technology sectors comprised the main areas of outperformance.  Within consumer goods, overweight positions in both personal goods and tobacco benefited performance.  Health care performed relatively strongly due to an overweight position and good stock selection. Strong stock selection in travel and leisure aided performance.  On the other hand, the underweight position in oil producers and weak stock selection in chemicals within the industrials sector hurt performance.

 

Turning to the individual holdings, there were a number of companies that demonstrated substantial share price increases.  British American Tobacco and Imperial Brands performed very strongly as their attractive yields and defensive growth profiles coupled with substantial non-sterling earnings was looked upon favourably by the market. Compass performed very well due to good operational momentum but also thanks to its substantial US dollar denominated earnings base.  Similarly Unilever, which has continued to make sound strategic progress, performed strongly over the year.

 

On the other hand, Standard Chartered performed particularly poorly in the first half of the year before partly recovering.  The slowdown in emerging markets, lower corporate finance income and a high regulatory burden resulted in a rights issue and a change of management that now puts the bank on a much stronger footing.  Close Brothers and Provident Financial also performed poorly as investors fretted over a weakening domestic economy. Finally, BHP Billiton underperformed given its commodity exposure and the impact of the Samarco dam disaster.

 

Performance Attribution for the year ended 30 June 2016



2016



%

Net Asset Value total return for year per Ordinary share

5.9

FTSE All Share Index total return

2.2

Relative return

3.7




Relative return

%

Stock selection (equities)



Oil & Gas

0.4


Basic Materials

-0.6


Industrials

-0.7


Consumer Goods

0.6


Health Care

0.4


Consumer Services

0.3


Telecommunications

0.7


Utilities

-0.8


Technology

0.5


Financials

-0.6

Total stock selection (equities)

0.2

 

Asset allocation (equities)


Oil & Gas

-1.0


Basic Materials

0.1


Industrials

0.2


Consumer Goods

0.5


Health Care

0.5


Consumer Services

1.0


Telecommunications

-


Utilities

0.7


Technology

0.5


Financials

0.9

Total asset allocation (equities)

3.4

 

Cash & options

 

0.2

Gearing

0.5

Administrative expenses

-0.2

Management fees

-0.6

Tax charge

-0.1

Share buybacks

0.1

Residual effect

0.2

 

Total

 

3.7

 

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. Cash & Options effect - measures the impact on relative returns of the two asset categories. Gearing effect - measures the impact on relative returns of net borrowings. Administrative and Management fees - these reduce total assets and therefore reduce performance. Recovered VAT is netted-off against the fees and expenses. Residual effect - this arises as a result of the different methodologies of calculating performance between the NAV total return, the benchmark provider Lipper and the performance attribution system. 

 

Portfolio Activity and Structure

In keeping with our patient buy and hold approach, turnover was characteristically modest during the period. However, we introduced five new companies during the year. The first new holding added was Capita.  The business process outsourcing company benefits from a strong outsourcing dynamic with good growth potential both in the UK and overseas. The company has excellent earnings visibility given its long contract lengths and has no large contract renewals until 2020. The second company introduced was Rotork, the market leader in actuators, which are motors for controlling a mechanism, such as a valve.  Weakness in the share price due to lower demand from its oil and gas end-markets (which account for around 50% of sales) provided a good entry point. The company has strong brands and good pricing power.  There are also good opportunities to grow in end-markets away from oil and gas including water and nuclear.  Rotork's balance sheet is strong and management have a reputation for being prudent.  The third new holding was Hansteen, a UK and Continental European property investment company, which should benefit from improving asset prices in its markets. It brings some further diversification and provides an attractive dividend yield.  The fourth new holding was XP Power, which designs and manufactures power control solutions such as power converters.  It benefits from a diversified customer base, low cost manufacturing facilities and with a significant investment in research and development is able to provide products with improved functionality and efficiency compared to its peers. The final introduction was Scandinavian Tobacco Group which is listed in Denmark.  It has a strong position in hand-rolled and machine-made cigars in the United States and scope to consolidate a fragmented market in Europe.  STG also owns the largest online distributor of cigars in the United States. The company benefits from strong brands, a robust balance sheet and significant scope to improve efficiency.

 

Conversely, we sold five companies and additionally the takeover of BG by Royal Dutch Shell was completed during the period.  The first company sold was Tesco given the lack of dividend yield, high debt burden and concern over the development of the food retail industry from a competitive and structural standpoint. The second company sold was ENI, the Italian oil major, due to concerns over the company's ability to adjust to a more challenging operating environment. The third company was Casino, the supermarket group, due to worries over the ability of the company to maintain its dividend payment given high absolute gearing and a very weak Brazilian trading environment. The fourth company was Engie, the French utility company, where we believed a dividend cut was likely. Finally, we sold the holding in Cobham following a period of increasing concern about the financial health of the company given its stretched balance sheet, poor working capital performance and concerns about the number of senior management departures.

 

We increased exposure to a number of existing holdings.  We took advantage of weak trading statements to add to Inmarsat and Elementis.  Despite some temporary difficulties, we believe that Inmarsat's technological and service advantages remain strong and it will be a long term beneficiary from the increase in data usage.  We think that Elementis will be able to overcome the challenges in its Chromium division where the strong US dollar has impacted exports sales. Share price volatility provided the opportunity to add to the holding in Schroders at times of market weakness.  The Vodafone holding was increased given that the improvement in the operating environment has reduced the risk to the company's dividend. We added to the holding in Imperial Tobacco following the closure of the company's acquisition of various US assets from Reynolds and Lorillard. We believe this deal transforms the company's position in the United States and offers an avenue for long term growth. Finally, we also participated in the rights issues of Standard Chartered and BBA Aviation - the former to help strengthen its balance sheet and accelerate execution of its strategy, and the latter to help purchase its competitor Landmark Aviation. In contrast we reduced our exposure to Centrica to reflect the more challenging operating and competitive environment facing the company.

 

A number of call options were assigned in companies that had performed strongly, including Sage, British American Tobacco, National Grid and Unilever, leading to a marginal reduction in our exposure to these names.  Conversely, the assignment of put options led to small increases in Rolls Royce and Ultra Electronics.

 

These assignments were part of our broader option writing programme which continued to provide the benefit of increasing and diversifying the income available to the Company.  The income from writing options increased in percentage terms accounting for 7.1% of total income compared to 5.8% 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 at the year end comprised 46 holdings with the overseas exposure representing 15.0% of gross assets (compared to 16.5% at the end of the prior period).

 

Changes to the sector positioning of the Company compared to the prior year have been modest.  However, the weighting in the consumer goods sector has increased given the outperformance of the tobacco holdings and Unilever. Similarly the outperformance of the pharmaceutical holdings led to an increase in the exposure to this sector.  Conversely, the exposure to the consumer services sector reduced following the sales of Tesco and Casino.

 

Income

For the financial year ended 30 June 2016, the Company witnessed a reduction in the level of income generated overall leading to a decrease in the revenue return per share from 33.1p to 32.0p.  Income from investments reduced as the high level of special dividends in the prior year was not repeated. Nevertheless, there were five special dividends (from Svenska Handelsbanken, Hiscox, Aberforth Smaller Companies, Prudential and Elementis) that were recognized 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. The income derived from writing options increased compared to the previous year.  In addition, a reduction in the margin on the Company's borrowings was helpful coupled with the earnings enhancement from fewer shares in issue. Revenue reserves now stand at £28.3m (before payment of the third interim and final dividends).

 

The weakness in sterling following the EU referendum result is helpful given that around 40% of the Company's income is denominated in non-sterling currencies.  However, the dividend outlook for a number of large sectors remains difficult where payout ratios are high and earnings growth is weak.  Unless we witness a sustainable recovery in earnings the outlook for income generation is likely to remain challenging.

 

Outlook

Although the UK equity market has recovered swiftly, many uncertainties remain following the decision to leave the EU. For management teams and consumers alike the future is far from clear, a position manifested by the broad range of forecasts for UK GDP growth over the medium term. As monetary policy reaches the limits of its capabilities and effectiveness, we are likely to see the baton passed to fiscal policy to support the domestic economy.  However, the lack of transparency regarding the UK's relationship with the EU is unlikely to be easily or simply resolved.  This complicates an already challenging global macro-economic picture where vulnerabilities include Europe's banking sector, China's credit-fuelled growth and the outcome of the Presidential election in the United States.  In an environment where quantitative easing has benefited asset prices more than the real economy and with an uneven distribution of wealth, it is perhaps unsurprising to see an increase in populist political rhetoric.  This rhetoric is being increasingly manifested through, for example, a greater focus on taxation or the introduction of minimum wage legislation, subjecting the profitability of companies to further pressure in a world where structural reform is still required, economic growth remains subpar and pricing power is generally weak.  It is difficult to suggest that valuations in absolute terms look attractive although a more powerful argument can be made relative to government or corporate bonds but perhaps this should not be overly relied on given the current highly unorthodox setting.  Indeed, in more difficult times it tends to be those companies with globally diverse revenue streams, strong competitive advantages and robust financial characteristics that perform best.  We will endeavour to retain this focus as we navigate the uncharted waters ahead.

 

Charles Luke

Aberdeen Asset Managers Limited

Investment Manager

8 September 2016

 

 

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 2016 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 2016, the Company had 67,192,458 fully paid Ordinary shares of 25p each (2015 - 68,142,458 Ordinary shares) with voting rights in issue and an additional 1,401,000 (2015 - 451,000) shares in treasury. During the year ended 30 June 2016, 950,000 Ordinary shares, equivalent to 1.4% of the Company's issued share capital excluding treasury shares as at 30 June 2015, were bought back into treasury. A further 42,000 Ordinary shares were bought back into treasury between 1 July 2016 and the date of approval of this Report resulting in 67,150,458 Ordinary shares in issue, with voting rights, and 1,443,000 shares held in treasury.

 

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 2016 indicate a total gain attributable to equity shareholders for the year of £27,143,000 (2015 - loss of £11,474,000).

 

The final dividend for the year ended 30 June 2015, of 11.00p per Ordinary share, was paid to shareholders on 30 October 2015. The first, second and third interim dividends, each of 7.0p per Ordinary share, for the year ended 30 June 2016, were paid to shareholders on 15 January 2016, 1 April 2016 and 1 July 2016, respectively.

 

The Directors now recommend a final dividend for the year ended 30 June 2016 of 11.25p per Ordinary share, payable to shareholders on 3 November 2016, making a total distribution to Ordinary shareholders of £21,786,000 (2015 - £21,806,000) relating to the year ended 30 June 2016, as shown in note 6 to the financial statements. The ex-dividend date is 29 September 2016 and the record date is 30 September 2016. 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 November, after the Annual General Meeting. Further information on dividends is contained in the Chairman's Statement.

 

Manager and Company Secretary

AFML has been appointed by the Company, under a management agreement ("MA") to provide investment management, risk management, administration and company secretarial services as well as promotional activities.  The Company's portfolio is managed by AAML by way of a group delegation agreement in place between AFML and AAML.  In addition, AFML has sub-delegated promotional activities to Aberdeen Asset Managers Limited ("AAM") and administrative and secretarial services to Aberdeen Asset Management PLC.

 

A monthly fee is payable to AFML 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 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 companies during the year ended 30 June 2016 are shown in notes 3 and 4 to the financial statements. 

 

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and, as required by the Listing Rules of the UK Listing Authority, this statement describes how the Company applies the Main Principles identified in the UK Corporate Governance Code published in September 2014 (the "UK Code") and which first applies to the Company's year ended 30 June 2016. The UK Code is available on the Financial Reporting Council's ("the FRC") website: frc.org.uk.

 

The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance as published in February 2015 ("the AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("the AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment trusts. The AIC Code and AIC Guide are available on the AIC's website: theaic.co.uk

 

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders.

 

The Board confirms that, during the year, the Company complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.

 

The UK Code includes provisions relating to:

-      the role of the chief executive (A.1.2);

-      executive directors' remuneration (D.1.1 and D.1.2); and

-      the need for an internal audit function (C.3.6).

 

For the reasons set out in the AIC Guide and UK Code, the Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions.

 

The full text of the Company's Statement of Corporate Governance can be found on its website: murray-income.co.uk.

 

Directors

The Board consists of a non-executive Chairman and five non-executive Directors, all of whom held office throughout the year under review, with the exception of Mike Balfour who was appointed a Director on 11 February 2016. The Senior Independent Director is David Woods.

 

The names and biographies of each of the Directors are shown in the Annual Report and on the Company's website which indicate their range of experience as well as length of service. Each Director has the requisite high level and range of business and financial experience which enables the Board to provide clear and effective leadership and proper stewardship of the Company.

 

The Directors attended Board and Committee meetings during the year ended 30 June 2016 as follows (with their eligibility to attend the relevant meeting in brackets):

 

Director

Board Meetings Attended

Audit, Nomination, Management Engagement and Remuneration Committee Meetings Attended A

N A Honebon

6 (6)

10 (10)

D E Woods

6 (6)

8 (8)

J C Park

6 (6)

10 (10)

D A Cameron

6 (6)

8 (8)

N A H Rogan

6 (6)

10 (10)

M W Balfour B

3 (3)

7 (7)

 

Notes:

A Committees of the Board may not involve all Directors

B Appointed as a Director on 11 February 2016

 

Mike Balfour will retire at the AGM and, being eligible, seeks election to the Board. Neil Honebon, David Woods, Jean Park, Donald Cameron and Neil Rogan shall retire and, being eligible, seek re-election as Directors at the AGM. The Board as a whole believes that each Director remains independent of the AIFM and free of any relationship which could materially interfere with the exercise of his or her independent judgement on issues of strategy, performance, resources and standards of conduct and confirms that, following formal performance evaluations, the individuals' performance continues to be effective and demonstrates time commitment to the role. The Board therefore has no hesitation in recommending the election of Mike Balfour as a Director and the re-election as Directors of Neil Honebon, David Woods, Jean Park, Donald Cameron and Neil Rogan, at the forthcoming AGM.

 

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.

 

The Company's Statement of Corporate Governance includes further information on the operation of the Board, including the matters reserved to the Board for consideration, annual performance of the Directors, the recruitment process for new Directors.

 

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.

 

Management of Conflicts of Interest and Anti-Bribery Policy

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his/her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his/her wider duties is affected. Each Director is required to notify the Company Secretaries of any potential, or actual, conflict situations which will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

 

No Director has a service contract with the Company although Directors are issued with letters of appointment upon taking up office. There were no contracts with the Company during, or at the end of the year, in which any Director was interested.

 

The Board takes a zero tolerance approach to bribery and has adopted appropriate procedures designed to prevent bribery. The Aberdeen Group also takes a zero tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption.

 

Board Committees

The Board has appointed a number of Committees as set out below. Copies of their terms of reference, which define the responsibilities and duties of each Committee, are available on the Company's website and from the Company Secretaries, on request. Further information on the functioning of the Board Committees may be found in the Statement of Corporate Governance published on the Company's website.

 

Audit Committee

The Audit Committee's Report may be found in the Annual Report.

 

Management Engagement Committee

The terms and conditions of the Company's agreement with the Manager are considered by the Management Engagement Committee which comprises the whole Board and was chaired during the year by Neil Honebon.

 

In monitoring the performance of the Manager, the Committee 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 and open-ended funds. The Committee also reviews the management processes, risk control mechanisms and promotional activities of the Manager. As a result of these reviews, the Directors consider the continuing appointment of the Manager to be in the interests of shareholders because the Aberdeen Group has the investment management, promotional and associated secretarial and administrative skills required for the effective operation of the Company.

 

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which comprises the whole Board and was chaired during the year by Neil Honebon.

 

The Committee's overriding priority in appointing new Directors to the Board is to identify the candidate with the optimal range of skills and experience to complement the existing Directors. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Directors.

 

Remuneration Committee

Directors' remuneration is considered by the Remuneration Committee which comprises the whole Board and was chaired during the year by David Woods. Further information may be found in the Directors' Remuneration Report.

 

Accountability and Audit

The responsibilities of the Directors and the Auditor, in connection with the financial statements, appear in the Annual Report.

 

The Directors who held office at the date of this Report each confirm that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and that he or she has taken all the steps that he or she could reasonably be expected to have taken as a Director in order to make him or her aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. Additionally there have been no important events since the year end which warrant disclosure.

 

The Directors have reviewed the level of non-audit services provided by the Auditor during the year, together with the auditor's procedures in connection with the provision of such services, and remain satisfied that the Auditor's objectivity and independence is being safeguarded.

 

Going Concern

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 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 23 September 2015, the Company entered into a two-year multi-currency revolving loan facility ("the Facility") with The Royal Bank of Scotland PLC for up to £80m of which £55m had been drawn down as at 30 June 2016.

 

Viability Statement

The Company does not have a fixed period strategic plan but the Board does formally consider risks and strategy on at least an annual basis. The Board regards the Company, with no fixed life, as a long term investment vehicle, but for the purposes of this viability statement has decided that a period of three years ("the Review period") is an appropriate timeframe over which to report. The Board considers that this Review period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than three years.

 

In assessing the viability of the Company over the review period the Directors have focussed upon the following factors:

 

-    the Company's principal risks and uncertainties as set out in the Strategic Report;

-    the relevance of the Company's investment objective in the current environment;

-    the demand for the Company's shares indicated by the historic level of premium and/or discount;

-    the level of income generated by the Company's portfolio as compared to its expenses;

-    the overall liquidity of the Company's investment portfolio;

-    the renewal of the Company's £80 million loan facility in September 2017.

 

In addition, the Board has considered that significant economic or stock market volatility, or changes in regulatory uncertainty, could have an impact on its assessment of the Company's prospects and viability in the future.

 

Accordingly, taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report.

 

Substantial Interests

At 30 June 2016, 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

12,358,886

18.4

Speirs & Jeffrey

4,625,548

6.9

Rathbones

4,360,711

6.5

Alliance Trust Savings

3,622,977

5.4

Hargreaves Lansdown (execution only)

2,982,832

4.4

Brewin Dolphin

2,319,730

3.5

 

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

 

UK Stewardship Code and Proxy Voting as an Institutional Shareholder

Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the AIFM which has sub-delegated that authority to the Investment Manager.

 

The full text of the Company's response to the Stewardship Code may be found on the Company's website.

 

Socially Responsible Investment Policy

The Board is aware of its duty to act in the best interests of the Company. As an investment trust, the Company has no direct social, environmental or community responsibilities. However, the Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner and the Board, therefore, ensures that they take regular account of the social, environment and ethical factors, which may affect the performance or value of the Company's investments.

 

Relations with Shareholders

The Directors place great importance on communication with shareholders. The Annual Report is widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up-to-date information on the Company through its website, murray-income.co.uk, or via the Aberdeen Group's Customer Services Department. The Company responds to letters from shareholders on a wide range of issues.

 

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the management group (either the Company Secretary or the Aberdeen Group) in situations where direct communication is required and representatives from the Board offer to meet with major shareholders on an annual basis in order to gauge their views. The Company Secretary only acts on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds, as appropriate, on behalf of the Board.

 

In addition, members of the Board accompany the Manager when undertaking a series of meetings with institutional shareholders.

 

The Notice of AGM included within the Annual Report is normally sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Investment Manager at the Company's AGM.

 

Annual General Meeting

Among the resolutions being put at the Annual General Meeting of the Company to be held on 1 November 2016, the following resolutions will be proposed:

 

Authority to allot shares and disapply pre-emption rights

Ordinary Resolution No. 12 in the Notice of Annual General Meeting will renew the authority to allot the unissued share capital up to an aggregate nominal amount of £839,380 (equivalent to approximately 3.3m 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 2017, 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. 13 will, if passed, give the Directors power to allot for cash or sell from treasury equity securities up to an aggregate nominal amount of £1,678,761 (equivalent to approximately 6.7m 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 2017, 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 12 and 13 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 12 and 13.

 

Purchase of the Company's own Ordinary Shares

At the Annual General Meeting held on 28 October 2015, 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. 14 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 approximately 10.1m Ordinary shares). Such authority will expire on the date of the next Annual General Meeting, or on 31 December 2017, 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. 14. 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 60,950 Ordinary shares, representing 0.1% of the issued Ordinary share capital of the Company.

By Order of the Board

 

N A Honebon

Chairman

 

8 September 2016

 

 

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

8 September 2016

 

 

STRATEGIC REPORT - RESULTS

 

Financial Highlights

 


30 June 2016

30 June 2015

% change

Total assets (£'000)

570,036

570,888

-0.1

Equity shareholders' funds (£'000)

515,036

515,888

-0.2

Net asset value per Ordinary share

             766.5p

             757.1p

 

+1.2

Market capitalisation (£'000)

451,533

480,404

-6.0

Share price of Ordinary share (mid-market)

             672.0p

             705.0p

 

-4.7

Discount to net asset value on Ordinary shares

(12.3%)

(6.9%)






Gearing (ratio of borrowing to shareholders' funds)




Net gearing{A}

8.7%

7.2%






Dividends and earnings




Revenue return per share

               32.0p

               33.1p

 

-3.3

Dividends per share{B}

             32.25p

             32.00p

 

+0.8

Dividend cover

 0.99 times

 1.03 times


Revenue reserves (£'000){C}

28,276

28,340






Operating costs




Ongoing charges ratio{D}

0.76%

0.74%


{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 £4,705,000 and £7,559,000 respectively (2015 - third interim and final dividends amounting to £4,770,000 and £7,496,000 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

+0.1

+3.2

+27.6

Net asset value per Ordinary share

+5.9

+18.2

+42.3

Source: Aberdeen Asset Managers Limited/Morningstar



 

 

Dividends

 


Rate

xd date

Record date

Payment date

1st interim 2016

7.00p

17 December 2015

18 December 2015

15 January 2016

2nd interim 2016

7.00p

3 March 2016

4 March 2016

1 April 2016

3rd interim 2016

7.00p

2 June 2016

3 June 2016

1 July 2016

Proposed final 2016

11.25p

29 September 2016

30 September 2016

3 November 2016

Total dividends 2016

32.25p




 

 

Ten Year Financial Record

Year end 30 June

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Revenue (£'000)

19,251

22,390

19,790

18,257

21,844

22,688

23,566

23,926

25,476

24,838

Per Ordinary share (p)











Net revenue return

24.7

29.3

28.1

25.4

30.9

30.6

31.1

30.5

33.1

32.0

Dividends{A}

24.25

27.00

27.75

28.00

28.75

29.75

30.75

31.25

32.00

32.25

Net asset value

802.3

619.9

455.4

547.9

671.5

649.6

734.6

805.2

757.1

766.5


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

Shareholders' funds (£'000)

522,617

400,536

294,570

354,425

434,406

425,458

492,878

547,652

515,888

515,036


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____












{A}The figures for dividends per share reflect the years to which their declaration relates and not the years they were paid.

 

 



MURRAY INCOME TRUST PLC

 

Statement of Comprehensive Income

 



Year ended 30 June 2016

Year ended 30 June 2015



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Gains/(losses) on investments

9

-

6,899

6,899

-

(32,303)

(32,303)

Currency gains


-

150

150

-

33

33

Income

2

24,838

-

24,838

25,476

-

25,476

Investment management fees

3

(1,302)

(1,302)

(2,604)

(1,396)

(1,396)

(2,792)

Administrative expenses

4

(1,145)

-

(1,145)

(1,183)

-

(1,183)



_______

_______

_______

_______

_______

_______

Net return before finance costs and taxation


22,391

5,747

28,138

22,897

(33,666)

(10,769)









Finance costs of borrowing

5

(328)

(328)

(656)

(380)

(380)

(760)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities before taxation


22,063

5,419

27,482

22,517

(34,046)

(11,529)









Taxation on ordinary activities

7

(339)

-

(339)

55

-

55



_______

_______

_______

_______

_______

_______

Net return on ordinary activities after taxation


21,724

5,419

27,143

22,572

(34,046)

(11,474)



_______

_______

_______

_______

_______

_______









Return per Ordinary share (pence)

8

32.0

8.0

40.0

33.1

(50.0)

(16.9)



_______

_______

_______

_______

_______

_______









The total column of this statement represents the profit and loss account of the Company. The 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies.

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

No operations were acquired or discontinued in the year.

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











£'000

£'000

£'000

£'000

£'000

£'000

Ordinary dividends on equity shares

6

21,788

-

21,788

21,240

-

21,240



_______

_______

_______

_______

_______

_______









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

 

 



MURRAY INCOME TRUST PLC

 

Statement of Financial Position

 



As at

As at



30 June 2016

30 June 2015


Notes

£'000

£'000

Non-current assets




Investments at fair value through profit or loss

9

553,527

547,339





Current assets




Other debtors and receivables

10

7,203

7,148

Cash and short term deposits


10,270

17,874



___________

___________



17,473

25,022



___________

___________





Creditors: amounts falling due within one year




Other payables

11

(964)

(1,473)

Bank loans

11

(55,000)

(55,000)



___________

___________

Net current liabilities


(38,491)

(31,451)



___________

___________

Net assets


515,036

515,888



___________

___________





Share capital and reserves




Called-up share capital

12

17,148

17,148

Share premium account


24,020

24,020

Capital redemption reserve


4,997

4,997

Capital reserve

13

440,595

441,383

Revenue reserve


28,276

28,340



___________

___________

Equity shareholders' funds


515,036

515,888



___________

___________





Net asset value per Ordinary share (pence)

14

766.5

757.1



___________

___________

 

 



MURRAY INCOME TRUST PLC

 

Statement of Changes in Equity

 

For the year ended 30 June 2016











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2015


17,148

24,020

4,997

441,383

28,340

515,888

Return on ordinary activities after taxation


-

-

-

5,419

21,724

27,143

Buyback of Ordinary shares for treasury


-

-

-

(6,207)

-

(6,207)

Dividends paid

6

-

-

-

-

(21,788)

(21,788)



______

______

______

______

______

______

Balance at 30 June 2016


17,148

24,020

4,997

440,595

28,276

515,036



______

______

______

______

______

______









For the year ended 30 June 2015











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total



£'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



______

______

______

______

______

______

 

 

 


MURRAY INCOME TRUST PLC

 

Statement of Cash Flows

 



Year ended

Year ended



30 June 2016

30 June 2015




As re-presented (Note 1)


Notes

£'000

£'000

Net return before finance costs and taxation


28,138

(10,769)

Decrease in accrued expenses


(33)

(365)

Overseas withholding tax


(405)

(240)

Dividends income

2

(22,982)

(23,885)

Dividends received


22,928

24,220

Interest income

2

(46)

(103)

Interest received


46

103

Interest paid


(659)

(768)

(Gains)/losses on investments

9

(6,899)

32,303

Decrease/(increase) in other debtors


66

(4,774)

Stock dividends included in investment income

2

(1,095)

(1,699)



_______

_______

Net cash inflow from operating activities


19,059

14,023





Investing activities




Purchases of investments


(49,539)

(53,437)

Sales of investments


50,871

54,935



_______

_______

Net cash inflow from investing activities


1,332

1,498





Financing activities




Dividends paid

6

(21,788)

(21,240)

(Buyback)/issue of Ordinary shares

12

(6,207)

950

Drawdown of bank loans


-

10,000



_______

_______

Net cash outflow from financing activities


(27,995)

(10,290)



_______

_______

(Decrease)/increase in cash


(7,604)

5,231



_______

_______

Analysis of changes in cash during the year




Opening balance


17,874

12,643

(Decrease)/increase in cash as above


(7,604)

5,231



_______

_______

Closing balance


10,270

17,874



_______

_______

 

 



MURRAY INCOME TRUST PLC

 

Notes to the Financial Statements

Year Ended 30 June 2016

 

1.

Accounting policies


(a)

Basis of preparation



The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. The financial statements are prepared in sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and 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 Statement of Comprehensive Income.






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 Statement of Comprehensive Income except as follows:



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



-     expenses are charged as a capital item in the Statement of Comprehensive Income 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



Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position 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 Statement of Financial Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods. Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the Statement of Financial Position date.






Due to the Company's status as an investment trust company and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. 






The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue within the Statement of Comprehensive Income on the same basis as the particular item to which it relates using the Company's effective rate of tax for the year, based on the marginal basis.





(e)

Valuation of investments



The Company has chosen to apply the recognition and measurement provisions of IAS 39 Financial Instruments: Recognition and Measurement (as adopted for use in the EU) and 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 Statement of Comprehensive Income 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 using the effective interest method. 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 classified as fair value through profit or loss, held for trading, and 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 Statement of Comprehensive Income along with fair value changes in the open position which occur due to the movement in underlying securities. Losses realised on the exercise of the contracts are recorded in the capital column of the Statement of Comprehensive Income as they arise. Where the Company enters into derivative contracts to manage market risk, gains or losses arising on such contracts are recorded in the capital column of the Statement of Comprehensive Income.





(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)

Nature and purpose of reserves



Capital redemption reserve



The capital redemption reserve arose when Ordinary shares were redeemed, at which point an amount equal to the par value of the Ordinary share capital was transferred from the Statement of Comprehensive Income to the capital redemption reserve.






Capital reserve



This reserve reflects any gains or losses on investments realised in the period along with any movement in the fair value of investments held that have been recognised in the Statement of Comprehensive Income. These include gains and losses from foreign currency exchange differences. Additionally, expenses, including finance costs, are charged to this reserve in accordance with (c) above. The cost of share buybacks to be held in treasury are also deducted from this reserve.






Revenue reserve



This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.





(k)

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.





(l)

Dividends payable



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

 



2016

2015

2.

Income

£'000

£'000


Income from investments




UK dividends (all listed)

17,551

16,471


Overseas dividends (all listed)

4,336

5,838


Stock dividends

1,095

1,576



_______

_______



22,982

23,885



_______

_______


Other income




Deposit interest

46

103


Underwriting income

41

-


Traded option premiums

1,769

1,488



1,856

1,591



_______

_______


Total income

24,838

25,476



_______

_______






During the year, the Company received premiums totalling £1,769,000 (2015 - £1,488,000) in exchange for entering into derivative transactions. At the year end there were no open positions (2015 - one), valued at a liability position of £nil (2015 - £34,000) and securities held by the Company with a value of £nil (2015 - £3,743,000) were pledged as collateral against this.

 



2016

2015



Revenue

Capital

Total

Revenue

Capital

Total

3.

Management fee

£'000

£'000

£'000

£'000

£'000

£'000


Management fee

1,302

1,302

2,604

1,396

1,396

2,792



_______

_______

_______

_______

_______

_______










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 2016 was £2,604,000 (2015 - £2,792,000) and the balance due to AFML at the year end was £225,000 (2015 - £225,000).

 



2016

2015

4.

Administrative expenses

£'000

£'000


Shareholders' services{A}

571

569


Directors' remuneration

143

133


Secretarial fees{B}

90

90


Auditor's remuneration:




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

22

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

317

347



_______

_______



1,145

1,183



_______

_______






{A}    Includes registration, savings scheme and other wrapper administration and promotion expenses, of which £481,000 (2015 - £489,000) was paid to Aberdeen Asset Managers Limited ("AAML") under a delegation agreement with AFML to cover promotional activities during the year. There was £120,000 (2015 - £121,000) due to AAML in respect of these promotional activities at the year end.


{B}    Payable to AFML, balance outstanding £23,000 (2015 - £23,000) 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 (2015 - £4,000).

 



2016

2015



Revenue

Capital

Total

Revenue

Capital

Total

5.

Finance costs of borrowing

£'000

£'000

£'000

£'000

£'000

£'000


Bank loans

328

328

656

380

380

760



_______

_______

_______

_______

_______

_______

 



2016

2015

6.

Ordinary dividends on equity shares

£'000

£'000


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

4,770

4,761


Final 2015 of 11.00p (2014 - 10.25p)

7,496

6,972


First interim 2016 of 7.00p (2015 - 7.00p)

4,770

4,770


Second interim 2016 of 7.00p (2015 - 7.00p)

4,752

4,770


Return of unclaimed dividends

-

(33)



_______

_______



21,788

21,240



_______

_______






The third interim and proposed final dividends for 2016 have not been included as a liability in these financial statements as they were not payable until after the reporting date. The proposed final dividend for 2016 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 £21,724,000 (2015 - £22,572,000).







2016

2015



£'000

£'000


Three interim dividends of 7.00p each (2015 - 7.00p)

14,227

14,310


Proposed final dividend of 11.25p (2015 - 11.00p)

7,559

7,496



_______

_______



21,786

21,806



_______

_______






The amount reflected above for the cost of the proposed final dividend for 2016 is based on 67,192,458 Ordinary shares, being the number of Ordinary shares in issue at the date of this Report.

 



2016

2015



Revenue

Capital

Total

Revenue

Capital

Total

7.

Taxation

£'000

£'000

£'000

£'000

£'000

£'000


(a)

Analysis of charge for the year









Overseas tax suffered

543

-

543

763

-

763



French WHT reclaimed

-

-

-

(512)

-

(512)



Overseas tax reclaimable

(204)

-

(204)

(306)

-

(306)




_______

_______

_______

_______

_______

_______



Total tax charge for the year

339

-

339

(55)

-

(55)




_______

_______

_______

_______

_______

_______











(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% (2015 - 20.75%). The differences are explained as follows:







2016

2015




Revenue

Capital

Total

Revenue

Capital

Total




£'000

£'000

£'000

£'000

£'000

£'000



Net profit on ordinary activities before taxation

22,063

5,419

27,482

22,517

(34,046)

(11,529)




_______

_______

_______

_______

_______

_______



Return on ordinary activities multiplied by the standard rate of corporation tax of 20% (2015 - 20.75%)

4,413

1,084

5,497

4,672

(7,065)

(2,393)



Effects of:









Non-taxable UK dividends

(3,510)

-

(3,510)

(3,418)

-

(3,418)



Non-taxable stock dividends

(219)

-

(219)

(327)

-

(327)



Non-taxable overseas dividends

(815)

-

(815)

(1,161)

-

(1,161)



Movement in unutilised loan relationships

58

66

124

137

79

216



Movement in unutilised management expenses

73

260

333

97

290

387



Other capital returns

-

(1,410)

(1,410)

-

6,696

6,696



Overseas tax payable/(recoverable)

339

-

339

(55)

-

(55)




_______

_______

_______

_______

_______

_______



Total tax charge

339

-

339

(55)

-

(55)




_______

_______

_______

_______

_______

_______











(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 £58,898,000 (2015 - £56,816,000). 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.

 



2016

2015

8.

Return per Ordinary share

£'000

p

£'000

p


Returns are based on the following figures:






Revenue return

21,724

32.0

22,572

33.1


Capital return

5,419

8.0

(34,046)

(50.0)



_______

_______

_______

_______


Total return

27,143

40.0

(11,474)

(16.9)



_______

_______

_______

_______


Weighted average number of Ordinary shares in issue


67,867,787


68,100,677




_________


_________

 



 2016

 2015

9.

Investments

 £'000

 £'000


Held at fair value through profit or loss:




Opening valuation

547,339

578,506


Opening investment holdings gains

(133,099)

(170,702)



_______

_______


Opening book cost

414,240

407,804


Movements during the year:




Purchases at cost

50,160

55,948


Sales - proceeds

(50,871)

(54,812)


Sales - (losses)/gains

(8,932)

5,300



_______

_______


Closing book cost

404,597

414,240


Closing investment holdings gains

148,930

133,099



_______

_______


Closing valuation

553,527

547,339



_______

_______







2016

2015


The portfolio valuation:

£'000

£'000


UK equities

467,464

453,091


Overseas equities

86,063

94,248



_______

_______


Total

553,527

547,339



_______

_______







2016

2015


Gains/(losses) on investments

£'000

£'000


(Losses)/gains based on book cost

(8,932)

5,300


Net movement in investment holdings gains

15,831

(37,603)



_______

_______



6,899

(32,303)



_______

_______




Where there are open positions on traded options the Company pledges collateral greater than the market value of the traded options in accordance with standard commercial practice. At 30 June 2016, the carrying amount of financial assets pledged equated to £nil as no open positions existed (2015 - £3,743,000 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 Statement of Comprehensive Income. The total costs were as follows:



2016

2015



£'000

£'000


Purchases

272

285


Sales

42

30



_______

_______



314

315



_______

_______

 



2016

2015

10.

Other debtors and receivables

£'000

£'000


Prepayments and accrued income

7,203

7,148



_______

_______

 



2016

2015

11.

Creditors: amounts falling due within one year

£'000

£'000


Other creditors

503

503


Amounts due to brokers

461

936


Amounts due on derivative contracts

-

34


Bank loans

55,000

55,000



_______

_______



55,964

56,473



_______

_______


At the reporting date there were no (2015 - one) open option positions, having a value of £nil (2015 - £34,000).




At 30 June 2016 the Company had drawn down £55,000,000 (30 June 2015 - £55,000,000) of an £80,000,000 multi-currency unsecured revolving bank credit facility with The Royal Bank of Scotland PLC, which is committed to the Company until 15 September 2017. 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 0.5% for the relevant period of the advance. As at 30 June 2016 this rate was 1.01092% (30 June 2015 - 1.36256%) and the loan rolled over on 22 July 2016.




At the date this Report was approved, the Company had drawn down the following amounts of the facility, all with a maturity date of 6 October 2016:

 


- Swiss Franc 24,470,000 at an all-in rate of 0.5%


- Euro 10,320,000 at an all-in rate of 0.5%


- Swedish Krona 131,100,000 at an all-in rate of 0.5%


- US Dollar 21,240,000 at an all-in rate of 1.02572% 




Financial covenants contained within the loan agreement provide, inter alia, that borrowings to net assets must not exceed 30% (30 June 2016 - 10.7%; 30 June 2015 - 10.7%) and that net assets must exceed £225 million (30 June 2016 - £515.0 million; 30 June 2015 - £515.9 million). All financial covenants were met during the year and also during the period from the year end to the date of this report.

 



2016

2015

12.

Called-up share capital

Shares

£'000

Shares

£'000


Allotted, called-up and fully-paid






Ordinary shares of 25p each: publicly held

67,192,458

16,798

68,142,458

17,035


Ordinary shares of 25p each: held in treasury

1,401,000

350

451,000

113



__________

_______

__________

_______



68,593,458

17,148

68,593,458

17,148



__________

_______

__________

_______








During the year there were 950,000 Ordinary shares repurchased (2015 - nil) to be held in treasury by the company at a total cost of £6,207,000 (2015 - £nil).




No Ordinary shares were sold from the Treasury account (2015 - nil) and no (2015 - 125,000) new shares were allotted. All of the shares allotted in 2015 were sold at a premium to net asset value raising £950,000 net of expenses.

 



2016

2015

13.

Capital reserve

£'000

£'000


At 1 July 2015

441,383

475,429


Movement in investment holding gains

15,831

(37,603)


(Losses)/gains on realisation of investments at fair value

(8,932)

5,300


Currency gains

150

33


Finance costs of bank loan

(328)

(380)


Buyback of shares

(6,207)

-


Investment management fees

(1,302)

(1,396)



_______

_______


At 30 June 2016

440,595

441,383



_______

_______

 

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:







2016

2015


Net asset value attributable (£'000)

515,036

515,888


Number of Ordinary shares in issue (note 12)

67,192,458

68,142,458


Net asset value per share (p)

766.5

757.1

 

15.

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.





2016



Liabilities

Gross



£'000

£'000


No open positions

-

-



_______

_______


Total

-

-



_______

_______






2015



Liabilities

Gross



£'000

£'000


British American Tobacco (Put)

34

1,878



_______

_______


Total

34

1,878



_______

_______






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 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 8.7% of net assets as at 30 June 2016 (2015 - 7.2%). 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. 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 may be found below, and an analysis of the equity portfolio by sector may be found in the Annual Report. 




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 reporting date was as follows:







Floating rate

Non-interest bearing



2016

2015

2016

2015



£'000

£'000

£'000

£'000


 Danish Krone

-

-

2,946

-


 Euro

126

29

12,581

30,471


 Sterling

9,943

17,815

467,464

453,091


 Swedish Krona

-

-

16,972

20,538


 Swiss Francs

132

20

29,827

26,087


 US Dollars

69

10

23,737

17,152



_______

_______

_______

_______


 Total

10,270

17,874

553,527

547,339



_______

_______

_______

_______








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 2016 (2015 - £55,000,000). 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.




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 reporting 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 2016 and net assets would decrease/increase by £447,000 (2015 -  decrease/increase by £371,000). 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 Statement of Financial Position 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. It is not the Company's policy to hedge this currency risk but the Board keeps under review the currency returns in both capital and income.



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





30 June 2016

30 June 2015




Net

Total


Net

Total




monetary

currency


monetary

currency



Investments

liabilities

exposure

Investments

liabilities

exposure



£'000

£'000

£'000

£'000

£'000

£'000


Danish Krone

2,946

-

2,946

-

-

-


Euro

12,581

126

12,707

30,471

29

30,500


Sterling

467,464

(45,057)

422,407

453,091

(37,185)

415,906


Swedish Krona

16,972

-

16,972

20,538

-

20,538


Swiss Francs

29,827

132

29,959

26,087

20

26,107


US Dollars

23,737

69

23,806

17,152

10

17,162



_______

_______

_______

_______

_______

_______


Total

553,527

(44,730)

508,797

547,339

(37,126)

510,213



_______

_______

_______

_______

_______

_______










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. Foreign currency exposure of monetary items is not considered material since they are predominantly carried in the Company's functional currency which is sterling.




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 sector. The allocation of assets to international markets and the stock selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy.




Other price risk sensitivity


If market prices at the reporting 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 2016 would have increased/decreased by £55,353,000 (2015 - £54,734,000).




Liquidity risk 


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





Within

Within



3 months

3 months



2016

2015



£'000

£'000


Bank loans

55,000

55,000


Interest cash flows on bank loans

46

62


Cash flow on forward currency contracts

-

34



_______

_______



55,046

55,096



_______

_______






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 2016 the Company utilised £55,000,000 of a £80,000,000 (2015 - £55,000,000) revolving bank credit facility, which is committed until 15 September 2017. Interest is charged at a variable rate based on LIBOR plus a margin of 0.5% (2015 - margin 0.5%) for the relevant period of the advance. As at 30 June 2016 this rate was 1.01092% (2015 - 1.36256%) and the loan rolled over on 22 July 2016 (2015 - rolled on 29 July 2015). The aggregate of all future interest payments at the rate ruling at 30 June 2016 and the redemption of the loan amounted to £55,046,000 (2015 - £55,062,000).




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 2016 is £12,185,000 (30 June 2015 - £19,735,000) consisting of £1,915,000 (2015 - £1,861,000) of dividends receivable from equity shares and £10,270,000 (2015 - £17,874,000) in cash held.




None of the Company's financial assets are past due or impaired (2015 - £nil).

 

16.

Fair value hierarchy


FRS 102 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 Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016. This has not resulted in any reclassifications in levelling and the prior year comparative has been disclosed under the new hierarchy. The fair value hierarchy shall have the following levels:




Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date;


Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly; and


Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.




The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:









For the year ended 30 June 2016









Level 1

Level 2

Level 3

Total



Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

553,527

-

-

553,527









Financial liabilities at fair value through profit or loss







Derivatives

b)

-

-

-

-




_______

_______

_______

_______


Net fair value


553,527

-

-

553,527




_______

_______

_______

_______









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




_______

_______

_______

_______









a) Quoted equities


The fair value of the Company's investments in quoted equities has 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.

 

17.

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 in the published Annual Report. The balance of fees due to Directors at the year end was £nil (2015 - £11,000).




The Company has agreements with AFML 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 are disclosed in notes 3 and 4.

 

18.

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 principally of UK 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 borrowings to net assets must not exceed 30% and that the net assets must exceed £225 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.

 

19.     Final dividend

If approved by shareholders at the Annual General Meeting on 1 November 2016, the proposed final dividend of 11.25p per share will be paid on 3 November 2016 to holders of Ordinary shares on the register at the close of business on 30 September 2016. The relevant ex-dividend date is 29 September 2016.

 

20.     Annual General Meeting

The Annual General Meeting will be held on 1 November 2016 at 12.30 pm at The Mermaid, Puddle Dock, Blackfriars, London EC4V 3DB.

 

The figures and financial information for the year ended 30 June 2016 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 2015 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 2016 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 at 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

 

8 September 2016

 

 



MURRAY INCOME TRUST PLC

 

Summary of Investment Changes during the year

 


Valuation



Valuation


30 June 2015

Transactions

Gains/(losses)

30 June 2016


£'000

£'000

£'000

£'000

Equities







United Kingdom

453,091

79.4

7,337

7,036

467,464

82.0

Denmark

-

-

2,529

417

2,946

0.5

France

20,021

3.5

(18,636)

6,414

7,799

1.4

Germany

5,555

1.0

-

(773)

4,782

0.8

Italy

4,895

0.8

(5,976)

1,081

-

-

Sweden

20,538

3.6

-

(3,566)

16,972

3.0

Switzerland

26,087

4.6

-

3,740

29,827

5.2

United States

17,152

3.0

5,103

1,482

23,737

4.2


_______

_______

_______

_______

_______

_______

Total investments

547,339

95.9

(9,643)

15,831

553,527

97.1


_______

_______

_______

_______

_______

_______

Other net assets{A}

23,549

4.1

(7,040)

-

16,509

2.9


_______

_______

_______

_______

_______

_______

Total assets

570,888

100.0

(16,683)

15,831

570,036

100.0


_______

_______

_______

_______

_______

_______








{A}Excluding borrowings







 

 

Summary of Net Assets

 


As at

As at


30 June 2016

30 June 2015


£'000

%

£'000

%

Equities

553,527

107.5

547,339

106.1

Other net assets

16,509

3.2

23,549

4.6

Borrowings

(55,000)

(10.7)

(55,000)

(10.7)


_______

_______

_______

_______

Equity shareholders' funds

515,036

100.0

515,888

100.0


_______

_______

_______

_______

 

 



MURRAY INCOME TRUST PLC

 

Twenty Largest Investments

As at 30 June 2016

 


Valuation

Total

Valuation


2016

assets

2015

Investment

£'000

%

£'000

1 (1) 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.

31,710

5.6

25,444

2 (2) 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.

30,317

5.3

24,076

3 (4) 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.

27,116

4.8

22,350

4 (3) 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.

25,060

4.4

22,546

5 (10) 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.

23,156

4.1

18,797

6 (7) 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.

21,171

3.7

19,198

7 (19) Imperial Brands




Imperial Brands 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.

19,781

3.5

12,728

8 (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.

18,444

3.2

14,487

9 (17) 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.

17,508

3.1

12,965

10 (6) 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.

16,152

2.8

19,693

Top ten investments

230,415

40.5


 

11 (5) 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.

15,839

2.8

19,738

12 (8) 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.

15,616

2.7

19,108

13 (20) 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.

15,344

2.7

12,642

14 (15) 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.

15,118

2.7

13,443

15 (9) Centrica




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

14,914

2.6

18,934

16 (18) 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.

13,471

2.4

12,917

17 (11) 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.

13,388

2.3

17,736

18 (12) 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.

12,977

2.3

17,031

19 (-) Inmarsat




Inmarsat operates a global communications staellite system which provides voice and high-speed data services. Customers include major corporations from the maritime, media, oil and gas, construction and aeronautical industries, as well as governments and aid agencies.

12,696

2.2

10,071

20 (-) Microsoft




Microsoft develops, manufactures, licenses, sells and supports software products. The Company offers operating systems software, server application software, business and consumer applications software, software development tools, and internet and intranet software.

12,249

2.1

8,983

 

Top twenty investments

 

372,027

 

65.3



The value of the 20 largest investments represents 65.3% (2015 - 61.6%) 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
 
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