Half Yearly Financial Report

RNS Number : 1226D

Murray Income Trust PLC

17 February 2020

 

Murray Income Trust PLC

LEGAL ENTITY IDENTIFIER (LEI): 549300IRNFGVQIQHUI

Half-Yearly Report for the 6 months ended 31 December 2019

The Directors of Murray Income Trust PLC report the unaudited results for the six months ended 31 December 2019.

Financial Highlights

	31 December 2019	30 June 2019
Total assets{A} (£'000)	673,224	633,647
Equity shareholders' funds (£'000)	626,990	587,150
Net asset value per Ordinary share - debt at par	948.4p	888.1p
Share price of Ordinary share (mid-market)	896.0p	850.0p
Discount to net asset value on Ordinary shares - debt at par{B}	5.5%	4.3%
Net gearing{B}	2.6%	3.1%
Ongoing charges ratio{B}	0.62%	0.65%
{A}      Total assets as per the Condensed Statement of Financial Position less current liabilities (excluding prior charges such as bank loans).
{B}      Considered to be an Alternative Performance Measure.

Performance (total return)

Net asset value total return per Ordinary share{A}		Share price total return per Ordinary share{A}		FTSE All-Share Index total return
Six months ended 31 December 2019	+9.0%	Six months ended 31 December 2019	+7.7%	Six months ended 31 December 2019	+5.5%
Year ended 30 June 2019	+7.9%	Year ended 30 June 2019	+13.2%	Year ended 30 June 2019	+0.6%
Revenue return per Ordinary share		Dividend yield{A}		Discount to net asset value{A}
Six months ended 31 December 2019	15.4p	As at 31 December 2019	3.8%	As at 31 December 2019	5.5%
Six months ended 31 December 2018	13.7p	As at 30 June 2019	4.0%	As at 30 June 2019	4.3%
{A} Considered to be an Alternative Performance Measure.

Financial Calendar

Payment dates of quarterly dividends	20 December 2019 20 March 2020 19 June 2020 September 2020
Financial year end	30 June 2020
Expected announcement date of results for year ended 30 June 2020	September 2020
Annual General Meeting (Glasgow)	3 November 2020

CHAIRMAN'S STATEMENT

I am pleased to report another strong six months of performance from our Manager, Aberdeen Standard Fund Managers Limited. The Company's net asset value ("NAV") per share rose 9.0% in the six months ended 31 December 2019 in total return terms, outperforming the FTSE All-Share Index (the "Index") return of 5.5%. The share price total return was 7.7% with the discount widening slightly from 4.3% to 5.5%.

Looking over longer periods to 31 December 2019, performance is ahead of the Index over one, three and five and ten years. At the same time we continue to grow our dividend, with a dividend increase chalked up in every one of the past forty-six years. This puts us into the top ten on the AIC's list of 'Dividend Heroes', as measured by the number of years of dividend growth, the investment trusts with the longest records of consecutive annual dividend growth.

Investment Objective

The Company aims for a high and growing income combined with capital growth through investment in a portfolio principally of UK equities. Plain vanilla if you like, it is a diversified portfolio of quality companies.

Investment Process

Our Manager's investment process is best summarised as a search for good quality companies at attractive valuations. The Manager defines a quality company as one capable of strong and predictable cash generation, sustainably high returns on capital and with attractive growth opportunities. These typically result from a sound business model, a robust balance sheet, good management and strong environmental, social and governance characteristics.

Investment People

Charles Luke has been our portfolio manager since 2006. If you were not able to come to our Annual General Meeting in November, you can find his latest presentation on our website. His deputy is Iain Pyle and they are members of the Manager's five-strong UK Equity Income team which itself is part of the sixteen-strong UK Equity Team headed by Andrew Millington.

Performance

The FTSE All-Share Index is the Board's primary benchmark by which to assess performance and the headline numbers are recorded previously. Performance attribution again shows UK stock selection as the main contributor to outperformance. Charles and Iain assess performance in more detail in the Manager's Portfolio Report. The Directors also look at performance relative to other investment trusts in the UK Equity Income sector. The last six months have improved our relative rankings considerably such that we were third, out of 18 trusts, over one, three and five years to 31 December 2019, in NAV total return terms.

Fully Independent Board

Your Directors are all fully independent and are responsible for the governance of the Company, appointing the Manager, setting dividend policy and so on. Merryn Somerset Webb was appointed a Director on 7 August 2019.

Dividends

At 31 December 2019, the Company's shares were yielding 3.8% (calculated as dividing the total dividends paid in the past 12 months of 34p by the period end share price of 896p). This compares to the 4.1% yield available from the FTSE All-Share Index and the size-weighted average yield of 3.7% for trusts in the AIC UK Equity Income Sector.

A final dividend of 10.0p per share was paid on 8 November 2019 following shareholder approval at the AGM on 5 November 2019. Also at the AGM, shareholders approved a policy whereby the Company will pay four interim dividends for the years ending on and after 30 June 2020, in place of the previous pattern of three interim dividends and a final dividend. The purpose of this was to pay shareholders their dividends both earlier and at regular three-month intervals.

Following the introduction of this revised policy, the Company announced in November 2019 that it would pay 8.25p per share on 20 December 2019, 20 March 2020 and 19 June 2020 for the first, second and third interim dividends, respectively.  The practical impact of this is that shareholders will have received the final dividend for the 2018-2019 year in November 2019 and the first interim dividend for the current year in December 2019. The Board will announce the rate for its fourth interim dividend in early August 2020, with payment expected in September 2020.

Share Capital

The Company did not issue nor buy back any shares during the six months ended 31 December 2019.

Ongoing Charges

Lower ongoing charges are a competitive advantage for investment trusts compared with open ended funds. Our ongoing charges for the year ended 30 June 2019 were 0.65% and we continue to aim to trend lower, as evidenced by the annualised 0.62% recorded for the review period. The management fee, which is the largest component of ongoing charges, is tiered (see note 4 for details). On net assets of £627m at 31 December 2019, the blended management fee rate was equivalent to 0.45%. The marginal rate of management fees is 0.25% per annum charged on net assets above £450m.

Engaging Individual Shareholders

We have a high proportion of the Company owned by individual investors and are committed to making sure that up-to-date information on the Company is easily accessible. In the year ahead, we plan to continue the enhancements to the content on the Company's website, maintained by the Manager, at murray-income.co.uk and continue in our commitment to find ways to reach new investors as well as how better to reach investors who use third-party platforms. In particular, shareholders may have seen the additional coverage we achieved last year in promoting November's Annual General Meeting. The Directors and Manager were delighted to meet so many shareholders at that meeting in London and we had positive feedback both on Charles' presentation and the lunch. This year's Annual General Meeting will be held in Glasgow on Tuesday 3 November 2020.

Update

From 31 December 2019 to 31 January 2020, the net asset value per share total return and share price total return were -1.3% and +0.7%, respectively, while the discount had narrowed from 5.5% to 3.7%. The FTSE All-Share Index total return was -3.3%.

Electronic Communications for Registered Shareholders

As we reported in September, the Board is proposing to move to more electronic-based forms of communication with its registered shareholders. Increased use of electronic communications should be a more cost effective, as well as faster and more environmentally friendly way of providing information to shareholders. Registered shareholders will therefore find enclosed with this Half-Yearly Report a letter containing our electronic communications proposals and an opportunity to supply an email address to the Registrar, Link Asset Services. Registered shareholders who wish to continue to receive hard copies of documents and communications by post will need to send back their replies in the enclosed prepaid envelope as soon as possible, but in any event by 31 March 2020.

Shareholders who hold their shares through the Aberdeen Standard Investment Trust Share Plan, ISA and Children's Plan (Planholders) will continue to receive all documentation by post in hard copy form for the time being.  Aberdeen Asset Managers Limited, the plan manager, is currently assessing how to adopt more electronically-based communications within the savings plans, and planholders will be contacted directly with more detail in due course.

Outlook

There is still plenty to worry about and the world's media and stock markets are very good at worrying. The transition period on leaving the EU, President Trump, trade wars and tariffs, Prime Minister Johnson, the Middle East, the coronavirus, there are potential negative headlines everywhere you look. There are further obstacles to overcome this year: Trade deals with the EU, US and beyond will be difficult to negotiate in a tight timetable. The US Presidential election in November will dominate headlines.

Climate change is far more than just a one-year problem and those governments and companies that are not doing enough will come under ever-increasing pressure. Companies seen to be taking this issue seriously will be rewarded for their endeavours and the Manager's extensive dialogue with those in the portfolio aims to ensure that this is the case.

Irrespective of which way you leaned on Brexit or the UK General Election, the removal of political uncertainty is usually positive for stock markets. It is uncertainty that stops companies from committing to new capital expenditure plans, and uncertainty that makes consumers wait before spending. Now that the UK has left the European Union and now that the new UK Government has a very strong majority to take it through the next five years, it is likely that many of those spending decisions will be made sooner rather than later. Add to this the Government's announced commitment to infrastructure and regional spending plus the Bank of England's loose monetary conditions and it is not impossible that we will start to worry about the UK economy overheating before too long. That would be another negative but the journey from here to there would be interesting for investors. Very interesting.

Neil Rogan,

Chairman

14 February 2020

Performance	Year ended	3 years ended	5 years ended	10 years ended
(total return)	31 December 2019	31 December 2019	31 December 2019	31 December 2019
Net Asset Value per Ordinary share (par)A	26.8%	31.2%	52.3%	150.0%
Share price per Ordinary shareA	28.3%	40.8%	47.8%	165.9%
FTSE All-Share Index	19.2%	22.0%	43.8%	118.3%
A Considered to be an Alternative Performance Measure.
Source: Aberdeen Standard Investments, Morningstar & Lipper

INTERIM BOARD REPORT

Principal Risks and Uncertainties

The Board regularly reviews the principal risks and uncertainties which it has identified, together with the delegated controls it has established to manage the risks and address the uncertainties, and these are set out in detail on pages 9 to 11 of the Company's Annual Report for the year ended 30 June 2019 ("Annual Report 2019") which is available on the Company's website. The Annual Report 2019 also contains, in note 17 to the Financial Statements, an explanation of other risks relating to the Company's investment activities, specifically market risk, liquidity risk and credit risk, and a note of how these risks are managed.

Related Party Transactions

Under Generally Accepted Accounting Practice (UK Accounting Standards and applicable law), the Company has identified the Directors as related parties. No other related parties have been identified. There have been no related party transactions that have had a material effect on the financial position of the Company.

Going Concern

The factors which have an impact on the Company's status as a going concern are set out in the Going Concern section of the Directors' Report on page 35 of the Annual Report 2019. As at 31 December 2019, there had been no significant changes to these factors.

The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants. As at 31 December 2019, in addition to the £40m 10 year Senior Loan Notes, £6.3m of the Company's three-year £20m multi-currency revolving bank credit facility was drawn down.

The Directors are mindful of the principal risks and uncertainties disclosed above and, having reviewed forecasts detailing revenue and liabilities, they believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future, even in the event of potential dislocation during or after the transition period until 31 December 2020 which the UK entered following its departure from the EU on 31 January 2020.  Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis of accounting in preparing the Financial Statements.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

-         the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

-         the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

-         the Half-Yearly Board Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

The Half-Yearly Financial Report for the six months ended 31 December 2019 comprises the Half-Yearly Board Report, the Directors' Responsibility Statement and the condensed set of Financial Statements.

For and on behalf of the Board

Neil Rogan,

Chairman

14 February 2020

MANAGER'S INVESTMENT REPORT

The portfolio outperformed the benchmark during the six months ended 31 December 2019 with the NAV per Ordinary share rising by 9.0% compared to an increase in the FTSE All-Share Index of 5.5% (all figures calculated on a total return basis).

The robust level of outperformance reflected two broad themes in the portfolio. Firstly, our high quality domestically-oriented mid cap companies (including holdings such as Countryside Properties, Howden Joinery, Assura and Close Brothers) performed strongly following the Prime Minister's agreement with the European Union for a revised Withdrawal Agreement agreed in October and then again following the General Election result in December. Secondly, the corollary of this was the underperformance of some of the largest companies in the market (including Shell, BP and HSBC) in which the portfolio is underweight.

	Contribution to
Top 5 Contributors	Relative Return
Countryside Properties	1.0%
Royal Dutch Shell	0.9%
HSBC Holdings	0.5%
Howden Joinery	0.3%
Assura	0.3%

	Detraction from
Top 5 Detractors	Relative Return
BHP Group	-0.3%
Telenor	-0.2%
British American Tobacco	-0.2%
Barclays	-0.2%
AstraZeneca	-0.2%

Our trading activity reflected no particularly strong dynamic other than a focus on high quality companies, albeit some with transient issues which had provided an opportunity, with attractive valuations which are preferably under-appreciated by the market.

We added seven new holdings to the portfolio. The first was Convatec, a mid cap medical devices company with a strong position in wound and ostomy care. The company has suffered from mostly self-inflicted issues which we believe the management can cure allowing the potential for the company to take greater advantage of its attractive end markets. The second purchase was Telenor, a good quality Scandinavian telecoms company with attractive emerging markets assets. The next new holding was Polypipe, a mid cap piping systems company where we believe the competitive position of the business and the regulatory growth drivers are under-appreciated. A modest holding in Mowi, a Norwegian supplier of sustainable salmon, was added to the portfolio. The company benefits from strong demand growth, diversified supply and an attractive dividend yield. We also purchased a small holding in Mondi, a large cap high quality cyclical paper company with a strong balance sheet, a conservative management team and with some interesting growth prospects.  A holding in mid cap National Express was introduced to the portfolio. The company looks attractively valued given a number of interesting growth drivers and opportunities to increase returns. Finally, a weak trading update at the end of the period provided an opportunity to purchase a modest holding in mid cap John Laing which through its investment and management of infrastructure and renewables projects has generated a long history of strong returns.

We increased exposure to a number of our existing holdings which we believe have high quality characteristics with attractive growth prospects including: Smith & Nephew; Close Brothers; SSE; WH Smith and Relx.

We sold six holdings during the period. Firstly, InterContinental Hotels Group which was sold given concerns over the relatively high gearing following the Six Senses acquisition, potential cyclical pressures and the relatively low dividend yield. Secondly, Nordea due to our lack of confidence in the sustainability of its dividend and the pressure on earnings from weak macroeconomic conditions and low interest rates. Thirdly, Hiscox was sold (prior to its profit warning) given concerns around weak trading and a more challenging competitive environment.  Fourthly, given a deterioration in quality and our lack of confidence in the company's strategy and its ability to maintain its dividend, the holding in Imperial Brands was sold. Fifthly, the holding in St James's Place was sold due to our concerns around a more challenging regulatory environment.  Finally, the holding in London Stock Exchange was sold following a period of very strong share price performance that had left the valuation somewhat stretched and the balance sheet relatively highly geared assuming the potential acquisition of Refinitiv is completed.

We took profits in a number of holdings that had performed strongly and where the valuation had started to look less attractive such as Marshalls, Aveva, Rentokil, Kone, Experian and Microsoft. A number of holdings were also reduced where we had concerns around more challenging trading conditions with the likelihood that growth would be subdued including Vodafone, HSBC and British American Tobacco.

We continued our judicious option-writing programme with a significant bias during the period towards call options. We continue to feel that the option writing strategy has been of benefit to the Company by diversifying and increasing the level of income generated and providing a good discipline for optimising our exposure to individual holdings.

Market and Economic Background

The UK equity market rose by 5.5% on a total return basis over the six month period. This completed a remarkably strong calendar year for the market with the index increasing by 19.2%. Despite worries around the impact of trade wars and protectionism resulting in anaemic global growth, political concerns regarding Brexit and a potential market-unfriendly Labour government, investors took comfort from the prospect of easier fiscal and monetary policy. In addition, the weakness of sterling in the first half of the year buoyed overseas earners and the strength of domestically-oriented companies in the last quarter of the calendar year provided a further fillip for the market.

Over the six month period in question at a sector level, the more defensive areas of the market such healthcare and utilities outperformed while the more economically sensitive areas such oil & gas and mining underperformed. The Mid Cap Index (with its greater exposure to domestic earnings) increased by 13.1% on a total return basis outperforming the FTSE 100 Index which increased by 2.7%.

UK GDP increased by 0.3% in the third quarter of 2019 and the first estimate for the fourth quarter of 2019 suggests flat growth. Although business investment and exports have been weak household consumption has remained robust. The result of the General Election should provide a greater degree of certainty and a number of surveys in the post-election period have confirmed an increase in confidence for both consumers and companies - we wait to see whether this will translate into an improvement in activity, remaining cognisant that downside risks include that trading arrangements remain uncertain and global growth is not particularly supportive. Throughout the period the Monetary Policy Committee ("MPC") voted to maintain base rate at 0.75% although in December two members voted to reduce interest rates on the basis that the economy was softer than expected, core inflation remain subdued and employment growth had slowed.  Since the period end the MPC has voted to maintain the base rate at 0.75%.

Overseas, recent data has suggested a stabilisation in the global economy helped by central banks loosening monetary policy and early signs of a thaw in the US-China trade war, as well as a reduction in the likelihood of a Brexit dislocation.  Having cut interest rates three times during period, the US Federal Reserve has signalled that it has no plans to change rates during 2020. Although US consumer activity has remained robust helped by a solid labour market backdrop, manufacturing data, business investment and exports were weak over the period prompting the reduction in interest rates. Eurozone economic activity has also been weak with measures of industrial activity, business confidence and trade volumes depressed. The main emerging markets have demonstrated somewhat differing trends over the period with a slowdown in growth in China, despite efforts to stimulate the economy, and a similar picture in India with weakness in the consumer sector. In Brazil and Russia activity has stabilised following the slowdown earlier in the calendar year.

In the shorter term, the impact of the emerging coronavirus is uncertain. However, looking further forward, the United States' presidential election has the potential to offer the American electorate a broad spectrum of candidates with differing economic visions and will influence the future direction of US trade policy with China. For the UK, future trading relationships will be dependent on the outcome of negotiations with the US and EU but reaching agreements for these are likely to be fraught with difficulty. The new Chancellor of the Exchequer does have the option to stimulate the economy with a programme of fiscal easing and infrastructure spending which has the potential to provide a significant tailwind for future growth - the extent that he wishes to pursue this will become clearer in the Budget next month.

Charles Luke and Iain Pyle,
Aberdeen Asset Managers Limited
Investment Manager

14 February 2020

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

		Six months ended
		31 December 2019
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains/(losses) on investments		-	42,918	42,918
Currency gains/(losses)		-	139	139
Income	2	11,412	-	11,412
Investment management fees	4, 13	(410)	(956)	(1,366)
Administrative expenses		(607)	-	(607)
		_________	_________	_________
Net return before finance costs and taxation		10,395	42,101	52,496
Finance costs		(170)	(396)	(566)
		_________	_________	_________
Net return before taxation		10,225	41,705	51,930
Taxation	5	(25)	-	(25)
		_________	_________	_________
Net return after taxation		10,200	41,705	51,905
		_________	_________	_________
Return per Ordinary share (pence)	6	15.4	63.1	78.5
		_________	_________	_________
The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are both prepared under guidance issued by the Association of Investment Companies.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Condensed Statement of Comprehensive Income.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the condensed financial statements.

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited) (Cont'd)

		Six months ended
		31 December 2018
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains/(losses) on investments		-	(53,589)	(53,589)
Currency gains/(losses)		-	(107)	(107)
Income	2	10,287	-	10,287
Investment management fees	4, 13	(392)	(914)	(1,306)
Administrative expenses		(585)	-	(585)
		_________	_________	_________
Net return before finance costs and taxation		9,310	(54,610)	(45,300)
Finance costs		(174)	(406)	(580)
		_________	_________	_________
Net return before taxation		9,136	(55,016)	(45,880)
Taxation	5	(85)	-	(85)
		_________	_________	_________
Net return after taxation		9,051	(55,016)	(45,965)
		_________	_________	_________
Return per Ordinary share (pence)	6	13.7	(83.0)	(69.3)
		_________	_________	_________

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF FINANCIAL POSITION (unaudited)

		As at	As at
		31 December 2019	30 June 2019
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		640,922	602,636
Current assets
Other debtors and receivables		3,561	7,982
Cash and cash equivalents		30,354	27,171
		_________	_________
		33,915	35,153
		_________	_________
Creditors: amounts falling due within one year
Derivative financial instruments		(335)	-
Other payables		(1,278)	(4,142)
Bank loans	7	(6,336)	(6,601)
		_________	_________
		(7,949)	(10,743)
		_________	_________
Net current assets		25,966	24,410
		_________	_________
Total assets less current liabilities		666,888	627,046
Creditors: amounts falling due after one year
2.51% Senior Loan Notes	7	(39,898)	(39,896)
		_________	_________
Net assets		626,990	587,150
		_________	_________
Share capital and reserves
Called-up share capital	8	17,148	17,148
Share premium account		24,020	24,020
Capital redemption reserve		4,997	4,997
Capital reserve		557,686	515,981
Revenue reserve		23,139	25,004
		_________	_________
Equity shareholders' funds		626,990	587,150
		_________	_________
Net asset value per Ordinary share (pence)	9
Debt at par value		948.4	887.8
		_________	_________
The accompanying notes are an integral part of the condensed financial statements.

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF CHANGES IN EQUITY (unaudited)

Six months ended 31 December 2019
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2019	17,148	24,020	4,997	515,981	25,004	587,150
Net return after tax	-	-	-	41,705	10,200	51,905
Dividends paid (note 3)	-	-	-	-	(12,065)	(12,065)
	_______	_______	_______	_______	_______	_______
Balance at 31 December 2019	17,148	24,020	4,997	557,686	23,139	626,990
	_______	_______	_______	_______	_______	_______
Six months ended 31 December 2018
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2018	17,148	24,020	4,997	500,887	23,877	570,929
Net return after tax	-	-	-	(55,016)	9,051	(45,965)
Buyback of Ordinary shares for treasury	-	-	-	(4,355)	-	(4,355)
Dividends paid (note 3)	-	-	-	-	(6,131)	(6,131)
	_______	_______	_______	_______	_______	_______
Balance at 31 December 2018	17,148	24,020	4,997	441,516	26,797	514,478
	_______	_______	_______	_______	_______	_______
The accompanying notes are an integral part of the condensed financial statements.

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF CASH FLOWS (unaudited)

		Six months ended	Six months ended
		31 December 2019	31 December 2018
	Notes	£'000	£'000
Operating activities
Net return before finance costs and taxation		52,496	(45,300)
Increase in accrued expenses		432	231
Overseas withholding tax		(50)	(84)
Dividend income		(10,286)	(9,251)
Dividends received		10,384	10,017
Interest income		(79)	(42)
Interest received		81	41
Interest paid		(571)	(581)
Amortisation of Loan Notes		2	6
Foreign exchange (gains)/losses on loans		(234)	200
(Gains)/losses on investments		(42,918)	53,589
Increase in other debtors		(168)	(6)
Stock dividends included in investment income		(788)	(67)
		_______	_______
Net cash inflow from operating activities		8,301	8,753
Investing activities
Purchases of investments		(66,822)	(80,317)
Sales of investments		73,800	72,989
		_______	_______
Net cash inflow/(outflow) from investing activities		6,978	(7,328)
Financing activities
Dividends paid	3	(12,065)	(6,131)
Repayment of bank loans		(2,051)	(1,034)
Drawdown of bank loans		2,020	1,061
Buyback of Ordinary shares for treasury		-	(4,551)
		_______	_______
Net cash outflow from financing activities		(12,096)	(10,655)
		_______	_______
Increase/(decrease) in cash		3,183	(9,230)
		_______	_______
Analysis of changes in cash during the period
Opening balance		27,171	22,008
Increase/(decrease) in cash as above		3,183	(9,230)
		_______	_______
Closing balance		30,354	12,778
		_______	_______
The accompanying notes are an integral part of the condensed financial statements.

Notes to the Financial Statements

1.	Accounting policies
	Basis of preparation. The condensed financial statements have been prepared in accordance with Financial Reporting Standard ("FRS") 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in October 2019 (the AIC SORP). 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.
	The condensed financial statements have been prepared using the same accounting policies as the preceding annual financial statements.

2.	Income
		Six months ended	Six months ended
		31 December 2019	31 December 2018
		£'000	£'000
	Investment income
	UK dividends	8,515	8,189
	Overseas dividends	403	524
	Property income dividends	580	471
	Stock dividends	788	67
		_______	_______
		10,286	9,251
		_______	_______
	Other income
	Deposit interest	79	42
	Stock lending income	12	9
	Traded option premiums	1,035	985
		_______	_______
		1,126	1,036
		_______	_______
	Total income	11,412	10,287
		_______	_______

3.	Dividends. Dividends paid on Ordinary shares deducted from the revenue reserve:
		Six months ended	Six months ended
		31 December 2019	31 December 2018
		£'000	£'000
	2018 final dividend - 9.25p	-	6,131
	2019 final dividend - 10.00p	6,611	-
	2020 first interim dividend - 8.25p	5,454	-
		_______	_______
		12,065	6,131
		_______	_______
	A second interim dividend for 2020 of 8.25p (2019 - 8.00p) will be paid on 20 March 2020 to shareholders on the register on 21 February 2020. The ex-dividend date is 20 February 2020.
	A third interim dividend for 2020 of 8.25p (2019 - 8.00p) will be paid on 19 June 2020 to shareholders on the register on 22 May 2020. The ex-dividend date is 21 May 2020.

4.	Management fee and finance costs. The management fee and finance costs are as reported in the Annual Report 2019 being a tiered fee based on net assets and calculated as follows:
	Fee rate	Net
	per annum	assets	£'million
	0.55%	less than	350
	0.45%	within the range	350-450
	0.25%	greater than	450
	With effect from 1 July 2018, the management fees and finance costs are charged 70% to capital and 30% to revenue (previously 50% to capital and 50% to revenue).

5.	Taxation. The expense for taxation reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The estimated annual corporation tax rate used for the year to 30 June 2020 is an effective rate of 18.5% (2019 - 19%).
	During the period the Company suffered withholding tax on overseas dividend income of £25,000 (31 December 2018 - £85,000).

6.	Return per Ordinary share
		Six months ended		Six months ended
		31 December 2019		31 December 2018
		£'000	p	£'000	p
	Revenue return	10,200	15.4	9,051	13.7
	Capital return	41,705	63.1	(55,016)	(83.0)
		_______	_______	_______	_______
	Total return	51,905	78.5	(45,965)	(69.3)
		_______	_______	_______	_______
	Weighted average number of Ordinary shares in issue		66,110,413		66,302,291
			_______		_______

7.	Secured Senior Loan Notes and bank loans. The Company has in issue £40,000,000 of 10 year Senior Loan Notes at a fixed rate of 2.51%. Interest is payable in half yearly instalments in May and November and the Loan Notes are due to be redeemed at par on 8 November 2027. The Loan Notes are secured by a floating charge over the whole of the assets of the Company. The Company has complied with the Note Purchase Agreement that the ratio of net assets to gross borrowings will be greater than 3.5:1 and that net assets will not be less than £275,000,000.
	The fair value of the Senior Loan Notes as at 31 December 2019 was £40,145,000 (30 June 2019 - £40,138,000), the value being calculated by aggregating the expected future cash flows discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time.
	At 31 December 2019 the Company had drawn down £6,336,000 (30 June 2019 - £6,601,000) of its £20,000,000, 3 year unsecured multi-currency revolving bank credit facility agreement with Scotiabank Europe PLC committed until 6 November 2020. As at 31 December 2019 the Company had drawn down the following amounts from the facility:
		31 December 2019		30 June 2019
		Currency	£'000	Currency	£'000
	Euro 900,000 at an all-in rate of 0.85%	900,000	763	3,200,000	2,863
	Swiss Franc 3,300,000 at an all-in rate of 0.85%	3,300,000	2,572	3,360,000	2,708
	US Dollar 1,600,000 at an all-in rate of 2.58975%	1,600,000	1,208	1,311,000	1,030
	Danish Krone 9,000,000 at an all-in rate of 0.85%	9,000,000	1,020	-	-
	Norwegian Krone 9,000,000 at an all-in rate of 2.50%	9,000,000	773	-	-
			_______		_______
			6,336		6,601
			_______		_______

8.	Called up share capital
		Six months ended	Year ended
		31 December 2019	30 June 2019
	Ordinary shares of 25p each: publicly held
	Opening balance	66,110,413	66,672,313
	Buyback for treasury	-	(561,900)
		_______	_______
		66,110,413	66,110,413
		_______	_______
	Ordinary shares of 25p each; held in treasury
	Opening balance	2,483,045	1,921,145
	Buyback for treasury	-	561,900
		_______	_______
		2,483,045	2,483,045
		_______	_______

9.	Net asset value. The net asset value per Ordinary share and the net asset value attributable to the Ordinary shares at the end of the period follow. These were calculated using 66,110,413 (30 June 2019 - same) Ordinary shares in issue at the period end (excluding treasury shares).
			31 December 2019		30 June 2019
			Net Asset Value		Net Asset Value
			Attributable		Attributable
		£'000	pence	£'000	pence
	Net asset value - debt at par	626,990	948.4	587,150	888.1
	Add: Amortised cost of 2.51% Senior Loan Notes	39,898	60.3	39,896	60.4
	Less: Fair value of 2.51% Senior Loan Notes	(40,145)	(60.7)	(40,138)	(60.7)
		_______	_______	_______	_______
	Net asset value - debt at fair value	626,743	948.0	586,908	887.8
		_______	_______	_______	_______

10.	Transaction costs. During the period, 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 Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		31 December 2019	31 December 2018
		£'000	£'000
	Purchases	281	402
	Sales	26	26
		_______	_______
		307	428
		_______	_______

11.	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 fair value hierarchy has 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 Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
				Level 1	Level 2	Level 3	Total
	As at 31 December 2019		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	640,922	-	-	640,922
	Financial liabilities at fair value through profit or loss
	Derivatives		b)	(189)	(146)	-	(335)
				_______	_______	_______	_______
	Net fair value			640,733	(146)	-	640,587
				_______	_______	_______	_______
				Level 1	Level 2	Level 3	Total
	As at 30 June 2019		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	602,636	-	-	602,636
				_______	_______	_______	_______
	Net fair value			602,636	-	-	602,636
				_______	_______	_______	_______
	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 observable market inputs on an exchange traded basis and therefore has been included in Fair Value Level 1.
		The fair value of the Company's investments in Over the Counter Options (where the underlying equities are also held) has been determined using observable market inputs other than quoted prices of the underlying equities (which are included within Fair Value level 1) and therefore determined as Fair Value Level 2.
		All other financial assets and liabilities of the Company are included in the Condensed Statement of Financial Position at their book value which in the opinion of the Directors is not materially different from their fair value.

12.	Analysis of changes in net debt
		At				At
		30 June 2019	Currency differences	Cash flows	Non-cash movements	31 December 2019
		£000	£000	£000	£000	£000
	Cash and cash equivalents	27,171	(95)	3,278	-	30,354
	Debt due within one year	(6,601)	234	31	-	(6,336)
	Debt due after one year	(39,896)	-	-	(2)	(39,898)
	Amounts (due to)/from brokers	1,188	-	(1,532)	-	(344)
		_______	_______	_______	_______	_______
	Total	(18,138)	139	1,777	(2)	(16,224)
		_______	_______	_______	_______	_______
		At				At
		30 June 2018	Currency differences	Cash flows	Non-cash movements	31 December 2018
		£000	£000	£000	£000	£000
	Cash and cash equivalents	22,008	93	(9,323)	-	12,778
	Debt due within one year	(6,351)	(200)	(27)	-	(6,578)
	Debt due after one year	(39,884)	-	-	(6)	(39,890)
	Amounts (due to)/from brokers	2,975	-	(2,975)	-	-
		_______	_______	_______	_______	_______
	Total	(21,252)	(107)	(12,325)	(6)	(33,690)
		_______	_______	_______	_______	_______

13.	Transactions with the Manager. The Company has delegated the provision of investment management, secretarial, accounting and administration and promotional services to Aberdeen Standard Fund Managers Limited ("ASFML" or the "Manager").
	The amounts charged for the period are set out below:
		Six months ended	Six months ended
		31 December 2019	31 December 2018
		£'000	£'000
	Management fees	1,366	1,306
	Promotional activities	255	240
	Secretarial fees	45	45
		_______	_______
		1,666	1,591
		_______	_______
	The amounts payable at the period end are set out below:
		Six months ended	Six months ended
		31 December 2019	31 December 2018
		£'000	£'000
	Management fees	462	424
	Promotional activities	178	120
	Secretarial fees	45	23
		_______	_______
		685	567
		_______	_______
	No fees are charged in the case of investment managed or advised by the Standard Life Aberdeen PLC group. There was one commonly managed fund held in the portfolio during the six months to 31 December 2019 (2018 - one). The management agreement may be terminated by either party on the expiry of three months written notice. On termination the Manager would be entitled to receive fees which would otherwise have been due up to that date.

14.	Segmental Information. 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.

15.

The financial information in this report does not comprise statutory accounts within the meaning of Section 434 - 436 of the Companies Act 2006. The financial information for the year ended 30 June 2019 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and contained no statement under Section 498 of the Companies Act 2006.

16.	This Half-Yearly Financial Report was approved by the Board on 14 February 2020.

ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
Total return. Total return is considered to be an alternative performance measure. Share price and NAV total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-ended and closed-ended competitors, and the FTSE All-Share Index, respectively.
		Share
		Price	NAV
Opening at 1 July 2019	a	850.0p	888.1p
Closing at 31 December 2019	b	896.0p	948.4p
Price movements	c=(b/a)-1	5.4%	6.8%
Dividend reinvestment{A}	d	2.3%	2.2%
		_______	_______
Total return	c+d	7.7%	9.0%
		_______	_______
{A} Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend.
Discount to net asset value per Ordinary share. The discount is the amount by which the share price is lower than the net asset value per share, expressed as a percentage of the net asset value.
		31 December 2019	30 June 2019
NAV per Ordinary share (p)	a	948.4	888.1
Share price (p)	b	896.0	850.0
Discount	(b-a)/a	-5.5%	-4.3%
		_______	_______
Dividend yield. The annual dividend of 34.00p per Ordinary share (30 June 2019 - 34.00p) divided by the share price of 896.00p (30 June 2019 - 850.00p), expressed as a percentage.
		31 December 2019	30 June 2019
Dividends per share (p)	a	34.0	34.0
Share price (p)	b	896.0	850.0
		_______	_______
Dividend yield	a/b	3.8%	4.0%
		_______	_______
Net gearing. Net gearing measures the total borrowings less cash and cash equivalents divided by shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due to and from brokers at the year end as well as cash and cash equivalents.
		31 December 2019	30 June 2019
Borrowings (£'000)	a	46,234	46,497
Cash (£'000)	b	30,354	27,171
Amounts due to brokers (£'000)	c	344	3,326
Amounts due from brokers (£'000)	d	-	4,514
Shareholders' funds (£'000)	e	626,990	587,150
Net gearing	(a-b+c-d)/e	2.6%	3.1%
Ongoing charges. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year. The ratio for 31 December 2019 is based on forecast ongoing charges for the year ending 30 June 2020.
		31 December 2019	30 June 2019
Investment management fees (£'000)	a	2,766	2,624
Administrative expenses (£'000)	b	1,088	1,013
Less: non-recurring charges{A} (£'000)	c	(105)	(20)
Ongoing charges (£'000)	a+b+c	3,749	3,617
Average net assets (£'000)	d	608,761	553,095
Ongoing charges ratio	(a+b+c)/d	0.62%	0.65%
{A} Includes promotional activities and professional fees.
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations, which includes financing and transaction costs.

INVESTMENT PORTFOLIO - AS AT 31 DECEMBER 2019

			Total
		Valuation	investments
Investment	Sector	£'000	%
AstraZeneca	Pharmaceuticals & Biotechnology	22,400	3.5
GlaxoSmithKline	Pharmaceuticals & Biotechnology	22,380	3.5
Diageo	Beverages	22,246	3.5
Relx	Media	20,528	3.2
Countryside Properties	Household Goods & Home Construction	20,034	3.1
Close Brothers	Banks	19,544	3.1
Aveva	Software & Computer Services	18,595	2.9
BHP Group	Mining	17,928	2.8
National Grid	Gas, Water & Multi-utilities	17,865	2.8
Unilever	Personal Goods	17,702	2.7
Top ten investments		199,222	31.1
Royal Dutch Shell	Oil & Gas Producers	17,591	2.7
BP	Oil & Gas Producers	17,499	2.7
Inchcape	General Retailers	16,000	2.5
Prudential	Life Assurance	15,848	2.5
Roche Holdings	Pharmaceuticals & Biotechnology	15,836	2.5
Rio Tinto	Mining	14,370	2.2
Assura	Real Estate Investment Trusts	14,364	2.2
Standard Chartered	Banks	13,916	2.2
SSE	Electricity	13,213	2.1
Microsoft	Software & Computer Services	13,195	2.1
Top twenty investments		351,054	54.8
WH Smith	General Retailers	12,889	2.0
Associated British Foods	Food Producers	12,076	1.9
Experian	Support Services	10,915	1.7
Smith & Nephew	Health Care Equipment & Services	10,304	1.6
British American Tobacco	Tobacco	10,011	1.6
Euromoney Institutional Investor	Media	9,999	1.6
Croda International	Chemicals	9,971	1.5
Big Yellow Group	Real Estate Investment Trusts	9,907	1.5
Howden Joinery	Support Services	9,878	1.5
Ashmore Group	Financial Services	9,618	1.5
Top thirty investments		456,622	71.2
Rentokil Initial	Support Services	9,233	1.4
Compass Group	Travel & Leisure	9,222	1.4
Bodycote	Industrial Engineering	9,095	1.4
Telecom Plus	Fixed Line Telecommunications	9,000	1.4
Nestle	Food Producers	8,707	1.4
Kone	Industrial Engineering	8,698	1.4
LondonMetric Property	Real Estate Investment Trusts	8,468	1.3
Novo-Nordisk	Pharmaceuticals & Biotechnology	7,455	1.2
VAT Group	Industrial Engineering	7,345	1.2
M&G	Financial Services	6,717	1.1
Top forty investments		540,562	84.4
Telenor	Mobile Telecommunications	6,694	1.1
HSBC Holdings	Banks	6,606	1.0
Convatec	Health Care Equipment & Services	6,572	1.0
Standard Life UK Smaller Companies Trust	Equity Investment Instruments	6,532	1.0
Weir Group	Industrial Engineering	6,415	1.0
Marshalls	Construction & Materials	6,399	1.0
Polypipe	Construction & Materials	5,787	0.9
Mondi	Forestry & Paper	5,399	0.9
Signature Aviation	Industrial Transportation	5,382	0.8
XP Power	Electronic & Electrical Equipment	5,250	0.8
Top fifty investments		601,598	93.9
National Express	Travel & Leisure	5,053	0.8
Diploma	Support Services	4,959	0.8
Workspace Group	Real Estate Investment Trusts	4,728	0.7
Chesnara	Life Assurance	4,614	0.7
Hansteen	Real Estate Investment Trusts	4,538	0.7
Sirius	Real Estate Investment Services	4,290	0.7
Scandinavian Tobacco	Tobacco	4,153	0.6
Mowi	Food Producers	3,217	0.5
Hostelworld	Travel & Leisure	1,926	0.3
Vodafone	Mobile Telecommunications	1,503	0.2
Top sixty investments		640,579	99.9
John Laing	Financial Services	343	0.1
Total investments		640,922	100.0

 

END

 

 

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