Annual Financial Report/Final Results
MURRAY INTERNATIONAL TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2012
1. CHAIRMAN'S STATEMENT
Highlights
· Net Asset Value Total Return of 14.0%
· Benchmark Total Return of 11.4%
· Total Ordinary dividend increased by 9.5% compared with 2011
· Shares traded at a premium to net asset value per Ordinary share for the whole year
· £99m of new shares issued at a premium during the year
Performance
Positive capital gains over the period represented a significant and welcome recovery for global equity markets following last year's negative returns. With Western Central Banks uniformly creating liquidity through expanding sovereign balance sheets, equity prices were well supported. The difficult economic reality and decelerating corporate profit growth induced by austerity and deleveraging had little restraining influence on this wave of positive market sentiment. The total return on net asset value of 14.0% was ahead of the return of the benchmark index of 11.4%, and the share price total return of 19.0% reflected a slight expansion of the premium. The Investment Manager's Review in the Report contains an attribution analysis which shows the factors affecting net asset performance. The key positive influences were a significant overweight position in Asia ex Japan and excellent stock selection in Latin America.
Background
It is rational to assume that positive financial returns should be reflective of improving underlying economic fundamentals, but such logic offered no insight into financial returns in 2012. Weighed down by severe indebtedness and anaemic growth, most countries in the Developed World, at best, stagnated. Further contractions in living standards negatively impacted all consumer orientated economies as households attempted to rebuild their over-stretched balance sheets. Policy inertia also prevailed. Political brinkmanship with fiscal budget responsibilities in the United States was an example of such inertia. In Europe, where social tensions escalated in response to painful austerity measures, previously stated commitments to balance the books softened. Pressures to avoid systemic collapse produced a more accommodating tone towards debt repayment. Recurring periods of heightened uncertainty made for a rollercoaster ride for stock markets. Early year strength succumbed to summer weakness as risk aversion spiked higher, but once concerted quantitative easing took hold, liquidity propelled markets upwards towards year end. Perceived higher growth in Emerging Markets led to superior performance in numerous Asian markets, whilst Mexico stood out in capital return terms from Latin America. With corporate profit growth generally lagging broad market gains, valuations have become more expensive. As is often the case with liquidity driven markets, poorer quality financial assets experienced the strongest gains, but the Trust's positive total return from its portfolio of high quality equities and bonds was ahead of long term norms in both absolute and relative terms.
Dividends
In 2012 Trade Weighted Sterling appreciated by 4.0% thereby reducing the sterling value on translation of revenues arising from our 86% holding of non-UK assets. Nevertheless we were able to continue the trend of increasing the level of dividends paid and three interim dividends of 9.0p were declared (2011: three interims of 8.0p). Your Board is now recommending a final dividend of 13.5p (2011: 13.0p) which, subject to the approval of shareholders at the Annual General Meeting, will be paid on 16 May 2013 to shareholders on the register on 5 April 2013. Subject to the approval of the final dividend, the total Ordinary dividend for the year will amount to 40.5p, an increase of 9.5% from last year (2011: 37.0p). B Ordinary shares will receive their capitalisation issue of B Ordinary shares at the same time as each dividend is paid. Accordingly, subject to approval at the Annual General Meeting, B Ordinary shareholders will be issued on 16 May 2013 with new B Ordinary shares equivalent in Net Asset Value to the recommended final dividend for the year just ended.
Share issuance of £99 million at a premium occurred during the year. As I mentioned in my Interim Board Report, such issuance can have a dilutive effect upon the Company's earnings as the dividend paid on newly issued shares may not have been earned in full over the year. This is not always the case but depends, amongst other things, upon the timing of issuance and yield obtained on the stocks in which we subsequently invest. We seek to mitigate the impact of any subsequent revenue dilution by paying quarterly dividends, investing the proceeds of new shares promptly and by not issuing shares during the period immediately before a dividend is paid. The objective is to ensure that, in terms of overall returns to Shareholders, the premium received on issuing new shares more than covers any revenue dilution during the period. The Board tracks these effects and shareholders were comfortably advantaged in total return terms in the year under review through the operation of the share issuance programme. This is demonstrated in the attribution analysis in the Annual Report. We continuously review the merits of share issuance and the premium to net asset value at which this is conducted. Our primary concern in operating the issuance programme is to ensure that it remains in shareholders' best overall interests to continue with this activity.
Issue of New Shares
At the Annual General Meeting held in April 2012 shareholders renewed the annual authority to issue up to 10% of the Company's issued share capital for cash at a premium to the prevailing asset value at the time of each issue. During the year we have continued to see a strong demand for the Company's shares resulting in the issue of 10.146 million new Ordinary shares representing 9.1% of the Ordinary shares in issue at the start of the year. Given the continuing demand for the Company's shares, the Board will be seeking approval from shareholders to renew the authority to issue new shares for cash in 2013. As in previous years, to avoid diluting the asset value of existing shareholders, new shares will only be issued at a premium to net asset value. Resolutions to this effect will be proposed at the Annual General Meeting and the Directors strongly encourage shareholders to support this proposal.
Gearing
At the year end total borrowings amounted to the equivalent of £146.0 million all drawn in Yen representing 10.1% of net assets. At the year end the proportion of net assets invested in equities was 104% (2011 - 105%).
Directorate
As I stated in the Half-Yearly Report last August, Ms Marcia Campbell joined the Board in April 2012 and I am now pleased to report that Ms Campbell has agreed to become Chairman of the Audit Committee with effect from the end of the AGM on 11 April 2013. Mr Shedden will stand down as Chairman of the Audit Committee from that date but will remain a member of the Audit Committee.
Annual General Meeting
This year's Annual General Meeting will be held in Glasgow on 11 April 2013 at 12.30 p.m. at the Radisson Blu Hotel, 301 Argyle Street, Glasgow G2 8DL. As at previous AGMs, there will be a presentation from the Manager and an opportunity to meet the Directors and Manager and ask questions. I would be grateful if you would confirm your attendance by completing the notice that will accompany the Annual Report and returning it together with an indication of any particular questions.
Outlook
Reviewing a year when so much happened yet arguably so little changed, our deep rooted concerns over the global investment backdrop remain unchanged. The bank and sovereign bailouts facilitated by quantitative easing in the Developed World leaves a growth restraining debt legacy that will persist for years. It is unclear what the impact on Central Bank credibility and integrity will be in the long run from these policies. Furthermore there is little in economic and financial history to guide judgments about the effects on currencies and capital markets of policies implemented on this scale. The challenge going forward will be to consolidate and preserve capital against such an uncertain backdrop, whilst simultaneously securing sustainable income growth. Sound balance sheets and strong business models characterise the holdings in the Trust's portfolio. These qualities, in combination with diversified sources of income growth, will continue to be features of the portfolio. We believe this approach offers the best formula for navigating the current circumstances.
Kevin Carter
Chairman
26 February 2013
2. MANAGER'S REVIEW
Background
"Not worth the paper it is written on". The derogatory inference of such diction translates into most languages around the world. A university degree awarded without passing exams, a licence granted where standards are not met or a certificate of excellence when only mediocrity prevails are familiar symptoms of the same disease. All compromise integrity and ultimately erode trust. Unfortunately such universal recognition of basic common sense remained distant from Western politicians and policymakers as they intensified their efforts to convert their currencies into confetti. For, without doubt, the process of quantitative easing, or printing money in straight-talking vernacular, dominated the economic landscape over the past twelve months. Extolling the virtues of fiscal prudence and economic austerity, Central Banks conducted the rhetoric of resolve and restraint, but behind the scenes the monetary printing presses provided the orchestral support for evolving events. Seemingly neither concerned nor embarrassed by flooding financial markets with extra liquidity, government balance sheets deteriorated further. Effectively paralysed by political campaigning in a Presidential election year, American policymakers watched impotently as outstanding liabilities reached record highs and external funding options evaporated. The issuing entity of US government debt, namely the US Federal Reserve, increasingly became the only purchaser of US government debt. Extending experimentation with unorthodox monetary policy also prevailed in the UK, and in Japan where policymakers flooded their domestic economy with billions of extra Yen. Even German resolve was ultimately broken. Devoid of proven policy measures to address escalating insolvency concerns over member states, the European Central Bank finally reneged on previous promises and joined the global gang of monetary junkies. Growing social resentment towards austerity and reluctance to implement unpopular debt-reduction policies lay behind such softening attitudes of Western Finance Ministers. As the pain of deleveraging within democracies increasingly threatened political tenure, the easy option was embraced. 2012 witnessed worrying acceptance to go down this path for the debt-infested developed world. By year end, unorthodox policy in the form of quantitative easing was being trumpeted as the New Orthodoxy. For any rational observer, such arrogance invokes unreserved revulsion. History dictates that currency debasement is always the end result for persistent printing of money because all respect, integrity and trust in the paper it is written on are eventually lost. Such economic vandalism must stop, and soon, if credibility is to be restored to the Western financial system. Thankfully not all nations displayed such economic irresponsibility. Prudent fiscal and monetary policy management enabled numerous countries in Asia and Latin America to prosper. Financed by abundant domestic savings and strong direct investment inflows, long term competitive fundamentals continued to improve. Here, traditional macro-economic management prevailed, ensuring positive longer term stability for rising real incomes, consumption and share of global output. Such trends again proved beneficial for overall investment returns.
Unperturbed by uncertainty and potentially destabilising debt dynamics, stock markets generally thrived on the rising wave of global liquidity. Regionally, Asia recorded the largest gains in Sterling terms as investors poured money into perceived growth assets. Somewhat ironically this occurred against a backdrop of slowing GDP growth for many Asian economies, but with market returns of +25%, +23% and +18% from Singapore, Hong Kong and China respectively, hope triumphed over reality. Artificial suppression of US and UK bond yields forced savers to seek out higher returning assets, contributing to above average returns of 11% and 10% from North America and UK equities. The quality underlying European equity returns was not great as rising liquidity fuelled speculation that many of Europe's most heavily indebted companies stood better chances of survival. Preferring to hold quality companies in defensive businesses cost relative performance, but solid capital gains enhanced overall returns. Domestic stock market strength in Japan was largely offset by currency weakness, resulting in yet another disappointing year for Japanese returns in Sterling terms. The +3.3% gain proved one of the lowest in the world. Total return diversity in Latin America witnessed one of the widest spreads ever recorded. Sustainable, improving domestic macro-economic fundamentals in Mexico undoubtedly contributed to the domestic market's rise of +24%, whereas slowing global growth and periodic rising risk aversion pressurised Brazilian equities to decline -4% in Sterling terms. Latin America's overall regional return of under 3% proved very disappointing relative to strong prevailing corporate fundamentals.
Performance
The Net Asset Value Total Return for the year to 31 December 2012 with net dividends reinvested was 14.0% compared with a return on the benchmark of 11.4%. A full attribution analysis is given in the Annual Report which details the various influences on portfolio performance. In summary, of the 175 basis points (before expenses) of performance above the benchmark, asset allocation added 2 basis points and stock selection contributed 173 basis points. Structural effects relating to the fixed income portfolio and gearing, net of borrowing and hedging costs, added a further 84 basis points of positive relative performance.
USA
In the operational and policy vacuum that accompanies a US Presidential election year, fundamental economic improvement is usually unlikely. From this perspective, the past twelve months did not disappoint. Eight years have elapsed since US house prices peaked and started falling yet recovery remained as elusive as ever. Unemployment remained stubbornly above eight per cent for the fourth consecutive year and real income growth contracted to its lowest level in a decade. Orthodox economic policy remained paralysed and redundant. Following a decade of excessive monetary and fiscal abuse, the world's biggest debtor nation edged closer towards insolvency as politicians repeatedly shirked budget responsibilities. Procrastination ruled as gridlock prevailed, keeping investors on edge throughout. The Achilles heel of fiscal sustainability centred on dwindling sources of foreign capital which previously financed debt liabilities amassed over forty years of running excessive budget and current account deficits. As ten year US Treasury bond yields declined to all time historical lows of 1.5%, financing from surplus foreign capital dried up. Without domestic savings to plug the gap, the Federal Reserve's Hobson's choice was to become buyer of last resort. Like vultures patiently waiting for a discarded carcass, the rating agencies looked set to savage US credit worthiness. In the event, further downgrades were not forthcoming…. for now! Unfortunately, in the absence of any fiscal retrenchment or consensual political will to resolve fundamental structural economic imbalances, greater uncertainty dominates the outlook going forward. Can America achieve meaningful fiscal adjustment without plunging the economy into recession? Will the $16.4 trillion debt ceiling be raised to accommodate such fiscal largesse? Can US sovereign debt withstand further downgrades without having a materially negative impact on domestic interest rates? Most important, how hard will such fiscal malaise impact growth, employment, confidence and US corporate profitability over the next few years. Patience is wearing thin and time is most certainly not on America's side. US investment exposure remained focused on truly international companies with significant earnings growth potential overseas. Within a North American regional context, a new position in Potash Corporation of Saskatchewan, the world's leading natural fertilizer company, was built up throughout the year.
UK
Economic inertia dominated the UK financial backdrop throughout 2012. Basking in smugness at Europe's pain, traditionalists sought solace in others discomfort, but as deleveraging gathered momentum, Europe's problem increasingly became the UK's problem. Given the similarity of debt-related structural weaknesses that exist, this was hardly surprising. Anaemic growth, declining living standards, high unemployment, bloated fiscal deficits and crippled banking systems are just some of the less salubrious characteristics Britain shares with its fellow Europeans. Unfortunately, all contributed to an undistinguished year for the UK economy. From an historical perspective, it proved very concerning indeed. UK base interest rates remained close to zero, the lowest level since the Bank of England's inception in 1694, some 319 years ago. Reflecting a stagnant economy, characterised by exhausted monetary policy and crippling debt-servicing obligations, responsible savers continued to be punished by the previous profligacy of others. Adding insult to injury, the largest trade deficit for decades provided evidence of slower export demand from Europe and inelasticity of rapidly rising energy imports. That Sterling stayed strong as external imbalances intensified was a mystery. The much publicised crusade to restore fiscal fundamentals yielded marginal improvements on yearly budget imbalances but the UK Plc's overall balance sheet expanded further. Total outstanding debt reached unprecedented levels, negatively impacted by the Monetary Policy Committee's obsession with printing money. Businesses struggled in such hostile conditions. Over fifty High Street retailers declared bankruptcy as trading conditions deteriorated. Exporters experienced margin erosion from fierce international price competition and households endured a torrid time as real disposable incomes were squeezed by higher food, energy and travel costs. Without growth, which for the beleaguered UK economy remains unforthcoming, an uncertain future in unfamiliar territory darkens investment prospects going forward. Portfolio exposure emphasised companies with extensive overseas earnings and growth potential, but overall cautiousness towards future prospects prevented any additional investment.
Europe
Previously labelled the epicentre of global systemic financial risk, the Eurozone surprised many sceptics by surviving intact for another twelve months. As sensational escape acts go, peripheral Europe's performance was nothing short of "Harry Houdini-esque" in proportions. Domestic bond markets in Spain, Portugal and Greece began the year discounting imminent default, yet somehow managed to survive. Their saviour proved to be a radical shift in direction of European Central Bank policy. German resilience crumbled as non-conventional bailout measures were introduced, completely contradicting previously held beliefs of thrift and prudence. Over one trillion Euros of "synthetic" liquidity was created through quantitative easing and unleashed upon the financial system. Designed to buy time for dysfunctional banks and insolvent sovereign debtors, such policy capitulation carried with it the passport to moral bankruptcy, yet dissenting voices were few and far between. Disorderly default was avoided, fears over Eurozone collapse subsided and some degree of functionality was restored to credit markets. But at what cost to the credibility of European policymakers and the promises they make? Whilst technocrats fought the fires threatening systemic financial meltdown, Rome, Madrid, Lisbon and Athens sometimes literally burned. An intensification of strikes, social unrest and violence reminded the watching world that punitive austerity does not sit comfortably with democracy. Deep social wounds reopened as unemployment reached record levels. Demands for less austerity and prolonged debt-servicing payment terms gathered momentum as union leaders, industrialists, academics and even the IMF publically voiced concerns over the severity of budget cuts. Clearly more imaginative thinking was, and still is, required on sustainable debt reduction over much longer timescales if economic progress is to be restored. Does democracy possess such patience? We will see. Not surprisingly confidence and sentiment towards Europe endured a torrid, roller-coaster ride as tensions ebbed and flowed. Market strength was significantly impacted by low quality financials recovering from the brink of extinction, so European portfolio performance lagged broader benchmarks. This was of little concern, since strategic focus was and will continue to be, on high quality companies such as Roche, Novartis and Nestlé where arguably macro-economic instability in Europe is less likely to be felt.
Latin America
With so much of the world suspended in macro-economic purgatory, it is comforting to reflect on a region where macro-economic orthodoxy prevails. In Latin America, active fiscal policy, active monetary policy and the credit cycle remained alive and well. Confidently negotiating a Presidential campaign and change of government in July, Mexican economic activity never missed a beat throughout. Guided by strong, independent Central Bank management, economic growth remained above trend, inflation stayed well under control, foreign exchange reserves climbed to record highs and sovereign bond yields trended lower. Financial market fiscal year returns showed the Mexican peso up 4% against Sterling and a +62% total return from portfolio exposure. Never as flamboyant nor extravert as many of its Latin American neighbours, Mexico again delivered a predictable result that the highly indebted developed world could only dream of. Potential energy sector reforms, proposals for a Free Trade Agreement with Brazil and transparent corporate earnings and dividend growth support interesting future investment opportunities. In Brazil, both monetary and fiscal policy remained in accommodative mode. The downward descent of interest rates continued unabated, improving the outlook for capital investment, bank lending and consumption. Commodity exports of iron ore and precious metals suffered from softening international demand, but fuelled by capital spending projects for the Football World Cup in 2014 and Olympics in 2016, infrastructure investment remained robust. Bouts of currency weakness and periodic, politically-induced risk aversion prevented positive financial returns in Sterling terms from Brazilian equities over the period but prospects are improving. Solid wage growth, near record employment levels, historically low interest rates and greater availability of credit suggest pro-cyclical forces are poised to gather momentum. Should the government adopt a more conciliatory attitude towards partially state-owned business interests, the picture may become even brighter. Either way, scope exists for corporate Brazil to surprise on the upside in 2013 in terms of earnings and dividends. Exposure was added to existing positions in Vale, one of the world's lowest-cost commodity producers, and Petrobras, Brazil's largest oil company. Strategic portfolio diversification through exposure to Latin America will remain a valued component of overall investment strategy going forward.
Japan and Asia
Uncertainty from enormous social and economic dislocations associated with the tsunami twenty four months ago still reverberated around Japanese society in 2012. The structural plight of Japan's deflationary economy deteriorated further following a brief period of respite from rebuilding and reconstruction. Economic growth declined, incomes and prices declined and exporters squealed as continued currency strength curbed their international competitiveness. Sustainable corporate profitability proved problematic to project against a backdrop of inflated comparisons with 2011's rebound. Corporate dividends remained essentially unchanged as companies contemplated an onerous and opaque outlook. Towards year end the Bank of Japan yielded to popular demands for action by flooding financial markets with increased liquidity through further debt monetisation (printing money). Such blatant policy manipulation in pursuit of a weaker Yen proved popular and successful in the short term, but carries with it great risk. Rising supply concerns coupled with rising bond yields could potentially destabilise the Japanese bond market. Given Japan's enormous outstanding public sector debt, funding risk from domestic savings could increasingly distort financial markets in future.
The scarcity of Western economic growth prompted many investors to focus on the East. Interpreting changing growth dynamics in China and India dominated macro-economic analysis, often to the detriment of progress being made elsewhere. Rising real incomes and consumption growth kept Malaysia, Thailand and Indonesia growing at rates not witnessed in the West since the 1950's! Sovereign wealth funds expanded from surplus savings, sovereign credit quality improved throughout the region and currencies remained competitive. The only real fly in the ointment was lower than expected corporate profit and dividend growth. Many Asian companies experienced margin pressure from intensely competitive global pricing. Weaker export markets in Europe and the United States negatively affected volumes, causing constraints on revenue growth. Asia's strict adherence to pay-out ratios on net earnings meant lower dividends from those companies worst affected. Despite this, equity markets rose strongly, based on increased liquidity and expanding valuations. Whilst partially justifiable on the basis that markets tend to "anticipate" better profits ahead, Asian equities are no longer cheap on an absolute or relative basis. The challenge for this year will be to secure both quality earnings and dividend growth at attractive prices.
Conclusion
Corruptio Optimi Pessima. "The worst of all is the corruption of the best". When sentiment towards an asset class becomes universally one dimensional, the dangers associated with change become extreme. To conventional wisdom it seems irrelevant that the United States and the UK possess the worst debt-related fundamentals ever in their history. To conventional wisdom these countries are perceived as the safest of safe havens, so never have their bond prices been so high and their bond yields so low. Yet never have they printed so much money with such blatant disregard for its integrity, nor possessed such hideously over-indebted fundamentals. What happens when such conventional wisdom of being perceived as "the best" wakes up to the reality of actually being amongst "the worst"? There is no precedent within fixed income history to assess the likely damage, but significant sums of money will be lost. Quite simply, sovereign bonds in the developed world appear ludicrously expensive relative to cripplingly negative fundamentals, yet no-one seems to care. A lethal cocktail of unparalleled levels of global debt and unparalleled global money printing, shaken and stirred by numerous financial indicators at multi-century highs/lows, suggests a global fixed income hangover is fast approaching. Perhaps the toughest investment strategy to implement going forward is how to preserve capital in a world of rising bond yields. That is the challenge for this year and beyond. Towards this end, gross assets will remain predominately exposed to equities, with continued emphasis on high quality companies. Balance sheet strength to fund internal growth and reward shareholders with increasing dividends remains extremely important for companies seeking to protect themselves from prevailing macro-economic hostilities. Such strategic exposure will remain at the core of capitalising on investment opportunities going forward.
Bruce Stout
Aberdeen Asset Managers Limited
Investment Manager
26 February 2013
3. BUSINESS REVIEW
A review of the Company's operations is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities, likely future developments of the business, recommended final dividend and details of the issue of new shares during the year by the Company. The major risks associated with the Company are detailed below and in note 19 to the financial statements. The Key Performance Indicators for the Company including NAV and share price information are in the Financial Highlights Section.
Results and Dividends
The total gain attributable to equity shareholders for the year amounted to £138.8 million.
A final dividend for the year ended 31 December 2011 of 13.0p per Ordinary share was paid on 16 May 2012. Interim dividends of 9.0p each were paid on 16 August 2012, 15 November 2012 and 18 February 2013 making a total distribution to Ordinary shareholders of £46.8 million. The Directors are recommending a final dividend for the year ended 31 December 2012 of 13.5p per Ordinary share payable on 16 May 2013 to holders of Ordinary shares on the register at close of business on 5 April 2013.
Whenever a cash dividend is paid on the Ordinary shares, a bonus issue of B Ordinary shares is made to the holders of B Ordinary shares. In connection with the final dividend the Directors will make a corresponding capitalisation issue of B Ordinary shares credited as fully paid. This capitalisation issue will be equivalent in asset value to the final dividend now recommended on the Ordinary shares but excluding any tax credit thereon. Subject to the approval of shareholders of the final dividend, definitive certificates in respect of the capitalisation issue will be posted on 16 May 2013. Fractional entitlements will be sold for the benefit of B Ordinary shareholders. The new B Ordinary shares will rank equally with the existing B Ordinary shares.
Principal Risks and Uncertainties
General
An investment in the shares is only suitable for investors who are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses which may arise therefrom (which may be equal to the whole amount invested). Such an investment should be seen as long term in nature and complementary to existing investments in a range of other financial assets.
Changes in economic conditions (including, for example, interest rates and rates of inflation), industry conditions, competition, changes in the law, political and diplomatic events and trends, tax laws and other factors can substantially and adversely affect the value of investments and therefore the Company's performance and prospects.
Past performance of the Company, and of investments managed by the Manager, is not necessarily indicative of future performance.
The Shares
The market value of, and the income derived from, the shares can fluctuate and, notwithstanding the Board's discount and premium control policy, may not always reflect the Net Asset Value per share. There can be no guarantee that any appreciation in the value of the Company's investments will occur and investors may not get back the full value of their investment. No assurance can be given that any sale of the Company's investments would realise proceeds which would be sufficient to repay any borrowings or provide funds for any capital repayment to shareholders. Shareholders will bear the rewards and risks of the success or otherwise of the Company's investments.
The market value of the shares, as well as being affected by their Net Asset Value, also takes into account their dividend yield and prevailing interest rates, supply and demand for the shares, market conditions and general investor sentiment.
Borrowings
The Company may incur borrowings for investment purposes. Whilst the use of borrowings should enhance the total return on the shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is falling, further reducing the total return on the shares. As a result, the use of borrowings by the Company may increase the volatility of the Net Asset Value and market price per share.
There is no guarantee that any borrowings of the Company would be refinanced on their maturity either at all or on terms that are acceptable to the Company.
Dividends
The Company will only pay dividends on the Ordinary shares (and a capitalisation issue for B Ordinary shares) to the extent that it has profits (including available reserves) available for that purpose, which will largely depend on the amount of income which the Company receives on its investments and the timing of such receipt. The amount of dividends payable by the Company may fluctuate.
If under UK law or accounting rules and standards applicable to the Company, there were to be a change to the basis on which dividends could be paid by companies, this could have a negative effect on the Company's ability to pay dividends.
Investment Objective and Strategy
There is no guarantee that the Company's investment objective will be achieved.
The Company may from time to time invest in other listed investment companies. As a consequence of these investments, the Company may itself be indirectly exposed to gearing through the borrowings from time to time of these other investment companies. The Company has a policy of not investing more than 15% of its gross assets in other listed investment companies. The Net Asset Value, which is a factor in determining the market value of the shares, will be linked to the underlying share price performance of any such other investment companies.
Debt Instruments
The Company invests in fixed interest investments issued by corporate bodies and sovereign issuers. Bonds are subject to credit, liquidity and interest rate risks and in the event of a default there is a risk that the Net Asset Value may be adversely affected. Adverse changes in the financial position of an issuer of bonds or in general economic conditions may impair the ability of the issuer to make payments of principal and interest or may cause the liquidation or insolvency of an issuer. There can be no assurance as to the levels of default and/or recoveries that may be experienced with respect to bonds. Debt instruments held by the Company may be affected by changes in market sentiment or changes in interest rates that will, in turn, result in increases and decreases in the market value of those instruments. When interest rates decline, the value of the Company's investments in fixed rate debt obligations can be expected to rise and, when interest rates rise or are expected to rise, the value of those investments can be expected to decline.
To the extent that the Company invests in sub-investment grade securities, the Company may realise a higher yield than the yield offered by investment grade securities, but investment in such securities involves a greater volatility of price and a greater risk of default by the issuers of such securities, with potential loss of interest payment and principal. Sub-investment grade securities will be subject, in the judgment of a ratings agency, to uncertainties in terms of their performance in adverse conditions and will be speculative with respect to an issuer's capacity to meet interest payments and repay principal in accordance with its obligations. There can be no assurance that an issuer will not default or that the Company will be able to recover its investments in defaulted fixed interest debt instruments.
As bond investments of the Company mature, it may be difficult for the Company to obtain replacement investments having similar financial characteristics.
Market Price Risk
The fair value of equity and other financial securities held in the Company's portfolio fluctuates with changes in market prices. Prices are themselves affected by movements in currencies and interest rates and by other financial issues including the market perception of future risks.
Foreign Currency Risks
The Company's investments are principally in overseas securities. The Company accounts for its activities and reports its results in pounds sterling. The Company currently hedges most of the foreign currency exposure in respect of the liabilities attached to its borrowings. Where the Company does not hedge its currency exposure, which is currently the case with the investment portfolio, the movement of exchange rates may have a favourable or unfavourable effect on the gains and losses experienced on investments and the income derived from investments which are made or realised in currencies other than pounds sterling.
Charges to Capital
The Company currently deducts part of the management charge from capital. This increases distributable income at the expense of capital growth, which will either be eroded or constrained. The maintenance of a high level of dividend may also diminish capital values.
Discount and Premium Control Policy
The Company operates a discount and premium control policy. The operation of the discount control element of this policy could lead to a significant reduction in the size of the Company over time, which would increase the Company's total expense ratio and prejudice the ability of the Company to pay satisfactory levels of dividend to shareholders. While the Company intends to issue new shares and to resell shares held in treasury at a small premium to the Net Asset Value per share where demand exceeds supply, this will be dependent upon the Company being able to issue new shares and to resell shares held in treasury at a premium, on market conditions generally at the relevant time, upon shareholders in general meeting conferring appropriate authorities on the Board to issue further shares and, where required under the Prospectus Rules, upon a prospectus having been approved by the Financial Services Authority and published. The ability of the Company to operate the discount control policy will depend on the Company being able to purchase its own shares, which will be dependent upon shareholders in general meeting conferring authority on the Board to purchase its own shares. The Directors will seek renewal of this authority from shareholders annually and at other times should this prove necessary. However, there can be no guarantee that requisite shareholder approvals will be obtained.
In accordance with the Listing Rules, the extent of each buy-back authority which will be sought by the Company from shareholders in general meeting will be limited to 14.99% of the Company's issued share capital as at the date on which such authority is granted. In order to continue purchasing its own shares once any such authority has been exhausted, the Company would be required to seek a renewal of such authority from shareholders in general meeting.
The ability of the Company to purchase its own shares will be subject to the Companies Act 2006 and all other applicable legislation, rules and regulations of any government, regulatory body or market applicable to the Directors or the Company and, in particular, will be dependent on the availability of distributable reserves.
Cessation of Investment Trust Status
The Company attempts to conduct its business so as to satisfy the conditions for approval as an investment trust under Part 24 Chapter 4 of the Corporation Tax Act 2010. In respect of each accounting period for which approval is granted, the Company will be exempt from United Kingdom taxation on its capital gains. Any breach of the tests that a company must meet to obtain approval as an investment trust company could lead to the Company being subject to tax on capital gains.
Tax and Accounting
Any change in the Company's tax status or in taxation legislation or accounting practice could affect the value of the investments held by the Company, affect the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders. Representations in this document concerning the taxation of investors are based upon current tax law and practice which are subject to change.
Any change in accounting standards may adversely affect the value of the Company's assets in its books of account or restrict the ability of the Company to pay dividends.
Regulatory
The Alternative Investment Fund Managers Directive will begin to be implemented from July with it being fully implemented in the UK by July 2014. The Directive may have significant consequences for the Company (and all similar investment companies) which might materially increase compliance and regulatory costs. The Directive is subject to further implementation guidance, and the Board will continue to monitor the progress and likely implications of the Directive.
Reliance Upon The Manager
The ability of the Company to successfully pursue its investment policy is significantly dependent upon the expertise of the Manager and the principal members of its management team. The Company does not currently have employees or own any facilities and depends on the Manager for the day to day management and operation of its business. The loss of any of the Manager's management team could reduce the Company's ability to pursue successfully its planned investment policy.
Reliance Upon Third Party Service Providers
The Company has no employees and the Directors have all been appointed on a non executive basis. The Company is therefore reliant upon the performance of third party service providers for its executive function. In particular, the Manager and the Secretary will be performing services which are integral to the operation of the Company. The failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Company and could affect the ability of the Company to pursue successfully its investment policy.
Fluctuations In Operating Results
The Company may experience fluctuations in its operating results from period to period due to a number of factors, including changes in the values of investments made by the Company, changes in the amount of distributions, dividends or interest paid in respect of investments in the portfolio, changes in the Company's operating expenses, and general economic and market conditions. Such variability may lead to volatility in the market price of the shares and cause the Company's results for a particular period not to be indicative of its performance in a future period.
4. STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Directors' 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 that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they 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 accounting 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 adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.
The financial statements are published on www.murray-intl.co.uk which is a website maintained by the Company's Manager. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors confirms that to the best of his or her knowledge:
· the financial statements, prepared in accordance with the applicable UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
· the Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
For Murray International Trust PLC
Kevin Carter
Chairman
26 February 2013
5. INCOME STATEMENT
For the year ended 31 December 2012
|
|
|
Year ended |
Year ended |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Gains/(losses) on investments |
10 |
- |
101,381 |
101,381 |
- |
(37,470) |
(37,470) |
|
Income |
2 |
55,141 |
- |
55,141 |
55,128 |
- |
55,128 |
|
Investment management fees |
3 |
(1,763) |
(4,116) |
(5,879) |
(1,585) |
(3,698) |
(5,283) |
|
Performance fees |
4 |
- |
(3,246) |
(3,246) |
- |
(3,830) |
(3,830) |
|
Currency gains/(losses) |
18 |
- |
692 |
692 |
- |
(1,478) |
(1,478) |
|
Other expenses |
5 |
(1,944) |
- |
(1,944) |
(1,850) |
- |
(1,850) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Net return before finance costs and taxation |
|
51,434 |
94,711 |
146,145 |
51,693 |
(46,476) |
5,217 |
|
|
|
|
|
|
|
|
|
|
Finance costs |
6 |
(1,246) |
(2,911) |
(4,157) |
(1,261) |
(2,944) |
(4,205) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Return on ordinary activities before tax |
|
50,188 |
91,800 |
141,988 |
50,432 |
(49,420) |
1,012 |
|
|
|
|
|
|
|
|
|
|
Tax on ordinary activities |
7 |
(3,532) |
382 |
(3,150) |
(3,632) |
822 |
(2,810) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Return attributable to equity shareholders |
|
46,656 |
92,182 |
138,838 |
46,800 |
(48,598) |
(1,798) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Return per Ordinary share assuming full conversion of the B Ordinary shares (pence) |
9 |
39.8 |
78.5 |
118.3 |
43.6 |
(45.2) |
(1.6) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|||||||
|
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. |
|||||||
|
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement. |
|||||||
|
All revenue and capital items in the above statement derive from continuing operations. |
|||||||
|
No operations were acquired or discontinued in the year. |
|||||||
|
The accompanying notes are an integral part of these financial statements. |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Ordinary dividends on equity shares |
8 |
44,911 |
- |
44,911 |
38,858 |
- |
38,858 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
The above dividend information does not form part of the Income Statement. |
|||||||
6. BALANCE SHEET
As at 31 December 2012
|
|
|
As at |
As at |
||
|
|
|
31 December 2012 |
31 December 2011 |
||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
|
|
Investments listed at fair value through profit or loss |
10 |
|
1,327,532 |
|
1,140,963 |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Debtors |
11 |
5,169 |
|
9,450 |
|
|
Cash and short term deposits |
|
25,940 |
|
32,600 |
|
|
|
|
_______ |
|
_______ |
|
|
|
|
31,109 |
|
42,050 |
|
|
|
|
_______ |
|
_______ |
|
|
|
|
|
|
|
|
|
Creditors: amounts falling due within one year |
|
|
|
|
|
|
Bank loans |
12/13 |
(58,525) |
|
- |
|
|
Other creditors |
12 |
(14,873) |
|
(6,431) |
|
|
|
|
_______ |
|
_______ |
|
|
|
|
(73,398) |
|
(6,431) |
|
|
|
|
_______ |
|
_______ |
|
|
Net current (liabilities)/assets |
|
|
(42,289) |
|
35,619 |
|
|
|
|
________ |
|
________ |
|
Total assets less current liabilities |
|
|
1,285,243 |
|
1,176,582 |
|
|
|
|
|
|
|
|
Creditors: amounts falling due after more than one year |
|
|
|
|
|
|
Bank loans and Debentures |
12/13 |
(87,664) |
|
(171,808) |
|
|
Other creditors |
12 |
(5,336) |
|
(5,522) |
|
|
|
|
_______ |
|
_______ |
|
|
|
|
|
(93,000) |
|
(177,330) |
|
|
|
|
_______ |
|
_______ |
|
Net assets |
|
|
1,192,243 |
|
999,252 |
|
|
|
|
________ |
|
_______ |
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
Called-up share capital |
14 |
|
30,546 |
|
28,000 |
|
Share premium account |
|
|
282,240 |
|
185,712 |
|
Capital redemption reserve |
|
|
8,230 |
|
8,230 |
|
Capital reserve |
15 |
|
806,596 |
|
714,424 |
|
Revenue reserve |
|
|
64,631 |
|
62,886 |
|
|
|
|
_______ |
|
_______ |
|
Equity shareholders' funds |
|
|
1,192,243 |
|
999,252 |
|
|
|
|
________ |
|
_______ |
|
|
|
|
|
|
|
|
Net Asset Value per Ordinary and B Ordinary share (pence) |
16 |
|
975.8 |
|
892.2 |
|
|
|
|
_______ |
|
_______ |
7 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
|
For the year ended |
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 December 2011 |
|
28,000 |
185,712 |
8,230 |
714,424 |
62,886 |
999,252 |
|
Return on ordinary activities after taxation |
|
- |
- |
- |
92,182 |
46,656 |
138,838 |
|
Dividends paid |
8 |
- |
- |
- |
- |
(44,911) |
(44,911) |
|
Issue of new shares |
|
2,546 |
96,528 |
- |
(10) |
- |
99,064 |
|
|
|
_______ |
_______ |
______ |
_______ |
______ |
________ |
|
Balance at 31 December 2012 |
|
30,546 |
282,240 |
8,230 |
806,596 |
64,631 |
1,192,243 |
|
|
|
_______ |
_______ |
______ |
_______ |
______ |
________ |
|
|
|
|
|
|
|
|
|
|
For the year ended |
|
|
|||||
|
|
|
|
Share |
Capital |
|
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 December 2010 |
|
25,999 |
115,472 |
8,230 |
763,031 |
54,944 |
967,676 |
|
Return on ordinary activities after taxation |
|
- |
- |
- |
(48,598) |
46,800 |
(1,798) |
|
Dividends paid |
8 |
- |
- |
- |
- |
(38,858) |
(38,858) |
|
Issue of new shares |
|
2,001 |
70,240 |
- |
(9) |
- |
72,232 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
_______ |
|
Balance at 31 December 2011 |
|
28,000 |
185,712 |
8,230 |
714,424 |
62,886 |
999,252 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
|
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. |
|||||||
|
The accompanying notes are an integral part of these financial statements. |
|||||||
8 CASH FLOW STATEMENT
For the year ended 31 December 2012
|
|
|
Year ended |
Year ended |
||
|
|
|
31 December 2012 |
31 December 2011 |
||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Net cash inflow from operating activities |
17 |
|
42,571 |
|
41,679 |
|
|
|
|
|
|
|
|
Returns on investments and servicing of finance |
|
|
|
|
|
|
Interest paid |
|
(4,233) |
|
(4,178) |
|
|
|
|
________ |
|
________ |
|
|
Net cash outflow from servicing of finance |
|
|
(4,233) |
|
(4,178) |
|
|
|
|
|
|
|
|
Financial investment |
|
|
|
|
|
|
Purchases of investments |
|
(162,382) |
|
(196,704) |
|
|
Sales of investments |
|
77,474 |
|
138,606 |
|
|
|
|
________ |
|
________ |
|
|
Net cash outflow from financial investment |
|
|
(84,908) |
|
(58,098) |
|
|
|
|
|
|
|
|
Equity dividends paid |
8 |
|
(44,911) |
|
(38,954) |
|
|
|
|
________ |
|
________ |
|
Net cash outflow before financing |
|
|
(91,481) |
|
(59,551) |
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
Share issue |
14 |
99,064 |
|
72,232 |
|
|
|
|
|
|
|
|
|
Net cash inflow from financing |
|
________ |
99,064 |
|
72,232 |
|
|
|
|
________ |
|
________ |
|
Increase in cash |
18 |
|
7,583 |
|
12,681 |
|
|
|
|
________ |
|
________ |
9 NOTES TO THE FINANCIAL STATEMENTS
|
1. |
Accounting policies |
||
|
|
(a) |
Basis of preparation |
|
|
|
|
The financial statements have been prepared in accordance with applicable UK Law and Accounting Standards (UK Generally Accepted Accounting Practice) and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. |
|
|
|
|
|
|
|
|
(b) |
Income |
|
|
|
|
Dividends receivable on equity shares (other than special dividends) are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available dividends are recognised on their due date. Provision is made for any dividends not expected to be received. Special dividends are credited to capital or revenue, according to their circumstances. |
|
|
|
|
|
|
|
|
|
The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities and shares. |
|
|
|
|
|
|
|
|
|
Interest receivable from cash and short-term deposits and interest payable is accrued to the end of the year. |
|
|
|
|
|
|
|
|
(c) |
Expenses |
|
|
|
|
All expenses are accounted for on an accruals basis and are charged to the Income Statement. Expenses are charged against revenue except as follows: |
|
|
|
|
- |
transaction costs on the acquisition or disposal of investments are charged to the capital account in the Income Statement; |
|
|
|
- |
expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 30% to revenue and 70% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth. The performance fee has been charged 100% to realised capital reserves, as the fee will have arisen wholly or predominantly by virtue of the capital performance of the investments. |
|
|
|
|
|
|
|
(d) |
Taxation |
|
|
|
|
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Balance Sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Balance Sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods. Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the Balance Sheet date. |
|
|
|
|
|
|
|
|
|
Due to the Company's status as an investment trust company and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. |
|
|
|
|
|
|
|
|
|
The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue within the Income Statement on the same basis as the particular item to which it relates using the Company's effective rate of tax for the year, based on the marginal basis. |
|
|
|
|
|
|
|
|
(e) |
Investments |
|
|
|
|
All investments have been designated upon initial recognition as fair value through profit or loss. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis. |
|
|
|
|
|
|
|
|
|
Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are valued at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange. |
|
|
|
|
|
|
|
|
|
Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Income Statement and are ultimately recognised in the capital reserve. |
|
|
|
|
|
|
|
|
(f) |
Borrowings |
|
|
|
|
Monies borrowed to finance the investment objectives of the Company are stated at the amount of the net proceeds immediately after issue plus cumulative finance costs less cumulative payments made in respect of the debt. The finance costs of such borrowings are accounted for on an accruals basis using the effective interest rate method and are charged 30% to revenue and 70% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth. |
|
|
|
|
|
|
|
|
(g) |
Exchange rates |
|
|
|
|
Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. |
|
|
|
|
|
|
|
|
|
Translation of all other foreign currency balances including foreign assets and foreign liabilities is at the middle rates of exchange at the year end. Differences arising from translation are treated as a gain or loss to capital or revenue within the Income Statement depending upon the nature of the gain or loss. |
|
|
|
|
|
|
|
|
(h) |
Derivative financial instruments |
|
|
|
|
Financial derivatives are measured at fair value based on an appropriate model. Changes in the fair value of derivative financial instruments are recognised in the Income Statement. If capital in nature, the associated change in value is presented as a capital item in the Income Statement. |
|
|
|
|
2012 |
2011 |
|
2. |
Income |
£'000 |
£'000 |
|
|
Income from investments: |
|
|
|
|
UK dividends |
7,721 |
7,704 |
|
|
UK unfranked investment income |
1,025 |
1,374 |
|
|
Overseas dividends |
41,477 |
40,501 |
|
|
Overseas interest |
4,913 |
5,535 |
|
|
|
__________ |
__________ |
|
|
|
55,136 |
55,114 |
|
|
Interest: |
__________ |
__________ |
|
|
Deposit interest |
5 |
10 |
|
|
Interest from HMRC |
- |
4 |
|
|
|
__________ |
__________ |
|
|
|
5 |
14 |
|
|
|
__________ |
__________ |
|
|
Total income |
55,141 |
55,128 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
Income from investments comprises: |
£'000 |
£'000 |
|
|
Listed UK |
8,746 |
9,078 |
|
|
Listed overseas |
46,390 |
46,036 |
|
|
|
__________ |
__________ |
|
|
|
55,136 |
55,114 |
|
|
|
__________ |
__________ |
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
3. |
Investment management fees |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment management fees |
1,763 |
4,116 |
5,879 |
1,585 |
3,698 |
5,283 |
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
Details of the fee basis are contained in the Annual Report |
||||||
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
4. |
Performance fees |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Performance fees |
- |
3,246 |
3,246 |
- |
3,830 |
3,830 |
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
|
|
|
|||
|
|
Details of the fee basis are contained in the Annual Report |
||||||
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
5. |
Other expenses |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Shareholders' services{A} |
757 |
- |
757 |
720 |
- |
720 |
|
|
Directors' remuneration |
148 |
- |
148 |
125 |
- |
125 |
|
|
Irrecoverable VAT |
67 |
- |
67 |
76 |
- |
76 |
|
|
Secretarial fees |
100 |
- |
100 |
100 |
- |
100 |
|
|
Auditor's fees for: |
|
|
|
|
|
|
|
|
Statutory audit |
23 |
- |
23 |
22 |
- |
22 |
|
|
Other assurance services |
7 |
- |
7 |
8 |
- |
8 |
|
|
Tax compliance |
19 |
- |
19 |
45 |
- |
45 |
|
|
Other expenses |
823 |
- |
823 |
754 |
- |
754 |
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
1,944 |
- |
1,944 |
1,850 |
- |
1,850 |
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
{A} Includes registration, savings scheme and other wrapper administration and promotion expenses, of which £579,000 (2011 - £579,000) was payable to Aberdeen Asset Managers Limited (AAM) to cover marketing activities during the year. £145,000 was due to AAM at the year end (2011 - £nil). |
||||||
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
6. |
Finance costs |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Bank loans and overdrafts |
1,019 |
2,381 |
3,400 |
1,021 |
2,386 |
3,407 |
|
|
Swap contracts |
225 |
526 |
751 |
238 |
554 |
792 |
|
|
Debenture Stock |
2 |
4 |
6 |
2 |
4 |
6 |
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
1,246 |
2,911 |
4,157 |
1,261 |
2,944 |
4,205 |
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
2012 |
2011 |
|||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
7. |
Taxation |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
(a) |
Tax charge |
|
|
|
|
|
|
|
|
|
The tax charge comprises: |
|
|
|
|
|
|
|
|
|
Current UK tax |
486 |
- |
486 |
545 |
- |
545 |
|
|
|
Tax relief to capital |
382 |
(382) |
- |
822 |
(822) |
- |
|
|
|
Overseas tax |
4,176 |
- |
4,176 |
3,704 |
- |
3,704 |
|
|
|
Overseas tax reclaimable |
(1,026) |
- |
(1,026) |
(894) |
- |
(894) |
|
|
|
Double taxation relief |
(486) |
- |
(486) |
(545) |
- |
(545) |
|
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
Total tax |
3,532 |
(382) |
3,150 |
3,632 |
(822) |
2,810 |
|
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
Factors affecting the tax charge for the year |
||||||
|
|
|
The UK corporation tax rate was 26% until 31 March 2012 and 24% from 1 April 2012, giving an effective rate of 24.5% (2011 - 26.5%). The tax assessed for the year is lower than the effective corporation tax rate. The differences are explained below: |
||||||
|
|
|
|
||||||
|
|
|
|
2012 |
2011 |
||||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
Return on ordinary activities before taxation |
50,188 |
91,800 |
141,988 |
50,432 |
(49,420) |
1,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax thereon at an effective rate of 24.5% (2011 - 26.5%) |
12,296 |
22,491 |
34,787 |
13,364 |
(13,096) |
268 |
|
|
|
Effects of: |
|
|
|
|
|
|
|
|
|
Non taxable UK dividends |
(1,892) |
- |
(1,892) |
(2,041) |
- |
(2,041) |
|
|
|
(Gains)/losses on investments not taxable |
- |
(24,838) |
(24,838) |
- |
9,930 |
9,930 |
|
|
|
Currency (gains)/losses not taxable |
- |
(170) |
(170) |
- |
392 |
392 |
|
|
|
Non taxable overseas dividends |
(9,536) |
- |
(9,536) |
(9,956) |
- |
(9,956) |
|
|
|
Overseas tax reclaimable |
(1,026) |
- |
(1,026) |
(894) |
- |
(894) |
|
|
|
Irrecoverable overseas tax suffered |
4,176 |
- |
4,176 |
3,704 |
- |
3,704 |
|
|
|
Double taxation relief |
(486) |
- |
(486) |
(545) |
- |
(545) |
|
|
|
Tax relief obtained by expenses capitalised |
382 |
(382) |
- |
822 |
(822) |
- |
|
|
|
Expenses charged to capital available to be utilised |
(2,517) |
2,517 |
- |
(2,774) |
2,774 |
- |
|
|
|
Excess management expenses |
2,135 |
- |
2,135 |
1,952 |
- |
1,952 |
|
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
|
3,532 |
(382) |
3,150 |
3,632 |
(822) |
2,810 |
|
|
|
|
______ |
______ |
______ |
______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
No provision for deferred tax has been made in the current or prior accounting period. |
||||||
|
|
|
|
||||||
|
|
|
The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust company. |
||||||
|
|
|
|
||||||
|
|
|
The Company has an unrecognised deferred tax asset of £2,769,000 (2011 - £1,341,000) arising as a result of unutilised management expenses and loan relationship deficits of £12,039,000 (2011 - £5,311,000). Any excess management expenses will be utilised against any taxable income that may arise. |
||||||
|
|
|
2012 |
2011 |
|
8. |
Ordinary dividends on equity shares |
£'000 |
£'000 |
|
|
Amounts recognised as distributions paid during the year: |
|
|
|
|
Third interim for 2011 of 8.0p (2010 - 6.8p) |
8,891 |
7,015 |
|
|
Special interim for 2011 of nil (2010 - 2.5p) |
- |
2,617 |
|
|
Final dividend for 2011 of 13.0p (2010 - 11.6p) |
14,818 |
12,145 |
|
|
First interim for 2012 of 9.0p (2011 - 8.0p) |
10,499 |
8,513 |
|
|
Second interim for 2012 of 9.0p (2011 - 8.0p) |
10,703 |
8,664 |
|
|
Refund of unclaimed dividends |
- |
(96) |
|
|
|
_______ |
_______ |
|
|
|
44,911 |
38,858 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
In accordance with UK GAAP the third interim dividend and proposed final dividend for 2012 have not been included as liabilities in these financial statements. The proposed final dividend for 2012 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 Sections 1158-1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £46,656,000 (2011 - £46,800,000). |
||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
£'000 |
£'000 |
|
|
Three interim dividends for 2012 of 9.0p (2011 - 8.0p) |
32,117 |
26,068 |
|
|
Proposed final dividend for 2012 of 13.5p (2011 - 13.0p) |
16,631 |
14,659 |
|
|
|
______ |
______ |
|
|
|
48,748 |
40,727 |
|
|
|
______ |
______ |
|
|
|
|
|
|
|
Subsequent to the year end the Company has issued a further 1,912,000 Ordinary shares; therefore the amounts reflected above for the cost of the proposed final dividend for 2012 are based on 123,195,242 Ordinary shares in issue, being the number of Ordinary shares in issue at the date of this Report. |
||
|
9. |
Returns per share |
2012 |
2011 |
|
|
Returns have been based on the following figures: |
|
|
|
|
Weighted average number of Ordinary shares |
116,468,656 |
106,560,813 |
|
|
Weighted average number of B Ordinary shares |
883,841 |
850,690 |
|
|
|
__________ |
__________ |
|
|
Weighted average number of Ordinary shares assuming conversion of B Ordinary shares |
117,352,497 |
107,411,503 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
|
£'000 |
£'000 |
|
|
Revenue return attributable to equity shareholders |
46,656 |
46,800 |
|
|
Capital return attributable to equity shareholders |
92,182 |
(48,598) |
|
|
|
________ |
________ |
|
|
Total return attributable to equity shareholders |
138,838 |
(1,798) |
|
|
|
________ |
________ |
|
|
|
2012 |
2011 |
|
|
10. |
Investments listed at fair value through profit or loss |
£'000 |
£'000 |
|
|
|
Opening valuation |
1,140,963 |
1,119,500 |
|
|
|
Opening investment holdings gains |
(314,276) |
(384,102) |
|
|
|
|
________ |
________ |
|
|
|
Opening book cost |
826,687 |
735,398 |
|
|
|
Movements during the year: |
|
|
|
|
|
Purchases |
162,382 |
196,704 |
|
|
|
Sales - proceeds |
(77,474) |
(138,606) |
|
|
|
Sales - realised gains |
11,683 |
32,356 |
|
|
|
Amortisation of fixed income book cost |
280 |
835 |
|
|
|
|
________ |
________ |
|
|
|
Closing book cost |
923,558 |
826,687 |
|
|
|
Closing investment holdings gains |
403,974 |
314,276 |
|
|
|
|
________ |
________ |
|
|
|
Closing valuation |
1,327,532 |
1,140,963 |
|
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
The portfolio valuation |
£'000 |
£'000 |
|
|
|
Listed on stock exchanges at bid valuation: |
|
|
|
|
|
United Kingdom: |
|
|
|
|
|
- equities |
177,556 |
166,277 |
|
|
|
- fixed income |
16,083 |
24,602 |
|
|
|
Overseas: |
|
|
|
|
|
- equities |
1,066,169 |
888,186 |
|
|
|
- fixed income |
67,724 |
61,898 |
|
|
|
|
_________ |
_________ |
|
|
|
Total |
1,327,532 |
1,140,963 |
|
|
|
|
_________ |
_________ |
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
Gains/(losses) on investments |
£'000 |
£'000 |
|
|
|
Realised gains based on book cost |
11,683 |
32,356 |
|
|
|
Net movement in investment holdings gains |
89,698 |
(69,826) |
|
|
|
|
_________ |
_________ |
|
|
|
|
101,381 |
(37,470) |
|
|
|
|
_________ |
_________ |
|
|
|
|
|
|
|
|
|
All investments are categorised as held at fair value through profit and loss and were designated as such upon initial recognition. |
|||
|
|
|
|||
|
|
Transaction costs |
|||
|
|
During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains/(losses) on investments in the Income Statement. The total costs were as follows: |
|||
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
£'000 |
£'000 |
|
|
|
Purchases |
301 |
414 |
|
|
|
Sales |
71 |
186 |
|
|
|
|
______ |
______ |
|
|
|
|
372 |
600 |
|
|
|
|
______ |
______ |
|
|
|
|
2012 |
2011 |
|
11. |
Debtors: amounts falling due within one year |
£'000 |
£'000 |
|
|
Current taxation |
916 |
1,175 |
|
|
Other debtors |
52 |
167 |
|
|
Forward contracts |
- |
2,715 |
|
|
Prepayments and accrued income |
4,201 |
5,393 |
|
|
|
______ |
______ |
|
|
|
5,169 |
9,450 |
|
|
|
______ |
______ |
|
|
None of the above amounts is overdue. |
|
|
|
|
|
2012 |
2011 |
|
12. |
Creditors |
£'000 |
£'000 |
|
|
Amounts falling due within one year: |
|
|
|
|
Bank loans (note 13) |
58,525 |
- |
|
|
Swap contracts |
315 |
1,151 |
|
|
Forward contracts |
8,805 |
- |
|
|
Accruals |
5,753 |
5,280 |
|
|
|
______ |
______ |
|
|
|
73,398 |
6,431 |
|
|
|
______ |
______ |
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
Amounts falling due after more than one year: |
£'000 |
£'000 |
|
|
Bank loans and Debentures (note 13) |
87,664 |
171,808 |
|
|
Accruals |
5,336 |
5,522 |
|
|
|
______ |
______ |
|
|
|
93,000 |
177,330 |
|
|
|
______ |
______ |
|
|
|
|
|
|
|
Management fees of £1,522,000 (2011 - £1,380,000) were outstanding at the year end to the Manager. |
||
|
|
|
||
|
|
A performance fee of £8,768,000 (2011 - £8,710,000) was outstanding at the year end to the Manager. Of this amount, £5,336,000 (2011 - £5,522,000) falls due after more than one year. |
||
|
|
|
||
|
|
All financial liabilities are included at amortised cost or at fair value for swap and forward contracts. |
||
|
|
|
2012 |
2011 |
||
|
13. |
Bank loans and Debentures |
£'000 |
£'000 |
||
|
|
Secured by floating charge and repayable other than by instalments or at the Company's option: |
|
|
||
|
|
- |
4% Debenture Stock |
150 |
150 |
|
|
|
|
|
|
|
|
|
|
Unsecured bank loans repayable: |
|
|
||
|
|
within one year |
|
|
||
|
|
- |
Yen 1,900,000,000 at 0.77657% - 4 June 2013 |
13,519 |
- |
|
|
|
- |
Yen 6,325,600,000 at 0.77657% - 4 June 2013 |
45,006 |
- |
|
|
|
|
|
|
|
|
|
|
in more than one year but no more than five years |
|
|
||
|
|
- |
Yen 1,900,000,000 at 0.86071% - 4 June 2013 |
- |
15,890 |
|
|
|
- |
Yen 6,325,600,000 at 0.86071% - 4 June 2013 |
- |
52,902 |
|
|
|
- |
Yen 2,300,000,000 at 2.03% - 16 February 2014 |
16,364 |
19,235 |
|
|
|
- |
Yen 8,400,000,000 at 3.17% - 14 May 2015 |
59,766 |
70,250 |
|
|
|
- |
Yen 1,600,000,000 at 2.82% - 15 May 2016 |
11,384 |
13,381 |
|
|
|
|
|
________ |
________ |
|
|
|
|
|
146,189 |
171,808 |
|
|
|
|
|
________ |
________ |
|
|
|
|
||||
|
|
The terms of these loans permit early repayment at the borrower's option which may give rise to additional amounts being either payable or repayable in respect of fluctuations in interest rates since drawdown. Since the Directors, currently, have no intention of repaying the loans early, they have been included in the accounts to 31 December 2012 at their principal amounts. |
||||
|
|
|
||||
|
|
The Company currently has a fixed rate term loan facility with ING Bank N.V., which is fully drawn down and has a maturity date of 15 May 2016. |
||||
|
|
|
||||
|
|
The Company currently has a loan facility with Barclays Bank, which is fully drawn down and has a maturity date of 4 June 2013. The rates for these loans drawn down have been fixed for five years through a swap. The swap is separate from the loan and under this the borrower either pays or receives the difference between LIBOR and the swap rate so that the actual rate paid is always the same. The interest charged on the loan is at LIBOR plus the margin. For Yen the LIBOR is re-set every six months and the LIBOR rate under the loan and as reset under the swap should be identical to each other at every six month interval to preserve the "fixed" nature of the overall interest costs. |
||||
|
|
|
||||
|
|
The Company currently has two fixed rate term loan facilities with The Royal Bank of Scotland plc, both of which are fully drawn down and have maturity dates of 16 February 2014 and 14 May 2015 respectively. |
||||
|
|
|
||||
|
|
Financial covenants contained within the relevant loan agreements provide, inter alia, that borrowings shall at no time exceed 40% of net assets and that the net assets must exceed £400 million. The net assets were £1,192.2 million at 31 December 2012. |
||||
|
|
|
2012 |
2011 |
||
|
14. |
Share capital |
Number |
£'000 |
Number |
£'000 |
|
|
Allotted, called up and fully paid: |
|
|
|
|
|
|
Ordinary shares of 25p each |
121,283,242 |
30,321 |
111,131,628 |
27,783 |
|
|
B Ordinary shares of 25p each |
899,997 |
225 |
866,687 |
217 |
|
|
|
__________ |
_______ |
__________ |
_______ |
|
|
|
122,183,239 |
30,546 |
111,998,315 |
28,000 |
|
|
|
__________ |
_______ |
__________ |
_______ |
|
|
|
|
|
|
|
|
|
During the year 10,145,888 Ordinary shares were issued pursuant to the Company's block listing facility. All of these shares were issued at a premium to net asset value, enhancing net assets per share for existing shareholders. The issue prices ranged from 900p to 1031p and raised a total of £99,064,000, net of expenses. These expenses have been offset against the capital reserve. |
||||
|
|
|
||||
|
|
In accordance with Article 131 of the Company's Articles of Association, 8,608 B Ordinary shares, 13,256 B Ordinary shares, 8,513 B Ordinary shares, and 8,659 B Ordinary shares were allotted by way of capitalisation of reserves on 17 February, 16 May, 16 August and 15 November 2012 respectively. |
||||
|
|
|
||||
|
|
On 29 June 2012, 5,726 B Ordinary shares were converted into a like number of Ordinary shares of 25p in accordance with Article 47 of the Company's Articles of Association. When the nominal value of the allotted and fully paid B Ordinary shares is less than £100,000 the Directors may, under the terms of Article 47(B), require the conversion of such shares into Ordinary shares. The net asset value at the conversion date of 29 June 2012 was 905.01p per share. |
||||
|
|
|
||||
|
|
On a winding up of the Company, any surplus assets available after payment of all debts and satisfaction of all liabilities of the Company shall be applied in repaying the Ordinary and B Ordinary shareholders the amounts paid up on such shares. Any surplus shall be divided among the holders of Ordinary and B Ordinary shares pari passu according to the amount paid up on such shares respectively. |
||||
|
|
|
||||
|
|
Voting rights |
||||
|
|
In accordance with the Articles of Association of the Company, on a show of hands, every member (or duly appointed proxy) present at a general meeting of the Company has one vote; and, on a poll, every member present in person or by proxy shall have 89 votes for every 25p nominal amount of Ordinary or B Ordinary shares held. |
||||
|
|
|
2012 |
2011 |
|
15. |
Capital reserve |
£'000 |
£'000 |
|
|
At 31 December 2011 |
714,424 |
763,031 |
|
|
Movement in fair value gains |
101,381 |
(37,470) |
|
|
Capitalised expenses (net of tax) |
(9,891) |
(9,650) |
|
|
Issue of shares |
(10) |
(9) |
|
|
Currency gains/(losses) |
692 |
(1,478) |
|
|
|
________ |
________ |
|
|
At 31 December 2012 |
806,596 |
714,424 |
|
|
|
________ |
________ |
|
|
|
|
|
|
|
Included in the total above are investment holdings gains at the year end of £403,974,000 (2011 - £314,276,000). |
||
|
16. |
Net asset value per share |
||||
|
|
The diluted net asset value per share and the net asset value attributable to the Ordinary shares (including conversion of the B Ordinary shares), at the year end calculated in accordance with the Articles of Association were as follows: |
||||
|
|
|
||||
|
|
|
Net asset value |
Net asset value |
||
|
|
|
per share |
attributable |
||
|
|
|
2012 |
2011 |
2012 |
2011 |
|
|
|
p |
p |
£'000 |
£'000 |
|
|
Basic |
|
|
|
|
|
|
Ordinary and B Ordinary shares (note 14) |
975.8 |
892.2 |
1,192,243 |
999,252 |
|
|
Diluted |
|
|
|
|
|
|
Ordinary and B Ordinary shares (note 14) |
975.8 |
892.2 |
1,192,243 |
999,252 |
|
17. |
Reconciliation of net return before finance costs and |
2012 |
2011 |
|
|
taxation to net cash inflow from operating activities |
£'000 |
£'000 |
|
|
Net return before finance costs and taxation |
146,145 |
5,217 |
|
|
Add: (gains)/losses on investments |
(101,381) |
37,470 |
|
|
Add: currency (gains)/losses |
(692) |
1,478 |
|
|
Amortisation of fixed income book cost |
(280) |
(835) |
|
|
Decrease in accrued income |
1,192 |
589 |
|
|
Decrease in other debtors |
115 |
968 |
|
|
Increase in accruals |
363 |
157 |
|
|
Tax on unfranked income - overseas |
(2,891) |
(3,365) |
|
|
|
______ |
______ |
|
|
|
42,571 |
41,679 |
|
|
|
______ |
______ |
|
|
|
At |
|
|
|
At |
|
|
|
2011 |
differences |
flows |
movements |
2012 |
|
18. |
Analysis of changes in net debt |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash and short term deposits |
32,600 |
(14,243) |
7,583 |
- |
25,940 |
|
|
Forward contracts |
2,715 |
(11,520) |
- |
- |
(8,805) |
|
|
Swap |
(1,151) |
836 |
- |
- |
(315) |
|
|
Debt due within one year |
- |
9,790 |
- |
(68,315) |
(58,525) |
|
|
Debt due after more than one year |
(171,808) |
15,829 |
- |
68,315 |
(87,664) |
|
|
|
________ |
______ |
______ |
______ |
________ |
|
|
|
(137,644) |
692 |
7,583 |
- |
(129,369) |
|
|
|
________ |
______ |
______ |
______ |
________ |
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
At |
|
|
|
31 December |
Currency |
Cash |
Non-cash |
31 December |
|
|
|
2010 |
differences |
flows |
movements |
2011 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash and short term deposits |
10,765 |
9,154 |
12,681 |
- |
32,600 |
|
|
Forward contracts |
3,984 |
(1,269) |
- |
- |
2,715 |
|
|
Swap |
(1,804) |
653 |
- |
- |
(1,151) |
|
|
Debt due after more than one year |
(161,792) |
(10,016) |
- |
- |
(171,808) |
|
|
|
________ |
______ |
______ |
______ |
________ |
|
|
|
(148,847) |
(1,478) |
12,681 |
- |
(137,644) |
|
|
|
________ |
______ |
______ |
______ |
________ |
|
|
|
|
|
|
|
|
|
|
A statement reconciling the movement in net funds to the net cash flow has not been presented as there are no differences from the above analysis. |
|||||
|
19. |
Derivatives and other financial instruments |
|||||||||||||||||||||
|
|
Risk management |
|||||||||||||||||||||
|
|
The Company's financial instruments, other than derivatives, comprise securities and other investments, cash balances, loans and debentures and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company also has the ability to enter into derivative transactions in the form of swap contracts, forward foreign currency contracts, futures and options, for the purpose of managing currency and market risks arising from the Company's activities. |
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||
|
|
The Manager has a dedicated investment management process, which ensures that the investment policy explained is achieved. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a Senior Investment Manager and also by the Manager's Investment Committee. |
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||
|
|
The Company's Manager has an independent Investment Risk department for reviewing the investment risk parameters of all core equity, fixed income and alternative asset classes on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models. |
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||
|
|
Additionally, the Manager's Compliance department continually monitors the Company's investment and borrowing powers and reports to the Manager's Risk Management Committee. |
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||
|
|
The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk. |
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||
|
|
The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors, other than for currency disclosures. |
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||
|
|
(i) |
Market risk |
||||||||||||||||||||
|
|
|
The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Interest rate risk |
||||||||||||||||||||
|
|
|
Interest rate movements may affect: |
||||||||||||||||||||
|
|
|
the fair value of the investments in fixed interest rate securities; |
||||||||||||||||||||
|
|
|
the level of income receivable on cash deposits; |
||||||||||||||||||||
|
|
|
interest payable on the Company's variable rate borrowings. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
The Board reviews on a regular basis the values of the fixed interest rate securities. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. The fixed rate Yen facilities are used to finance opportunities at low rates and, the revolving and uncommitted facilities to provide flexibility in the short-term. Current bank covenant guidelines state that the total borrowings will not exceed 40% of the adjusted net tangible assets of the Company. The Company currently has two loan facilities with Barclays Bank, which are fully drawn down and have maturity dates of 4 June 2013. The rates for these loans have been fixed for five years through a swap. The swap is separate from the loan and under this the borrower either pays or receives the difference between LIBOR and the swap rate so that the actual rate paid is always the same. The interest charged on the loan is at LIBOR plus the margin. For JPY, the LIBOR is re-set every six months and the LIBOR rate under the loan and as reset under the swap should be identical to each other at every six month interval to preserve the "fixed" nature of the overall interest costs. Details of borrowings at 31 December 2012 are shown in note 13. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Interest risk profile |
||||||||||||||||||||
|
|
|
The interest rate risk profile of the portfolio of financial assets and liabilities at the Balance Sheet date was as follows: |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
Weighted |
|
|
|
|
|||||||||||||||
|
|
|
|
average |
|
|
|
|
|||||||||||||||
|
|
|
|
period for |
Weighted |
|
|
Non- |
|||||||||||||||
|
|
|
|
which |
average |
Fixed |
Floating |
interest |
|||||||||||||||
|
|
|
|
rate is fixed |
interest rate |
rate |
rate |
bearing |
|||||||||||||||
|
|
|
At 31 December 2012 |
Years |
% |
£'000 |
£'000 |
£'000 |
|||||||||||||||
|
|
|
Assets |
|
|
|
|
|
|||||||||||||||
|
|
|
Sterling |
5.09 |
5.38 |
16,083 |
25,920 |
177,556 |
|||||||||||||||
|
|
|
US Dollar |
12.53 |
7.16 |
41,330 |
- |
282,176 |
|||||||||||||||
|
|
|
Euro |
12.47 |
4.50 |
13,176 |
- |
107,199 |
|||||||||||||||
|
|
|
Other |
12.86 |
9.75 |
13,218 |
20 |
676,794 |
|||||||||||||||
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|||||||||||||||
|
|
|
Total assets |
|
|
83,807 |
25,940 |
1,243,725 |
|||||||||||||||
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|||||||||||||||
|
|
|
Liabilities |
|
|
|
|
|
|||||||||||||||
|
|
|
Bank loans - Japanese Yen |
1.53 |
2.06 |
(146,039) |
- |
- |
|||||||||||||||
|
|
|
Debenture Stock |
- |
- |
(150) |
- |
- |
|||||||||||||||
|
|
|
Accruals |
- |
- |
- |
- |
(5,336) |
|||||||||||||||
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|||||||||||||||
|
|
|
Total liabilities |
|
|
(146,189) |
- |
(5,336) |
|||||||||||||||
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
Weighted |
|
|
|
|
|||||||||||||||
|
|
|
|
Average |
|
|
|
|
|||||||||||||||
|
|
|
|
period for |
Weighted |
|
|
Non- |
|||||||||||||||
|
|
|
|
Which |
average |
Fixed |
Floating |
interest |
|||||||||||||||
|
|
|
|
rate is fixed |
interest rate |
rate |
rate |
bearing |
|||||||||||||||
|
|
|
At 31 December 2011 |
Years |
% |
£'000 |
£'000 |
£'000 |
|||||||||||||||
|
|
|
Assets |
|
|
|
|
|
|||||||||||||||
|
|
|
Sterling |
5.48 |
5.44 |
24,602 |
32,571 |
166,277 |
|||||||||||||||
|
|
|
US Dollar |
13.81 |
7.21 |
39,219 |
- |
246,111 |
|||||||||||||||
|
|
|
Euro |
13.47 |
4.50 |
9,006 |
- |
82,213 |
|||||||||||||||
|
|
|
Other |
13.84 |
9.75 |
13,673 |
29 |
559,862 |
|||||||||||||||
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|||||||||||||||
|
|
|
Total assets |
|
|
86,500 |
32,600 |
1,054,463 |
|||||||||||||||
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|||||||||||||||
|
|
|
Liabilities |
|
|
|
|
|
|||||||||||||||
|
|
|
Bank loans - Japanese Yen |
2.53 |
2.09 |
(171,658) |
- |
- |
|||||||||||||||
|
|
|
Debenture Stock |
- |
- |
(150) |
- |
- |
|||||||||||||||
|
|
|
Accruals |
- |
- |
- |
- |
(5,522) |
|||||||||||||||
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|||||||||||||||
|
|
|
Total liabilities |
|
|
(171,808) |
- |
(5,522) |
|||||||||||||||
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. The maturity dates of the Company's loans are shown in note 13 to the financial statements. |
||||||||||||||||||||
|
|
|
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates. |
||||||||||||||||||||
|
|
|
The non-interest bearing assets represent the equity element of the portfolio. |
||||||||||||||||||||
|
|
|
Short-term debtors and creditors have been excluded from the above tables. |
||||||||||||||||||||
|
|
|
Forward currency contracts are measured at fair value. Other financial liabilities are measured at amortised cost. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Maturity profile |
||||||||||||||||||||
|
|
|
The table below shows the timing of cash outflows to settle the Company's financial liabilities at the Balance Sheet date. |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
More |
|
|||||||||||||
|
|
|
|
Within |
Within |
Within |
Within |
Within |
than |
|
|||||||||||||
|
|
|
|
1 year |
1-2 years |
2-3 years |
3-4 years |
4-5 years |
5 years |
Total |
|||||||||||||
|
|
|
At 31 December 2012 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||||||||
|
|
|
Bank loans |
58,525 |
16,364 |
59,766 |
11,384 |
- |
- |
146,039 |
|||||||||||||
|
|
|
Debenture Stock{A} |
- |
- |
- |
- |
- |
150 |
150 |
|||||||||||||
|
|
|
Interest cash flows on bank loans and Debenture Stock |
2,585 |
2,420 |
1,283 |
167 |
6 |
223 |
6,684 |
|||||||||||||
|
|
|
Interest cash flows on swaps |
356 |
- |
- |
- |
- |
- |
356 |
|||||||||||||
|
|
|
Cash flow on forward currency contracts |
8,805 |
- |
- |
- |
- |
- |
8,805 |
|||||||||||||
|
|
|
Cash flows on other creditors |
5,752 |
2,755 |
1,769 |
812 |
- |
- |
11,088 |
|||||||||||||
|
|
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
______ |
_____ |
|||||||||||||
|
|
|
|
76,023 |
21,539 |
62,818 |
12,363 |
6 |
373 |
173,122 |
|||||||||||||
|
|
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
______ |
_____ |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
More |
|
|||||||||||||
|
|
|
|
Within |
Within |
Within |
Within |
Within |
than |
|
|||||||||||||
|
|
|
|
1 year |
1-2 years |
2-3 years |
3-4 years |
4-5 years |
5 years |
Total |
|||||||||||||
|
|
|
At 31 December 2011 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||||||||
|
|
|
Bank loans |
- |
68,792 |
19,235 |
70,250 |
13,381 |
- |
171,658 |
|||||||||||||
|
|
|
Debenture Stock{A} |
- |
- |
- |
- |
- |
150 |
150 |
|||||||||||||
|
|
|
Interest cash flows on bank loans and Debenture Stock |
3,644 |
3,340 |
2,844 |
1,507 |
196 |
229 |
11,760 |
|||||||||||||
|
|
|
Interest cash flows on swaps |
827 |
414 |
- |
- |
- |
- |
1,241 |
|||||||||||||
|
|
|
Cash flows on other creditors |
5,280 |
2,620 |
1,944 |
958 |
- |
- |
10,802 |
|||||||||||||
|
|
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|||||||||||||
|
|
|
|
9,751 |
75,166 |
24,023 |
72,715 |
13,577 |
379 |
195,611 |
|||||||||||||
|
|
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
{A} The Debenture Stock is perpetual and has therefore been disclosed as maturing after more than 5 years. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Interest rate sensitivity |
||||||||||||||||||||
|
|
|
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the Balance Sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Of the total bank loans the interest rate on Yen 8,225,600,000 (£58,525,000) is fixed through a swap and forward currency contract, as detailed in note 13.
|
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
If interest rates had been 100 basis points higher or lower (based on current parameter used by the Manager's Investment Risk Department on risk assessment) and all other variables were held constant, the Company's: |
||||||||||||||||||||
|
|
|
revenue return for the year ended 31 December 2012 would increase/decrease by £259,000 (2011 - increase/decrease by £326,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances. These figures have been calculated based on cash positions at each year end. |
||||||||||||||||||||
|
|
|
equity reserves would increase/decrease by £9,973,000 (2011 - increase/decrease by £7,438,000). This is also mainly attributable to the Company's exposure to interest rates on cash balances and its fixed interest portfolio. These figures have been calculated based on cash and fixed interest portfolio positions at each year end. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. The risk parameters used will also fluctuate depending on the current market perception. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Foreign currency risk |
||||||||||||||||||||
|
|
|
A significant proportion of the Company's investment portfolio is invested in overseas securities and the Balance Sheet can be significantly affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. A significant proportion of the Company's borrowings, as detailed in note 13, is in foreign currency as at 31 December 2012. The Manager seeks, when deemed appropriate, to manage exposure to currency movements on borrowings by using forward foreign currency contracts as a hedge against potential foreign currency movements. At 31 December 2012 the Company had a foreign currency contract, details of which are disclosed below. During the year a loss of £14,614,000 (2011 - gain of £9,721,000) was realised. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
The revenue account is subject to currency fluctuation arising on overseas income. The Company does not hedge this currency risk. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Currency risk exposure by currency of denomination: |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
|
31 December 2012 |
31 December 2011 |
||||||||||||||||||
|
|
|
|
UK and |
|
|
UK and |
|
|
||||||||||||||
|
|
|
|
overseas |
Net |
Total |
overseas |
Net |
Total |
||||||||||||||
|
|
|
|
equity |
monetary |
currency |
equity |
monetary |
currency |
||||||||||||||
|
|
|
|
investments |
assets |
exposure |
investments |
assets |
exposure |
||||||||||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||||||
|
|
|
US Dollar |
282,176 |
- |
282,176 |
246,111 |
- |
246,111 |
||||||||||||||
|
|
|
Sterling |
177,556 |
25,920 |
203,476 |
166,277 |
32,571 |
198,848 |
||||||||||||||
|
|
|
Euro |
107,199 |
- |
107,199 |
82,213 |
- |
82,213 |
||||||||||||||
|
|
|
Hong Kong Dollar |
94,222 |
- |
94,222 |
74,112 |
- |
74,112 |
||||||||||||||
|
|
|
Swiss Franc |
88,148 |
- |
88,148 |
71,290 |
- |
71,290 |
||||||||||||||
|
|
|
Taiwan Dollar |
75,020 |
14 |
75,034 |
51,055 |
28 |
51,083 |
||||||||||||||
|
|
|
Brazilian Real |
65,777 |
- |
65,777 |
57,299 |
- |
57,299 |
||||||||||||||
|
|
|
Canadian Dollar |
56,052 |
- |
56,052 |
29,083 |
- |
29,083 |
||||||||||||||
|
|
|
Malaysian Ringgit |
46,214 |
- |
46,214 |
37,514 |
- |
37,514 |
||||||||||||||
|
|
|
Indonesian Rupiah |
42,488 |
- |
42,488 |
42,010 |
- |
42,010 |
||||||||||||||
|
|
|
Singapore Dollar |
40,173 |
- |
40,173 |
30,262 |
- |
30,262 |
||||||||||||||
|
|
|
Mexican Peso |
36,223 |
- |
36,223 |
22,833 |
1 |
22,834 |
||||||||||||||
|
|
|
Swedish Krone |
25,839 |
- |
25,839 |
21,951 |
- |
21,951 |
||||||||||||||
|
|
|
Indian Rupee |
20,610 |
- |
20,610 |
17,228 |
- |
17,228 |
||||||||||||||
|
|
|
Australian Dollar |
19,439 |
- |
19,439 |
18,623 |
- |
18,623 |
||||||||||||||
|
|
|
Thailand Baht |
13,153 |
- |
13,153 |
23,984 |
- |
23,984 |
||||||||||||||
|
|
|
Japanese Yen |
53,436 |
(58,519) |
(5,083) |
62,618 |
- |
62,618 |
||||||||||||||
|
|
|
|
________ |
_______ |
_______ |
_______ |
_____ |
________ |
||||||||||||||
|
|
|
Total |
1,243,725 |
(32,585) |
1,211,140 |
1,054,463 |
32,600 |
1,087,063 |
||||||||||||||
|
|
|
|
________ |
_______ |
_______ |
_______ |
_____ |
________ |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
The asset allocation between specific markets can vary from time to time based on the Manager's opinion of the attractiveness of the individual markets. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Foreign currency sensitivity |
||||||||||||||||||||
|
|
|
The following table details the Company's sensitivity to a 10% increase and decrease in sterling against the major foreign currencies in which the Company has exposure (based on exposure >5% of total exposure). The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. |
||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
2012 |
2012 |
2011 |
2011 |
||||||||||||||||
|
|
|
|
Revenue |
Equity{A} |
Revenue |
Equity{A} |
||||||||||||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||||||||
|
|
|
US Dollar |
875 |
28,218 |
862 |
24,611 |
||||||||||||||||
|
|
|
Euro |
700 |
10,720 |
539 |
8,221 |
||||||||||||||||
|
|
|
Hong Kong Dollar |
286 |
9,422 |
252 |
7,411 |
||||||||||||||||
|
|
|
Swiss Franc |
339 |
8,815 |
248 |
7,129 |
||||||||||||||||
|
|
|
Taiwan Dollar |
242 |
7,502 |
207 |
5,105 |
||||||||||||||||
|
|
|
Brazilian Real |
222 |
6,578 |
242 |
5,730 |
||||||||||||||||
|
|
|
|
_____ |
_____ |
_____ |
_______ |
||||||||||||||||
|
|
|
Total |
2,664 |
71,255 |
2,350 |
58,207 |
||||||||||||||||
|
|
|
|
_____ |
_____ |
_____ |
_______ |
||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
{A} represents equity exposures to the relevant currencies |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Foreign exchange contracts |
||||||||||||||||||||
|
|
|
The following Japanese Yen forward contracts were outstanding at the Balance Sheet date: |
||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
Unrealised loss at |
||||||||||||||||
|
|
|
|
|
Amount |
|
31 December |
||||||||||||||||
|
|
|
|
Settlement |
JPY |
Contracted |
2012 |
||||||||||||||||
|
|
|
Date of contract |
date |
'000 |
rate |
£'000 |
||||||||||||||||
|
|
|
5 December 2012 |
8 March 2013 |
20,000,000 |
140.45 |
8,805 |
||||||||||||||||
|
|
|
|
|
__________ |
_______ |
_______ |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
The fair value of forward foreign currency contracts is based on forward exchange rates at the Balance Sheet date. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Other price risk |
||||||||||||||||||||
|
|
|
Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process, both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges worldwide. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Other price risk sensitivity |
||||||||||||||||||||
|
|
|
If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 December 2012 would have increased/decreased by £132,753,000 (2011 - increase/decrease of £114,096,000) and equity reserves would have increased/decreased by the same amount. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
(ii) |
Liquidity risk |
||||||||||||||||||||
|
|
|
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of loan and overdraft facilities (note 13). |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
(iii) |
Credit risk |
||||||||||||||||||||
|
|
|
This is failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
The risk is not significant, and is managed as follows: |
||||||||||||||||||||
|
|
|
where the Manager makes an investment in a bond, corporate or otherwise, the credit ratings of the issuer are taken into account so as to manage the risk to the Company of default; |
||||||||||||||||||||
|
|
|
investments in quoted bonds are made across a variety of industry sectors and geographic markets so as to avoid concentrations of credit risk; |
||||||||||||||||||||
|
|
|
transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Company of default; |
||||||||||||||||||||
|
|
|
investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker; |
||||||||||||||||||||
|
|
|
the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the custodian's records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. The Manager's Compliance department carries out periodic reviews of the custodian's operations and reports its finding to the Manager's Risk Management Committee. |
||||||||||||||||||||
|
|
|
cash is held only with reputable banks with acceptable credit quality. It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Credit risk exposure |
||||||||||||||||||||
|
|
|
In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 December 2012 was as follows: |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
|
2012 |
2011 |
||||||||||||||||||
|
|
|
|
Balance |
Maximum |
Balance |
Maximum |
||||||||||||||||
|
|
|
|
Sheet |
exposure |
Sheet |
exposure |
||||||||||||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||||||||
|
|
|
Non-current assets |
|
|
|
|
||||||||||||||||
|
|
|
Securities at fair value through profit or loss |
1,327,532 |
1,327,532 |
1,140,963 |
1,140,963 |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
Current assets |
|
|
|
|
||||||||||||||||
|
|
|
Current taxation |
916 |
916 |
1,175 |
1,175 |
||||||||||||||||
|
|
|
Other debtors |
52 |
52 |
167 |
167 |
||||||||||||||||
|
|
|
Forward contracts |
- |
- |
2,715 |
2,715 |
||||||||||||||||
|
|
|
Accrued income |
4,201 |
4,201 |
5,393 |
5,393 |
||||||||||||||||
|
|
|
Cash and short term deposits |
25,940 |
25,940 |
32,600 |
32,600 |
||||||||||||||||
|
|
|
|
________ |
________ |
________ |
________ |
||||||||||||||||
|
|
|
|
1,358,641 |
1,358,641 |
1,183,013 |
1,183,013 |
||||||||||||||||
|
|
|
|
________ |
________ |
________ |
________ |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
None of the Company's financial assets is secured by collateral or other credit enhancements. |
||||||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Fair values of financial assets and financial liabilities |
||||||||||||||||||||
|
|
|
The fair value of borrowings has been calculated at £150,759,000 as at 31 December 2012 (2011 - £178,461,000) compared to an accounts value in the financial statements of £146,189,000 (2011 - £171,808,000) (note 13). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. All other assets and liabilities of the Company are included in the Balance Sheet at fair value. |
||||||||||||||||||||
|
20. |
Fair value hierarchy |
||||||
|
|
FRS 29 'Financial Instruments: Disclosures' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels: |
||||||
|
|
|
||||||
|
|
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
||||||
|
|
Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and |
||||||
|
|
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
||||||
|
|
|
||||||
|
|
The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at the reporting date as follows: |
||||||
|
|
|
||||||
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
As at 31 December 2012 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
Quoted equities |
a) |
1,243,725 |
- |
- |
1,243,725 |
|
|
|
Quoted preference shares |
a) |
5,585 |
- |
- |
5,585 |
|
|
|
Quoted bonds |
b) |
78,222 |
- |
- |
78,222 |
|
|
|
|
|
________ |
_____ |
_____ |
________ |
|
|
|
Total |
|
1,327,532 |
- |
- |
1,327,532 |
|
|
|
|
|
________ |
_____ |
_____ |
________ |
|
|
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
|
Foreign exchange forward contracts |
c) |
- |
(8,805) |
- |
(8,805) |
|
|
|
Derivatives |
d) |
- |
(315) |
- |
(315) |
|
|
|
|
|
_____ |
_____ |
_____ |
_____ |
|
|
|
Total |
|
- |
(9,120) |
- |
(9,120) |
|
|
|
|
|
________ |
_____ |
_____ |
________ |
|
|
|
Net fair value |
|
1,327,532 |
(9,120) |
- |
1,318,412 |
|
|
|
|
|
________ |
_____ |
_____ |
________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
As at 31 December 2011 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
Quoted equities |
a) |
1,054,463 |
- |
- |
1,054,463 |
|
|
|
Quoted preference shares |
a) |
4,435 |
- |
- |
4,435 |
|
|
|
Quoted bonds |
b) |
82,065 |
- |
- |
82,065 |
|
|
|
Foreign exchange forward contracts |
c) |
- |
2,715 |
- |
2,715 |
|
|
|
|
|
________ |
_____ |
_____ |
________ |
|
|
|
Total |
|
1,140,963 |
2,715 |
- |
1,143,678 |
|
|
|
|
|
________ |
_____ |
_____ |
________ |
|
|
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
|
Derivatives |
d) |
- |
(1,151) |
- |
(1,151) |
|
|
|
|
|
_____ |
_____ |
_____ |
_____ |
|
|
|
Total |
|
- |
(1,151) |
- |
(1,151) |
|
|
|
|
|
________ |
_____ |
_____ |
________ |
|
|
|
Net fair value |
|
1,140,963 |
1,564 |
- |
1,142,527 |
|
|
|
|
|
________ |
_____ |
_____ |
________ |
|
|
|
|
|
|||||
|
|
a) |
Quoted equities and preference shares |
|||||
|
|
|
The fair value of the Company's investments in quoted equities and preference shares has been determined by reference to their quoted bid prices at the reporting date. Quoted equities and preference shares included in Fair Value Level 1 are actively traded on recognised stock exchanges. |
|||||
|
|
b) |
Quoted bonds |
|||||
|
|
|
The fair value of the Company's investments in quoted bonds has been determined by reference to their quoted bid prices at the reporting date. Bonds included in Fair Value Level 1 include Government Bonds and Corporate Bonds. |
|||||
|
|
c) |
Foreign exchange forward contracts |
|||||
|
|
|
The fair value of the Company's investment in foreign exchange forward contracts has been determined in relation to models using observable market inputs and hence are categorised in Fair Value Level 2. |
|||||
|
|
d) |
Derivatives |
|||||
|
|
|
The fair value of the Company's investment in derivatives has been determined in relation to models using observable market inputs and hence are categorised in Fair Value Level 2. |
|||||
|
21. |
Capital management policies and procedures |
|
|
The investment objective of the Company is to achieve a total return greater than its benchmark by investing predominantly in equities worldwide. |
|
|
|
|
|
The capital of the Company consists of 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; and |
|
|
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. |
|
|
|
|
|
Details of the Company's gearing facilities and financial covenants are detailed in note 13 of the financial statements. |
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 December 2012 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2011 and 2012 statutory accounts received unqualified reports from the Company's auditors and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498 of the Companies Act 2006. The financial information for 2011 is derived from the statutory accounts for 2011 which have been delivered to the Registrar of Companies. The 2012 accounts will be filed with the Registrar of Companies in due course.
The Annual Report will be posted to shareholders in March 2013 and additional copies will be available from the registered office of the Company and on the Company's website, http://www.murray-intl.co.uk/doc.nsf/Lit/ReportUKClosedMINTAnnual*
The Annual General Meeting will be held at 12.30 pm on 11 April 2013 at the Radisson Blu Hotel, 301 Argyle Street, Glasgow G2 8DL.
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.
*Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
For Murray International Trust PLC
Aberdeen Asset Management PLC, Secretaries
26 February 2013
10 SUMMARY OF INVESTMENT CHANGES DURING THE YEAR
|
|
Valuation |
Appreciation/ |
|
Valuation |
||
|
|
31 December 2012 |
(depreciation) |
Transactions |
31 December 2011 |
||
|
|
£'000 |
% |
£'000 |
£'000 |
£'000 |
% |
|
Equities |
|
|
|
|
|
|
|
United Kingdom |
177,556 |
13.2 |
3,785 |
7,494 |
166,277 |
14.2 |
|
North America |
134,954 |
10.0 |
4,066 |
10,127 |
120,761 |
10.3 |
|
Europe ex UK |
221,186 |
16.5 |
9,447 |
36,285 |
175,454 |
14.9 |
|
Japan |
53,436 |
4.0 |
(1,700) |
(7,482) |
62,618 |
5.3 |
|
Asia Pacific ex Japan |
351,319 |
26.1 |
35,321 |
21,209 |
294,789 |
25.1 |
|
Latin America |
305,274 |
22.7 |
43,363 |
27,347 |
234,564 |
19.8 |
|
|
__________ |
________ |
_________ |
_________ |
_______ |
______ |
|
|
1,243,725 |
92.5 |
94,282 |
94,980 |
1,054,463 |
89.6 |
|
|
__________ |
________ |
_________ |
_________ |
_______ |
______ |
|
|
|
|
|
|
|
|
|
Fixed income |
|
|
|
|
|
|
|
United Kingdom |
16,083 |
1.2 |
2,043 |
(10,562) |
24,602 |
2.1 |
|
Europe ex UK |
13,176 |
1.0 |
4,084 |
86 |
9,006 |
0.8 |
|
Asia Pacific ex Japan |
13,218 |
1.0 |
(466) |
11 |
13,673 |
1.2 |
|
Latin America |
41,330 |
3.1 |
1,438 |
673 |
39,219 |
3.3 |
|
|
__________ |
________ |
_________ |
_________ |
_______ |
______ |
|
|
83,807 |
6.3 |
7,099 |
(9,792) |
86,500 |
7.4 |
|
|
__________ |
________ |
_________ |
_________ |
_______ |
______ |
|
Other net assets |
16,236 |
1.2 |
(19,383) |
- |
35,619 |
3.0 |
|
|
__________ |
________ |
_________ |
_________ |
_______ |
______ |
|
Total assets |
1,343,768 |
100.0 |
81,998 |
85,188 |
1,176,582 |
100.0 |
|
|
__________ |
________ |
_________ |
_________ |
_______ |
______ |
|
|
||||||
|
|
||||||
11 TWENTY LARGEST INVESTMENTS
As at 31 December 2012
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2012 |
assets |
2011 |
|
|
Company |
Country |
£'000 |
% |
£'000 |
|
|
1 (1) |
British American Tobacco{B} |
|
|
|
|
|
British American Tobacco is the holding company for a group of companies that manufacture, market and sell cigarettes and other tobacco products. The group sells over 300 brands in approximately 180 markets around the world. |
UK & Malaysia |
57,647 |
4.3 |
52,539 |
|
|
2 (9) |
Aeroportuario del Sureste ADS |
|
|
|
|
|
Grupo Aeroporto del Sureste operates airports in Mexico. The company holds long-term concessions to manage airports in leading tourist resorts such as Cancun and Cozumel, plus cities such as Oaxaca, Veracruz and Merida. |
Mexico |
52,521 |
3.9 |
26,934 |
|
|
3 (2) |
Souza Cruz |
|
|
|
|
|
Souza Cruz produces and sells cigarettes and other tobacco products in Latin America. Brand names include Lucky Strike, Carlton, Derby and Hollywood. The company also manufactures paper for cigarettes and packaging. |
Brazil |
51,824 |
3.9 |
44,259 |
|
|
4 (3) |
Unilever Indonesia |
|
|
|
|
|
Unilever Indonesia, the majority owned subsidiary of Unilever NV, manufactures soaps, detergents, margarine, oil and cosmetics. The company also produces dairy based foods, ice cream and tea beverages. |
Indonesia |
42,488 |
3.2 |
42,010 |
|
|
5 (6) |
Vale do Rio Doce{C} |
|
|
|
|
|
Vale is one of the world's largest, fully-integrated, natural resources companies. Based in Brazil, the company produces iron-ore, manganese, alloys, gold, nickel, copper, aluminium, potash and numerous other minerals. In addition to its mining assets, Vale also owns and operates railways and maritime terminals. |
Brazil & USA |
39,385 |
2.9 |
28,275 |
|
|
6 (5) |
Taiwan Mobile |
|
|
|
|
|
Taiwan Mobile is the leading provider of cellular telecommunications services in Taiwan. Although predominantly a wireless network operator, the company also sells and leases cellular telephony equipment. |
Taiwan |
39,299 |
2.9 |
28,889 |
|
|
7 (-) |
Kimberly Clark de Mexico |
|
|
|
|
|
Kimberly Clark de Mexico manufactures, markets and distributes consumer, industrial and institutional hygiene products. The company produces diapers, toilet paper and facial tissues, that it distributes and sells throughout Mexico. |
Mexico |
36,223 |
2.7 |
21,235 |
|
|
8 (18) |
Taiwan Semiconductor Manufacturing |
|
|
|
|
|
Taiwan Semiconductor Manufacturing Company is one of the largest integrated circuit manufacturers in the world. The company is involved in component design, wafer manufacturing, assembly, testing and mask production of integrated circuits which are used in the computer, communication and electronics industries. |
Taiwan |
35,721 |
2.7 |
22,167 |
|
|
9 (7) |
Philip Morris International |
|
|
|
|
|
Spun out from the Altria Group in 2008, Philip Morris International is one of the world's leading global tobacco companies. It manufactures and sells leading recognisable brands such as Marlboro, Parliament and Virginia Slims. |
USA |
34,994 |
2.6 |
28,272 |
|
|
10 (12) |
PetroChina |
|
|
|
|
|
PetroChina explores, develops and produces crude oil and natural gas. The company also refines, transports and distributes crude oil and petroleum products, produces and sells chemicals, and transmits, markets and sells natural gas. |
China |
32,996 |
2.4 |
24,836 |
|
|
Top ten investments |
|
423,098 |
31.5 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
{B} Holding comprises UK and Malaysia securities split £34,331,000 (2011 - £33,610,000) and £23,316,000 (2011 - £18,929,000). |
|||||
|
{C} Holding comprises equity and fixed income securities split £28,709,000 (2011 - £18,018,000) and £10,676,000 (2011 - £10,257,000). |
|||||
|
|
|
|
|
|
|
|
11 (4) |
Telus |
|
|
|
|
|
Telus is a telecommunications company providing a variety of communication products and services. The company provides voice, data, internet and wireless services to businesses and consumers throughout Canada. |
Canada |
32,148 |
2.4 |
29,083 |
|
|
12 (8) |
Standard Chartered |
|
|
|
|
|
Standard Chartered is an international banking group operating principally in Asia, Africa, Latin America and the Middle East. The company offers its products and services to a wide range of customers in over fifty countries worldwide. |
UK |
31,470 |
2.3 |
28,180 |
|
|
13 (-) |
Royal Dutch Shell |
|
|
|
|
|
Royal Dutch Shell, through numerous international subsidiaries and global partnerships, explores for and produces oil, gas and petroleum products. In addition to producing fuels, chemicals and lubricants, the company owns and operates petrol filling stations worldwide. |
UK |
29,580 |
2.2 |
21,227 |
|
|
14 (-) |
Fomento Economico Mexicano |
|
|
|
|
|
Fomento Economico Mexicano (FEMSA) produces, distributes and markets non-alcoholic beverages throughout Latin America as part of the Coca Cola system. The company also owns and operates OXXO convenience stores in Mexico and Colombia and holds a stake in the Heineken brewing company. |
Mexico |
29,114 |
2.2 |
21,067 |
|
|
15 (16) |
Tenaris ADR |
|
|
|
|
|
Tenaris manufactures, markets and distributes welded and seamless pipe. The company produces casing, tubing, pipeline and mechanical tubes for the oil and gas and energy industries and for mechanical applications and distributes its products worldwide. |
Mexico |
28,361 |
2.1 |
23,459 |
|
|
16 (-) |
Singapore Telecommunications |
|
|
|
|
|
Singapore Telecommunications Limited is a communications company providing a diverse range of communications services including fixed-line telephony, mobile, data, internet, satellite and pay television. The company operates throughout the Asian Pacific region. |
Singapore |
27,922 |
2.1 |
20,548 |
|
|
17 (-) |
ENI |
|
|
|
|
|
ENI explores for and produces hydrocarbons in Italy, Africa, the North Sea, the Gulf of Mexico, Kazakhstan and Australia. In addition to producing and processing natural gas, the company owns and operates an extensive pipeline network. |
Italy |
27,816 |
2.1 |
14,166 |
|
|
18 (10) |
Telefonica Brasil |
|
|
|
|
|
Telefonica Brasil provides fixed-line and wireless telecommunication services throughout the Brazilian State of Sao Paolo. The company provides voice, data, broadband and digital video to consumers, business and government entities. |
Brazil |
27,678 |
2.1 |
26,388 |
|
|
19 (-) |
Total |
|
|
|
|
|
Total is a fully integrated international energy company involved in exploration, production, refining, transportation and marketing of oil and natural gas.The company also operates a chemical division which produces polypropylene, polyethylene, polystyrene, rubber, paint, ink, adhesives and resins. |
France |
27,519 |
2.0 |
15,315 |
|
|
20 (-) |
Roche Holdings |
|
|
|
|
|
Roche Holdings develops and manufactures pharmaceutical and diagnostic products. The company produces prescription drugs in the areas of cardiovascular, respiratory diseases, dermatology, metabolic disorders, oncology and organ transplantation. |
Switzerland |
27,206 |
2.0 |
18,612 |
|
|
Top twenty investments |
|
711,912 |
53.0 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
The value of the 20 largest investments represents 53.0% (2011 - 48.3%) of total assets. The figures in brackets denote the position at the previous year end. (-) denotes not previously in 20 largest investments. |
|||||
Portfolio of Investments - Other Investments
|
|
|
Valuation |
Total |
Valuation |
|
|
|
2012 |
assets |
2011 |
|
Company |
Country |
£'000 |
% |
£'000 |
|
Nordea |
Sweden |
25,839 |
1.9 |
21,951 |
|
Wing Hang Bank |
Hong Kong |
24,872 |
1.9 |
14,923 |
|
Daito Trust Construction |
Japan |
24,584 |
1.8 |
17,636 |
|
Casino |
France |
24,554 |
1.8 |
16,689 |
|
Zurich Financial Services |
Switzerland |
24,528 |
1.8 |
21,934 |
|
Potash Corporation of Saskatchewan |
Canada |
23,904 |
1.8 |
- |
|
Banco Bradesco{D} |
Brazil |
23,707 |
1.8 |
23,616 |
|
China Mobile |
China |
23,639 |
1.8 |
20,738 |
|
Weir Group |
UK |
23,002 |
1.7 |
24,875 |
|
Public Bank |
Malaysia |
22,898 |
1.7 |
18,585 |
|
Top thirty investments |
|
953,439 |
71.0 |
|
|
Johnson & Johnson |
USA |
22,856 |
1.7 |
22,355 |
|
Petrobras ADR |
Brazil |
22,571 |
1.7 |
24,184 |
|
Novartis |
Switzerland |
22,395 |
1.6 |
15,151 |
|
Pepsico |
USA |
21,052 |
1.6 |
21,343 |
|
Hindustan Unilever |
India |
20,610 |
1.5 |
17,228 |
|
HSBC |
UK |
20,054 |
1.5 |
15,223 |
|
QBE Insurance Group |
Australia |
19,439 |
1.4 |
18,623 |
|
GDF Suez |
France |
15,901 |
1.2 |
9,680 |
|
Astellas Pharmaceutical |
Japan |
14,594 |
1.1 |
13,829 |
|
Canon |
Japan |
14,258 |
1.1 |
17,061 |
|
Top forty investments |
|
1,147,169 |
85.4 |
|
|
Nestlé |
Switzerland |
14,020 |
1.0 |
15,592 |
|
Wilson & Sons |
Brazil |
13,954 |
1.0 |
13,040 |
|
Centrica |
UK |
13,344 |
1.0 |
15,044 |
|
Portugal Telecom 4.5% 16/06/2025 |
Portugal |
13,176 |
1.0 |
9,006 |
|
PTT Exploration and Production |
Thailand |
13,153 |
1.0 |
23,984 |
|
Vodafone Group |
UK |
12,974 |
1.0 |
15,028 |
|
AstraZeneca |
UK |
12,802 |
1.0 |
13,090 |
|
Swire Pacific B |
Hong Kong |
12,715 |
0.9 |
13,615 |
|
Oversea-Chinese Bank |
Singapore |
12,251 |
0.9 |
9,714 |
|
Belgacom |
Belgium |
11,408 |
0.8 |
12,836 |
|
Top fifty investments |
|
1,276,966 |
95.0 |
|
|
Hypermarcas 6.5% 20/04/2021 |
USA |
10,653 |
0.8 |
9,137 |
|
Telefonica Emisiones 5.375% 02/02/2018 |
UK |
10,498 |
0.8 |
9,758 |
|
Republic of Venezuela 8.5% 08/10/2014 |
USA |
7,530 |
0.6 |
7,181 |
|
Republic of Indonesia 10% 15/02/2028 |
Indonesia |
6,670 |
0.5 |
6,831 |
|
Republic of Indonesia 9.5% 15/07/2023 |
Indonesia |
6,548 |
0.5 |
6,842 |
|
Federal Republic of Brazil 11% 17/08/2040 |
USA |
3,082 |
0.2 |
3,410 |
|
General Accident 7.875% Cum Irred Pref |
UK |
2,938 |
0.2 |
2,616 |
|
Santander 10.375% Non Cum Pref |
UK |
2,647 |
0.2 |
1,819 |
|
Total investments |
|
1,327,532 |
98.8 |
|
|
Net current assets |
|
16,236 |
1.2 |
|
|
Total assets{A} |
|
1,343,768 |
100.0 |
|
|
|
|
|
|
|
|
|
||||
|
{D} Holding comprises equity and fixed income securities split £14,319,000 (2011 - £14,382,000) and £9,388,000 (2011 - £9,234,000). |
||||
12 FINANCIAL HIGHLIGHTS
|
|
31 December 2012 |
31 December 2011 |
% |
|
Total assets less current liabilities (before deducting prior charges) |
£1,343,768,000 |
£1,176,582,000 |
|
|
Equity shareholders' funds (Net Assets) |
£1,192,243,000 |
£999,252,000 |
|
|
Share price - Ordinary share (mid market) |
1048.0p |
916.5p |
+14.3 |
|
Share price - B Ordinary share (mid market) |
1107.5p |
890.0p |
+24.4 |
|
Net Asset Value per Ordinary and B Ordinary share |
975.8p |
892.2p |
+9.4 |
|
Premium to Net Asset Value on Ordinary shares |
7.4% |
2.7% |
|
|
|
|
|
|
|
Gearing (ratio of borrowings less cash to shareholders' funds) |
|
|
|
|
Net gearing{A} |
10.1% |
13.9% |
|
|
|
|
|
|
|
Dividends and earnings per Ordinary share |
|
|
|
|
Revenue return per share |
39.8p |
43.6p |
-8.7 |
|
Dividends per share{B} |
40.5p |
37.0p |
+9.5 |
|
Dividend cover (including proposed final dividend) |
0.98 |
1.18 |
|
|
Revenue reserves{C} |
£64,631,000 |
£62,886,000 |
|
|
|
|
|
|
|
Ongoing charges{D} |
|
|
|
|
Excluding performance fee |
0.71% |
0.75% |
|
|
Including performance fee |
1.02% |
1.16% |
|
|
|
|
||
|
{A} Calculated in accordance with AIC guidance "Gearing Disclosures post RDR" |
|||
|
{B} The figure for dividends per share reflects the years in which they were earned (see note 8) and assuming approval of the 13.5p (2011 - 13.0p) final dividend. |
|||
|
{C} The revenue reserve figure does not take account of the third interim and final dividends amounting to £10,915,000 and £16,631,000 respectively (2011 - £8,891,000 and £14,659,000). |
|||
|
{D} Ongoing charges are calculated in accordance with recent 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. The figures for 2011 have been restated accordingly. |
|||
Performance (total return)
|
|
1 year |
3 year |
5 year |
10 year |
|
|
% return |
% return |
% return |
% return |
|
Share price{A} |
+19.0 |
+53.3 |
+90.4 |
+410.3 |
|
Net asset value per Ordinary and B Ordinary share |
+14.0 |
+42.0 |
+60.1 |
+293.2 |
|
Benchmark |
+11.4 |
+22.2 |
+17.3 |
+125.6 |
|
|
||||
|
Total return represents the capital return plus dividends reinvested. |
||||
|
{A} Mid to mid. |
||||
This information is provided by RNS
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