Annual Financial Report

RNS Number : 7713N
Murray Income Trust PLC
11 September 2013
 



MURRAY INCOME TRUST PLC

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

 

 

1. CHAIRMAN'S STATEMENT

 

Highlights

•     Total Dividend increased by 3.4% to 30.75p

•     Net Asset Value Total Return +18.8%

•     Share Price Total Return +21.5%

 

Performance

After the flat performance of last year it has been pleasing to see a total return of 18.8% in Net Asset Value ("NAV") and one of 21.5% in the share price, compared to a total return of 17.9% from the FTSE All-Share Index. The UK performed similarly to most developed equity markets as they enjoyed the powerful stimuli of continued extreme monetary ease and a perception, gradually a reality, that economic performance was improving. In an important contrast the performance of gilts, which had been so striking in the Company's last financial year, was much less impressive with a fall in the 25-year gilt on a total return basis of 5.1% producing a rise in yield to 3.5%. The performance of the market was a product of profit growth of 1% and a re-rating on a trailing Price-Earnings Ratio basis from 10.8x to 13.5x. The shift in the economic position was brought home very clearly by the reaction to Mr Bernanke's essentially unsurprising statement that the Federal Reserve was considering plans to "taper" the amount of Quantitative Easing or unusual monetary stimulus provided to the US economy later in the year. Against a background of extended bond markets and an overbought equity market in the short term markets reacted quite violently, with the All-Share Index falling by 11.3% and the 25-year gilt by 10.4% from their peaks to troughs. By the end of our year, markets seem to have decided that this was a nightmare that could safely be dismissed without the prospect of becoming reality.

 

The position in other markets was less attractive. The much-hyped BRICs all experienced difficult conditions, in response to weak commodity markets (Brazil and Russia) a creditable effort to re-balance the economy (China) and a backlash from trying to grow without sufficient savings (India). In addition, riots in Brazil and Turkey emphasized that political instability can appear without much warning, and indeed remains a risk in some countries within the European Union.

 

Dividend

Net revenue return per share rose for the year by 1.6% from 30.6p per share to 31.1p per share. Underlying this small increase the trends are more favourable. Income from investments increased by 6.3% albeit with the inclusion of two special dividends which did not, however, match the one paid by Vodafone last year. Although these special dividends reflected a reduction in the capital available to the companies, they represented the return to shareholders of reserves created by historically cautious dividends and therefore have been recognised as revenue by the Company. Income from the sale of options also decreased. It has been difficult to manage the income account over the last five years and we have been materially aided by VAT repayments and option income over that period. However, the former have now ended and the latter has reduced against a background of improving corporate profits and dividends, which herald a return to a more normal structure for the income account.

 

During the year the dividends were rebalanced in order to increase the proportion of distributable revenue paid through the interim dividends.  Accordingly, subject to approval at the Annual General Meeting, a final dividend of 9.75p per Ordinary share will be paid on 29 October 2013 to shareholders on the register on 27 September 2013. The ex-dividend date is 25 September 2013. This is a reduced final dividend payment compared to the 13.25p paid in the prior year, however, overall the full year dividend payment has increased by 3.4% for the current year.

 

Share Capital

The Company's shares have traded at a premium to NAV for almost all of the year ended 30 June 2013. As a result we have been able to issue 1,127,000 new shares and re-issue 466,000 treasury shares all at a small premium to NAV. This creates a small enhancement to NAV and mitigates the likelihood of disappointing share price returns from purchase at a high premium and subsequent, possibly much later, sale at a reduced premium or at a discount. It is also clear that many of the buyers of our shares are self-managed execution-only, individuals. On a net basis we estimate that such shareholdings have increased by 2.3m shares over the last year. We are pleased to see this. It may be that the transparency required by the Retail Distribution Review has caused individuals to decide to handle their investments themselves rather than pay intermediary fees. It is also a logical response to low nominal rates of return. Through the Company's website and the availability of hard copy reports we and Aberdeen Asset Management's marketing department do try to keep shareholders informed. However, the main opportunity for direct contact is at the Annual General Meeting and we hope that many individual shareholders will attend.

 

Board Changes

After serving on the Board since 2004, including as Chairman of the Audit Committee, Humphrey van der Klugt has decided not to seek re-election at the Annual General Meeting. We have very much valued his contribution particularly on investment and as a diligent and sharp-eyed Chairman of the Audit Committee. We shall miss him.

 

Annual General Meeting

The Annual General Meeting will be held on Friday 25 October 2013 at The London Chamber of Commerce and Industry, 33 Queen Street, London, EC4R 1AP at 12.30 p.m. It is the Board's intention to hold the 2014 Annual General Meeting in Glasgow.

 

AIFMD

After consideration, the Board has agreed in principle to appoint a subsidiary of Aberdeen Asset Management PLC as the Company's AIFM as required by the Alternative Investment Fund Managers Directive which came into force on 22 July 2013. The Board fully expects to be able to implement the changes with Aberdeen Asset Managers Limited and other service providers prior to the expiry of the AIFMD's transitional arrangements in July 2014.

 

Outlook

After a very good year which has continued the bull market which began in the gloomy depths of spring 2009 it is worth re-examining whether the forces that have sustained it are still intact. To a great extent they are. Monetary ease is likely to be with us for some time yet though Mr Bernanke's statements about a potential policy shift seem entirely appropriate. For equity markets it is important that there are signs that economic activity is getting stronger. The UK seems at last to be a fuller participant in this than it has been over the last three years. Such an improvement is likely to be associated with improved credit growth even if liquidity is reined in slightly. The prospects for help for equities from the gilt market however, seem remote. Even with the setback of the last year real yields remain derisory, and incidentally very attractive to governments, and only the onset of deflation can raise them without a fall in gilt prices and a rise in nominal yields. Even if central banks are slightly war-weary, deflation at this point doesn't seem a likely outcome. With no support for a further re-rating from this source, and even the possibility of some undermining, equities are now very dependent on the rate of profit growth of companies. At present the Manager is forecasting profits growth of 7.3% for the FTSE All-Share Index for the year to 30 June 2014. Against a background of what our managers consider to be fair valuation for the market overall returns should be close to this growth barring any positive or negative shocks. Our own portfolio consists of relatively resilient companies which should protect us against adverse changes while probably not containing the greatest beneficiaries from unexpected cyclical growth. We expect that such positioning will continue to deliver the relatively stable and attractive returns seen over recent years.                                   

 

Patrick Gifford

Chairman

11 September 2013

 

 

 

2. MANAGER'S REVIEW

 

Background

The UK equity market performed strongly during the year to the end of June 2013 following the small fall in the prior year.  The FTSE All-Share Index increased by 17.9% on a total return basis with the gains evenly split between the first and second halves of the year.  For the first eleven months of the period the market closed at consecutive highs before falling sharply during the final month of the year.  The catalyst for the improvements in risk appetite and investor sentiment was a realisation that coherent measures were being taken to resolve the Eurozone debt crisis. This was exhibited in actions taken by the European Central Bank to support the Euro, by measures introduced to improve fiscal sustainability and by greater political harmony within the Eurozone.  This led to lower bond yields (particularly for Italy and Spain) and reduced credit default swap rates providing confidence to equity investors as the most significant risks with low probability but high potential impact were reduced.  Although economic performance across emerging markets was mixed, the continued recovery in the US economy led investors to question when the Federal Reserve might start to withdraw monetary stimulus.  This resulted in concerns over an adjustment in asset prices which in turn led to the market giving back some of its gains in the final month of the period.

 

In the United Kingdom, domestic economic data remained relatively weak, although an improving trend was discernible as the period progressed.  United Kingdom GDP increased by 1.4% over the Company's financial year but still remained 3.3% below its peak achieved during the first quarter of 2008.  However, downgrades to United Kingdom GDP growth expectations at the start of the period were replaced by upgrades as the period came to a close with the International Monetary Fund expecting GDP growth of 0.9% and 1.5% for calendar 2013 and 2014 respectively.  The gently improving environment was manifested in a stronger housing market, higher consumer confidence and an employment picture that strengthened throughout the period.  Although above target, inflation remained steady allowing the Monetary Policy Committee to leave interest rates unchanged again throughout the whole period, although it did increase the level of asset purchases by £50bn at the start of the period. 

 

Approximately 70% of the Company's holdings' revenues are derived from overseas where economic growth presented a somewhat different picture from the trends of the last couple of years. Although in absolute terms there remains a significant difference between the growth rates in mature and emerging markets, conditions generally stabilised or improved in a number of mature markets while emerging markets which have been the principal engine of global growth provided mixed signals.  As mentioned above, in the Eurozone, actions taken by both central bankers and politicians assuaged investor concerns and conditions appear to have at least stabilised even if the journey back to competitiveness, both externally and internally, remains unfinished.  In the United States, the economy proved resilient to the 'fiscal cliff' and reduced government spending, as household consumption buoyed by strengthening labour and housing markets, took up the slack.  Japan has witnessed a significantly more expansionary monetary policy environment but as yet it is too soon to be sure of the impact.  The panacea of emerging markets growth became more questionable with the Chinese economy continuing to slow, albeit from high levels, and relatively anaemic growth in India and Brazil compared to historic rates.

 

Performance

The Company generated a positive net asset value per share total return of 18.8% in the year to 30 June 2013, compared to a total return from the FTSE All-Share Index of 17.9%.  The outperformance of 0.9% represented the fourth year in a row of positive relative performance. On a total return basis, the Company's share price increased by 21.5%, which reflected the move from a discount to a premium to Net Asset Value at which the shares traded compared to the previous year end. 

 

On a gross assets basis, the portfolio very marginally outperformed the benchmark by 0.1%.  Gearing benefited returns by 1.6%.   Borrowings remained steady at £40m during the year with the actual level of gearing maintained in a range between 5%-10% for the majority of the year. 

 

Within the market the Oil & Gas and Basic Materials sectors underperformed.  Mining companies performed particularly poorly for the second year in a row, the consequence of relatively geared balance sheets, weakening commodity prices and inflexible cost bases.  Conversely, the Financials sector performed very strongly, benefiting from low starting valuations, improving balance sheets and an upturn in sentiment as the issues surrounding the Eurozone stabilised.  It is worth noting that in general, much of the positive performance overall was due to a re-rating of valuations on which companies traded rather than positive changes in earnings growth.

 

From a size perspective, the FTSE 100 Index lagged both the Mid 250 and Small Cap Indices, a function of its more defensive constituents.  Although the pace of initial public offerings (from which we tend to stand back given that the information advantage rests heavily with the seller) has picked up, a little surprisingly, merger and acquisition activity has been relatively sparse.  However, as the confidence of management teams improves we would expect the rate of activity to quicken.

 

The Company benefited significantly, in asset allocation terms, from its underweight positions in Mining and to a lesser extent Oil & Gas, although the underweight standing relative to the Financials and Telecoms sectors proved to be detrimental.  Stock selection was positive in the Oil & Gas, Basic Materials and Heath Care sectors, although weak in the Consumer Services sector (in particular in Media and Food Retailers). 

 

From a stock-specific standpoint, many of the holdings performed well but a number with share prices that increased by more than 40% are worthy of specific mention.  GKN was helped by better momentum in the company's aerospace end-markets and a perceived improvement in the quality of the business which led to a re-rating.  The Prudential's share price increase was due to a robust performance from the company's Asian operations.  Roche also performed very strongly as the market looked forward optimistically to the prospects for its immunotherapy drugs as well as a strong performance from its existing oncology franchise.  Finally, the two smaller company investment trust holdings, Aberforth Smaller Companies and Dunedin Smaller Companies performed very well as risk appetite returned to the market.

 

On the other hand, there were a number of holdings that detracted from performance.  BG performed poorly due to a range of operational issues including delays to production in Brazil and the North Sea and higher decline rates than expected in Egypt.  BHP Billiton, although outperforming its peer group, was impacted by the fall in commodity prices.  Pearson's performance was disappointing, being primarily a function of cyclical weakness in the North American education market.   Finally, GDF Suez also performed poorly, its profitability affected by weak demand in Europe and outages at its Belgian nuclear reactors.

 

Portfolio Activity and Structure

Our patient, buy and hold investment process resulted in low turnover during the period, at below 10%. Our aim is to ensure that the Company's capital is employed as effectively as possible and to that end we will always seek to improve the earnings and dividend generating capability of the Company's holdings if we feel that valuations remain attractive.  Our belief is that companies with strong competitive positions, robust balance sheets and experienced management teams will generate attractive earnings and dividend growth over the long term which should translate into healthy share price appreciation. 

 

During the period we added to GKN and Linde, both through placings to help fund the acquisitions of Volvo Aerospace and Lincare respectively. 

 

Performance Attribution for the year to 30 June 2013

 

2013


%

Net Asset Value total return per Ordinary share

18.8

FTSE All-Share Index total return

17.9


_______

Relative return

0.9


_______



Relative return

%

Stock selection (equities)


Oil & Gas

0.7

Basic Materials

0.5

Industrials

-

Consumer Goods

-0.2

Health Care

1.1

Consumer Services

-2.1

Telecommunications

-

Utilities

-

Technology

-0.1

Financials

-0.2


_______

Total stock selection (equities)

-0.3


_______



Asset allocation (equities)


Oil & Gas

0.4

Basic Materials

1.8

Industrials

-

Consumer Goods

-

Health Care

-

Consumer Services

-0.3

Telecommunications

-0.5

Utilities

-0.3

Technology

-

Financials

-0.7


_______

Total asset allocation (equities)

0.4


_______

Gearing

1.6

Administrative expenses

-0.2

Management fees

-0.6

Tax charge

-0.1

Residual effect

0.1


_______

Total

0.9

_______


Sources : Aberdeen Asset Management, Mellon & Lipper

 

Notes: Stock Selection - measures the effect of equity selection relative to the benchmark. Asset Allocation - measures the impact of over or underweighting each industry basket in the equity portfolio, relative to the benchmark weights. Gearing effect - measures the impact on relative returns of net borrowings. Management fees & other expenses - these reduce total assets and therefore reduce performance. The effect is calculated by dividing expenses incurred during the year by average total assets less current liabilities. Residual effect - this arises as a result of the different methodologies for calculating performance between the NAV total return, the benchmark provider Lipper and the performance attribution system.

 

We added to our holding in Standard Chartered following the announcement of the fine levied by the New York Department of Financial Services concerning transactions with Iran, on the basis that the share price had overreacted.  Similarly, following a disappointing trading update from BG, we used this as an opportunity to increase our holding in the belief that the shares had been oversold.  Other additions included Close Brothers, Schneider Electric and Sage.  Finally, towards the end of the period, we added to BHP Billiton, encouraged by the tilt in strategy to focus on optimising the current asset portfolio (rather than a focus on acquisitive growth) allied to the attractive dividend yield.

 

In contrast, we took profits in a number of companies that had performed well and looked increasingly expensive such as Unilever, Associated British Foods and Compass.  The holdings in BP and Shell were reduced, helping to lessen the concentration risk in the sector.  The reduction in British American Tobacco reflected the significant portfolio weight and the more challenging regulatory backdrop.  The exposure to Vodafone was also reduced given the desire to diversify the income exposure and the company's relatively muted prospects for further dividend growth.

 

We invested in three new holdings during the period, two of which are listed overseas.  This increased our weighting in companies listed overseas to 14.9% at the end of the period.

 

The first new holding purchased was the Scandinavian bank, Svenska Handelsbanken, a high quality bank with leading market positions, a strong balance sheet with very low funding costs and scope for growth through its differentiated strategy.  The second new company was the insurer Hiscox.  This company provides a balance between opportunistic business written on internationally traded lines to generate profit, and the longer term growth and value potential from more niche areas with higher barrier to entry.  Finally we introduced a small holding in Casino, an international supermarket company.  Although the company's French operations remain challenging, strong growth is evident from Casino's supermarkets in Brazil, Colombia, Vietnam and Thailand.

 

The only company sold during the period was Whitbread where, to our minds, the further expansion of Premier Inn and roll out of Costa Coffee had become reflected in the company's valuation.

 

We continued to write options gently to increase and diversify the income available to the Company.  The income from writing options accounted for 6.5% of total income compared to 8.5% of total income during the prior year.  Although we are wary of becoming overly dependent on option income, we feel that the strategy has been of benefit to the Company by increasing the level of income generated and providing a good discipline for optimising our exposure to individual holdings.

 

In terms of portfolio construction, our aim is to build a sensibly diversified portfolio that is not dependent on any one particular economic scenario but provides broad exposure to the market as a whole. Equally, we are keen to ensure that each investment can make a difference, hence the relatively low number of individual holdings (there were 43 holdings at the period end).  Given the low turnover over the period, changes to the sector positioning of the Company have been modest.  However, the weighting in the Oil and Gas sector has reduced slightly due to the underperformance of the sector and the sales outlined above. The marginally higher exposure to Basic Materials is a result of the increases to BHP Billiton and Linde despite the poor performance of the Mining sector.  The weighting in the Industrials sector has increased due to strong performances from Cobham, Rolls Royce and BBA Aviation coupled with an increase in the holding in Schneider Electric.  The position in Consumer Goods is lower than the prior year mainly due to the reduction to the holding in British American Tobacco.  The exposure to Consumer Services has fallen due to the underperformance of Pearson and the food retail holdings.  The weight in the Telecoms sector decreased as we reduced the holding in Vodafone. Finally, the exposure to Financials increased significantly over the year, a function of the outperformance of the sector and the introduction of Svenska Handelsbanken and Hiscox to the portfolio.

 

Income

For the financial year ended 30 June 2013, the Company witnessed a small increase in the level of income generated, with the revenue return per share increasing from 30.6p to 31.1p, or by 1.6%.  Income from investments increased by 6.3% aided by the recognition of two special dividends (from Hiscox and Sage) as revenue items.  We believe that this recognition is appropriate given that the return of cash was more from a build-up of profits generated by ongoing operations than by a sale of assets. As noted above, the income derived from writing options decreased compared to the previous year.  The impact of a small rise in administrative expenses, higher taxation and marginally more shares in issue partially offset the increase in total income.

 

The broad outlook for income generation has improved considerably over the past couple of years and the dividend culture of the equity market has perhaps never been stronger, but as ever, there remains the potential for negative earnings shocks and hence dividend disappointments.  Our concentration on companies with strong cash flows and robust balance sheets should help to mitigate these risks. Furthermore, the portfolio has been constructed to avoid being overly reliant on any one sector or company for its income generation.  It is worth noting that market dividends, in aggregate, are at present expected to increase by 6.8% per annum and 7.9% per annum in the calendar years 2013 and 2014 respectively.  Although this may be a little optimistic for 2014, we would still expect reasonable dividend progression from the underlying holdings in the Company.  Furthermore, the income from option writing provides a useful fillip and our revenue reserves remain very strong.

 

Outlook

Equity markets in developed countries have performed very strongly over the past year as investors have taken encouragement from a series of actions by policymakers in the Eurozone and a gentle recovery in the United States economy.  Quantitative easing, where it has been employed, has more obviously benefited asset prices to a greater extent than the real economy.  Although the issues in the Eurozone have improved, it is likely that the region will remain in a prolonged period of low growth amidst austerity and high unemployment.  While the United Kingdom economy has started to heal, progress remains fragile and partly dependent on external factors.  Indeed, momentum in the global economy is still weak, the performance of many emerging markets has overall become more muted and high levels of debt in mature economies are likely to act as a cap on growth.  At the end of the period, concerns reflected, at least in the United States, the potential for a normalisation of monetary policy.  However, whilst inflation remains benign, these concerns and their ability to disrupt equity markets should probably not be overstated for now.

 

We have witnessed only the partial improvement in earnings that would help to justify the strong performance of the UK equity market over the past year.  Nonetheless, although no longer cheap, valuations do not look expensive relative to other regions or asset classes.  As well as starting valuations, returns over the long term will reflect the strengths of a company's underlying operations.  Hence the portfolio retains exposure to a mixture of robust businesses, with strong competitive positions and healthy financial characteristics to help protect against the challenges ahead but also to create a sound foundation for the Company to capitalise on any broader economic recovery.

 

Charles Luke

Aberdeen Asset Managers Limited

Investment Manager

11 September 2013

 

 

3. REVIEW OF BUSINESS

A review of the Company's activities is given in the Chairman's Statement and in the Manager's Review. This includes a review of the business of the Company and its principal activities, and likely future developments of the business.

 

Investment Objective

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

 

Benchmark

The Company's benchmark is the FTSE All-Share Index.

 

Investment Policy

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

 

Capital Structure and Voting Rights

The Company's issued share capital as at 30 June 2013 consisted of 67,092,458 Ordinary shares of 25p (2012 - 65,499,458) and 451,000 Ordinary shares held in treasury (2012 - 917,000). As at 11 September 2013, the date of approval of this Report, there were 67,592,458 Ordinary shares of 25p in issue and 451,000 Ordinary shares held in treasury.

 

Total Assets and Net Asset Value

At 30 June 2013, the Company had Total Assets of £532.9m and a Net Asset Value per Ordinary share of 734.6p.

 

Borrowings and Borrowing Covenants

The borrowings of £40 million represent 8.1% of Net Assets at 30 June 2013. Borrowing facilities of £70 million are committed to the Company until 29 September 2013. Financial covenants contained within the loan agreement provide, inter alia, that the ratio of Net Assets to borrowings shall at no time fall below 3.5:1 (in effect, a limit on borrowings equivalent to 28.6% of Net Assets), and that the Net Assets must exceed £185 million. The Net Assets were £492.9 million at 30 June 2013. If any of the financial covenants are breached, the lender is entitled, following the serving of notice to the Company, to declare the loans and all accrued interest, fees and other sums owed under the agreement to be immediately due and repayable.

 

Duration

The Company does not have a fixed life.

 

Risk

Equity markets are volatile, and short-term movements may therefore be greater than justified by longer-term trends. The use of gearing is likely to lead to an increase in the volatility of the Company's Net Asset Value. Currently, 50% of the investment management fees and interest costs are charged to capital. This increases distributable income at the expense of capital growth, which will be reduced to the same extent. The policy of investing in higher-yielding shares may also diminish capital growth. There is no guarantee that the market price of investment trust shares will accurately reflect their underlying Net Asset Value or move in line with it. More detailed information is available in note 17 to the financial statements.

 

Investments are not formally limited as to market capitalisation or sector weightings within the UK. It is the Company's policy to have a focused portfolio. There were 43 holdings at 30 June 2013.

 

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

 

Oversight and Review of Performance

The Board meets typically five times a year to review performance with the Manager. As well as carrying out the matters set out in the Statement of Corporate Governance in the Annual Report, the Board receives, for each meeting, a detailed portfolio report and an analysis of economic indicators, and discusses performance and strategy, considering perceived risks and economic conditions. It uses measures such as attribution analysis against the benchmark, active weights and valuation matrices to assess the Company's success in achieving its objectives.

 

 

The key performance indicators are established industry measures, and are as follows:

 

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

•     Share price (total return)

•     Discount to net asset value

•     Performance attribution

•     Earnings and dividends per share

•     Ongoing charges ratio.

 

A historical record of these measures (except performance attribution) is disclosed in Results. The Company's performance is compared to the benchmark and selected peer companies and the performance attribution is disclosed in the Manager's Review. A range of comparator groups are used, including the AIC UK Growth & Income peer group and the Open-Ended UK Equity Income peer group.

 

Management of Risk

The Board regularly reviews the major strategic risks that the Board and the Manager have identified, and against these the Board sets out the delegated controls designed to manage those risks. The principal risks associated with the Company are:

•      Resource risk - like most other investment trusts, the Company has no employees. The Company therefore relies on services provided by third parties, including, in particular, the Manager, to whom responsibility for the management of the Company has been delegated under an investment management agreement (the "Agreement"). The terms of the Agreement cover the necessary duties and conditions expected of the Manager. The Board reviews the performance of the Manager on a regular basis and their compliance with the Agreement formally on an annual basis.

•      Diversification risk - the objective of the Company is to achieve a high and growing income combined with capital growth. The Board's aim is to maximise absolute returns to shareholders while managing risk by ensuring an appropriate diversification of stocks and sectors. As a consequence, the investment portfolio may not always match that of the stock market as a whole, with a consequential impact on shareholder returns.

•      Investment policy and gearing - a major risk affecting the Company is inappropriate sector and stock selection leading to under-performance relative to the Company's benchmark index and peer group. In addition, the use of borrowing facilities to invest in markets may have a negative impact if markets fall. To mitigate these risks, the Manager operates within investment guidelines and agreed levels of borrowing. Performance against the benchmark index and the peer group is regularly monitored. 

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

•      Foreign currency risk - a proportion of the Company's investment portfolio is invested in overseas securities and the value of the Company's investments and the income derived from them can, therefore, be affected by movements in foreign exchange rates. In addition, the earnings of the Company's other investments may also be affected by currency movements which, indirectly, could have an impact on the Company's performance.

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

 

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

 

Key risks relating to investment and strategy, for example, inappropriate asset allocation or gearing, are managed through investment policy guidelines and restrictions, and by the process of oversight at each Board meeting outlined above. Operational disruption, accounting and legal risks are also covered annually, and regulatory compliance is reviewed at each Board meeting.

 

Results and Dividends

The total return attributable to equity shareholders for the year amounted to £77,615,000 (2012 - £4,350,000).

 

A third interim dividend of 5.5p per Ordinary share was paid on 13 July 2012, and the final dividend for the year ended 30 June 2012 of 13.25p per Ordinary share was paid on 25 October 2012. The first and second interim dividends for the year ended 30 June 2013 of 7.0p per Ordinary share each were paid on 14 January 2013 and 12 April 2013 respectively, making a total distribution to Ordinary shareholders of £21,543,000 during the year ended 30 June 2013, as shown in note 6. The third interim dividend of 7.0p per Ordinary share was paid on 12 July 2013.

 

The Directors now recommend a final dividend of 9.75p per Ordinary share payable on 29 October 2013 to holders of Ordinary shares on the register on 27 September 2013. The ex-dividend date is 25 September 2013. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.

 

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

 

 

4. STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under the law they have elected to prepare the financial statements in accordance with UK Accounting Standards. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

 

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

· select suitable accounting policies and then apply them consistently;

· make judgments and estimates that are reasonable and prudent; and

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

 

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report (including a Business Review), Directors' Remuneration Report and Corporate Governance

Statement that comply with that law and those regulations.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

The Directors confirm that to the best of their knowledge:

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

·  the Chairman's Statement, Manager's Review and Business Review contained within the Report of the Directors (together constituting the Management Report) include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces; and

·  the financial statements and the Directors' Report and Business Review include details on related party transactions.

 

 

For and on behalf of the Board of Murray Income Trust PLC

 

Humphrey van der Klugt

Chairman of the Audit Committee

11 September 2013

 

 

5. RESULTS

For the year ended 30 June 2013

 

30 June 2013

30 June
2012

%
change

Total assets (£'000)

532,878

465,458

+14.5

Equity shareholders' funds (£'000)

492,878

425,458

+15.8

Net asset value per Ordinary share

734.6p

649.6p

+13.1

Share price of Ordinary share (mid-market)

741.0p

 640.0p

+15.8

Premium/(discount) to net asset value on Ordinary shares

0.9%

-1.5%


Gearing (ratio of borrowing to shareholders' funds)




Net gearing {A}

5.6%

4.7%


Dividends and earnings




Revenue return per share

31.1p

30.6p

+1.6

Dividends per share{B}

30.75p

 29.75p

+3.4

Dividend cover

 1.01 times

 1.03 times


Revenue reserves (£'000){C}

27,031

27,992


Operating costs




Ongoing charges ratio{D}

0.8%

0.8%





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

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

{C}      The revenue reserve figure does not take account of the proposed third interim and final dividends amounting to £4,676,000 and £6,590,000 respectively (2012 - third interim and final dividends amounting to £3,602,000 and £8,679,000 respectively).

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

 

Performance (total return)

 

 1 year return

3 year return

5 year return


%

%

%

Share price

+21.5

+59.9

+74.9

Net asset value per Ordinary share

+18.8

+54.3

+51.8

Source: Aberdeen Asset Managers/Morningstar




 

Dividends

 

Rate

xd date

Record date

Payment date

1st interim 2013

7.00p

19 December 2012

21 December 2012

14 January 2013

2nd interim 2013

7.00p

6 March 2013

8 March 2013

12 April 2013

3rd interim 2013

7.00p

5 June 2013

7 June 2013

12 July 2013

Proposed final 2013

9.75p

25 September 2013

27 September 2013

29 October 2013

Total dividends 2013

30.75p




 

Ten Year Financial Record

 

Year end 30 June

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Revenue (£'000)

16,827

16,533

17,237

19,251

22,390

19,790

18,257

21,844

22,688

23,566

Per Ordinary share (p)











Net revenue return

19.6

20.0

21.8

24.7

29.3

28.1

25.4

30.9

30.6

31.1

Dividends

18.25

19.15

21.60

24.25

27.00

27.75

28.00

28.75

29.75

30.75

Net asset value

496.2

603.3

699.7

802.3

619.9

455.4

547.9

671.5

649.6

734.6


______

______

______

______

______

______

______

______

______

______

Shareholders' funds (£'000)

345,138

404,601

456,714

522,617

400,536

294,570

354,425

434,406

425,458

492,878


______

______

______

______

______

______

______

______

______

______


The Net Asset Value figure for 2005 has been restated to reflect the changes in accounting policies (FRS 26 - 'Financial Instruments: Recognition and Measurement'; FRS 21 - 'Events after the Balance Sheet Date').

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

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

 

MURRAY INCOME TRUST PLC

 

Income Statement

 


Year ended 30 June 2013

Year ended 30 June 2012



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Gains/(losses) on investments

9

-

58,679

58,679

-

(14,044)

(14,044)

Currency (losses)/gains


-

(45)

(45)

-

80

80

Income

2

23,566

-

23,566

22,688

-

22,688

Investment management fees

3

(1,238)

(1,238)

(2,476)

(1,112)

(1,112)

(2,224)

Administrative expenses

4

(1,030)

-

(1,030)

(981)

-

(981)



_______

_______

_______

_______

_______

_______

Net return before finance costs and taxation


21,298

57,396

78,694

20,595

(15,076)

5,519









Finance costs of borrowing

5

(363)

(363)

(726)

(460)

(460)

(920)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities before taxation


20,935

57,033

77,968

20,135

(15,536)

4,599









Taxation on ordinary activities

7

(353)

-

(353)

(249)

-

(249)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities after taxation


20,582

57,033

77,615

19,886

(15,536)

4,350



_______

_______

_______

_______

_______

_______









Return per Ordinary share (pence)

8

31.1

86.3

117.4

30.6

(23.9)

6.7



_______

_______

_______

_______

_______

_______









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

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

No operations were acquired or discontinued in the year.

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

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



















£'000

£'000

£'000

£'000

£'000

£'000

Ordinary dividends on equity shares

6

21,543

-

21,543

18,604

-

18,604



_______

_______

_______

_______

_______

_______









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

 

MURRAY INCOME TRUST PLC

 

Balance Sheet

 


As at

As at



30 June 2013

30 June 2012


Notes

£'000

£'000

Non-current assets




Investments at fair value through profit or loss

9

517,619

443,355



___________

___________





Current assets




Other debtors and receivables

10

3,445

3,115

Cash and short term deposits


12,539

19,867



___________

___________



15,984

22,982



___________

___________





Creditors: amounts falling due within one year




Other payables

11

(725)

(879)

Bank loans

11

(40,000)

(40,000)



___________

___________

Net current liabilities


(24,741)

(17,897)



___________

___________

Net assets


492,878

425,458



___________

___________





Share capital and reserves




Called-up share capital

12

16,886

16,604

Share premium account


16,202

8,103

Capital redemption reserve


4,997

4,997

Capital reserve

13

427,762

367,762

Revenue reserve

13

27,031

27,992



___________

___________

Total equity shareholders' funds


492,878

425,458



___________

___________





Net asset value per Ordinary share (pence)

14

734.6

649.6



___________

___________

 

MURRAY INCOME TRUST PLC

 

Reconciliation of Movements in Shareholders' funds

 

For the year ended 30 June 2013











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2012


16,604

8,103

4,997

367,762

27,992

425,458

Return on ordinary activities after taxation


-

-

-

57,033

20,582

77,615

Issue of Ordinary shares


282

8,099

-

2,967

-

11,348

Dividends paid

6

-

-

-

-

(21,543)

(21,543)



_______

_______

_______

_______

_______

_______

Balance at 30 June 2013


16,886

16,202

4,997

427,762

27,031

492,878



_______

_______

_______

_______

_______

_______









For the year ended 30 June 2012











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total



£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2011


16,604

7,955

4,997

378,140

26,710

434,406

Return on ordinary activities after taxation


-

-

-

(15,536)

19,886

4,350

Issue of Ordinary shares


-

148

-

5,158

-

5,306

Dividends paid

6

-

-

-

-

(18,604)

(18,604)



_______

_______

_______

_______

_______

_______

Balance at 30 June 2012


16,604

8,103

4,997

367,762

27,992

425,458



_______

_______

_______

_______

_______

_______

 

 

 


MURRAY INCOME TRUST PLC

 

Cash Flow Statement

 


Year ended

Year ended



30 June 2013

30 June 2012


Notes

£'000

£'000

£'000

£'000

Net cash inflow from operating activities

15


18,541


18,888







Servicing of finance






Interest paid



(725)


(976)







Taxation






Net tax paid



(314)


(397)







Financial investment






Purchases of investments


(44,450)


(68,224)


Sales of investments


30,224


78,279




_______


_______


Net cash (outflow)/inflow from financial investment



(14,226)


10,055







Equity dividends paid

6


(21,543)


(18,604)




_______


_______

Net cash (outflow)/inflow before financing



(18,267)


8,966







Financing






Issue of Ordinary shares

12

10,984


5,306


Drawdown of loan


-


5,000


Repayment of loan


-


(5,000)




_______


_______


Net cash inflow from financing



10,984


5,306




_______


_______

(Decrease)/increase in cash   

16


(7,283)


14,272




_______


_______


MURRAY INCOME TRUST PLC

 

Notes to the Financial Statements

Year Ended 30 June 2013

 

1.

Accounting policies


(a)

Basis of preparation



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






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





(b)

Income



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






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






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





(c)

Expenses



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



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

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





(d)

Taxation



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






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






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





(e)

Valuation of investments



Investments have been designated upon initial recognition at fair value through profit or loss. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value.  Subsequent to initial recognition, investments are valued at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange. Gains and losses arising from changes in fair value are included in the net return for the period as a capital item in the Income Statement and are ultimately recognised in the capital reserve.





(f)

Cash and cash equivalents



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





(g)

Borrowings



Interest-bearing bank loans and overdrafts are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. Subsequently, they continue to be valued at fair value, which is determined by aggregating the expected future cash flows for that loan or overdraft at a rate comprising the borrower's margin plus an average of market rates applicable to loans or overdrafts of a similar period of time and currency. Finance charges are accounted for on an accruals basis using the effective interest rate method and are charged 50% to revenue and 50% to capital to reflect the Company's investment policy and prospective income and capital growth.





(h)

Traded options



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





(i)

Segmental reporting



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





(j)

Treasury shares



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


(k)

Dividends payable



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

 


 2013

 2012

2.

Income

 £'000

 £'000


Income from investments




UK dividends (all listed)

16,231

17,472


Overseas dividends (all listed)

4,405

2,427


Bond interest

-

60


Stock dividends

1,359

741



_______

_______



21,995

20,700



_______

_______






Other income




Deposit interest

23

48


Traded option premiums

1,548

1,940



1,571

1,988



_______

_______


Total income

23,566

22,688



_______

_______






During the year, the Company received premiums totalling £1,548,000 (2012 - £1,940,000) in exchange for entering into derivative transactions. At the year end there was 1 open position (2012 - 16), valued at a liability position of £51,000 (2012 - £223,000) and securities held by the Company with a value of £2,549,000 (2012 - £2,954,000) were pledged as collateral against this.

 


2013

2012



Revenue

Capital

 Total

Revenue

Capital

 Total

3.

Investment management fees

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000


Investment management fees

1,238

1,238

2,476

1,112

1,112

2,224



_______

______

_____

______

______

______










Details of the fee basis are contained in the Annual Report. There was £446,000 (2012 - £439,000) due to Aberdeen Asset Managers Limited in respect of these investment management services at the year end.

 


2013

2012

4.

Administrative expenses

£'000

£'000


Shareholders' services{A}

523

488


Directors' remuneration

137

114


Secretarial fees

91

90


Auditor's remuneration




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

20

19


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

2

4


Other expenses

257

266



_______

_______



1,030

981



_______

_______




{A} Includes registration, savings scheme and other wrapper administration and promotion expenses, of which £434,000 (2012 - £390,000) was paid to Aberdeen Asset Managers Limited (AAM) to cover marketing activities during the year. There was £106,000 (2012 - £83,000) due to AAM in respect of these marketing activities at the year end.




All of the expenses above, with the exception of Auditor's remuneration, include irrecoverable VAT where applicable. For the Auditor's remuneration this amounted to £4,000 (2012 - £4,000). The prior year expenses have been restated to take account of irrecoverable VAT, though the overall total value remains unchanged.

 


2013

2012



Revenue

Capital

 Total

Revenue

Capital

 Total

5.

 Finance costs of borrowing

 £'000

 £'000

 £'000

 £'000

 £'000

 £'000


 Bank loans and overdrafts

363

363

726

 460

 460

 920



______

______

______

______

______

______

 


2013

2012

6.

Ordinary dividends on equity shares

£'000

£'000


Third interim 2012 of 5.50p (2011 - 5.50p)

3,602

3,558


Final 2012 of 13.25p (2011 - 12.25p)

8,679

7,924


First interim 2013 of 7.00p (2012 - 5.50p)

4,624

3,558


Second interim 2013 of 7.00p (2012 - 5.50p)

4,638

3,574


Return of unclaimed dividends

-

(10)



_______

_______



21,543

18,604



_______

_______






The third interim and proposed final dividends for 2013 have not been included as a liability in these financial statements as they were not payable until after the Balance Sheet date. The proposed final dividend for 2013 is subject to approval by shareholders at the Annual General Meeting.




We set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Section 1158-1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £20,582,000 (2012 - £19,886,000).







2013

2012



£'000

£'000


Three interim dividends of 7.00p each (2012 - 5.50p)

13,938

10,734


Proposed final dividend of 9.75p (2012 - 13.25p)

6,590

8,679



_______

_______



20,528

19,413



_______

_______




Subsequent to the year end the Company has issued a further 500,000 Ordinary shares; therefore the amount reflected above for the cost of the proposed final dividend for 2013 is based on 67,592,458 Ordinary shares, being the number of Ordinary shares in issue at the date of this Report.

 


2013

2012



 Revenue

 Capital

 Total

Revenue

 Capital

 Total

7.

Taxation

£'000

£'000

£'000

£'000

£'000

£'000


(a)

Analysis of charge for the year









Overseas tax suffered

541

-

541

400

-

400



Overseas tax reclaimable

(188)

-

(188)

(151)

-

(151)




_______

______

_____

_______

_______

_____



Current tax charge for the year

353

-

353

249

-

249




_______

______

_____

_______

_______

_____





(b)

Factors affecting the tax charge for the year



The tax assessed for the year is lower than the effective rate of corporation tax rate of 23.75% (2012 - 25.5%).  The differences are explained as follows:









2013

2012




Revenue

 Capital

 Total

Revenue

 Capital

 Total




£'000

£'000

£'000

£'000

£'000

£'000



Net profit on ordinary activities before taxation

20,935

57,033

77,968

20,135

(15,536)

4,599












Return on ordinary activities multiplied by the effective rate of corporation tax of 23.75% (2012 - 25.5%)

4,972

13,545

18,517

5,134

(3,962)

1,172



Effects of:









Non-taxable UK dividends

(3,855)

-

(3,855)

(4,382)

-

(4,382)



Non-taxable stock dividends

(323)

-

(323)

(189)

-

(189)



Non-taxable overseas dividends

(985)

-

(985)

(619)

-

(619)



Movement in income accruals taxable on receipt

-

-

-

6

-

6



Movement in unutilised loan relationships

167

86

253

97

117

214



Movement in unutilised management expenses

24

295

319

-

236

236



Tax relief from expenses charged to capital

-

-

-

(47)

47

-



Other capital returns

-

(13,926)

(13,926)

-

3,562

3,562



Overseas tax irrecoverable

353

-

353

249

-

249




_______

______

_____

_______

_______

_____



Current tax charge

353

-

353

249

-

249




_______

______

_____

_______

_______

_____











(c)

Factors that may affect future tax charges



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






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






At the year end, the Company has, for taxation purposes only, accumulated unrelieved management expenses and loan relationship deficits of £50,914,000 (2012 - £48,506,000). A deferred tax asset in respect of this has not been recognised and these expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. It is considered too uncertain that the Company will generate such profits and therefore no deferred tax asset has been recognised.

 


2013

2012

8.

Return per Ordinary share

£'000

p

£'000

p


Returns are based on the following figures:






Revenue return

20,582

31.1

19,886

30.6


Capital return

57,033

86.3

(15,536)

(23.9)



_______

______

_____

_______


Total return

77,615

117.4

4,350

6.7



_______

______

_____

_______








Weighted average number of Ordinary shares in issue


66,081,926


64,937,245




_________


_________

 


 2013

 2012

9.

Investments

 £'000

 £'000


Held at fair value through profit or loss:




Opening valuation

443,355

466,713


Opening investment holdings gains

(83,546)

(109,319)



_________

________


Opening book cost

359,809

357,394


Movements during the year:




Purchases at cost

45,809

68,965


Sales - proceeds

(30,224)

(78,279)


Sales - gains

9,509

11,729



_________

________


Closing book cost

384,903

359,809


Closing investment holdings gains

132,716

83,546



_________

________


Closing valuation

517,619

443,355



_________

________







2013

2012


The portfolio valuation:

£'000

£'000


UK equities

438,444

392,431


Overseas equities

79,175

50,924



_________

________


Total

517,619

443,355



_________

________







2013

2012


Gains/(losses) on investments

£'000

£'000


Gains based on book cost

9,509

11,729


Net movement in investment holdings gains

49,170

(25,773)



_________

________



58,679

(14,044)



_________

________






As at 30 June 2013, the Company had pledged collateral greater than the market value of the traded options in accordance with standard commercial practice. The carrying amount of financial assets pledged equated to £2,549,000 (2012 - £2,954,000), all in the form of securities. The collateral position is monitored on a daily basis, which then determines if further assets are required to be pledged over and above those already pledged.




Transaction costs


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



2013

2012



£'000

£'000


Purchases

 148

 183


Sales

 31

 76



_________

________



 179

 259



_________

________

 


 2013

 2012

10.

Other debtors and receivables

 £'000

 £'000


Prepayments and accrued income

 3,445

 3,115



_________

________





 


 2013

 2012

11.

Creditors: amounts falling due within one year

 £'000

 £'000


Accruals

 674

656


Amounts due on derivative contracts

 51

223


Bank loans

40,000

  40,000



_________

________



 40,725

 40,879



_________

________






Accruals include £453,000 (2012 - £445,000) of management fees and secretarial fees due to Aberdeen Asset Managers Limited, the Investment Manager and 1 (2012 - 16) open option position having a value of £51,000 (2012 - £223,000).




At 30 June 2013 the Company had drawn down £40,000,000 (30 June 2012 - £40,000,000) of a £70,000,000 unsecured revolving bank credit facility with Scotiabank (Ireland) Limited. Under the terms of the agreement, advances from the facility may be made for periods of up to six months or for such longer periods agreed by the lender. Interest is charged at a variable rate based on LIBOR plus a margin of 1.15% for the relevant period of the advance. As at 30 June 2013 this rate was 1.64313% (30 June 2012 - 1.76600%) and the loan rolled over on 31 July 2013 and on 31 August 2013.




On 11 September 2013 the Company had drawn down £40,000,000 of the facility, at an all-in interest rate of 1.64188% until maturity on 27 September 2013. Borrowing facilities of £70 million are committed to the Company until 29 September 2013. The Company is in negotiation with its bankers in advance of renewal but at this stage has not received confirmation that the facility will be renewed. If acceptable terms are available from the existing bankers, or any alternative, the Company would expect to continue to access the facility. However, should these terms not be forthcoming, any outstanding borrowing would be repaid through the proceeds of equity sales.




Financial covenants contained within the loan agreement provide, inter alia, that the Adjusted Asset Coverage must exceed 3.5 to 1 and that net assets must exceed £185 million. All financial covenants were met during the year and also during the period from the year end to the date of this report.

 


2013

2012

12.

Called-up share capital

 Shares

 £'000

 Shares

 £'000


Allotted, called-up and fully-paid






Ordinary shares of 25p each: publicly held

67,092,458

16,773

65,499,458

16,375


Ordinary shares of 25p each: held in treasury

 451,000

113

917,000

229



_________

______

_________

______



67,543,458

16,886

 66,416,458

16,604



_________

______

_________

______








During the year there were no Ordinary shares repurchased (2012 - nil), 466,000 Ordinary shares were sold from the Treasury account (2012 - 810,000) and 1,127,000 (2012 - nil) new shares were allotted. All of these shares were sold at a premium to net asset value. The issue prices ranged from 654.5p to 799.0p and raised £11,348,000 (2012 - £5,306,000) net of expenses.

 


2013

2012

13.

Retained earnings

£'000

£'000


Capital reserve




At 1 July 2012

367,762

378,140


Movement in investment holding gains

49,170

(25,773)


Gains on realisation of investments at fair value

9,509

11,729


Currency (losses)/gains

(45)

80


Finance costs of bank loan

(363)

(460)


Investment management fees

(1,238)

(1,112)


Issue of Ordinary shares

2,967

5,158



_________

________


At 30 June 2013

427,762

367,762



_________

________






Revenue reserve





2013

2012



£'000

£'000


At 1 July 2012

27,992

26,710


Revenue

20,582

19,886


Dividends paid

(21,543)

(18,604)



_________

________


At 30 June 2013

27,031

27,992



_________

________





 

14.

Net asset value per share


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







 2013

 2012


Net asset value attributable (£'000)

492,878

425,458


Number of Ordinary shares in issue (note 12)

67,092,458

65,499,458


Net asset value per share (p)

734.6

649.6

 

15.

Reconciliation of net return before finance costs and

 2013

 2012


taxation to net cash inflow from operating activities

 £'000

 £'000


Net return before finance costs and taxation

78,694

5,519


Adjustments for:




(Gains)/losses on investments

(58,679)

14,044


Currency losses/(gains)

45

(80)


Non cash stock dividend

(1,359)

(741)


(Increase)/decrease in accrued income

(81)

148


Decrease/(increase) in other debtors

77

(10)


(Decrease)/increase in accruals

(156)

8



_________

________


Net cash inflow from operating activities

18,541

18,888



_________

________

 


 At



 At



 1 July
2012

 Cash flows

Currency losses

 30 June 2013

16.

Analysis of changes in net debt

 £'000

 £'000

 £'000

 £'000


Net cash:






Cash

19,867

(7,283)

(45)

12,539


Debt:






Debt due within one year

(40,000)

-

-

(40,000)



_________

________

_________

________


Net debt

(20,133)

(7,283)

(45)

(27,461)



_________

________

_________

________

 

17.

Derivatives and other financial instruments


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




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




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




The Board has agreed the parameters for gearing, which was 5.6% of net assets as at 30 June 2013 (2012 - 4.7%). The Manager's policies for managing these risks are summarised below and have been applied throughout the current and previous year. The numerical disclosures in the table listed below exclude short-term debtors and creditors.




Market risk 


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




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




Interest rate risk


Interest rate movements may affect:


the fair value of the investments in fixed interest rate securities;


the level of income receivable on cash deposits; and


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



 Financial assets


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





Floating rate

Non-interest bearing



 2013

 2012

 2013

 2012



 £'000

 £'000

 £'000

 £'000


Euro

142

  610

41,809

26,789


Sterling

12,380

19,160

438,444

392,431


Swedish Krona

-

-

11,585

4,199


Swiss Francs

17

97

25,781

19,936



_________

________

_________

________


Total

12,539

19,867

517,619

  443,355



_________

________

_________

________








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




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




Financial liabilities 


The Company has borrowings by way of a loan facility, details of which are in note 11. The fair value of this loan has been calculated at £40,000,000 as at 30 June 2013 (2012 - £40,000,000). The fair value of the loan equates to the cost as the loans are rolled over on a regular basis.




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




Maturity profile








 Within 

 Within



 1 year

 1 year



 2013

 2012


Assets

 £'000

 £'000


Floating rate




Cash

12,539

19,867



_________

________







 Within 

 Within 



 1 year

 1 year



 2013

 2012


Liabilities

 £'000

 £'000


Floating rate




Revolving bank credit facility

40,000

40,000



_________

________






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




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 in the case of instruments that have floating rates.




If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's profit before tax for the year ended 30 June 2013 and net assets would decrease/increase by £275,000 (2012 -  decrease/increase by £201,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances and borrowings.




Foreign currency risk


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




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




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





 30 June 2013

 30 June 2012




Net

Total


Net

Total




monetary

currency


monetary

currency



Investments

liabilities

exposure

Investments

liabilities

exposure



£'000

£'000

£'000

£'000

£'000

£'000


Euro

41,809

142

41,951

26,789

610

27,399


Sterling

438,444

(27,620)

410,824

392,431

(20,840)

371,591


Swedish Krona

11,585

-

11,585

4,199

-

4,199


Swiss Francs

25,781

17

25,798

19,936

97

20,033



_________

________

_________

________

_________

________


Total

517,619

(27,461)

490,158

443,355

(20,133)

423,222



_________

________

_________

________

_________

________










Foreign currency sensitivity






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




Other price risk








Other price risk sensitivity


If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders and equity for the year ended 30 June 2013 would have increased/decreased by £51,761,000 (2012 - £44,336,000).




Liquidity risk


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



As at 30 June 2013 the Company utilised £40,000,000 of a £70,000,000 (2012 - £40,000,000) revolving bank credit facility, which is committed until 29 September 2013. Interest is charged at a variable rate based on LIBOR plus a margin of 1.15% (2012 - margin 1.15%) for the relevant period of the advance. As at 30 June 2013 this rate was 1.64313% (2012 - 1.76600%) and the loan rolled over on 31 July 2013 (2012 - matured on 31 July 2012). The aggregate of all future interest payments at the rate ruling at 30 June 2013 and the redemption of the loan amounted to £40,059,000 (2012 - £40,062,000).




Credit risk


Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. This is mitigated by the Investment Manager reviewing the credit ratings of broker counterparties. The risk attached to dividend flows is mitigated by the Investment Manager's research of potential investee companies. The Company's custodian bank is responsible for the collection of income on behalf of the Company and its performance is reviewed by the Board on a regular basis. It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties. The maximum credit risk at 30 June 2013 is £15,387,000 (30 June 2012 - £22,626,000) consisting of £2,848,000 (2012 - £2,759,000) of dividends receivable from equity shares and £12,539,000 (2012 - £19,867,000) in cash held .






Capital management policies and procedures















At the year end financial covenants contained within the loan agreement provide, inter alia, that the Adjusted Asset Coverage must exceed 3.5 to 1 and that the net assets must exceed £185 million. At 30 June 2013 net gearing was 5.6% (2012 - 4.7%) and the net assets were £492.9 million (2012 - £425.5 million).

 

18.

Fair value hierarchy


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




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


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


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




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




For the year ended 30 June 2013




Level 1

Level 2

Level 3

Total



Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss




Quoted equities

a)

517,619

-

-

517,619









Financial liabilities at fair value through profit or loss




Derivatives

b)

(51)

-

-

(51)




_________

_______

________

_______


Net fair value


517,568

-

-

517,568




_________

_______

________

_______









For the year ended 30 June 2012







Level 1

Level 2

Level 3

Total



Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss




Quoted equities

a)

443,355

-

-

443,355









Financial liabilities at fair value through profit or loss




Derivatives

b)

(147)

(76)

-

(223)




_________

_______

________

_______


Net fair value


443,208

(76)

-

443,132




_________

_______

________

_______









a) Quoted equities






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




b) Derivatives 


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




The fair value of the Company's investments in over-the-counter options has been determined using observable market inputs other than quoted prices and are therefore included within Level 2.

 

19.

Related party disclosure


The Directors of the Company received fees for their services. Further details are provided in note 4.

 

20.     Final dividend

          If approved, the proposed final dividend of 9.75p per share will be paid on 29 October 2013 to holders of Ordinary shares on the register at the close of business on 27 September 2013. The relevant ex-dividend date is 25 September 2013.

 

21.     Annual General Meeting

       The Annual General Meeting will be held on 25 October 2013 at 12.30 pm at The Capital Suite, The London Chamber of Commerce, 33 Queen Street, London, EC4R 1AP.

 

The figures and financial information for the year ended 30 June 2013 are compiled from an extract of the latest accounts of the Company and do not constitute the statutory accounts for that year. Those accounts included the report of the Auditor which was unqualified, did not contain a statement under either section 498(2) or (3) of the Companies Act 2006 and have not yet been delivered to the Registrar of Companies. The figures and financial information for the year ended 30 June 2012 are compiled from an extract of the latest published accounts of the Company and do not constitute the statutory accounts for that year; those accounts have been delivered to the Registrar of Companies and included the report of the Auditor which was unqualified and did not contain a statement under either section 498(2) or (3) of the Companies Act 2006. The 2013 accounts will be filed with the Registrar of Companies in due course.

 

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

 

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

 

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.

 

 

By Order of the Board

ABERDEEN ASSET MANAGEMENT PLC

Secretary

11 September 2013

MURRAY INCOME TRUST PLC

 

Summary of Investment Changes during the year

 

 

Valuation



Valuation


30 June 2012

Transactions

Gains/(losses)

30 June 2013


£'000

% 

£'000

£'000

£'000

% 

Equities







United Kingdom

392,431

84.3

(1,427)

47,440

438,444

82.3

France

12,277

2.6

9,760

602

22,639

4.3

Germany

3,264

0.7

1,137

1,245

5,646

1.0

Italy

11,248

2.4

2,417

(141)

13,524

2.5

Sweden

4,199

0.9

5,393

1,993

11,585

2.2

Switzerland

19,936

4.3

(1,695)

7,540

25,781

4.8


_______

_______

_______

_______

_______

_______

Total investments

443,355

 95.2

15,585

58,679

517,619

97.1








Other net assets

22,103

 4.8

(6,844)

-

15,259

2.9


_______

_______

_______

_______

_______

_______

Total assets less current liabilities (excluding bank loan)

465,458

100.0

8,741

58,679

532,878

100.0


_______

_______

_______

_______

_______

_______

 

 

Summary of Net Assets

 

As at

As at


30 June 2013

30 June 2012


£'000

%

£'000

%

Equities

517,619

105.0

443,355

104.2

Other net assets

15,259

3.1

22,103

5.2

Borrowings

(40,000)

(8.1)

(40,000)

(9.4)


_______

_______

_______

_______

Equity shareholders' funds

492,878

100.0

425,458

100.0


_______

_______

_______

_______


MURRAY INCOME TRUST PLC

 

Twenty Largest Investments

As at 30 June 2012

 

Valuation

Total

Valuation


2013

assets

2012

Investment

£'000

%

£'000

1 (2) GlaxoSmithKline




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

27,851

5.2

 24,454

2 (5) Centrica




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

25,034

4.7

22,101

3 (6) Unilever




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

 22,707

4.3

19,510

4 (4) Royal Dutch Shell




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

22,077

4.1

 23,769

5 (1) British American Tobacco




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

21,552

4.0

26,904

6 (3) Vodafone Group




Vodafone is one of the world's largest mobile phone companies, with a significant position in major economies including Germany, Italy, the UK and the US, as well as many emerging markets. The group generates a significant amount of free cashflow.

 20,988

4.0

24,218

7 (12) Roche Holdings




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

19,306

3.6

14,227

8 (7) Pearson




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

18,607

3.5

17,281

 

 

 

 

 

 

9 (8) AstraZeneca




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

 18,597

3.5

17,032

10 (10) HSBC Holdings




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

18,227

3.4

14,996

 

Top ten investments

214,946

 40.3


 

11 (11) BHP Billiton




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

17,308

3.2

14,647

12 (13) Tesco




Tesco is one of the world's largest food retailers, with operations around the world. Its international operations provide a platform for growth, coupled with non-food sales and financial services. The company benefits from significant property asset-backing.

15,148

2.9

14,172

13 (14) National Grid




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

14,375

2.7

13,017

14 (9) BP




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

13,835

2.6

16,278

 

 

15 (20) Prudential

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

 

 

 

13,814

 

 

 

2.6

 

 

 

 9,483

 

16 (16) ENI




Listed in Italy, ENI is an integrated energy company, committed to developing its activities in research, production, transport and marketing of oil and natural gas. The company operates in 79 countries employing 80,000 people. ENI offers a generous dividend yield.

13,524

2.5

11,248

 

17 (15) Cobham




Cobham designs and manufactures a wide range of equipment and specialised systems for the defence and aerospace industries.  Cobham maintains leading positions in air to air refuelling, antennas and tactical communications systems, as a result of its strong intellectual property and long term customer relationships.

12,838

2.4

 11,373

 

18 (18) Compass Group




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

12,247

2.3

10,717

 

19 (-) Aberforth Smaller Companies




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

11,604

2.2

8,287

 

20 (17) Morrison (Wm) Supermarkets




Morrisons is one of the UK's largest supermarket chains. With an emphasis on good value, the company's vertically-integrated model means that it manages most of its operations in-house. There remains substantial opportunity for the company to expand its footprint in the UK through smaller stores.

 10,697

2.0

10,873

 

Top twenty investments

 

350,336

 

65.7



The value of the 20 largest investments represents 65.7% (2012 - 70.0%) of total assets.

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

 


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