Register
Login:
Share:
Email Facebook Twitter


UPDATE: #COPL set timeline for Q2/Q3 Nigeria drilling programme
RESULTS: IFA led wealth managers AFH Financial results show strong growth


Regulatory News


Half-Yearly Financial Report

Mon, 11th Feb 2019 07:00


RNS Number : 5595P
Murray Income Trust PLC
11 February 2019

Murray Income Trust PLC

LEGAL ENTITY IDENTIFIER (LEI): 549300IRNFGVQIQHUI

Half-Yearly Report for the 6 months ended 31 December 2018

The Directors of Murray Income Trust PLC report the unaudited results for the six months ended 31 December 2018.

Financial Highlights


31 December 2018

30 June
2018

% Change





Total assets{A} ('000)

560,946

617,164

-9.1

Equity shareholders' funds ('000)

514,478

570,929

-9.9

Net asset value per Ordinary share - debt at par

778.2p

856.3p

-9.1

Share price of Ordinary share (mid-market)

728.0p

784.0p

-7.1

Discount to net asset value on Ordinary shares - debt at par

6.5%

8.4%


Net gearing{B}

6.5%

4.2%


Ongoing charges ratio{B}

0.70%

0.69%



{A} Total assets as per the Condensed Statement of Financial Position less current liabilities (excluding prior charges such as bank loans).

{B} Considered to be an Alternative Performance Measure.

Performance (total return)


Six months ended

Year ended


31 December 2018

30 June 2018

Net asset value per Ordinary share{A}

-7.2%

+3.9%

Share price per Ordinary share{A}

-5.0%

+3.3%

FTSE All-Share Index

-11.0%

+9.0%


{A} Considered to be an Alternative Performance Measure.

Financial Calendar

11 January 2019

First interim dividend (8.0p per share) paid for year ending 30 June 2019

February 2019

Half-Yearly Report posted to shareholders

29 March 2019

Second interim dividend (8.0p per share) payable for year ending 30 June 2019

28 June 2019

Third interim dividend (8.0p per share) payable for year ending 30 June 2019

September 2019

Announcement of Annual Results for year ending 30 June 2019

October 2019

Annual Report posted to shareholders

5 November 2019

Annual General Meeting, London

8 November 2019

Final dividend payable for year ending 30 June 2019

CHAIRMAN'S STATEMENT

It is pleasing to report a return to form by our Manager, Aberdeen Standard Fund Managers Limited. The Company's net asset value per share returned -7.2% in the six months ended 31 December 2018 in total return terms, outperforming the FTSE All-Share Index return of -11.0%.

This strong relative performance over six months helped create 2018 out-performance of 2.4% (the Company's NAV fell 7.3% as compared to a fall in the FTSE All-Share Index of 9.5%). The discount of the share price to net asset value narrowed from 8.4% at 30 June 2018 to 6.5% at 31 December 2018.

Investment Objective

The Company aims to provide a high and growing income combined with capital growth through investment in a portfolio principally of UK equities. Nothing fancy, plain vanilla if you like, it is a diversified portfolio of quality companies.

Investment Process

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

Investment People

Charles Luke has been our portfolio manager since 2006. His deputy is Iain Pyle and they are members of the Manager's five-strong UK Equity Income team which itself is part of the sixteen-strong UK Equity Team headed by Andrew Millington.

As a Board we believe that the merger between Aberdeen Asset Management PLC and Standard Life plc has resulted in a strengthened investment team for the Company and an improved investment process. This would have helped performance but so would the tailwind of falling and volatile markets and a bursting of the tech bubble, which has brought the old Aberdeen quality style back into fashion. It is not possible to quantify these impacts but we can confidently say it has been an encouraging first year post-merger.

Performance

Over the six months to 31 December 2018 net asset value total return was -7.2% with the UK equity market as represented by the FTSE All-Share Index returning -11.0%. The FTSE All-Share Index is the Board's primary benchmark by which to assess performance, but the Directors also look at performance relative to other investment trusts in the UK Equity Income sector. The last six months have improved our relative rankings considerably such that we were fourth over one year and third over three years to 31 December 2018 out of nineteen trusts.

Charles Luke assesses performance in more detail in the Manager's Portfolio Review.

Fully Independent Board

Your Directors are all fully independent and are responsible for the governance of the Company, appointing the Manager, setting dividend policy and so on. David Woods retired from the Board after the Annual General Meeting in November, having served his full nine-year term. We thank him for his outstanding contribution. A search is now underway for a new Director.

Dividends

At 31 December 2018, our shares were yielding 4.6% (calculated as dividing the total dividends paid in the past 12 months of 33.25p by the period end share price of 728.0p), which was above both the 4.5% yield available from the FTSE All-Share Index and the size-weighted average yield of 4.0% for trusts in the AIC UK Equity Income Sector. Last year marked the forty-fifth consecutive year of dividend increases for the Company. This record has put us into ninth place, as measured by the number of years of dividend growth, on the AIC's list of 'Dividend Heroes', the investment trusts with the longest records of consecutive annual dividend growth.

Last year's dividend of 33.25p per share was more than fully covered by revenue and we have dividend reserves equivalent to 32.5p per share at 31 December 2018. We have again announced that we will pay three quarterly dividends of 8.0p in January, March and June 2019 with a final dividend payable on 8 November 2019, after the AGM.

Buybacks

During the six months to 31 December 2018, the Company bought back 561,900 shares into Treasury, representing 0.8% of total shares in issue, excluding treasury shares, as at the start of the period.

Ongoing Charges

Lower ongoing charges are a competitive advantage for investment trusts as compared with OEICs. Our ongoing charges for the year ended 30 June 2018 were 0.69% and we continue to aim to trend lower. The management fee, which is the largest component of ongoing charges, is tiered (see note 4 for details). On net assets of 515m at 31 December 2018, the blended management fee rate was equivalent to 0.51%. The marginal rate of management fees is 0.25% per annum charged on net assets above 450m.

Gearing (or borrowing)

Investment trusts can gear or borrow money to enhance capital and income returns to shareholders. We borrowed 40m for 10 years fixed at 2.51% in November 2017 through the issue of loan notes and we also have a 20m multicurrency floating bank credit facility. Net gearing was 6.5% of net assets at 31 December 2018. The Board sets the permitted range of gearing while the Manager is responsible for the day-to-day level of gearing within this range.

Engaging Individual Shareholders

We have a high proportion of the Company owned by individual investors. In 2019, we plan to enhance further the content available on the Company's website, maintained by the Manager, at murray-income.co.uk. We continue in our commitment to find ways to reach new investors and are also exploring how better to reach investors who use third-party platforms. It was a pleasure to meet so many shareholders at November's Annual General Meeting in Glasgow. This year's Annual General Meeting will be held in London on Tuesday 5 November 2019.

Update

From 31 December 2018 to 31 January 2019, the net asset value per share total return and share price total return were 2.7% and 3.0%, respectively, while the discount had narrowed from 6.5% to 5.5%. The FTSE All-Share Index total return was 4.2%.

Outlook

With Brexit, trade wars, increased interest rate uncertainty, quantitative tightening and unstable governments, there continues to be no shortage of bad news. The media is full of headlines warning that various outcomes or events "could" have a materially negative effect on the UK. Hard to deny and therefore easy to publish, these warnings are dominating investor sentiment. But "will" they have a negative impact on Unilever's sales of Dove and Persil in the UK and Europe; "will" they affect Diageo's sales of whisky in America; "will" they affect Prudential's growing insurance business in Asia? These are the much more important questions that our Manager has to address. Its focus on quality "could" be the answer.

N A H Rogan

Chairman

8 February 2019

INTERIM BOARD REPORT

Principal Risks and Uncertainties

The Board regularly reviews the principal risks and uncertainties which it has identified, together with the delegated controls it has established to manage the risks and address the uncertainties, and these are set out in detail on pages 10 and 11 of the Company's Annual Report for the year ended 30 June 2018 ("Annual Report 2018") which is available on the Company's website. The Annual Report 2018 also contains, in note 17 to the Financial Statements, 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.

Related Party Transactions

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

Going Concern

The factors which have an impact on the Company's status as a going concern are set out in the Going Concern section of the Directors' Report on pages 37 and 38 of Annual Report 2018. As at 31 December 2018, there had been no significant changes to these factors.

The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants. As at 31 December 2018, in addition to the 40m 10 year Senior Loan Notes, 6.6m of the Company's three-year 20m multi-currency revolving bank credit facility was drawn down.

The Directors are mindful of the principal risks and uncertainties disclosed above, and, having reviewed forecasts detailing revenue and liabilities, they believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future, even in the event of potential dislocation associated with the UK's departure from the EU, scheduled for 29 March 2019. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis of accounting in preparing the Financial Statements.

Statement of Directors' Responsibilities

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

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

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

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

The Half-Yearly Financial Report for the six months ended 31 December 2018 comprises the Half-Yearly Board Report, the Directors' Responsibility Statement and the condensed set of Financial Statements.

For and on behalf of the Board

N A H Rogan

Chairman

8 February 2019

MANAGER'S PORTFOLIO REVIEW

The portfolio outperformed the benchmark during the six months ended 31 December 2018 with the NAV per Ordinary share falling by 7.2% compared to a fall in the FTSE All-Share Index of 11.0% (all figures calculated on a total return basis). The significant level of outperformance reflected a number of broad themes in the portfolio.

Firstly, our focus on high quality companies tends to come to the fore in more challenging markets: our holdings tend to have defensive growth characteristics, strong balance sheets and attractive dividend yields with a relatively high degree of income security. Secondly, the overseas exposure, both in terms of the companies in the portfolio listed overseas and those listed in the UK earning their revenues abroad, was beneficial during a period of Sterling weakness and concern around the UK economy. However, as the period progressed, the valuations of high quality UK-focused companies became more appealing and the portfolio changes below partly reflect a greater focus on this dynamic.

We added five new holdings to the portfolio. The first was Marshalls, a mid-cap building products company specialising in paving stones. The company benefits from an excellent management team, a high and growing market share, a national footprint and a strong balance sheet. The second purchase was Countryside Properties, a mid-cap housebuilder with a high quality Partnership business (which partners with local authorities to regenerate areas with social housing) that we feel is markedly undervalued. The next new holding was Inchcape, the mid-cap auto distribution business, we feel that the quality of this business is considerably underappreciated by the market given the strong, long term customer relationships and attractive margins and returns. We also purchased a small holding in London Stock Exchange Group, the company offers attractive structural growth drivers around regulation and an increasing requirement for index data. Finally, we purchased a holding in Ashmore, the emerging markets focused investment manager. The company has an attractive long-term focused culture and benefits from an increasing trend for greater allocations to emerging markets assets.

We increased exposure to a number of high quality companies with attractive growth prospects including: Associated British Foods, the owner of Primark; Rentokil; National Grid; Telecom Plus; and Relx.

Of note were a number of strong relative share price performances. Roche's share price recovered from an oversold position helped by upgrades as its new treatments gained momentum. The continued success of its cloud offering benefited Microsoft. Finally, the prospect of the introduction of a standard variable tariff price cap increased enthusiasm towards Telecom Plus.

We sold three holdings during the period. Firstly, GIMA, due to concerns that orders for the company's manufacturing and packaging machines for next generation tobacco products were likely to disappoint given the slowdown in the take-up of these products. We also sold the holding in Rolls Royce following the recovery in the company's share price and concerns over operational issues coupled with the company's relatively low dividend yield. Finally, we sold the holding in Rotork given the full valuation and apprehension that market forecasts would be difficult to achieve given a slower rebound in oil and gas capital expenditure.

Our experience of more challenging market environments reminded us that the combination of financial and operational leverage can be an unpleasant cocktail and a review of the portfolio led us to reduce a number of holdings as a precautionary measure. These were British American Tobacco, Vodafone and BBA Aviation. In addition, amongst other reductions, we lowered our exposure to AstraZeneca and Compass given that their strong share price performances had resulted in less attractive valuations.

A number of holdings performed relatively poorly over the period. In particular, BBA Aviation following a slowdown in private jet activity in the United States, Weir, given a reduction in demand for its oil pumping products, and finally XP Power, which is tied into the semiconductor capex cycle and has been impacted by tariffs on goods produced in China.

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

Economic and Market Background

The UK equity market fell by 11.0% on a total return basis over the 6 month period. This completed a poor calendar year for the market with the index decreasing by 9.5%. Worries around the impact of trade wars and protectionism, political concerns regarding Brexit and Italy, and rising bond yields at the start of the period and the prospect of a US recession by the end of the period, unnerved investors.

Over the 6 month period in question at a sector level, the more defensive areas of the market such healthcare and utilities outperformed while the more economically sensitive areas such as industrials and chemicals underperformed. The Mid Cap Index (with its greater exposure to domestic earnings) fell by 14.9% on a total return basis underperforming the FTSE 100 Index which decreased by 10.2%.

Although the outcome of Brexit is unknown, the impact on the UK economy to date has not been as severe as many expected, cushioned to some extent by the weakness of Sterling and lower oil prices (which declined from $74 to $45) over the period. In the third quarter of the year, UK GDP grew by 0.6%, representing the strongest growth rate since the final quarter of 2016. Household spending and exports were the main contributors of growth although business investment continues to be weak, likely a function of the uncertainty stemming from Brexit. Relative weakness over the fourth quarter in the Services Purchasing Managers' Index (PMI) portends a likely slowdown in growth with UK GDP expanding by 0.3% in the three months to November. However, Brexit uncertainty has delivered a benefit for UK manufacturing as stockpiling helped the Manufacturing PMI to climb towards the end of the year. In August the Monetary Policy Committee voted unanimously to raise interest rates by 0.25% to 0.75% given concerns around the limited level of slack in the economy and increasing wage pressure. The latest data suggests that the annual growth rate of pay in real terms is at its highest level for two years aided in part by the rate of inflation of 2.1% in December being at its lowest rate for nearly two years, mostly due to the lower cost of petrol. The unemployment rate of 4% in the three months to November represents the lowest level for over 30 years. Apart from measures to incentivise business investments, the Budget was largely uneventful.

Overseas, not helped by concerns around trade and protectionism, the outlook for shorter term global growth generally deteriorated over the period mostly due to a slowing in developed economies, and the euro area in particular. In the euro area, growth in the third quarter of 0.2% was at its lowest level since 2014, mostly due to weakness in Germany and Italy. Euro area composite PMI surveys during the fourth quarter suggest that the poor economic performance has continued. In the United States, activity has been more robust with GDP growth of 0.9% reported in the third quarter, helped by private consumption and business investment. However, trade tensions and the federal government shutdown may well presage a period of weaker growth. In emerging markets, there were broad signs of stabilisation. Although, in China, there were mixed signals with fourth quarter GDP growth of 6.4% representing annual growth of 6.6%, the slowest pace since 1990 despite the likely front-loading of exports before the introduction of US tariffs.

Charles Luke

Iain Pyle

Aberdeen Asset Managers Limited

Investment Manager

8 February 2019

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited)



Six months ended



31 December 2018



Revenue

Capital

Total


Notes

'000

'000

'000

(Losses)/gains on investments


-

(53,589)

(53,589)

Currency (losses)/gains


-

(107)

(107)

Income

2

10,287

-

10,287

Investment management fees

4

(392)

(914)

(1,306)

Administrative expenses


(585)

-

(585)



_________

_________

_________

Net return before finance costs and taxation


9,310

(54,610)

(45,300)






Finance costs


(174)

(406)

(580)



_________

_________

_________

Net return before taxation


9,136

(55,016)

(45,880)






Taxation

5

(85)

-

(85)



_________

_________

_________

Net return after taxation


9,051

(55,016)

(45,965)



_________

_________

_________






Return per Ordinary share (pence)

6

13.7

(83.0)

(69.3)



_________

_________

_________





The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company. The supplementary revenue and capital columns are both prepared under guidance issued by the Association of Investment Companies.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Condensed Statement of Comprehensive Income.

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

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

MURRAY INCOME TRUST PLC

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



Six months ended



31 December 2017



Revenue

Capital

Total


Notes

'000

'000

'000

(Losses)/gains on investments


-

9,501

9,501

Currency (losses)/gains


-

811

811

Income

2

9,449

-

9,449

Investment management fees

4

(730)

(730)

(1,460)

Administrative expenses


(619)

-

(619)



_________

_________

_________

Net return before finance costs and taxation


8,100

9,582

17,682






Finance costs


(181)

(181)

(362)



_________

_________

_________

Net return before taxation


7,919

9,401

17,320






Taxation

5

(74)

-

(74)



_________

_________

_________

Net return after taxation


7,845

9,401

17,246



_________

_________

_________






Return per Ordinary share (pence)

6

11.7

14.0

25.7



_________

_________

_________

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF FINANCIAL POSITION (unaudited)



As at

As at



31 December 2018

30 June 2018


Notes

'000

'000

Non-current assets




Investments at fair value through profit or loss


546,628

589,652





Current assets




Other debtors and receivables


2,550

8,136

Cash and short term deposits


12,778

22,008



_________

_________



15,328

30,144



_________

_________

Creditors: amounts falling due within one year




Other payables


(1,010)

(2,632)

Bank loans

7

(6,578)

(6,351)



_________

_________



(7,588)

(8,983)



_________

_________

Net current assets


7,740

21,161



_________

_________

Total assets less current liabilities


554,368

610,813





Creditors: amounts falling due after one year




2.51% Senior Loan Notes

7

(39,890)

(39,884)



_________

_________

Net assets


514,478

570,929



_________

_________

Share capital and reserves




Called-up share capital

8

17,148

17,148

Share premium account


24,020

24,020

Capital redemption reserve


4,997

4,997

Capital reserve

9

441,516

500,887

Revenue reserve


26,797

23,877



_________

_________

Equity shareholders' funds


514,478

570,929



_________

_________





Net asset value per Ordinary share (pence)

10



Debt at par value


778.2

856.3



_________

_________

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF CHANGES IN EQUITY (unaudited)

Six months ended 31 December 2018
















Share

Capital





Share

premium

redemption

Capital

Revenue



capital

account

reserve

reserve

reserve

Total


'000

'000

'000

'000

'000

'000

Balance at 1 July 2018

17,148

24,020

4,997

500,887

23,877

570,929

Net return after tax

-

-

-

(55,016)

9,051

(45,965)

Buyback of Ordinary shares for treasury

-

-

-

(4,355)

-

(4,355)

Dividends paid (note 3)

-

-

-

-

(6,131)

(6,131)


_______

_______

_______

_______

_______

_______

Balance at 31 December 2018

17,148

24,020

4,997

441,516

26,797

514,478


_______

_______

_______

_______

_______

_______








Six months ended 31 December 2017
















Share

Capital





Share

premium

redemption

Capital

Revenue



capital

account

reserve

reserve

reserve

Total


'000

'000

'000

'000

'000

'000

Balance at 1 July 2017

17,148

24,020

4,997

504,943

25,354

576,462

Net return after tax

-

-

-

9,401

7,845

17,246

Dividends paid (note 3)

-

-

-

-

(7,875)

(7,875)


_______

_______

_______

_______

_______

_______

Balance at 31 December 2017

17,148

24,020

4,997

514,344

25,324

585,833


_______

_______

_______

_______

_______

_______

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF CASH FLOWS (unaudited)


Six months ended

Six months ended


31 December 2018

31 December 2017


'000

'000

Operating activities



Net return before finance costs and taxation

(45,300)

17,682

Increase in accrued expenses

231

207

Overseas withholding tax

(84)

(97)

Dividend income

(9,251)

(8,579)

Dividends received

10,017

9,599

Interest income

(42)

(10)

Interest received

41

12

Interest paid

(575)

(224)

Losses/(gains) on investments

53,589

(9,501)

Foreign exchange losses/(gains) on loans

228

(73)

(Increase)/decrease in other debtors

(7)

3

Stock dividends included in investment income

(67)

(192)


_______

_______

Net cash inflow from operating activities

8,780

8,827




Investing activities



Purchases of investments

(80,317)

(38,748)

Sales of investments

72,989

37,590


_______

_______

Net cash outflow from investing activities

(7,328)

(1,158)




Financing activities



Dividends paid

(6,131)

(7,875)

Buyback of Ordinary shares for treasury

(4,551)

-

Repayment of bank loans

-

(40,652)

Issue of Senior Loan Notes net of issue costs

-

39,954


_______

_______

Net cash outflow from financing activities

(10,682)

(8,573)


_______

_______

Decrease in cash

(9,230)

(904)


_______

_______

Analysis of changes in cash during the period



Opening balance

22,008

25,801

Decrease in cash as above

(9,230)

(904)


_______

_______

Closing balance

12,778

24,897


_______

_______

Notes to the Financial Statements

1.

Accounting policies


Basis of preparation


The condensed financial statements have been prepared in accordance with Financial Reporting Standard ("FRS") 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 and updated in February 2018 with consequential amendments (the AIC SORP). They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.




The condensed financial statements have been prepared using the same accounting policies as the preceding annual financial statements.



Six months ended

Six months ended



31 December 2018

31 December 2017

2.

Income

'000

'000


Investment income




UK dividends

8,189

7,280


Overseas dividends

524

696


Property income dividends

471

411


Stock dividends

67

192



_______

_______



9,251

8,579



_______

_______


Other income




Deposit interest

42

10


Stock lending income

9

-


Traded option premiums

985

860



_______

_______



1,036

870



_______

_______


Total income

10,287

9,449



_______

_______

3.

Dividends


Dividends paid on Ordinary shares deducted from the revenue reserve:







Six months ended

Six months ended



31 December 2018

31 December 2017



'000

'000


2017 final dividend - 11.75p

-

7,875


2018 final dividend - 9.25p

6,131

-



_______

_______



6,131

7,875



_______

_______






A first interim dividend for 2019 of 8.00p (2018 - 8.00p) was paid on 14 January 2019 to shareholders on the register on 14 December 2018. The ex-dividend date was 13 December 2018.




A second interim dividend for 2019 of 8.00p (2018 - 8.00p) will be paid on 29 March 2019 to shareholders on the register on 1 March 2019. The ex-dividend date is 28 February 2019.




A third interim dividend for 2019 of 8.00p (2018 - 8.00p) will be paid on 28 June 2019 to shareholders on the register on 31 May 2019. The ex-dividend date is 30 May 2019.

4.

Management fee and finance costs


The management fee and finance costs are as reported in the Annual Report 2018 being a tiered fee based on net assets and calculated as follows:









From

Until


Fee rate

Net

1 January
2018

31 December 2017


per annum

assets

'million

'million


0.55%

less than

350

400


0.45%

within the range

350-450

400-550


0.25%

greater than

450

550







With effect from 1 July 2018, the management fees and finance costs are charged 70% to capital and 30% to revenue (previously 50% to capital and 50% to revenue).

5.

Taxation


The expense for taxation reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The estimated annual corporation tax rate used for the year to 30 June 2019 is an effective rate of 19% (2018 - 19%).




During the period the Company suffered withholding tax on overseas dividend income of 85,000 (31 December 2017 - 74,000).



Six months ended

Six months ended



31 December 2018

31 December 2017

6.

Return per Ordinary share

'000

p

'000

p


Revenue return

9,051

13.7

7,845

11.7


Capital return

(55,016)

(83.0)

9,401

14.0



_______

_______

_______

_______


Total return

(45,965)

(69.3)

17,246

25.7



_______

_______

_______

_______


Weighted average number of Ordinary shares in issue


66,302,291


67,022,458




__________


__________

7.

Secured Senior Loan Notes and bank loans


The Company has in issue 40,000,000 of 10 year Senior Loan Notes at a fixed rate of 2.51%. Interest is payable in half yearly instalments in May and November and the Loan Notes are due to be redeemed at par on 8 November 2027. The Loan Notes are secured by a floating charge over the whole of the assets of the Company. The Company has complied with the Note Purchase Agreement that the ratio of net assets to gross borrowings will be greater than 3.5:1 and that net assets will not be less than 275,000,000.




The fair value of the Senior Loan Notes as at 31 December 2018 was 40,075,000 (30 June 2018 - 40,072,000), the value being calculated by aggregating the expected future cash flows discounted at a rate comprising the borrower's margin plus a market rate applicable to a loan over a similar time period.




At 31 December 2018 the Company had drawn down 6,578,000 (30 June 2018 - 6,351,000) of its 20,000,000, 3 year unsecured multi-currency revolving bank credit facility agreement with Scotiabank Europe PLC until 6 November 2020. As at 31 December 2018 the Company had drawn down the following amounts from the facility:


- Euro 3,200,000 at an all-in rate of 0.85% (30 June 2018 - 2,521,000 at an all-in rate of 0.85%);


- Swedish Krona Nil (30 June 2018 - 8,860,000 at an all-in rate of 0.85%).


- Swiss Franc 3,360,000 at an all-in rate of 0.85% (30 June 2018 - 2,746,000 at an all-in rate of 0.85%);


- US Dollar 1,311,000 at an all-in rate of 3.23694% (30 June 2018 - 1,685,000 at an all-in rate of 2.87961%);



Six months ended

Year
ended

8.

Called up share capital

31 December 2018

30 June
2018


Ordinary shares of 25p each: publicly held




Opening balance

66,672,313

67,022,458


Buyback for treasury

(561,900)

(350,145)



_________

_________



66,110,413

66,672,313



_________

_________


Ordinary shares of 25p each; held in treasury




Opening balance

1,921,145

1,571,000


Buyback for treasury

561,900

350,145



_________

_________



2,483,045

1,921,145



_________

_________

9.

Capital reserve


The capital reserve reflected in the Condensed Statement of Financial Position at 31 December 2018 includes gains of 94,104,000 (30 June 2018 - 174,318,000) which relate to the revaluation of investments held at the reporting date.

10.

Net asset value


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







As at

As at


Debt at par

31 December 2018

30 June 2018


Attributable net assets ('000)

514,478

570,929


Number of Ordinary shares in issue (excluding shares held in treasury)

66,110,413

66,672,313


Net asset value per Ordinary share (p)

778.2

856.3






Debt at fair value

'000

'000


Attributable net assets

514,478

570,929


Add: Amortised cost of 2.51% Senior Loan notes

39,890

39,884


Less: Fair value of 2.51% Senior Loan Notes

(40,075)

(40,072)



_______

_______



514,293

570,741



_______

_______






Number of Ordinary shares in issue (excluding shares held in treasury)

66,110,413

66,672,313


Net asset value per Ordinary share (p)

777.9

856.0

11.

Transaction costs


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



Six months ended

Six months ended



31 December 2018

31 December 2017



'000

'000


Purchases

402

171


Sales

26

15



_______

_______



428

186



_______

_______

12.

Fair value hierarchy


FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:




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


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


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




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











Level 1

Level 2

Level 3

Total


As at 31 December 2018

Note

'000

'000

'000

'000


Financial assets at fair value through profit or loss







Quoted equities

a)

546,628

-

-

546,628









Financial liabilities at fair value through profit or loss







Derivatives

b)

(126)

(49)

-

(175)




_______

_______

_______

_______


Net fair value


546,502

(49)

-

546,453




_______

_______

_______

_______











Level 1

Level 2

Level 3

Total


As at 30 June 2018

Note

'000

'000

'000

'000


Financial assets at fair value through profit or loss







Quoted equities

a)

589,652

-

-

589,652




_______

_______

_______

_______


Net fair value


589,652

-

-

589,652




_______

_______

_______

_______









a)

Quoted equities



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





b)

Derivatives



The fair value of the Company's investments in Exchange Traded Options has been determined using observable market inputs on an exchange traded basis and therefore has been included in Fair Value Level 1.






The fair value of the Company's investments in Over the Counter Options (where the underlying equities are also held) has been determined using observable market inputs other than quoted prices of the underlying equities (which are included within Fair Value level 1) and therefore determined as Fair Value Level 2.






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

13.

Transactions with the Manager


The Company has delegated the provision of investment management, secretarial, accounting and administration and promotional services to Aberdeen Standard Fund Managers Limited ("ASFML" or the "Manager").




The amounts charged for the period are set out below:







Six months ended

Six months ended



31 December 2018

31 December 2017



'000

'000


Management fees

1,306

1,460


Promotional activities

240

240


Secretarial fees

45

45



_______

_______



1,591

1,745



_______

_______


The amounts payable at the period end are set out below:









Six months ended

Six months ended



31 December 2018

31 December 2017



'000

'000


Management fees

424

245


Promotional activities

120

120


Secretarial fees

23

23



_______

_______



567

388



_______

_______






No fees are charged in the case of investment managed or advised by the Standard Life Aberdeen PLC group. There was one commonly managed fund held in the portfolio during the six months to 31 December 2018 (2017 - one). The management agreement may be terminated by either party on the expiry of three months written notice. On termination the Manager would be entitled to receive fees which would otherwise have been due up to that date.

14.

Segmental Information


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

15.

The financial information in this report does not comprise statutory accounts within the meaning of Section 434 - 436 of the Companies Act 2006. The financial information for the year ended 30 June 2018 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and contained no statement under Section 498 of the Companies Act 2006.

16.

This Half-Yearly Financial Report was approved by the Board on 8 February 2019.

ALTERNATIVE PERFORMANCE MEASURES

Alternative Performance Measures ("APMs") are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Board uses APMs to monitor the performance of the Company.


Total return

The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies. Total return is considered to be an alternative performance measure. NAV total return involves investing the same net dividend in the NAV of the Company with debt at fair value on the date on which that dividend was earned. Share price total return involves reinvesting the net dividend in the month that the share price goes ex-dividend.


The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the six months ended 31 December 2018 and 31 December 2017.



Dividend


Share

2018

rate

NAV

price

30 June 2018

N/A

856.32p

784.00p

27 September 2018

9.25p

853.41p

770.00p

13 December 2018

8.00p

786.33p

730.00p

31 December 2018

N/A

778.20p

728.00p



_______

_______

Total return


-7.2%

-5.0%



_______

_______






Dividend


Share

2017

rate

NAV

price

30 June 2017

N/A

860.10p

795.00p

28 September 2017

11.75p

834.99p

764.00p

14 December 2017

8.00p

838.81p

771.00p

31 December 2017

N/A

874.08p

797.00p



_______

_______

Total return


4.0%

2.8%



_______

_______





Net gearing




Net gearing measures the total borrowings of 46,468,000 (30 June 2018 - 46,235,000) less cash and cash equivalents of 12,778,000 (30 June 2018 - 22,008,000) divided by shareholders' funds of 514,478,000 (30 June 2018 - 570,929,000), expressed as a percentage.


Ongoing charges

Ongoing charges is considered to be an alternative performance measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year. The ratio for 31 December 2018 is based on forecast ongoing charges for the year ending 30 June 2019.





31 December

30 June


2018

2018

Investment management fees ('000)

2,562

2,776

Administrative expenses ('000)

1,148

1,168

Less: non-recurring charges ('000)

(1)

(36)


_______

_______

Ongoing charges ('000)

3,709

3,908


_______

_______

Average net assets ('000)

530,075

566,525


_______

_______

Ongoing charges ratio

0.70%

0.69%


_______

_______




The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations.

INVESTMENT PORTFOLIO - AS AT 31 DECEMBER 2018



Valuation

Total assets

Investment

Sector

'000

%

Unilever

Personal Care

23,172

4.1

AstraZeneca

Pharmaceuticals & Biotechnology

20,438

3.7

BHP Group

Mining

19,522

3.5

Diageo

Beverages

19,431

3.5

BP

Oil & Gas Producers

18,402

3.3

Royal Dutch Shell

Oil & Gas Producers

18,381

3.3

Prudential

Life Assurance

16,838

3.0

Roche Holdings

Pharmaceuticals & Biotechnology

15,913

2.8

Relx

Media

15,366

2.7

HSBC Holdings

Banks

14,615

2.6

Top ten investments


182,078

32.5

Rio Tinto

Mining

14,495

2.6

Hiscox

Non-life Assurance

13,587

2.4

Close Brothers

Financial Services

12,571

2.2

GlaxoSmithKline

Pharmaceuticals & Biotechnology

12,384

2.2

National Grid

Gas, Water & Multi-utilities

12,244

2.2

Standard Chartered

Banks

11,902

2.1

Aveva

Software & Computer Services

11,761

2.1

Microsoft

Software & Computer Services

11,231

2.0

Nordea Bank

Banks

9,867

1.8

Associated British Foods

Food Producers

9,500

1.7

Top twenty investments


301,620

53.8

Experian

Support Services

9,462

1.7

Compass Group

Travel & Leisure

9,454

1.7

Nestle

Food Producers

9,405

1.7

Croda International

Chemicals

9,356

1.7

Novo-Nordisk

Pharmaceuticals & Biotechnology

9,328

1.6

British American Tobacco

Tobacco

9,145

1.6

Countryside Properties

Household Goods & Home Construction

8,922

1.6

Vodafone

Mobile Telecommunications

8,687

1.5

Telecom Plus

Fixed Line Telecommunications

8,581

1.5

Schroders

Financial Services

8,161

1.5

Top thirty investments


392,121

69.9

Rentokil Initial

Support Services

8,112

1.5

Ashmore

Financial Services

7,981

1.4

Assura

Real Estate Investment Trusts

7,922

1.4

Kone

Industrial Engineering

7,729

1.4

Ultra Electronics

Aerospace & Defence

7,429

1.3

Big Yellow Group

Real Estate Investment Trusts

7,224

1.3

Aberforth Smaller Companies Trust

Equity Investment Instruments

7,159

1.3

Bodycote

Industrial Engineering

6,940

1.2

InterContinental Hotels

Travel & Leisure

6,745

1.2

Euromoney International Investor

Media

6,536

1.2

Top forty investments


465,898

83.1

Inchcape

General Retailers

6,199

1.1

LondonMetric Property

Real Estate Investment Trusts

6,167

1.1

Marshalls

Construction & Materials

6,132

1.1

Imperial Brands

Tobacco

5,657

1.0

Weir Group

Industrial Engineering

5,518

1.0

Saga

General Retailers

5,240

0.9

Chesnara

Life Assurance

5,110

0.9

BBA Aviation

Industrial Transportation

4,645

0.8

London Stock Exchange

Financial Services

4,281

0.8

Scandinavian Tobacco

Tobacco

4,248

0.7

Top fifty investments


519,095

92.5

Standard Life UK Smaller Companies Trust

Equity Investment Instruments

4,190

0.7

VAT Group

Industrial Engineering

3,966

0.7

Hansteen

Real Estate Investment Trusts

3,612

0.7

XP Power

Electronic & Electrical Equipment

3,600

0.6

Workspace Group

Real Estate Investment Trusts

3,158

0.6

Hostelworld

Travel & Leisure

3,109

0.6

Diploma

Support Services

2,965

0.5

Manx Telecom

Fixed Line Telecommunications

2,933

0.5

Total investments


546,628

97.4

Net current assets{A}


14,318

2.6

Total assets


560,946

100.0

{A} Excludes borrowings.





This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR EAXAPEDSNEFF





Back to Regulatory News


Share Price, Share Chat, Stock Market news at lse.co.uk
FREE Member Services
- Setup a personalised Watchlist and Virtual Portfolio.
- Gain access to LIVE real-time Regulatory News (RNS).
- View more Trades, Directors' Deals, and Broker Ratings.
Share Price, Share Chat, Stock Market news at lse.co.uk




Datafeed and UK data supplied by NBTrader and Digital Look. While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk.
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.