Half-year Report
01/03/2023 07:00
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RNS Number : 4200R Murray Income Trust PLC 01 March 2023
Murray Income Trust PLC
Half Yearly Report 31 December 2022
An investment trust founded in 1923 aiming for high and growing income with
capital growth.
Performance Highlights
Net asset value total return(A) Share price total return(A)
Six months ended 31 December 2022 Six months ended 31 December 2022
+4.0% +3.8%
Year ended 30 June 2022 -4.0% Year ended 30 June 2022 -0.7%
Benchmark total return Ongoing charges(A)
Six months ended 31 December 2022 Forecast year to 30 June 2023
+5.1% 0.50%
Year ended 30 June 2022 +1.6% Year ended 30 June 2022 0.48%
Earnings per share (revenue) Dividend per Ordinary share
Six months ended 31 December 2022 Year ended 30 June 2022
16.3p 36.00p
Six months ended 31 December 2021 17.7p Year ended 30 June 2021 34.50p
Discount to net asset value(A) Dividend yield(A)
As at 31 December 2022 As at 31 December 2022
4.1% 4.3%
As at 30 June 2022 3.8% As at 30 June 2022 4.3%
(A) Considered to be an Alternative Performance Measure as set out on pages 28
and 29.
Net asset value per share - At 30 June (*31 December) - pence
2018 2019 2020 2021 2022 2022*
856.3 888.1 808.3 934.6 864.9 880.2
Dividends per share - Year ended 30 June - pence
2018 2019 2020 2021 2022
33.25 34.00 34.25 34.50 36.00
Mid-Market price per share - At 30 June (*31 December) - pence
2018 2019 2020 2021 2022 2022*
784.0 850.0 768.0 871.0 832.0 844.0
Financial Calendar, Dividends and Investment Portfolio by Sector
Financial Calendar
Payment dates of quarterly dividends March, June, September, December
Financial year end 30 June
Expected announcement date of annual results September
Centenary Annual General Meeting (Glasgow) 7 November 2023
Dividends
Rate Ex-dividend date Record date Payment date
First interim 8.25p 17 Nov 2022 18 Nov 2022 15 Dec 2022
Second interim 8.25p 16 Feb 2023 17 Feb 2023 16 Mar 2023
Third interim 8.25p 18 May 2023 19 May 2023 15 Jun 2023
Investment Portfolio by Sector as at 31 December 2022
Company FTSE All-Share
Financials 18.1 22.4
Industrials 14.1 10.8
Consumer Staples 14.0 16.0
Health Care 13.8 11.6
Consumer Discretionary 9.8 10.4
Basic Materials 8.7 8.9
Energy 7.1 11.2
Utilities 6.9 3.5
Technology 3.4 1.3
Real Estate 2.8 2.5
Telecommunications 1.3 1.4
100.0 100.0
Chairman's Statement
Shareholders continue to benefit from the enlarged scale of the Company
following the merger with Perpetual Income & Growth Investment Trust with
net assets over £1 billion, a lower blended management fee rate of 0.37%, a
lower forecast ongoing charges ratio of 0.50%, plus additional liquidity and
lower bid-offer spreads when trading. Our objective is to continue to provide
a high and growing income combined with capital growth from a portfolio
principally of UK equities: the dividend yield stood at 4.3% as at 31 December
2022 and we have now increased the dividend every year for the past forty-nine
years.
Performance
Over the six months ended 31 December 2022, the Company's net asset value
("NAV") per share rose 4.0% in total return terms, as compared to the FTSE
All-Share Index (the "Benchmark") return of 5.1%. The share price total return
was 3.8% reflecting the discount widening from 3.8% to 4.1%.
The two principal parts of our investment objective are to provide a high and
growing income. The dividend yield, based on the 31 December 2022 share price
of 844.0 pence, is 4.3% which is high by most people's standards for an equity
portfolio. We continue to grow our dividend, with a dividend increase chalked
up in every one of the past forty-nine years. This puts us into the top ten on
the AIC's list of 'Dividend Heroes' (the investment trusts with the longest
records of annual dividend growth) as measured by the number of consecutive
years of dividend growth.
For the full calendar year 2022, NAV total return was -6.0% while the
Benchmark returned 0.3% and the share price total return was -4.1%. The
underperformance came in the first half of 2022, caused largely by being
underweight in the oil and gas sector (which benefited from the war in
Ukraine) and a small number of stock specific factors. Looking over longer
periods ended 31 December 2022, both NAV and share price performance were
behind the Benchmark over three years but ahead of the Benchmark over five and
ten years.
3 years ended 5 years ended 10 years ended
31 December 2022 31 December 2022 31 December 2022
Performance (total return) % % %
Share price(A) 6.8 30.8 94.5
Net asset value per Ordinary share(A) 5.7 24.2 99.6
FTSE All-Share 7.1 15.5 88.2
Source: abrdn & Morningstar
Investment Process
Our Manager's investment process is best summarised as a search for good
quality companies at attractive valuations. The Manager defines a quality
company as one capable of strong and predictable cash generation, sustainably
high returns on capital and with attractive growth opportunities. These
typically result from a sound business model, a robust balance sheet, good
management and strong environmental, social and governance characteristics.
These qualities helped avoid the worst of the dividend shocks during the
pandemic.
Investment People
abrdn is our appointed investment management company. Charles Luke has been
our lead portfolio manager since 2006, and works alongside Rhona Millar and
Co-Manager Iain Pyle, as members of abrdn's now 20-strong UK and European
Team.
Annual General Meeting ("AGM")
It was like old times at our Annual General Meeting ("AGM") on 1 November
2022, held in London, with many shareholders and their guests attending and
plenty of questions asked. Over a buffet lunch afterwards, the opportunity was
taken to informally discuss a whole range of matters with shareholders. This
year's AGM on 7 November 2023 will be celebrating the Company's centenary and
will be held where the Company was founded, in Glasgow.
Board
This is my final year as Chairman and as a Director of the Company. After
serving nine years as a Director, I will retire from the Board at the end of
the centenary AGM. I am delighted that the other members of the Board have
determined that Peter Tait, currently Senior Independent Director, will
succeed me as Chairman at that time.
Dividend Policy
Our normal practice is to announce in November our plans for the first, second
and third interim dividends for the financial year. On 1 November 2022 we
announced interim dividends, each of 8.25p per share, to be paid on 15
December 2022, 16 March 2023 and 15 June 2023. The Board also advised that it
expected the fourth interim dividend, to be announced in August 2023 and paid
in September 2023, to be at least 11.75 pence per share, as compared to 11.25
pence per share declared for the previous year.
In the year ended 30 June 2022 we were able to increase our full year dividend
per share to 36.0p which represented a yield of 4.3% on the 31 December 2022
share price of 844.0p. Revenue earned by the Company for the year was 40.5p
per share, with the surplus 4.5p being added to our revenue reserves which
serve to support and smooth future dividends. For the year ending 30 June
2023, revenue earned is currently projected to be ahead of last year's
dividend.
Share Capital
The Company bought back 1,168,091 Ordinary shares of 25p into treasury during
the six months ended 31 December 2022, representing 1.0% of shares in issue at
30 June 2022, resulting in there being 115,522,381 Ordinary shares of 25p in
issue with voting rights and an additional 4,007,151 shares held in treasury,
at 31 December 2022.
Environmental, Social and Governance ("ESG")
In last year's Half-Yearly Report, we reported a new focus on the net zero
initiative, one aspect of our ESG approach. Countries and companies are
signing up to commitments as to when their operations will become net zero in
terms of carbon emissions and on what basis they will be measured. We can
apply this focus to Murray Income too: 96% of the portfolio by value or 50 out
of 55 companies held in the portfolio on 31 December 2022 have set a net zero
target date. The breakdown is shown in the following table:
% of Portfolio by Value Number of Companies
2030 37 18
2040 25 11
2050 34 21
Not yet committed 4 5
Total 100 55
Source: abrdn
Our Manager continues to engage with those that have not yet set a date as
well as holding to account or pressing further those that have committed. From
the companies that have committed we can infer an average net zero date for
the Murray Income portfolio of 2040, a similar number to this time last year.
The encouraging change over the year is that only five companies have yet to
commit, compared to 16 a year ago. Please note that these numbers are
snapshots, they could move up or down if the portfolio changes and the
outcomes are not in any case within our control. But this will be a useful
number for comparison over time, whilst remembering that net zero is just one
of the environmental factors within ESG.
ESG considerations are integrated into the company analysis carried out by our
Manager which is able to draw on the expertise of more than 20 in-house ESG
specialists covering the UK and Europe. This aims to mitigate risk and
enhance returns over the longer term, results in frequent dialogue with
investee companies and helps to ensure that the companies in the portfolio are
acting in the best long-term interests of their shareholders and society at
large. It is important to note that the policy pursued by our Investment
Manager on our behalf is dynamic rather than static. ESG conclusions can
change if the inputs change: for example, one might look at Russia's invasion
of Ukraine and conclude that the social factor of security and safety is more
important now than previously considered. Similarly, one might consider energy
security be given a higher weight relative to absolute CO2 emissions and come
to a different conclusion on holding an oil or
gas stock.
The Investment Manager's Report contains further information (including
examples) on how ESG factors are incorporated into the Managers' investment
approach. For more detailed information we would refer you to our 30 June 2022
Annual Report (pages 93-97) and to our website (www.murray-income.co.uk).
Update
From 31 December 2022 to 23 February 2023 (the latest practicable date prior to approval of this Report), the net asset value per share total return and share price total return were 5.1% and 4.5%, respectively, while the Benchmark total return was 6.4%. The discount widened to 6.0% over the same period, during which a further 1,559,380 shares were bought back into treasury by the Company, resulting in 113,963,001 shares with voting rights, and an additional 5,566,531 shares in treasury, as at the date of this Report.
Outlook
Writing this amongst headlines of crisis, emergency, strikes, inflation,
recession and 'Spare' Harry, it was easy to miss the headline that the UK's
FTSE-100 Index was at a 4-year high. How could that be if everything is so
bad? A sense that some of these factors are either as bad as they could be or
have started to recover is part of the answer. Let's consider the predominant
concerns:
Inflation rose way higher than expected in 2022 fuelled by the jump in oil and
gas prices following Russia's invasion of Ukraine. As companies passed on the
pain to consumers, inflation rates rose well above central bank targets and
sparked demands for increased wages to maintain living standards. The outlook
now is rather different: wholesale oil and gas prices have already dropped
sharply from last year's levels. The warm European winter (so far) has helped
as have increased imports of Liquid Natural Gas. It is possible that we end
this winter with enough gas in storage to meet next winter's needs. Central
banks in the western world were too slow to react initially but have now
tightened monetary policy significantly in response to rising inflation. While
the effect is yet to be seen, remember that monetary policy works with a lag:
most economists would say 12-18 months. Inflation may have already peaked.
That monetary lag is a negative for growth prospects. Many believe that we in
the UK are already in recession. If not, we are very close to it. With
interest rates still rising, consumer electricity and gas costs still very
high and wages not keeping up with inflation it is going to be a while before
growth recovers. But remember that the world economy is still growing.
After thirteen years of super-low interest rates in response to the 2008
financial crisis, it should have been no surprise that interest rates have
started to return to normal, that is into the 3-5% range that would be
considered average by historical standards. Yet some have been taken by
surprise and have clearly not stress tested their business models for a return
of normality. The most obvious example of this is the blow-up in LDI
(Liability Driven Investment, a strategy used by pension funds to match their
assets and liabilities more closely) that caused the crash in the UK gilt
market in September. UK gilt yields rose to a level that was entirely
reasonable but caught out many pension funds by doing so in six weeks, meaning
that a significant number of them could not easily meet their increased
collateral requirements. The real problem in this was leverage: some funds
were, and still are, using leverage to boost their asset returns so as to meet
their future liabilities.
Whenever a new financial crisis appears, excessive leverage is the most likely
root cause. Banks' excessive exposure to sub-prime real estate lending is well
understood to be the root cause of the 2008 crash. The question is: are
markets strong enough to withstand the future stresses on leverage? Those
stresses currently seem most visible in property and private equity. Just
applying a common sense test reveals that most property prices are too high,
yet most investors in property have little experience of falling prices.
Combined with leverage and illiquidity, a property crash would be painful for
many. Less obvious is the now-huge private equity sector, which depends
heavily on leverage and favourable tax treatment for its returns. If you
were a private equity fund that stripped the cash out of a company and paid it
to yourselves in dividends, funding that payment by borrowing on the company's
balance sheet and then interest rates go up, the net worth of that company
would fall. In aggregate, private equity companies are yet to feel that pain.
Excess leverage will be a problem if interest rates stay high.
One more visible change from last year in the UK is in politics: the new Sunak
Conservative government may have less than two years to run before losing a
general election to Labour, but there seems to be very little difference
between the economic policies of the UK's two main political parties. Headline
announcements of "take back control', "reform the NHS" and "no unfunded tax
cuts" have originated from the Labour camp. This is perhaps the important
legacy of the doomed Truss government: do something too radical and the
consequences will force you out of office. Heeding this warning, the two
parties now offer remarkably similar economic policies. However unlikely, that
heralds the return of political stability. Another intriguing possibility is
that a great reset is underway which will lay the foundation for future
prosperity. It is well understood that productivity growth in the UK has
lagged well behind previous trends and that many UK companies have depended on
cheap labour, whether imported or otherwise, to fund their profitability.
Whether it was Covid or Brexit, the supply of cheap labour has been disrupted.
Companies are finding it very difficult to recruit workers on the low-wage or
zero-hours contracts of before. Although the headline unemployment number is
low, many people of working age are not currently seeking work, with early
retirement and illness being common reasons. The initial response from many
companies has been to cut back a little on staff numbers and wait. But now a
new mood is emerging: higher hourly wage rates and better terms and conditions
in return for productivity improvements is a recipe for future prosperity.
Something is clearly starting to change here.
While the national mood is clearly and rightly pessimistic, there are some
grounds for optimism. Remember that 2022 turned out to be nothing like the way
it was forecasted to be a year ago. It wouldn't be a surprise if 2023
confounds forecasts too.
Neil Rogan
Chairman
28 February 2023
Investment Manager's Report
The portfolio underperformed the FTSE All-Share Index (the "Benchmark") during
the six months ended 31 December 2022 leading to the NAV per Ordinary share
rising by 4.0% compared to an increase in the Benchmark of 5.1% (both figures
calculated on a total return basis).
From a style perspective the portfolio's Quality bias continued to be a
headwind to performance (albeit to a lesser extent than during the first half
of the calendar year) as the Value factor outperformed. In sector terms, the
portfolio's underweight position in the Communication Services sector and
overweight exposure to the Information Technology sector benefited
performance. In contrast, the overweight positions in the Materials and Real
Estate sectors detracted from relative performance. The holdings in Aveva,
TotalEnergies and BHP were the most beneficial to relative returns while the
holdings in Marshalls and Watkin Jones detracted the greatest, relatively. Not
holding Vodafone and HSBC contributed positively to relative performance while
not owning Glencore, Shell and Rio Tinto detracted from relative performance.
Three new holdings were purchased for the portfolio during the six months. The
first purchase was the pharmaceutical company, Roche, which has a healthy
balance sheet and a strong pipeline which we believe to be undervalued. The
second new entrant was Games Workshop, the hobby miniatures company, which we
see as a unique asset with strong quality credentials and an attractive
dividend yield. The third purchase was LVMH, the European luxury goods company
which offers strong long-term growth potential through its portfolio of
well-known brands.
We increased exposure to a number of our existing holdings which we believe
have high quality characteristics with attractive growth prospects at
appealing valuations including Sage, Unilever, Kone, London Stock Exchange
Group, Howden Joinery and Relx.
Ten holdings were sold during the period, of which three stocks were sold
following takeover bids: Aveva, Euromoney and Countryside Partnerships (we
continue to have a holding in the acquiror, Vistry). Concern around high
levels of leverage and potential risk to dividends given rising discount rates
and higher interest charges resulted in the sales of Sirius Real Estate,
Assura and Unite Group in the real estate sector. The small holding in Watkin
Jones was sold following a profit warning which led to a change in confidence
in the company's business model and concern about the risk of further
downgrades. The residual position in Haleon, the consumer healthcare business
which was spun-out from GSK, was exited. Finally, the small positions in
Bodycote and Weir were sold given more attractive opportunities.
We reduced the exposure to a number of holdings where we have higher
conviction in other names in their respective sectors including Ashmore and
Nestlé. The holding in AstraZeneca was reduced in order to manage its
increasingly large weight in the portfolio.
We continued our measured option-writing programme which is based on our
fundamental analysis of holdings in the portfolio. We believe that the
option-writing strategy, which we have now employed for over 10 years, is of
benefit to the Company by diversifying and modestly increasing the level of
income generated and providing headroom to invest in companies with lower
starting yields but better dividend and capital growth prospects.
One of the tenets of our investment philosophy is the belief that over the
long term in order to grow dividends a company needs to grow its earnings and
that high quality companies are best placed to do that. We believe that the
portfolio is very well positioned to do just this. Looking at the portfolio
from a quantitative perspective at the end of the period, typical measures of
portfolio quality such as returns measures and earnings stability were high in
absolute terms and considerably better than the Benchmark (for example, in
aggregate, the return on equity and return on assets of the portfolio holdings
was 24.1% and 8.2% respectively, compared to the Benchmark at 17.0% and 5.7%
respectively). Furthermore, the portfolio generates a dividend yield above the
Benchmark. At 31 December 2022, the portfolio traded on a P/E multiple of
13.8x compared to the Benchmark on 11.8x: a little more expensive but to our
minds a small price to pay for a considerably better quality portfolio and one
still very attractively valued in absolute terms.
Environmental, Social and Governance ("ESG")
ESG engagement issues are addressed as part of our regular meetings with
management. However, we also engage on a variety of specific issues outside
our regular meetings cycle. It should be noted that given the quality
threshold inherent in the portfolio, these meetings are rarely about issues
for which we hold significant concerns. To provide a couple of examples of our
engagement during the period;. firstly, we met with Nordea to discuss their
targets for green lending and reducing financed carbon emissions in their
lending portfolio. Nordea appear well placed to benefit from the rise in green
bonds and are on a positive trajectory towards achieving their climate
targets; and, secondly, we conducted a meeting with London Stock Exchange
Group ("LSEG") to discuss the company's approach to human capital management
in the context of the large acquisition of Refinitiv and a competitive market
for technology talent. We think LSEG are managing these challenges well.
Market and Economic Background
The UK equity market rose by 5.1% on a total return basis over the six month
period. The period was characterised by high levels of inflation, monetary
policy tightening and concerns about a potential recession. Sentiment towards
the outlook ebbed and flowed at times with strong corporate earnings providing
some comfort and some optimism that central banks would slow the pace of rate
hikes, contrasted with periods of growing fears about recession risks.
Performance at a sector level was mixed. Mining and oil and gas companies
performed well but telecommunications, media and real estate companies
struggled. The FTSE100 Index outperformed the more domestically focused
FTSE250 Index over the period.
Domestic economic data was generally weak. UK GDP was unchanged in the fourth
quarter of 2022 following a decline of 0.2% in the third quarter. The UK is
the only Group of Seven ("G7") country not to fully recover output lost during
the Covid-19 pandemic with the economy 0.8% smaller than at the end of 2019.
Consumer confidence was reported to be at its lowest level since records began
in 1974. Conversely, employment data generally continued to be strong given
the shortage of labour.
Inflation continued to be high with the Consumer Prices Index reaching 11.1%
in October, the highest level in more than four decades. The government
announced caps to household energy bills for the next two years. Widespread
strike action towards the end of 2022 weighed on sectors including transport,
health, education, and postal services. The Bank of England ("BoE") acted to
control inflation by raising interest rates multiple times over the period,
with the policy rate ending the year at 3.5% (and subsequently has been
increased to 4.0%).
Political uncertainty was elevated as Prime Minister Johnson announced his
resignation. The impact of fiscal policy on markets was heightened when the
new Chancellor Kwarteng's mini-budget, announcing widespread tax cuts, sparked
a wave of selling of UK gilts and a substantial weakening of the pound. The
BoE launched emergency measures to stabilise markets, delaying a planned gilt
sale and instead committing to buy more gilts. UK government bond prices rose
and the pound recovered somewhat as first Chancellor Kwarteng and then Prime
Minister Truss resigned and many of their previously announced tax cuts were
reversed.
Circumstances overseas also had an impact on the UK equity market. Towards the
end of the period, signs that China would move away from their zero-covid
policy was taken positively for stocks with exposure to the Chinese economy,
including miners. Energy prices continued to be elevated compared to historic
averages due to the impact of the Russian invasion of Ukraine on energy
markets, which led to the energy sector outperforming.
Outlook
We expect the multiple headwinds facing the global economy - rate hikes,
elevated energy costs and the continued impact of Covid-19 - to lead to
challenging conditions in 2023. Uncertainties remain around the potential
depth and severity of an economic downturn. For the UK, we currently forecast
GDP to decline by 1.3% in 2023. We expect the BoE to continue to act to
control inflation. For 2023, the Manager's economists expect one more 0.50%
rate increase from the BoE, which would see rates reach 4.5% in the spring.
Given the recessionary outlook they then foresee a sharp cutting cycle
resulting in base rates ending 2023 at 2.5%.
Although the backdrop may be challenging, we are optimistic about the outlook
for the holdings in the portfolio. The portfolio is jam-packed with high
quality, predominantly global businesses capable of delivering appealing
long-term earnings and dividend growth at a modest aggregate valuation. In
more difficult times it is those companies which can demonstrate pricing power
and resilience, benefit from their robust balance sheets and are led by
experienced management teams that are able to emerge stronger - ultimately
this will be recognised in their valuations. That these companies are
predominantly listed in the UK, a market that remains attractive on a
relative, absolute and cyclically-adjusted basis, is doubly appealing.
Therefore, we feel very comfortable maintaining our focus on excellent quality
highly profitable businesses capable of delivering sustainable earnings and
dividend growth over the long term.
Charles Luke and Iain Pyle,
abrdn Investments Limited
Investment Manager
28 February 2023
Ten Largest Investments
As at 31 December 2022
AstraZeneca Diageo
AstraZeneca researches, develops, produces and markets pharmaceutical Diageo produces, distills and markets alcoholic beverages including vodkas,
products. With a significant focus on oncology and rare diseases the company whiskies, tequilas, gins and beer. The company should benefit from attractive
offers appealing growth potential over the medium term. long term drivers such as population and income growth, and premiumisation.
The company has a variety of very strong brands and faces very limited private
label competition.
Unilever Relx
Unilever is a global consumer goods company supplying food, home and personal Relx is a global provider of information and analytics for professionals and
care products. The company has a portfolio of strong brands including Dove, businesses across a number of industries including scientific, technical,
Knorr, Axe and Persil. Over half of the company's sales are to developing and medical and law. The company offers resilient earnings combined with long term
emerging markets. structural growth opportunities.
TotalEnergies BHP Group
TotalEnergies is a broad energy company that produces and markets fuels, BHP Group (formerly BHP Billiton) is a diversified resources group with a
natural gas and electricity. It is a leader in the sector's energy transition global portfolio of high quality assets particularly iron ore and copper. The
with an attractive pipeline of renewable assets. company combines an appealing dividend yield combined with a strong balance
sheet.
SSE Anglo American
SSE is a utility company mostly focused on networks and renewables. The path Anglo American is a diversified mining company with appealing exposure to
to net zero will require significant investment in distribution networks and future-facing commodities such as copper and platinum group metals. The
the company should also benefit from its strong position in offshore wind company offers attractive growth prospects coupled with a strong balance sheet
generation. and generous dividend yield.
BP Standard Chartered
BP is a fully integrated energy company involved in exploration, production, Standard Chartered is an international banking group offering a broad mix of
refining, transportation and marketing of oil and natural gas. We believe the services, primarily in emerging markets. The startegy is focused on creating a
industry is currently in a sweetspot with rising prices and benign costs. The higher quality business, growing with end markets while controlling costs
company provides an attractive dividend yield and is well placed for the leading to improving returns.
energy transition.
Investment Portfolio
As at 31 December 2022
Total
Valuation investments
Investment Sector Country £'000 %
AstraZeneca Pharmaceuticals and Biotechnology UK 69,196 6.3
Diageo Beverages UK 57,207 5.2
Unilever Personal Care, Drug and Grocery Stores UK 54,457 4.9
RELX Media UK 49,444 4.5
TotalEnergies Oil, Gas and Coal France 45,007 4.1
BHP Industrial Metals and Mining UK 40,669 3.7
SSE Electricity UK 37,524 3.4
Anglo American Industrial Metals and Mining UK 36,290 3.3
BP Oil, Gas and Coal UK 33,557 3.1
Standard Chartered Banks UK 29,655 2.7
Top ten investments 453,006 41.2
Experian Industrial Support Services UK 27,342 2.5
Inchcape Industrial Support Services UK 27,314 2.5
London Stock Exchange Finance and Credit Services UK 25,237 2.3
Coca-Cola HBC Beverages UK 25,004 2.3
Sage Software and Computer Services UK 24,203 2.2
Safestore Real Estate Investment Trusts UK 23,955 2.2
National Grid Gas, Water and Multi-utilities UK 23,166 2.1
Novo-Nordisk Pharmaceuticals and Biotechnology Denmark 22,565 2.0
Close Brothers Banks UK 22,329 2.0
Rentokil Initial Industrial Support Services UK 22,090 2.0
Top twenty investments 696,211 63.3
Croda International Chemicals UK 18,767 1.7
Convatec Medical Equipment and Services UK 17,648 1.6
Howden Joinery Retailers UK 17,621 1.6
Nordea Bank Banks Sweden 17,401 1.6
Intermediate Capital Investment Banking and Brokerage Services UK 17,328 1.6
M&G Investment Banking and Brokerage Services UK 17,093 1.5
Oversea-Chinese Banking Banks Singapore 16,617 1.5
Direct Line Insurance Non-life Insurance UK 15,373 1.4
Drax Electricity UK 15,190 1.4
OSB Finance and Credit Services UK 14,469 1.3
Top thirty investments 863,718 78.5
Vistry Household Goods and Home Construction UK 14,390 1.3
Kone Industrial Engineering Finland 14,207 1.3
Hiscox Non-life Insurance UK 13,978 1.3
Microsoft Software and Computer Services United States 13,307 1.2
GSK Pharmaceuticals and Biotechnology UK 13,073 1.2
Smith & Nephew Medical Equipment and Services UK 12,312 1.1
LVMH Personal Goods France 11,501 1.0
Nestlé Food Producers Switzerland 11,146 1.0
Oxford Instruments Electronic and Electrical Equipment UK 10,916 1.0
Mondi General Industrials UK 10,875 1.0
Top forty investments 989,423 89.9
Roche Pharmaceuticals and Biotechnology Switzerland 10,765 1.0
RS Industrial Support Services UK 10,332 1.0
Games Workshop Leisure Goods UK 10,153 0.9
Marshalls Construction and Materials UK 9,968 0.9
Telenor Telecommunications Service Providers Norway 9,020 0.8
VAT Electronic and Electrical Equipment Switzerland 8,694 0.8
Chesnara Life Insurance UK 7,482 0.7
Genuit Construction and Materials UK 7,475 0.7
Industrials REIT Real Estate Investment Trusts UK 6,760 0.6
Dechra Pharmaceuticals Pharmaceuticals and Biotechnology UK 6,694 0.6
Top fifty investments 1,076,766 97.9
Mowi Food Producers Norway 5,923 0.5
XP Power Electronic and Electrical Equipment UK 5,560 0.5
Accton Technology Telecommunications Equipment Taiwan 5,074 0.5
Moonpig Retailers UK 4,362 0.4
Ashmore Investment Banking and Brokerage Services UK 2,452 0.2
Total investments (55) 1,100,137 100.0
All investments are in ordinary shares.
Investment Case Studies
Games Workshop
Games Workshop, with a market capitalisation of approximately £3bn, was
introduced to the portfolio in the period under review. The unique mid-cap
company has very strong intellectual property through its fantasy wargame
Warhammer series. The company designs, manufactures, distributes and sells
high quality miniatures and related products via retail, trade and online
channels. Around three-quarters of sales are outside the UK with significant
growth opportunities in the United States and Asia. There are also
opportunities to grow outside the core table-top product, for example in
computer games and television and the company recently announced it would work
with Amazon to develop film and television productions. High customer loyalty
and strong IP means the business model has high margins, generating very high
returns on capital employed. The company has no debt and an attractive
dividend yield.
LVMH
LVMH, the Paris-listed luxury goods company, was added to the portfolio in the
period under review. The company has an approximate market capitalisation of
€400bn and the holding provides the portfolio with exposure to a market
segment that is difficult to access through companies listed in the UK. The
company has a wide selection of best-in-class brands across divisions
including Fashion & Leather Goods (for example Louis Vuitton, Dior, Fendi,
Marc Jacobs), Wines & Spirits (for example, Moet Hennessey, Krug, Dom
Perignon, Glenmorangie), Perfumes & Cosmetics and Watches & Jewellery.
LVMH demonstrates very strong financial quality characteristics with pricing
power, high gross and operating margins, strong cashflows and a robust balance
sheet, and is known for taking a long-term perspective on investment. The
dividend yield is relatively modest but we see good scope for strong long-term
dividend growth.
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. These are considered to be unchanged
as at 31 December 2022, as compared to 30 June 2022, other than in relation to
the Board's perception of heightened interest rate risk and geopolitical
uncertainty, noting the potential volatility associated with the conflict in
Ukraine, which the Board anticipates will persist over the six months to 30
June 2023. The principal risks and uncertainties are set out in detail on
pages 16 to 19 of the Company's Annual Report for the year ended 30 June 2022
("Annual Report 2022") which is available on the Company's website. The Annual
Report 2022 also contains, in note 18 to the Financial Statements, an
explanation of other risks relating to the Company's investment activities,
specifically market risk, liquidity
risk and credit risk, and a note of how these risks are managed.
Related Party Transactions
Under Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law), the Company has identified the Directors as related parties.
No other related parties have been identified. There have been no related
party transactions that have had a material effect on the financial position
of the Company.
Going Concern
The factors which have an impact on the Company's status as a going concern
are set out in the Going Concern section of the Directors' Report on page 42
of the Annual Report 2022. As at 31 December 2022, there had been no material
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 covenants associated with
the Senior Loan Notes and bank facilities. As at 31 December 2022, in addition
to the £40m 10 year Senior Loan Notes 2027 and £60m 10 year Senior Loan
Notes 2029, £6.7m of the Company's three-year £50m multi-currency revolving
bank credit facility (the "Facility") was drawn down. On the expiry of the
Facility in October 2024, the Company would expect to continue to access a
credit facility. However, should acceptable terms for a new credit facility
not be forthcoming at that time, any outstanding borrowing will be repaid
through the proceeds of equity sales.
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. Accordingly, the Directors
believe that it is appropriate to continue to adopt the going concern basis of
accounting in preparing the Financial Statements.
US Executive Order No. 14032
The Board confirms that the Company has not and does not intend to invest in
any of the companies designated as "Chinese Military-Industrial Complex
Companies" by the US Executive Order No. 14032.
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 2022
comprises the Half-Yearly Board Report, the Directors' Responsibility
Statement and the condensed set of Financial Statements.
For and on behalf of the Board
Neil Rogan,
Chairman
28 February 2023
Condensed Statement of Comprehensive Income (unaudited)
Six months ended Six months ended
31 December 2022 31 December 2021
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 22,014 22,014 - 59,821 59,821
Currency gains/(losses) - 626 626 - (19) (19)
Income 2 20,869 - 20,869 22,562 - 22,562
Investment management fees 4, 13 (566) (1,321) (1,887) (611) (1,425) (2,036)
Administrative expenses (718) - (718) (748) - (748)
Net return before finance costs and taxation 19,585 21,319 40,904 21,203 58,377 79,580
Finance costs (359) (837) (1,196) (344) (802) (1,146)
Net return before taxation 19,226 20,482 39,708 20,859 57,575 78,434
Taxation 5 (259) - (259) (130) - (130)
Net return after taxation 18,967 20,482 39,449 20,729 57,575 78,304
Return per Ordinary share 6 16.3p 17.6p 33.9p 17.7p 49.2p 66.9p
The total column of this statement represents the profit and loss account of
the Company prepared in accordance with FRS 102. The 'Revenue' and 'Capital'
columns represent supplementary information prepared under guidance issued by
the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the period.
The accompanying notes are an integral part of the condensed financial
statements.
Condensed Statement of Financial Position (unaudited)
As at As at
31 December 2022 30 June 2022
Notes £'000 £'000
Fixed assets
Investments at fair value through profit or loss 1,100,137 1,098,793
Current assets
Other debtors and receivables 5,345 9,061
Cash and cash equivalents 30,859 20,131
36,204 29,192
Creditors: amounts falling due within one year
Derivative financial instruments (1,372) -
Other payables (1,585) (1,513)
Bank loans 7 (6,665) (6,507)
(9,622) (8,020)
Net current assets 26,582 21,172
Total assets less current liabilities 1,126,719 1,119,965
Creditors: amounts falling due after one year
2.51% Senior Loan Notes 2027 7 (39,935) (39,930)
4.37% Senior Loan Notes 2029 7 (69,990) (70,780)
(109,925) (110,710)
Net assets 1,016,794 1,009,255
Capital and reserves
Share capital 8 29,882 29,882
Share premium account 438,213 438,213
Capital redemption reserve 4,997 4,997
Capital reserve 513,858 502,672
Revenue reserve 29,844 33,491
Total Shareholders' funds 1,016,794 1,009,255
Net asset value per Ordinary share 9
Debt at par value 880.2p 864.9p
The accompanying notes are an integral part of the condensed financial
statements.
Condensed Statement of Changes in Equity (unaudited)
Six months ended 31 December 2022
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2022 29,882 438,213 4,997 502,672 33,491 1,009,255
Net return after tax - - - 20,482 18,967 39,449
Buyback of shares - - - (9,296) - (9,296)
Dividends paid (note 3) - - - - (22,614) (22,614)
Balance at 31 December 2022 29,882 438,213 4,997 513,858 29,844 1,016,794
Six months ended 31 December 2021
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2021 29,882 438,213 4,997 594,282 26,485 1,093,859
Net return after tax - - - 57,575 20,729 78,304
Buyback of shares - - - (3,075) - (3,075)
Dividends paid (note 3) - - - - (21,053) (21,053)
Balance at 31 December 2021 29,882 438,213 4,997 648,782 26,161 1,148,035
The accompanying notes are an integral part of the condensed financial
statements.
Condensed Statement of Cash Flows (unaudited)
Six months ended Six months ended
31 December 2022 31 December 2021
Notes £'000 £'000
Operating activities
Net return before finance costs and taxation 40,904 79,580
Increase in accrued expenses 1,114 445
Overseas withholding tax (244) (648)
Dividend income (19,333) (21,566)
Dividends received 20,933 22,382
Interest income (330) (92)
Interest received 283 92
Interest paid (1,177) (1,131)
Gains on investments (22,014) (59,821)
Amortisation on Loan Notes (785) (784)
Foreign exchange (gains)/losses (626) 19
Increase in other debtors (342) (165)
Stock dividends included in investment income - (2,696)
Net cash inflow from operating activities 18,383 15,615
Investing activities
Purchases of investments (112,528) (95,243)
Sales of investments 135,999 116,577
Net cash inflow from investing activities 23,471 21,334
Financing activities
Dividends paid 3 (22,614) (21,053)
Buyback of Ordinary shares for treasury 8 (9,296) (3,034)
Repayment of bank loans (6,755) (6,290)
Drawdown of bank loans 6,664 6,258
Net cash outflow from financing activities (32,001) (24,119)
Increase in cash 9,853 12,830
Analysis of changes in cash during the period
Opening balance 20,131 4,493
Effect of exchange rate fluctuations on cash held 875 29
Increase in cash as above 9,853 12,830
Closing balance 30,859 17,352
The accompanying notes are an integral part of the condensed financial
statements.
Notes to the Financial Statements
For the year ended 31 December 2022
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
July 2022. They have also been prepared on a going concern basis and on the
assumption that approval as an investment trust will continue to be granted.
The condensed financial statements have been prepared using the same
accounting policies as the preceding annual financial statements.
2. Income
Six months ended Six months ended
31 December 2022 31 December 2021
£'000 £'000
Investment income
UK dividends 15,006 14,927
Overseas dividends 3,693 3,698
Property income dividends 634 245
Stock dividends - 2,696
19,333 21,566
Other income
Deposit interest 13 -
Money Market interest 318 -
Traded option premiums 1,205 996
1,536 996
Total income 20,869 22,562
3. Dividends
Dividends paid on Ordinary shares deducted from the revenue reserve:
Six months ended Six months ended
31 December 2022 31 December 2021
£'000 £'000
2021 fourth interim dividend - 9.75p - 11,412
2022 first interim dividend - 8.25p - 9,641
2022 fourth interim dividend - 11.25p 13,127 -
2023 first interim dividend - 8.25p 9,556 -
Return of unclaimed dividends (69) -
22,614 21,053
The first interim dividend for 2023 of 8.25p (2022 - 8.25p) was paid on 15
December 2022 to shareholders on the register on 18 November 2022. The
ex-dividend date was 17 November 2022.
A second interim dividend for 2023 of 8.25p (2022 - 8.25p) will be paid on 16
March 2023 to shareholders on the register on 17 February 2023. The
ex-dividend date is 16 February 2023.
A third interim dividend for 2023 of 8.25p (2022 - 8.25p) will be paid on 15
June 2023 to shareholders on the register on 19 May 2023. The ex-dividend date
is 18 May 2023.
4. Management fee and finance costs
The management fee is as reported in the 2022 Annual Report, being a tiered
fee based on net assets and calculated as follows:
Fee rate Net
per annum assets £'million
0.55% up to 350
0.45% within the range 350-450
0.25% greater than 450
The management fee and finance costs are charged 30% to revenue and 70% to
capital.
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 2023 is an effective rate of 19% (2022 - 19%) until 31 March 2023 and
25% thereafter.
During the period the Company suffered withholding tax on overseas dividend
income of £259,000 (31 December 2021 - £130,000).
6. Return per Ordinary share
Six months ended Six months ended
31 December 2022 31 December 2021
£'000 p £'000 p
Revenue return 18,967 16.3 20,729 17.7
Capital return 20,482 17.6 57,575 49.2
Total return 39,449 33.9 78,304 66.9
Weighted average number of Ordinary shares in issue 116,250,589 116,964,663
7. Senior Loan Notes and bank loans
Senior Loan Notes
The Company has in issue:
(i) £40,000,000 of 10 year Senior Loan Notes at a fixed rate of 2.51%,
redeemable at par on 8 November 2027;
(ii) £60,000,000 of 15 year Senior Loan Notes at a fixed rate of 4.37%
redeemable at par on 8 May 2029.
The Loan Notes rank pari passu and are secured by floating charges over the
whole of the assets of the Company and pay interest in half yearly instalments
in May and November. The Company has complied with both Note Purchase
Agreements: that the ratio of net assets to gross borrowings must be greater
than 3.5:1 and that net assets must not be less than £550,000,000.
The fair value of the Loan Notes is shown in note 9. The fair value of the
2.51% Loan Notes is calculated by aggregating the expected future cash flows
discounted at a rate comprising the borrower's margin plus an average of
market rates applicable to loans of a similar period of time. The fair value
of the 4.37% Loan Notes is based on a comparable quoted debt security and
their amortisation is presented as a finance cost, split 70% to capital and
30% to revenue.
31 December 2022 30 June 2022
£'000 £'000
2.51% Senior Loan Notes 40,000 40,000
Unamortised 2.51% Senior Loan Notes issue expenses (65) (70)
4.37% Senior Loan Notes at fair value 73,344 73,344
Amortisation of 4.37% Senior Loan Note (3,354) (2,564)
109,925 110,710
Bank loans
The Company has a three year £50 million multi-currency unsecured revolving
bank credit facility with Bank of Nova Scotia Limited, committed until 27
October 2024. At the period end the Company had drawn down the facility as
shown below:
31 December 2022 30 June 2022
Rate Currency £'000 Rate Currency £'000
Euro 2.82% 3,300,000 2,928 1.15% 2,326,000 2,002
Swiss Franc 1.80% 1,200,000 1,078 1.35% 2,500,000 2,150
US Dollar 5.14% 1,570,000 1,305 2.70% 768,000 633
Danish Krona 3.08% 6,850,000 817 1.15% 5,410,000 626
Norwegian Krone 4.40% 6,360,000 537 2.59% 13,145,000 1,096
6,665 6,507
8. Share capital
Six months ended Year ended
31 December 2022 30 June 2022
Ordinary shares of 25p each: publicly held
Opening balance 116,690,472 117,046,487
Buyback of shares for treasury (1,168,091) (356,015)
115,522,381 116,690,472
Ordinary shares of 25p each; held in treasury
Opening balance 2,839,060 2,483,045
Buyback of shares for treasury 1,168,091 356,015
4,007,151 2,839,060
Total issued share capital 119,529,532 119,529,532
During the period 1,168,091 Ordinary shares were bought back for treasury at a
cost of £9,296,000. As at the date of signing this report a further 1,559,380
shares have been bought back at a cost of £13,565,000.
9. Net asset value per Ordinary share
The net asset value and the net asset value attributable to the Ordinary
shares at the end of the period follow. These were calculated using
115,522,381 (30 June 2022 - 116,690,472) Ordinary shares in issue at the
period end (excluding treasury shares).
31 December 2022 30 June 2022
Net Asset Value Net Asset Value
Attributable Attributable
£'000 pence £'000 pence
Net asset value - debt at par 1,016,794 880.2 1,009,255 864.9
Add: amortised cost of 2.51% Senior Loan Notes 39,935 34.5 39,930 34.1
Less: fair value of 2.51% Senior Loan Notes (39,518) (34.2) (39,725) (33.9)
Add: amortised cost of 4.37% Senior Loan Notes 69,990 60.6 70,780 60.5
Less: fair value of 4.37% Senior Loan Notes (58,765) (50.9) (63,905) (54.6)
Net asset value - debt at fair value 1,028,436 890.2 1,016,335 871.0
10. Transaction costs
During the period, expenses were incurred in acquiring or disposing of
investments classified at fair value through profit or loss. These have been
expensed through capital and are included within gains on investments in the
Condensed Statement of Comprehensive Income. The total costs were as follows:
Six months ended Six months ended
31 December 2022 31 December 2021
£'000 £'000
Purchases(A) 479 315
Sales(A) 82 58
561 373
(A) Costs associated with the purchases and sale of portfolio investments in
the normal course of the Company's business comprising stamp duty, financial
transaction taxes and brokerage.
11. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following levels:
Level 1: unadjusted quoted prices in an active market for identical assets or
liabilities that the entity can access at the measurement date;
Level 2: inputs other than quoted prices included within Level 1 that are
observable (ie developed using market data) for the asset or liability, either
directly or indirectly; and
Level 3: inputs are unobservable (ie for which market data is unavailable) for
the asset or liability.
The financial assets and liabilities measured at fair value in the Condensed
Statement of Financial Position are grouped into the fair value hierarchy at
the reporting date as follows:
Level 1 Level 2 Level 3 Total
As at 31 December 2022 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 1,100,137 - - 1,100,137
Financial liabilities at fair value through profit or loss
Derivatives b) (992) (380) - (1,372)
Net fair value 1,099,145 (380) - 1,098,765
Level 1 Level 2 Level 3 Total
As at 30 June 2022 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 1,098,793 - - 1,098,793
Net fair value 1,098,793 - - 1,098,793
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.
The fair value of the 2.51% Senior Loan Notes have been calculated as
£39,518,000 (30 June 2022 - £39,725,000), determined by aggregating the
expected future cash flows for that loan discounted at a rate comprising the
borrower's margin plus an average of market rates applicable to loans of a
similar period of time, compared to carrying amortised cost of £39,935,000
(30 June 2022 - £39,930,000).
The fair value of the 4.37% Senior Loan Notes, have been calculated as
£58,765,000 (30 June 2022 - £63,905,000), the value being based on a
comparable debt security, compared to carrying amortised cost of £69,990,000
(30 June 2022 - £70,780,000).
All other financial assets and liabilities of the Company are included in the
Condensed Statement of Financial Position at their book value which in the
opinion of the Directors is not materially different from their fair value.
12. Analysis of changes in net debt
At Currency Non-cash At
30 June 2022 differences Cash flows movements 31 December 2022
£000 £000 £000 £000 £000
Cash and cash equivalents 20,131 875 9,853 - 30,859
Debt due within one year (6,507) (249) 91 - (6,665)
Debt due after one year (110,710) - - 785 (109,925)
Total (97,086) 626 9,944 785 (85,731)
At Currency Non-cash At
30 June 2021 differences Cash flows movements 31 December 2021
£000 £000 £000 £000 £000
Cash and cash equivalents 4,493 29 12,830 - 17,352
Debt due within one year (6,241) (48) 32 - (6,257)
Debt due after one year (112,279) - - 784 (111,495)
(114,027) (19) 12,862 784 (100,400)
13. Transactions with the Manager
The Company has delegated the provision of investment management, secretarial,
accounting and administration and promotional services to the Manager.
The amounts charged excluding VAT for the period are set out below:
Six months ended Six months ended
31 December 2022 31 December 2021
£'000 £'000
Management fees 1,887 2,036
Promotional activities 200 200
Secretarial fees 38 38
2,125 2,274
The amounts payable excluding VAT at the period end are set out below:
Six months ended Six months ended
31 December 2022 31 December 2021
£'000 £'000
Management fees 635 675
Promotional activities 100 100
Secretarial fees 19 19
754 794
No fees are charged in the case of investments managed or advised by the abrdn
Group. There were no commonly managed funds held in the portfolio during the
six months to 31 December 2022 (2021 - none). 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 2022 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 28 February
2023.
Alternative Performance Measures ("APMs")
Alternative performance measures are numerical measures of the Company's
current, historical or future performance, financial position or cash flows,
other than financial measures defined or specified in the applicable financial
framework. The Company's applicable financial framework includes FRS 102 and
the AIC SORP. The Directors assess the Company's performance against a range
of criteria which are reviewed as particularly relevant for closed-end
investment companies.
Discount to net asset value per Ordinary share
The discount is the amount by which the share price is lower than the net
asset value per share, expressed as a percentage of the net asset value.
31 December 2022 30 June 2022
NAV per Ordinary share (p) a 880.2p 864.9p
Share price (p) b 844.0p 832.0p
Discount (b-a)/a 4.1% 3.8%
Dividend yield
The annual dividend per Ordinary share divided by the share price, expressed
as a percentage.
31 December 2022 30 June 2022
Dividends per share (p) a 36.00p 36.00p
Share price (p) b 844.0p 832.0p
Dividend yield a/b 4.3% 4.3%
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents
dividend by shareholders' funds, expressed as a percentage. Under AIC
reporting guidance cash and cash equivalents includes amounts due to and from
brokers at the year end as well as cash and cash equivalents.
31 December 2022 30 June 2022
Borrowings (£'000) a 116,590 117,217
Cash (£'000) b 30,859 20,131
Amounts due to brokers (£'000) c - -
Amounts due from brokers (£'000) d - 2,490
Shareholders' funds (£'000) e 1,016,794 1,009,255
Net gearing (a-b+c-d)/e 8.4% 9.4%
Ongoing charges
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and
administrative expenses and expressed as a percentage of the average daily net
asset values with debt at fair value published throughout the period. The
ratio for 31 December 2022 is based on forecast ongoing charges for the year
ending 30 June 2023.
31 December 2022 30 June 2022
Investment management fees (£'000) a 3,783 3,997
Administrative expenses (£'000) b 1,341 1,350
Less: non-recurring charges(A) (£'000) c (8) (30)
Ongoing charges (£'000) a+b+c 5,116 5,317
Average net assets (£'000) d 1,024,717 1,102,862
Ongoing charges ratio (a+b+c)/d 0.50% 0.48%
(A) 31 December 2022 comprises £7,000 relating to legal fees and £1,000
relating to other professional services unlikely to recur. 30 June 2022
comprises £20,000 Directors recruitment fee, £8,000 for legal fees relating
to the private placement notes and £2,000 for professional fees for Taiwan
tax work.
The ongoing charges ratio provided in the Company's Key Information Document
is calculated in line with the PRIIPs regulations, which includes financing
and transaction costs.
Total return
Total return is considered to be an alternative performance measure. Share
price and NAV total returns show how the NAV and share price has performed
over a period of time in percentage terms, taking into account both capital
returns and dividends paid to shareholders. Share price and NAV total returns
are monitored against open-ended and closed-ended competitors, and the FTSE
All-Share Index, respectively.
Share price NAV
Opening at 1 July 2022 a 832.0p 864.9p
Closing at 31 December 2022 b 844.0p 880.2p
Price movements c=(b/a)-1 1.4% 1.8%
Dividend reinvestment(A) d 2.4% 2.2%
Total return c+d 3.8% 4.0%
(A) Share price total return involves reinvesting the net dividend in the
share price of the Company on the date on which that dividend goes
ex-dividend. NAV total return involves investing the net dividend in the NAV
of the Company with debt at fair value on the date on which that dividend goes
ex-dividend.
END
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