REG - Murray Inc Trust PLC - Annual Financial Report
18/09/2024 07:00
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RNS Number : 5831E Murray Income Trust PLC 18 September 2024
Murray Income Trust PLC
Annual Report 30 June 2024
Performance Highlights
Net asset value total return(ABC) Share price total return(AB)
+9.9% +7.6%
2023: +8.8% 2023: +4.9%
Benchmark total return(AD) Ongoing charges(B)
+13.0% 0.50%
2023: +7.9% 2023: 0.50%
Earnings per share (revenue) Dividend per share
37.4p 38.50p
2023: 38.7p 2023: 37.50p
Discount to net asset value(BC) Dividend yield(B)
10.5% 4.5%
2023: 8.2% 2023: 4.5%
(A) Total return.
(B) Considered to be an Alternative Performance Measure.
(C) With debt at fair value.
(D) The Company's benchmark is the FTSE All-Share Index.
Net Asset Value per share(c) Dividends per share Mid-market price per share
At 30 June - pence Year ended 30 June - pence At 30 June - pence
2020 807.7 2020 34.25 2020 768.0
2021 835.7 2021 34.50 2021 871.0
2022 871.0 2022 36.00 2022 832.0
2023 911.7 2023 37.50 2023 837.0
2024 949.9 2024 38.50 2024 857.0
Murray Income Trust PLC, established in 1923, is an investment trust aiming
for high and growing income with capital growth through investment in a
portfolio principally composed of UK equities. Managed by abrdn, a leading
global asset management company, the Company has a market cap approaching £1
billion, is listed on the London Stock Exchange and is a constituent of the
FTSE-250 Index.
The Company is recognised as a 'Dividend Hero' by the Association of
Investment Companies, boasting a 51-year track record of annual dividend
increases, making it an attractive choice for risk-averse income seekers. The
Manager's investment process prioritises quality characteristics, targeting
exceptional companies by thoroughly evaluating their management, finances, and
business models first-hand. This rigorous approach aims to build a portfolio
capable of delivering a high and growing income, with dividends paid
quarterly.
The Manager employs a '3D' investment approach - dependable, diversified, and
differentiated - to identify high-quality large-cap companies with robust
earnings potential, as well as small and mid-cap companies with strong growth
prospects. The ability to invest up to 20% of the portfolio in overseas-listed
companies provides differentiation from peers.
The Board of the Company and the Manager believe that investment in the UK
equity income sector offers a compelling opportunity, with investors
increasingly recognising that dividends are a key driver of long-term total
equity returns. Many areas of the UK market have seen dividends rebased and
pay-out ratios remain modest, providing a strong foundation for dividend
growth. The Manager's focus on quality companies gives investors access to
predominantly global businesses capable of delivering appealing long-term
earnings and dividend growth.
For more information, or to sign up for regular updates from the Company,
please visit: www.murray-income.co.uk (http://www.murray-income.co.uk) .
Strategic Report
Chair's Statement
Highlights
· Annual dividend increased by 2.7%, the 51(st) year of consecutive growth.
Investment management fee reduced to a competitive 0.35% for the first £1.1bn
of the Company's net assets from 1 July 2024.
· Net Asset Value ("NAV") (A,B) total return of 9.9% for the Year.
· Share price (A,B) total return was 7.6% as the discount, calculated on a
fair value NAV, widened from 8.2% to 10.5%.
· Over 7.0 million shares (6.3% of the total) bought back by the Company
during the year ended 30 June 2024.
(A) considered to be an Alternative Performance Measure.
(B) With debt at fair value.
It has been a turbulent but positive period for world stock markets in the
year ended 30 June 2024 (the "Year"). Global indices ended higher across the
board with the MSCI World Index up 21.5% in Sterling terms. The UK's FTSE
All-Share Index (the Company's Benchmark) ended the Year with a positive total
return of 13.0%. One of the drivers for positive market returns was the fall
in inflation across the major global economies.
In the UK, for example, the Consumer Prices Index fell from 6.8% to just 2.0%
over the Year and was in line with the Bank of England inflation target for
the first time in three years. UK food price inflation also fell to 2.5% in
June, its lowest level since October 2021. The hoped-for corollary of
subsiding inflation is the potential for interest rates to fall. As a
leading indicator, the UK stock market has already risen modestly in
anticipation of such a move, the first step of which occurred in early August,
after the Year end, with a cut announced by the Bank of England, from 5.25% to
5.00%. Perhaps interest rates will not decline as far or as fast as had been
anticipated at the start of the calendar year, but it does seem likely that
they will end 2024 at a lower level.
Investment Performance
Over the Year, the Company's NAV per share (with debt at fair value) rose 9.9%
in total return terms, as compared to the Benchmark total return of 13.0%. The
share price total return was 7.6% reflecting the discount widening from 8.2%
to 10.5% (based on NAV with debt at fair value). Further details of the
portfolio performance, including attribution, may be found in the Investment
Manager's report. Performance returns over the longer term are shown in the
table below.
From 30 June 2024 to 12 September 2024, being the latest practicable date
prior to approval of this Report, the NAV per share (with debt at fair value)
returned 1.1% as compared to 2.0% for the FTSE All-Share Index (both figures
on a total return basis). The share price total return was 0.7%, reflecting
the discount widening from 10.5% to 11.0%.
Dividend
The Board announced, on 30 July 2024, its 51(st) consecutive year of growing
dividends. For the year ended 30 June 2024, the dividend increased from 37.5p
to 38.5p per share, a rise of 2.7%. Revenue per share for the year was 37.4p,
a slight decrease on last year's 38.7p. The Board understands that, whilst
the short term outlook for dividends is complicated by the increasing use of
share buybacks by certain listed companies, one of the positive features of
investment companies is their ability to smooth distributions to shareholders.
The Board is confident in keeping its dividend growing in future years as it
possesses revenue reserves, as at 30 June 2024, equivalent to 55% of the
current annual dividend.
3 years ended 5 years ended 10 years ended
30 June 2024 (annualised) 30 June 2024 (annualised) 30 June 2024
(annualised)
Performance (total return) % % %
Share price (A)(,B) 3.9 4.6 5.5
Net asset value per Ordinary share (A)(,B,C) 4.9 5.7 6.0
FTSE All-Share 7.4 5.5 5.9
Source: abrdn & Morningstar
(A) Total return.
(B) Considered to be an Alternative Performance Measure.
(C) With debt at fair value.
The Association of Investment Companies (the "AIC") awards Dividend Hero
status to investment trusts which have raised their annual dividend
consecutively for twenty years or more. Maintaining that Dividend Hero status
is a source of pride for the Board as it pursues its long term objective of a
high and growing dividend income combined with capital growth from a
diversified portfolio consisting primarily of UK equities.
Discount and Share Buybacks
There has been turbulence in investment companies over the last 18 months or
so, with discounts to NAV coming under pressure, particularly for those
vehicles comprising less liquid assets. The UK equity income sector, despite
the greater liquidity of its underlying stocks, was not immune from the
overall trend as indicated by the widening of the Company's discount, as noted
above.
One reason for the higher level of discounts in the UK equity sector has been
a widespread lack of enthusiasm for UK equities over the past few years. UK
funds, in general, have not seen any net monthly inflows since July 2021. Many
reasons have been put forward for this, including the uncertainty caused by
Brexit, then the Covid epidemic, not to mention the recent political
uncertainty, with four UK Prime Ministers in the past five years. UK Defined
Benefit pension schemes have also sharply reduced their exposure to UK
equities over the past two decades. Part of the reason for widening discounts
can also be put down to the underlying interest rate environment. When
interest rates are high or rising, markets tend to trade in a 'risk-off' mode
with limited enthusiasm overall, given the competing attractions of high
interest paying deposit accounts. When interest rates start to fall, however,
investors are more likely to be in 'risk-on' mode, looking for attractive
opportunities as deposit rates fall. One such opportunity could be accessed
through buying investment trusts at prices which represent higher than average
discounts to net asset value.
Share buybacks across the investment trust sector are currently running at
record levels. Total investment trust buybacks during 2023 amounted to
£3.9bn. In the six months ended June 2024 alone, buybacks reached £3.7bn.
At 30 June 2024, the average discount for investment companies, excluding 3i
Group plc, stood at 15%. During the course of the Year, the Board has pursued
a policy of buybacks in order to limit the volatility of the discount. The
share buyback policy also aligns the views of the Board with that of
shareholders in seeking to maintain an orderly market in the shares, enhance
shareholder returns by buying shares at a discount and highlighting the
overall value in being able to buy a good quality portfolio of liquid, readily
tradable assets at a discount.
The Company bought back just over 7.0 million shares, 6.3% of the shares
outstanding at the beginning of July 2023. This compares to a figure of 4.3%
for the previous year. These shares were bought at an average discount of
8.9%, with a corresponding positive impact on the NAV total return of 0.6%
over the Year. The shares bought back are kept in Treasury meaning there is
the potential for them to be reissued should the Company return to a sustained
premium to NAV in the future.
The Board monitors the discount level closely and will again be requesting
shareholders' approval at the AGM to renew the Company's buyback and issuance
powers. As at 30 June 2024, there were 104,685,001 (2023: 111,720,001)
Ordinary 25p shares in issue with voting rights and 14,844,531 (2023:
7,809,531) shares held in Treasury. Between 1 July 2024 and 13 September 2024,
the latest practicable date prior to approval of this Report, the Company
bought back an additional 1,005,021 shares, resulting in 103,679,980 shares in
issue, and a further 15,849,552 shares in Treasury.
Gearing
The Company's net gearing was 9.1% at 30 June 2024 (2023: 10.3%) and the
Board's policy towards gearing remained unchanged during the Year. The
Company has in place £100 million of long term borrowings made up of £40m
loan notes redeemable at par in November 2027 and £60 million loan notes
redeemable at par in May 2029. These combined have a weighted interest cost of
3.6%.
Reduction and Simplification of Investment Management Fees
The Board is pleased to report that it has reached agreement with the Manager
to reduce and simplify its management fee. The new annual fee structure,
back-dated to the start of the Company's financial year on 1 July 2024, will
be simplified from three tiers to two tiers with 0.35% charged on the first
£1.1bn of net assets, falling to 0.25% for net assets above that level. Until
30 June 2024, the annual management fee was 0.55% of the first £350m of net
assets, 0.45% on net assets from £350m and £450m and 0.25% on any net assets
in excess of £450m. The Board is confident that this is a competitive fee
structure within the overall investment trust industry. For example, at its
current size of approximately £1bn of net assets, the annual management fee
of the Company would be 0.35% of net assets under the new basis as compared to
0.375% on the former basis, equivalent to a reduction of £250,000.
Board Composition
Alan Giles, currently Senior Independent Director, has indicated that he will
not seek re-election as a Director at the forthcoming Annual General Meeting
("AGM") and will retire from the Board at the conclusion of the meeting. Alan
was appointed a Director following the merger between the Company and
Perpetual Income and Growth Investment Trust plc in November 2020. The Board
shall miss Alan's wise counsel and the considerable experience of listed
companies which he brought to its deliberations. I, and the Board, wish him
well in his future endeavours.
I am pleased to announce that Stephanie Eastment has agreed to become the
Company's Senior Independent Director, replacing Alan, while Nandita Sahgal
Tully will take over from Stephanie as Chair of the Audit Committee. As
referenced in the Half-Yearly Report, Angus Franklin joined the Board as a
non-executive director in January of this year following the retirement of
previous Chair, Neil Rogan and fellow director, Merryn Somerset Webb.
The Board has commenced a search for a new Director, with a view to having
someone in situ by the end of this calendar year or early 2025.
Investment Process
Our Manager's investment process is best summarised as a search for good
quality companies at attractive valuations, with the potential for sustainable
dividend growth. The Manager defines a quality company as one capable of
strong and predictable cash generation, enduring high returns on capital and
with attractive growth opportunities over the longer term. These typically
result from a sound business model, a robust balance sheet, good management
and strong environmental, social and governance characteristics.
Investment People
abrdn is our appointed investment management company. Charles Luke has been
our lead portfolio manager since 2006 and works alongside Co-Manager, Iain
Pyle, and Rhona Millar, as members of the Manager's 39-strong Developed
Markets Equities team.
Sustainability and ESG
Sustainability and ESG (environmental, social and governance) continue to be
at the top of UK's regulatory agenda. In April of this year, the FCA published
its guidance on new anti-greenwashing rules which aim to protect consumers by
ensuring that sustainable products and services are accurately described.
Whilst the Company does not have a sustainability objective and its investment
policy does not have specific sustainability characteristics, ESG analysis is
integrated into the Manager's investment process. The Board delegates the
management of the portfolio to the Manager and endorses its approach to
integrating ESG into portfolio construction and investee company engagement.
Overview
In addition to the significant widening of discounts across the investment
trust sector, we have also witnessed unprecedented corporate actions and
mergers over the past year with eight transactions completed and two more
announced in 2024 to date. If discounts remain high, that trend is likely to
continue. In some cases the activity is due to potential corporate buyers
seeing the value in the underlying assets. In some cases, this is due to
investment trust boards, themselves, reviewing their own policies, the overall
trends in their sectors and the scope for greater liquidity and economies of
scale through judicious merger.
On a longer term basis, however, despite all the turbulence, UK equities have
returned 9.6% p.a. over the past 50 years. Crucially, about 40% of this return
has derived from dividend income - highlighting the genuine attractions of
long term income investing. This is especially important for shareholders in
this Company. There remains significant demand for a reliable income stream
from many investment trust shareholders, and Murray Income Trust is well
placed to fulfil this with its current yield of 4.5% and its record of
consistent dividend growth over more than half a century.
It is also the case, as observed by Charles Luke in his report, that UK
equities are cheap by international standards. Whilst few commentators would
argue that there is good value in the UK equity market and in those investment
trusts trading at higher than average discounts, there is still the question
of what might be the catalyst to unlock that value. I mentioned above the
impact that lower interest rates could have. I also make no bones about the
fact that the UK Government can play a big role in creating the conditions for
making the UK equity market a more attractive long-term place to invest.
There are many initiatives which can be undertaken. I can report that I, as
Chair of your Company, have written to Tulip Siddiq, the new Economic
Secretary to the Treasury, urging her to reform the rules governing cost
disclosures for investors. This is a somewhat arcane, technical issue, but the
way in which costs are currently assessed and disclosed is a big disincentive
for investors to invest in investment trusts. Previous governments had
promised reform since 2021, but no action has yet been taken. The new
government can quickly and easily correct this misleading and discriminatory
cost disclosure regime.
I also welcome the steps taken by the Government to encourage more companies
to list on the UK stock exchange, by making the listing requirements more
similar to those on the European and US stock exchanges. The new Chancellor,
Rachel Reeves, wants to encourage more investment in British industry.
Anything she can do to make it more attractive to invest in UK listed
companies would be welcome. Given that it is unlikely that the Government will
be pursuing the idea of a separate British ISA, it would still be worthwhile
simplifying the existing range of different ISAs and an increase in the annual
investment limit to £25,000 would also be welcome. Encouraging pension funds
to invest a certain minimum percentage of their assets in the UK market might
also be worth considering. Finally, and I realise that this is unlikely to be
top of the Chancellor's agenda, a commitment to scrapping the 0.5% stamp duty
charge on the purchase of UK shares would go a long way towards levelling the
playing field against other major equity markets which do not impose such a
charge.
A combination of some or all of these measures, together with the current
relative undervaluation of UK equities could significantly help to make the UK
market the natural home for many UK investors, particularly income investors,
once again.
These are matters to which I may well return in the future as I think it
important to speak out on issues which could be of great benefit to our
shareholders over the medium to long term.
Online Shareholder Presentation
The Company will hold an online shareholder presentation for shareholders and
other interested parties at 11.00am on 17 October 2024. This will feature your
Chair and Investment Manager discussing the outlook for the Company and
answering your questions live. Further information on how to register for the
online shareholder presentation may be found on the Company's website at
https://www.murray-income.co.uk/en-gb
Annual General Meeting
The Company will hold its AGM at 12.30 pm on Tuesday 5 November 2024 at
Wallacespace Spitalfields, 15 Artillery Lane, London E1 7HA. One of the
advantages of investing via investment trusts is that all shareholders have
the opportunity to meet their Manager and the Directors at the AGM. This
year's meeting will commence with a presentation on the Company and market
outlook from Charles Luke. There will then be the formal part of the AGM where
shareholders can ask questions about the AGM resolutions and thereafter cast
their votes via a poll.
I always welcome questions from our shareholders at the AGM. Alternatively,
shareholders may submit questions prior to the AGM by sending an email to:
murray.income@abrdn.com.
Shareholders will find enclosed with this Annual Report an Invitation Card and
Form of Proxy for use in relation to the AGM. Whether or not you propose to
attend the AGM, shareholders are encouraged to complete the Form of Proxy, for
which the latest date of receipt by the registrar is 12.30pm on 1 November
2024. Completion of a Form of Proxy does not prevent a shareholder from
attending and voting in person at the AGM.
Shareholders who wish to attend and/or vote at the AGM and hold their shares
via a platform will need to make arrangements with the administrator of their
platform. Further details on how to attend and vote at company meetings for
holders of shares via platforms can be found at:
www.theaic.co.uk/aic/how-to-vote-your-shares.
Shareholders wishing to attend the AGM and who are unsure how to register, can
email murray.income@abrdn.com.
Peter Tait
Chair
17 September 2024
Investment Manager's Report
Background
The UK equity market, as measured by the Benchmark FTSE All-Share Index, rose
by 13.0% on a total return basis over the Year. Investor sentiment around the
timing of central banks beginning interest rate cutting cycles continued to be
a main driver of market performance. Optimism that interest rates across major
economies had peaked began to build in November, leading to an equity market
rally at the end of 2023. By the start of the new calendar year, that optimism
wavered as central banks suggested rate cuts may come later than expected.
This concern was especially prevalent in the UK when December inflation came
in higher than expected, which led to the UK stock market ending January
lower. By March, central banks in the US, Europe and UK opened the door for
cuts in the near term which was a boost to markets and continued to lead to
positive market performance through May. Global equities continued their rise
in June, boosted by positive corporate results and falling inflation figures.
US stock indices reached fresh highs with the technology sector particularly
strong and the potential for Artificial Intelligence ("AI") driving sentiment.
However, equity indices in the UK and Europe pulled back against a backdrop of
elevated political uncertainty ahead of July's elections in the UK and France.
The UK economy fell into a technical recession in the second half of calendar
2023, when a 0.3% decline in GDP in the fourth quarter was the second
sequential quarter of negative GDP growth. Since then, there have been signs
of economic improvement in the first half of this calendar year with GDP
expansion of 0.7% and 0.6% in the first and second quarters, respectively,
helped by the strength in the services sector. The UK's unemployment rate fell
to 4.2% in the three months to the end of June down from 4.4% in the previous
quarter. Annual earnings growth, although above inflation, slowed to the
lowest rate in almost two years in the three months to the end of June.
Inflation continued to decline over the Year, with the Consumer Prices Index
("CPI") falling from 6.8% in the twelve months to July 2023 to the Bank of
England's ("BoE") target interest rate of 2% in May 2024, the lowest level in
almost three years albeit subsequently the rate increased marginally to 2.2%
in July. Commentary from the BoE now anticipates inflation picking up modestly
in the second half of 2024 but interest rates were cut by 0.25% to 5% in
August and we still expect some further reductions later in the year.
These inflation trends have been similar in the US and the Eurozone. The US
Federal Reserve has held rates flat since last summer while the European
Central Bank began to cut rates in June. Economic data from the US has
generally continued to be robust but with some recent signs of moderation in
activity growth. Oil prices ended the Year moderately higher, rising strongly
on OPEC production cuts and following the Israel-Hamas conflict, before
falling back on concerns about slowing global growth and OPEC plans to unwind
some production cuts in the second half of 2024.
Within the UK market, the more domestically focused FTSE 250 Index slightly
outperformed the larger and more internationally exposed companies in the FTSE
100 Index. From a factor perspective, broadly-speaking, 'Value' stocks
outperformed while the 'Growth' and 'Quality' factors underperformed, on a
relative basis.
Most sectors of the UK equity market delivered a positive total return over
the Year. The financials sector performed particularly strongly benefiting
from the prospect of interest rates remaining higher for longer. Although a
relatively small sector in the UK market, the technology sector displayed
another year of strong performance mostly for individual stock specific
reasons. In a continuation of the trend seen in the prior year, some of the
more defensive areas of the market such as consumer staples, utilities and
healthcare lagged the performance of a number of the more cyclical,
economically sensitive areas of the market such as the industrials, energy and
real estate sectors.
Performance Attribution for the year ended 30 June 2024
%
NAV per share total return (with debt at fair value) +9.9
FTSE All- Share Index total return +13.0
Relative return -3.1
Relative return
Stock selection
Energy -0.3
Basic Materials -0.4
Industrials -2.4
Health Care +0.1
Consumer Staples -0.6
Consumer Discretionary +1.7
Telecommunications +0.3
Utilities -0.3
Technology -0.1
Financials -0.6
Real Estate -0.4
Total stock selection (equities) -3.0
Asset allocation (equities)
Energy -0.3
Industrials +0.5
Health Care -0.1
Consumer Staples +0.3
Utilities -0.2
Technology +0.4
Financials -0.1
Total asset allocation (equities) 0.5
Management fees -0.4
Administrative expenses -0.2
Cash and Options -0.4
Tax -0.2
Gearing - finance costs +0.6
Difference between fair value and par value returns -0.8
Share buybacks +0.6
Residual effect +0.2
Total -3.1
Notes: Stock Selection - measures the effect of equity selection relative to
the benchmark. Asset allocation - measures the impact of over or
underweighting each industry basket in the equity portfolio, relative to the
benchmark weights. Cash & options effect - measures the impact on relative
returns of these categories. Gearing - measures the impact on relative returns
of net borrowings. Management fees, administrative expenses and tax - these
reduce total assets and therefore reduce performance. Source - abrdn.
Performance
The Company generated a positive Net Asset Value per share total return of
9.9% for the Year (based on debt at fair value) underperforming the benchmark
FTSE All-Share Index which returned 13.0%. On a total return basis, the
Company's share price increased by 7.6%, reflecting a widening of the discount
to Net Asset Value (debt at fair value) at which the shares traded from 8.2 to
10.5% by 30 June 2024.
Our investment process encompasses a patient buy and hold approach and longer
term returns also remain positive when comparing the Net Asset Value (based on
debt at fair value) to the Benchmark over five years, with the Net Asset Value
per share (based on debt at fair value, annualised) outperforming the FTSE
All-Share Index by 0.2%. On the other hand, the Share Price has underperformed
the Benchmark over five years by approximately 0.9% (annualised) on a total
return basis as the discount to NAV has widened. The widening of discounts has
been a relatively common theme within the investment trust sector.
In absolute terms, taking account of the £60m of senior secured fixed rate
notes 2029, £40m of senior secured fixed rate notes 2027, as well as
approximately £6m drawn down from an unsecured multi-currency revolving
credit loan facility agreement with The Bank of Nova Scotia Limited, debt was
£114m at the end of the Year. Net gearing was 9.1% at the end of the Year as
compared to 10.3% at the end of the prior year.
Performance benefited from good stock selection in the consumer discretionary
and telecommunications sectors and the overweight exposure to the industrials
and technology sectors. This was offset by negative stock selection in the
industrials, financials and consumer staples sectors.
Turning to the individual holdings, the positions in Novo Nordisk and
Intermediate Capital generated the greatest stock level outperformance,
delivering 82% and 58% share price increases respectively. Not holding Reckitt
Benckiser which is a constituent of the benchmark index also contributed
positively to relative performance. As has been a theme in the UK market in
recent years, corporate and takeover activity has been elevated. Of the
holdings in the portfolio, during the year, Anglo American and Direct Line
rejected approaches at a premium to the level at which the shares had been
trading prior to the approach.
The holding in Close Brothers detracted most from relative performance as its
shares fell heavily when the FCA launched a review of motor finance practices
in the industry. The company subsequently decided to suspend its dividend to
conserve capital in anticipation of potential customer redress. Non-held Rolls
Royce (which did not return to the dividend list during the Year) and Shell
(where we prefer BP and TotalEnergies) also had a negative impact on relative
return over the Year.
Portfolio Activity and Structure
Turnover of approximately 18% was the same as the prior year. The pattern of
trades reflected the ongoing desire to improve, where possible, the quality of
the portfolio and maintaining the focus on attractive capital and dividend
growth. Active share (the proportion of the portfolio that differs from the
benchmark) remained stable and was 67% at the end of the year.
The portfolio added nine new holdings in the Year. Four of these, HSBC,
Haleon, Berkeley Group, and Smurfit Kappa are UK large-cap company
introductions. HSBC, the international banking and financial services company,
has an attractive dividend yield and we see the bank as a relatively higher
quality company in the sector. Haleon, was previously the consumer healthcare
division of GSK before being demerged as a standalone company in July 2022.
The company has strong brands benefitting from long-term growth drivers.
Berkeley Group is a UK housebuilder focused on urban regeneration developments
primarily in London and the South East. We view the company as higher quality
than the wider housebuilding sector, with less cyclical exposure and a
stronger balance sheet. Smurfit Kappa, the provider of paper-based packaging
solutions, was added to the portfolio following the company's proposed
acquisition of WestRock which creates synergy opportunities and positions the
company as a global leader in the sector.
There was one UK mid-cap addition to the portfolio in the Year. Rotork is a
leading global actuator business with strong quality characteristics and
under-appreciated growth opportunities. Drivers of growth include their
electric actuator product which is used to reduce methane emissions in the Oil
& Gas sector, which is increasingly a priority as the industry looks to
meet emission reduction targets. A new position was also initiated in
Coca-Cola Europacific Partners ("CCEP"), which trades at an attractive
valuation and gives exposure to a number of high quality consumer brands. CCEP
is our preferred Coca-Cola bottler and the holding in Coca-Cola HBC was
subsequently sold after the Year end.
The Company can invest up to 20% of gross assets in overseas listed companies.
This has three main benefits: firstly, to provide access to industries not
available to UK-only investors; secondly, to diversify risk in concentrated
sectors in the UK market; and thirdly, to enable investment in better quality
proxies of UK listed companies. During the year, three overseas holdings were
added to the portfolio, as we focused more acutely on gaining access to
industries not available to UK-only investors. The first purchase was
US-listed Mastercard, which we see as having attractive quality
characteristics, including strong competitive positioning and high barriers to
entry, as well as having multiple long-term growth opportunities. The second
was a new position in vehicle manufacturer Mercedes-Benz. The German-listed
company has improving quality characteristics through an increasing focus on
its luxury brands as well as an attractive dividend yield and valuation. A new
position was also started in Air Liquide, the French-listed industrial gases
supplier, which is a high quality company with long term tailwinds from the UK
energy transition.
We increased exposure to several of our existing holdings which we believe
possess high quality characteristics and attractive growth prospects at
appealing valuations including Convatec, L'Oréal, London Stock Exchange
Group, National Grid, Oxford Instruments, Oversea-Chinese Banking Corp,
Rentokil Initial, RS Group, and Safestore.
Nine holdings were sold during the Year, primarily reflecting either weakening
conviction in the investment case or to reflect changes in relative
preferences within a sector. Four exits fell into the first category: Croda,
where our conviction in the long-term strategy deteriorated, while the
valuation remained high; Marshalls, where we had concerns around the trading
environment and potential implications for the company's balance sheet; Drax,
due to increasing uncertainty around the long-term business model; and Roche
was exited due to concerns about the outlook for the productivity of the
company's Research & Development function. Five stocks were exited which
were replaced by new additions in the same sector. For example, in the banking
sector the position in Standard Chartered was exited reflecting the relative
preference for new holding HBSC. In the paper & packaging sector the
position in Mondi was exited and replaced by Smurfit Kappa while in the
consumer staples sector Nestlé was exited with proceeds re-invested in
UK-listed Haleon in order to optimise the use of the overseas-listed budget.
The holding in Smith & Nephew was sold given the company's challenged
competitive position in orthopaedics while we prefer other stocks in the
sector, namely Convatec. In the housebuilding sector, Berkeley Group replaced
the holding in Vistry which was exited following strong share price
performance and a view that dividend payments were less likely, with the
company instead favouring buybacks.
In addition, we reduced the exposure to a number of holdings where we have
higher conviction in other names in their respective sectors or to manage
position sizes in the portfolio. Positions in stocks including Anglo
American, AstraZeneca, Close Brothers, Coca-Cola HBC, Direct Line, Hiscox,
Howden Joinery, Intermediate Capital, Relx, Total Energies, Unilever, and VAT
Group were trimmed.
Overall, the net effect of the purchases and sales has been to maintain the
number of holdings at 52. However, given that the Company also bought back
6.3% of the Company's shares in issue during the Year, there was net selling
in the portfolio.
We continued our measured option-writing programme which is based on our
fundamental analysis of the holdings in the portfolio. The option-writing
strategy has been of benefit to the Company by diversifying and increasing the
level of income generated. It also provides headroom to invest in companies
with lower starting yields but better dividend and capital growth prospects.
Income from writing options of £2.8m represented 6.5% of total income earned
in the Year which compared to 5.6% in the prior year.
Our aspiration in terms of portfolio construction is simple: to invest in good
quality companies with attractive growth prospects through a sensibly
diversified portfolio with appealing dividend characteristics. Furthermore,
the ability to invest up to 20% of gross assets overseas is helpful in
achieving these aims with 13 overseas-listed companies in the portfolio at the
period end representing approximately 20% of gross assets.
Portfolio Engagement
Whilst the Company does not have a sustainability objective, ESG is integrated
into the investment process. For example, our company research analyses the
risk and opportunities that ESG factors may contribute to the investment case.
We also put significant effort into engagement with the companies in the
portfolio to ensure that they are run in the Company's best interests.
Examples of this engagement during the Year included issues such as board
composition, executive remuneration, capital allocation, mergers and
acquisitions activity, and risk management (including issues such as climate
change, regulatory risk, and managing succession planning). We pursued these
issues through meetings with the executive management of the companies as well
as with the non-executive directors, particularly the chairs of the board and
remuneration committees. In addition, a significant aspect of the governance
work that we carry out is manifested in our proxy voting activities where we
employ a proprietary lens rather than simply relying on proxy voting
agencies. MSCI independently rated the Company's portfolio as "AA" for its
ESG characteristics.
An example of a typical engagement is our dialogue with RS Group to better
understand the company's exposure to rising logistics costs due to the need to
decarbonise transport and increasing carbon taxes. We were encouraged to learn
about the company's programme to optimise its supply chain, including
sourcing, storing and shipping more products regionally and locally. This
programme is complex but should improve customer services, reduce costs and
ultimately lower emissions, as seen in the company's recent reductions in
Scope 3 emissions from downstream transport logistics. We also discussed
actions taken by the company to benefit from growth in low-carbon transition
industries and to offer customers products with lower emissions footprints.
Overall, it appears early days for RS Group in terms of generating additional
revenues from the energy transition but we take comfort from the company's
measures to respond to customers' increasing demands for more sustainable
products with better traceability as well as its success in establishing
relationships with new customer bases, such as in UK offshore wind. As next
steps, we encouraged the company (where feasible) to expand its disclosures
over time on progress made in pursuing these initiatives.
Income
For the Year, the Company witnessed a decrease in the level of earnings per
share due to a number of different factors. Firstly, dividend growth across
the UK equity market as a whole has been limited as companies increasingly
prefer to return capital through share buybacks rather than pursuing ordinary
dividend growth or special dividends. This is positive in the sense that it
indicates that companies believe that their shares are attractively valued but
unhelpful from an income perspective. For the first time in many years no
special dividends were included in income from investments. Secondly, income
generation was affected by the suspension of Close Brothers' dividend and a
reduced Direct Line dividend. We expect Close Brothers to return to the
dividend list once the FCA's motor finance review has concluded. Direct Line
is likely to significantly increase its dividend over the medium term.
Finally, dividends from the mining sector again declined following the
elevated levels of the prior couple of years.
The Company's earnings per share decreased by 3.4% from 38.7p to 37.4p. Paying
a full year dividend of 38.5p per share will result in £0.6m being drawn from
the Company's revenue reserves. Revenue reserves carried forward thus
represent 55% of the full year dividend, based on the latest available number
of ordinary shares in issue (excluding treasury shares). The ability to call
on revenue reserves is a clear benefit of the investment trust structure.
We view the portfolio's exposure to attractive and enduring earnings trends as
providing the potential for appealing income growth over the long term.
Outlook
The portfolio is aligned to compelling long-term trends such as an ageing
population, the increasing wealth of the middle class, the digital
transformation and energy transition. We identify and invest in high quality
companies capable of delivering appealing long term earnings and dividend
growth at a relatively modest aggregate valuation. These companies demonstrate
high returns on capital, pricing power, attractive margins and strong balance
sheets. We also believe a focus on quality companies should provide both
earnings resilience and less volatility which are helpful in underpinning the
portfolio's income generation.
We expect the trajectory of inflation data and the associated path of monetary
policy will continue to influence markets over the next year. Recent data
points, particularly relating to the labour market, have brought into question
the extent to which the US economy will achieve a 'soft landing' but our
economists still believe this to be the case. We expect the rate cutting
cycles that have been started by the BoE and ECB to continue with the Federal
Reserve reducing rates imminently. Political risk remains elevated through
2024 with the US election in November, while following the election of a
Labour government in the UK in July we do not expect significant changes to
the growth outlook in the near-term but policy could increase growth potential
in the longer-term.
Many of the valuation characteristics highlighted last year remain in place.
Although perhaps a little less so than 12 months ago, the valuations of
UK-listed companies still remain attractive on a relative and absolute basis.
Investors are benefitting from global income at a discounted valuation.
Moreover, the dividend yield of the UK market remains at an appealing premium
to other regional equity markets.
Perhaps, unlike last year, the political environment in the UK feels more
settled which may encourage overseas investors to look at the UK market with
greater confidence. In summary, we feel optimistic that our long-term focus
on investments in high quality companies with robust competitive positions and
strong balance sheets, which are led by experienced management teams will be
capable of delivering premium earnings and
dividend growth.
Charles Luke
Senior Investment Director
abrdn Investments Limited
17 September 2024
Performance
Performance (total return, including reinvested dividends)
1 year return 3 year return 5 year return 10 year return
% % % %
Share price(A) +7.6 +12.1 +25.1 +70.4
Net asset value per Ordinary share (debt at fair value)(A) +9.9 +15.5 +32.1 +79.1
Net asset value per Ordinary share (debt at par value)(A) +10.8 +14.4 +30.5 +77.1
Benchmark(B) +13.0 +23.9 +30.9 +77.8
(A) Considered to be an Alternative Performance Measure.
(B) FTSE All-Share Index.
Source: abrdn & Morningstar
Ten Year Financial Record
Year end 30 June 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Income (£'000) 25,476 24,838 26,667 25,987 25,597 22,804 35,979 51,018 48,879 43,899
Shareholders' funds (£'000) 515,888 515,036 576,462 570,929 587,150 534,361 1,093,859 1,009,255 999,184 990,282
Per Ordinary share (p)
Net revenue return 33.1 32.0 34.9 33.6 34.9 30.5 33.7 40.5 38.7 37.4
Dividends(A) 32.00 32.25 32.75 33.25 34.00 34.25 34.50 36.00 37.50 38.50
Net asset value (capital only) 757.1 766.5 860.1 856.3 888.1 808.3 934.6 864.9 894.4 946.0
(A) The figures for dividends per share reflect the years to which their
declaration relates and not the years they were paid.
Financial Highlights and Dividends
Financial Highlights
30 June 2024 30 June 2023 % change
Shareholders' funds (£'000) 990,282 999,184 -0.9
Net asset value ("NAV") per Ordinary share - debt at fair value(A) 957.9p 911.7p +5.1
Net asset value per Ordinary share - debt at par 946.0p 894.4p +5.8
Market capitalisation (£'000) 897,150 935,096 -4.1
Share price of Ordinary share 857.0p 837.0p +2.4
Discount to net asset value on Ordinary shares - debt at fair value(A) 10.5% 8.2%
Discount to net asset value on Ordinary shares - debt at par(A) 9.4% 6.4%
Gearing (ratio of borrowing to shareholders' funds)
Net gearing(A) 9.1% 10.3%
Dividends and earnings
Revenue return per share 37.4p 38.7p -3.4
Dividends per share(B) 38.50p 37.50p +2.7
Dividend cover(A) 0.97 times 1.03 times
Dividend yield(A) 4.5% 4.5%
Revenue reserves (£'000)
Prior to payment of fourth interim dividend(C) 32,403 36,664
After payment of fourth interim dividend 21,975 22,576
Operating costs
Ongoing charges ratio(A) 0.50% 0.50%
(A) Considered to be an Alternative Performance Measure.
(B) The figures for dividends per share reflect the years in which they were
earned (see note 7).
(C) Per the Statement of Financial Position.
Dividends
Rate XD date Record date Payment date
First interim 9.50p 16 Nov 2023 17 Nov 2023 14 Dec 2023
Second interim 9.50p 15 Feb 2024 16 Feb 2024 14 Mar 2024
Third interim 9.50p 16 May 2024 17 May 2024 13 Jun 2024
Fourth interim 10.00p 15 Aug 2024 16 Aug 2024 12 Sep 2024
Total dividends 38.50p
Overview of Strategy
Business Model
Murray Income Trust PLC (the "Company") is an investment trust whose Ordinary
shares are listed on the London Stock Exchange.
The Company is governed by a Board of Directors (the "Board"), all of whom are
non-executive, and has no employees. The Board is responsible for determining
the Company's investment objective and investment policy. Like other
investment companies, the day-to-day investment management and administration
of the Company is outsourced by the Board to an investment management group,
abrdn, and other third party providers. The Company has appointed abrdn Fund
Managers Limited (the "Manager") as its alternative investment fund manager,
which has in turn delegated certain functions, including administration of the
investment policy, to abrdn Investments Limited. The Manager has delegated the
company secretarial function to abrdn Holdings Limited.
The Company complies with Section 1158 of the Corporation Tax Act 2010 which
permits the Company to operate as an investment trust.
Investment Objective
The Company aims for a high and growing income combined with capital growth
through investment in a portfolio principally of UK equities.
Investment Policy
In pursuit of the Company's investment objective, the Company's investment
policy is to invest in the shares of companies that have potential for real
earnings and dividend growth, while at the same time providing an
above-average portfolio yield. The emphasis is on the management of risk and
on the absolute return and yield from the portfolio as a whole rather than the
individual companies which the Company invests in, which is achieved by
ensuring an appropriate diversification of stocks and sectors within the
portfolio, with a high proportion of assets in strong, well-researched
companies. The Company makes use of borrowing facilities to enhance
shareholder returns when appropriate.
Delivering the Investment Policy
The Company maintains a diversified portfolio of the equity securities of UK
and overseas companies with an emphasis on investing in quality companies with
good management, strong cash flow, a sound balance sheet and which are
generating a reliable earnings stream.
The Investment Manager follows a bottom-up investment process based on a
disciplined evaluation of companies, including through direct visits by its
fund managers. Stock selection is the major source of added value,
concentrating on quality first, then price. Top-down investment factors are
secondary in the Investment Manager's portfolio construction with
diversification rather than formal controls guiding stock and sector weights.
Board Investment Limits
The Board sets additional investment guidelines within which the Investment
Manager must operate :
· the portfolio typically comprises between 40 and 70 holdings (but without
restricting the Company from holding a more or less concentrated portfolio
from time to time);
· the Company may invest up to 100% of its gross assets in UK-listed
equities and other securities and is permitted to invest up to 20% of its
gross assets in other overseas-listed equities and securities;
· the Investment Manager may invest in any market sector, however, the top
five holdings may not exceed 40% of the total value of the portfolio and the
top three sectors represented in the portfolio may not exceed 50%; and
· the Company may invest no more than 15% of its gross assets in other
listed investment companies (including investment trusts).
The Company may use derivatives for the purpose of enhancing portfolio returns
and for hedging purposes in a manner consistent with the Company's broader
investment policy. The Investment Manager is permitted to invest in options
and in structured products, provided that any structured product issued in the
form of a note or bond has a minimum credit rating of "A".
Gearing
The Board is responsible for setting the gearing policy of the Company and for
the limits on gearing. The Manager is responsible for gearing within the
limits set by the Board. The Board has set its gearing limit at a maximum of
25% of NAV at the time of draw down. Gearing - borrowing money - is used
selectively to leverage the Company's portfolio in order to enhance returns
where this is considered appropriate. Particular care is taken to ensure that
any financial covenants permit maximum flexibility of investment policy.
Significant changes to gearing levels are communicated to shareholders.
Key Performance Indicators
At each Board meeting, the Directors consider a number of Key Performance
Indicators ("KPIs") to assess the Company's success in achieving its
objectives. These KPIs are described below, with those also categorised as
Alternative Performance Measures marked with an asterisk and noting that "NAV"
is calculated with debt at fair value:
KPI Description
NAV (total return) * relative to the Company's benchmark The Board considers the Company's NAV (total return), relative to the FTSE
All-Share Index, to be the best indicator of performance over different time
periods. A graph showing NAV total return over the past five years. as
compared to the FTSE All-Share Index is shown in the published Annual Report.
Share price (total return) * The Board monitors share price performance relative to open-ended and
closed-ended competitor products, taking account of differing investment
objectives and policies pursued by those products.
The figures for share price (total return) for the Year and for the past
three, five and ten years, as well as for the NAV (total return) per share,
are shown in the published Annual Report. A graph showing share price total
return performance against the FTSE All-Share Index over the past five years
is shown in the published Annual Report.
Discount/premium to NAV * The discount/premium at which the Company's share price trades relative to the
NAV per share is closely monitored by the Board. A graph showing the
discount/premium over the last five years is shown in the published Annual
Report.
Earnings and dividends per share The Board aims to meet the 'high and growing' element of the Company's
investment objective by developing revenue reserves sufficient to support the
payment of a growing dividend; figures may be found in Financial Highlights
and Dividends in respect of earnings and dividends per share, together with
the level of revenue reserves, for the Year and previous year.
Ongoing charges* The Board monitors the Company's operating costs and their composition with a
view to limiting increases wherever possible. Ongoing charges are disclosed
below for the Year and the previous year and include look through costs.
Principal Risks and Uncertainties
There are a number of risks and uncertainties which, if realised, could have a
material adverse effect on the Company's business model, future performance
and solvency. The Board, through the Audit Committee, has put in place a
robust process to identify, assess and monitor these by means of a risk
assessment and internal controls system. This system was reviewed during the
year, as explained in the Audit Committee Report. As noted therein, the
committee has a risk register and uses a post-mitigation heat risk map to
identify principal, and emerging, risks.
Macroeconomic and geopolitical uncertainty continues as a significant risk.
However, factors creating this uncertainty have changed, both during the Year
and subsequently. For example, the uncertainty created by the increase in
global armed conflict versus the de-risking from lower inflation and interest
rates. Accordingly, the Board considers that the risk ratings arising from
these factors remain at a heightened level, consistent with the last two
years. The Board does not consider that, overall, the principal risks and
uncertainties identified have changed materially during the Year. The Audit
Committee and the Board both consider emerging risks as part of their normal
review of factors which could affect the Company, both in the short and longer
term. For example, negative climate change impacts, the potential escalation
of military conflicts and the unknown outcome of the US presidential election
in later 2024, form part of the Directors' assessment, with input from the
Manager and broker.
The following table sets out the Company's principal risks and uncertainties
and the Company's mitigating actions and comments if the post-mitigation risk
assessment has changed, together with the reason why.
Principal Risk Mitigating Action
STRATEGIC AND MARKET
The Company's investment objective and policy are no longer meeting investors' The Company's investment objective and policy ("IOP") are reviewed regularly
requirements (unchanged) by the Board to ensure they remain appropriate and effective. The Board
holds an annual strategy meeting at which strategy and approach is reviewed;
Lack of a robust strategic review, failure to understand the market/investor this includes consideration of distributions; both dividends and share
demand. Failure to analyse and react to changes or uncertainty, unclear buybacks.
dividend policy.
Discount control risk (increased) The Board monitors the discount at which the Company's shares trade, including
comparison with peer group discounts, and will buyback or issue shares to try
Investment trust shares tend to trade at discounts to their underlying NAVs, to minimise the impact of any discount or premium volatility. Whilst these
although they can also trade at premium. Discounts and premiums can fluctuate measures seek to reduce volatility, they are not guaranteed to do this.
considerably leading to more volatile returns for shareholders.
The Board has assessed the discount control risk as increased due to the
higher discount at which the Company's shares traded during the year.
Significant share buybacks could lead to the shrinkage of the Company, with
implications for the liquidity of its shares and potentially reduced
attractiveness for investors.
Market risk (unchanged) The Company's investment policy and its approach to risk diversification may
be found in Overview of Strategy, both of which serve to mitigate the effect
Market risk arises from the volatility in prices of the Company's investments of market risk on the portfolio. The Board considers the diversification of
and the potential loss the Company could suffer through realising investments the portfolio, asset allocation, stock selection and levels of gearing on a
following negative market movements. regular basis. The Board also monitors the Company's relative performance as
compared to peers and the Company's benchmark.
Changes in general economic or market conditions (such as interest rates,
exchange rates and rates of inflations) as well as global political events and The Board assesses climate change as an emerging risk in terms of how it
trends, could substantially and adversely affect the prices of securities and, develops, including how investor sentiment is evolving towards climate change
as a consequence, the value of the Company's investment portfolio, its within investment portfolios, and will consider how the Company may mitigate
prospects and share price. this risk, any other emerging risks, if and when they become material.
Current heightened risks arise from factors such as the increase in global The Board engages with the Manager, at each Board meeting, to understand how
armed conflict and the possible recession in the US. Conversely, the recent UK climate change and environmental factors are being assessed . Both are key
general election result has reduced uncertainty in the UK to which financial considerations within the Manager's investment process.
markets have responded positively. The longer term emergence of the effects
on investee companies of climate change, and the regulatory environment around During the Year, the Board evaluated market risk as elevated due to the limit
this, presents a further risk. on the Company's ability to mitigate the effect of external factors.
Gearing risk (unchanged) Gearing is monitored and strict restrictions on borrowings are imposed:
gearing continues to operate within pre-agreed limits so as not to exceed 25%
The Company uses both long term and short term borrowings to increase the of NAV at the time of draw down.
funds available for investment. These arrangements increase the funds
available for investment. While this has the potential to enhance investment The Board, via the Manager, is in advanced discussions with several third
returns in rising markets, in falling markets the impact could be detrimental. parties for the provision of a new short term borrowing facility and will
provide an update to shareholders following formal agreement of terms. Given
The Company's three year £50m facility matures on 27 October 2024. There is the advanced nature of discussions, the Board have a reasonable expectation
the risk that the Company is not able to find short term borrowings of an that any new funding will be available of an amount and at a rate acceptable
amount required (which can be less than the full £50 million) to repay the to both the Board and the Manager.
current short term borrowings
INVESTMENT MANAGEMENT
Underperformance risk (unchanged) The Board evaluates performance at each board meeting on both an absolute and
relative basis, against the Company's benchmark and peers, and across various
Consistent underperformance by the Investment Manager over short, medium and periods: short, medium and long term. Performance is also reviewed at the
long term. annual strategy meeting.
The Investment Manager's style may result in the portfolio being significantly The Company has a set of investment limits and Board guidelines which ensure
over or under weight positions in stocks and sectors compared to the benchmark diversification of the portfolio.
and the Company's performance may deviate significantly from that of the
benchmark and peers, possibly for extended periods.
Risk of loss of key staff (unchanged) Charles Luke has been the lead portfolio manager for the Company since 2006.
His co-manager is Iain Pyle who has been with the Manager since 2015, and
Loss of key staff though natural loss, or Manager reorganisation and/or Rhona Millar, with seven years' experience, also works alongside them. All
redundancy. Loss of investor confidence if lead work within the Manager's 39-strong Developed Markets Equities team.
manager lost.
MARKETING
General marketing risk (unchanged) The Manager's investor relations team works closely with the Board on
institutional shareholder contact. In addition, quarterly updates are provided
Failure to implement the Board's marketing policy. Failure to address to the Board by the broker. All correspondence addressed to the Board is
shareholder concerns or complaints. circulated to Directors while any complaints relating to the Company's savings
plans are reviewed by the Board quarterly.
Issues could arise from the lack of process ownership, poor procedures or the
failure to appropriately manage distribution, concerns or complaints of
shareholders. The Board is working with the Manager to optimise the
effectiveness of marketing undertaken on behalf of the Company.
OPERATIONAL
Service provider risk (unchanged) Contracts with third party providers are entered into after appropriate due
diligence. Thereafter the performance of each provider is subject to an annual
In common with most other investment companies, the Company relies on the review by the Audit Committee. The Depositary reports to the Audit Committee
services provided by third parties and is dependent on the control systems of at least
the Manager (who acts as investment manager, company secretary and maintains
annually, including on the Company's compliance with AIFMD.
the Company's assets, dealing procedures and accounting records); BNP Paribas
The Manager also regularly reviews the performance of
SA, London Branch (who acts as Depositary and Custodian); and the registrar.
the Depositary.
The security of
the Company's assets, dealing procedures, accounting records and adherence to Global assurance reports are obtained from the Manager, BNP Paribas SA, London
regulatory and legal requirements depend Branch and the registrar. These are reviewed by the Audit Committee. The
on the effective operation of the systems of these third party service reports include an independent assessment of the effectiveness of risks and
providers. internal controls at the service providers including their planning for
business continuity and disaster recovery scenarios, together with their
policies and procedures designed to address the risks posed to the Company's
operations by cyber-crime. The Audit Committee receives an annual update on
Failure by any service provider to carry out its obligations could have a the Manager's IT resilience.
material adverse effect on the Company's performance. Disruption, including
that caused by information technology breakdown or a cyber-related issue, The Company's assets are subject to a strict liability regime and, in the
could prevent, for example, the functioning of the Company; accurate reporting event of a loss of assets, the Depositary must return assets of an identical
to the Board or shareholders; or payment of dividends in accordance with the type or the corresponding amount, unless able to demonstrate the loss was a
announced timetable. result of an event beyond its reasonable control.
The Board has assessed the risk posed by cyber-crime as elevated, despite the
available mitigation, reflecting the potential disruption which might be
caused to the Company's operations by a cyber-attack.
REGULATORY
Regulatory risk (including change of existing rules and regulation) The Manager provides investment, company secretarial, administration and
(increased) accounting services through qualified third
The Company is required to comply with relevant rules and regulations. party professional providers.
Failure to do so could result in loss of investment trust status, fines,
suspension of the Company's shares, criminal proceedings or financial or The Board receives regular reports from its Manager and briefings from its
reputational damage. broker, auditor and the industry trade body (the Association of Investment
Companies ("AIC")) on changes to regulations which could impact the Company
and its industry.
New rules introduced during the year included those relating to Consumer Duty
and reporting around sustainability. The Board has assessed the regulatory
risk as marginally increased due to the number and complexity of these new
rules and regulations which are not necessarily specific to investment
companies but which, due to their application to the Manager, could have a
negative impact on the reputation of the Company were there to be any lack of
compliance by the Manager.
The following are other risks identified by the Board which could have a major
impact on the Company, but due to mitigation are not deemed to be principal
risks:
Other Risks Mitigating Action
Dividend risk The Board reviews estimates of revenue income and expenditure prepared by the
Manager, which look forward up to five years.
There is a risk that the Company fails to generate sufficient income from its
investment portfolio to meet the Company's dividend requirements. The Company's level of revenue reserves is monitored and can be added to in
years of surplus, or used to support the dividend in years where there is a
A cut in the dividend of the Company would likely cause a revenue deficit. Dividends can also be paid from capital, though use of
drop in the share price and would end the Company's capital reserves for dividends is expected to be rare.
"Dividend Hero" status.
Financial risk Details of these risks and the policies and procedures for their monitoring
and mitigation are disclosed earlier in this section and in note 18.
The Company's investment activities expose it to a variety of financial risks
which include market risk (which is identified as a principal risk, above),
liquidity risk and credit risk (including counterparty risk).
Emerging risk The Board regularly reviews all risks to the Company, including emerging
risks, which are identified by a variety of means, including advice from AIC,
Failure to have in place procedures that assist in identifying emerging the Company's professional advisors, Directors' knowledge of markets, changes
risks. This may cause reactive actions rather than being pro-active and, in and events.
the worst case, could cause the Company to become unviable or otherwise fail.
The principal risks associated with an investment in the Company's shares can
be found in the pre-investment disclosure document ("PIDD") published by the
Manager, which is available from the Company's website: murray-income.co.uk.
Promotional Activities
The Board recognises the importance of promoting the Company to existing and
prospective investors both for improving liquidity and enhancing the rating of
the Company's shares. The Board believes one effective way to achieve this is
through subscription to, and participation in, the promotional programme run
by the Manager on behalf of a number of investment trusts under its
management. The Company also supports the Manager's investor relations
programme which involves regional roadshows, promotional and public relations
campaigns. The Manager's promotional and investor relations teams report to
the Board on a quarterly basis giving analysis of their activities as well as
updates on the shareholder register and any changes in the make-up of that
register.
Communicating the long-term attractions of the Company is key. The promotional
programme includes commissioning independent paid for research on the Company,
most recently from Edison Investment Research Limited; a copy may be found on
the Company's website.
The UK Stewardship Code and Proxy Voting
The Company supports the UK Stewardship Code 2020, and seeks to play its role
in supporting good stewardship of the companies in which it invests.
Responsibility for actively monitoring the activities of portfolio companies
has been delegated by the Board to the Manager.
The Manager is a tier 1 signatory of the UK Stewardship Code 2020 which aims
to enhance the quality of engagement by investors with investee companies in
order to improve their socially responsible performance and the long term
investment return to shareholders. The Manager's Annual Stewardship Report for
2023 may be found at abrdn.com. While delivery of stewardship activities has
been delegated to the Manager, the Board acknowledges its role in setting the
tone for the effective delivery of stewardship on the Company's behalf.
The Board has also given discretionary powers to the Manager to exercise
voting rights on resolutions proposed by the investee companies within the
Company's portfolio. The Manager reports to the Board on a six monthly basis
on stewardship (including voting) issues and additional information may be
found in the published Annual Report.
Global Greenhouse Gas Emissions and Streamlined Energy and Carbon Reporting ("SECR")
All of the Company's activities are outsourced to third parties. The Company
therefore has no greenhouse gas emissions to report from the operations of its
business, nor does it have responsibility for any other emissions producing
sources under the Companies Act 2006 (Strategic Report and Directors' Reports)
Regulations 2013. For the same reason as set out above, the Company
considers itself to be a low energy user under the SECR regulations and
therefore is not required to disclose energy and carbon information. Further
information on the Manager's obligatory disclosures under the Taskforce on
Climate-related Financial Disclosures ("TCFD") may be found on the Company's
website.
Viability Statement
The Company does not have a fixed period strategic plan but the Board does
formally consider risks and strategy on at least an annual basis. The Board
regards the Company, with no fixed life, as a long term investment vehicle but
for the purposes of this viability statement has decided that a period of five
years (the "Review Period") is an appropriate timeframe over which to report.
The Board considers that this Review Period reflects a balance between looking
out over a long term horizon and the inherent uncertainties of looking out
further than five years.
In assessing the viability of the Company over the Review Period the Directors
have focused upon the following factors:
· the Company's principal risks and uncertainties as set out in the
Strategic Report;
· the relevance of the Company's investment objective;
· the demand for the Company's shares as indicated by the level of premium
and/or discount;
· the level of income generated by the Company's portfolio as compared to
its expenses;
· the overall liquidity of the Company's investment portfolio;
· the £40m senior loan notes and £60m senior loan notes, which are
repayable in 2027 and in 2029, respectively, and any likelihood of them
breaching their covenants; and
· the requirement for the Company to repay its three year £50 million bank
loan facility at its maturity in October 2024.
In making this assessment, the Board has considered in particular a large
economic shock, such as another global pandemic, a period of increased stock
market volatility and/or markets at depressed levels, a significant reduction
in the liquidity of the portfolio, or persistent inflationary pressures, or
changes in investor sentiment or regulation, and how these factors might
affect the Company's prospects and viability in the future. The Board
undertook scenario analysis, incorporating income forecasting, in reaching its
conclusions, but recognising that the Company's expenses are significantly
lower than its total income.
Taking into account the Company's current position and the potential impact of
its principal risks and uncertainties, the Directors have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due for a period of five years from the date of
this Report.
Performance, Financial Position and Outlook
A review of the Company's activities and performance during the Year,
including future developments, is set out in the Chair's Statement and in the
Investment Manager's Report. These cover market background, investment
activity, portfolio strategy, dividend policy, gearing and investment
outlook. A comprehensive analysis of the portfolio is provided below while
the full portfolio of investments is published monthly on the Company's
website. The Company's Statement of Financial Position shows the assets and
liabilities at the year end. Borrowing facilities at the year end comprised a
mix of fixed and floating debt: a three year £50 million bank loan, £40
million of senior loan notes due for repayment in 2027 and £60 million of
senior loan notes due for repayment in 2029. Details of these are shown in
notes 13 and 14 to the financial statements, respectively.
The future strategic direction and development of the Company is regularly
discussed as part of Board meeting agendas. The Board also considers the
Manager's promotional strategy for the Company, including effective
communications with shareholders. The Board intends to maintain, for the
year ending 30 June 2025, the strategy set out in the Strategic Report as it
believes that this is in the best interests of shareholders.
Board Diversity
The Board supports the principle of boardroom diversity, of which diversity of
skills, gender and ethnicity are all important aspects. Further information
on Board diversity may be found in the Directors' Report.
Environmental, Community, Social and Human Rights Issues
The Company has no employees and, accordingly, there are no disclosures to be
made in respect of employees. In relation to the investment portfolio, the
Board has delegated assessment of these issues to the Investment Manager,
responsibility and further information may be found in the published Annual
Report.
Modern Slavery Act
Due to the nature of its business, being a company that does not offer goods
and services to customers, the Board considers that the Company is not within
the scope of the Modern Slavery Act 2015 because it has no turnover. The
Company is therefore not required to make a slavery and human trafficking
statement. The Board considers the Company's supply chains, dealing
predominantly with professional advisers and service providers in the
financial services industry, to be low risk in relation to this matter.
The Strategic Report has been approved by the Board and signed on its behalf
by:
Peter Tait
Chair
17 September 2024
Promoting the Success of the Company
The Board is required to report how it has discharged its duties and
responsibilities under section 172 of the Companies Act 2006 during the Year.
Under this requirement, the Directors have a duty to promote the success of
the Company for the benefit of its members (shareholders) as a whole, taking
into account the likely long term consequences of decisions, the need to
foster relationships with the Company's stakeholders, and the impact of the
Company's operations on the environment. In addition the Directors must act
fairly between shareholders and be cognisant of maintaining the reputation of
the Company.
The Purpose of the Company and Role of the Board
The Company has been established as an investment vehicle for the purpose of
delivering its investment objective which is set out on the inside front cover
of this Report. Investment trusts, such as the Company, are long-term
investment vehicles that are typically externally-managed, have no employees,
and are overseen by an independent non-executive board of directors.
The Board is responsible for all decisions relating to the Company's
investment objective and policy, gearing, corporate governance and strategy,
and for monitoring the performance of the Company's third party service
providers, including the Manager.
The Board's philosophy is that the Company should foster a culture where all
parties are treated with respect. The Directors provide mutual support
combined with constructive challenge. Integrity, openness and diligence are
defining characteristics of the Board's culture. The Company has a number of
policies and procedures in place to aid a culture of good governance, such as
those relating to Director's conflicts of interests and dealings in the
Company's shares, annual evaluation of Directors, anti-bribery and anti-tax
evasion. At its regular meetings, the Board engages with the Manager to
understand its culture and receives regular reporting and feedback from the
other key service providers.
The Company's primary stakeholders have been identified as its shareholders,
the Manager, other key
third party service providers, investee companies and lenders. The following
table sets out details of
the Company's engagement.
Shareholders The Directors place great importance on communication with shareholders.
Further details on the Company's relations with Shareholders, including its
approach to the Annual General Meeting, and investor relations can be found in
the Directors' Report.
In addition, the Chair and Investment Manager are holding an online
shareholder presentation on 17 October 2024, further details of which may be
found in the Chair's Statement.
Manager The Investment Manager's Report details the key investment decisions taken
during
the Year. The Board engages with the Investment Manager at every Board meeting
and receives presentations from the Investment Manager to help it to exercise
effective oversight of the Investment Manager and delivery of the Company's
strategy. The Board also receives regular updates from the Manager outside of
these meetings.
The Management Engagement Committee's monitoring of the performance of the
Manager over the Year is detailed in the Directors' Report.
Other Key Third Party Service Providers The Board ensures that it promotes the success of the Company by engaging
specialist third party suppliers with the resources, controls and performance
records to deliver the service required. The Board seeks to maintain
constructive relationships with its key service providers (the Company's
registrar, depositary and broker) either directly, or through the Manager,
with ongoing dialogue and formal regular meetings. The Audit Committee
conducts an annual assessment of key service providers as set out in the
Committee's report. The Board seeks regular assurance that key third party
service providers have in place appropriate business continuity plans and
which are expected to allow them to maintain service levels in the face of
disruption.
Investee Companies The Board is committed to investing in a responsible manner and actively
monitors the activities of investee companies through its delegation to the
Investment Manager. In order to achieve this, the Investment Manager has
discretionary powers to exercise voting rights on resolutions proposed by the
investee companies and reports quarterly to the Board on stewardship issues,
including voting. The Board monitors investments made and divested and
questions the rationale for exposures taken and voting decisions made.
Information on how the Investment Manager engages with investee companies may
be found in the published Annual Report.
Lenders to the Company On behalf of the Board, the Manager maintains a positive working relationship
with the provider of the Company's multi-currency loan facility and the
holders of the Company's Senior Loan Notes, assuring compliance with lenders'
covenants and providing regular updates on business activity.
Specific Examples of Stakeholder Consideration During the Year
While the importance of giving due consideration to the Company's stakeholders
is not a new requirement, and is considered as part of every Board decision,
the Directors were particularly mindful of stakeholder considerations during
the following decisions reached during the Year.
Reduction in Management Fee
As reported in the Chair's Statement, the Board and the Manager have agreed a
reduction in the management fee, from 1 July 2024, with the initial tier rate
reducing from 0.55% to 0.35% of net assets. Full details are included in Note
4 to the Financial Statements.
Dividends Paid to Shareholders
The level, frequency and timing of dividends paid are key considerations for
the Board, taking into account net earnings for the year and the Company's
objective of providing shareholders with a high and growing income, combined
with the Company's Dividend Hero status.
The total dividend for the Year of 38.5p is an increase of 2.7% on the
previous year. Dividend payments are quarterly with the first three payments
increased from 8.25p to 9.50p to equalise (as far as practical) the four
quarterly payments.
Share Buybacks
During the Year the Company bought back 7,035,000 (2023 - 4,970,471) Ordinary
shares, to be held in treasury, providing a small accretion to the NAV and a
degree of liquidity to the market at times when the discount to the NAV per
share had widened during normal market conditions. It is the view of the Board
that this policy remains in the best interests of all shareholders.
Board Succession
The Board, via the Nomination Committee, reviewed its succession plan in light of the retirement of Alan Giles at the AGM on 5 November 2024 and further recruitment is under way. Further information may be found in the Directors' Report.
Shareholder Communication
The Chair hosted an online event for shareholders on 3 November 2023, to allow
those shareholders who may have been unable to attend the AGM in person on 7
November 2023 to pose questions to both the Chair and the Investment Manager.
A similar event will be held on 17 October 2024, as described in the Chair's
Statement.
Portfolio
Ten Largest Investments
As at 30 June 2024
AstraZeneca Unilever
AstraZeneca researches, develops, produces and markets pharmaceutical Unilever is a global consumer goods company supplying food, home and personal
products. With a significant focus on oncology and rare diseases, the company care products. The company has a portfolio of strong brands including: Dove,
offers appealing growth potential over the medium term. Knorr, Axe and Persil. Over half of the company's sales are to developing and
emerging markets.
RELX London Stock Exchange
RELX is a global provider of information and analytics for professionals and London Stock Exchange is a diversified global financial markets infrastructure
businesses across a number of industries including scientific, technical, and data business. The company is highly cash generative and very well
medical and law. The company offers resilient earnings combined with long term placed to benefit from increased spend on data services.
structural growth opportunities.
Diageo bp
Diageo produces, distills and markets alcoholic beverages including vodkas, bp is a fully integrated energy company involved in exploration, production,
whiskies, tequilas, gins and beer. The company should benefit from attractive refining, transportation and marketing of oil and natural gas. We believe the
long term drivers such as population and income growth, and premiumisation. industry is currently in a sweet spot with rising prices and benign costs. The
The company has a variety of very strong brands and faces very limited private company provides an attractive dividend yield and is well placed for the
label competition. energy transition.
TotalEnergies National Grid
TotalEnergies is a broad energy company that produces and markets fuels, National Grid is an investor-owned utility company which owns and operates the
natural gas and electricity. It is a leader in the sector's energy transition electricity and gas transmission network in Great Britain and the electricity
with an attractive pipeline of renewable assets. transmission networks in the Northeastern United States. The company offers
resilient earnings and an attractive dividend yield.
Experian Sage Group
Experian is a market leader in the provision of credit and marketing Sage Group is a software publishing business which develops, publishes and
services. It maintains one of the largest credit bureaus and offers distributes accounting and payroll software. It also maintains a registered
specialist analytical solutions for credit scoring, risk management and user database which provides a market for their related products and services,
application processing across a number of different markets including including computer forms, software support contracts, program upgrades and
financial services, health, retail and government. training.
Portfolio
As at 30 June 2024
Valuation Total Valuation
2024 investments 2023
Investment FTSE All-Share Sector Country £'000 % £'000
AstraZeneca Pharmaceuticals and Biotechnology UK 58,253 5.4 60,904
Unilever Personal Care Drug and Grocery Stores UK 57,626 5.4 56,200
RELX Media UK 56,359 5.2 61,856
London Stock Exchange Finance and Credit Services UK 43,837 4.1 33,912
Diageo Beverages UK 41,515 3.9 52,951
bp Oil, Gas and Coal UK 40,630 3.8 32,387
TotalEnergies Oil, Gas and Coal France 38,041 3.5 34,369
National Grid Gas, Water and Multi-utilities UK 35,502 3.3 24,156
Experian Industrial Support Services UK 33,099 3.1 29,324
Sage Group Software and Computer Services UK 32,402 3.0 30,020
Top ten investments 437,264 40.7
Intermediate Capital Investment Banking and Brokerage Services UK 31,190 2.9 20,793
Oversea-Chinese Banking Banks Singapore 27,374 2.5 21,124
BHP Group Industrial Metals and Mining UK 27,321 2.5 33,932
Anglo American Industrial Metals and Mining UK 26,436 2.5 25,065
Rentokil Initial Industrial Support Services UK 25,060 2.3 26,708
Inchcape Industrial Support Services UK 23,243 2.2 25,899
SSE Electricity UK 22,031 2.1 37,940
Convatec Medical Equipment and Services UK 21,336 2.0 15,569
Microsoft Software and Computer Services United States 20,316 1.9 17,865
Howden Joinery Retailers UK 19,553 1.8 20,155
Top twenty investments 681,124 63.4
Oxford Instruments Electronic and Electrical Equipment UK 19,052 1.8 17,179
HSBC Banks UK 18,661 1.8 -
Safestore Real Estate Investment Trusts UK 18,574 1.7 21,600
RS Group Industrial Support Services UK 18,480 1.7 8,771
Nordea Bank Banks Sweden 18,454 1.7 16,694
Games Workshop Leisure Goods UK 16,150 1.5 15,579
M&G Investment Banking and Brokerage Services UK 15,840 1.5 14,862
Haleon Pharmaceuticals and Biotechnology UK 13,662 1.3 -
Smurfit Kappa General Industrials UK 13,096 1.2 -
Kone Industrial Engineering Finland 12,953 1.2 13,653
Top thirty investments 846,046 78.8
OSB Finance and Credit Services UK 12,913 1.2 14,469
GSK Pharmaceuticals and Biotechnology UK 12,798 1.2 12,630
Genuit Construction and Materials UK 12,524 1.2 8,519
Genus Pharmaceuticals and Biotechnology UK 12,427 1.2 16,314
Rotork Electronic and Electrical Equipment UK 11,589 1.1 -
Close Brothers Banks UK 11,402 1.1 26,700
L'Oréal Personal Goods France 11,282 1.0 9,181
Hiscox Non-life Insurance UK 11,271 1.0 13,985
Coca-Cola Europacific Beverages UK 11,172 1.0 -
Berkeley Household Goods and Home Construction UK 10,901 1.0 -
Top forty investments 964,325 89.8
Accton Technology Telecommunications Equipment Taiwan 10,827 1.0 7,051
Air Liquide Chemicals France 10,770 1.0 -
Telenor Telecommunications Service Providers Norway 10,535 1.0 9,323
LVMH Personal Goods France 10,068 1.0 12,325
Novo-Nordisk Pharmaceuticals and Biotechnology Denmark 9,923 0.9 22,239
Mercedes-Benz Automobiles and Parts Germany 9,855 0.9 -
Direct Line Insurance Non-life Insurance UK 9,728 0.9 9,445
VAT Group Electronic and Electrical Equipment Switzerland 9,486 0.9 12,447
Mastercard Industrial Support Services United States 8,582 0.8 -
Moonpig Retailers UK 7,538 0.7 5,703
Top fifty investments 1,061,637 98.9
Chesnara Life Insurance UK 6,505 0.6 7,138
Coca-Cola HBC Beverages UK 5,392 0.5 29,787
Total investments 1,073,534 100.0
Ordinary shares unless otherwise stated.
Summary of Investment Changes During the Year
Valuation Valuation
30 June 2023 Transactions Gains / (losses) 30 June 2024
£'000 % £'000 £'000 £'000 %
Equities
UK 898,427 81.8 (67,457) 34,098 865,068 80.6
Denmark 22,239 2.0 (20,713) 8,397 9,923 0.9
Finland 13,653 1.3 - (700) 12,953 1.3
France 55,875 5.1 11,866 2,420 70,161 6.5
Germany - - 11,418 (1,563) 9,855 0.9
Norway 9,323 0.9 - 1,212 10,535 1.0
Singapore 21,124 1.9 2,228 4,022 27,374 2.5
Switzerland 36,060 3.3 (26,510) (64) 9,486 0.9
Sweden 16,694 1.5 - 1,760 18,454 1.7
Taiwan 7,051 0.6 - 3,776 10,827 1.0
United States 17,865 1.6 5,644 5,389 28,898 2.7
Total investments 1,098,311 100.0 (83,524) 58,747 1,073,534 100.0
Directors' Report
The Directors present their report and the audited financial statements for
the year ended 30 June 2024.
Results and Dividend Policy
The financial statements for the Year indicate a total return attributable to
equity shareholders for the year of £94,779,000 (2023 - £73,486,000) and an
explanation for the Company's financial performance may be found in the
Chair's Statement.
On 9 November 2023, the Company declared first, second and third interim
dividends, each of 9.50p per share, to be paid on 14 December 2023, 14 March
2024 and 13 June 2024.
The Company further announced, on 30 July 2024, the payment to shareholders on
12 September 2024 of a fourth interim dividend for the year of 10.00p per
share (2023 - 12.75p) with an ex-dividend date of 15 August 2024 and a record
date of 15 August 2024. This resulted in total dividends of 38.50p per share
for the year ended 30 June 2024, an increase of 2.7% on the 37.50p per share
paid for the prior year, which represented the 51(st) year of consecutive
growth in the Company's annual dividend.
The Board is proposing to maintain the dividend policy of paying four
quarterly interim dividends each year. In line with good corporate governance,
the Board therefore proposes to put the Company's dividend policy to
Shareholders for approval at the forthcoming AGM, as resolution 3.
Principal Activity and Status
The Company, which was incorporated in 1923, is registered as a public limited
company in Scotland under company number SC012725 and is an investment company
within the meaning of Section 833 of the Companies Act 2006.
The Company has been accepted by HM Revenue & Customs as an investment
trust subject to the Company continuing to meet the relevant eligibility
conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing
requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all
financial years commencing on or after 1 July 2012. The Directors are of the
opinion that the Company has conducted its affairs during the Year so as to
enable it to comply with the ongoing requirements for investment trust status.
The Company has conducted its affairs so as to satisfy the requirements as a
qualifying security for Individual Savings Accounts. The Directors intend that
the Company will continue to conduct its affairs in this manner.
Capital Structure and Voting Rights
At 30 June 2024, the Company had 104,685,001 (2023 - 111,720,001) fully paid
Ordinary shares of 25p each in issue, with voting rights, and an additional
14,844,531 (2023 - 7,809,531) shares in Treasury. During the Year, 7,035,000
Ordinary shares were bought back into Treasury (2023 - 4,970,471).
Since the year end, up to the date of this Report, the Company has bought back
a further 1,005,021 Ordinary shares into treasury. Accordingly, as at the date
of this Report, the Company's issued share capital consisted of 103,679,980
Ordinary shares of 25 pence each and 15,849,552 Ordinary shares held in
treasury.
Ordinary shareholders are entitled to vote on all resolutions which are
proposed at general meetings of the Company. The Ordinary shares, excluding
shares in Treasury, carry a right to receive dividends. On a winding up,
after meeting the liabilities of the Company, the surplus assets will be paid
to Ordinary shareholders in proportion to their shareholdings. There are no
restrictions on the transfer of Ordinary shares in the Company other than
certain restrictions which may be applied from time to time by law (for
example, laws prohibiting insider trading).
Manager and Company Secretary
The Manager has been appointed by the Company, under a management agreement,
to provide investment management, risk management, administration and company
secretarial services as well as promotional activities. The Company's
portfolio is managed by the Investment Manager by way of a group delegation in
place with the Manager. In addition, the Manager has sub-delegated
promotional activities to the Investment Manager and administrative and
secretarial services to abrdn Holdings Limited.
On 30 August 2024, the Company announced revised terms for the management
agreement with effect from 1 July 2024, under which the Manager is entitled to
an annual fee of 0.35% on up to £1.1 billion of net assets and 0.25% on any
net assets in excess of £1.1 billion.
Until 30 June 2024, annual fees under the management agreement were charged on
the same basis as above, other than the applicable rate was: 0.55% on the
first £350 million of net assets, 0.45% on net assets between £350 million
and £450 million and 0.25% on any net assets in excess of £450 million.
The value of any investments in unit trusts, open ended and closed ended
investment companies and investment trusts of which the Manager, or another
company within abrdn, is the operator, manager or investment adviser, is
deducted from net assets when calculating the fee.
The management agreement is terminable on not less than three months' notice.
In the event of termination by the Company on less than the agreed notice
period, compensation is payable to the Manager in lieu of the unexpired notice
period.
An annual secretarial fee of £75,000 (plus applicable VAT) is payable to
abrdn Holdings Limited, which is chargeable 100% to revenue. An annual fee
equivalent to up to 0.05% of gross assets (calculated at 30 September each
year, and capped at £400,000, excluding VAT) is paid to the Investment
Manager to cover promotional activities undertaken on behalf of the Company.
The finance costs and investment management fees are charged 70% to capital
and 30% to revenue in line
with the Board's expectation of the split of future investment returns.
The management, secretarial and promotional activity fees paid to subsidiaries
of abrdn during the Year are shown in notes 4 and 5 to the financial
statements.
External Agencies
The Board has contractually delegated to external agencies, including the
Manager and other service providers, certain services including: the
management of the investment portfolio, the day-to-day accounting and company
secretarial requirements, the depositary services (which include cash
monitoring, the custody and safeguarding of the Company's financial
instruments and monitoring the Company's compliance with investment limits and
leverage requirements) and the share registration services. Each of these
contracts was entered into after full and proper consideration by the Board of
the quality and cost of services offered in so far as they relate to the
affairs of the Company. In addition, ad hoc reports and information are
supplied to the Board as requested.
Directors
As at the date of this Report, the Board consisted of a non-executive Chair
and four non-executive Directors.
Peter Tait, Stephanie Eastment, Alan Giles and Nandita Sahgal Tully were
Directors throughout the Year. Neil Rogan and Merryn Somerset Webb retired
from the Board on 7 November 2023. Angus Franklin was appointed as a Director
on 1 January 2024.
Peter Tait was the Company's Senior Independent Director ("SID") until 7
November 2023, when he became Chair of the Board and Alan Giles succeeded him
as SID.
The Role of the Chair and Senior Independent Director
The Chair is responsible for providing effective leadership to the Board, by
setting the tone of the Company, demonstrating objective judgement and
promoting a culture of openness and debate. The Chair facilitates the
effective contribution of, and encourages active engagement by, each Director.
In conjunction with the Company Secretary, the Chair ensures that Directors
receive accurate, timely and clear information to assist them with effective
decision-making. The Chair acts upon the results of the Board evaluation
process by recognising strengths and addressing any weaknesses and also
ensures that the Board engages with major shareholders and that all Directors
understand shareholder views.
The SID acts as a sounding board for the Chair and acts as an intermediary for
other directors, when necessary. The SID takes responsibility for an orderly
succession process for the Chair and leads the annual appraisal of the Chair's
performance. The SID is also available to shareholders to discuss any concerns
they may have.
Management of Conflicts of Interest, Anti-Bribery Policy and Tax Evasion Policy
The Board has a procedure in place to deal with a situation where a Director
has a conflict of interest. As part of this process, the Directors prepare a
list of other positions held and all other conflict situations that may need
to be authorised either in relation to the Director concerned or his/her
connected persons. The Board considers each Director's situation and decides
whether to approve any conflict, taking into consideration what is in the best
interests of the Company and whether the Director's ability to act in
accordance with his/her wider duties is affected. Each Director is required to
notify the Company Secretaries of any potential, or actual, conflict
situations which will need authorising by the Board. Authorisations given by
the Board are reviewed at each Board meeting.
The Board takes a zero-tolerance approach to bribery and has adopted
appropriate procedures designed to prevent bribery. abrdn also takes a
zero-tolerance approach and has its own detailed policy and procedures in
place to prevent bribery and corruption. It is the Company's policy to conduct
all of its business in an honest and ethical manner. The Company takes a
zero-tolerance approach to facilitation of tax evasion, whether under UK law
or under the law of any foreign country and its full policy on tax evasion may
be found on its website.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced
individuals with the right knowledge represented on the Board in order to
allow it to fulfil its obligations. The Board also recognises the benefits and
is supportive of, and will give due regard to, the principle of diversity in
its recruitment of new Board members. The Board will not display any bias for
age, gender, race, sexual orientation, socio-economic background, religion,
ethnic or national origins or disability in considering the appointment of
Directors. The Board will continue to ensure that all appointments are made on
the basis of merit against the specification prepared for each appointment.
The Board will take account of the targets set out in the FCA's Listing Rules,
which are set out below.
The Board has resolved that the Company's year end date is the most
appropriate date for disclosure purposes. The following information has been
provided by each Director through the completion of questionnaires.
Table for reporting on sex as at 30 June 2024
Number of board members Percentage of the board Number of senior positions Number in executive management Percentage of executive management
on the board
(CEO, CFO,
Chair and SID)
Men 3 60% n/a n/a n/a
(note 3) (note 3) (note 3)
Women 2 40% (note 1)
Not specified/prefer not to say - -
Table for reporting on ethnic background as at 30 June 2024
Number of board members Percentage of the board Number of senior positions Number in executive management Percentage of executive management
on the board
(CEO, CFO,
Chair and SID)
White British or other White 4 80% n/a n/a n/a
(including minority-white groups)
(note 3) (note 3) (note 3)
Asian/Asian British 1 20%
(note 2)
Not specified/prefer not to say - -
Notes:
1. Meets target that at least 40% of Directors are women as set out in LR
9.8.6R (9)(a)(i).
2. Meets target that at least one Director is from a minority ethnic
background as set out in LR 9.8.6R (9)(a)(iii).
3. This column is not applicable as the Company is externally managed and
does not have any executive staff, specifically it does not have either a CEO
or CFO. The Company considers that the roles of Chair of the Board, Senior
Independent Director and Chair of the Audit Committee are senior board
positions and accordingly that the Company meets in spirit the requirement
that at least one of the senior board positions is held by a woman. The
Company notes that, with effect from the conclusion of the AGM on 5 November
2024, one of the four senior board positions, as set out in LR 9.8.6R
(9)(a)(ii), will be occupied by a woman.
Directors' Insurance and Indemnities
The Company's Articles of Association indemnify each of the Directors out of
the assets of the Company against any liabilities incurred by them as a
Director of the Company in defending proceedings, or in connection with any
application to the Court in which relief is granted. In addition, the
Directors have been granted qualifying indemnity provisions by the Company
which are currently in force. Directors' and Officers' liability insurance
cover has been maintained throughout the Year at the expense of the Company.
Corporate Governance
The Company is committed to high standards of corporate governance and its
Statement of Corporate Governance.
Matters Reserved for the Board
The Board sets the Company's objectives and ensures that its obligations to
its shareholders are met. It has formally adopted a schedule of matters which
are required to be brought to it for decision, thus ensuring that it maintains
full and effective control over appropriate strategic, financial, operational
and compliance issues.
These matters include:
· the maintenance of clear investment objectives and risk management
policies;
· the monitoring of the business activities of the Company ranging from
analysis of investment performance through to review of quarterly management
accounts;
· monitoring requirements such as approval of the Half-Yearly Report and
Annual Report and financial statements and approval and recommendation of any
dividends;
· setting the range of gearing in which the Manager may operate;
· major changes relating to the Company's structure including share
buybacks and share issuance;
· Board appointments and removals and the related terms;
· authorisation of Directors' conflicts or possible conflicts of interest;
· terms of reference and membership of Board Committees;
· appointment and removal of the Manager and the terms and conditions of
the Management Agreement relating thereto; and
· London Stock Exchange/Financial Conduct Authority - responsibility for
approval of all circulars, listing particulars and other releases concerning
matters decided by the Board.
Full and timely information is provided to the Board to enable it to function
effectively and to allow the Directors to discharge their responsibilities.
Board Committees
The Board has appointed a number of Committees as set out below. Copies of
their terms of reference, which define the responsibilities and duties of each
Committee, are available on the Company's website.
Audit Committee
The Audit Committee Report is set out below.
Management Engagement Committee
The terms and conditions of the Company's agreement with the Manager, set out
above, are considered by the Management Engagement Committee which comprises
the whole Board and was chaired by Neil Rogan until 7 November 2023 and by
Peter Tait thereafter. The key responsibilities of the Management Engagement
Committee include:
· monitoring and evaluating the performance of the Manager;
· assessing the Manager's discharge of its responsibilities under Consumer
Duty;
· reviewing, at least annually, the continued retention of the Manager; and
· reviewing, at least annually, the terms of appointment of the Manager
including, but not limited to, the level and methodology of the management
fees as well as the notice period of the Manager.
In monitoring the performance of the Manager, the Committee considers the
investment record of the Company over the short and long term, taking into
account its performance against the Benchmark, peer group investment trusts
and open-ended funds, and against its delivery of the investment objective to
shareholders. The Committee also reviews the management processes, risk
control mechanisms and promotional activities of the Manager.
At its meeting in May 2024, the Committee reviewed covering all of the
services provided to the Company by the Manager including investment
management, risk management and internal controls, marketing and investor
relations, company secretarial and administration services, and also included
consideration as to the appropriateness of the management fee arrangements. In
light of the outcome of the review, the Directors consider the continuing
appointment of the Manager, on the current terms (see above), to be in the
best interests of shareholders because they believe that the Manager has the
investment management, promotional and associated secretarial and
administrative skills required for the effective operation of the Company.
Consumer Duty
The FCA's Consumer Duty rules, published in July 2022, are a fundamental
component of the FCA's consumer protection strategy and aim to improve
outcomes for retail customers across the entire financial services industry
through the assessment of various outcomes, one of which is an assessment of
whether a product provides value. Under the Consumer Duty, the Manager is the
product 'manufacturer' of the Company and therefore the Manager was required
to publish an annual assessment of value from April 2023. The Manager uses its
proprietary assessment methodology to assess the Company as 'expected to
provide fair value for the reasonably foreseeable future'. The Committee
reviewed the Manager's basis of assessment and no concerns were identified
with either the assessment method or the outcome of the assessment.
Nomination Committee
The Board has established a Nomination Committee, comprising all of the
Directors, with Neil Rogan as Chair until 7 November 2023 and Peter Tait
thereafter. The Committee is responsible for:
· determining the overall size and composition of the Board (including the
skills, knowledge, experience and diversity);
· undertaking longer term succession planning, including setting a policy
on tenure for Directors;
· undertaking an annual evaluation of the Directors, including establishing
that each Director possesses the capacity to commit sufficient time to
discharge their responsibilities;
· oversight of appointments to the Board, including open advertising or
engagement of independent search consultants, with a view to attracting
candidates from a wide range of backgrounds and with different experience,
with due regard to the benefits of diversity on the Board;
· assessing, annually, the effectiveness and independence of each Director;
and
· making recommendations for the election or re-election of any Director,
having evaluated their individual performance, capacity and contribution.
The Committee's overriding priority in appointing new Directors is to identify
the candidate with the optimal range of skills and experience to complement
the existing Directors. The Board also recognises the benefits, and is
supportive, of the principle of diversity in its recruitment of new Directors.
Nurole Limited, an independent search firm with no connection with the
Company, was engaged in the search which resulted in the appointment of Angus
Franklin as a Director during the Year.
The Committee has reviewed the Board succession plan and has commenced the
recruitment of a new Director who is expected to be appointed by early 2025.
During the Year, through the work of the Nomination Committee, the Directors
undertook a review of the Board, its Committees and the performance of
individual Directors. The process involved the completion of questionnaires by
each Director with the results discussed by the Board thereafter, with
appropriate action points agreed. Following the evaluation process, the
Board concluded that it operates effectively to promote the success of the
Company and that each Director makes a significant contribution to the
collective Board. The review of the Chair was undertaken by the Senior
Independent Director.
The biographies of each of the Directors seeking re-election are shown on the
Company's website and include their experience, length of service and the
contribution that each Director makes to the Board. Each Director
has the requisite high level and range of business and financial experience
which enables the Board to provide clear and effective leadership and proper
stewardship of the Company.
Policy on Tenure
The Committee has adopted a policy whereby all Directors will stand for
re-election at each AGM. In addition Directors, including the Chair, will not
stand for re-election as a Director of the Company later than the AGM
following the ninth anniversary of their appointment to the Board unless in
relation to exceptional circumstances.
Re-election of Directors
During the Year, each Director attended all meetings for which they were
eligible, as set out in the table. The Board meets more frequently when
business needs require:
Board Meetings Audit Committee Management Remuneration Committee Meetings
(7) Meetings Engagement Nomination Committee Meetings (1)
(3) Committee (3)
Meetings
(1)
Peter Tait(A) 7 1 1 3 1
Alan Giles 7 3 1 3 1
Stephanie Eastment 7 3 1 3 1
Nandita Sahgal Tully 7 3 1 3 1
Angus Franklin (B) 3 2 1 2 1
Neil Rogan(A, C) 3 - - - -
Merryn Somerset Webb (C) 3 1 - - -
(A) The Chair of the Board is not a member of the Audit Committee but attended
all of the meetings at the invitation of the Committee Chair. Peter Tait
succeeded Neil Rogan as Chair of the Board on 7 November 2023.
(B) Appointed a Director on 1 January 2024.
(C) Resigned as a Director on 7 November 2023.
The Board as a whole believes that Peter Tait, Stephanie Eastment, Nandita
Sahgal Tully and Angus Franklin each remains independent of the Manager and
free of any relationship which could materially interfere with the exercise of
his or her independent judgement on issues of strategy, performance, resources
and standards of conduct and confirms that, following formal performance
evaluations, the individuals' performance continues to be effective and
demonstrates commitment to the role.
Alan Giles is not standing for re-election as a Director and will retire from
the Board at the conclusion of the AGM. Peter Tait, Stephanie Eastment and
Nandita Sahgal Tully, each being eligible, offer themselves for re-election as
Directors of the Company at the AGM on 5 November 2024. Angus Franklin, being
eligible, offers himself for election as a Director of the Company.
Remuneration Committee
The Board has established a Remuneration Committee, comprising all of the
Directors, whose Chair was Peter Tait, until 7 November 2023, when he was
succeeded by Alan Giles. The Directors' Remuneration Report on 47 to 50 sets
out the responsibilities of the Committee and work undertaken by the Committee
during the Year.
Accountability and Audit
The responsibilities of the Directors and the auditor in connection with the
financial statements appear in the Statement of Responsibilities of Directors
and in the Independent Auditor's Report.
The Directors who held office at the date of this Report each confirm that, so
far as they are aware, there is no relevant audit information of which the
Company's auditor is unaware and that they have taken all the steps that they
could reasonably be expected to have taken as a Director in order to make
themselves aware of any relevant audit information and to establish that the
Company's auditor is aware of that information. Further, there have been no
important, additional events since the year end which warrant disclosure. The
Directors confirm that no non-audit services were provided by the auditor
during the Year and, after reviewing the auditor's procedures in connection
with the provision of any such services, remain satisfied that the auditor's
objectivity and independence is being safeguarded.
Going Concern
The Directors have undertaken a rigorous review and consider both that there
are no material uncertainties and that the adoption of the going concern basis
of accounting is appropriate. This conclusion is consistent with the longer
term Viability Statement.
The Company's assets consist primarily of a diverse portfolio of listed equity
shares nearly all of which, in most circumstances, are realisable within a
short timescale. The Board has set limits for borrowing and regularly reviews
the level of any gearing, cash flow projections and compliance with banking
and loan note covenants.
The Directors are mindful of the principal risks and uncertainties and have
reviewed forecasts detailing revenue and liabilities. The Directors are
satisfied that the Company has adequate resources to continue in operational
existence for the foreseeable future, being at least 12 months from the date
of approval of this Annual Report.
Relations with Shareholders
The Directors place great importance on communication with shareholders noting
that the Company's shareholder register is retail-dominated. The Manager,
together with the Company's broker, regularly meets with current and
prospective shareholders to discuss performance. The Board receives investor
relations updates from the Manager on at least a quarterly basis. Any changes
in the shareholder register as well as shareholder feedback is discussed by
the Directors at each Board meeting.
Regular updates are provided to shareholders through the Annual Report, Half
Yearly Report, monthly factsheets and company announcements, including daily
net asset values, all of which are available through the Company's website at:
murray-income.co.uk. The Annual Report is also widely distributed to other
parties who have an interest in the Company's performance. Shareholders and
investors may obtain up-to-date information on the Company through its website
or by contacting the Company via email to: new.india@abrdn.com.
The Board's policy is to communicate directly with shareholders and their
representative bodies without the involvement of the management group (either
the Company Secretary or abrdn) in situations where direct communication is
required and representatives from the Board offer to meet with major
shareholders on an annual basis in order to gauge their views. The Company
Secretary acts on behalf of the Board, not the Manager, and there is no
filtering of communication. At each Board meeting the Board receives full
details of any communication from shareholders to which the Chair responds, as
appropriate, on behalf of the Board.
In addition, in relation to institutional shareholders, members of the Board
may be either accompanied by the Manager or conduct meetings in the absence of
the Manager.
The Company's Annual General Meeting ordinarily provides a forum, both formal
and informal, for shareholders to meet and discuss issues with the Directors
and Investment Manager. The Notice of AGM included within the Annual Report is
normally sent out at least 20 working days in advance of the meeting.
The Company will also hold an online presentation for existing and potential
shareholders on 17 October 2024. Further information on how to register may be
found in the Chair's Statement.
Relations with Suppliers, Customers and Others
The Directors have regard to the need to foster the Company's business
relationships with suppliers, customers and others, and the effect of that
regard, including on the principal decisions taken by the Company during the
financial year; further information on the Company's responsibilities under
Section 172 of Companies Act 2006 may be found below.
Independent Auditor
Shareholders approved the re-appointment of PricewaterhouseCoopers LLP as the
Company's auditor at the AGM on 7 November 2023 and resolutions to approve its
re-appointment for the year to 30 June 2025, and to authorise the Audit
Committee to determine its remuneration, will be proposed at the forthcoming
AGM.
Substantial Interests
As at 30 June 2024 and 31 August 2024 the following interests over 3% in the
issued Ordinary share capital of the Company (excluding treasury shares) had
been disclosed in accordance with the requirements of the FCA's Guidance and
Transparency Disclosure Rules:
30 June 2024 31 August 2024
Shareholder Number of shares held % Number of shares held %
held
held
Interactive Investor 24,953,313 23.8 24,652,971 23.7
(execution only)
Hargreaves Lansdown 15,848,366 15.1 15,782,138 15.2
(execution only)
Rathbones 10,361,162 9.9 10,129,234 9.7
A J Bell 4,214,331 4.0 4,252,875 4.1
(execution only)
Halifax Share Dealing 3,543,971 3.4 3,504,149 3.4
(execution only)
The Company had not been notified of any change to the above interests, at 31
August 2024, as at the date of approval of this Report.
Future Developments of the Company
Disclosures relating to the future developments of the Company may be found in
the Chair's Statement.
Disclosures Required by FCA Listing Rule 9.8.4
This rule requires listed companies to report certain information in a single
identifiable section of their annual financial reports. None of the prescribed
information is applicable to the Company in the Year.
Financial Instruments
The financial risk management objectives and policies arising from financial
instruments and the exposure of the Company to risk are disclosed in note 18
to the financial statements.
Annual General Meeting ("AGM")
Among the special business being put at the AGM of the Company to be held on 5
November 2024, the following resolutions will be proposed:
Authority to allot shares and disapply pre-emption rights (Resolutions 10 and 11)
Ordinary resolution 10 will renew the authority to allot the unissued share
capital up to an aggregate nominal amount of £1.3m (equivalent to
approximately 5.2m Ordinary shares, or, if less, 5% of the Company's existing
issued share capital (excluding treasury shares) on the date of passing of
this resolution). Such authority will expire on the date of the AGM in 2025 or
on 31 December 2025, whichever is earlier. This means that the authority will
require to be renewed at the next AGM.
When shares are to be allotted for cash, Section 561 of the Companies Act 2006
(the "Act") provides that existing shareholders have pre-emption rights and
that the new shares to be issued, or sold from treasury, must be offered first
to such shareholders in proportion to their existing holding of shares.
However, shareholders can, by special resolution, authorise the Directors to
allot shares or sell from treasury otherwise than by a pro rata issue to
existing shareholders. Special resolution 11 will, if passed, give the
Directors power to allot for cash or sell from treasury equity securities up
to an aggregate nominal amount of £2.6m (equivalent to approximately 10.4m
Ordinary shares, or, if less, 10% of the Company's existing issued share
capital (excluding treasury shares) on the date of passing of this resolution,
as if Section 561 of the Act does not apply). This authority will also expire
on the date of the AGM in 2025 or on 31 December 2025, whichever is earlier.
This authority will not be used in connection with a rights issue by the
Company.
The Directors intend to use the authorities given by resolutions 10 and 11 to
allot shares or sell shares from treasury and disapply pre-emption rights only
in circumstances where this will be clearly beneficial to shareholders as a
whole. The issue proceeds would be available for investment in line with the
Company's investment policy. No issue of shares will be made which would
effectively alter the control of the Company without the prior approval of
shareholders in general meeting. It is the intention of the Board that any
issue of shares or any re-sale of treasury shares would only take place at a
price not less than 0.5% above the NAV per share prevailing at the date of
sale. It is also the intention of the Board that sales from treasury would
only take place when the Board believes that to do so would assist in the
provision of liquidity to the market.
Purchase of the Company's own Ordinary shares (Resolution 12)
At the AGM held on 7 November 2023, shareholders approved the renewal of the
authority permitting the Company to repurchase its Ordinary shares. The
Directors wish to renew the authority given by shareholders at the previous
AGM. A share buyback facility enhances shareholder value by acquiring shares
at a discount to NAV as and when the Directors consider this to be
appropriate. The purchase of shares, when they are trading at a discount to
NAV per share, should result in an increase in the NAV per share for the
remaining shareholders. This authority, if conferred, will only be exercised
if to do so would result in an increase in the NAV per share for the remaining
shareholders and if it is in the best interests of shareholders generally. Any
purchase of shares will be made within guidelines established from time to
time by the Board. It is proposed to seek shareholder authority to renew this
facility for another year at the AGM.
Under the FCA's Listing Rules, the maximum price that may be paid on the
exercise of this authority must not exceed the higher of (i) 105% of the
average of the middle market quotations for the shares over the five business
days immediately preceding the date of purchase and (ii) the higher of the
last independent trade and the highest current independent bid on the trading
venue where the purchase is carried out. The minimum price which may be paid
is 25p per share. Shares which are purchased under this authority will either
be cancelled or held as treasury shares. Special resolution 12 will renew the
authority to purchase in the market a maximum of 14.99% of shares in issue at
the date of passing of the resolution (amounting to approximately 15.5m
Ordinary shares). Such authority will expire on the date of the AGM in 2025,
or on 31 December 2025, whichever is earlier. This means in effect that the
authority will have to be renewed at the next AGM, or earlier, if the
authority has been exhausted. No dividends may be paid on any shares held in
treasury and no voting rights will attach to such shares. The benefit of the
ability to hold treasury shares is that such shares may be sold at short
notice. This should give the Company greater flexibility in managing its share
capital, and improve liquidity in its shares.
Recommendation
The Directors believe that the resolutions to be proposed at the AGM are in
the best interests of the Company and its shareholders as a whole, and
recommend that shareholders vote in favour of the resolutions, as the
Directors intend to do in respect of their own beneficial shareholdings,
amounting to 21,404 Ordinary shares, representing 0.02% of the Company's
issued share capital (excluding treasury shares) at 30 June 2024.
On behalf of the Board
Peter Tait
Chair
17 September 2024
Statement of Corporate Governance
Murray Income Trust PLC (the "Company") is committed to high standards of
corporate governance. The Board is accountable to the Company's shareholders
for good governance and this statement describes how the Company has applied
the principles identified in the UK Corporate Governance Code as published in
July 2018 (the "UK Code"), which is available on the Financial Reporting
Council's (the "FRC") website: frc.org.uk, and is applicable for the Company's
Year.
The Board has also considered the principles and provisions of the AIC Code of
Corporate Governance as published in February 2019 (the "AIC Code"). The AIC
Code addresses the principles and provisions set out in the UK Code, as well
as setting out additional provisions on issues that are of specific relevance
to the Company. The AIC Code is available on the AIC's website: theaic.co.uk.
The Board considers that reporting against the principles and provisions of
the AIC Code, which has been endorsed by the FRC, provides more relevant
information to shareholders.
The Board confirms that, during the Year, the Company has complied with the
principles and provisions of the AIC Code and the relevant provisions of the
UK Code, except for those provisions relating to:
· the role and responsibility of the chief executive;
· executive directors' remuneration; and
· the requirement for an internal audit function.
The Board considers that these provisions are not relevant to the position of
the Company being an externally managed investment company. In particular, all
of the Company's day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no executive
directors, employees or internal operations. The Company has therefore not
reported further in respect of these provisions.
Information on how the Company has applied the AIC Code, the UK Code, the
Companies Act 2006 and the FCA's DTR 7.2.6 can be found in the published
Annual Report:
· the composition and operation of the Board and its Committees are
detailed in the Directors' Report and Report of the Audit Committee;
· the Board's policy on diversity, and related information, is in the
Directors' Report;
· the Company's approach to internal control and risk management is
detailed in the Report of the Audit Committee;
· the contractual arrangements with the Manager and details of the annual
assessment of the Manager may be found in the Directors' Report and section on
the Management Engagement Committee;
· the Company's capital structure and voting rights are summarised in the
Directors' Report;
· the substantial interests disclosed in the Company's shares are listed in
the Directors' Report;
· the rules concerning the appointment and replacement of Directors are
contained in the Company's Articles of Association and are summarised in the
Directors' Remuneration Report. There are no agreements between the Company
and its Directors concerning compensation for loss of office; and
· the powers to issue or buyback the Company's ordinary shares, which are
sought annually, and any amendments to the Company's Articles of Association
require a special resolution (75% majority) to be passed by shareholders and
information on these resolutions may be found in the Directors' Report.
By order of the Board
abrdn Holdings Limited, Secretaries
1 George Street
Edinburgh
EH2 2LL
17 September 2024
Directors' Remuneration Report
The Remuneration Committee, established by the Board, has prepared this
Directors' Remuneration Report which consists of three parts:
a) a Remuneration Policy, which is subject to a binding shareholder vote
every three years, was most recently voted on at the AGM on 7 November 2023
where the result of the poll on the relevant resolution was: For - 33,554,452
votes (99.2%); Against - 277,825 votes (0.8%); and Withheld - 217,548 votes.
The Remuneration Policy will be put to a shareholder vote no later than the
AGM in 2026;
b) an annual Implementation Report, which is subject to an advisory
vote; and
c) an Annual Statement.
The fact that the Remuneration Policy is subject to a binding vote at least
every three years does not imply any change on the part of the Company. The
principles remain the same as for previous years. There has been no change
to the Remuneration Policy during the period of this Report, since the AGM on
7 November 2023.
The law requires the Company's auditor to audit certain of the disclosures
provided in this report. Where disclosures have been audited, they are
indicated as such. The independent auditor's opinion is included in the
published Annual Report.
Remuneration Policy
This part of the Report provides details of the Company's Policy for Directors
of the Company, which takes into consideration corporate governance
principles, and which was approved by shareholders at the AGM on 7 November
2023. The Board considers, where raised, shareholders' views on Directors'
remuneration.
Fees for Directors are determined by the Board within the limit stated in the
Company's Articles of Association (the "Articles"). The Articles limit
aggregate fees to £250,000 per annum. The limit can be amended by shareholder
resolution and was last increased at the AGM in 2017.
The remuneration of Directors is reviewed annually, although such review may
not necessarily result in any change. The annual review ensures that
remuneration supports the strategic objectives of the Company, reflects
Directors' duties and responsibilities, expected time commitment, the level of
skills and experience required, and the need for Directors to maintain on an
ongoing basis an appropriate level of knowledge of regulatory and compliance
requirements in an industry environment of increasing complexity. Remuneration
should be fair and comparable to that of similar investment trusts.
The Policy applies to any new Directors who will be paid the appropriate fee
based on the Directors' fees level in place at the date of appointment.
· The Company has no employees and consequently has no policy on the
remuneration of employees.
· All the Directors are non-executive and are appointed under the terms of
letters of appointment.
· Directors do not have service contracts.
· No incentive or introductory fees will be paid to encourage a
directorship.
· Directors' remuneration is not subject to any performance-related fee.
· Directors are not eligible for bonuses, pension benefits, share options,
long term incentive schemes or other benefits.
· Directors are not entitled to exit payments or any compensation for loss
of office.
· Directors are entitled to be reimbursed for any reasonable expenses
properly incurred in the performance of their duties.
· Directors can be paid additional discretionary payments for services
which , in the opinion of the Directors, are outside of the scope of the
ordinary duties of a Director.
· The terms of appointment provide that a Director may be removed subject
to three months' written notice.
· Directors must retire and be subject to re-election at the first AGM
after their appointment; the Company has also determined that every Director
will stand for re-election at each AGM.
· No Director will stand for re-election as a Director of the Company later
than the AGM following the ninth anniversary of their appointment to the Board
unless in relation to exceptional circumstances.
· The Company indemnifies its Directors for all costs, charges, losses
together with certain expenses and liabilities which may be incurred in the
discharge of duties, as a Director of the Company.
Directors' & Officers' liability insurance cover is maintained by the
Company on behalf of the Directors.
Implementation Report
Directors' Fees
The level of fees for the Year and the preceding year are set out in the table
below. There are no further fees to disclose as the Company has no employees,
Chief Executive or Executive Directors.
30 June 2024 30 June 2023
£
£
Chair 43,125 41,200
Audit Committee Chair 35,950 34,300
Senior Independent Director 31,625 30,200
Director 28,750 27,500
Directors' fees were last revised on 1 July 2023. The Board carried out a
review of Directors' annual fees during the Year by reference to inflation,
measured by the increase in the Consumer Prices Index since 1 July 2023, and
taking account of peer group comparisons by sector and by market
capitalisation. Following this review, it was decided that the Directors' base
fee would be increased by approximately 3.5% (2023 - 4.5%), with similar
increases for other positions. With effect from 1 July 2024, Directors' fees
are £44,625 for the Chair, £37,200 for the Audit Committee Chair, £32,725
for the Senior Independent Director and £29,750 for the other Directors.
These increased fees are considered to reflect increases in inflation and to
be commensurate with the time commitment required of Directors of the Company
to adequately discharge their responsibilities, taking into account
increasingly complex and onerous regulatory requirements.
Company Performance
The graph (in the published Annual Report) shows the share price total return
(assuming all dividends are reinvested) to Ordinary shareholders compared to
the total return from the FTSE All-Share Index for the ten year period ended
30 June 2024 (rebased to 100 at 30 June 2014). This index was chosen for
comparison purposes, as it is the benchmark used for investment performance
measurement purposes.
Statement of Proxy Voting at Annual General Meeting
At the Company's latest AGM, held on 7 November 2023, shareholders approved
the Directors' Remuneration Report (other than the Directors' Remuneration
Policy) in respect of the year ended 30 June 2023, where the result of the
poll on the relevant resolution was: For - 33,676,593 (99.4%); Against -
192,560 votes (0.6%); and Withheld - 180,672 votes.
Audited Information
Directors' Remuneration
The Directors received remuneration in the form of fees and taxable expenses
as set out in the tables below
The Directors' remuneration excludes any employers' national insurance
contributions, if applicable. All remuneration is fixed in nature and there is
no variable remuneration. Fees are pro-rated where a change takes place during
a financial year. No payments were made to third parties. There are no other
fees to disclose as the Company has no employees, chief executive or executive
directors. Taxable expenses refer to amounts claimed by Directors for
travelling to attend meetings.
Directors' Remuneration Table (audited)
Year ended 30 June 2024 Year ended 30 June 2023
Fees Taxable Expenses Fees Taxable Expenses
£ £ Total £ £ Total
£ £
Peter Tait (appointed Chair on 7 November 2023) 39,068 573 39,641 30,200 907 31,107
Stephanie Eastment 35,950 511 36,461 34,300 188 34,488
Alan Giles( ) (appointed SID on 7 November 2023) 30,611 371 30,982 27,500 91 27,591
Nandita Sahgal Tully 28,750 476 29,226 27,500 204 27,704
Angus Franklin (appointed a Director on 1 January 2024) 14,375 - 14,375 n/a n/a n/a
Neil Rogan (retired as a Director on 7 November 2023) 15,213 1,446 16,659 41,200 502 41,702
Merryn Somerset Webb (retired as a Director on 7 November 2023) 10,142 - 10,142 27,500 1,312 28,812
Total 174,109 3,377 177,486 188,200 3,204 191,404
Annual Percentage Change in Directors' Remuneration
The table below sets out, for the Directors who served during the Year, the
annual percentage change in Directors' fees for the past five years.
Year ended 30 June 2024 Year ended 30 June 2023 Year ended 30 June 2022 Year ended 30 June 2021 Year ended 30 June 2020
Fees Fees Fees Fees Fees
% % % % %
Peter Tait (appointed SID on 2 November 2021 and Chair on 7 November 2023) 29.4 (C) 5.6 12.1 0.0 0.0
Stephanie Eastment 4.8 2.4 11.7 0.0 14.3
Alan Giles (appointed on 17 November 2020) 11.3 (C) 2.6 68.9 (B) See note (A) n/a
Nandita Sahgal Tully (appointed on 3 November 2021) 4.5 55.2 (B) See note (A) n/a n/a
Angus Franklin (appointed on 1 January 2024) See note (A) n/a n/a n/a n/a
Neil Rogan (retired on 7 November 2023) See note (A) 2.5 7.2 0.0 0.0
Merryn Somerset Webb (appointed on 7 August 2019 and retired on 7 November See note (A) 2.6 5.1 11.0 (B) See note (A)
2023)
(A) A meaningful percentage change figure cannot be calculated in the year
of appointment or for a year when a Director resigns/retires.
(B) If the Director had been appointed for the whole of the previous year,
the annual change figure would have been nil for Merryn Somerset Webb, 5.1%
for Alan Giles and 2.6% for Nandita Sahgal Tully.
(C) In a year of change to a more senior role, and in the following year,
the percentage change figures will be distorted to show a higher figure than
the 'real' change of fee levels in the year.
Spend on Pay
As the Company has no employees, the Directors do not consider it appropriate
to present a table comparing remuneration paid to Directors with distributions
to shareholders. However, for ease of reference, the total fees paid to
Directors are shown in the table below while dividends paid to shareholders
are set out in note 7 and share buybacks are detailed in note 15.
Directors' Interests in the Company (audited)
The Directors are not required to have a shareholding in the Company. The
Directors (including their persons closely associated) at 30 June 2024, and 30
June 2023, had no interest in the share capital of the Company other than
those interests shown below, all of which are beneficial interests, unless
indicated otherwise:
30 June 2024 30 June 2023
Director Ord 25p Ord 25p
Peter Tait 7,000 7,000
Alan Giles 5,000 5,000
Stephanie Eastment 4,500 (A) 4,500 (A)
Nandita Sahgal Tully 560 560
Angus Franklin 6,044 n/a
Neil Rogan 44,719 (B) 44,719
Merryn Somerset Webb 3,449 (B) 3,449
(A) Of which 1,700 shares were held non-beneficially
(B) As at date of retirement on 7 November 2023
There have been no changes to the Directors' interests in the share capital of
the Company since the year end up to the date of approval of this Report.
Annual Statement
On behalf of the Board and in accordance with Part 2 of Schedule 8 of the
Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013, I confirm that the above Report on Remuneration Policy and
Remuneration Implementation summarises, as applicable, for the Year:
· the major decisions on Directors' remuneration;
· any substantial changes relating to Directors' remuneration made during
the Year; and
· the context in which the changes occurred and in which decisions have
been taken.
On behalf of the Board
Alan Giles
Chair of the Remuneration Committee
17 September 2024
Audit Committee Report
Stephanie Eastment is Chair of the audit committee, membership of which
comprises all of the Directors of the Company, with the exception of the Chair
of the Board. In compliance with the July 2018 UK Code on Corporate Governance
(the "Code"), the Chair of the Board is not a member of the committee but
attends the committee by invitation of the committee Chair.
The Directors have satisfied themselves that at least two of the committee's
members have recent and relevant financial experience - Stephanie Eastment and
Nandita Sahgal Tully are both Fellows, and Angus Franklin is a Member, of the
Institute of Chartered Accountants in England & Wales - and that,
collectively, the committee possesses competence relevant to investment
trusts.
The committee meets at least twice each year, in line with the cycle of annual
and half-yearly reports, which is considered by the Directors to be a
frequency appropriate to the size and complexity of the Company.
Role of the Audit Committee
In summary, the committee's main audit review functions are:
· to review and monitor the internal control systems and risk management
systems (including review of non-financial risks) on which the Company is
reliant (see "Internal Controls and Risk Management", below);
· to consider annually whether there is a need for the Company to have its
own internal audit function;
· to monitor the integrity of the half-yearly and annual financial
statements of the Company by reviewing, and challenging where necessary, the
actions and judgements of the Manager;
· to review, and report to the Board on, the significant financial
reporting issues and judgements made in connection with the preparation of the
Company's financial statements, half-yearly reports, announcements and related
formal statements;
· to review the content of the Annual Report and financial statements and
advise the Board on whether, taken as a whole, it is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy;
· to meet with the external auditor to review their proposed audit
programme of work and the findings as auditor;
· to develop and implement a policy on the engagement of the auditor to
supply non-audit services;
· to review a statement from the Manager detailing the arrangements in
place for the Manager's staff, in confidence, to escalate concerns about
possible improprieties in matters of financial reporting or other matters
("whistleblowing");
· to oversee and manage audit tenders and selection processes, to make
recommendations to the Board in relation to the appointment of the auditor and
removal of the auditor and to approve the remuneration and terms of engagement
of the auditor;
· to monitor and review annually the auditor's independence, objectivity,
effectiveness, resources and qualification; and
· to investigate the reasons giving rise to any resignation of the auditor
and consider whether any action is required.
The committee fulfilled all the above required roles and responsibilities
during the Year.
Internal Controls and Risk Management
Through the committee, the Board is ultimately responsible for the Company's
system of internal control and risk management and for reviewing its
effectiveness. The committee confirms that there is a robust process for
identifying, evaluating and managing the Company's significant business and
operational risks, that it has been in place for the Year and up to the date
of approval of the Annual Report and Financial Statements, and that it is
regularly reviewed by the Board and accords with the risk management and
internal control guidance for directors in the Code.
The design, implementation and maintenance of controls and procedures to
safeguard the assets of the Company and to manage its affairs extends to
operational and compliance controls and risk management.
The Directors have delegated the investment management of the Company's assets
to the Manager within overall guidelines and this embraces implementation of
the system of internal control, including financial, operational and
compliance controls and risk management. Internal control systems are
monitored and supported by the Manager's Internal Audit department which
undertakes periodic examination of business processes and ensures that
recommendations to improve controls are implemented.
Risks are identified and documented through a risk management framework by
each function within the Manager's activities. Risk is considered in the
context of the FRC and AIC Code guidance, and includes financial, regulatory,
market, operational and reputational risks. This helps the internal audit risk
assessment model identify those functions for review. Any weaknesses
identified are reported to the Board, and timetables are agreed for
implementing improvements to systems. The implementation of any remedial
action required is monitored and feedback provided to the Board.
The principal risks and uncertainties facing the Company are identified in the
Overview of Strategy.
The key components designed to provide effective internal control are outlined
below:
· the Manager prepares forecasts and management accounts which allow the
Board to assess the Company's activities and review its performance; the
emphasis is on obtaining the relevant degree of assurance and not merely
reporting by exception;
· the Board and Manager have agreed clearly-defined investment criteria,
specified levels of authority and exposure limits. Reports on these, including
performance statistics and investment valuations, are regularly submitted to
the Board and there are meetings with the Manager as appropriate;
· as a matter of course, the Manager's compliance department continually
reviews the Manager's operations;
· written agreements are in place which specifically define the roles and
responsibilities of the Manager and other third-party service providers and
the committee reviews, where relevant, ISAE3402 Reports, a global assurance
standard for reporting on internal controls for service organisations; in
particular, the Board receives equivalent assurance from Link Group, the
Company's Registrar; and
· at its September 2024 meeting, the committee carried out its annual
assessment of internal controls for the Year including the internal audit and
compliance functions, and taking account of events since 30 June 2024.
In addition, the Manager ensures that clearly documented contractual
arrangements exist in respect of any activities that have been delegated to
external professional organisations. A senior member of the Manager's Internal
Audit department reports six-monthly to the committee and has direct access to
the Directors at any time.
Internal control systems are designed to meet the Company's particular needs
and the risks to which it is exposed. Accordingly, the internal control
systems are designed to manage, rather than eliminate, the risk of failure to
achieve business objectives and, by their nature, can only provide reasonable,
and not absolute, assurance against misstatement and loss.
Significant Risks for the Audit Committee
During its review of the Company's financial statements for the Year, the
committee considered the following significant risks including, in particular,
those communicated by the auditor as key areas of audit emphasis during their
planning and reporting of the year end audit:
Valuation and Existence of Investments
How the risk was addressed
The valuation of investments is undertaken in accordance with the accounting
policies, disclosed in note 2(e) to the financial statements. All investments
are considered liquid and quoted in active markets and have been categorised
as Level 1 within the FRS 102 fair value hierarchy and can be verified against
daily market prices. The portfolio is reviewed and verified by the Manager on
a regular basis and management accounts, including a full portfolio listing,
are prepared each month and circulated to the Board. The Company used the
services of an independent depositary (BNP Paribas Trust Corporation UK
Limited until 31 May 2024 and BNP Paribas SA, London Branch thereafter)
through which the assets of the Company were held. The depositary confirmed
that the accounting records correctly reflected all investee holdings and that
these agreed to custodian records.
Income Recognition
How the risk was addressed
The recognition of investment income is undertaken in accordance with
accounting policy note 2(b) to the financial statements. Special dividends are
allocated to the capital or revenue accounts according to the nature of the
payment and the intention of the underlying company. The Directors also
review, at each meeting, the Company's income, including income received,
revenue forecasts and dividend comparisons.
Internal Auditor
The Board has considered the need for an internal audit function but, because
the Company is externally-managed, the Board has decided to place reliance on
the Manager's risk management/internal controls systems and internal audit
procedures.
External Auditor
Review of the Auditor
The committee has reviewed the effectiveness of the auditor including:
· independence - the auditor discusses with the committee, at least
annually, the steps it takes to ensure its independence and objectivity,
including the level of non-audit fees it has received from the Company, and
makes the committee aware of any potential issues, explaining all relevant
safeguards;
· quality of audit work including the ability to resolve issues in a timely
manner - identified issues are satisfactorily and promptly resolved;
· its communications/presentation of outputs - the explanation of the audit
plan, any deviations from it and the subsequent audit findings are
comprehensive and comprehensible, and working relationship with management -
the auditor has a constructive working relationship with the Manager; and
· quality of people and service including continuity and succession plans -
the audit team is made up of sufficient, suitably experienced staff with
provision made for knowledge of the investment trust sector and retention of
that knowledge on rotation of the partner.
For the Year, the committee was satisfied with the auditor's effectiveness,
independence and the objectivity of the audit process.
Re-appointment of the Auditor
This year's audit of the Company's Annual Report is the fifth performed by
PricewaterhouseCoopers LLP since their appointment following an audit tender
process held by the Company in 2019.
Shareholders will have the opportunity to vote on the re-appointment of
PricewaterhouseCoopers LLP as auditor and to authorise the committee to
approve the auditor's remuneration, as Ordinary Resolutions 8 and 9, at the
AGM on 5 November 2024.
Provision of Non-Audit Services
The committee has put in place a policy on the supply of non-audit services
provided by the auditor. Such services are considered on a case-by-case basis
and may only be provided if the service is at a reasonable and competitive
cost and does not constitute a conflict of interest or potential conflict of
interest or prevent the auditor from remaining objective and independent. All
non-audit services require the pre-approval of the committee. No non-audit
fees were paid to the auditor during the Year (2023 - nil). The committee
confirms that it has complied with Part 5.1 of the Competitions and Market
Authority's Order 2014.
Stephanie Eastment,
Chair of the Audit Committee
17 September 2024
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law)
including FRS 102 'The Financial Reporting Standard applicable in the UK and
Republic of Ireland'. Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the
Company for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
· adopt a going concern basis of accounting for the financial statements
unless it is inappropriate to assume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, Directors' Remuneration Report, Strategic
Report and Statement of Corporate Governance that comply with that law and
those regulations.
The financial statements are published on murray-income.co.uk which is a
website maintained by the Company's Manager. The work carried out by the
auditor does not involve consideration of the maintenance and integrity of the
website and, accordingly, the auditor accepts no responsibility for any
changes that have occurred to the financial statements since being initially
presented on the website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Each of the Directors confirms to the best of his or her knowledge that:
· the financial statements, prepared in accordance with the applicable
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Company;
· the Annual Report includes a fair review of the development and
performance of the business and
the position of the Company, together with a description of the principal
risks and uncertainties that the Company faces;
· in the opinion of the Board, the Annual Report and financial statements
taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's position and
performance, business model and strategy; and
· the financial statements are prepared on an ongoing concern basis.
For and on behalf of the Board of Murray Income Trust PLC
Peter Tait
Chair
17 September 2024
Statement of Comprehensive Income
Year ended 30 June 2024 Year ended 30 June 2023
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments 10 - 58,747 58,747 - 32,602 32,602
Currency gains - - - - 733 733
Income 3 43,899 - 43,899 48,879 - 48,879
Investment management fees 4 (1,108) (2,584) (3,692) (1,141) (2,663) (3,804)
Administrative expenses 5 (1,334) - (1,334) (1,390) - (1,390)
Net return before finance costs and tax 41,457 56,163 97,620 46,348 30,672 77,020
Finance costs 6 (770) (1,797) (2,567) (735) (1,714) (2,449)
Net return before tax 40,687 54,366 95,053 45,613 28,958 74,571
Taxation 8 (274) - (274) (1,085) - (1,085)
Net return after tax 40,413 54,366 94,779 44,528 28,958 73,486
Return per Ordinary share 9 37.4p 50.2p 87.6p 38.7p 25.2p 63.9p
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 year.
The accompanying notes are an integral part of the financial statements.
Statement of Financial Position
As at As at
30 June 2024 30 June 2023
Notes £'000 £'000
Non-current assets
Investments at fair value through profit or loss 10 1,073,534 1,098,311
Current assets
Other debtors and receivables 11 12,512 7,274
Cash and cash equivalents 12 25,148 15,115
37,660 22,389
Creditors: amounts falling due within one year
Other payables (7,056) (5,997)
Bank loans (6,282) (6,378)
13 (13,338) (12,375)
Net current assets 24,322 10,014
Total assets less current liabilities 1,097,856 1,108,325
Non-current liabilities
Creditors: amounts falling due after more than one year
2.51% Senior Loan Notes (39,955) (39,941)
4.37% Senior Loan Notes (67,619) (69,200)
14 (107,574) (109,141)
Net assets 990,282 999,184
Capital and reserves
Share capital 15 29,882 29,882
Share premium account 438,213 438,213
Capital redemption reserve 4,997 4,997
Capital reserve 484,787 489,428
Revenue reserve 32,403 36,664
Total Shareholders' funds 990,282 999,184
Net asset value per Ordinary share 16
Debt at fair value 957.9p 911.7p
Debt at par value 946.0p 894.4p
The financial statements were approved by the Board of Directors and
authorised for issue on 17 September 2024 and were signed on its behalf by:
Peter Tait
Chairman
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Equity
For the year ended 30 June 2024
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2023 29,882 438,213 4,997 489,428 36,664 999,184
Net return after tax - - - 54,366 40,413 94,779
Buyback of Ordinary shares for treasury 15 - - - (59,007) - (59,007)
Dividends paid 7 - - - - (44,674) (44,674)
Balance at 30 June 2024 29,882 438,213 4,997 484,787 32,403 990,282
For the year ended 30 June 2023
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'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 - - - 28,958 44,528 73,486
Buyback of Ordinary shares for treasury 15 - - - (42,202) - (42,202)
Dividends paid 7 - - - - (41,355) (41,355)
Balance at 30 June 2023 29,882 438,213 4,997 489,428 36,664 999,184
The accompanying notes are an integral part of the financial statements.
Statement of Cash Flows
Year ended Year ended
30 June 2024 30 June 2023
Notes £'000 £'000
Operating activities
Net return before finance costs and taxation 97,620 77,020
(Decrease)/increase in accrued expenses (703) 783
Overseas withholding tax (1,332) (1,458)
Increase in dividend income receivable (422) (324)
Decrease/(increase) in interest income receivable 32 (54)
Interest paid (2,858) (2,196)
Gains on investments 10 (58,747) (32,602)
Amortisation of loan note expenses 6 14 12
Accretion of loan note book cost 6 (1,581) (1,581)
Foreign exchange gains - (733)
(Increase)/decrease in other debtors (2) 47
Stock dividends included in investment income 3 - (1,006)
Net cash inflow from operating activities 32,021 37,908
Investing activities
Purchases of investments (177,080) (180,130)
Sales of investments 259,782 218,912
Net cash inflow from investing activities 82,702 38,782
Financing activities
Dividends paid 7 (44,674) (41,355)
Buyback of Ordinary shares for treasury (59,920) (40,955)
Repayment of bank loans (6,327) (6,755)
Draw down of bank loans 6,270 6,664
Net cash outflow from financing activities (104,651) (82,401)
Increase/(decrease) in cash 10,072 (5,711)
Analysis of changes in cash during the year
Opening balance 15,115 20,131
Effect of exchange rate fluctuations on cash held 17 (39) 695
Increase/(decrease) in cash as above 17 10,072 (5,711)
Closing balance 25,148 15,115
Represented by:
Cash at bank and in hand 12 1,045 1,227
Money market funds 12 24,103 13,888
25,148 15,115
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 30 June 2024
1. Principal activity
The Company is a closed-end investment company, registered in Scotland No
SC012725, with its Ordinary shares being listed on the London Stock Exchange.
2. Accounting policies
(a) Basis of preparation. The financial statements have been prepared in
accordance with Financial Reporting Standard 102, the Companies Act 2006 and
with the Statement of Recommended Practice 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts' issued in July 2022. The financial
statements are prepared in Sterling which is the functional currency of the
Company and rounded to the nearest £'000. They have also been prepared on the
assumption that approval as an investment trust will continue to be granted.
The accounting policies applied are unchanged from the prior year and have
been applied consistently.
The Directors have undertaken a rigorous review and consider both that there
are no material uncertainties and that the adoption of the going concern basis
of accounting is appropriate. This conclusion is consistent with the longer
term Viability Statement.
The Company's assets consist primarily of a diverse portfolio of listed equity
shares nearly all of which, in most circumstances, are realisable within a
very short timescale. The Board has set limits for borrowing and regularly
reviews the level of any gearing, cash flow projections and compliance with
banking and loan note covenants. The Directors are mindful of the principal
risks and uncertainties disclosed in the Overview of Strategy, and have
reviewed forecasts detailing revenue and liabilities. The Directors are
satisfied that the Company has adequate resources to continue in operational
existence for the foreseeable future being at least 12 months from the date of
approval of this Annual Report.
(b) Income. Dividends receivable on equity shares are treated as revenue for the
year on an ex-dividend basis. Where no ex-dividend date is available dividends
receivable on or before the year end are treated as revenue for the year.
Where the Company has elected to receive dividends in the form of additional
shares rather than cash, the amount of the cash dividend foregone is
recognised as revenue and any residual amount is recognised as capital.
Provision is made for any dividends not expected to be received. Special
dividends are credited to capital or revenue, according to the circumstances.
Dividend revenue is presented gross of any non-recoverable withholding taxes,
which are disclosed separately within the Statement of Comprehensive Income.
Interest receivable from cash and short-term deposits and stock lending income
is recognised on an accruals basis.
(c) Expenses. All expenses are accounted for on an accruals basis. All expenses
are charged through the revenue column of the Statement of Comprehensive
Income except as follows:
- transaction costs on the acquisition or disposal of investments are
recognised as a capital item in the Statement of Comprehensive Income.
- expenses are charged as a capital item in the Statement of Comprehensive
Income where a connection with the maintenance or enhancement of the value of
the investments can be demonstrated. In this respect the investment management
fee has been allocated 30% to revenue and 70% to capital to reflect the
Company's investment policy and prospective income and capital growth.
(d) Taxation. Taxation represents the sum of tax currently payable and deferred
tax. Any tax payable is based on the taxable profit for the year. Taxable
profit differs from net profit as reported in the Statement of Comprehensive
Income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Company's liability for current tax is calculated using tax
rates that were applicable at the Statement of Financial Position date.
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the Statement of Financial Position date, where
transactions or events that result in an obligation to pay more tax in the
future or right to pay less tax in the future have occurred at the Statement
of Financial Position date. This is subject to deferred tax assets only being
recognised if it is considered more likely than not that there will be
suitable profits from which the future reversal of the underlying timing
differences can be deducted. Timing differences are differences arising
between the Company's taxable profits and its results as stated in the
financial statements which are capable of reversal in one or more subsequent
periods. Deferred tax is measured on a non-discounted basis at the tax rates
that are expected to apply in the periods in which timing differences are
expected to reverse, based on tax rates and laws enacted or substantively
enacted at the Statement of Financial Position date.
Due to the Company's status as an investment trust company and the intention
to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided deferred tax on any capital
gains and losses arising on the revaluation or disposal of investments.
The tax effect of different items of income/gain and expenditure/loss is
allocated between capital and revenue within the Statement of Comprehensive
Income on the same basis as the particular item to which it relates using the
Company's effective rate of tax for the year, based on the marginal basis.
(e) Valuation of investments. The Company has chosen to apply the recognition and
measurement provisions of IAS 39 Financial Instruments: Recognition and
Measurement. All investments have been designated upon initial recognition at
fair value through profit or loss. This is done because all investments are
considered to form part of a group of financial assets which is evaluated on a
fair value basis, in accordance with the Company's documented investment
strategy, and information about the grouping is provided internally on that
basis. Investments are recognised and de-recognised at trade date where a
purchase or sale is under a contract whose terms require delivery within the
timeframe established by the market concerned, and are measured initially at
fair value. Subsequent to initial recognition, investments are valued at fair
value through profit or loss. For listed investments, this is deemed to be bid
market prices or closing prices for stocks traded on recognised stock
exchanges. Gains and losses arising from changes in fair value are included in
the net return for the period as a capital item in the Statement of
Comprehensive Income and are ultimately recognised in the capital reserve.
(f) Cash and cash equivalents. Cash comprises cash in hand and demand deposits.
Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and that are subject to insignificant
risk of change in value.
(g) Borrowings and finance costs. Borrowings of interest bearing bank loans and
2.51% Senior Loan Notes are recognised initially at the fair value of the
consideration received, net of any issue expenses, and subsequently at
amortised cost using the effective interest method. Borrowings of 4.37% Senior
Loan Notes, which were novated to the Company on the merger with Perpetual
Income and Growth Investment Trust plc, were recorded initially at their fair
value of £73,344,000 and are amortised over the remaining life of the loan
towards their redemption value of £60,000,000. The amortisation adjustment is
presented as a finance cost. Finance costs accrue using the effective interest
rate over the life of the borrowings and are allocated 30% to revenue and 70%
to capital.
(h) Traded options. The Company may enter into certain derivative contracts (eg
options) to gain exposure to the market. The option contracts are classified
as fair value through profit or loss, held for trading, and accounted for as
separate derivative contracts and are therefore shown in other assets or other
liabilities at their fair value ie market value. The premium on the option (as
with written options generally) is treated as the option's initial fair value
and is recognised over the life of the option in the revenue column of the
Statement of Comprehensive Income along with fair value changes in the open
position which occur due to the movement in underlying securities. Losses
realised on the exercise of the contracts are recorded in the capital column
of the Statement of Comprehensive Income as they arise. Where the Company
enters into derivative contracts to manage market risk, gains or losses
arising on such contracts are recorded in the capital column of the Statement
of Comprehensive Income.
(i) Segmental reporting. The Directors are of the opinion that the Company is
engaged in a single segment of business activity, being investment business.
Consequently, no business segmental analysis is provided.
(j) Nature and purpose of reserves
Share capital. The Ordinary share capital on the Statement of Financial
Position relates to the number of shares in issue and in treasury. Only when
the shares are cancelled, either from treasury or directly, is a transfer made
to the capital redemption reserve. This is a non-distributable reserve.
Share premium account. The balance classified as share premium includes the
premium above nominal value from the proceeds on issue of any equity share
capital comprising Ordinary shares of 25p and includes the premium arising
following the issue of shares on the combination with Perpetual Income and
Growth Investment Trust plc on 17 November 2020. This is a non-distributable
reserve.
Capital redemption reserve. The capital redemption reserve reflects the
cancellation of Ordinary shares, when an amount equal to the par value of the
Ordinary share capital is transferred from the share capital reserve to the
capital redemption reserve. This is a non-distributable reserve.
Capital reserve. This reserve reflects any gains or losses on investments
realised in the period along with any movements in the fair value of
investments held that have been recognised in the Statement of Comprehensive
Income. These include gains and losses from foreign currency exchange
differences. Additionally, expenses, including finance costs, are charged to
this reserve in accordance with (b) and (f) above. When making a distribution
to shareholders, the Directors determine profits available for distribution by
reference to 'Guidance on realised and distributable profits under the
Companies Act 2006' issued by the Institute of Chartered Accountants in
England and Wales and the Institute of Chartered Accountants of Scotland in
April 2017. The availability of distributable reserves in the Company is
dependent on those distributions meeting the definition of qualifying
consideration within the guidance and on available cash resources of the
Company and other accessible sources of funds. The distributable reserves are
therefore subject to any future restrictions or limitations at the time such
distribution is made.
The capital reserve, to the extent it constitutes realised profits, is
distributable. This may include unrealised (losses)/gains on investments where
these are readily convertible to cash. The amount of the capital reserve that
is distributable is complex to determine and is not necessarily the full
amount of the reserve as disclosed within these financial statements of
£484,787,000 as at 30 June 2024 as this is subject to fair value movements
and may not be readily realisable at short notice.
Revenue reserve. This reserve reflects all income and costs which are
recognised in the revenue column of the Statement of Comprehensive Income. The
revenue reserve is distributable by way of dividend.
(k) Treasury shares. When the Company buys back the Company's equity share capital
as treasury shares, the amount of the consideration paid, including directly
attributable costs and any tax effects, is recognised as a deduction from
equity. When these shares are sold or reissued subsequently, the net amount
received is recognised as an increase in equity, and the resulting surplus or
deficit on the transaction is transferred to or from the capital reserve.
(l) Dividends payable. Final dividends are recognised from the date on which they
are approved by Shareholders. Interim dividends are recognised when paid.
Dividends are shown in the Statement of Changes in Equity.
(m) Foreign currency. Transactions in foreign currencies are converted to Sterling
at the exchange rate ruling at the date of the transaction. Monetary assets
and liabilities and non-monetary assets held at fair value denominated in
foreign currencies are translated into Sterling at rates of exchange ruling at
the Statement of Financial Position date. Exchange gains and losses are taken
to the Statement of Comprehensive Income as a capital or revenue item
depending on the nature of the underlying item.
(n) Significant estimates and judgements. The Directors do not believe that any
accounting estimates or judgements have been applied to these financial
statements that have a significant risk of causing material adjustment to the
carrying amount of assets and liabilities.
3. Income
2024 2023
£'000 £'000
Income from investments
UK dividends (all listed):
- ordinary 27,115 32,132
- special - 353
Property income dividends 681 814
Overseas dividends (all listed)
- ordinary 12,277 10,343
- special - 756
Stock dividends - 1,006
40,073 45,404
Other income
Deposit interest 64 34
Money Market interest 926 682
Traded option premiums 2,836 2,759
3,826 3,475
Total income 43,899 48,879
There were no special dividends in the year (2023 - £1,109,000) which were
recognised as being revenue in nature.
During the year, the Company received premiums totalling £2,836,000 (2023 -
£2,759,000) in exchange for entering into derivative transactions. At the
year end there were no open positions (2023 - none).
4. Investment management fees
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fee 1,108 2,584 3,692 1,141 2,663 3,804
The management fee is based on 0.55% per annum for net assets up to £350
million, 0.45% per annum on the next £100 million of net assets and 0.25% per
annum for net assets over £450 million, calculated and payable monthly. The
fee has been allocated 30% to revenue and 70% to capital. The management
agreement is terminable on three months' notice. The fee payable to the
Manager at the year end was £622,000 (2023 - £1,273,000).
Under the terms of the management agreement, the value of the Company's
investments in other funds managed by abrdn is excluded from the calculation
of the management fee. The Company held no such other funds managed by abrdn
at the year end (2023 - none).
Subsequent to the year end, the Company and the Manager agreed to a change in
the management fee arrangements. With effect from 1 July 2024, the management
fee is to based on 0.35% per annum for net assets up to £1.1 billion and
0.25% per annum for net assets over £1.1 billion, calculated and payable
monthly.
5. Administrative expenses
2024 2023
£'000 £'000
Shareholders' services(A) 406 418
Directors' remuneration(B) 174 188
Secretarial fees(C) 75 75
Registrars fees 68 76
Depositary fees 78 90
Custody fees 72 68
Printing and postage 41 61
Auditors' remuneration:
- fees payable to the Company's auditors for the audit of the Company's annual 54 42
financial statements
Legal and professional fees 50 38
Irrecoverable VAT 137 164
Other expenses 179 170
1,334 1,390
(A) Includes savings scheme and other wrapper administration and promotion
expenses, paid to the Manager under a delegation agreement with the Manager to
cover promotional activities during the year. There was £98,000 (2023 -
£106,000) due to the Manager in respect of these promotional activities at
the year end.
(B) Refer to the Directors' Remuneration section of the Directors'
Remuneration Report.
(C) Payable to the Manager, balance outstanding of £38,000 (2023 - £19,000)
at the year end.
6. Finance costs
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Bank loans and overdraft interest 152 356 508 118 274 392
2.51% Senior Loan Note 301 703 1,004 301 703 1,004
4.37% Senior Loan Note 787 1,835 2,622 787 1,835 2,622
Amortisation of 2.51% Senior Loan Note issue expenses 4 10 14 3 9 12
Amortisation of 4.37% Senior Loan Note (474) (1,107) (1,581) (474) (1,107) (1,581)
770 1,797 2,567 735 1,714 2,449
Details of the Loan Notes and their amortisation are set out in note 14.
Finance costs are allocated 30% to revenue and 70% to capital.
7. Ordinary dividends on equity shares
2024 2023
Rate £'000 Rate £'000
Fourth interim dividend previous year 12.75p 14,100 11.25p 13,128
First interim dividend current year 9.50p 10,334 8.25p 9,556
Second interim dividend current year 9.50p 10,208 8.25p 9,431
Third interim dividend current year 9.50p 10,032 8.25p 9,337
Return of unclaimed dividends - (97)
44,674 41,355
The fourth interim dividend for 2024 of 10.00p per Ordinary share has not been
included as a liability in these financial statements as it was not paid until
after the reporting date (12 September 2024).
The following table sets out the total dividends paid and proposed in respect
of the financial year, which is the basis on which the requirements of Section
1158-1159 of the Corporation Tax Act 2010 are considered. The revenue
available for distribution by way of dividend for the year is £40,413,000
(2023 - £44,528,000).
2024 2023
Rate £'000 Rate £'000
Three interim dividends of 9.50p each (2023: three interim dividends of 8.25p 28.50p 30,574 24.75p 28,324
each)
Fourth interim dividend 10.00p 10,428 12.75p 14,088
38.50p 41,002 37.50p 42,412
8. Taxation
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(a) Analysis of charge for the year
Overseas tax incurred 1,104 - 1,104 2,244 - 2,244
Overseas tax reclaimable (830) - (830) (1,159) - (1,159)
Total tax charge for the year 274 - 274 1,085 - 1,085
(b) Factors affecting the tax charge for the year. The UK corporation tax rate is
25% (2023 - 25%). The tax charge for the year is lower than the corporation
tax rate (2023 - lower). The differences are explained below:
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return before taxation 40,687 54,366 95,053 45,613 28,958 74,571
Net return multiplied by the effective rate of corporation tax of 25% (2023 - 10,172 13,592 23,764 9,351 5,936 15,287
20.5%)
Effects of:
Non-taxable UK dividends (6,853) (6,853) (6,057) (6,057)
Non-taxable overseas dividends (3,069) (3,069) (3,008) (3,008)
Expenses not deductible for tax purposes 11 11 2 2
Movement in unutilised management expenses (261) 1,095 834 (288) 897 609
Realised and unrealised gains on investments held - (14,687) (14,687) - (6,683) (6,683)
Currency movements not taxable - - - - (150) (150)
Overseas tax payable 274 - 274 1,085 - 1,085
Total tax charge 274 - 274 1,085 - 1,085
(c) Factors that may affect future tax charges. No provision for deferred tax has
been made in the current or prior accounting period.
The Company has not provided for deferred tax on capital gains or losses
arising on the revaluation or disposal of investments as it is exempt from tax
on these items because of its status as an investment trust company.
At the year end, the Company has, for taxation purposes only, accumulated
unrelieved management expenses and loan relationship deficits of £77,761,000
(2023 - £74,422,000). A deferred tax asset at the standard rate of
corporation of 25% (2023 - 25%) of £19,440,000 (2023 - £18,606,000) has not
been recognised and these expenses will only be utilised if the Company has
profits chargeable to corporation tax in the future. It is considered too
uncertain that the Company will generate such profits and therefore no
deferred tax asset has been recognised.
9. Return per Ordinary share
2024 2023
£'000 p £'000 p
Returns are based on the following figures:
Revenue return 40,413 37.4 44,528 38.7
Capital return 54,366 50.2 28,958 25.2
Total return 94,779 87.6 73,486 63.9
Weighted average number of Ordinary shares in issue 108,144,845 114,958,339
10. Investments at fair value through profit or loss
2024 2023
£'000 £'000
Opening book cost 989,936 1,017,087
Opening investment holdings gains 108,375 81,706
Opening fair value 1,098,311 1,098,793
Analysis of transactions made during the year
Purchases at cost 180,045 183,338
Sales proceeds received (263,569) (216,422)
Gains on investments 58,747 32,602
Closing fair value 1,073,534 1,098,311
2024 2023
£'000 £'000
Closing book cost 922,927 989,936
Closing investment gains 150,607 108,375
Closing fair value 1,073,534 1,098,311
2024 2023
Gains on investments £'000 £'000
Realised gains on sale of investments at fair value 16,515 5,988
Realised loss on exercise of put options - (55)
Net movement in investment holdings gains 42,232 26,669
58,747 32,602
The Company received £263,569,000 (2023 - £216,422,000) from investments
sold in the year. The book cost of these investments when they were purchased
was £247,054,000 (2023 - £210,434,000). These investments have been revalued
over time and until they were sold any unrealised gains/(losses) were included
in the fair value of the investments.
The Company may write and purchase both exchange traded and over the counter
derivative contracts as part of its investment policy. The Company pledges
collateral greater than the market value of the traded options in accordance
with standard commercial practice. At 30 June 2024 there were no shares
pledged as part of the option underwriting programme (30 June 2023 - none).
The liability of collateral held at the year end was £nil as no open
positions existed (30 June 2023 - £nil).
Transaction costs. During the year expenses were incurred in acquiring or
disposing of investments classified at fair value through profit or loss.
These have been expensed through capital and are included within gains on
investments in the Statement of Comprehensive Income. The total costs were as
follows:
2024 2023
£'000 £'000
Purchases 842 797
Sales 114 144
956 941
The above transaction costs are calculated in line with the AIC SORP. The
transaction costs in the Company's Key Information Document are calculated on
a different basis and in line with the PRIIPs regulations.
11. Other debtors and receivables
2024 2023
£'000 £'000
Amounts due from brokers 3,787 -
Accrued income 3,471 3,080
Taxation recoverable 5,228 4,170
Prepayments 26 24
12,512 7,274
12. Cash and cash equivalents
2024 2023
£'000 £'000
Cash at bank and in hand 1,045 1,227
Money market funds 24,103 13,888
25,148 15,115
The Company holds £24,103,000 (2023 - £13,888,000) in Aberdeen Standard
Liquidity Fund (Lux) - Sterling Fund which is managed and administered by
abrdn.
13. Creditors: amounts falling due within one year
2024 2023
£'000 £'000
Other creditors 1,563 2,548
Amounts due to brokers for purchase of investments 5,167 2,202
Amounts due to brokers for Ordinary shares bought back 326 1,247
7,056 5,997
Bank loans 6,282 6,378
13,338 12,375
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. Under the terms of the agreement, advances from the facility may
be made for periods of up to six months or for such longer periods agreed by
the lender.
As at 30 June 2024, the Company had drawn down the following amounts from the
facility, all with a maturity date of 29 July 2024 (2023 - 26 July 2023):
2024 2023
Currency £'000 Currency £'000
Swiss Franc at an all-in rate of 2.55% (2023: 2.798%) 363,000 319 1,200,000 1,055
Euro at an all-in rate of 4.79% (2023: 4.563%) 4,050,000 3,434 3,300,000 2,832
Norwegian Krone at an all-in rate of 5.78% (2023: 5.11%) 4,275,000 318 6,360,000 467
Danish Krona at an all-in rate of 4.75% (2023: 4.56%) 2,750,000 313 6,850,000 789
US Dollar at an all-in rate of 6.57% (2023: 6.314%) 2,400,000 1,898 1,570,000 1,235
6,282 6,378
At the date this Report was approved, the Company had drawn down the following
amounts from the facility, all with a maturity date of 30 September 2024:
- Swiss Franc 363,000 at an all-in rate of 2.55716%, equivalent to £328,000.
- Euro 4,050,000 at an all-in rate of 4.734%, equivalent to £3,418,000.
- Norwegian Krone 4,275,000 at an all-in rate of 5.79%, equivalent to
£302,000.
- Danish Krona 2,750,000 at an all-in rate of 4.6367%, equivalent to
£311,000.
- US Dollar 2,400,000 at an all-in rate of 6.5745%, equivalent to £1,838,000.
Financial covenants contained within the facility agreement provide, inter
alia, that the ratio of net assets to borrowings must be greater than 3.5:1
and that net assets must exceed £550 million. All financial covenants were
met during the year and also during the period from the year end to the date
of this report.
14. Creditors: amounts falling due after more than one year
2024 2023
£'000 £'000
2.51% Senior Loan Note 40,000 40,000
Unamortised 2.51% Senior Loan Note issue expenses (45) (59)
39,955 39,941
4.37% Senior Loan Note at fair value 73,344 73,344
Amortisation of 4.37% Senior Loan Note (5,725) (4,144)
67,619 69,200
107,574 109,141
On 8 November 2017 the Company issued £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.
As a result of the transaction with Perpetual Income and Growth Investment
Trust plc on 17 November 2020, £60,000,000 of 15 year Senior Loan Notes at a
fixed rate of 4.37% issued on 8 May 2014 were novated to the Company. Under
FRS 102 the loan notes are required to be recorded initially at their fair
value of £73,344,000 in the Company's Financial Statements and are then
amortised over the remaining life of the loan towards their redemption value
of £60,000,000. The amortisation adjustment is presented as a finance cost,
split 70% to capital and 30% to revenue. Interest is payable in half yearly
instalments in May and November and the Loan Notes are due to be redeemed at
par on 8 May 2029.
Both the Loan Notes are secured by a floating charge over the whole of the
assets of the Company and rank pari passu. The Company has complied with the
Senior Loan Note Purchase Agreements covenants throughout the year that the
ratio of net assets to gross borrowings must be greater than 3.5:1, and that
net assets will not be less than £550,000,000 throughout the year.
15. Share capital
2024 2023
Shares £'000 Shares £'000
Allotted, called-up and fully-paid:
Ordinary shares of 25p each: publicly held 104,685,001 26,171 111,720,001 27,930
Ordinary shares of 25p each: held in treasury 14,844,531 3,711 7,809,531 1,952
119,529,532 29,882 119,529,532 29,882
During the year 7,035,000 Ordinary shares were bought back (2023 - 4,970,471)
to be held in treasury by the Company at a total cost of £59,007,000 (2023-
£42,202,000) representing 6.3% (2023 - 4.3%) of called-up share capital
excluding Ordinary shares held in treasury at the start of the year.
16. Net asset value per Ordinary share
The net asset value per Ordinary share and the net asset value attributable to
the Ordinary shares at the year end follow. These were calculated using
104,685,001 (2023 - 111,720,001) Ordinary shares in issue at the year end
(excluding treasury shares).
2024 2023
Net Asset Value Attributable Net Asset Value Attributable
£'000 pence £'000 pence
Net asset value - debt at par 990,282 946.0 999,184 894.4
Add: amortised cost of 2.51% Senior Loan Notes 39,955 38.2 39,941 35.8
Less: fair value of 2.51% Senior Loan Notes (36,530) (34.9) (34,928) (31.3)
Add: amortised cost of 4.37% Senior Loan Notes 67,619 64.5 69,200 61.9
Less: fair value of 4.37% Senior Loan Notes (58,535) (55.9) (54,900) (49.1)
Net asset value - debt at fair value 1,002,791 957.9 1,018,497 911.7
17. Analysis of changes in net debt
At Currency Non-cash At
1 July 2023 differences Cash flows movements 30 June 2024
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents* 15,115 (39) 10,072 - 25,148
Debt due within one year (6,378) 39 57 - (6,282)
Debt due after more than one year (109,141) - - 1,567 (107,574)
(100,404) - 10,129 1,567 (88,708)
At Currency Non-cash At
1 July 2022 differences Cash flows movements 30 June 2023
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents* 20,131 695 (5,711) - 15,115
Debt due within one year (6,507) 38 91 - (6,378)
Debt due after more than one year (110,710) - - 1,569 (109,141)
(97,086) 733 (5,620) 1,569 (100,404)
* An analysis of cash and cash equivalents between cash at bank and in hand
and money market funds is provided in note 12.
A statement reconciling the movement in net funds to the net cash flow has not
been presented as there are no differences from the above analysis.
18. Financial instruments
This note summarises the risks deriving from the financial instruments that
comprise the Company's assets and liabilities.
The Company's investment activities expose it to various types of financial
risk associated with the financial instruments and markets in which it
invests. The Company's financial instruments, other than derivatives, comprise
securities and other investments, cash balances, liquid resources, loans and
debtors and creditors that arise directly from its operations; for example, in
respect of sales and purchases awaiting settlement, and debtors for accrued
income. The Company also has the ability to enter into derivative transactions
in the form of forward foreign currency contracts, futures and options,
subject to Board approval, for the purpose of enhancing portfolio returns and
for hedging purposes in a manner consistent with the Company's broader
investment policy. As at 30 June 2024 there were no open positions in
derivatives transactions (2023 - same).
Risk management framework. The directors of abrdn Fund Managers Limited
collectively assume responsibility for the Manager's obligations under the
AIFMD including reviewing investment performance and monitoring the Company's
risk profile during the year.
The Manager is a wholly owned subsidiary of the abrdn Group ("the Group"),
which provides a variety of services and support to the Manager in the conduct
of its business activities, including in the oversight of the risk management
framework for the Company. The Manager has delegated the day to day
administration of the investment policy to abrdn Limited, which is responsible
for ensuring that the Company is managed within the terms of its investment
guidelines and the limits set out in its pre-investment disclosures to
investors (details of which can be found on the Company's website). The
Manager has retained responsibility for monitoring and oversight of investment
performance, product risk and regulatory and operational risk for the Company.
The Manager conducts its risk oversight function through the operation of the
Group's risk management processes and systems which are embedded within the
Group's operations. The Group's Risk Division ("the Division") supports
management in the identification and mitigation of risks and provides
independent monitoring of the business. The Division includes Compliance,
Business Risk, Market Risk, Risk Management and Legal. The team is headed up
by the Group's Chief Risk Officer, who reports to the Chief Executive Officer
("CEO") of the Group. The Risk Division achieves its objective through
embedding the Risk Management Framework throughout the organisation using the
Group's operational risk management system ("SHIELD").
The Group's Internal Audit Department is independent of the Risk Division and
reports directly to the Group CEO and to the Audit Committee of the Group's
Board of Directors. The Internal Audit Department is responsible for providing
an independent assessment of the Group's control environment.
The Group's corporate governance structure is supported by several committees
to assist the board of directors, its subsidiaries and the Company to fulfil
their roles and responsibilities. The Group's Risk Division is represented on
all committees, with the exception of those committees that deal with
investment recommendations. The specific goals and guidelines on the
functioning of those committees are described in the committees' terms of
reference.
Risk management of the financial instruments. The main risks the Company faces
from these financial instruments are (a) market risk (comprising (i) interest
rate, (ii) foreign currency and (iii) other price risk), (b) liquidity risk
and (c) credit risk.
In order to mitigate risk, the investment strategy is to select investments
for their fundamental value. Stock selection is therefore based on disciplined
accounting, market and sector analysis. It is the Board's policy to hold an
appropriate spread of investments in the portfolio in order to reduce the risk
arising from factors specific to a particular sector. The Attribution
Analysis, detailing the allocation of assets and the stock selection, is shown
in the Performance Attribution table in the Investment Manager's Report. The
Investment Manager actively monitors market prices throughout the year and
reports to the Board, which meets regularly in order to consider investment
strategy. The Company's strategy is detailed in the Chair's Statement, in the
Investment Manager's Report, and in Overview of Strategy.
The Board has agreed the parameters for net gearing, which was 9.1% of net
assets as at 30 June 2024 (2023 - 10.4%). The Manager's policies for managing
these risks are summarised below and have been applied throughout the current
and previous year. The numerical disclosures in the tables listed below
exclude short-term debtors and creditors.
18 (a) Market risk. The Company's investment portfolio is exposed to market
price fluctuations, which are monitored by the Manager in pursuance of the
investment objective as set out on page 1. Adherence to investment guidelines
and to investment and borrowing powers set out in the management agreement
mitigates the risk of exposure to any particular security or issuer. Further
information on the investment portfolio is set out in the Investment Manager's
Report.
Market price risk arises mainly from uncertainty about future prices of
financial instruments used in the Company's operations. It represents the
potential loss the Company might suffer through holding market positions as a
consequence of price movements. It is the Board's policy to hold equity
investments in the portfolio in a broad spread of sectors in order to reduce
the risk arising from factors specific to a particular sector.
18 (a)(i) Interest rate risk. Interest rate movements may affect:
- the level of income receivable on cash deposits;
- interest payable on the Company's variable rate borrowings; and
- the fair value of any investments in fixed interest rate securities.
Management of the risk. The possible effects on fair value and cash flows that
could arise as a result of changes in interest rates are taken into account
when making investment and borrowing decisions. Details of the bank loan and
interest rates applicable can be found in note 13.
The Board imposes borrowing limits to ensure gearing levels are appropriate to
market conditions and reviews these on a regular basis. Interest rate risk is
the risk of movements in the value of financial instruments as a result of
fluctuations in interest rates.
Financial assets. The interest rate risk of the portfolio of financial assets
at the reporting date was as follows:
Floating rate Non-interest bearing
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Danish Krona - - 9,923 22,239
Euro - - 104,139 69,528
Norwegian Krone - - 10,535 9,323
Singapore Dollars - - 27,374 21,124
Sterling 25,148 15,115 853,898 898,427
Swedish Krone - - 18,454 16,694
Swiss Francs - - 9,486 36,060
Taiwan Dollars - - 10,827 7,051
US Dollars - - 28,898 17,865
Total 25,148 15,115 1,073,534 1,098,311
The floating rate assets consist of cash at bank and cash held in money market
funds earning interest at prevailing market rates.
The non-interest bearing assets represent the equity element of the portfolio.
Financial liabilities. The Company has floating rate borrowings by way of its
loan facility and fixed rate senior loan note issues, details of which are in
notes 13 and 14.
Interest rate sensitivity. The sensitivity analysis below has been determined
based on the exposure to interest rates for both derivative and non-derivative
instruments at the reporting date and the stipulated change taking place at
the beginning of the financial year and held constant in the case of
instruments that have floating rates.
Interest rate sensitivity. The sensitivity analysis below has been determined
based on the exposure to interest rates for both derivative and non-derivative
instruments at the reporting date and the stipulated change taking place at
the beginning of the financial year and held constant in the case of
instruments that have floating rates.
If interest rates had been 1% higher or lower and all other variables were
held constant, the Company's profit before tax for the year ended 30 June 2024
and net assets would increase/decrease by £175,000 (2023 - £53,000)
respectively. This is mainly attributable to the Company's exposure to
interest rates on its floating rate cash balances and borrowings.
18 (a)(ii) Foreign currency risk. A proportion of the Company's investment
portfolio is invested in overseas securities whose values are subject to
fluctuation due to changes in foreign exchange rates. In addition, the impact
of changes in foreign exchange rates upon the profits of investee companies
can result, indirectly, in changes in their valuations. Consequently, the
Statement of Financial Position can be affected by movements in exchange
rates.
Management of the risk. The revenue account is subject to currency
fluctuations arising on dividends receivable in foreign currencies and,
indirectly, due to the impact of foreign exchange rates upon the profits of
investee companies. It is not the Company's policy to hedge this currency risk
but the Board keeps under review the currency returns in both capital and
income.
Foreign currency risk exposure by currency of denomination falling due within
one year is set out in the table below. Net monetary assets/(liabilities)
comprise cash and loan balances and exclude other debtors and receivables and
other payables (including amounts due to or from brokers).
30 June 2024 30 June 2023
Net Net
monetary Total monetary Total
assets/ currency assets/ currency
Investments (liabilities) exposure Investments (liabilities) exposure
£'000 £'000 £'000 £'000 £'000 £'000
Danish Krona 9,923 (313) 9,610 22,239 (789) 21,450
Euro 104,139 (3,434) 100,705 69,528 (2,832) 66,696
Norwegian Krone 10,535 (318) 10,217 9,323 (467) 8,856
Singapore Dollars 27,374 - 27,374 21,124 - 21,124
Swedish Krone 18,454 - 18,454 16,694 - 16,694
Swiss Francs 9,486 (319) 9,167 36,060 (1,055) 35,005
Taiwan Dollars 10,827 - 10,827 7,051 - 7,051
US Dollars 28,898 (1,898) 27,000 17,865 (1,235) 16,630
Total 219,636 (6,282) 213,354 199,884 (6,378) 193,506
Foreign currency sensitivity. The following table details the impact on the
Company's net assets to a 10% decrease (in the context of a 10% increase the
figures below should all be read as negative) in Sterling against the foreign
currencies in which the Company has exposure. The sensitivity analysis
includes foreign currency denominated monetary and non-monetary items and
adjusts their translation at the period end for a 10% change in foreign
currency rates.
2024 2023
£'000 £'000
Danish Krona 961 2,145
Euro 10,071 6,670
Norwegian Krone 1,022 886
Singapore Dollars 2,737 2,112
Swedish Krone 1,845 1,669
Swiss Francs 917 3,501
Taiwan Dollars 1,083 705
US Dollars 2,700 1,663
Total 21,336 19,351
18(a)(iii) Other price risk. Other price risks (ie changes in market prices
other than those arising from interest rate or currency risk) may affect the
value of the quoted investments.
Management of the risk. It is the Board's policy to hold an appropriate spread
of investments in the portfolio in order to reduce the risk arising from
factors specific to a particular sector. The allocation of assets to
international markets and the stock selection process, as detailed in the
section "Delivering the Investment Policy", both act to reduce market risk.
The Manager actively monitors market prices throughout the year and reports to
the Board, which meets regularly in order to review investment strategy.
Other price risk sensitivity. If market prices at the reporting date had been
10% higher or lower while all other variables remained constant, the return
attributable to Ordinary shareholders and equity for the year ended 30 June
2024 would have increased/decreased by £107,353,000 (2023 - £109,831,000).
18 (b) Liquidity risk. This is the risk that the Company will encounter
difficulty in meeting obligations associated with financial liabilities as
they fall due in line with the maturity profile analysed as follows:
Within Within Within More than
1 year 1-3 years 3-5 years 5 years Total
At 30 June 2024 £000 £000 £000 £000 £000
Bank loans 6,282 - - - 6,282
2.51% Senior Loan Note 8/11/27 - - 40,000 - 40,000
4.37% Senior Loan Note 8/5/29 - - 60,000 - 60,000
Interest cash flows on bank loans 10 - - - 10
Interest cash flows on 2.51% Senior Loan Note 1,004 2,008 502 - 3,514
Interest cash flows 4.37% Senior Loan Note 2,622 5,244 5,244 - 13,110
Cash flows on other creditors 7,056 - - - 7,056
16,974 7,252 105,746 - 129,972
Within Within Within More than
1 year 1-3 years 3-5 years 5 years Total
At 30 June 2023 £000 £000 £000 £000 £000
Bank loans 6,378 - - - 6,378
2.51% Senior Loan Note 8/11/27 - - 40,000 - 40,000
4.37% Senior Loan Note 8/5/29 - - - 60,000 60,000
Interest cash flows on bank loans 3 - - - 3
Interest cash flows on 2.51% Senior Loan Note 1,004 2,008 1,506 - 4,518
Interest cash flows 4.37% Senior Loan Note 2,622 5,244 5,244 2,622 15,732
Cash flows on other creditors 5,997 - - - 5,997
16,004 7,252 46,750 62,622 132,628
Management of the risk. The Company's assets comprise readily realisable
securities which can be sold to meet funding commitments if necessary.
Short-term flexibility is achieved through the use of committed loan and
overdraft facilities.
As at 30 June 2024 the Company utilised £6,282,000 (2023 - £6,378,000) of a
£50,000,000 multi-currency revolving bank credit facility, which is committed
until 27 October 2024. Details of maturity dates and interest charges can be
found in note 13. The aggregate of all future interest payments at the rate
ruling at 30 June 2024 and the redemption of the loan amounted to £6,292,000
(2023 - £6,381,000).
18 (c) Credit risk. This is the risk that one party to a financial instrument
will fail to discharge an obligation and cause the other party to incur a
financial loss.
Management of the risk. The risk is mitigated by the Investment Manager
reviewing the credit ratings of counterparties. The risk attached to dividend
flows is mitigated by the Investment Manager's research of potential investee
companies. The Company's custodian bank is responsible for the collection of
income on behalf of the Company and its performance is reviewed by the
Depositary (on an ongoing basis) and by the Board on a regular basis. It is
the Manager's policy to trade only with A- and above (Long Term rated) and
A-1/P-1 (Short Term rated) counterparties. The maximum credit risk at 30 June
2024 is £32,365,000 (2023 - £18,123,000) consisting of £3,430,000 (2023 -
£3,080,000) of dividends receivable from equity shares, £3,787,000 (2023 -
£nil) receivable from brokers and £25,148,000 (2023 - £15,115,000) in cash
and cash equivalents.
None of the Company's financial assets are past due or impaired (2023 - none).
19. 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. Categorisation within the hierarchy is determined on the
basis of the lowest level input that is significant to the fair value
measurement of each relevant asset or liability. 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 valuation techniques used by the Company are explained in the accounting
policies note 2(e). The Company's portfolio consists wholly of quoted
equities, all of which are Level 1.
The fair value of both the 2.51% Senior Loan Notes and 4.37% Senior Loan Note
have been calculated by aggregating the expected future cash flows for that
loans discounted at a rate based on UK gilts issued with comparable coupon
rates and maturity dates plus a margin representing the credit risk for
Investment Grade A bonds. The fair value and amortised cost amounts can be
found in note 16.
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.
20. Related party transactions and transactions with the Manager
Fees payable during the year to the Directors and their interests in shares of
the Company are considered to be related party transactions and are disclosed
within the Directors' Remuneration section of the Directors' Remuneration
Report.
The Company has agreements with the Manager for the provision of management,
secretarial, accounting and administration services and promotional
activities. Details of transactions during the year and balances outstanding
at the year end are disclosed in notes 4 and 5.
21. Capital management policies and procedures
The investment objective of the Company is to achieve a high and growing
income combined with capital growth through investment in a portfolio
principally of UK equities.
The capital of the Company consists of debt (comprising loan notes and bank
loans) and equity (comprising issued capital, reserves and retained earnings).
The Company manages its capital to ensure that it will be able to continue as
a going concern while maximising the return to shareholders through the
optimisation of the debt and equity balance.
The Board monitors and reviews the broad structure of the Company's capital on
an ongoing basis. This review includes:
- the level of equity shares in issue;
- the planned level of gearing which takes into account the Investment
Manager's views on the market (net gearing figures can be found in 'Financial
Highlights'); and
- the extent to which revenue in excess of that which is required to be
distributed should be retained.
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding accounting period.
Notes 13 and 14 give details of the Company's bank facility agreement and loan
notes respectively.
22. Subsequent events
On 30 August 2024, the Company announced that it had agreed to a change in
the management fee arrangements with the Manager. With effect from 1 July
2024, the management fee is based on 0.35% per annum for net assets up to
£1.1 billion and 0.25% per annum for net assets over £1.1 billion,
calculated and payable monthly.
AIFMD Disclosures (Unaudited)
The Manager and the Company are required to make certain disclosures available
to investors in accordance
with the AIFMD. Those disclosures that are required to be made pre-investment
are included within a pre-investment disclosure document ("PIDD") which may be
found on the Company's website (murray-income.co.uk), maintained
by the Manager.
AIFMD or the Directive
The Alternative Investment Fund Managers Directive -
There have been no material changes to the disclosures contained within the
PIDD since its latest publication
in September 2024.
The periodic disclosures as required under the AIFMD to investors are made
below:
· information on the investment strategy, geographic and sector investment
focus and principal stock exposures is included in the Strategic Report;
· none of the Company's assets are subject to special arrangements arising
from their illiquid nature;
· the Strategic Report, Note 18 to the financial statements and the PIDD,
together set out the risk profile and risk management systems in place. There
have been no changes to the risk management systems in place in the period
under review and no breaches of any of the risk limits set, with no breach
expected;
· there are no new arrangements for managing the liquidity of the Company
or any material changes to the liquidity management systems and procedures
employed by the Manager;
· all authorised Alternative Investment Fund Managers are required to
comply with the AIFMD Remuneration Code. In accordance with the AIFMD
Remuneration Code, the AIFM's remuneration policy in respect of its reporting
period ended 31 December 2023 is available on the website of abrdn plc at
www.abrdn.com/en-gb/corporate/about-us/our-leadership-team/remuneration-disclosure,
or on request from the Company Secretaries, abrdn Holdings Limited.
Leverage
For the purposes of the Alternative Investment Fund Managers Directive,
leverage is any method which increases the Company's exposure, including the
borrowing of cash and the use of derivatives. It is expressed as a ratio
between the Company's exposure and its net asset value and can be calculated
on a gross and a commitment method. Under the gross method, exposure
represents the sum of the Company's positions after the deduction of Sterling
cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the
deduction of Sterling cash balances and after certain hedging and netting
positions are offset against each other.
The table below sets out the current maximum permitted limit and actual level
of leverage for the Company:
Gross Method Commitment Method
Maximum level of leverage 2.50:1 2.00:1
Actual level at 30 June 2024 1.20:1 1.22:1
There have been no breaches of the maximum level during the period and no
changes to the maximum level of leverage employed by the Company. There is no
right of re-use of collateral or any guarantees granted under the leveraging
arrangement. Changes to the information contained either within this Annual
Report or the PIDD in relation to any special arrangements in place, the
maximum level of leverage which the AIFM may employ on behalf of the Company;
the right of use of collateral or any guarantee granted under any leveraging
arrangement; or any change to the position in relation to any discharge of
liability by the Depositary will be notified via a regulatory news service
without undue delay in accordance with the AIFMD.
The information on this page has been approved for the purposes of Section 21
of the Financial Services and Markets Act 2000 (as amended by the Financial
Services Act 2012) by the Manager which is authorised and regulated by the
Financial Conduct Authority in the United Kingdom.
Alternative Performance Measures
Alternative performance measures are numerical measures of the Company's
current, historical or future performance, financial position or cash flows,
other than financial measures defined or specified in the applicable financial
framework. The Company's applicable financial framework includes FRS 102 and
the AIC SORP. The Directors assess the Company's performance against a range
of criteria which are reviewed as particularly relevant for closed-end
investment companies.
Discount to net asset value per Ordinary share with debt at fair value
The discount is the amount by which the share price is lower than the net
asset value per share with debt at fair value, expressed as a percentage of
the net asset value.
30 June 2024 30 June 2023
NAV per Ordinary share a 957.9p 911.7p
Share price b 857.0p 837.0p
Discount (b-a)/a (10.5)% (8.2)%
Discount to net asset value per Ordinary share with debt at par value
The discount is the amount by which the share price is lower than the net
asset value per share with debt at par value, expressed as a percentage of the
net asset value.
30 June 2024 30 June 2023
NAV per Ordinary share a 946.0p 894.4p
Share price b 857.0p 837.0p
Discount (b-a)/a (9.4)% (6.4)%
Dividend cover
Dividend cover is the revenue return per Ordinary share divided by dividends
per Ordinary share expressed as a ratio.
30 June 2024 30 June 2023
Revenue return per share a 37.40p 38.73p
Dividends per share b 38.50p 37.50p
Dividend cover a/b 0.97 1.03
Dividend yield
The annual dividend per Ordinary share divided by the share price, expressed
as a percentage.
30 June 2024 30 June 2023
Dividends per share (p) a 38.50p 37.50p
Share price (p) b 857.00p 837.00p
Dividend yield a/b 4.5% 4.5%
Net asset value per Ordinary share with debt at fair value
The calculation of the Company's net asset value per Ordinary share with debt
at fair value is set out in Note 16.
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.
30 June 2024 30 June 2023
Bank loans (£'000) a (6,282) (6,378)
Senior Loan Notes (£'000) b (107,574) (109,141)
Total borrowings (£'000) c=a+b (113,856) (115,519)
Cash (£'000) d 25,148 15,115
Amounts due to brokers (£'000) e (5,167) (2,202)
Amounts due from brokers (£'000) f 3,787 -
Shareholders' funds (£'000) g 990,282 999,184
Net gearing -(c+d+e+f)/g 9.1% 10.3%
Ongoing charges
The ongoing charges ratio has been calculated based on the total of investment
management fees and administrative expenses less non-recurring charges and
expressed as a percentage of the average daily net asset values with debt at
fair value published throughout the year.
30 June 2024 30 June 2023
Investment management fees (£'000) a 3,692 3,804
Administrative expenses (£'000) b 1,334 1,390
Less: non-recurring charges(A) (£'000) c (25) (8)
Ongoing charges (£'000) a+b+c 5,001 5,186
Average net assets (£'000) d 991,404 1,036,020
Ongoing charges ratio (a+b+c)/d 0.50% 0.50%
(A) 30 June 2024 comprises £20,000 Directors recruitment fee and £5,000
relating to other professional services unlikely to recur. 30 June 2023
comprises £7,000 professional fees relating to discussions with the registrar
and £1,000 quick turnaround fee on ESEF filing.
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
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 NAV NAV
Year ended 30 June 2024 price (debt at fair value) (debt at par)
Opening at 1 July 2023 a 837.0p 911.7p 894.4p
Closing at 30 June 2024 b 857.0p 957.9p 946.0p
Price movements c=(b/a)-1 2.4% 5.1% 5.8%
Dividend reinvestment(A) d 5.2% 4.8% 5.0%
Total return c+d 7.6% 9.9% 10.8%
Share NAV NAV
Year ended 30 June 2023 price (debt at fair value) (debt at par)
Opening at 1 July 2022 a 832.0p 871.0p 864.9p
Closing at 30 June 2023 b 837.0p 911.7p 894.4p
Price movements c=(b/a)-1 0.6% 4.7% 3.4%
Dividend reinvestment(A) d 4.3% 4.1% 4.1%
Total return c+d 4.9% 8.8% 7.5%
(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.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 June 2024 or 2023 but is derived
from those accounts. Statutory accounts for 2023 have been delivered to the
registrar of companies in England & Wales.
The statutory accounts for the year ended 30 June 2024 have been approved by
the Board and audited and will be filed with the Registrar of Companies. The
auditor has reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The Company's Annual General Meeting will be held at 12.30pm on 5 November
2024 at Wallacespace Spitalfields, 15 Artillery Lane, London E1 7HA.
The Annual Report will be posted to shareholders in October 2024 and will be
available shortly from the Company's website at: www.murray-income.co.uk
(http://www.murray-income.co.uk) .
By Order of the Board
abrdn Holdings Limited
Secretaries
17 September 2024
END
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