DUNEDIN INCOME GROWTH INVESTMENT
TRUST PLC
Legal Entity Identifier
(LEI): 549300PPXLZPR5JTL763
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 31 JANUARY 2024
Performance Highlights
· NAV
total return of 6.7%, outperforming the FTSE All-Share Index
return of 1.9%, resulting in the Company ranking top of the AIC UK
Equity Income sector by NAV total return for the
year.
· Five
year NAV total return of 43.8%, with the Company ranking 3rd out of
20 in the AIC UK Equity Income sector by NAV total
return.
· Record revenue return for the year of 13.54p per share, an
increase of 4.0%.
· Total dividend for the year of 13.75p per share, an increase
of 5.0% which compares to the CPI increase of 4.0%.
Net asset value total
returnAB
|
|
Earnings per share
(revenue)
|
+6.7%
|
|
13.5p
|
2023
|
+2.4%
|
|
2023
|
13.0p
|
|
|
|
|
|
Ongoing
chargesA
|
|
|
Share price total
returnA
|
|
0.64%
|
|
(1.6)%
|
2023
|
0.64%
|
|
2023
|
(0.9)%
|
|
|
|
|
|
Discount to net asset
valueAB
|
|
Dividends per Ordinary
share
|
|
10.7%
|
|
13.75p
|
2023
|
2.9%
|
|
2023
|
13.10p
|
A Alternative
Performance Measure.
|
B With debt at fair
value, dividends reinvested.
|
For further information, please
contact:
Paul Finlayson
abrdn Fund Managers
Limited
07990 130 451
Chairman's Statement
I am pleased to present the Annual
Report for Dunedin Income Growth Investment Trust for the year
ended 31 January 2024 and to report that our Company's net asset
value ("NAV") total return outperformed both the benchmark and
peers for the year.
Performance
After the rapid tightening of
monetary policy and dramatic geopolitical and domestic political
events of 2022, the reporting period this year provided a more
stable investment environment and one that provided fewer headwinds
to the Company's investment strategy. As a result, the portfolio's
total return exceeded that of the FTSE All-Share Index and, in
the process, delivered a positive absolute return. Whilst
performance of the portfolio, which is highly active and
differentiated from our benchmark, should be considered over longer
time periods, this year's performance represents a welcome return
to outperformance after two years in which the Investment Manager's
strategic focus on high quality companies with an emphasis on
dividend growth and sustainability had proven something of a
challenge in a market that had favoured more value orientated
investment styles and seen strong returns from commodity related
sectors.
Over the longer term, the Company
has delivered a NAV total return of 43.8% over five years
compared to the benchmark return of 30.4%, and over that
period ranks 3rd out of 20 in the AIC UK Equity Income sector
by NAV total return.
The Board recognises the
importance of the dividend return to shareholders and we are
pleased to report that the portfolio has seen continued
revenue growth, with revenue earnings per share reaching
another record high, at the upper end of our original
expectations for the year.
The NAV total return of the
Company remains ahead of the benchmark and peers over both the
short and longer term. The main frustration in the period has been
the widening of the discount at which the Company's shares are
trading to NAV. Particularly as this now represents a wider
discount than the average of the UK Equity Income sector,
despite stronger performance. Alongside that, the portfolio remains
highly differentiated to its peer group, offering a highly
active, relatively concentrated strategy, with
a sustainability overlay that remains unique within the
sector and rare within the wider investment trust
universe.
We remain committed to the
sustainability ambitions of the Company and believe it is the
right approach when investing for the long term and to deliver
sustainable and growing dividends. We expect that investors
will return their focus towards this segment of the market
as environmental and social risks rise and asset owners
turn their attention to the impact of their holdings. For the
Investment Manager, this is about both avoiding risks and
taking advantage of opportunities such as investing behind the
powerful demand trends stemming from the climate
transition.
Earnings and Dividend
Investment income increased by
4.6% during the year, reflecting good progress in dividend
distributions from companies in the portfolio. The revenue
return per share increased by 4.0%, reaching an all-time high
of 13.54p, growing slightly less than income due primarily to
higher finance costs given increases in interest
rates.
Having paid three quarterly
dividends of 3.2p per share, the Board is proposing a final
dividend of 4.15p per share, payable on 31 May 2024 to
shareholders on the register on 3 May 2024. This will make a
total dividend of 13.75p per share for the year, an increase
of 5.0% on last year and ahead of the rate of inflation of 4.0% as
measured by CPI. This represents a welcome return to dividend
growth in real terms after two years of exceptionally high
inflation and will be the 40th year out of the past 44 that the
Company has grown its dividend, with the distribution
maintained in the other four years. Furthermore, having
increased the dividend in every year since 2011, the Company
is classified as a 'next generation of dividend heroes' by
the Association of Investment Companies, being one of the
33 investment trusts that have raised their dividend for 10
to 19 consecutive years.
Following payment of the final
dividend, we will have utilised 0.21p per share of the
Company's revenue reserves to meet dividends declared for this
financial year, meaning that 9.0p per share will be available
to support future distributions. This represents
approximately 65% of the current annual dividend cost. The net
revenue earned during the financial year covers 98.5% of
the proposed dividend cost for the year. The Company
has drawn 2.84p per share from revenue reserves
since January 2019, both through the strategic transition away
from higher yielding, lower growth companies and,
particularly in 2020/21, to support the dividend through a
period of extraordinary market disruption when 1.9p per share was
utilised from revenue reserves following the impact of the
Covid pandemic on the portfolio. It is worth noting that,
given its long history, the Company is in a favourable position of
having the ability to pay dividends out of realised capital
reserves which exceeded £300 million at the year end, forming a
significant part of equity shareholders' funds.
The increased dividend of
13.75p per share represents a yield of 5.0% based on the share
price of 276p at the end of the year, compared to a notional
yield of 4.0% from the FTSE All-Share Index. Our distribution
policy remains to grow the dividend faster than inflation over
the medium term and, with the Company's robust revenue and
capital reserves and the healthy underlying dividend and
earnings growth of the companies within the portfolio, we
believe that the policy remains very
well supported.
Comments on SDR
The Board notes the FCA's recent
regulation on sustainability disclosures, including product
labelling and presentation of sustainable credentials by UK funds,
including investment trusts; the Sustainable Disclosure Regime
('SDR"). The Board is considering the implications of this for the
Company, which is one of the few UK investment trusts to adopt a
sustainable investment approach. It is worth noting that the
decision to formally adopt the sustainable investment approach in
2021 was very much an evolution of our investment approach which
focuses on quality companies capable of delivering superior total
returns with growing income, rather than a response to heightened
levels of investor interest. The Board will continue to ensure that
our approach and process are described in terms that meet all
facets of UK regulation and we are confident that our successful,
differentiated investment approach will not have to change in any
material respect as a result of the introduction of this
regulation.
Gearing
The Board believes that the
sensible use of modest financial gearing, whilst amplifying
market movements in the short term, will enhance returns of
both capital and income to shareholders over the long term. We
also recognise the benefit that having a reasonable
proportion of long-term fixed rate funding provides to
managing the Revenue Account, through greater certainty
over financing costs. The Company currently employs two
sources of gearing; the £30 million loan notes maturing in 2045,
and a £30 million multi-currency revolving credit facility
that expires in July 2024. A Sterling equivalent of £13.3
million of the revolving credit facility was drawn down at the
year end. The loan notes bear a fixed interest rate of 3.99% and
the multi-currency facility is at a variable rate, and thus the
costs of borrowing have increased compared to the prior
year.
With debt valued at par, the
Company's net gearing decreased from 7.1% to 6.8% during the
year. This decline was due to holding a higher cash
balance at the year end and a small reduction in borrowings due to
the impact of foreign exchange translation. The Board believes this
remains a relatively conservative level of gearing and, with
part of the revolving credit facility undrawn, this provides
the Company with financial flexibility should opportunities to
deploy additional capital arise.
Discount
The share price total return for
the year of -1.6% was significantly lower than the NAV total
return, reflecting a move in the discount from 2.9%
at the end of last year to 10.7% as at 31 January 2024
(on a cum-income basis with borrowings stated at fair
value). In response to this widening during the year, 2.1
million shares were bought back at an average price of £2.69, well
below the NAV.
The Board believes a consistent
rating of the Company's shares close to the underlying asset
value is of significant benefit to shareholders. As well as a
strong focus on execution of the investment strategy, the Board
continues to support efforts to attract new investors and retain
existing ones through clear messaging and regular engagement with
investors. We are confident that the company's strong performance,
attractive dividend profile and differentiated positioning are a
good basis to support a strong rating for the Company's shares over
the medium term. We will continue to use the buyback facility to
provide liquidity and address the imbalances between buyers and
sellers. Continued good performance and a renewal of broadly based
interest in UK equity markets will, we believe, place the Company's
shares back on a rating that reflects its performance. As in
previous years, we will seek shareholders' permission at the
forthcoming AGM to buy back shares and issue new
shares.
Annual General Meeting and Online
Shareholder Presentation
AGM
The AGM will be held at 12 noon on
Thursday 23 May 2024 at the offices of abrdn, 18 Bishops Square,
London E1 6EG. The meeting will include a presentation from the
Investment Manager and will be followed by lunch. We encourage all
shareholders to complete and return the Proxy Form enclosed with
the Annual Report so as to ensure that your votes are represented
at the meeting. If you hold your shares in the Company via a share
plan or a platform and would like to attend and/or vote at the AGM,
then you will need to make arrangements with the relevant
administrator.
We recognise that many shareholders
who previously held the Company's shares through the abrdn Savings
Schemes now hold their shares through the Interactive Investor
platform. Where we have contact details,
abrdn will keep you up to date with
information relating to the Company, including regarding the AGM.
You can also register for email alerts relating to the Company,
including links to videos and podcasts by the portfolio managers,
articles on the Company and notification of publication of interim
and annual results. You can register by scanning the QR Code on the
Contents Page of the Annual Report or by registering
here: www.dunedinincomegrowth.co.uk/en-gb/contact-and-support?tab=5.
We would encourage all shareholders to register
for updates. In addition, the Association of Investment
Companies has included helpful information on its website
explaining how platform customers can attend and vote at an
AGM: www.theaic.co.uk/how-to-vote-your-shares.
Should you wish to receive any information
directly from the Company, or request to receive a hard copy of
this and future Annual Reports, please contact the Company
Secretary at CEF.CoSec@abrdn.com
Online Shareholder
Presentation
In order to encourage as much
interaction as possible with our shareholders, and especially for
those who are unable to attend the AGM, we will also be hosting an
Online Shareholder Presentation, which will be held at 10.00 am on
Tuesday 7 May 2024. At this event you will receive a presentation
from the Investment Manager and have the opportunity to ask live
questions of the Chairman and the Investment Manager. The online
presentation is being held ahead of the AGM to allow shareholders
to submit their proxy votes subsequently.
Full details on how to register
for the online event can be found at: https://bit.ly/abrdn-Dunedin-Income-2024
Details are also contained on the
Company's website.
Board Succession
It is the Company's stated policy
that Directors should stand down after nine years on the Board.
Jasper Judd, who is Chairman of the Audit Committee, and I, both
joined the Board in February 2016. Accordingly, we will stand down
from the Board at the conclusion of the Company's AGM in 2025. The
Board will recruit a further Director during the course of this
financial year who, it is intended, will take over from Jasper as
Chairman of the Audit Committee. The number of Directors will
therefore increase to six for a short period to allow for an
orderly handover and smooth succession. Howard Williams, who has
been a Director since April 2018, will succeed me as Chair of the
Company and it is the Board's intention to recruit a fifth Director
in 2025 to bring the number of Directors back to five.
Outlook
The Company has a clear focus on
generating both total return and dividend growth while
formally incorporating sustainability into its mandate. The
Board believes that this is the correct strategy to deliver
capital outperformance and dividend growth over the longer
term. Having weathered a volatile economic and
political environment over the past few years, we believe that
there are now reasons for cautious optimism for the Company's
relative performance to continue to prove robust.
Inflationary pressures have eased
substantially, paving the way for the Bank of England to
potentially cut interest rates at some point in 2024. The global
economy, while far from booming, is continuing to prove relatively
robust, despite substantial tightening in monetary policy and very
subdued Chinese output. Sustainability is coming back onto
investors' radars as environmental, social and governance
increasingly impact investment cases. Meanwhile, the market
valuations of UK and European equities are extremely
attractive on an absolute and relative basis. This all potentially
points to an environment that can both support earnings delivery
and an expansion in equity multiples which could drive attractive
total returns to investors. While declining interest rates may also
help to narrow the discount at which your Company's shares
trade.
We also believe that the
Investment Manager's focus on sustainable companies means that the
income growth of the Company should be driven more by structural
rather than cyclical growth and that gives the Investment Manager a
higher degree of confidence on the likely path of income
generation. This should help to underpin earnings delivery even in
an environment where economic growth remains modest, while the
balance of the portfolio means it is well set to navigate
volatile markets and demonstrate resilience in a range of
different market environments.
There are a number of reasons to
be watchful. Elections at home and abroad will generate plenty of
speculation and debate and, while inflationary pressures have
eased, they are still at elevated levels compared to central bank
targets. Likewise, geopolitical tensions continue to persist across
the Middle East, Russia continues with its invasion of Ukraine and
China's relationship with Taiwan remains tense. As a result, we
think it is important to maintain a relatively well-balanced
portfolio and the Investment Manager's focus on investing in
companies with pricing power, strong balance sheets and with
greater exposure to structural, rather than cyclical, growth
should offer greater resilience in both capital and income
generation. The Company's track record over the past five
years with this strategy remains highly
creditable.
The Board is confident that the
Company is well-positioned to continue to deliver relative total
return outperformance over the medium and long term. This,
combined with the return to growing the dividend ahead of
inflation, should enable the Company's shares to trade closer to
NAV.
David Barron
Chairman
3 April 2024
Overview of Strategy
Business
The Company is an investment trust
with a premium listing on the London Stock Exchange.
Investment Objective
The Company's objective is to
achieve growth of income and capital from a portfolio invested
mainly in companies listed or quoted in the United Kingdom that
meet the Company's sustainable and responsible investing criteria
as set by the Board.
Investment Policy
In pursuit of its objective, the
Company's investment policy is to invest in high quality companies
with strong income potential and providing an above-average
portfolio yield.
The Company may only make material
changes to its investment policy (including the level of gearing
set by the Board) with the approval of shareholders in the form of
an ordinary resolution.
Risk
Diversification
The Company maintains a
diversified portfolio consisting, substantially, of equity or
equity-related securities, and it can invest in other financial
instruments. The Company is invested mainly in companies listed or
quoted in the
United Kingdom and can invest up to 25% of its gross assets
overseas.
It is the policy of the Company to
invest no more than 15% of its gross assets in other listed
investment companies and no more than 15% of its gross assets in
any one company.
Gearing
The Board is responsible for
determining the gearing strategy for the Company, with day-to-day
gearing decisions being made by the Manager within the remit set by
the Board. The Board has set its gearing limit at a maximum of 30%
of the net asset value at the time of draw down. Gearing is used
selectively to leverage the Company's portfolio in order to enhance
returns where and to the extent considered appropriate.
Delivering the Investment
Objective
The Directors are responsible for
determining the Company's investment objective and investment
policy. Day-to-day management of the Company's assets has been
delegated, via the AIFM, to the Investment Manager.
Benchmark
The Company's benchmark is the
FTSE All-Share Index (total return). Performance is measured on a
net asset value total return basis over the long-term.
Promoting the Success of the
Company
The Board's statement below
describes how the Directors have discharged their duties and
responsibilities over the course of the financial year under
section 172 (1) of the Companies Act 2006 and how they have
promoted the success of the Company for the benefit of the members
as a whole.
Key Performance Indicators
("KPIs")
The Board uses a number of
financial performance measures to assess the Company's success in
achieving its
objective and determining the progress of the Company in pursuing
its investment policy. The main KPIs are shown in the table
below.
KPI
|
Description
|
Performance of NAV against
benchmark index and comparable investment trusts
|
The Board measures the Company's
NAV total return performance against the total return of the
benchmark index - the FTSE All-Share Index. The Board also monitors
performance relative to a peer group of investment trusts which
have similar objectives, policies and yield
characteristics.
|
Revenue return per Ordinary
share
|
The Board monitors the Company's
net revenue return.
|
Dividend per Ordinary
share
|
The Board monitors the Company's
annual dividends per Ordinary share.
|
Share price performance
|
The Board monitors the performance
of the Company's share price on a total return basis.
|
Premium/discount to NAV
|
The premium/discount of the share
price relative to the NAV per share is monitored by the
Board.
|
Ongoing charges
|
The Board monitors the Company's
operating costs carefully
|
Principal Risks and
Uncertainties
The Board carries out a regular
review of the risk environment in which the Company operates,
changes to the environment and individual risks. The Board also
considers emerging risks which might
affect the Company. The Board receives updates from the Manager on
the risks that could affect the Company.
The Board has carried out a robust
assessment of the Company's principal and emerging risks, which
include those that would threaten its business model, future
performance, solvency, liquidity or reputation. The principal risks
and uncertainties facing the Company at the current time, together
with a description of the mitigating actions the Board has taken,
are set out in the table below. In addition to those principal
risks and uncertainties, the Board considers that the development
of Artificial Intelligence ("AI") presents potential risks to
businesses in almost every sector. The extent of the risk presented
by AI is extremely hard to assess at this point but the Board
considers that it is an emerging risk and, together with the
Manager, will monitor developments in this area.
There are a number of other risks
which, if realised, could have a material adverse effect on the
Company and its financial condition, performance and prospects.
These include a number of existing geo-political risks. The Board
is also conscious of the impact of inflation and higher interest
rates on financial markets.
The principal risks associated
with an investment in the Company's shares are published monthly in
the Company's factsheet and they can be found in the pre-investment
disclosure document ("PIDD") published by the Manager, both of
which are available on the Company's website.
Risk
|
Mitigating Action
|
Investment objectives
- a lack of demand for the Company's shares could
result in a widening of the discount of the share price to its
underlying NAV and a fall in the value of its shares.
|
Board review. The Board formally reviews the Company's objectives and
strategies for achieving them on an annual basis, or more regularly
if appropriate.
Shareholder communication.
The Board is cognisant of the importance of
regular communication with shareholders. Directors attend meetings
with the Company's largest shareholders and meet other shareholders
at the Annual General Meeting and, as explained in the Chairman's
Statement, the Company will hold an online shareholder presentation
in advance of the Annual General Meeting this year including the
opportunity for an interactive question and answer session. The
Board reviews shareholder correspondence and investor relations
reports and also receives feedback from the Company's
Stockbroker.
Discount monitoring.
The Board, through the Manager, keeps the level
of discount under constant review. The Board is responsible for the
Company's share buy back policy and is prepared to authorise the
use of share buy backs to provide liquidity to the market and try
to limit any widening of the discount.
|
Investment strategies
- the Company adopts inappropriate investment
strategies in pursuit of its objectives which could result in
investors avoiding the Company's shares, leading to a widening of
the discount and poor investment performance.
|
Adherence to investment
guidelines. The Board sets investment
guidelines and restrictions which the Manager follows, covering
matters such as asset allocation, diversification, gearing,
currency exposure and use of derivatives, as well as the Company's
sustainable and responsible investment criteria. These guidelines
are reviewed regularly and the Manager reports on compliance with
them at Board meetings.
Diversification.
In order to ensure adequate diversification, the
Board has set absolute limits on maximum holdings and exposures in
the portfolio at the time of investment, which are in addition to
the limits contained in the Company's investment policy, including
the following:
- No
more than 10% of gross assets to be invested in any single stock;
and
- The
top five holdings should not account for more than 40% of gross
assets.
|
Investment performance
- the appointment or continuing appointment of an
investment manager with inadequate resources, skills or expertise
or which makes poor investment decisions. This could result in poor
investment performance, a loss of value for shareholders and a
widening discount.
|
Monitoring of
performance. The Board meets the
Investment Manager on a regular basis and keeps under close review
(inter alia) its resources and adherence to investment processes.
The Board also keep under review the adequacy of risk controls and
investment performance.
Management Engagement
Committee. A detailed formal appraisal of
the Manager is carried out annually by the Management Engagement
Committee.
|
Income/dividends
- the Company adopts an unsustainable dividend
policy resulting in cuts to or suspension of dividends to
shareholders, or one which fails to meet investor
demands.
|
Revenue forecasting and
monitoring. The Manager presents detailed
forecasts of income and expenditure covering both the current and
subsequent financial years at Board meetings. Dividend income
received is compared to forecasts and
variances analysed.
Use of reserves.
The Company has built up revenue reserves which
are available to smooth dividend distributions to shareholders
should there be a shortfall in revenue returns. The Company also
has the ability to fund dividend distributions from realised
capital reserves.
|
Financial/market
- insufficient oversight or controls over
financial risks, including market risk, foreign currency risk,
liquidity risk and credit risk could result in losses to the
Company.
|
Management controls.
The Manager has a range of procedures and
controls relating to the Company's financial instruments, including
a review of investment risk parameters by its Investment Risk
department and a review of credit worthiness of counterparties by
its Counterparty Credit Risk team.
Foreign currency
hedging. It is not the Company's policy to
hedge foreign currency exposure but the Company may, from time to
time, partially mitigate it by drawing down borrowings in foreign
currencies.
Board review. As stated above, the Board sets investment guidelines and
restrictions which are reviewed regularly and the Manager reports
on compliance with them at Board meetings.
Further details of the Company's
financial instruments and risk management are included in note 19
to the financial statements.
|
Gearing -
gearing accentuates the effect of rises or falls in the market
value of the Company's investment portfolio on its NAV. An
inappropriate level of gearing at a time of falling values could
result in a significant fall in the value of the Company's net
assets and share price. Such a fall in the value of the Company's
net assets could result in a breach of loan covenants and trigger
demands for early repayment or require investments to be sold to
meet any shortfall. This could result in further losses.
|
Gearing restrictions.
The Board sets gearing limits within which the
Manager can operate.
Monitoring. Both the limits and actual levels of gearing are monitored on
an ongoing basis by the Manager and at regular Board meetings. In
the event of a possible impending covenant breach, appropriate
action would be taken to reduce borrowing levels.
Scrutiny of loan
agreements. The Board takes advice from
the Manager and the Company's lawyers before approving details of
loan agreements. Care is taken to ensure that covenants are
appropriate and unlikely to be breached.
Limits on derivative
exposure. The Board has set limits on
derivative exposures and positions are monitored at regular Board
meetings.
|
Regulatory - changes to, or failure to comply with, relevant regulations
(including the Companies Act, The Financial Services and Markets
Act, The Alternative Investment Fund Managers Directive, accounting
standards, investment trust regulations, the Packaged Retail and
Insurance-based Investment Product Regulations, the Listing Rules,
Disclosure Guidance and Transparency Rules and Prospectus Rules)
could result in fines, loss of reputation, reduced demand for the
Company's shares and potentially loss of an advantageous tax
regime.
|
Board awareness. The Directors have an awareness of the more important
regulations and are provided with information on changes by the
Association of Investment Companies. In terms of day to day
compliance with regulations, the Board is reliant on the knowledge
and expertise of the Manager. However, where necessary, the Board
engages the service of external advisers. In addition, all
Directors are encouraged to attend relevant training
courses.
Management controls.
The Manager's company secretariat and accounting
teams use checklists to aid compliance and these are backed by the
Manager's compliance monitoring programme and risk based internal
audit investigations.
|
ESG Risks - failure of the Company to adhere to its sustainable and
responsible investment criteria, or non-compliance with applicable
regulations, could lead to a loss of investor confidence or
accusations of greenwashing.
|
Adherence to restrictions.
The Board sets restrictions relating to the
Company's sustainable and responsible investment criteria, which
the Investment Manager follows. These restrictions are reviewed
regularly and the Investment Manager reports on compliance with
them at Board meetings.
Awareness of regulations.
Through the Regulatory risk controls stated
above, the Board is also aware of the relevant ESG regulations
impacting the Company.
|
Operational (including
cyber-crime) - the Company is reliant on
services provided by third parties (in particular those of the
Manager and the Depositary) and any control gaps and failures in
their operations could expose the Company to loss or
damage.
|
Agreements. Written agreements are in place defining the roles and
responsibilities of all third party service providers.
Internal control systems of the
Manager. The Board receives reports on the
operation and efficacy of the Manager's IT and control systems,
including those relating to cyber-crime, and its internal audit and
compliance functions.
Safekeeping of
assets. The Depositary is ultimately
responsible for the safekeeping of the Company's assets and its
records are reconciled to those of the Manager on a regular basis.
Through a delegation by the Depositary, the Company's investments
and cash balances are held in segregated accounts by the
Depositary.
Monitoring of other third party
service providers. The Manager monitors
closely the control environments and quality of services provided
by third parties, including those of the Depositary. This includes
controls relating to cyber-crime and is conducted through service
level agreements, regular meetings and key performance indicators.
The Directors review reports on the Manager's monitoring of third
party service providers on a periodic basis.
|
Geo-political - the impact of current and future
geo-political events could result in losses to the
Company.
|
Board and Manager
awareness. Geo-political events over which
the Company has no control are always a risk. The Investment
Manager's focus on quality companies, the diversified nature of the
portfolio and a managed level of gearing all serve to provide a
degree of protection in times of market volatility.
|
Geo-political risk is considered
to have increased during the year as a result of heightened global
tensions. The trend of other principal risks has not changed during
the year.
|
Promotional Activities
The Board recognises the
importance of promoting the Company to 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 abrdn on behalf of a number of investment trusts
under its management. The Company's financial contribution to the
programme is matched by the Manager. 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 the promotional
activities as well as updates on the shareholder register and any
changes in the make-up of that register.
The purpose of the promotional and
investor relations programmes is both to communicate effectively
with existing and prospective investors and to gain new
shareholders, with the aim of improving liquidity and enhancing the
value and rating of the Company's shares. 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 Kepler Trust Intelligence. A copy
of the latest research note is available from the Key Literature
section of the Company's website.
Environmental, Social and Human
Rights Issues
The Company has no employees as
the Board has delegated the day to day management and
administrative functions to the Manager. There are therefore no
disclosures to be made in respect of employees.
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. The Company is therefore not
required to make a slavery and human trafficking statement. In any
event, 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 UK Stewardship Code and Proxy
Voting
The Company supports the UK
Stewardship Code, 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 which has sub-delegated
that authority to the Investment Manager. abrdn plc is a tier 1
signatory of the UK Stewardship Code 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. 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 on a quarterly basis on stewardship
(including voting) issues.
Global Greenhouse Gas
Emissions
The Company has no greenhouse gas
emissions to report from its operations, nor does it have
responsibility for any other emissions producing sources under the
Companies Act 2006 (Strategic Report and Directors' Reports)
Regulations 2013.
Under Listing Rule 15.4.29(R), the
Company, as a closed ended investment company, is exempt from
complying with the Task Force on Climate-related Financial
Disclosures.
Viability Statement
The Board considers that the
Company, which does not have a fixed life, is a long term
investment vehicle and, for the purposes of this statement, has
decided that five years is an appropriate period over which to
consider its viability. The Board considers that this period
reflects a balance between looking out over a long term horizon and
the inherent uncertainties of looking out further than five
years.
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.
In assessing the viability of the
Company over the review period, the Directors have focused upon the
following factors:
- The principal risks and
uncertainties detailed above and the steps taken to mitigate these
risks.
- The relevance of the
Company's investment objective.
- The Company is invested
in readily-realisable listed securities.
- Share buy backs carried
out in the past have not resulted in significant reductions to the
capital of the Company.
- Although the Company's
stated investment policy contains a maximum gearing limit of 30% of
the NAV at the time of draw down, the Board's policy is to have a
relatively modest level of gearing and the financial covenants
attached to the Company's borrowings provide for significant
headroom.
- The ability of the
Company to refinance its £30 million multi-currency credit facility
when it matures in July 2024 (see Going Concern).
- The level of ongoing
charges.
- The robustness of the
operations of the Company's third party service
suppliers.
In making its assessment, the
Board is also aware that there are other matters that could have an
impact on the Company's prospects or viability in the future,
including current and future geo-political events, economic shocks
or significant stock market volatility caused by other factors, and
changes in regulation or investor sentiment.
Outlook
The Board's view on the general
outlook for the Company can be found in the Chairman's Statement
whilst the Investment Manager's views on the outlook for the
portfolio are included in its report..
On behalf of the Board
David Barron
Chairman
3 April 2024
Promoting the Success of the
Company
Introduction
Section 172 (1) of the Companies
Act 2006 (the "Act") requires each Director to act in the way
he/she considers, in good faith, would be most likely to promote
the success of the Company for the benefit of its members as a
whole.
The Board is required to describe
to the Company's shareholders how the Directors have discharged
their duties and responsibilities over the course of the financial
year under that provision of the Act (the "Section 172
Statement"). This statement provides an explanation of how
the Directors have promoted the success of the Company for the
benefit of its members as a whole, taking into account, among other
things, the likely long term consequences of decisions, the need to
foster relationships with all stakeholders and the impact of the
Company's operations on the environment.
The Purpose of the Company and
Role of the Board
The purpose of the Company is to
act as a vehicle to provide, over time, financial returns (both
income and capital) to its shareholders. Investment trusts, such as
the Company, are long-term investment vehicles and are typically
externally managed, have no employees, and are overseen by an
independent non-executive board of directors.
The Board, which throughout the
year comprised five independent non-executive Directors with a
broad range of skills and experience across all major functions
that affect the Company, retains responsibility for taking 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 service
providers.
The Board's philosophy is that the
Company should operate in a transparent culture where all parties
are provided with the opportunity to offer practical challenge and
participate in positive debate which is focused on the aim of
achieving the expectations of shareholders and other stakeholders
alike. The Board reviews the culture and manner in which the
Manager and Investment Manager operate at its regular meetings and
receives regular reporting and feedback from the other key service
providers. The Board works very closely with the Manager and
Investment Manager in reviewing how stakeholder issues are handled,
ensuring good governance and responsibility in managing the
Company's affairs, as well as visibility and openness in how the
affairs are conducted.
The Company's main stakeholders
have been identified as its Shareholders, the Manager (and
Investment Manager), Service Providers, Investee Companies, Debt
Providers and, more broadly, the environment and community at
large.
How the Board Engages with
Stakeholders
The Board considers its
stakeholders at Board meetings and receives feedback on the
Manager's interactions
with them.
Further details are included in
the table below.
Stakeholder
|
How We Engage
|
Shareholders
|
Shareholders are key stakeholders
and the Board places great importance on communication with them.
The Board welcomes all shareholders' views and aims to act fairly
between all of them. The Manager and Company's Stockbroker meet
regularly with current and prospective shareholders to discuss
performance and shareholder feedback is discussed by the Directors
at Board meetings. In addition, the Manager meets with analysts who
cover the investment trust sector and the Directors attend meetings
with the Company's largest shareholders and meet other shareholders
at the Annual General Meeting.
The Company subscribes to the
Manager's investor relations programme in order to maintain
communication channels, in particular, with the Company's
institutional shareholder base.
Regular updates are provided to
shareholders through the Annual Report, Half Yearly Report, monthly
factsheets, Company announcements, including daily NAV
announcements, and the Company's website.
The Company's Annual General
Meeting provides a forum, both formal and informal, for
shareholders to meet and discuss issues with the Directors and
Manager. The Board encourages as many shareholders as possible to
attend the Company's Annual General and to provide feedback on the
Company. In addition to the Annual General Meeting, this year the
Company will again hold an interactive online shareholder
presentation at which shareholders will
receive updates from the Chairman and Investment Manager and there
will be the opportunity for an interactive question and answer
session. Further details are provided in the Chairman's
Statement.
|
Manager
(and Investment Manager)
|
The Investment Manager's Review
details the key investment decisions taken during the year. The
Investment Manager has continued to manage the Company's assets in
accordance with the mandate provided by the Company, with the
oversight of the Board.
The Board regularly reviews the
Company's performance against its investment objective and the
Board undertakes an annual strategy review meeting to ensure that
the Company is positioned well for the future delivery of its
objective for its stakeholders.
The Board receives presentations
from the Investment Manager at every Board meeting to help it to
exercise effective oversight of the Investment Manager and the
Company's strategy.
The Board, through the Management
Engagement Committee, formally reviews the performance of the
Manager at least annually.
|
Service Providers
|
The Board seeks to maintain
constructive relationships with the Company's suppliers either
directly or through the Manager, with regular communications and
meetings.
The Management Engagement
Committee conducts an annual review of the performance, terms and
conditions of the Company's main service providers to ensure they
are performing in line with Board expectations, carrying out their
responsibilities and providing value for money.
|
Investee Companies
|
Responsibility for actively
monitoring the activities of portfolio companies has been delegated
by the Board to the Manager which has sub-delegated that authority
to the Investment Manager.
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 on a quarterly basis on stewardship
(including voting) issues.
Through engagement and exercising
voting rights, the Investment Manager actively works with companies
to improve corporate standards, transparency and
accountability.
The Manager reports regularly to
the Board on investment and engagement activity.
|
Debt Providers
|
On behalf of the Board, the
Manager maintains a positive working relationship with The Bank of
Nova Scotia, London Branch, the provider of the Company's
multi-currency loan facility, and provides regular updates on
business activity and compliance with its loan
covenants.
The Manager also provides regular
covenant compliance certificates to the holders of the Company's
£30 million Loan Notes.
|
Environment and
Community
|
The Board and Manager are
committed to investing in a sustainable and responsible manner and
the Investment Manager embeds Environmental, Social and Governance
("ESG") considerations into the research and analysis as part of
the investment decision-making process.
|
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 during every Board decision, the
Directors were particularly mindful of stakeholder considerations
during the following decisions undertaken during the year ended 31
January 2024. Each of these decisions was made after taking into
account the short and long term benefits for
stakeholders.
Investment Objective and
Portfolio
The Investment Manager's Review
details the key investment decisions taken during the year. The
overall shape and structure of the investment portfolio is an
important factor in delivering the Company's stated investment
objective and is reviewed at every Board meeting, including
compliance with the Company's sustainable and responsible investing
criteria.
During the year, through the work
of the Management Engagement Committee, the Board decided that the
continuing appointment of the Manager is in the best interests of
shareholders.
Dividend
Following the payment of the final
dividend for the year, of 4.15p per Ordinary share, total dividends
for the year will amount to 13.75p per Ordinary share. This
represents an increase of 5.0% compared to the previous year. This
will be the 40th year out of the past 44 that the Company has grown
its dividend, with the distribution maintained in the other four
years, and is in accordance with its policy to grow total annual
dividends in real terms over the medium term.
Through meetings with shareholders
and feedback from the Manager and the Company's Stockbroker, the
Board is conscious of the importance that shareholders place on the
level of dividends paid by the
Company.
Renewal of Bank Loan
During the year, the Board
announced the renewal of the Company's £30 million multi-currency
revolving credit facility with Bank of Nova Scotia London Branch.
The facility replaced the expiring £30 million multi-currency
revolving credit facility and will expire on 11 July
2024.
Under the terms of the facility,
the Company has the option to increase the level of the commitment
from £30 million to £40 million at any time, subject to the
lender's credit approval.
The Board continues to believe
that borrowings, in the form of the Company's Loan Notes 2045 and
the multi-currency revolving credit facility, are beneficial to
long term net asset value returns and is one of the benefits of the
closed ended investment trust structure.
Share Buy Backs
During the year, the Company
bought back 2,091,781 Ordinary shares to be held in treasury, providing a small
accretion to the NAV per share and a degree of liquidity to the
market at times when the discount to the NAV per share had widened
in normal market conditions. It is the view of the Board that this
policy is in the interest of all shareholders.
Shareholder Engagement
During the year, the Board met
shareholders at the AGM and the Chairman met directly with
representatives of some of the Company's largest shareholders. The
AGM was held in Dundee in 2023 and will be held in London this
year.
To encourage and promote stronger
interaction and engagement with the Company's shareholders, the
Board will hold an interactive online shareholder presentation
which will be held at 10.00am on Tuesday 7 May 2024. At the
presentation, shareholders will receive updates from the Chairman
and Investment Manager and there will be the opportunity for an
interactive question and answer session. The online presentation is
being held ahead of the Annual General Meeting to allow
shareholders to submit their proxy votes prior to the meeting.
Details of how to register for the event can be found in the
Chairman's Statement.
The Board considers that it is
very important to maintain an ongoing dialogue with shareholders to
properly understand their views and to communicate the actions of
the Board.
On behalf of the Board
David Barron
Chairman
3 April 2024
Performance
Performance (total
return)
|
1
year
|
3
year
|
5
year
|
|
%
return
|
%
return
|
%
return
|
Total return (Capital return plus
net dividends reinvested)
|
|
|
|
Net asset
valueAB
|
+6.7%
|
+18.0%
|
+43.8%
|
Share priceB
|
(1.6)%
|
+9.8%
|
+41.4%
|
FTSE All-Share Index
|
+1.9%
|
+27.5%
|
+30.4%
|
|
|
|
|
Capital return
|
|
|
|
Net asset
valueA
|
+2.0%
|
+3.8%
|
+17.1%
|
Share price
|
(6.1)%
|
(3.8)%
|
+14.1%
|
FTSE All-Share Index
|
(1.9)%
|
+14.6%
|
+9.1%
|
A Cum-income NAV with
debt at fair value.
|
|
|
|
B Considered to be an
Alternative Performance Measure
|
|
|
|
Source: abrdn, Factset &
Morningstar
|
|
|
|
Ten Year Financial
Record
Year ended 31 January
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
2024
|
Total revenue (£'000)
|
20,994
|
20,359
|
21,963
|
22,317
|
22,263
|
20,518
|
18,346
|
21,518
|
21,950
|
22,949
|
Per share (p)
|
|
|
|
|
|
|
|
|
|
|
Revenue return
|
11.90
|
12.11
|
12.55
|
12.64
|
12.68
|
12.08
|
10.90
|
12.87
|
13.02
|
13.54
|
Dividends paid/proposed
|
11.25
|
11.40
|
11.70
|
12.10
|
12.45
|
12.70
|
12.80
|
12.90
|
13.10
|
13.75
|
Revenue
reserveA
|
8.89
|
9.63
|
10.51
|
11.16
|
11.54
|
10.94
|
9.07
|
9.05
|
8.97
|
8.99
|
Net asset
valueB
|
279.66
|
237.48
|
270.34
|
290.57
|
266.83
|
312.22
|
297.64
|
309.03
|
302.80
|
308.98
|
Total
returnC
|
27.76
|
(28.94)
|
43.83
|
30.83
|
(11.95)
|
58.57
|
(1.81)
|
23.78
|
1.92
|
15.45
|
Shareholders' funds
(£'000)
|
428,702
|
368,041
|
415,810
|
442,384
|
401,731
|
469,806
|
448,293
|
464,579
|
448,605
|
445,815
|
A After payment of
third interim and final dividends (see note 16 for further
details).
|
B With debt at fair
value.
|
C Per Statement of
Comprehensive Income.
|
Investment Manager's
Review
Introduction
For the year ended 31 January
2024, the Company's net asset value total return of 6.7% compared
favourably to a total return of 1.9% from the benchmark, the FTSE
All-Share Index. This encouraging outcome occurred despite various
challenges in the UK market, such as geopolitical risks, concerns
over the financial stability of the banking sector, fears of
persistent inflation, and the delayed impact of tight monetary
policy. Economies proved more resilient than anticipated coming
into the year. Consumer confidence has benefited from real wage
growth and a moderating cost of living, meanwhile the UK faced a
mild technical recession in the latter half of the year. More
disappointingly, in the context of strong portfolio outperformance,
the share price of the Company declined over the year by 1.6% in
total return terms and the discount widened. The revenue return hit
a new record level of 13.54p a share.
The global macro-economic outlook
remains mixed, with a high degree of uncertainty. While fears of a
US recession have lessened, the Chinese recovery has disappointed
and global growth is expected to slow. Recognising this backdrop,
we believe the Company is well-positioned to navigate potential
challenges in the market. Our focus on higher-quality companies and
investments that can deliver both income and capital growth, while
adhering to the Company's sustainable and responsible investing
approach, should help us manage any difficult market conditions
ahead.
The portfolio remains highly
differentiated compared to both peers and its benchmark. It remains
the only UK Equity Income investment trust with a formal
sustainability approach. The active share of the portfolio is 76%,
while the number of holdings is a focussed group of 35. We see
attractive opportunities in innovative mid-sized UK companies and
have 25% of the Company's assets in the FTSE 250 Index and 50% in
UK large companies. We utilise the Company's flexibility to invest
overseas with an allocation of up to 25% to high quality overseas
companies, offering diversification and unique
exposures.
The Company offers an attractive
5.0% dividend yield (based on the year end share price of 276p),
approximately 20% ahead of the FTSE All-Share Index. The free cash
flow performance of companies held in the portfolio has been
strong, with many growing their dividends during the year. As a
result, income generation came in ahead of our initial
expectations.
Performance
We are pleased with the Company's
income progression in the year. The revenue earnings per share of
13.54p exceeded our expectations and represents an increase of 4.0%
over the previous year. Special dividends were paid by
Volvo and
Softcat in the year. A
number of holdings delivered strong dividend growth,
including Games Workshop, Morgan Sindall,
Novo-Nordisk, Relx, and
Sirius Real Estate. We
continued writing options based on our fundamental analysis of
holdings in the portfolio and this has been a benefit to the
Company by diversifying and increasing the level of income
generated.
The UK market concluded the year
with a modest increase, despite experiencing some volatility
throughout the year. The Company benefited from positive sector
allocation given its underweight exposure to the basic materials
sector, which underperformed due to lower commodity prices
associated with weaker Chinese activity. The portfolio's overweight
position in the technology sector, an area with numerous quality
and growth characteristics that we focus on, proved beneficial to
performance.
The Company's sustainable
investment approach targets investment in high-quality, sustainable
Leaders and Improvers across the market and we continue to engage
with investee companies. Filters are applied to the universe to
reduce exposure to sectors and companies facing the highest
environmental and social risks. During the year, the investable
universe provided a tailwind to relative performance, primarily due
to its lower exposure to basic materials. While the primary focus
of the Company is on selecting high-quality, sustainable companies,
we continue to monitor factor risks presented by this approach and
remain confident that it aligns with positive outcomes for
shareholders.
Encouragingly, fundamental
analysis and stock picking contributed positively, with the market
rewarding companies that demonstrated attractive growth and
improving fundamentals. In the healthcare sector,
Novo-Nordisk announced a
series of trial data indicating that the anti-obesity drug Wegovy
not only leads to weight loss in patients but also reduces the risk
of cardiovascular events. The drug targets a significant unmet
need, obesity, with attractive long-term supply/demand dynamics and
the shares responded very favourably. The accounting software
firm Sage exceeded expectations with accelerating revenue growth,
driven by its US cloud accounting software product, Sage Intacct.
Upon purchasing shares in late 2022, we anticipated that the
company was at a growth and margin inflection point, which has
subsequently materialised. Sage's transition to subscription
contracts and product innovation form a strong foundation for
sustained growth in the medium term. Relx is performing better than
anticipated due to its investment in data analytics and
decision-making tools, which enable customers to extract more value
from its platform. With the valuation at a discount to US peers,
mainly due to its UK listing, we continue to believe it is a
compelling opportunity.
As addressed in last year's Annual
Report, UK domestic and mid-sized companies' underperformance in
2022 resulted in heavily discounted valuations, but we anticipated
that long-term alpha generation from UK mid-sized companies would
return. This trend of underperformance continued through to October
2023 due to concerns about sticky inflation, recession risk and
market liquidity headwinds, before sharply reversing in the last
quarter of the financial year. The holding in Intermediate Capital rebounded
strongly, while UK construction company Morgan Sindall and large
housebuilder Taylor Wimpey
saw share price recovery as fears of a deep UK
recession and house price deflation moderated. Taylor Wimpey's
unique dividend policy, based on net asset value rather than
earnings, ensured a visible and healthy shareholder
distribution.
Turning to the detractors to
performance. The holding in the Asian insurer Prudential underperformed on
concerns about the pace of recovery in China. We view this as a
temporary setback and believe that Prudential's long-term
structural growth potential, offered by its market exposures, is
not reflected in its discounted valuation. The specialist UK
lender Close Brothers faced news that the UK financial regulator, the FCA, has
opened an enquiry into legacy motor finance commission structures
in the industry and whether customers are owed financial redress.
The quantum and timing of the amount to be paid to customers is
uncertain and patience will be required, with a regulatory
announcement anticipated in September this year. Meanwhile the
company cut its dividend in order to conserve capital which was a
disappointing development.
Portfolio Activity
We introduced several new holdings
this year. We initiated a position in Telecom Plus, a retailer of utility,
telecom and insurance products, which operates in the UK under the
Utility Warehouse brand. The company has a capital-light business
model, strong balance sheet and attractive cost advantage which
means it is well placed to deliver long-term customer growth,
earnings progression and shareholder distributions. We also
introduced the UK's largest IT value added reseller Softcat to the
portfolio. We believe Softcat
has significant potential for long-term growth,
coupled with a strong balance sheet and the optionality for
enhanced shareholder cash returns. Alongside these additions, we
purchased a new position in German automotive manufacturer
Mercedes-Benz which is
repositioning its strategy towards the luxury end of the market and
is well positioned from a technology perspective to meet the
challenges of the electric vehicle transition and the gradual move
to autonomous driving.
Finally, we introduced
National Grid, which has been owned by the Company in the past. The company
aims to deliver both asset value and earnings growth over the
medium term, driven by the investment required to decarbonise the
UK and US energy networks and is a critical enabler of the energy
transition. We part funded this purchase with a reduction in the
holding in SSE,
which benefits from similar drivers. National Grid has a superior
shareholder distribution return and so is helpful from an income
perspective.
To fund these new ideas we exited
small holdings in lower conviction names Direct Line Insurance, Ashmore and Ubisoft. We also took the opportunity to exit Dechra Pharmaceuticals after it
received an all-cash offer from private equity company EQT and the
private equities investment department of Abu Dhabi Investment
Authority. Finally, we exited Coca-Cola
Hellenic Bottling Company following strong
share price recovery from the negative reaction to the Russian
invasion of Ukraine, and resilient earnings.
Outlook
Signs are emerging that the
actions taken by central banks to manage the high levels of
inflation in the UK and Europe are having their desired effect.
While inflation is decelerating, geopolitical risk and wage growth
remain elevated, together making the path to monetary easing a
challenge to predict. Global growth is expected to slow and the UK
and Eurozone are already in recession-like conditions. The US
economy has remained more resilient than many feared, however
household savings and corporate balance sheets are finite. Chinese
growth has stabilised amid easing but household confidence and the
real estate sector weigh on the economy. Despite this backdrop, we
remain positive on the potential long-term returns available from
the portfolio. Fundamental company analysis supports our conviction
in the high quality businesses in the portfolio, and we see
attractive opportunities that are underappreciated by the
market.
There are reasons to be
optimistic. The Company should benefit from the focus on higher
quality companies with less reliance on the economic cycle, given
our attention to diversification, balance sheet strength, and
resilience of income. The UK equity market remains highly
attractive in terms of valuation, both on an absolute basis and
relative to global markets. This view is supported by the increased
frequency of mergers and acquisitions across the market which, in
our view, will act as a catalyst to address the
mispricing.
Overall, we will continue to
maintain a balanced approach to the positioning of the portfolio,
giving it the potential to perform in a range of market
environments. Our primary attention is on protecting capital,
but we will continue to look to participate in opportunities where
share prices in good companies with attractive long-term prospects
have been oversold. Simultaneously, we will concentrate on those UK
and overseas companies committed to creating a more sustainable
future.
Ben Ritchie and Rebecca
Maclean,
abrdn Investments Limited
3 April 2024
Portfolio
|
|
Valuation
|
Total
|
Valuation
|
|
|
2024
|
assets
|
2023
|
Company
|
Sector
|
£'000
|
%
|
£'000
|
AstraZeneca
|
Pharmaceuticals and
Biotechnology
|
32,517
|
6.7
|
38,221
|
Unilever
|
Personal Care, Drug and Grocery
Stores
|
28,205
|
5.8
|
35,175
|
TotalEnergies
|
Oil, Gas and Coal
|
26,125
|
5.3
|
28,736
|
Relx
|
Media
|
23,846
|
4.9
|
24,794
|
London Stock Exchange
|
Finance and Credit
Services
|
23,696
|
4.8
|
13,697
|
Diageo
|
Beverages
|
22,711
|
4.6
|
25,344
|
National Grid
|
Gas Water and
Multi-utilities
|
17,956
|
3.7
|
-
|
Intermediate Capital
|
Investment Banking and Brokerage
Services
|
16,018
|
3.3
|
12,451
|
Chesnara
|
Life Insurance
|
15,510
|
3.2
|
16,934
|
Taylor Wimpey
|
Household Goods and Home
Construction
|
15,075
|
3.1
|
11,926
|
Ten largest investments
|
|
221,659
|
45.4
|
|
SSE
|
Electricity
|
13,876
|
2.8
|
20,814
|
ASML
|
Technology Hardware and
Equipment
|
13,067
|
2.7
|
10,202
|
Prudential
|
Life Insurance
|
13,015
|
2.7
|
17,980
|
Sage
|
Software and Computer
Services
|
12,769
|
2.6
|
10,059
|
M&G
|
Investment Banking and Brokerage
Services
|
12,402
|
2.5
|
9,072
|
Games Workshop
|
Leisure Goods
|
12,196
|
2.5
|
12,772
|
Volvo
|
Industrial
Transportation
|
11,466
|
2.3
|
14,667
|
Sirius Real Estate
|
Real Estate Investment
Trusts
|
11,433
|
2.3
|
4,112
|
Morgan Sindall
|
Construction and
Materials
|
11,166
|
2.3
|
8,085
|
Nordea Bank
|
Banks
|
11,012
|
2.3
|
20,309
|
Twenty largest
investments
|
|
344,061
|
70.4
|
|
Weir Group
|
Industrial Engineering
|
10,471
|
2.1
|
11,653
|
Assura
|
Real Estate Investment
Trusts
|
10,061
|
2.1
|
13,327
|
Hiscox
|
Non-life Insurance
|
10,043
|
2.1
|
10,869
|
Edenred
|
Industrial Support
Services
|
10,040
|
2.1
|
9,319
|
Mercedes-Benz
|
Automobiles &
Parts
|
9,893
|
2.0
|
-
|
Oxford Instruments
|
Electronic and Electrical
Equipment
|
9,228
|
1.9
|
80
|
Croda
|
Chemicals
|
9,179
|
1.9
|
9,297
|
Novo-Nordisk
|
Pharmaceuticals and
Biotechnology
|
9,009
|
1.8
|
9,909
|
Telecom Plus
|
Telecommunication Service
Providers
|
8,970
|
1.8
|
-
|
Pets At Home
|
Retailers
|
8,951
|
1.8
|
11,329
|
Thirty largest
investments
|
|
439,906
|
90.0
|
|
Marshalls
|
Construction and
Materials
|
8,914
|
1.8
|
9,109
|
Softcat
|
Software and Computer
Services
|
7,269
|
1.5
|
-
|
Genus
|
Pharmaceuticals and
Biotechnology
|
6,865
|
1.4
|
6,020
|
Close Brothers
|
Banks
|
6,170
|
1.3
|
11,001
|
Moonpig
|
Retailers
|
4,963
|
1.0
|
3,551
|
Total investments
|
|
474,087
|
97.0
|
|
Net current
assetsA
|
|
14,780
|
3.0
|
|
Total assets less current
liabilitiesA
|
|
488,867
|
100.0
|
|
A Excluding bank loan
of £13,307,000
|
Sector Analysis
As at 31 January
2024
|
|
|
FTSE
All-Share
|
Portfolio
|
Portfolio
|
|
|
Index
weighting
|
weighting
|
weighting
|
|
|
2024
|
2024
|
2023
|
|
|
%
|
%
|
%
|
Energy
|
Oil, Gas and Coal
|
10.8
|
5.3
|
5.8
|
|
|
10.8
|
5.3
|
5.8
|
Basic Materials
|
Industrial Metals And
Mining
|
6.3
|
1.9
|
1.9
|
|
Precious Metals And
Mining
|
0.2
|
-
|
-
|
|
Chemicals
|
0.6
|
-
|
-
|
|
|
7.1
|
1.9
|
1.9
|
Industrials
|
Construction and
Materials
|
0.4
|
4.1
|
3.5
|
|
Aerospace And Defence
|
3.3
|
-
|
-
|
|
Electronic and Electrical
Equipment
|
1.0
|
1.9
|
-
|
|
General Industrials
|
1.6
|
-
|
-
|
|
Industrial Engineering
|
0.6
|
2.1
|
2.4
|
|
Industrial Support
Services
|
3.6
|
2.1
|
1.9
|
|
Industrial
Transportation
|
1.2
|
2.3
|
3.0
|
|
|
11.7
|
12.5
|
10.7
|
Consumer Discretionary
|
Automobiles & Parts
|
0.1
|
2.0
|
-
|
|
Consumer Services
|
1.6
|
-
|
-
|
|
Household Goods and Home
Construction
|
1.3
|
3.1
|
2.5
|
|
Leisure Goods
|
0.1
|
2.5
|
3.0
|
|
Personal Goods
|
0.3
|
-
|
-
|
|
Media
|
4.1
|
4.9
|
5.0
|
|
Retailers
|
1.5
|
2.9
|
3.0
|
|
Travel And Leisure
|
3.5
|
-
|
-
|
|
|
12.5
|
15.4
|
13.6
|
Health Care
|
Medical Equipment And
Services
|
0.6
|
-
|
-
|
|
Pharmaceuticals and
Biotechnology
|
10.7
|
9.9
|
12.2
|
|
|
11.3
|
9.9
|
12.2
|
Consumer Staples
|
Beverages
|
3.2
|
4.6
|
8.3
|
|
Food Producers
|
0.6
|
-
|
-
|
|
Tobacco
|
3.0
|
-
|
-
|
|
Personal Care, Drug and Grocery
Stores
|
7.6
|
5.8
|
7.1
|
|
|
14.4
|
10.4
|
15.5
|
Real Estate
|
Real Estate Investment and
Services
|
0.4
|
-
|
3.5
|
|
Real Estate Investment
Trusts
|
2.3
|
4.4
|
-
|
|
|
2.7
|
4.4
|
3.5
|
Utilities
|
Electricity
|
0.9
|
2.8
|
4.2
|
|
Gas Water and
Multi-utilities
|
2.8
|
3.7
|
-
|
|
|
3.7
|
6.5
|
4.2
|
Financials
|
Banks
|
9.0
|
3.6
|
6.3
|
|
Finance and Credit
Services
|
1.9
|
4.8
|
2.8
|
|
Investment Banking and Brokerage
Services
|
2.9
|
5.8
|
5.5
|
|
Closed End Investments
|
6.3
|
-
|
-
|
|
Life Insurance
|
2.4
|
5.8
|
7.1
|
|
Non-life Insurance
|
0.8
|
2.1
|
4.1
|
|
|
23.3
|
22.1
|
25.7
|
Technology
|
Software and Computer
Services
|
1.4
|
4.1
|
2.0
|
|
Technology Hardware and
Equipment
|
-
|
2.7
|
2.1
|
|
|
1.4
|
6.8
|
4.1
|
Telecommunications
|
Telecommunication Service
Providers
|
1.1
|
1.8
|
-
|
|
|
1.1
|
1.8
|
-
|
Total investments
|
|
100.0
|
97.0
|
97.3
|
Net current assets before
borrowingsA
|
|
|
3.0
|
2.7
|
Total assets less current
liabilitiesA
|
|
|
100.0
|
100.0
|
A Excluding bank loan
of £13,307,000
|
Directors' Report
(extract)
The Directors present their report
and the audited financial statements for the year ended 31 January
2024.
Results and Dividends
The financial statements for the
year ended 31 January 2024 are contained
below. First, second and third interim dividends, each of 3.20p per
Ordinary share, were paid on 25 August 2023, 24 November 2023 and
29 February 2024 respectively. The
Directors recommend a final dividend of 4.15p per Ordinary share,
payable on 31 May 2024 to shareholders on the register on 3 May
2024. The ex-dividend date is 2 May 2024. A resolution to approve
the final dividend will be proposed at the Annual General
Meeting.
Principal Activity and
Status
The Company is registered as a
public limited company (registered in Scotland No. SC000881) and is
an investment company within the meaning of Section 833 of the
Companies Act 2006. The Company has been approved by HM Revenue
& Customs as an investment trust subject to it 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 February 2012. The Directors are of
the opinion that the Company has conducted its affairs for the year
ended 31 January 2024 so as to enable it to comply with the ongoing
requirements for investment trust status.
Individual Savings
Accounts
The Company has conducted its
affairs in such a way 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.
Donations to Charity
During the previous year, the
Board decided that amounts of unclaimed dividends greater than 12
years old, which are returned annually to the Company by the
Registrar in accordance with the Company Articles of Association,
would be donated to charity. Accordingly, the Company made a
donation of £19,000 (2023: £16,000) to the abrdn Charitable
Foundation, which directs funding to charities around the
world.
The abrdn Charitable Foundation is
a registered charity. Its board of directors includes independent
representation from the abrdn Group and provides oversight and
guidance for its charitable giving activities.
Capital Structure and Voting
Rights
The issued Ordinary share capital
at 31 January 2024 consisted of 146,172,889 Ordinary shares of 25p
and 7,505,046 Ordinary shares held in treasury.
Each Ordinary share holds one
voting right and shareholders are entitled to vote on all
resolutions which are proposed at general meetings of the Company.
The Ordinary shares, excluding treasury shares, carry a right to
receive dividends. On a winding up or other return of
capital, 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, or voting rights attaching to, the Ordinary shares in
the Company other than certain restrictions which may from time to
time be imposed by law.
Management Agreement
The Company has appointed abrdn
Fund Managers Limited ("aFML"), a wholly owned subsidiary of abrdn
plc, as its alternative investment fund manager. aFML has been
appointed to provide investment management, risk management,
administration and company secretarial services and promotional
activities to the Company. The Company's portfolio is managed by
abrdn Investments Limited ("aIL) by way of a group delegation
agreement in place between aFML and aIL. In addition, aFML
has sub-delegated administrative and secretarial services to abrdn
Holdings Limited and promotional activities to aIL. Details of the
management fees and fees payable for promotional activities are
shown in notes 4 and 5 to the
financial statements.
The management agreement is
terminable on not less than six 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.
Substantial Interests
Information provided to the
Company by major shareholders pursuant to the FCA's Disclosure
Guidance and Transparency Rules is published by the Company via a
Regulatory Information Service.
The table below sets out the
interests in 3% or more of the issued share capital of the Company,
of which the Board was aware as at 31 January 2024.
Shareholder
|
Number
of shares held
|
%
held
|
Interactive Investor
|
37,572,556
|
25.7
|
Hargreaves Lansdown
|
17,857,977
|
12.2
|
EFG Harris Allday
|
6,942,544
|
4.7
|
A J Bell
|
6,328,721
|
4.3
|
W M Thomson
|
5,750,363
|
3.9
|
Charles Stanley
|
5,547,100
|
3.8
|
Rathbones
|
5,404,196
|
3.7
|
HSDL
|
5,044,283
|
3.4
|
Canaccord Genuity Wealth
Management
|
4,579,615
|
3.1
|
|
There have been no changes
notified to the Company between the year end and the date of
approval of this Report.
Directors
Throughout the year, the Board
comprised five non-executive Directors, each of whom is considered
by the Board to be independent of the Company and the Manager.
David Barron is the Chairman and Howard Williams is the Senior
Independent Director.
The Directors attended scheduled
Board and Committee meetings during the year ended 31 January 2024
as follows (with their eligibility to attend the relevant meetings
in brackets):
|
Board
Meetings
|
Audit
Committee Meetings
|
Management Engagement Committee Meetings
|
Nomination and Remuneration Committee Meetings
|
David Barron
|
6
(6)
|
-
(-)A
|
1
(1)
|
1
(1)
|
Gay Collins
|
6
(6)
|
2
(2)
|
1
(1)
|
1
(1)
|
Jasper Judd
|
6
(6)
|
2
(2)
|
1
(1)
|
1
(1)
|
Christine Montgomery
|
6
(6)
|
2
(2)
|
1
(1)
|
1
(1)
|
Howard Williams
|
6
(6)
|
2
(2)
|
1
(1)
|
1
(1)
|
A David Barron is not a member of the Audit Committee but
attends by invitation. He attended all Audit Committee meetings
during the year.
The Board meets more frequently
when business needs require.
Under the terms of the Company's
Articles of Association, Directors are subject to election at the
first Annual General Meeting after their appointment and are
required to retire and be subject to re-election at least every
three years thereafter. However, the Board has decided that all
Directors will retire annually. Accordingly, Gay Collins, Jasper
Judd, Howard Williams, Christine Montgomery and David Barron will
retire at the Annual General Meeting and, being eligible, offer
themselves for re-election.
The Board believes that all the
Directors seeking re-election remain independent of the Manager and
free from any relationship which could materially interfere with
the exercise of their judgement on issues of strategy, performance,
resources and standards of conduct. The Board believes that each
Director has the requisite high level and range of business,
investment and financial experience which enables the Board to
provide clear and effective leadership and proper governance of the
Company. Following formal performance evaluations, each Director's
performance continues to be effective and demonstrates commitment
to the role, and their individual performances contribute to the
long-term sustainable success of the Company. The Board therefore
recommends the re-election of each of the Directors at the Annual
General Meeting.
Board's Policy on
Tenure
In normal circumstances, it is the
Board's expectation that Directors will not serve beyond the Annual
General Meeting following the ninth anniversary of their
appointment. However, the Board takes the view that independence of
individual Directors is not necessarily compromised by length of
tenure on the Board and that continuity and experience can add
significantly to the Board's strength. The Board believes that
recommendation for re-election should be on an individual basis
following a rigorous review which assesses the contribution made by
the Director concerned, but also taking into account the need for
managed succession and diversity.
It is the Board's policy that the
Chairman of the Board will not serve as a Director beyond the
Annual General Meeting following the ninth anniversary of his or
her appointment to the Board. However, this may be extended in
exceptional circumstances or to facilitate effective succession
planning and the development of a diverse Board. In such a
situation the reasons for the extension will be fully explained to
shareholders and a timetable for the departure of the Chairman
clearly set out.
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, the principle of
diversity in its recruitment of new Board members, including
diversity of thought, location and background. The Board will not
display any bias for age, gender, race, sexual orientation,
religion, ethnic or national origins, or disability in considering
the appointment of its Directors. In view of its size, the Board
will continue to ensure that all appointments are made on the basis
of merit against the specification prepared for each appointment.
In doing so, 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.
Table for reporting on gender as
at 31 January 2024
|
Number
of Board members
|
Percentage of the Board
|
Number
of senior positions on the Board (CEO, CFO, Chair and
SID)
|
Number
in executive management
|
Percentage of executive management
|
Men
|
3
|
60%
|
n/a
(note
3)
|
n/a
(note
3)
|
n/a
(note
3)
|
Women
|
2
|
40%
(note 1)
|
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.
Does not meet 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 Chairman of the Board, Senior Independent Director and
Chairs of the Audit Committee, Nomination and Remuneration
Committee and Management Engagement 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 as set out in LR 9.8.6R (9)(a)(ii) .
As shown in the above table, the
Company has not as yet met the target set out in LR
9.8.6R (9)(a)(iii) that at least one Director is from a minority ethnic
background. It is the Board's intention
that this target will be taken into account at the time of the next
appointment.
The Roles of the Chairman and
Senior Independent Director
The Chairman is responsible for
providing effective leadership of the Board, demonstrating
objective judgement and promoting a culture of openness and debate.
The Chairman facilitates the effective contribution and encourages
active engagement by each Director. In conjunction with the Company
Secretary, the Chairman ensures that Directors receive accurate,
timely and clear information to assist them with effective
decision-making. The Chairman 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 Senior Independent Director
acts as a sounding board for the Chairman and acts as an
intermediary for other Directors, when necessary. Working closely
with the Nomination and Remuneration Committee, the Senior
Independent Director takes responsibility for an orderly succession
process for the Chairman, and leads the annual appraisal of the
Chairman's performance. The Senior Independent Director is also
available to shareholders to discuss any concerns they may
have.
Directors' and Officers' Liability
Insurance
The Company maintains insurance in
respect of Directors' and Officers' liabilities in relation to
their acts on behalf of the Company. Each Director is entitled to
be indemnified out of the assets of the Company to the extent
permitted by law against any loss or liability incurred by him or
her in the execution of his or her duties in relation to the
affairs of the Company. These rights are included in the Articles
of Association of the Company.
Management of Conflicts of
Interest
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, each Director prepares 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 or 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 or her wider duties is affected. Each Director is required
to notify the Company Secretary of any potential, or actual,
conflict situations that will need authorising by the Board.
Authorisations given by the Board are reviewed at each Board
meeting.
No Director has a service contract
with the Company although all Directors are issued with letters of
appointment. There were no contracts during, or at the end of the
year, in which any Director was interested.
The Company has a policy of
conducting its business in an honest and ethical manner. The
Company takes a zero-tolerance approach to bribery and corruption
and has procedures in place that are proportionate to the Company's
circumstances to prevent them. The Manager also adopts a group-wide
zero-tolerance approach and has its own detailed policy and
procedures in place to prevent bribery and corruption. Copies of
the Manager's anti-bribery and corruption policies are available on
its website.
In relation to the corporate
offence of failing to prevent tax evasion, it is the Company's
policy to conduct all 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 is committed to acting professionally, fairly and with
integrity in all its business dealings and
relationships.
Corporate Governance
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.
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 complied with the principles and provisions
of the AIC Code and the relevant provisions of the UK Code, except
as set out below.
The UK Code includes provisions
relating to:
- interaction with the
workforce (provisions 2, 5 and 6);
- the role and
responsibility of the chief executive (provisions 9 and
14);
- requirement of the
chairman of a remuneration committee to have served on a
remuneration committee for at least 12 months prior to appointment
(provision 32); and
- executive directors'
remuneration (provisions 33 and 36 to 40).
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.
Full details of the Company's
compliance with AIC Code can be found on its website.
Going Concern
The Company's assets consist
mainly of equity shares in companies listed on the London Stock
Exchange and in most circumstances are considered to be realisable
within a short timescale. The Board has set limits for borrowing
and derivative contract positions and regularly reviews actual
exposures, cash flow projections and compliance with loan
covenants. The Directors have considered the fact that Company's
investments comprise readily realisable securities which can be
sold to meet funding requirements if necessary. The Directors have
also performed stress testing on the portfolio and the loan
financial covenants.
The Company has borrowings in the
form of £30 million 3.99% Loan Notes that mature in December 2045,
and a £30 million multi-currency revolving credit facility with The
Bank of Nova Scotia, London Branch, which matures in July 2024. The
Board has reviewed indicative quotes for the renewal of the
multi-currency revolving credit facility and expects to be able to
renew it upon its maturity with a similar facility.
Following this assessment, the
Directors believe that the Company has adequate financial resources
to continue in operational existence for the foreseeable future and
for at least twelve months from the date of this Report.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing the financial statements.
Accountability and
Audit
Each Director confirms that, so
far as he or she is aware, there is no relevant audit information
of which the Company's Auditor is unaware, and they have taken all
the steps that they could reasonably be expected to have taken as
Directors in order to make themselves aware of any relevant audit
information and to establish that the Company's Auditor is aware of
that information.
Independent Auditor
The Company's Auditor, Deloitte
LLP, has indicated its willingness to remain in office. The Board
will propose resolutions at the Annual General Meeting to
re-appoint Deloitte LLP as Auditor for the ensuing year and to
authorise the Directors to determine its remuneration.
Relations with
Shareholders
The Directors place a great deal
of importance on communications with shareholders. Shareholders and
investors may obtain up to date information on the Company through
its website.
The Board's policy is to
communicate directly with shareholders and their representative
bodies without the involvement of the management group (including
the Company Secretary or the Manager) in situations where direct
communication is required, and representatives from the Board and
Manager meet with major shareholders on at least an annual basis in
order to gauge their views.
abrdn Holdings Limited has been
appointed Company Secretary to the Company. Whilst abrdn Holdings
Limited is a wholly owned subsidiary of the abrdn Group, there is a
clear separation of roles between the Manager and Company Secretary
with different board compositions and different reporting lines in
place. The Company Secretary only 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 Chairman responds personally as appropriate.
Directors attend meetings with the
Company's largest shareholders and meet other shareholders at the
Annual General Meeting and, as explained in the Chairman's
Statement, the Company will hold an online shareholder presentation
in advance of the Annual General Meeting this year, which will
include an interactive question and answer session.
The notice of the Annual General
Meeting is sent out at least 20 working days in advance of the
meeting. All shareholders have the opportunity to put questions to
the Board and Manager at the meeting.
Disclosures in Strategic
Report
In accordance with Section 414 C
(11) of the Companies Act 2006, the following information otherwise
required to be set out in the Directors'
Report has been included in the Strategic Report: risk management
objectives and policies and likely future developments in the
business.
Annual General
Meeting
The Annual General Meeting will be
held at 18 Bishops Square, London E1 6EG at 12 noon on Thursday 23
May 2024.
By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
3 April 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 UK Accounting
Standards, 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 judgments and
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
- prepare the financial
statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in
business.
The Directors are responsible for
keeping proper accounting records that disclose with reasonable
accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the
Companies Act 2006. They have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets
of the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and
regulations, the Directors are also responsible for preparing a
Strategic Report, Directors' Report, Directors' Remuneration Report
and Statement of Corporate Governance that comply with that law and
those regulations.
The Directors are responsible for
the maintenance and integrity of the corporate and financial
information included on the Company's website, but not for the
content of any information included on the website that has been
prepared or issued by third parties. Legislation in the UK
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors confirm that to the
best of their knowledge:
- the financial
statements have been prepared in accordance with applicable
accounting standards and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
and
- the Annual Report taken
as a whole, is fair, balanced and understandable and it provides
the information necessary to assess the Company's position and
performance, business model and strategy; and
- the Strategic Report
and Directors' Report include a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that the Company faces.
On behalf of the Board
David Barron
Chairman
3 April 2024
Statement of Comprehensive Income
|
|
Year
ended 31 January 2024
|
Year
ended 31 January 2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Gains/(losses) on
investments
|
10
|
-
|
4,712
|
4,712
|
-
|
(13,996)
|
(13,996)
|
Currency profit/(loss)
|
|
-
|
267
|
267
|
-
|
(558)
|
(558)
|
Income
|
3
|
22,949
|
-
|
22,949
|
21,950
|
-
|
21,950
|
Investment management
fee
|
4
|
(696)
|
(1,044)
|
(1,740)
|
(682)
|
(1,022)
|
(1,704)
|
Administrative expenses
|
5
|
(1,072)
|
-
|
(1,072)
|
(951)
|
-
|
(951)
|
Net return/(loss) before finance
costs and taxation
|
|
21,181
|
3,935
|
25,116
|
20,317
|
(15,576)
|
4,741
|
|
|
|
|
|
|
|
|
Finance costs
|
6
|
(757)
|
(1,116)
|
(1,873)
|
(597)
|
(888)
|
(1,485)
|
Return/(loss) before
taxation
|
|
20,424
|
2,819
|
23,243
|
19,720
|
(16,464)
|
3,256
|
|
|
|
|
|
|
|
|
Taxation
|
7
|
(410)
|
-
|
(410)
|
(412)
|
-
|
(412)
|
Return/(loss) after
taxation
|
|
20,014
|
2,819
|
22,833
|
19,308
|
(16,464)
|
2,844
|
|
|
|
|
|
|
|
|
Return/(loss) per Ordinary share
(pence)
|
9
|
13.54
|
1.91
|
15.45
|
13.02
|
(11.10)
|
1.92
|
|
a)
|
b)
|
c)
|
d)
|
e)
|
f)
|
g)
|
The column of this statement
headed "Total" represents the profit and loss account of the
Company.
|
All revenue and capital items in
the above statement derive from continuing operations.
|
The accompanying notes are an
integral part of the financial statements.
|
Statement of Financial
Position
|
|
As
at
|
As
at
|
|
|
31
January 2024
|
31
January 2023
|
|
Notes
|
£'000
|
£'000
|
Non-current assets
|
|
|
|
Investments at fair value through
profit or loss
|
10
|
474,087
|
478,895
|
|
|
|
|
Current assets
|
|
|
|
Debtors
|
11
|
2,925
|
2,452
|
Cash and cash
equivalents
|
|
12,868
|
12,267
|
|
|
15,793
|
14,719
|
|
|
|
|
Creditors: amounts falling due
within one year
|
|
|
|
Bank loan
|
12
|
(13,307)
|
(13,762)
|
Other creditors
|
12
|
(1,013)
|
(1,509)
|
|
|
(14,320)
|
(15,271)
|
Net current
assets/(liabilities)
|
|
1,473
|
(552)
|
Total assets less current
liabilities
|
|
475,560
|
478,343
|
|
|
|
|
Creditors: amounts falling due
after more than one year
|
13
|
(29,745)
|
(29,738)
|
Net assets
|
|
445,815
|
448,605
|
|
|
|
|
Capital and reserves
|
|
|
|
Called-up share capital
|
14
|
38,419
|
38,419
|
Share premium account
|
|
4,908
|
4,908
|
Capital redemption
reserve
|
|
1,606
|
1,606
|
Capital reserve
|
|
376,996
|
379,839
|
Revenue reserve
|
16
|
23,886
|
23,833
|
Equity shareholders'
funds
|
|
445,815
|
448,605
|
|
|
|
|
Net asset value per Ordinary share
(pence)
|
17
|
304.99
|
302.57
|
|
|
|
|
The financial statements were
approved and authorised for issue by the Board of Directors on 3
April 2024 and were signed on its behalf by:
|
David Barron
|
|
|
|
Director
|
|
|
|
Company Number:
SC000881
|
The accompanying notes are an
integral part of the financial statements.
|
Statement of Changes in
Equity
For the year ended 31 January
2024
|
|
|
|
Share
|
Capital
|
|
|
|
|
|
Share
|
premium
|
redemption
|
Capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 31 January
2023
|
|
38,419
|
4,908
|
1,606
|
379,839
|
23,833
|
448,605
|
Return after taxation
|
|
-
|
-
|
-
|
2,819
|
20,014
|
22,833
|
Repurchase of shares for
Treasury
|
|
-
|
|
-
|
(5,662)
|
-
|
(5,662)
|
Dividends paid
|
8
|
-
|
-
|
-
|
-
|
(19,961)
|
(19,961)
|
Balance at 31 January
2024
|
|
38,419
|
4,908
|
1,606
|
376,996
|
23,886
|
445,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 January
2023
|
|
|
|
Share
|
Capital
|
|
|
|
|
|
Share
|
premium
|
redemption
|
Capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 31 January
2022
|
|
38,419
|
4,619
|
1,606
|
396,303
|
23,632
|
464,579
|
(Loss)/return after
taxation
|
|
-
|
-
|
-
|
(16,464)
|
19,308
|
2,844
|
Issue of shares from
Treasury
|
|
-
|
289
|
-
|
-
|
-
|
289
|
Dividends paid
|
8
|
-
|
-
|
-
|
-
|
(19,107)
|
(19,107)
|
Balance at 31 January
2023
|
|
38,419
|
4,908
|
1,606
|
379,839
|
23,833
|
448,605
|
|
|
|
|
|
|
|
|
The Revenue reserve and the part
of the Capital reserve represented by realised capital gains
represent the amount of the Company's reserves distributable by way
of dividend.
|
The accompanying notes are an
integral part of the financial statements.
|
Statement of Cash Flows
|
|
Year
ended
|
Year
ended
|
|
|
31
January 2024
|
31
January 2023
|
|
Notes
|
£'000
|
£'000
|
Operating activities
|
|
|
|
Net return before finance costs
and taxation
|
|
25,116
|
4,741
|
Adjustment for:
|
|
|
|
(Gains)/losses on
investments
|
|
(4,712)
|
13,996
|
Currency (gains)/losses
|
|
(267)
|
558
|
Decrease in accrued dividend
income
|
|
196
|
18
|
Decrease/(increase) in other
debtors excluding tax
|
|
15
|
(16)
|
Increase in other
creditors
|
|
109
|
186
|
Overseas withholding
tax
|
|
(1,093)
|
(1,052)
|
Net cash flow from operating
activities
|
|
19,364
|
18,431
|
|
|
|
|
Investing activities
|
|
|
|
Purchases of
investments
|
|
(91,372)
|
(109,784)
|
Sales of investments
|
|
100,244
|
120,822
|
Net cash from investing
activities
|
|
8,872
|
11,038
|
|
|
|
|
Financing activities
|
|
|
|
Interest paid
|
|
(1,916)
|
(1,409)
|
Dividends paid
|
8
|
(19,961)
|
(19,107)
|
Buyback of Ordinary shares for
treasury
|
|
(5,571)
|
-
|
Issue of shares from
treasury
|
|
-
|
289
|
Net cash used in financing
activities
|
|
(27,448)
|
(20,227)
|
Increase in cash and cash
equivalents
|
|
788
|
9,242
|
|
|
|
|
Analysis of changes in cash and
cash equivalents during the year
|
|
|
|
Opening balance
|
|
12,267
|
2,855
|
Effect of exchange rate
fluctuations on cash held
|
|
(187)
|
170
|
Increase in cash as
above
|
|
788
|
9,242
|
Closing balance
|
|
12,868
|
12,267
|
|
|
|
|
The accompanying notes are an
integral part of the financial statements. A reconciliation of the
changes in net debt can be found in note 18.
|
Notes to the Financial
Statements
For the year ended 31 January
2024
1.
|
Principal activity
|
|
The Company is a closed-end
investment company, registered in Scotland No. SC000881, with its
Ordinary shares being listed on the London Stock
Exchange.
|
2.
|
Accounting policies
|
|
(a)
|
Basis of preparation and going
concern. The financial statements have
been prepared in accordance with Financial Reporting Standard 102,
the requirements of the Companies Act 2006 and with the AIC
("Association of Investment Companies") 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 Company's assets consist
mainly of equity shares in companies listed on the London Stock
Exchange and in most circumstances are considered to be realisable
within a short timescale. The Board has set limits for borrowing
and derivative contract positions and regularly reviews actual
exposures, cash flow projections and compliance with loan
covenants. The Directors have considered the fact that Company's
investments comprise readily realisable securities which can be
sold to meet funding requirements if necessary. The Directors have
also performed stress testing on the portfolio and the loan
financial covenants.
|
|
|
The Company has borrowings in the
form of £30 million 3.99% Loan Notes that mature in December 2045,
and a £30 million multi-currency revolving credit facility with The
Bank of Nova Scotia, London Branch, which matures in July 2024. The
Board has reviewed indicative quotes for the renewal of the
multi-currency revolving credit facility and expects to be able to
renew it upon its maturity with a similar facility.
|
|
|
Following this assessment, the
Directors believe that the Company has adequate financial resources
to continue in operational existence for the foreseeable future and
for at least twelve months from the date of this Report.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing the financial statements.
|
|
|
Critical accounting judgements and
key sources of estimation uncertainty. The
preparation of financial statements requires the use of certain
significant accounting judgements, estimates and assumptions which
requires management to exercise its judgement in the process of
applying the accounting policies which are continually evaluated.
The Board considers that there are no accounting judgements,
estimates and assumptions which would significantly impact the
financial statements.
|
|
(b)
|
Revenue, expenses and interest
payable. Income from equity investments
(other than special dividends), including taxes deducted at source,
is included in revenue by reference to the date on which the
investment is quoted ex-dividend. Special dividends are credited to
revenue or capital according to the circumstances. Foreign income
is converted at the exchange rate applicable at the time of
receipt. Interest receivable on short term deposits and expenses
are accounted for on an accruals basis. Income from underwriting
commission is recognised as earned. Interest payable is calculated
on an effective yield basis. Stock lending income is recognised on
an accruals basis.
|
|
|
Underwriting commission is taken
to revenue, unless any shares underwritten are required to be taken
up, in which case the proportionate commission received is deducted
from the cost of the investment.
|
|
|
Expenses are charged to capital
when they are incurred in connection with the maintenance or
enhancement of the value of investments. In this respect, the
investment management fee and relevant finance costs, including the
amortisation of expenses, are allocated between revenue and capital
in line with the Board's expectation of returns from the Company's
investments over the long-term of 40% to revenue and 60% to
capital.
|
|
(c)
|
Investments. Investments have been designated upon initial recognition as
fair value through profit or loss. 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
recognised at fair value through profit or loss. For listed
investments, this is deemed to be bid market prices or closing
prices for SETS stocks sourced from the London Stock Exchange. SETS
is the London Stock Exchange electronic trading service covering
most of the market including all FTSE All-Share and the most liquid
AIM constituents. Gains or losses arising from changes in fair
value are included in net profit or loss for the period as a
capital item in the Statement of Comprehensive Income.
|
|
(d)
|
Dividends payable.
Final dividends payable to equity shareholders
are recognised in the financial statements when they have been
approved by Shareholders and become a liability of the Company.
Interim dividends are recognised in the financial statements in the
period in which they are paid.
|
|
(e)
|
Nature and purpose of
reserves
|
|
|
|
Called-up 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.
|
|
|
|
Share premium account.
The balance classified as share premium includes
the premium above the nominal value from the proceeds on issue of
any equity share capital comprising Ordinary shares of
25p.
|
|
|
|
Capital redemption reserve.
The capital redemption reserve is used to record
the amount equivalent to the nominal value of any of the Company's
own shares purchased and cancelled in order to maintain the
Company's capital.
|
|
|
|
Capital reserve.
Gains or losses on the disposal of investments
and changes in the fair values of investments are transferred to
the capital reserve. The capital element of the management fee and
relevant finance costs are charged to this reserve. Any associated
tax relief is also credited to this reserve. Certain other items
including gains or losses on foreign currency and special dividends
are also allocated to this reserve as appropriate. The part of this
reserve represented by realised capital gains is available for
distribution by way of dividend.
|
|
|
|
The costs of share buybacks to be
held in treasury are also deducted from this reserve.
|
|
|
|
Revenue reserve.
Income and expenses which are recognised in the
revenue column of the Statement of Comprehensive Income are
transferred to the revenue reserve. The revenue reserve is
available for distribution by way of dividend.
|
|
|
(f)
|
Taxation. The charge for taxation is based on the profit for the year
and takes into account taxation deferred because of timing
differences between the treatment of certain items for taxation and
accounting purposes.
|
|
|
|
Owing to the Company's status as
an investment trust, 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.
|
|
|
(g)
|
Foreign currency.
Monetary assets and liabilities and non-monetary
assets held at fair value denominated in foreign currencies are
converted into sterling at the rate of exchange ruling at the
reporting date. Transactions during the year involving foreign
currencies are converted at the rate of exchange ruling at the
transaction date. Gains or losses arising from a change in exchange
rates subsequent to the date of a transaction are included as a
currency gain or loss in revenue or capital in the Statement of
Comprehensive Income, depending on whether the gain or loss is of a
revenue or capital nature. The Company receives a proportion of its
investment income in foreign currency. These amounts are translated
at the rate ruling on the date of receipt.
|
|
|
(h)
|
Traded options.
The Company may enter into certain derivative
contracts (e.g. options). Option contracts are accounted for as
separate derivative contracts and are therefore shown in other
assets or other liabilities at their fair value. The initial fair
value is based on the initial premium, which is recognised upfront.
The premium received and fair value changes in the open position
which occur due to the movement in underlying securities are
recognised in the revenue column, losses realised on the exercise
of the contracts are recorded in the capital column of the
Statement of Comprehensive Income.
|
|
|
|
In addition, the Company may enter
into derivative contracts to manage market risk and gains or losses
arising on such contracts are recorded in the capital column of the
Statement of Comprehensive Income.
|
|
|
(i)
|
Borrowings. Borrowings are measured initially at the fair value of the
consideration received, net of any issue expenses, and subsequently
at amortised cost using the effective interest method. The finance
costs of such borrowings are accounted for on an accruals basis
using the effective interest rate method and are charged 40% to
revenue and 60% to capital in the Statement of Comprehensive Income
to reflect the Company's investment policy and prospective income
and capital growth.
|
|
|
(j)
|
Treasury shares.
When the Company purchases the Company's equity
share capital to be held as treasury shares, the amount of the
consideration paid, which includes directly attributable costs, is
net of any tax effects, and is recognised as a deduction from the
capital reserve. When these shares are sold subsequently, the
amount received is recognised as an increase in equity, and any
resulting surplus on the transaction is transferred to the share
premium account and any resulting deficit is transferred from the
capital reserve.
|
|
|
|
|
|
| |
3.
|
Income
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Income from investments
|
|
|
|
UK dividend income
|
14,970
|
13,643
|
|
Overseas dividends
|
5,843
|
6,262
|
|
|
20,813
|
19,905
|
|
|
|
|
|
Other income
|
|
|
|
Income on derivatives
|
2,060
|
2,007
|
|
Interest on tax
reclaims
|
3
|
-
|
|
Interest received on withholding
tax refunds
|
73
|
38
|
|
|
2,136
|
2,045
|
|
Total income
|
22,949
|
21,950
|
|
|
h)
|
i)
|
|
During the year, the Company
earned premiums totalling £2,060,000 (2023 - £2,007,000) in
exchange for entering into derivative transactions. The Company had
no open positions in derivative contracts at 31 January 2024 (2023
- no open positions). Losses realised on the exercise of derivative
transactions are disclosed in note 10.
|
4.
|
Management fee
|
|
|
2024
|
2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Management fee
|
696
|
1,044
|
1,740
|
682
|
1,022
|
1,704
|
|
|
|
|
|
|
|
|
|
The Company has an agreement with
abrdn Fund Managers Limited ("aFML") for the provision of
investment management, risk management, accounting, administrative
and secretarial services. The management fee is calculated and
charged, on a monthly basis, at 0.45% per annum on the first £225
million, 0.35% per annum on the next £200 million and 0.25% per
annum on amounts over £425 million of the net assets of the
Company, with debt at par and excluding commonly managed funds. The
balance due at the year end was £289,000 (2023 - £286,000). The
management fee is allocated 40% to revenue and 60% to capital.
There were no commonly managed funds held in the portfolio during
the year to 31 January 2024 (2023 - none).
|
|
The management agreement may be
terminated by either party on six months' written notice.
|
5.
|
Administrative expenses
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
£'000
|
£'000
|
|
Directors' fees
|
|
161
|
153
|
|
Auditor's remuneration (excluding
VAT):
|
|
|
|
|
- fees payable to the Company's
Auditor for the audit of the Company's annual accounts
|
|
34
|
30
|
|
- fees payable to the Company's
Auditor for other services:
|
|
|
|
|
|
- interim review
|
-
|
7
|
|
Irrecoverable VAT
|
|
64
|
61
|
|
Promotional activities
|
|
246
|
243
|
|
Registrar's fees
|
|
46
|
43
|
|
Share plan fees
|
|
149
|
120
|
|
Printing and postage
|
|
104
|
65
|
|
Other expenses
|
|
268
|
229
|
|
|
|
1,072
|
951
|
|
|
|
|
|
|
Expenses of £246,000 (2023 -
£243,000) were paid to aFML in respect of the promotional
activities of the Company. The balance outstanding at the year end
was £79,000 (2023 - £81,000).
|
|
|
|
|
| |
6.
|
Finance costs
|
|
|
|
|
|
|
|
|
2024
|
2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Bank loan
|
263
|
394
|
657
|
110
|
166
|
276
|
|
Loan Notes - repayable after more
than five years
|
479
|
718
|
1,197
|
479
|
718
|
1,197
|
|
Amortised Loan Notes issue
expenses
|
3
|
4
|
7
|
3
|
4
|
7
|
|
Bank overdraft
|
12
|
-
|
12
|
5
|
-
|
5
|
|
|
757
|
1,116
|
1,873
|
597
|
888
|
1,485
|
|
|
|
|
|
|
|
|
|
Finance costs (excluding bank
overdraft interest) are allocated 40% to revenue and 60% to
capital.
|
7.
|
Taxation
|
|
|
|
|
2024
|
|
|
2023
|
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
(a)
|
Analysis of charge for the
year
|
|
|
|
|
|
|
|
|
Overseas tax suffered
|
1,203
|
-
|
1,203
|
1,154
|
-
|
1,154
|
|
|
Overseas tax
reclaimable
|
(793)
|
-
|
(793)
|
(742)
|
-
|
(742)
|
|
|
Total tax charge for the
year
|
410
|
-
|
410
|
412
|
-
|
412
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Factors affecting the tax charge
for the year. The UK corporation tax rate
is 25% (2023 - 19%). The tax assessed for the year is lower than
the rate of corporation tax. The differences are explained
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024
|
|
|
2023
|
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Return before taxation
|
20,424
|
2,819
|
23,243
|
19,720
|
(16,464)
|
3,256
|
|
|
|
|
|
|
|
|
|
|
|
Corporation tax at 24% (2023 -
19%)
|
4,902
|
677
|
5,579
|
3,747
|
(3,128)
|
619
|
|
|
Effects of:
|
|
|
|
|
|
-
|
|
|
Non-taxable UK dividend
income
|
(3,406)
|
-
|
(3,406)
|
(2,628)
|
-
|
(2,628)
|
|
|
Non-taxable stock
dividends
|
|
-
|
-
|
-
|
-
|
-
|
|
|
Capital (gains)/losses on
investments not taxable
|
-
|
(1,123)
|
(1,123)
|
-
|
2,659
|
2,659
|
|
|
Expenses not deductible for tax
purposes
|
1
|
-
|
1
|
1
|
-
|
1
|
|
|
Currency (gains)/losses not
taxable
|
-
|
(73)
|
(73)
|
-
|
106
|
106
|
|
|
Overseas taxes
|
410
|
-
|
410
|
412
|
-
|
412
|
|
|
Non-taxable overseas
dividends
|
(1,402)
|
-
|
(1,402)
|
(1,050)
|
-
|
(1,050)
|
|
|
Excess management
expenses
|
(95)
|
519
|
424
|
(70)
|
363
|
293
|
|
|
Total tax charge
|
410
|
-
|
410
|
412
|
-
|
412
|
|
|
|
|
|
|
|
|
|
|
(c)
|
Factors that may affect future tax
charges. At the year end, the Company has,
for taxation purposes only, accumulated unrelieved management
expenses and loan relationship deficits of £135,671,000 (2023 -
£133,906,000). A deferred tax asset in respect of this has not been
recognised and these unrelieved expenses will only be utilised if
the Company has profits chargeable to corporation tax in the
future.
|
|
|
The UK corporation tax rate
increased to 25% with effect from 1 April 2023. This impacted,
where appropriate, the value of UK deferred tax balances and the
tax charged on future UK profits.
|
8.
|
Ordinary dividends on equity
shares
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Amounts recognised as
distributions paid during the year:
|
|
|
|
Third interim dividend for 2023 -
3.00p (2022 - 3.00p)
|
4,448
|
4,445
|
|
Final dividend for 2023 - 4.10p
(2022 - 3.90p)
|
6,079
|
5,782
|
|
First interim dividend for 2024 -
3.20p (2023 - 3.00p)
|
4,744
|
4,448
|
|
Second interim dividend for 2024 -
3.20p (2023 - 3.00p)
|
4,709
|
4,448
|
|
Return of unclaimed
dividendsA
|
(19)
|
(16)
|
|
|
19,961
|
19,107
|
|
A Unclaimed dividends
returned to the Company during the year ended 31 January 2024 have
been donated to charity (see note 22).
|
|
|
|
|
|
A third interim dividend of 3.20p
per Ordinary share was declared on 14 December 2023, payable on 29
February 2024 to shareholders on the register on 2 February 2024
and has not been included as a liability in these financial
statements. The final dividend of 4.15p per Ordinary share was
approved by the Board on 3 April 2024, payable on 31 May 2024 to
shareholders on the register on 3 May 2024 and has not been
included as a liability in the financial statements.
|
|
The table below sets out the total
dividends paid and proposed in respect of the financial year, which
is the basis upon which the requirements of Sections 1158-1159 of
the Corporation Tax Act 2010 are considered. The net revenue
available for distribution by way of dividend for the year is
£20,014,000 (2023 - £19,308,000).
|
|
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
First interim dividend for 2024 -
3.20p (2023 - 3.00p)
|
4,744
|
4,448
|
|
Second interim dividend for 2024 -
3.20p (2023 - 3.00p)
|
4,709
|
4,448
|
|
Third interim dividend for 2024 -
3.20p (2023 - 3.00p)
|
4,678
|
4,448
|
|
Final dividend for 2024 - 4.15p
(2023 - 4.10p)
|
6,019
|
6,079
|
|
|
20,150
|
19,423
|
|
|
|
|
|
The final dividend is based on the
latest share capital of 145,039,800 Ordinary shares excluding those
held in treasury.
|
9.
|
Return per Ordinary
share
|
|
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
p
|
£'000
|
p
|
|
Revenue return
|
20,014
|
13.54
|
19,308
|
13.02
|
|
Capital return/(loss)
|
2,819
|
1.91
|
(16,464)
|
(11.10)
|
|
Total return
|
22,833
|
15.45
|
2,844
|
1.92
|
|
|
|
|
|
|
|
Weighted average number of
Ordinary shares in issue
|
|
147,764,075
|
|
148,256,451
|
10.
|
Investments at fair value through
profit or loss
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Opening book cost
|
424,815
|
428,488
|
|
Investment holdings
gains
|
54,080
|
73,935
|
|
Opening fair value
|
478,895
|
502,423
|
|
Analysis of transactions made
during the year
|
|
|
|
Purchases
|
90,723
|
110,433
|
|
Sales - proceeds
|
(100,243)
|
(119,965)
|
|
Gains/(losses) on
investments
|
4,712
|
(13,996)
|
|
Closing fair value
|
474,087
|
478,895
|
|
|
|
|
|
Closing book cost
|
409,443
|
424,815
|
|
Closing investment holdings
gains
|
64,644
|
54,080
|
|
Closing fair value
|
474,087
|
478,895
|
|
|
|
|
|
The Company received £100,243,000
(2023 - £119,965,000) from investments sold in the year. The book
cost of these investments when they were purchased was £105,411,000
(2023 - £114,106,000). 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 realised gains figure above
includes losses realised on the exercise of traded options of
£1,251,000 (2023 - £625,000). Premiums received of £2,060,000 (2023
- £2,007,000) are included within income per note 3.
|
|
Transaction costs.
During the year expenses were incurred in
acquiring or disposing of investments classified as fair value
through profit or loss. These have been expensed through capital
and are included within gains/(losses) on investments in the
Statement of Comprehensive Income. The total costs were as
follows:
|
|
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Purchases
|
333
|
506
|
|
Sales
|
55
|
76
|
|
|
388
|
582
|
|
|
|
|
|
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.
|
Debtors: amounts falling due
within one year
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Net dividends and interest
receivable
|
568
|
763
|
|
Tax recoverable
|
2,340
|
1,657
|
|
Other loans and
receivables
|
17
|
32
|
|
|
2,925
|
2,452
|
12.
|
Creditors: amounts falling due
within one year
|
|
|
|
2024
|
2023
|
|
(a)
|
Bank loan
|
£'000
|
£'000
|
|
|
EUR 15,600,000 - 11 February
2023
|
-
|
13,762
|
|
|
EUR 15,600,000 - 11 February
2024
|
13,307
|
-
|
|
|
|
13,307
|
13,762
|
|
|
|
|
|
|
|
The Company has a £30,000,000
multi-currency revolving credit facility with The Bank of Nova
Scotia, London Branch committed until 11 July 2024. Under the terms
of the facility, subject to the lender's credit approval, the
Company has the option to increase the level of the facility from
£30,000,000 to £40,000,000 at any time, should further investment
opportunities be identified. As at 31 January 2024 €15,600,000 had
been drawn down at a rate of 5.130% (2023 - €15,600,000 at a rate
of 3.618%), which matured on 15 February 2024. At the date this
Report was approved €15,600,000 had been drawn down at a rate of
5.109%, maturing on 15 April 2024. The terms of the loan facility
contain covenants that the adjusted asset coverage is not be less
than 4.00 to 1.00 and that the minimum net assets of the Company
are £200 million.
|
|
|
|
|
|
|
|
|
2024
|
2023
|
|
(b)
|
Other creditors
|
£'000
|
£'000
|
|
|
Loan Notes and bank loan
interest
|
209
|
257
|
|
|
Amount due to brokers
|
92
|
649
|
|
|
Sundry creditors
|
712
|
603
|
|
|
|
1,013
|
1,509
|
13.
|
Creditors: amounts falling due
after more than one year
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
3.99% Loan Notes 2045
|
30,000
|
30,000
|
|
Unamortised Loan Note issue
expenses
|
(255)
|
(262)
|
|
|
29,745
|
29,738
|
|
|
|
|
|
The 3.99% Loan Notes were issued
in December 2015 and are due to be redeemed at par on 8 December
2045. Interest is payable in half-yearly instalments in June and
December. The Loan Notes are secured by a floating charge over the
whole of the assets of the Company. The Company has complied with
the Loan Note Trust Deed covenant that total net borrowings (ie.
after the deduction of cash balances) should not exceed 33% of the
Company's net asset value and that the Company's net asset value
should not be less than £200 million.
|
|
The fair value of the Loan Notes
as at 31 January 2024 was £23,916,000 (2023 - £29,393,000), the
value stated in note 19. The effect on the net asset value of
deducting the Loan Notes at fair value rather than at par is
disclosed in note 17.
|
14.
|
Called-up share capital
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Allotted, called up and fully
paid:
|
|
|
|
146,172,889 (2023 - 148,264,670)
Ordinary shares of 25p each - equity
|
36,543
|
37,066
|
|
Treasury shares:
|
|
|
|
7,505,046 (2023 - 5,413,265)
Ordinary shares of 25p each - equity
|
1,876
|
1,353
|
|
|
38,419
|
38,419
|
|
|
|
|
|
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.
|
|
During the year the Company issued
no Ordinary shares (2023 - 100,000 shares issued at a price of 290p
per share). During the year the Company repurchased 2,091,781 (2023
- nil) ordinary shares at a cost of £5,662,000, including expenses.
All of the shares were placed in treasury.
|
15.
|
Analysis of changes in financing
during the year
|
|
|
2024
|
2023
|
|
|
Equity
|
|
Equity
|
|
|
|
share
capital
|
|
share
capital
|
|
|
|
(including
|
Loan
|
(including
|
Loan
|
|
|
premium)
|
Notes
|
premium)
|
Notes
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Opening balance at 31 January
2023
|
43,327
|
29,738
|
43,038
|
29,731
|
|
Issue of shares from
Treasury
|
-
|
-
|
289
|
-
|
|
Movement in unamortised Loan Notes
issue expenses
|
-
|
7
|
-
|
7
|
|
Closing balance at 31 January
2024
|
43,327
|
29,745
|
43,327
|
29,738
|
16.
|
Revenue reserve per
share
|
|
|
|
|
The following information is
presented supplemental to the financial statements to show the
Companies Act position at the year end.
|
|
|
|
|
|
|
|
|
2024
|
2023
|
|
Revenue reserve (£'000)
|
|
23,886
|
23,833
|
|
Number of Ordinary shares in issue
at year end
|
146,172,889
|
148,264,670
|
|
|
|
|
|
|
Revenue reserve per Ordinary share
(p) as per the Companies Act
|
|
16.34
|
16.07
|
|
Less:
|
- third interim dividend
(p)
|
(3.20)
|
(3.00)
|
|
|
- final dividend (p)
|
(4.15)
|
(4.10)
|
|
Revenue reserve per Ordinary share
(p)
|
|
8.99
|
8.97
|
|
|
|
|
| |
17.
|
Net asset value per share
|
|
Equity shareholders' funds have
been calculated in accordance with the provisions of FRS 102. The
analysis of equity shareholders' funds on the face of the Statement
of Financial Position does not reflect the rights under the
Articles of Association of the Ordinary shareholders on a return of
assets. These rights are reflected in the net asset value and the
net asset value per share attributable to Ordinary shareholders at
the year end, adjusted to reflect the deduction of the Loan Notes
at par. A reconciliation between the two sets of figures is as
follows:
|
|
|
|
|
|
|
2024
|
2023
|
|
Net assets attributable
(£'000)
|
445,815
|
448,605
|
|
Number of Ordinary shares in issue
at year endA
|
146,172,889
|
148,264,670
|
|
Net asset value per Ordinary
share
|
304.99p
|
302.57p
|
|
A Excluding shares held
in treasury.
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net assets
|
2024
|
2023
|
|
Net assets attributable (£'000) as
above
|
445,815
|
448,605
|
|
Unamortised Loan Note issue
expenses (note 13)
|
(255)
|
(262)
|
|
Adjusted net assets attributable
(£'000)
|
445,560
|
448,343
|
|
|
|
|
|
Number of Ordinary shares in issue
at year endA
|
146,172,889
|
148,264,670
|
|
Adjusted net asset value per
Ordinary share
|
304.82p
|
302.39p
|
|
A Excluding shares held
in treasury.
|
|
|
|
|
|
|
|
|
|
|
|
Net assets - debt at fair
value
|
£'000
|
£'000
|
|
Net assets attributable
|
445,815
|
448,605
|
|
Amortised cost Loan
Notes
|
29,745
|
29,738
|
|
Market value Loan Notes
|
(23,916)
|
(29,393)
|
|
Net assets attributable
|
451,644
|
448,950
|
|
|
|
|
|
Number of Ordinary shares in issue
at the period endA
|
146,172,889
|
148,264,670
|
|
Net asset value per Ordinary share
(debt at fair value)
|
308.98p
|
302.80p
|
|
A Excluding shares held
in treasury.
|
|
|
18.
|
Analysis of changes in net
debt
|
|
|
At
|
Currency
|
|
Non-cash
|
At
|
|
|
31
January 2023
|
differences
|
Cash
flows
|
movements
|
31
January 2024
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cash and cash
equivalents
|
12,267
|
(187)
|
788
|
-
|
12,868
|
|
Debt due within one
year
|
(13,762)
|
455
|
-
|
-
|
(13,307)
|
|
Debt due after more than one
year
|
(29,738)
|
-
|
-
|
(7)
|
(29,745)
|
|
|
(31,233)
|
268
|
788
|
(7)
|
(30,184)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
Currency
|
|
Non-cash
|
At
|
|
|
31 January 2022
|
differences
|
Cash
flows
|
movements
|
31
January 2023
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cash and cash
equivalents
|
2,855
|
170
|
9,242
|
-
|
12,267
|
|
Debt due within one
year
|
(13,034)
|
(728)
|
-
|
-
|
(13,762)
|
|
Debt due after more than one
year
|
(29,731)
|
-
|
-
|
(7)
|
(29,738)
|
|
|
(39,910)
|
(558)
|
9,242
|
(7)
|
(31,233)
|
|
|
|
|
|
|
|
|
A statement reconciling the
movement in net funds to the net cash flow has not been presented
as there are no differences from the above analysis.
|
19.
|
Financial instruments and risk
management
|
|
|
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 comprise securities and other
investments, cash balances, 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 option contracts for the purpose of
generating income and futures/options for hedging market
exposures.
|
|
|
During the year, the Company
entered into certain options contracts for the purpose of
generating income. Positions closed during the year realised a loss
of £1,251,000 (2023 - £625,000). As disclosed in note 3, the
premium received and fair value changes in respect of options
written in the year was £2,060,000 (2023 - £2,007,000). The largest
position in derivative contracts held during the year at any given
time was £905,000 (2023 - £889,000). The Company had no open
positions in derivative contracts at 31 January 2024 (2023 -
none).
|
|
|
The Board relies on abrdn Fund
Managers Limited ("aFML" or the "Manager") for the provision of
risk management activities under the terms of its management
agreement with aFML (further details of which are included under
note 4). The Board regularly reviews and agrees policies for
managing each of the key financial risks identified with the
Manager. The types of risk and the Manager's approach to the
management of each type of risk, are summarised below. Such
approach has been applied throughout the year and has not changed
since the previous accounting period. The numerical disclosures
exclude short-term debtors and creditors on the grounds that they
are not considered to be material.
|
|
|
The Company's Manager has an
independent Investment Risk department for reviewing the investment
risk parameters of all core equity, fixed income and alternative
asset classes on a regular basis. The department reports to the
Manager's Performance Review Committee which is chaired by the
Manager's Chief Investment Officer. The department's responsibility
is to review and monitor ex-ante (predicted) portfolio risk and
style characteristics using best practice, industry standard
multi-factor models.
|
|
|
Risk management
framework. The directors of aFML
collectively assume responsibility for aFML's obligations under the
AIFMD including reviewing investment performance and monitoring the
Company's risk profile during the year.
|
|
|
aFML is a fully integrated member
of the abrdn Group (the "Group") which provides a variety of
services and support to aFML in the conduct of its business
activities, including in the oversight of the risk management
framework for the Company. aFML 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). aFML 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 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 Officers 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's Chief Executive Officers 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 of abrdn, 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 on the committees' terms of reference.
|
|
|
Risk Management.
The main risks the Company faces from its
financial instruments are (i) market risk (comprising interest rate
risk, currency risk and other price risk), (ii) liquidity risk and
(iii) credit risk.
|
|
|
The Board regularly reviews and
agrees policies for managing each of these risks. The Group's
policies for managing these risks are summarised below and have
been applied throughout the year. The numerical disclosures exclude
short-term debtors and creditors, other than for currency
disclosures.
|
|
|
(i)
|
Market risk. Market risk comprises three elements - interest rate risk,
currency risk and price risk.
|
|
|
|
(a) Interest rate risk.
Interest rate movements may affect:
|
|
|
|
- the fair value of the
investments in fixed interest rate securities;
|
|
|
|
- the level of income receivable
on cash deposits; and
|
|
|
|
- interest payable on the
Company's variable rate borrowings.
|
|
|
|
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.
|
|
|
|
The Board imposes borrowing limits
to ensure gearing levels are appropriate to market conditions and
reviews these on a regular basis. Borrowings comprise fixed rate,
revolving, and uncommitted facilities. Details of borrowings at 31
January 2024 are shown in notes 12 and 13.
|
|
|
|
Interest risk profile.
The interest rate risk profile of the portfolio
of financial assets and liabilities at the Statement of Financial
Position date was as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
Weighted
|
|
|
|
|
|
|
period
for
|
average
|
|
|
|
|
|
|
which
|
interest
|
Fixed
|
Floating
|
|
|
|
|
rate is
fixed
|
rate
|
rate
|
rate
|
|
|
|
At 31 January 2024
|
Years
|
%
|
£'000
|
£'000
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Sterling
|
-
|
-
|
-
|
12,868
|
|
|
|
Total assets
|
-
|
-
|
-
|
12,868
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Bank loans
|
0.08
|
5.13
|
(13,307)
|
-
|
|
|
|
Loan Notes
|
21.87
|
3.99
|
(29,745)
|
-
|
|
|
|
Total liabilities
|
-
|
-
|
(43,052)
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
Weighted
|
|
|
|
|
|
|
period
for
|
average
|
|
|
|
|
|
|
which
|
interest
|
Fixed
|
Floating
|
|
|
|
|
rate is
fixed
|
rate
|
rate
|
rate
|
|
|
|
At 31 January 2023
|
Years
|
%
|
£'000
|
£'000
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Sterling
|
-
|
-
|
-
|
12,267
|
|
|
|
Total assets
|
-
|
-
|
-
|
12,267
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Bank loans
|
0.17
|
3.62
|
(13,762)
|
-
|
|
|
|
Loan Notes
|
22.87
|
3.99
|
(29,738)
|
-
|
|
|
|
Total liabilities
|
-
|
-
|
(43,500)
|
-
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average interest rate
is based on the current yield of each asset, weighted by its market
value. The weighted average interest rate on bank loans is based on
the interest rate payable, weighted by the total value of the
loans. The maturity dates of the Company's borrowings are shown in
notes 12 and 13 to the financial statements.
|
|
|
|
The floating rate assets consist
of cash deposits all earning interest at prevailing market
rates.
|
|
|
|
The Company's equity portfolio and
short-term debtors and creditors (excluding bank loans) have been
excluded from the above tables. All financial liabilities are
measured at amortised cost.
|
|
|
|
Interest rate sensitivity.
Movements in interest rates would not
significantly affect net assets attributable to the Company's
shareholders and total profit.
|
|
|
|
(b) 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 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.
It is not the Company's policy to hedge this risk
on a continuing basis but the Company may, from time to time, match
specific overseas investment with foreign currency borrowings. A
proportion of the Company's borrowings, as detailed in note 12, is
in foreign currency as at 31 January 2024. The revenue account is
subject to currency fluctuations arising on dividends received in
foreign currencies and, indirectly, due to the impact of foreign
exchange rates upon the profits of investee companies. The Company
does not hedge this currency risk.
|
|
|
|
Foreign currency risk exposure by
currency of denomination:
|
|
|
|
|
|
31 January 2024
|
31 January 2023
|
|
|
|
|
|
|
Net
|
Total
|
|
Net
|
Total
|
|
|
|
|
|
|
monetary
|
currency
|
|
monetary
|
currency
|
|
|
|
|
|
Investments
|
assets
|
exposure
|
Investments
|
assets
|
exposure
|
|
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
Euro
|
|
57,491
|
(11,208)
|
46,283
|
44,258
|
(12,391)
|
31,867
|
|
|
|
Swiss Francs
|
|
-
|
96
|
96
|
15,617
|
90
|
15,707
|
|
|
|
Danish Krone
|
|
9,009
|
109
|
9,118
|
9,909
|
114
|
10,023
|
|
|
|
Norwegian Krone
|
|
13,067
|
11
|
13,078
|
10,202
|
12
|
10,214
|
|
|
|
Swedish Krona
|
|
22,478
|
-
|
22,478
|
34,976
|
1
|
34,977
|
|
|
|
Sterling
|
|
372,042
|
(17,280)
|
354,762
|
363,933
|
(18,116)
|
345,817
|
|
|
|
Total
|
|
474,087
|
(28,272)
|
445,815
|
478,895
|
(30,290)
|
448,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The asset allocation between
specific markets can vary from time to time based on the Manager's
opinion of the attractiveness of the individual stocks in these
markets.
|
|
|
|
Foreign currency
sensitivity. There is no sensitivity
analysis included as the Board believes the amount exposed to
foreign currency denominated monetary assets to be immaterial.
Where the Company's equity investments (which are non-monetary
items) are priced in a foreign currency, they have been included
within the other price risk sensitivity analysis so as to show the
overall level of exposure.
|
|
|
|
(c) Price risk.
Price risks (i.e. changes in market prices other
than those arising from interest rate or currency risk) may affect
the value of the quoted investments and traded options.
|
|
|
|
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
company or sector. Both the allocation of assets and the stock
selection process act to reduce market risk. The Manager actively
monitors market prices throughout the year and reports to the
Board, which meets regularly in order to review investment
strategy. The investments held by the Company are listed on various
stock exchanges in the UK and Europe.
|
|
|
|
Price risk sensitivity.
If market prices at the Statement of Financial
Position date had been 10% higher while all other variables
remained constant, the return attributable to Ordinary shareholders
for the year ended 31 January 2024 would have increased by
£47,409,000 (2023 - increase of £47,890,000) and equity reserves
would have increased by the same amount. Had market prices been 10%
lower the converse would apply.
|
|
|
(ii)
|
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
below.
|
|
|
|
|
|
|
|
|
More
|
|
|
|
|
Within
|
Within
|
Within
|
Within
|
Within
|
than
|
|
|
|
|
1
year
|
1-2
years
|
2-3
years
|
3-4
years
|
4-5
years
|
5
years
|
Total
|
|
|
At 31 January 2024
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Bank loans
|
13,307
|
-
|
-
|
-
|
-
|
-
|
13,307
|
|
|
Loan Notes
|
-
|
-
|
-
|
-
|
-
|
30,000
|
30,000
|
|
|
Interest cash flows on bank loans
and loan notes
|
1,254
|
1,197
|
1,197
|
1,197
|
1,197
|
20,349
|
26,391
|
|
|
Cash flows on other
creditors
|
804
|
-
|
-
|
-
|
-
|
-
|
804
|
|
|
|
15,365
|
1,197
|
1,197
|
1,197
|
1,197
|
50,349
|
70,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More
|
|
|
|
|
Within
|
Within
|
Within
|
Within
|
Within
|
than
|
|
|
|
|
1
year
|
1-2
years
|
2-3
years
|
3-4
years
|
4-5
years
|
5
years
|
Total
|
|
|
At 31 January 2023
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Bank loans
|
13,762
|
-
|
-
|
-
|
-
|
-
|
13,762
|
|
|
Loan Notes
|
-
|
-
|
-
|
-
|
-
|
30,000
|
30,000
|
|
|
Interest cash flows on bank loans
and loan notes
|
1,281
|
1,197
|
1,197
|
1,197
|
1,197
|
21,546
|
27,615
|
|
|
Cash flows on other
creditors
|
1,252
|
-
|
-
|
-
|
-
|
-
|
1,252
|
|
|
|
16,295
|
1,197
|
1,197
|
1,197
|
1,197
|
51,546
|
72,629
|
|
|
|
|
|
|
|
|
|
|
|
|
Management of the
risk. The Board imposes borrowing limits
to ensure gearing levels are appropriate to market conditions and
reviews these on a regular basis. Borrowings comprise Loan Notes
and a revolving facility. The Loan Notes provide secure long-term
funding while short term flexibility is achieved through the
borrowing facility. It is the Board's policy to maintain a gearing
level, measured on the most stringent basis of calculation after
netting off cash equivalents, of less than 30% at all times.
Details of borrowings at 31 January 2024 are shown in notes 12 and
13.
|
|
|
Liquidity risk is not considered
to be significant as the Company's assets comprise mainly cash and
listed securities, which can normally be sold to meet funding
commitments if necessary. Short-term flexibility is achieved
through the use of loan and overdraft facilities, details of which
can be found in note 12. Under the terms of the loan facility, the
Manager provides the lender with loan covenant reports on a monthly
basis, to provide the lender with assurance that the terms of the
facility are not being breached. The Manager will also review the
credit rating of a lender on a regular basis. Details of the
Board's policy on gearing are shown in the interest rate risk
section of this note.
|
|
|
Liquidity risk
exposure. At 31 January 2024 and 31
January 2023 the amortised cost of the Company's Loan Notes was
£29,745,000 and £29,738,000 respectively. At 31 January 2024 and 31
January 2023 the Company's bank loans amounted to £13,307,000 and
£13,762,000 respectively. The facility is committed until 11 July
2024.
|
|
(
|
Credit risk. This is failure of the counterparty to a transaction to
discharge its obligations under that transaction that could result
in the Company suffering a loss.
|
|
|
Management of the risk. Investment
transactions are carried out with a large number of brokers, whose
credit standing is reviewed periodically by the Manager, and limits
are set on the amount that may be due from any one broker;
|
|
|
- the risk of counterparty
exposure due to failed trades causing a loss to the Company is
mitigated by the review of failed trade reports on a daily basis.
In addition, both stock and cash reconciliations to the Custodians'
records are performed on a daily basis to ensure discrepancies are
investigated on a timely basis. The Group's Compliance department
carries out periodic reviews of the custodian's operations and
reports its finding to the abrdn Group's Risk Management Committee.
This review will also include checks on the maintenance and
security of investments held;
|
|
|
- cash is held only with reputable
banks whose credit ratings are monitored on a regular basis.
|
|
|
There are internal exposure limits
to cash balances placed with counterparties. The credit worthiness
of counterparties is also reviewed on a regular basis.
|
|
|
None of the Company's financial
assets are secured by collateral or other credit
enhancements.
|
|
|
Credit risk
exposure. In summary, compared to the
amounts in the Statement of Financial Position, the maximum
exposure to credit risk at 31 January was as follows:
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
Balance
|
Maximum
|
Balance
|
Maximum
|
|
|
|
Sheet
|
exposure
|
Sheet
|
exposure
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Non-current assets
|
|
|
|
|
|
|
Investments at fair value through
profit or loss
|
474,087
|
-
|
478,895
|
-
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and short term
deposits
|
12,868
|
12,868
|
12,267
|
12,267
|
|
|
|
486,955
|
12,868
|
491,162
|
12,267
|
|
|
|
|
|
None of the Company's financial
assets is past due or impaired.
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|
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Fair values of financial assets
and financial liabilities. The fair value
of borrowings has been calculated at £37,223,000 as at 31 January
2024 (2023 - £43,155,000) compared to an accounts value in the
financial statements of £43,052,000 (2023 - £43,500,000) (notes 12
and 13). The fair value of each loan is determined by aggregating
the expected future cash flows for that loan discounted at a rate
comprising the borrower's margin plus an average of market rates
applicable to loans of a similar period of time and currency. All
other assets and liabilities of the Company are included in the
Statement of Financial Position at fair value.
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20.
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Fair value hierarchy
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FRS 102 requires an entity to
classify fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the
measurements. The fair value hierarchy has the following
classifications:
|
|
Level 1: unadjusted quoted prices in an active market for identical
assets or liabilities that the entity can access at the measurement
date.
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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.
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Level 3: inputs are unobservable (ie for which market data is
unavailable) for the asset or liability.
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The financial assets and
liabilities measured at fair value in the Statement of Financial
Position are grouped into the fair value hierarchy at the reporting
date as follows:
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Level
1
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Level
2
|
Level
3
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Total
|
|
As at 31 January 2024
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
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Financial assets at fair value
through profit or loss
|
|
|
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|
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Quoted equities
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a)
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474,087
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-
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-
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474,087
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Total
|
|
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474,087
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-
|
-
|
474,087
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|
|
|
|
|
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|
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|
|
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Level
1
|
Level
2
|
Level
3
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Total
|
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As at 31 January 2023
|
|
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£'000
|
£'000
|
£'000
|
£'000
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Financial assets at fair value
through profit or loss
|
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Quoted equities
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a)
|
478,895
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-
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-
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478,895
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Total
|
|
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478,895
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-
|
-
|
478,895
|
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a)
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Quoted equities.
The fair value of the Company's investments in
quoted equities has been determined by reference to their quoted
bid prices at the reporting date. Quoted equities included in Fair
Value Level 1 are actively traded on recognised stock
exchanges.
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21.
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Capital management policies and
procedures
|
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The Company's capital management
objectives are:
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- to ensure that the Company will
be able to continue as a going concern; and
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- to maximise the return to its
equity shareholders through an appropriate balance of equity
capital and debt.
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The capital of the Company
consists of equity, comprising issued capital, reserves and
retained earnings.
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The Board monitors and reviews the
broad structure of the Company's capital. This review includes the
nature and planned level of gearing, which takes account of the
Manager's views on future expected returns and the extent to which
revenue in excess of that which is required to be distributed
should be retained. The Company is not subject to any externally
imposed capital requirements.
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22.
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Related party transactions and
transactions with the Manager
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Directors' fees and
interests. Fees payable during the year to
the Directors and their interests in the shares of the Company are
disclosed within the Directors' Remuneration Report.
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Transactions with the
Manager. The Company has an agreement with
the abrdn Group for the provision of management, secretarial,
accounting and administration services and also for the provision
of promotional activities. Details of transactions during the year
and balances outstanding at the year end are disclosed in notes 4
and 5.
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During the year, the Company
received £19,000 in respect of returned, unclaimed dividends
accumulated over a number of years. The Board took the decision to
donate these monies to the abrdn Charitable Foundation. The abrdn
Charitable Foundation is a registered charity. Its board of
directors includes independent representation from the abrdn Group
and provides oversight and guidance for its charitable giving
activities.
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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 viewed as
particularly relevant for closed-end investment
companies.
|
Dividend cover
|
Dividend cover measures the
revenue return per share divided by total dividends per share,
expressed as a ratio.
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|
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2024
|
2023
|
Revenue return per
share
|
a
|
13.54p
|
13.02p
|
Dividends per share
|
b
|
13.75p
|
13.10p
|
Dividend cover
|
a/b
|
0.98
|
0.99
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|
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Net gearing
|
|
|
|
Net gearing measures total
borrowings less cash and cash equivalents divided by shareholders'
funds, expressed as a percentage. Under AIC reporting guidance cash
and cash equivalents includes net amounts due to and from brokers
at the period end as well as cash and short term deposits.
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|
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2024
|
2023
|
Borrowings (£'000)
|
a
|
43,052
|
43,500
|
Cash (£'000)
|
b
|
12,868
|
12,267
|
Amounts due to brokers
(£'000)
|
c
|
92
|
649
|
Amounts due from brokers
(£'000)
|
d
|
-
|
-
|
Shareholders' funds
(£'000)
|
e
|
445,815
|
448,605
|
Net gearing
|
(a-b+c-d)/e
|
6.79%
|
7.11%
|
|
|
|
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Discount to net asset value per
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 with debt at fair value.
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2024
|
2023
|
NAV per Ordinary share (p) (see
note 17)
|
a
|
308.98p
|
302.80p
|
Share price (p)
|
b
|
276.00p
|
294.00p
|
Discount
|
(a-b)/b
|
10.67%
|
2.91%
|
|
|
|
|
Ongoing charges
|
The ongoing charges ratio has been
calculated in accordance with guidance issued by the AIC as the
total of investment management fees and administrative expenses
less non-recurring charges, expressed as a percentage of the
average net asset values with debt at fair value throughout the
year.
|
|
|
|
|
|
|
2024
|
2023
|
Investment management fees
(£'000)
|
|
1,740
|
1,704
|
Administrative expenses
(£'000)
|
|
1,073
|
951
|
Less: non-recurring charges
(£'000)
|
|
(17)
|
-
|
Ongoing charges (£'000)
|
|
2,796
|
2,655
|
Average net assets
(£'000)
|
|
448,512
|
430,038
|
Ongoing charges ratio (excluding
look-through costs)
|
|
0.62%
|
0.62%
|
Look-through
costsA
|
|
0.02%
|
0.02%
|
Ongoing charges ratio (including
look-through costs)
|
|
0.64%
|
0.64%
|
ACalculated in
accordance with AIC guidance issued in October 2020 to include the
Company's share of costs of holdings in investment companies on a
look-through basis.
|
|
|
|
|
The ongoing charges ratio provided
in the Company's Key Information Document is calculated in line
with the PRIIPs regulations which amongst other things, includes
the cost of borrowings and transaction costs.
|
Total return
|
|
|
|
NAV and share price 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 Reference Index, respectively.
|
|
|
|
|
|
|
|
Share
|
Year ended 31 January
2024
|
|
NAV
|
Price
|
Opening at 1 February
2023
|
a
|
302.8p
|
294.0p
|
Closing at 31 January
2024
|
b
|
309.0p
|
276.0p
|
Price movements
|
c=(b/a)-1
|
2.0%
|
-6.1%
|
Dividend
reinvestmentA
|
d
|
4.7%
|
4.5%
|
Total return
|
c+d
|
+6.7%
|
(1.6)%
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
Year ended 31 January
2023
|
|
NAV
|
Price
|
Opening at 1 February
2022
|
a
|
309.0p
|
310.0p
|
Closing at 31 January
2023
|
b
|
302.8p
|
294.0p
|
Price movements
|
c=(b/a)-1
|
(2.0)%
|
(5.2)%
|
Dividend
reinvestmentA
|
d
|
4.4%
|
4.3%
|
Total return
|
c+d
|
+2.4%
|
-0.9%
|
A 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. 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.
|
Additional Notes to Annual
Financial Report
The Annual General Meeting will be
held at the offices of abrdn plc, 18
Bishops Square, London E1 6EG at 12 noon on Thursday 23 May
2024.
The Annual Financial Report
Announcement is not the Company's statutory accounts. The above
results for the year ended 31 January 2024 are an
abridged version of the Company's full accounts, which have been
approved and audited with an unqualified report. The 2023 and 2024
statutory accounts received unqualified reports from the Company's
Auditor and did not include any reference to matters to which the
Auditor drew attention by way of emphasis without qualifying the
reports, and did not contain a statement under S498 of the
Companies Act 2006. The financial information for 2023 is derived
from the statutory accounts for the year ended 31 January 2023
which have been delivered to the Registrar of Companies. The
accounts for the year ended 31 January 2024 will be filed with the
Registrar of Companies in due course.
The Annual Report and Accounts
will be posted to shareholders in April 2023 and copies will be
available from the registered office of the Company and on the
Company's website, www.dunedinincomegrowth.co.uk.*
Please note that past performance
is not necessarily a guide to the future and that the value of
investments and the income from them may fall as well as
rise. Investors may not get back the amount they originally
invested.
By order of the Board
abrdn Holdings Limited
Company Secretary
3 April 2024
* Neither the Company's website nor the content of any
website accessible from hyperlinks on the Company's website (or any
other website) is (or is deemed to be) incorporated into, or forms
(or is deemed to form) part of this announcement.