REG - abrdn Diversfd. I&G - Half Yearly Financial Report
07/06/2023 07:00
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RNS Number : 9300B abrdn Diversified Income and Growth 07 June 2023
abrdn Diversified Income and Growth plc
(formerly Aberdeen Diversified Income and Growth Trust PLC)
Half Yearly Report 31 March 2023
Investing across asset classes aiming to deliver reliable income and growth
Performance Highlights
Net asset value total return(AB) Share price total return(A)
Six months ended 31 March 2023 Six months ended 31 March 2023
+2.2% -6.5%
Year ended 30 September 2022 +1.2% Year ended 30 September 2022 -5.0%
Dividend yield(A) Revenue return per share
As at 31 March 2023 Six months ended 31 March 2023
7.0% 2.52p
As at 30 September 2022 6.2% Six months ended 31 March 2022 2.79p
(A) Considered to be an Alternative Performance Measure..
(B) Debt at fair value.
Financial Calendar, Dividends and Highlights
Expected payment dates of quarterly dividends 3 April 2023
6 July 2023
19 October 2023
22 January 2024
Financial year end 30 September 2023
Expected announcement of results for year ending 30 September 2023 December 2023
Annual General Meeting (London) February 2024
Financial Highlights
31 March 2023 30 September 2022 % change
Total assets less current liabilities (before deducting prior charges) £368,028,000 £379,052,000 -2.9
Total shareholders' funds (Net Assets) £352,317,000 £363,358,000 -3.0
Ordinary share price (mid market) 81.40p 89.80p -9.4
Net asset value per Ordinary share (debt at fair value)(AB) 115.93p 117.63p -1.4
Discount to net asset value on Ordinary shares (debt at fair value)(AB) 29.8% 23.7%
Net (cash)/gearing (debt at fair value)(AB) (0.60%) 2.00%
Ongoing charges ratio(A) 1.35% 1.41%
(A) Considered to be an Alternative Performance Measure..
(B) Fair value of 6.25% Bonds 2031 £17,043,000 (2022 - £16,222,000).
Six months ended Six months ended
31 March 2023 31 March 2022 % change
Net revenue return after taxation £7,740,000 £8,628,000 -10.3
Revenue return per share 2.52p 2.79p -9.7
Dividends
First interim dividend 1.42p 1.40p +1.4
Second interim dividend 1.42p 1.40p +1.4
Total dividends declared in respect of the period 2.84p 2.80p +1.4
Chairman's Statement
"Since the new investment strategy was adopted in September 2020, through periods of volatility, the Company has delivered dependable income as part of an NAV total return of 19.6%, ahead of the target return of 6% per annum, equivalent to 16.2% over the same period."
Change of Name
The Company announced on 31 March 2023 a change of its name to abrdn
Diversified Income and Growth plc, to reflect the rebranding of the Company's
Manager, abrdn.
Performance
Over the six months ended 31 March 2023, the Company's net asset value per
share ("NAV"), with debt at fair value and including income, delivered a total
return of 2.2%. Losses on the revaluation of investments were broadly offset
by gains resulting from the management of currency risk.
However, the Company's share price total return (which assumes dividends are
reinvested) was -6.5% with the share price discount to NAV widening from 23.7%
to 29.8% at 31 March 2023. The drop in the share price appears to be driven
predominantly by the stock market currently applying a substantial discount to
private equity assets, reflecting uncertainties over asset valuations.
Although your Company has under 12% of its assets in private equity
investments, this substantial discount appears to have been applied to all the
Company's private market assets, even to sectors such as infrastructure
(comprising 16% of the Company's assets), which typically trades on a tighter
discount.
The Board appreciates the frustration of shareholders at this share price
performance. To address the issue, the Board and Manager continue to
communicate to the market the quality of the Company's portfolio and the
steady NAV returns it has generated. Since the new investment strategy was
adopted in September 2020, the Company has delivered an NAV total return of
19.6%, ahead of the target return of 6% per annum, equivalent to 16.2% over
the same period.
The Board will also continue to monitor regularly the valuations applied to
all private market assets to ensure they are prudent and as up to date as
possible. It is pleasing to report in that context that since the half year
end, the only revaluation that has occurred has been to revise up the
valuation of the Burford Opportunity Fund by 17% following a positive ruling
in one of the court cases it has funded.
Dividend
Part of our investment proposition to shareholders is to offer a dependable
quarterly dividend. The Company's revenue return for the six months ended 31
March 2023 was 2.52 pence per share (2022 - 2.79 pence). For the year to 30
September 2023, a first interim dividend of 1.42 pence (2022 - 1.40 pence) per
share was paid to shareholders on 3 April 2023. A second interim dividend
per share of 1.42 pence (2022 - 1.40 pence) per share, payable on 6 July 2023,
was announced by the Company on 31 May 2023.
On an annualised basis, a quarterly dividend of 1.42 pence per share is
equivalent to a dividend yield of 7.0% based on the period end share price of
81.4p.
Share buybacks and Treasury shares policy
In line with the investment-led share buyback policy, the Company will use
available cash to buy back its own shares where this represents a better
prospect of delivering the return objective and long-term shareholder value
than could be achieved by investing in new opportunities. As a result, the
Company bought back 5.7m shares into treasury at a cost of £5.0 million.
Despite these significant buybacks the Company's discount (calculated with
debt at fair value) increased from 23.7% as at 30 September 2022 to 29.8% as
at 31 March 2023.
Between 1 April 2023 and the date of approval of this Report, the Company
bought back an additional 1.1m shares into treasury. The Board monitors
frequently the wider discount at which the Company's shares currently trade,
relative to their underlying net asset value, and will continue to buy back
shares into treasury in accordance with its stated policy.
Gearing
The Company's gearing showed a net cash position of 0.6% as at 31 March 2023,
with its £16.1m 6.25% Bonds due 2031 priced at fair value. The Board
continues to keep the overall level of gearing under review but, in the
prevailing economic environment, there is no current intention to introduce
further fixed rate gearing.
Environmental, social and governance ("ESG")
Taking account of ESG factors is now an integral part of the investment
process at abrdn as well as ongoing monitoring after investments are brought
into the portfolio. Equally as important the investment teams undertake
constructive engagement with the management of the investments held, in both
public and private markets, on ESG issues and related risks. More detail on
the approach to ESG may be found in the Company's 2022 Annual Report. It is an
evolutionary process, and the Board continues to review closely the Manager's
approach to, and adherence with, its ESG philosophy and policies.
Outlook
In the short-term markets will continue to move on the back of assumptions
around inflation, interest rates and economic growth while also reflecting the
significant geopolitical risks that currently exist. The Board believes that
over the medium term, however, the Company's strategy, which seeks to provide
capital growth and a dependable quarterly dividend from a diversified
portfolio, is well positioned to deliver an attractive total return, with
lower volatility than equities, to our shareholders. Diversification within
the portfolio is provided through investment in a broad range of asset
classes, both listed and unlisted, and we continue to believe that the Company
is well-placed to take advantage of access to investment opportunities usually
only available to institutional investors. We remain mindful of the
challenges ahead and your Board together with the Manager review positioning
on a regular basis and continue to work to grow the NAV and narrow the wide
discount that the shares stand at to that NAV.
Davina Walter
Chairman
6 June 2023
Interim Management Report and Directors' Responsibility Statement
The Chairman's Statement and the Investment Manager's Report provide details
of the important events which have occurred during the period and their impact
on the financial statements.
Principal Risks and Uncertainties
The principal risks faced by the Company can be divided into various areas as
follows:
· Performance;
· Portfolio;
· Gearing;
· Income/dividend;
· Regulatory;
· Operational;
· Market; and
· Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Financial Statements (the "Annual Report")
for the year ended 30 September 2022; a detailed explanation can be found in
the Strategic Report on pages 12 to 14 of the Annual Report which is available
on the Company's website: abrdndiversified.co.uk
The Board continues to monitor the volatility and risks associated with
heightened political and economic uncertainty, particularly the reaction to
higher interest rates and the market volatility associated with the conflict
in Ukraine, both of which are expected to endure over the six months to 30
September 2023.
The Board is also conscious of the elevated threat posed by climate change and
continues to monitor, through its Investment Manager, the potential risk that
its portfolio investments may fail to adapt to the requirements imposed by
climate change.
In the view of the Board, there have not been any other changes to the
fundamental nature of the principal risks and uncertainties facing the Company
since the previous Annual Report, which are considered to be equally
applicable to the remaining six months of the financial year to 30 September
2023 as they were to the six months under review.
Going Concern
The Financial Statements of the Company have been prepared on a going concern
basis. The Directors have assessed the financial position of the Company as
outlined above and in the Chairman's Statement. The Board takes comfort from
the Manager's construction of an actively managed portfolio of diversified
assets which is designed to provide both a level of resilience in the face of
market volatility and the potential for an attractive return over the medium
and longer term.
The forecast projections and actual performance are reviewed on a regular
basis throughout the period and the Directors believe that this is the
appropriate basis and that the Company is financially sound with adequate
resources to continue in operational existence for the foreseeable future
(being a period of twelve months from the date that these financial statements
were approved). The Company is able to meet all of its liabilities from its
assets, including its ongoing operating expenses.
Whilst the Company is obliged to hold an annual continuation vote at the AGM,
as an ordinary resolution, the Directors do not believe this should
automatically trigger the adoption of a basis other than going concern in line
with the Association of Investment Companies ("AIC") Statement of Recommended
Practice ("AIC SORP") which states that it is more appropriate to prepare
financial statements on a going concern basis unless a continuation vote has
already been triggered and shareholders have voted against continuation.
Related Party Disclosures and Transactions with the Alternative Investment Fund Manager and Investment Manager
abrdn Fund Managers Limited ("AFML") has been appointed as the Company's
alternative investment fund manager.
AFML has (with the Company's consent) delegated certain portfolio and risk
management services, and other ancillary services, to abrdn Investments
Limited and abrdn Holdings Limited, which are regarded as related parties
under the UKLA's Listing Rules. Details of the fees payable to AFML are set
out in note 3 to the condensed financial statements.
Directors' Responsibility Statement
The Disclosure and Transparency Rules of the UK Listing Authority require the
Directors to confirm their responsibilities in relation to the preparation and
publication of the Interim Management Report and Financial Statements.
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within the half
yearly financial report has been prepared in accordance with applicable UK
Accounting Standard FRS 104 'Interim Financial Reporting' and give a true and
fair view of the assets, liabilities, financial position and return of the
Company for the period ended 31 March 2023; and
· the Interim Management Report, together with the Chairman's Statement and
Investment Manager's Report, include a fair review of the information required
by 4.2.7R and 4.2.8R of the FCA's Disclosure and Transparency Rules.
This Half-Yearly Financial Report has been reviewed by the Company's auditor,
PricewaterhouseCoopers LLP, and their report is set out below.
The Half-Yearly Financial Report was approved by the Board and the above
Director's Responsibility Statement was signed on its behalf by the Chairman.
For and on behalf of the Board
Davina Walter
Chairman
6 June 2023
Investment Manager's Report
Markets at the end of March moved to calmer waters as compared to the stormy
conditions seen in September 2022. That being said, it has not all been plain
sailing, as volatility still remains elevated, and we have started to see some
cracks appearing in pockets of the economy, with commercial property values
falling sharply, surprise OPEC oil production cuts, and the collapse of
Silicon Valley Bank followed by the acquisition of Credit Suisse by UBS. These
latter two events do not appear to be systemic, but there are headwinds for
investors to navigate.
Relative calm, but markets still exhibiting elevated volatility
In the last Annual Report, we noted that inflation was the number one factor
driving markets, with significant debate since then as to when it may peak and
for how long it will endure. This story has continued to drive markets, with
inflation remaining stubbornly higher than central bank targets globally,
forcing central bankers to continue to hike rates at a rapid pace. In the US
rates have hit 5% from a starting point of 0.25% 12 months ago, while the UK
has seen rates rise 3.5% over the same period. Further rises of 0.25% were
announced by the Bank of England, for the UK, in each of April 2023 and May
2023.
Over the last six months, the market has anticipated that hiking cycles are
nearing their peak, and the medium to long end of bond yields fell as a
result. This was interpreted as being positive for equity markets, in
particular large cap tech stocks, with the NASDAQ 100 up 20% in USD terms over
the period. However, this reaction is in contrast to economic forecasts, with
our own expectation for a recession in the US in the second half of 2023.
Recent stresses in the banking sector indicate that the long and variable lags
of monetary policy are starting to have an impact, although for now the data
from the US remains relatively strong. A mild winter and lower energy prices
have helped Europe avoid a deep contraction so far, but core inflation
pressures show little sign of moderating, with further interest rate hikes
from the ECB anticipated and a European recession also looking the likely
outcome. This bifurcation of rising markets and a worsening earnings outlook
provides challenges for equity and credit investors.
By contrast, the Chinese economy is rebounding rapidly and has the spare
capacity to keep growth going through our forecast horizon. Indeed, we expect
growth in China to exceed consensus expectations this year. While the
spillover from a strong China into broader emerging markets will be smaller
than it has been in the past, all this adds up to a global economy that should
look increasingly divergent later this year.
A stable NAV in a volatile environment
On an absolute and relative basis, the return on net asset value ("NAV"), with
debt at fair value and including income, has been reasonable during the
period. The Company delivered a total return of 2.2% with 3.2% volatility, a
good risk adjusted return per unit of risk taken. This compared with a 10.4%
return in equities as measured by the FTSE All-Share Index with 12.7%
volatility, and 4.5% in government bonds as measured by the ICE BofA UK Gilt
Index with a volatility of 13.9%. The share price total return was -6.5%
during the period.
The Company has been able to protect capital in an incredibly challenging
market environment, with Higher Yielding Fixed Income positions the top
performer, while Equity Growth and Diversifying Opportunities also performed
well. Our Real Asset holdings detracted from returns after a strong start to
2022.
In Higher Yield Fixed Income, the standout performers were Emerging Market
("EM") Bonds, and Asset Backed positions. Equities in general were positive
over the period as signs of inflation coming under control coupled with
expectations of peak interest rates and a growing belief that there could be a
soft landing. Our Diversifying Opportunities positions were also positive,
with the Litigation Finance fund, managed by Burford, the top performer.
We discuss performance, gross of management fees and expenses directly
attributable to the Company, in greater detail below.
How did the Company produce returns during such a volatile period?
Equity Growth
Equities returned 4.9% over the period, contributing 0.7% to the Company. This
was driven predominantly by the large cap tech names within our ESG Enhanced
Equity exposure. This sector is highly sensitive to discount rate movements,
as the majority of a fast-growing tech company's earnings will occur in the
future, with higher discount rates reducing the present value of those future
cashflows. Thus, the sector benefited from a decreasing government bond yield
environment in the US, with the NASDAQ up 9% in GBP terms over the 6 month
period.
Higher Yielding Fixed Income
Higher Yielding Fixed Income led return generation over the six months, adding
1.9%. Within this EM Bonds were the top performer, contributing 0.8%. As well
as offering strong income over the period, there were signs that certain EM
central banks are approaching the end of their interest rate hikes.
Credit markets have continued to experience low default rates and, while
spreads are wider than they were pre-Covid, this has helped to keep them
within a narrower range over the last six months. Our tilt to floating rate
lending has also enabled the portfolio to benefit from a higher rate
environment, increasing the running yield. Positive returns were generated by
privately held names Mount Row II, Hark III, and PIMCO Private Income Fund;
the Asset Backed portfolio was also positive with TwentyFour Asset Backed
Opportunities the top performer here.
Real Assets
Real assets detracted from performance, returning -1.5% over the six months.
Property assets have suffered from continued weakness in sectors such as
commercial offices, while the inability to fully pass through inflation has
also made them susceptible to rising rates. As central banks have increased
rates the yield on government bonds has increased. These are typically used as
the risk-free rate in discounted cashflow calculations that drive the
valuations for real assets. A higher risk-free rate increases the discount
rate and reduces the present value of future cashflows. As rates increased
at a fast pace over 2022, this has fed through to lower valuations, with the
bulk of the impact of rate rise moves over 2022 felt in the last 6 months.
While NAVs for our infrastructure positions have been more resilient to rising
interest rates, given the high inflation linkage of underlying revenues for
assets in the privately held portfolio, concerns about changes to the energy
market in Europe weighed on returns towards the end of the period.
There were a number of stock specific events over the period. Social housing
holding Home REIT was negative on concerns around the valuations of the
underlying assets and company governance. We sold in December following an
internal review, however, the stock still contributed -0.2% to returns. In
addition, one of the assets in private fund Agriculture Capital Management II
was written down to nil following a poor yield on its grape harvest resulted
in the company breaching its debt covenants - this detracted 0.2% from the
Company's performance.
Diversifying Opportunities
The basket of Diversifying Opportunities contributed 0.65% to the performance
of the Company over the period. Within this, the private holding in Burford
Opportunity Fund, in the litigation finance sector was the largest driver,
adding 0.3% to performance. The law courts in the US had been forced to pause
certain activities during the COVID pandemic, but normal service was mostly
resumed in 2022, and this has led to the successful resolution of several
cases in the Burford portfolio. Right at the end of the period, there was
significant progress in the YPF case, which has unlocked significant value for
the Company (see the case study).
Defensive Assets
Our exposure to lower returning defensive assets, such as government bonds and
cash, is limited as we seek to provide long term returns from a diversified
exposure of return seeking opportunities. While we had added to the exposure
at the end of the period given the more attractive yields on offer and the
economic challenges that we see ahead, over the period as a whole the small
Defensive basket, albeit performing as expected, had a limited impact on
performance, contributing a small positive return.
What portfolio changes did we make?
Equity Growth
Within the Equity Growth basket, we reduced the weighting of the ESG Enhanced
Core Equity sleeve by half and sold the satellite holding in Apax Global,
given our reduced conviction in the growth outlook and the increased
likelihood of recession in developed markets. The proceeds were moved to the
Defensive Assets basket.
In the privately held equity portfolio, there was a capital call of $1.7m USD
by the Secondary Opportunities Fund, to repay a tranche of debt put in at the
portfolio's inception. There were several small distributions from the
HarbourVest and Dover Street funds as portfolio investments matured and were
exited.
Higher Yielding Fixed Income
Within the higher yielding fixed income basket, we trimmed exposure to junior
ABS as well as EMD positions. The assets were rotated into higher quality
fixed income within the defensive basket.
In our private credit portfolio, the majority of committed capital has been
called, and there were no new commitments made, so there was no change at a
portfolio allocation level over the period.
Real Assets
Within private Real Assets, a significant change was the successful exit of
the I77 toll road asset in the US in December, which raised USD17.4m,
crystalising a strong return from this investment. In addition, there were
regular income payments from the renewable energy and concession
infrastructure projects invested in by the Company. From an investment
perspective, there was a medium sized drawdown from SLCI II to fund expansion
of Airband's rural UK fibre network. Ultimately, given the size of the I77
sale, the overall allocation to private real assets reduced over the period
(see the case study).
In the public sphere, we sold the struggling Home REIT in December prior to
its stock market suspension in early January. We also reduced our allocation
to property as a whole, selling out of further social housing investments in
the portfolio, as well as Supermarket Income REIT. Proceeds from these sales
were rotated into Foresight Solar, and diversified infrastructure names 3i and
Pantheon.
Diversifying Opportunities
In the public investments, we reduced our exposure to Round Hill Music
Royalties. In the privately held investments, the majority of the committed
capital in the sector has been called, and there were no new commitments made,
so there was no change at a portfolio allocation level over the period.
Where do we go from here?
Global divergence is a key theme for the second half of the year. We continue
to think a US recession is, in some sense, "necessary" to restore price
stability and bring inflation in line with target. Well-documented banking
stresses, as well as the broader evolution of the US data flow, increase our
conviction that the Fed's rate hiking cycle is providing the conditions for
such a recession. While we have seen some headline making and non-trivial
events, banking issues are not, at this time, believed to be a 2008 repeat.
In Europe, while economic data of late has been stronger, underlying inflation
pressures remain worryingly strong, which will keep the ECB hawkish in the
near term meaning European growth will move broadly sideways. In contrast, we
expect China to be the fastest growing major economy in 2023. A strong
re-opening rebound is underway, boosting domestic consumption with some
knock-on benefits for Emerging Markets in the region and commodities.
With core inflation still ahead of target, central banks will raise interest
rates further in the near term. However, the point of peak rates is close, and
once the recession commences and core inflation has fallen, a pronounced
cutting cycle will begin. As such, we have recently added some duration into
the portfolio to benefit from falling rates.
The likelihood of recession and the impact on earnings means we are less
favourable on corporate risk than earlier in the cycle. We have a preference
for investment-grade corporate bonds rather than high yield debt as a result.
In the higher yield space, we are maintaining our Emerging Market debt
positions. Emerging Market central banks are ahead of developed peers in
combatting inflation and will have more room to cut when a global recession
hits. We remain mindful of shorter-term volatility in this space however.
We are currently negative on Global Property. Despite the linkage of rents to
inflation, we expect the depressed economic environment to erode capital
values. In addition, sectors such as offices, are facing severe headwinds from
a reduction in demand due to hybrid working, and expensive refinancing rates,
with recent headlines of landlords turning the keys over to their banks rather
than refinance certain assets. We hold alternative investments in this space,
focussed on healthcare and social housing.
The Company has a well-diversified portfolio which has proven to be resilient
in the recent challenging environment. While we expect market conditions to
remain challenging, we believe the Company is well placed to continue to
provide a dependable income for shareholders and to navigate what is proving
to be a difficult economic environment.
Nalaka De Silva
Simon Fox
Heather McKay
Nic Baddeley
abrdn Investments Limited
Investment Manager
6 June 2023
Ten Largest Investments
As at 31 March 2023
At At
31 March 30 September
2023 2022
% of Total % of Total
investments investments
SL Capital Infrastructure II(AB) 6.1 5.2
European economic infrastructure
Aberdeen Standard Global Private Markets Fund(A) 5.7 5.1
Multi-strategy private markets exposure
TwentyFour Asset Backed Opportunities Fund 5.4 6.8
Investments in mortgages, SME loans originated in Europe
Burford Opportunity Fund(B) 5.1 4.7
Diverse portfolio of litigation finance investments initiated by Burford
Capital
Bonaccord Capital Partners I-A(B) 4.3 4.1
Targets investment in alternative asset management companies.
Andean Social Infrastructure Fund I(AB) 4.0 3.4
Infrastructure project investments in the Andean region of South America
Healthcare Royalty Partners IV(B) 3.7 3.6
Invests in healthcare royalty streams primarily in the US
iShares GBP Corp Bond UCITS ETF 3.5 -
Tracks the performance of an index composed of Sterling denominated investment
grade corporate bonds.
Aberdeen Property Secondaries Partners II(AB) 3.0 2.6
Realisation of value from property funds which are in run-off
BlackRock Renewable Income - UK 2.8 2.3
Invests in renewable power infrastructure projects in the United Kingdom.
(A) Denotes abrdn plc managed products
(B) Unlisted holdings
Investment Portfolio - Private Markets
As at 31 March 2023
Valuation Valuation Valuation
31 March 2023 31 March 2023 30 September 2022
Company £'000 % £'000
Infrastructure
SL Capital Infrastructure II(AB) 20,841 6.1 19,581
Andean Social Infrastructure Fund I(AB) 13,922 4.0 12,691
BlackRock Renewable Income - UK(B) 9,752 2.8 8,523
Aberdeen Global Infrastructure Partners II (AUD)(AB) 5,951 1.7 6,840
Pan European Infrastructure Fund(B) 1,666 0.5 1,697
Total Infrastructure 52,132 15.1
Private Equity
Bonaccord Capital Partners I-A(B) 14,818 4.3 15,255
Aberdeen Standard Secondary Opportunities Fund IV(AB) 9,312 2.7 9,385
TrueNoord Co-Investment(B) 9,225 2.7 9,976
Maj Invest Equity 5(B) 2,364 0.7 2,492
HarbourVest International Private Equity VI(B) 2,011 0.6 2,100
Maj Invest Equity 4(B) 1,252 0.4 1,335
Mesirow Financial Private Equity IV(B) 653 0.2 882
HarbourVest VIII Buyout Fund(B) 199 0.1 260
Mesirow Financial Private Equity III(B) 150 - 228
HarbourVest VIII Venture Fund 137 - 178
Top ten holdings 40,121 11.7
Other holdings 35 -
Total Private Equity 40,156 11.7
Real Estate
Aberdeen Property Secondaries Partners II(AB) 10,378 3.0 9,851
Aberdeen European Residential Opportunities Fund(AB) 9,389 2.7 9,769
Cheyne Social Property Impact Fund(B) 3,632 1.1 4,813
Total Real Estate 23,399 6.8
Natural Resources
Agriculture Capital Management Fund II(B) 3,286 1.0 4,258
Total Natural Resources 3,286 1.0
Private Credit
Mount Row Credit Fund II(B) 8,703 2.6 7,494
PIMCO Private Income Fund Offshore Feeder I LP(B) 7,573 2.2 8,796
ASI Hark III(AB) 5,698 1.7 4,088
Total Private Credit 21,974 6.5
Other
Aberdeen Standard Global Private Markets Fund(AB) 19,632 5.7 19,122
Burford Opportunity Fund(B) 17,589 5.1 17,520
Healthcare Royalty Partners IV(B) 12,734 3.7 13,522
Markel CATCo Reinsurance Fund Ltd - LDAF 2018 SPI(B) 285 0.1 298
Markel CATCo Reinsurance Fund Ltd - LDAF 2019 SPI(B) 45 - 281
Total Other 50,285 14.6
Total Private Markets 191,232 55.7
(A) Denotes abrdn plc managed products
(B) Unlisted holdings
Investment Portfolio - Equities
As at 31 March 2023
Valuation Valuation Valuation
31 March 2023 31 March 2023 30 September 2022
Company £'000 % £'000
ESG Enhanced Equity Sub-Fund
Apple 577 0.2 1,329
Microsoft 424 0.1 941
Alphabet 215 0.1 543
Amazon.com 175 0.1 524
Nvidia 151 - 178
Top five holdings 1,542 0.5
Other holdings 10,062 2.9
Total ESG Enhanced Equity Sub-Fund 11,604 3.4
Total European Green Infrastructure Sub-Fund 175 -
Infrastructure Sub-Fund
3I Infrastructure 4,353 1.3 2,532
International Public Partnerships 2,662 0.8 2,194
HICL Infrastructure 2,555 0.7 3,627
Cordiant Digital Infrastructure 2,131 0.6 2,336
Sequoia Economic Infrastructure Income 1,543 0.5 1,570
Top five holdings 13,244 3.9
Other holdings 781 0.2
Total Infrastructure Sub-Fund 14,025 4.1
Real Estate Sub-Fund
Assura 2,071 0.6 2,271
PRS REIT 1,447 0.4 1,673
Target Health Care 603 0.2 786
Total Real Estate Sub-Fund 4,121 1.2
Alternative Income Sub-Fund
BioPharma Credit 4,239 1.3 6,267
Tufton Oceanic Assets 2,409 0.7 2,936
Round Hill Music Royalty Fund 1,742 0.5 3,446
GCP Asset Backed Income Fund 1,475 0.4 2,440
SME Credit Realisation 44 - 201
Total Alternative Income Sub-Fund 9,909 2.9
Renewables Infrastructure Sub-Fund
Greencoat UK Wind 2,758 0.8 2,643
Greencoat Renewables 2,537 0.7 2,700
Foresight Solar Fund 1,824 0.5 985
NextEnergy Solar Fund 1,672 0.5 1,739
Pantheon Infrastructure 1,656 0.5 921
Top five holdings 10,447 3.0
Other holdings 5,899 1.7
Total Renewables Infrastructure Sub-Fund 16,346 4.7
Reinsurance Sub-Fund
CATCo Reinsurance Opportunities Fund 83 - 150
Total Reinsurance Sub-Fund 83 -
Total Equities 56,263 16.3
Investment Portfolio - Fixed Income & Credit
As at 31 March 2023
Valuation Valuation Valuation
31 March 2023 31 March 2023 30 September 2022
Company £'000 % £'000
Structured Credit
TwentyFour Asset Backed Opportunities Fund 18,620 5.4 25,509
Neuberger Berman CLO Income Fund 9,205 2.7 13,315
Blackstone/GSO Loan Financing 3,488 1.0 3,468
Fair Oaks Income Fund 944 0.3 1,089
Total Structured Credit 32,257 9.4
Syndicated Loans
Aberdeen Standard Alpha - Global Loans Fund(A) 2,165 0.6 2,347
Total Syndicated Loans 2,165 0.6
Investment Grade Credit
iShares GBP Ultrashort Bond 8,007 2.4 -
iShares LI UK Gilts UCITS ETF 7,991 2.3 -
Total Investment Grade Credit 15,998 4.7
Corporate Debt
iShares GBP Corp Bond UCTS ETF 12,076 3.5 -
Total Corporate Debt 12,076 3.5
Emerging Market Debt
Brazil (Fed Rep of) 10% 01/01/25 2,657 0.8 1,313
Secretaria Tesouro 10% 01/01/31 1,954 0.6 1,755
Mexico Bonos Desarr Fix Rt 10% 05/12/24 1,782 0.5 1,775
South Africa (Rep of) 8.75% 31/01/44 1,490 0.4 1,034
Mexico (Utd Mex St) 5% 06/03/25 1,447 0.4 -
Indonesia (Rep of) 8.375% 15/03/34 1,290 0.4 1,346
Indonesia (Rep of) 8.125% 15/05/24 1,193 0.3 1,309
Indonesia (Rep of) 8.375% 15/03/24 Fr70Idr 1,111 0.3 1,219
Malaysia (Govt of) 3.828% 05/07/34 1,027 0.3 988
Chile (Rep Of) 5.8% 01/06/24 1,007 0.3 894
Clp
Top ten holdings 14,958 4.3
Other holdings 19,203 5.6
Total Emerging Market Debt 34,161 9.9
Total Fixed Income & Credit 96,657 28.1
(A) Denotes abrdn plc managed products
Investment Portfolio - Net Assets Summary
As at 31 March 2023
Valuation Net assets Valuation Net assets
31 March 2023 31 March 2023 30 September 2022 30 September 2022
£'000 % £'000 %
Total investments 344,152 97.7 373,732 102.9
Cash and cash equivalents(A) 19,211 5.5 8,984 2.5
Forward contracts 4,344 1.2 (4,922) (1.4)
6.25% Bonds 2031 (15,711) (4.5) (15,694) (4.3)
Other net assets 321 0.1 1,258 0.3
Net assets 352,317 100.0 363,358 100.0
(A) Includes outstanding settlements
Investment Case Studies
Burford Opportunity Fund
Burford Opportunity Fund ("BOF") invests in litigation finance, a form of
specialty finance used by litigants and law firms involved in commercial
litigation. In short, BOF forward funds legal cases and receives a portion of
the proceeds should the case be won. The Company has committed $25m to BOF,
and BOF was c.5.0% of the Company's NAV as at 31 March 2023.
BOF has deployed a significant amount in a case against the government of
Argentina relating to the nationalisation of YPF. YPF is an Argentinian oil
and gas company that went public on the New York Stock Exchange in 1993. To
allay investor concerns at the time, the Argentinian government guaranteed
that if in the future they decided to nationalise the company, it would pay
shareholders a figure that would equal YPF's earnings per share over the
preceding four quarters multiplied by its highest price/earnings ratio over
the preceding two years. In early 2012, YPF was nationalised, but there was
debate around which date should be used for share price calculation. Two of
the largest minority shareholders in YPF suffered financial distress as a
result, and Burford has provided finance for their legal claims against the
Argentine government.
Since March 2022, the case has been sitting at the summary judgement phase
with the US Southern District Court of NY. A decision was made at 3pm (BST) on
31 March 2023 that the judgement was in BOF's favour, with a decision required
on the exact amount of damages to be awarded and the interest rate that should
be applied, particularly significant when there is eleven years of compounding
to consider.
While there are still factors at play influencing the outcome between now and
cash being received, the ruling is a significant event which unlocks
substantial value for BOF, evidencing its role as an uneconomically linked
driver of return in the Company's portfolio.
SL Capital Partners II Fund
SL Capital Partners II ("SLCI II") invests in infrastructure assets in Europe
and the UK, with a portfolio of assets including district heating networks in
Finland, liquid bulk storage terminals and rolling stock leases in Germany,
rolling stock leases and broadband networks in the UK, and a large portfolio
of operating solar photovoltaic farms in Poland.
The Q4 2022 valuation of the portfolio was up by 2% on the previous quarter,
and up 20% vs Q4 2021. The uplift in the most recent quarter was due to the
strong operational performance of Central Europe Renewable Infrastructure
("CERI"), the Polish solar energy portfolio. Annual generation was 9.9% above
budget following consistently favourable weather conditions and the high-power
price environment. A number of operating expenses such as security and
insurance have benefited from the economies of scale at the portfolio,
reducing costs and improving the profit margins. In FY 2022, CERI generated
438,496 MWh of CO2 free energy, saving 142,664 tonnes of CO2 emissions. As the
portfolio is now fully operational, it has started to distribute funds to SLCI
II, which in turn is gradually building up the yield it pays to the Company.
Condensed Statement of Comprehensive Income (unaudited)
Six months ended Six months ended
31 March 2023 31 March 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (13,384) (13,384) - 8,537 8,537
Foreign exchange gains/(losses) - 14,058 14,058 - (3,023) (3,023)
Income 2 9,118 - 9,118 9,757 - 9,757
Investment management fees 3 (291) (291) (582) (264) (397) (661)
Administrative expenses (461) (21) (482) (476) (13) (489)
Net return before finance costs and taxation 8,366 362 8,728 9,017 5,104 14,121
Finance costs (259) (259) (518) (210) (314) (524)
Net return before taxation 8,107 103 8,210 8,807 4,790 13,597
Taxation 4 (367) (927) (1,294) (179) (798) (977)
Return attributable to equity shareholders 7,740 (824) 6,916 8,628 3,992 12,620
Return per Ordinary share (pence) 5 2.52 (0.27) 2.25 2.79 1.29 4.08
The total column of the Condensed Statement of Comprehensive Income is the
profit and loss account of the Company. There has been no other comprehensive
income during the period, accordingly, the return/(loss) attributable to
equity shareholders is equivalent to the total comprehensive income/(loss) for
the period.
All revenue and capital items in the above statement derive from continuing
operations.
The accompanying notes are an integral part of these condensed financial
statements.
Condensed Statement of Financial Position (unaudited)
As at As at
31 March 2023 30 September 2022
(unaudited) (audited)
Notes £'000 £'000
Non-current assets
Investments at fair value through profit or loss 344,152 373,732
Deferred taxation asset 4 240 1,167
344,392 374,899
Current assets
Debtors 1,792 2,845
Derivative financial instruments 4,432 984
Cash and cash equivalents 18,626 7,179
24,850 11,008
Creditors: amounts falling due within one year
Derivative financial instruments (88) (5,906)
Other creditors (1,126) (949)
(1,214) (6,855)
Net current assets 23,636 4,153
Total assets less current liabilities 368,028 379,052
Non-current liabilities
6.25% Bonds 2031 7 (15,711) (15,694)
Net assets 352,317 363,358
Capital and reserves
Called up share capital 9 91,352 91,352
Share premium account 116,556 116,556
Capital redemption reserve 26,629 26,629
Capital reserve 83,733 89,560
Revenue reserve 34,047 39,261
Total shareholders' funds 352,317 363,358
Net asset value per Ordinary share (pence) 10
Bonds at par value 116.37 117.80
Bonds at fair value 115.93 117.63
The accompanying notes are an integral part of these condensed financial
statements.
Condensed Statement of Changes in Equity (unaudited)
Six months ended 31 March 2023
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
At 1 October 2022 91,352 116,556 26,629 89,560 39,261 363,358
Ordinary shares purchased for treasury 9 - - - (5,003) - (5,003)
Return after taxation - - - (824) 7,740 6,916
Dividends paid 6 - - - - (12,954) (12,954)
At 31 March 2023 91,352 116,556 26,629 83,733 34,047 352,317
Six months ended 31 March 2022
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
At 1 October 2021 91,352 116,556 26,629 106,572 41,009 382,118
Ordinary shares purchased for treasury 9 - - - (221) - (221)
Return after taxation - - - 3,992 8,628 12,620
Dividends paid 6 - - - - (12,864) (12,864)
At 31 March 2022 91,352 116,556 26,629 110,343 36,773 381,653
The accompanying notes are an integral part of these condensed financial
statements.
Condensed Statement of Cash Flows (unaudited)
Six months ended Six months ended
31 March 2023 31 March 2022
£'000 £'000
Operating activities
Net return before finance costs and taxation 8,728 14,121
Adjustments for:
Dividend income (7,613) (8,379)
Fixed interest income (1,349) (1,340)
Interest income (136) -
Other income (20) -
Dividends received 7,529 8,384
Fixed interest income received 1,324 1,199
Interest received 136 -
Other income received 20 -
Unrealised (gains)/losses on forward contracts (9,266) 2,121
Foreign exchange (losses)/gains (246) 217
Losses/(gains) on investments 13,384 (8,537)
Decrease in other debtors 36 2
Increase in accruals 40 121
Corporation tax paid (359) (273)
Taxation withheld (34) (82)
Net cash flow from operating activities 12,174 7,554
Investing activities
Purchases of investments (42,572) (30,549)
Sales of investments and return of capital 59,893 36,045
Net cash flow from investing activities 17,321 5,496
Financing activities
Purchase of own shares to treasury (4,837) (221)
Interest paid (503) (510)
Equity dividends paid (note 6) (12,954) (12,864)
Net cash flow used in financing activities (18,294) (13,595)
Increase/(decrease) in cash and cash equivalents 11,201 (545)
Analysis of changes in cash and cash equivalents during the period
Opening balance 7,179 7,201
Foreign exchange 246 (217)
Increase/(decrease) in cash and cash equivalents as above 11,201 (545)
Closing balance 18,626 6,439
The accompanying notes are an integral part of these condensed financial
statements.
Notes to the Financial Statements
For the year ended 31 March 2023
1. Accounting policies - Basis of accounting
The condensed financial statements have been prepared in accordance with
Financial Reporting Standard 104 (Interim Financial Reporting) and with the
Statement of Recommended Practice for 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts' issued in July 2022 and with the
Disclosure Transparency Rules issued by the Financial Reporting Council. Given
the Company's portfolio comprises a significant proportion of "Level 1" and
"Level 2" assets (listed on recognisable exchanges and realisable within a
short timescale), and the Company's relatively low level of gearing, the
Directors believe that adopting a going concern basis of accounting remains
appropriate. The condensed financial statements have also been prepared on the
assumption that approval as an investment trust will continue to be granted by
HMRC and that the annual continuation vote will be passed at the Company's
Annual General Meeting. Annual financial statements are prepared under
Financial Reporting Standard 102.
The interim financial statements have been prepared using the same accounting
policies as the preceding annual financial statements. There have been no new
standards, amendments or interpretations effective for the first time for this
interim period that require a change in accounting policies.
Significant accounting judgements, estimates and assumptions. The preparation
of financial statements requires the use of certain significant accounting
judgements, estimates and assumptions which requires Directors to exercise
their judgement in the process of applying the accounting policies. The area
where judgements, estimates and assumptions have the most significant effect
on the amounts recognised in the financial statements are the determination of
the fair value of unlisted investments (Level 3 assets in the Fair Value
Hierarchy table in note 12).
2. Income
Six months ended Six months ended
31 March 2023 31 March 2022
£'000 £'000
Income from investments
UK listed dividends 1,260 1,566
Overseas listed dividends 2,802 2,327
Unquoted Limited Partnership income 3,551 4,485
Stock dividends - 1
Treasury bill income - 9
Fixed interest income 1,349 1,340
8,962 9,728
Other income
Interest 136 -
Other income 20 29
Total income 9,118 9,757
3. Investment management fee
Six months ended Six months ended
31 March 2023 31 March 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 291 291 582 264 397 661
The investment management fee is levied by abrdn Fund Managers Limited at the
following tiered levels:
- 0.50% per annum in respect of the first £300 million of the net asset value
(with the 6.25% Bonds 2031 at fair value); and
- 0.45% per annum in respect of the balance of the net asset value (with the
6.25% Bonds 2031 at fair value).
The Company also receives rebates in respect of underlying investments in
other funds managed by the Group (where an investment management fee is
charged by the Group on that fund) in the normal course of business to ensure
that no double counting occurs. Any investments made in funds managed by the
Manager which themselves invest directly into alternative investments
including, but not limited to, infrastructure and property are charged at the
Manager's lowest institutional fee rate. To avoid double charging, such
investments are excluded from the overall management fee calculation.
At the period end, an amount of £288,000 (31 March 2022 - £216,000) was
outstanding in respect of management fees due by the Company.
4. Taxation
The taxation charge for the period represents withholding tax suffered on
overseas dividend income and fixed interest income and applicable corporation
tax.
The Company has a deferred tax asset of £240,000 as it is considered likely
that accumulated unrelieved management expenses and loan relationship deficits
will be extinguished in future years. In arriving at the amount recognised,
the Company has taken account of current year and future levels of taxable
income forecast to be generated.
The Company does not apply the marginal method of allocation of tax relief.
5. Return per Ordinary share
Six months ended Six months ended
31 March 2023 31 March 2022
p p
Revenue return 2.52 2.79
Capital (loss)/return (0.27) 1.29
Total return 2.25 4.08
The figures above are based on the following:
Six months ended Six months ended
31 March 2023 31 March 2022
£'000 £'000
Revenue return 7,740 8,628
Capital (loss)/return (824) 3,992
Total return 6,916 12,620
Weighted average number of shares in issue(A) 307,154,680 309,200,265
(A) Calculated excluding shares held in treasury.
6. Dividends
Six months ended Six months ended
31 March 2023 31 March 2022
£'000 £'000
Third interim dividend for 2022 - 1.40p (2021 - 1.38p) 4,319 4,269
Fourth interim dividend for 2022 - 1.40p (2021 - 1.38p) 4,314 4,267
First interim dividend for 2023 - 1.42p (2022 - 1.40p) 4,321 4,328
12,954 12,864
On 15 September 2022, the Board declared a third interim dividend of 1.40
pence per share which was paid on 20 October 2022 to shareholders on the
register on 23 September 2022. On 15 December 2022, the Board declared a
fourth interim dividend of 1.40 pence per share which was paid on 19 January
2023 to shareholders on the register on 23 December 2022. On 2 March 2023, the
Board declared a first interim dividend of 1.42 pence per share (2022 - 1.40p)
which was paid on 3 April 2023 to shareholders on the register on 10 March
2023, although this was prefunded to the Company's registrar on 29 March 2023.
Subsequent to the period end, the Board declared a second interim dividend of
1.42p per share (2022 - 1.40p), which will be paid on 6 July 2023 to
shareholders on the register as at 9 June 2023. The ex dividend date is 8 June
2023. The total cost of this dividend, based on 301,355,592 as the number of
shares in issue, excluding 36,395,854 reasury shares, as at the date of this
Report, will be £4,279,000 (2022 - £4,323,000).
7. 6.25% Bonds 2031
Six months ended Year ended
31 March 2023 30 September 2022
£'000 £'000
Balance at beginning of period 15,694 15,664
Amortisation of discount and issue expenses 17 30
Balance at end of period 15,711 15,694
The Company has in issue £16,096,000 (2022 - 16,096,000) Bonds 2031 which
were issued at 99.343%. The Bonds have been accounted for in accordance with
accounting standards, which require any discount or issue costs to be
amortised over the life of the bonds. The Bonds are secured by a floating
charge over all of the assets of the Company with interest paid in March and
September each year.
Under the covenants relating to the Bonds, the Company is required to ensure
that, at all times, the aggregate principal amount outstanding in respect of
monies borrowed by the Company does not exceed an amount equal to its share
capital and reserves.
The fair value of the 6.25% Bonds using the last available quoted offer price
from the London Stock Exchange as at 31 March 2023 of 105.8836p (30 September
2022 - 100.7812p) per bond was £17,043,000 (30 September 2022 -
£16,222,000).
8. Analysis of changes in net debt
At Currency Non-cash At
1 October 2022 differences Cash flows movements 31 March 2023
£000 £000 £000 £000 £000
Cash and cash equivalents 7,179 - 11,447 - 18,626
Forward contracts (4,922) 9,266 - - 4,344
Debt due after one year (15,694) - - (17) (15,711)
Total (13,437) 9,266 11,447 (17) 7,259
At Currency Non-cash At
1 October 2021 differences Cash flows movements 30 September 2022
£000 £000 £000 £000 £000
Cash and cash equivalents 7,201 - (22) - 7,179
Forward contracts (2,917) (2,005) - - (4,922)
Debt due after one year (15,664) - - (30) (15,694)
Total (11,380) (2,005) (22) (30) (13,437)
9. Called up share capital
During the period 5,696,441 (year ended 30 September 2022 - 871,424) Ordinary
shares of 25p each were purchased to be held in treasury at a cost of
£5,003,000 (year ended 30 September 2022 - £864,000).
At the end of the period there were 302,750,873 (30 September 2022 -
308,447,314) Ordinary shares in issue and 35,000,933 (30 September 2022 -
29,304,492) shares held in treasury.
10. Net asset value per Ordinary share
As at As at
31 March 2023 30 September 2022
Debt at par
Net asset value attributable (£'000) 352,317 363,358
Number of Ordinary shares in issue excluding treasury 302,750,873 308,447,314
Net asset value per share (p) 116.37 117.80
Debt at fair value £'000 £'000
Net asset value attributable 352,317 363,358
Add: Amortised cost of 6.25% Bonds 2031 15,711 15,694
Less: Market value of 6.25% Bonds 2031 (17,043) (16,222)
350,985 362,830
Number of Ordinary shares in issue excluding treasury 302,750,873 308,447,314
Net asset value per share (p) 115.93 117.63
11. Transaction costs
During the period expenses were incurred in acquiring or disposing of
investments classified as fair value though profit or loss. These have been
expensed through capital and are included within losses on investments in the
Condensed Statement of Comprehensive Income. The total costs were as follows:
Six months ended Six months ended
31 March 2023 31 March 2022
£'000 £'000
Purchases 17 23
Sales 23 31
40 54
12. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following levels:
Level 1 - Quoted prices in active markets for identical instruments. A
financial instrument is regarded as quoted in an active market if quoted
prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an arm's
length basis. The Company does not adjust the quoted price for these
instruments.
Level 2 - Valuation techniques using observable inputs. This category includes
instruments valued using quoted prices for similar instruments in markets that
are considered less than active; or other valuation techniques where all
significant inputs are directly or indirectly observable from market data.
Valuation techniques used for non-standardised financial instruments such as
over-the-counter derivatives, include the use of comparable recent arm's
length transactions, reference to other instruments that are substantially the
same, discounted cash flow analysis, option pricing models and other valuation
techniques commonly used by market participants making the maximum use of
market inputs and relying as little as possible on entity specific inputs.
Level 3 - Valuation techniques using significant unobservable inputs. This
category includes all instruments where the valuation technique includes
inputs not based on observable data and the unobservable inputs could have a
significant impact on the instrument's valuation.
This category also includes instruments that are valued based on quoted prices
for similar instruments where significant entity determined adjustments or
assumptions are required to reflect differences between the instruments and
instruments for which there is no active market. The investment manager
considers observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not proprietary,
and provided by independent sources that are actively involved in the relevant
market.
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement. For this purpose, the
significance of an input is assessed against the fair value measurement in its
entirety. If a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that measurement is a
Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement
in its entirety requires judgement, considering factors specific to the asset
or liability.
The financial assets and liabilities measured at fair value in the Condensed
Statement of Financial Position are grouped into the fair value hierarchy at
the reporting date as follows:
Level 1 Level 2 Level 3 Total
As at 31 March 2023 £'000 £'000 £'000 £'000
Financial assets/(liabilities) at fair value through profit or loss
Equity investments 88,769 18,620 191,232 298,621
Loan investments - 11,370 - 11,370
Fixed interest instruments - 34,161 - 34,161
Forward currency contracts - financial assets - 4,432 - 4,432
Forward currency contracts - financial liabilities - (88) - (88)
Net fair value 88,769 68,495 191,232 348,496
Level 1 Level 2 Level 3 Total
As at 30 September 2022 £'000 £'000 £'000 £'000
Financial assets/(liabilities) at fair value through profit or loss
Equity investments 91,349 25,509 209,065 325,923
Loan investments - 15,662 - 15,662
Fixed interest instruments - 32,147 - 32,147
Forward currency contracts - financial assets - 984 - 984
Forward currency contracts - financial liabilities - (5,906) - (5,906)
Net fair value 91,349 68,396 209,065 368,810
As at As at
31 March 2023 30 September 2022
Level 3 Financial assets at fair value through profit or loss £'000 £'000
Opening fair value 209,065 172,108
Purchases including calls (at cost) 10,936 24,445
Disposals and return of capital (17,395) (20,803)
Transfers from level 1* - 70
Transfers from level 2* - 2,853
Total gains or losses included in losses on investments in the Statement of
Comprehensive Income:
- assets disposed of during the period 7,276 535
- assets held at the end of the period* (18,650) 29,857
Closing balance 191,232 209,065
* see note below on holdings in Russia.
The Company's holdings in unlisted investments are classified as Level 3.
Unquoted investments, including those in Limited Partnerships ("LPs") are
valued by the Directors at fair value using International Private Equity and
Venture Capital Valuation Guidelines.
The Company's investments in LPs are subject to the terms and conditions of
the respective investee's offering documentation. The investments in LPs are
valued based on the reported Net Asset Value ("NAV") of such assets as
determined by the administrator or General Partner of the LPs and adjusted by
the Directors in consultation with the Manager to take account of concerns
such as liquidity so as to ensure that investments held at fair value through
profit or loss are carried at fair value. The reported NAV is net of
applicable fees and expenses including carried interest amounts of the
investees and the underlying investments held by each LP are accounted for, as
defined in the respective investee's offering documentation. While the
underlying fund managers may utilise various model-based approaches to value
their investment portfolios, on which the Company's valuations are based, no
such models are used directly in the preparation of fair values of the
investments. The NAV of LPs reported by the administrators may subsequently be
adjusted when such results are subject to audit and audit adjustments may be
material to the Company.
During the prior year, the Company reviewed its exposure to holdings in Russia
in light of the war in Ukraine and decided to write their value down to £nil.
The consequence of this is noted in transfers from Level 1 and Level 2 in the
above table and the write down in value of £70,000 and £2,853,000
respectively is included with assets held at the period end.
13. Related party disclosures
Transactions with the Manager. The investment management fee is levied by aFML
at the following tiered levels, payable monthly in arrears:
- 0.50% per annum in respect of the first £300 million of the net asset value
(with debt at fair value); and
- 0.45% per annum in respect of the balance of the net asset value (with debt
at fair value).
During the period, the Manager charged the Company £93,000 (2022 - £100,000)
in respect of promotional activities carried out on the Company's behalf.
The Company also receives rebates with regards to underlying investments in
other funds managed by abrdn plc (the "Group") (where an investment management
fee is charged by the Group on that fund) in the normal course of business to
ensure that no double counting occurs. Any investments made in funds managed
by the Group which themselves invest directly into alternative investments
including, but not limited to, infrastructure and property are charged at the
Group's lowest institutional fee rate. To avoid double charging, such
investments are excluded from the overall management fee calculation.
The table below details all investments held at 31 March 2023 that were
managed by the Group.
31 March 2023
£'000
SL Capital Infrastructure II(B) 20,841
Aberdeen Standard Global Private Markets Fund(B) 19,632
Andean Social Infrastructure Fund I(B) 13,922
Aberdeen Property Secondaries Partners II(C) 10,378
Aberdeen European Residential Opportunities Fund(B) 9,389
Aberdeen Standard Secondary Opportunities Fund IV(C) 9,312
Aberdeen Global Infrastructure Partners II (AUD)(D) 5,951
ASI Hark III(B) 5,698
Aberdeen Standard Alpha - Global Loans Fund(A) 2,165
97,288
(A) The Company is invested in a share class which is not subject to a
management charge from the Group.
(B) The value of this holding is removed from the management fee calculation
to ensure that no double counting occurs.
(C) An amount equivalent to the management fee received by the Manager on the
underlying is offset against the management fee payable by the Company to
ensure that no double counting occurs.
(D) The invested capital commitment is removed from the management fee
calculation to ensure that no double counting occurs.
14. Segmental information
The Directors are of the opinion that the Company is engaged in a single
segment of business being investment business.
15. Half-Yearly Report
The financial information in this Report does not comprise statutory accounts
within the meaning of Section 434 - 436 of the Companies Act 2006. The
financial information for the year ended 30 September 2022 has been extracted
from published accounts that have been delivered to the Registrar of Companies
and on which the report of the auditors was unqualified and contained no
statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The
interim accounts have been prepared using the same accounting policies as the
preceding annual accounts.
PricewaterhouseCoopers LLP has reviewed the financial information for the six
months ended 31 March 2023 pursuant to the Auditing Practices Board guidance
on Review of Interim Financial Information.
16. This Half-Yearly Report was approved by the Board and authorised for issue on
6 June 2023.
Alternative Performance Measures
Alternative Performance Measures ("APMs") are numerical measures of the
Company's current, historical or future performance, financial position or
cash flows, other than financial measures defined or specified in the
applicable financial framework. The Company's applicable financial framework
includes FRS 102 and the AIC SORP. The Directors assess the Company's
performance against a range of criteria which are viewed as particularly
relevant for closed-end investment companies.
Net asset value per Ordinary share - debt at fair value
The net asset value per Ordinary share with debt at fair value is calculated
as follows:
As at As at
31 March 2023 30 September 2022
£'000 £'000
Net asset value attributable 352,317 363,358
Add: Amortised cost of 6.25% Bonds 2031 15,711 15,694
Less: Market value of 6.25% Bonds 2031 (17,043) (16,222)
350,985 362,830
Number of Ordinary shares in issue excluding treasury shares 302,750,873 308,447,314
Net asset value per share (p) 115.93 117.63
Discount to net asset value per Ordinary share - debt at fair value
The discount is the amount by which the Ordinary share price is lower than the
net asset value per Ordinary share - debt at fair value, expressed as a
percentage of the net asset value - debt at fair value. The Board considers
this to be the most appropriate measure of the Company's discount.
31 March 2023 30 September 2022
Net asset value per Ordinary share (p) a 115.93 117.63
Share price (p) b 81.40 89.80
Discount (a-b)/a 29.8% 23.7%
Dividend yield
The annual dividend per Ordinary share divided by the share price, expressed
as a percentage.
31 March 2023 30 September 2022
Dividend per Ordinary share (p) a 5.68 5.60
Share price (p) b 81.40 89.80
Dividend yield a/b 7.0% 6.2%
Net (cash)/gearing - debt at par value
Net (cash)/gearing with debt at par value measures the 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, in addition to cash and
short term deposits.
31 March 2023 30 September 2022
Borrowings (£'000) a 15,711 15,694
Cash (£'000) b 18,626 7,179
Amounts due to brokers (£'000) c 166 -
Amounts due from brokers (£'000) d 751 1,806
Shareholders' funds (£'000) e 352,317 363,358
Net (cash)/gearing (a-b+c-d)/e (1.0%) 1.8%
Net (cash)/gearing - debt at fair value
Net (cash)/gearing with debt at fair value measures the 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 year end, in addition to cash and
short term deposits per the Statement of Financial Position.
31 March 2023 30 September 2022
Borrowings (£'000) a 17,043 16,222
Cash (£'000) b 18,626 7,179
Amounts due to brokers (£'000) c 166 -
Amounts due from brokers (£'000) d 751 1,806
Shareholders' funds (£'000) e 350,985 362,830
Net (cash)/gearing (a-b+c-d)/e (0.6%) 2.0%
Ongoing charges
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and
administrative expenses and expressed as a percentage of the average daily net
asset values with debt at fair value published throughout the year. The ratio
for 31 March 2023 is based on forecast ongoing charges for the year ending 30
September 2023.
31 March 2023 30 September 2022
£ £
Investment management fees 1,152,000 1,293,000
Administrative expenses 935,000 930,000
Less: non-recurring charges(A) (1,000) (37,000)
Ongoing charges 2,086,000 2,186,000
Average net assets with debt at fair value 352,729,000 371,257,000
Ongoing charges ratio (excluding look-through costs) 0.59% 0.59%
Look-through costs(B) 0.76% 0.82%
Ongoing charges ratio (including look-through costs) 1.35% 1.41%
(A) Professional services considered unlikely to recur.
(B) Calculated 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 includes financing
and transaction costs. This can be found within the literature library section
of the Company's website: abrdndiversified.co.uk.
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. NAV and share price total
returns are monitored against open-ended and closed-ended competitors, and the
Reference Index, respectively.
NAV NAV Share
Six months ended 31 March 2023 (debt at par) (debt at fair value) Price
Opening at 1 October 2022 a 117.8p 117.6p 89.8p
Closing at 31 March 2023 b 116.4p 116.0p 81.4p
Price movements c=(b/a)-1 -1.2% -1.4% -9.4%
Dividend reinvestment(A) d 3.6% 3.6% 2.9%
Total return c+d +2.4% +2.2% -6.5%
NAV NAV Share
Year ended 30 September 2022 (debt at par) (debt at fair value) Price
Opening at 1 October 2021 a 123.5p 121.7p 100.0p
Closing at 30 September 2022 b 117.8p 117.6p 89.8p
Price movements c=(b/a)-1 -4.6% -3.4% -10.2%
Dividend reinvestment(A) d 4.4% 4.6% 5.2%
Total return c+d -0.2% +1.2% -5.0%
(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.
Independent review report to abrdn Diversified Income and Growth plc on the condensed financial statements
Report on the condensed interimfinancial statements
Our conclusion
We have reviewed abrdn Diversified Income and Growth plc's condensed interim
financial statements (the "interim financial statements") in the Half Yearly
Report of abrdn Diversified Income and Growth plc for the 6 month period ended
31 March 2023 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with FRS 104 "Interim Financial Reporting"
issued by the Financial Reporting Council and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Statement of Financial Position as at 31 March 2023;
· the Condensed Statement of Comprehensive Income for the period then
ended;
· the Condensed Statement of Cash Flows for the period then ended;
· the Condensed Statement of Changes in Equity for the period then ended;
and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Yearly Report of abrdn
Diversified Income and Growth plc have been prepared in accordance with FRS
104 "Interim Financial Reporting" issued by the Financial Reporting Council
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Yearly Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the company to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Yearly Report, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Yearly Report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Yearly Report, including
the interim financial statements, the directors are responsible for assessing
the company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Yearly Report based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Edinburgh
6 June 2023
END
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