REG - Dunedin Inc.Growth - Annual Financial Report
15/04/2025 07:02
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RNS Number : 9641E Dunedin Income Growth Inv Tst PLC 15 April 2025
DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC
Legal Entity Identifier (LEI): 549300PPXLZPR5JTL763
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2025
Net asset value total return per Ord share(AB) Share price total return per Ord share(A)
9.0% 8.4%
2024 6.7% 2024 (1.6)%
Revenue return per Ord share Ongoing charges(A)
13.8p 0.56%
2024 13.5p 2024 0.64%
Discount to net asset value(AB) Dividends per Ordinary share
11.6% 14.20p
2024 10.7% 2024 13.75p
(A) Alternative Performance Measure.
(B) With debt at fair value.
For further information, please contact:
Paul Finlayson
abrdn Fund Managers Limited
07990 130 451
Chairman's Statement
The UK equity market performed strongly during the year ended 31 January 2025.
The Company's net asset value total return was 9.0%, and the share price total
return was 8.4%. The Board is pleased to declare an increase of 3.3% in the
dividend for the year, to 14.20p per share, equating to a dividend yield of
5.0% based on the year end share price.
Performance
Notwithstanding the positive NAV return for the year, it is disappointing to
report underperformance against the benchmark, the FTSE All-Share Index, which
produced a total return of 17.1%.
This was a year where relative performance was characterised by challenging
market conditions for the Investment Manager's strategy, with relatively
concentrated returns and strong performance from a number of sectors to which
the Company has limited exposure. In addition, selective tilts towards
European exposure, UK mid-caps and companies with quality characteristics have
historically been sources of opportunity, but in this period proved a
headwind. It is important to note that, while there were some stocks whose
performance lagged that expected by the Investment Manager, the Company has
suffered primarily from the opportunity cost of missing out on strong returns,
as opposed to significant issues affecting the holdings within the portfolio.
The period under review was one of surprisingly positive absolute equity
returns against a backdrop of significant elections at home and abroad and
general economic, technological and political volatility. The UK stock market
was one of the global leaders with its 17% total return, despite a domestic
economy that began to stall following the general election in July, and the
impact of the new government's revenue raising measures in the October budget.
During this time, the large-cap FTSE 100 Index comfortably outperformed the
mid-cap FTSE 250 Index and Smaller Companies Index. Inflation remained
elevated across most developed economies with UK CPI ending the year at 3.0%,
still above the Bank of England's ("BoE") target rate. Despite persistently
higher than desired price growth, central banks began the process of easing
monetary policy with the BoE cutting interest rates twice in 2024 to bring the
base rate to 4.75%. There has been a further reduction to 4.5% since the year
end and markets are pricing in a further modest reduction over the remainder
of 2025.
Frustratingly, the discount at which the Company's shares are trading to NAV
widened over the year by 0.9% to stand at 11.6%. Reducing the discount
remains a key objective of the Board and we have continued to buy back
substantial numbers of shares over the period. The three main elements
needed to reduce the Company's discount are improving benchmark relative
performance, demonstrating a compelling income proposition and delivering a
high quality and targeted investor relations programme, and these elements
continue to be the Board's key areas of focus.
Reflecting on this year's performance, it is worth considering what makes a
successful investment trust. For the shares of an investment trust to
consistently trade at a narrow discount or at a premium, the investment trust
needs to offer an investment strategy that shareholders consider worth
investing in, the investment mandate needs to be well-executed and the company
needs to have a cost-effective marketing and shareholder relations strategy.
These need to be delivered by teams that have experience in all aspects of
investment trust management. The Company has all these elements in place.
While near-term investment performance has been below our expectations, since
the Board repositioned the investment strategy in January 2016, the Company
has delivered a NAV total return of 101.3% compared to the benchmark return
of 96.2%, and over the same period ranks 6th out of 18 in the AIC UK
Equity Income sector by NAV total return, with an annualised NAV total return
of 8.1%. This demonstrates that, over this longer period, the Company's
returns have been competitive within the sector.
In the past year, the strategy has faced headwinds. In any active strategy,
not all investment decisions will be rewarded. In a concentrated portfolio,
the effects of poor stock selection are magnified. This is anything but an
index-like portfolio, a feature we believe shareholders value and, as we have
stated before, there will be years when we perform very differently from the
benchmark and many of our peers. This is demonstrated over the past two years:
for the year just past, the Company delivered a relatively strong absolute NAV
total return of 9.0%, but underperformed the benchmark index; and in the
previous year, ended 31 January 2024, the Company delivered a NAV total return
of 6.7%, outperforming the benchmark by nearly 5% and was the best performing
investment trust in the UK Equity Income sector for that year.
Active management requires the patience to absorb the vicissitudes of markets.
The strategy has delivered significant outperformance in the past and the
Board believes that it will do so again when the Investment Manager's style
returns to favour.
We remain committed to the sustainability ambitions of the Company and
believe it is a sensible approach when investing for the long term and to
deliver resilient 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. 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
The Board recognises the importance of the revenue return to shareholders and
we are pleased to report that the portfolio has seen revenue earnings per
share grow by 2.1%, reaching another record high of 13.82p per share, aided
by a combination of solid dividend distributions from portfolio companies, a
healthy level of option writing income and a reduction in the number of shares
outstanding through our ongoing programme of share buybacks. This level of
revenue growth per share is in line with the growth of dividend distributions
from the FTSE All-Share Index over 2024.
Dividend
Having paid three quarterly dividends of 3.20p per share, we are proposing a
final dividend of 4.60p per share, payable on 30 May 2025 to shareholders on
the register on 2 May 2025. This will make a total dividend of 14.20p
per share for the year, an increase of 3.3% on last year and ahead of the
rate of inflation. This will be the 41st year out of the past 45 years that
the Company has grown its dividend, with the distribution maintained in the
other four years.
In addition, having increased the dividend in every year since 2011, the
Company is pleased to be classified under the 'Next Generation of Dividend
Heroes' banner by the Association of Investment Companies, being one of the
30 investment trusts that have raised their dividend for between 10 and 19
consecutive years.
It is also worth noting that, since January 2016, the Company's dividend per
share has increased by 24.6%, outpacing the 18% growth in dividend
distributions from the FTSE All Share Index and doing so in a much more
resilient fashion, noting the UK market's 42% cut to dividend payments
experienced during the pandemic in 2020. The ability to smooth dividends using
revenue reserves or indeed pay from realised capital reserves to maintain
shareholder distributions is one of the key benefits of the investment trust
structure.
Following payment of the final dividend, the Company will have utilised 0.38p
per share of its revenue reserves, leaving nearly 10p per share available
to support future distributions. This represents approximately 69% of the
current annual dividend cost.
The Company has drawn 3.22p per share from revenue reserves since January
2019, both through the transition away from higher yielding, lower growth
companies and, particularly in 2020/21, when 1.9p per share was utilised from
revenue reserves following the impact of the Covid pandemic on the
portfolio. The Company does have the ability to pay dividends out of realised
capital reserves and, given its very long history, is in the very favourable
position of having capital reserves that form a significant part of equity
shareholders' funds.
The Investment Manager is focussed on enhancing the Company's longer-term
potential for both faster dividend growth and better capital performance. The
dividend yield was 5.0% based on the share price of 285p at the end of
the year, a 35% premium compared to a notional yield of 3.7% from the
FTSE All-Share Index and a premium of 11% to the Bank of England's base rate
of 4.5%, while offering the prospect of real growth.
Income return through dividends has been a significant proportion of the
return to shareholders from their investment in the Company, and the Board is
aware of its importance to shareholders. Historic wisdom and practice is that
dividends have and can be largely generated from revenue returns, that is
dividends paid by companies we invest in, supplemented in the Company's case
by the strategic use of option writing. Looking back over the past ten years,
as I retire from the Board, it is interesting to note that the UK market has
increasingly moved towards buybacks as a flexible form of capital management
and distribution. This trend is seemingly structural with buybacks
representing approximately 50% of the value of total distributions in 2024.
Furthermore, the Sterling amount of dividends being paid by the UK market last
year is not much higher than the total in 2014. This shifting landscape
presents questions for boards and shareholders both as to dividend policy -
what is paid out in any year, and what is a desirable rate of growth to aim
for - and investment policy, how your capital is invested to generate this
return. Whilst raising questions, in the Board's view these structural changes
also present the Company with real potential opportunities, through being able
to use the structural advantages of an investment trust to address these
shifting market dynamics.
Our progressive distribution policy remains, seeking to grow the dividend
faster than inflation over the medium term. With the Company's robust revenue
and capital reserves and the healthy underlying earnings growth of the
companies within the portfolio, we believe that an overall policy delivering
both reliable income and capital growth remains very well supported.
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, a £30 million loan
note which matures in 2045, and a £30 million multi-currency revolving
credit facility that expires in August 2027 which was put in place in 2024
and negotiated on attractive terms with The Bank of America. This facility
replaced the expiring £30 million loan with The Bank of Nova Scotia. A
Sterling equivalent of £18.9 million was drawn down from the facility at the
year end.
With debt valued at par, the Company's net gearing increased from 6.8% to
10.9% during the year. This was due to the Investment Manager drawing down an
additional £5 million of borrowings during the year to deploy into favoured
investment opportunities, a lower level of cash balances and the reduction in
net assets as a result of the ongoing share buybacks. The Board believes this
remains a relatively conservative level of gearing and the undrawn part of
the revolving credit facility provides the Company with
financial flexibility should opportunities to deploy additional capital
arise.
Discount
The share price total return for the year of 8.4% modestly underperformed the
NAV total return, reflecting a move in the discount from 10.7% at the end of
last year to 11.6% as at 31 January 2025 (on a cum-income basis with
borrowings stated at fair value). Reflecting this widening during the year,
11.2 million shares were bought back at an average discount to NAV of 11.0%,
providing an estimated enhancement of 1.0% to the NAV per share.
The widening of the Company's discount has been a cause of significant
frustration to the Board. The reduction in net demand for the Company's shares
has a number of causes, some Company specific and some relating to broader
sectoral issues. Specific issues include the transfer of the Aberdeen Savings
Schemes at the end of 2023 to the Interactive Investor platform, leading to
increased selling during and after the transfer process. The Board has engaged
with Aberdeen to understand how the attractive terms of savings schemes and
the sense of connection between investors and the Company can be replicated on
the Interactive Investor platform. In addition, recent capital performance of
the portfolio has not attracted new investors. The current negativity around
sustainable investing is also unhelpful. More broadly, UK equities have been
out of favour, with the wider reduction in equity exposure to the UK market
being well-documented.
The Board believes a consistent rating of the Company's shares close to the
underlying asset value is of significant benefit to shareholders and strives
to achieve this. The Board also believes that the successful implementation
by the Investment Manager of the investment strategy and delivery of both
dividend growth and attractive total return performance is key to ensuring
this. As in previous years, we will seek shareholders' permission at the AGM
to buy back shares and issue new shares. We have actively increased the
level of buybacks in recent months and will continue to look at different
approaches to reduce the discount, including enhancing the attractiveness of
the Company to potential investors, whilst preserving the integrity of the
closed ended structure which we believe is a benefit to our portfolio managers
and therefore our shareholders. At the time of writing the share price
discount to NAV has narrowed to around 8%.
Annual General Meeting and Online Shareholder Presentation
AGM
The AGM will be held at 12 noon on Thursday 22 May 2025 at InterContinental
Edinburgh, The George, 19-21 George Street, Edinburgh EH2 2PB. The meeting
will include a presentation from the Investment Manager and will be followed
by a buffet lunch. We encourage all shareholders to complete and return the
Proxy Form enclosed with the Annual Report to ensure that your votes are
represented at the meeting.
If you hold your shares in the Company on a platform via a nominee, please
note that the Association of Investment Companies has provided helpful
information on how to attend an AGM and how to vote investment company shares
held on some of the major platforms. This information can be found at:
theaic.co.uk/how-to-vote-your-shares
(http://www.theaic.co.uk/how-to-vote-your-shares)
Online Shareholder Presentation
To encourage as much interaction as possible with our shareholders, especially
those who are unable to attend the AGM, we will again also be hosting an
Online Shareholder Presentation, which will be held at 11.00 am on Wednesday 7
May 2025. 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:
bit.ly/abrdn-Dunedin-Income-2025 (https://bit.ly/abrdn-Dunedin-Income-2025)
Details are also available on the Company's website.
Board Succession
We were pleased to announce the appointment of Arun Kumar Sarwal as an
independent non-executive Director of the Company with effect from 1 February
2025.
Arun is a Chartered Accountant and has broad experience of global equities and
fund management over some 35 years in the UK, Europe, and Asia. He is a Board
Advisor to Tumelo and a director and Chairman of the Audit Committee of
JPMorgan European Discovery Trust plc. Arun will stand for election at the
AGM.
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. As previously stated, we will both
stand down from the Board at the AGM. It is the Board's intention that Arun
will be appointed as Chairman of the Audit Committee in place of Jasper at
that time. I would like to thank Jasper for his diligent and highly effective
chairing of the Company's Audit Committee and his contribution to Board
deliberations.
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 further
Director later in 2025 to bring the number of Directors back to five.
It has been a great pleasure to be a Director of the Company for the past nine
years. I have enjoyed working with my Board colleagues past and present. We
have planned for the succession and the Board of Directors taking the Company
forward is highly experienced in all aspects of investment trust management.
Our Manager, Aberdeen, has undergone significant change over the past nine
years but the team managing Dunedin Income Growth has been remarkably
consistent with Ben Ritchie involved in managing the portfolio since 2012 and
the lead manager since 2016. The individuals working with the Board have been
committed and diligent in managing your company and I would like to thank them
for their support.
Outlook
The past year has been a difficult period for the Company, notwithstanding the
clear focus on generating both total return and dividend growth. The focus of
our approach on high quality companies, with the ability to invest down the
market cap spectrum and overseas should give the portfolio both flexibility
and resilience. The Board believes that this is a sound strategy to deliver
capital outperformance and dividend growth over the longer term. We believe
that there are reasons to expect the Company's relative performance to
significantly improve and to return to outperformance of both peers and the
benchmark. In aggregate, the portfolio valuation is at the narrowest premium
to the wider market in three years, despite far stronger levels of
profitability, returns and balance sheets. At the stock level, the Investment
Manager sees compelling prospective returns from a significant number of the
companies in the portfolio, businesses that are trading at prices well below
their potential value.
As we have stated in past years, we also believe that the income growth of the
Company relies more on structural rather than cyclical growth and that gives
the Investment Manager a higher degree of confidence on the likely path of
income generation. The sustainability overlay enhances this approach. Our
approach should help to underpin earnings delivery, even in an environment
where economic growth remains modest. The balanced nature of the portfolio
means it is well set to navigate volatile markets and demonstrate resilience
in a range of different market environments.
There are of course risks to be aware of. At home in the UK, businesses now
have to navigate the substantially increased costs that will come through from
the Autumn budget. The economy remains stagnant and the confidence of
consumers and companies is subdued. Global politics have become more volatile
and the path and impact of US economic policy more difficult to ascertain.
President Trump's trade agenda has caused markets a great deal of discomfort
since the year end, particularly since his tariff announcement on 2 April.
Alongside this, there are already signs of an economic slowdown emerging as
businesses grapple with the daily torrent of policy announcements.
While inflationary pressures in the UK have eased, they are still at elevated
levels compared to central bank targets. Likewise, geopolitical tensions
continue to persist across the Middle East, as does Russia's conflict with
Ukraine. Meanwhile, China's economy remains subdued, unlikely to be aided by
the current trade dispute with the United States. If there is a potential
silver lining of this backdrop, it is that UK inflation may ease faster than
expected - energy prices have fallen sharply and this may give the Bank of
England greater scope to ease monetary policy, an essential boost to what
remains a consumption led domestic economy. 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, while retaining upside optionality.
The Board is confident that the Company is well positioned to return to
deliver relative total return outperformance over the medium and long term.
This, combined with continuing to deliver a progressive distribution policy
together with a targeted and effective investor relations programme should
help to move the Company's shares to trade closer to NAV.
David Barron
Chairman
14 April 2025
Overview of Strategy
Business
The Company is an investment trust with its shares listed on the main market
of the London Stock Exchange.
Investment Objective
The Company's objective is to achieve growth of income and capital from a high
quality portfolio invested mainly in companies listed or quoted in the United
Kingdom or companies having significant operations and/or exposure to the
United Kingdom that meet the Company's sustainable and responsible investing
approach.
Investment Policy
In pursuit of its objective, the Company's investment policy is to deliver
income and long-term growth from investing mainly in equities and
equity-related securities of companies incorporated or domiciled in the United
Kingdom, or companies having significant operations and/or exposure to the
United Kingdom, that meet the Company's sustainable and responsible investing
approach.
The Company ensures that all equity and equity related securities adhere to
the Investment Manager's Sustainable and Responsible Investment Equity
Approach..
The Company does not have a UK sustainable investment label under the
sustainability disclosure requirements and investment labels regime ("SDR").
While the Company has sustainability characteristics, it does not have a
sustainability objective. Sustainable investment labels are intended to help
investors find products that have a specific sustainability goal.
Management Process
The Investment Manager has discretion to actively manage the portfolio to
achieve a diverse asset mix at sector and stock level.
The Company incorporates sustainability characteristics through a combination
of positive allocation, negative exclusions, and corporate engagement. The
Company uses the Investment Manager's proprietary, forward-looking
Environmental Social and Governance ("ESG") tools to assess the sustainable
characteristics of investments and classifies holdings as Sustainable Leaders,
Solutions Providers and Transition companies.
The Investment Manager's internal ESG House Score and ESG Quality Score are
also used to identify and exclude companies exposed to the highest ESG risks.
For example, the Company will not invest in ESG Q 4 and 5 rated companies or
those with an ESG House Score in the bottom 10% of the investment universe. In
addition, a set of company exclusions are applied relating to the principles
of the UN Global Compact, tobacco manufacturing, thermal coal, oil & gas
and weapons.
Further, sustainability characteristics are targeted at the aggregate
portfolio level. The Company is committed to having a carbon footprint (Scope
1 and 2) of at least 20% below the FTSE All-Share Index.
The Company may also invest in other investment funds (including those managed
by the Investment Manager), money-market instruments and cash. These assets
may not adhere to the Company's investment objective but will not conflict
with the Company's sustainable and responsible investing approach and will
pass the Company's exclusionary screening criteria as agreed by the Board.
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.
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 and the prior approval of the FCA.
Delivering the Investment Objective and Policy
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, including
the impact on global financial markets of US tariffs announced since the year
end. The Board is also conscious of the effect of higher inflation on global
financial markets and the resultant implications for interest rates.
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 Board review. The Board formally reviews the Company's objectives and
in a widening of the discount of the share price to its underlying NAV and a strategies for achieving them on an annual basis, or more regularly if
fall in the value of its shares. 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 volatility in the share
price and any widening of the discount.
Investment strategies - the Company adopts inappropriate investment strategies Adherence to investment guidelines. The Board sets investment guidelines and
in pursuit of its objectives which could result in investors avoiding the restrictions which the Manager follows, covering matters such as asset
Company's shares, leading to a widening of the discount and poor investment allocation, diversification, gearing, currency exposure and use of
performance. 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 Monitoring of performance. The Board meets the Investment Manager on a regular
investment manager with inadequate resources, skills or expertise or which basis and keeps under close review (inter alia) its resources and adherence to
makes poor investment decisions. This could result in poor investment investment processes. The Board also keeps under review the adequacy of risk
performance, a loss of value for shareholders and a widening discount. controls and investment performance.
Management Engagement Committee. A detailed formal appraisal of the Manager is
carried out annually by the Management Engagement Committee.
Sustainable and responsible investing criteria - failure of the Company to Adherence to restrictions. The Board sets restrictions relating to the
adhere to its sustainable and responsible investment criteria, or Company's sustainable and responsible investment criteria, which the
non-compliance with applicable regulations, could lead to a loss of investor Investment Manager follows. These restrictions are reviewed regularly and the
confidence or accusations of greenwashing. Investment Manager reports on compliance with them at Board meetings.
Awareness of regulations. Through the regulatory risk controls stated below,
the Board is also aware of the relevant ESG regulations impacting the Company.
Income/dividends - the Company adopts an unsustainable dividend policy Revenue forecasting and monitoring. The Manager presents detailed forecasts of
resulting in cuts to or suspension of dividends to shareholders, or one which income and expenditure at Board meetings, covering both the current and
fails to meet investor demands. subsequent financial years. 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, Management controls. The Manager has a range of procedures and controls
including market risk, foreign currency risk, liquidity risk and credit risk relating to the Company's financial instruments, including a review of
could result in losses to the Company. 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 Gearing restrictions. The Board sets gearing limits within which the Manager
of the Company's investment portfolio on its NAV. An inappropriate level of can operate.
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 Monitoring. Both the limits and actual levels of gearing are monitored on an
the Company's net assets could result in a breach of loan covenants and ongoing basis by the Manager and at regular Board meetings. In the event of a
trigger demands for early repayment or require investments to be sold to meet possible impending covenant breach, appropriate action would be taken to
any shortfall. This could result in further losses. 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 Board awareness. The Directors have an awareness of the more important
(including the Companies Act, The Financial Services and Markets Act, The regulations and are provided with information on changes by the Manager and
Alternative Investment Fund Managers Directive, accounting standards, the Association of Investment Companies. In terms of day to day compliance
investment trust regulations, the Packaged Retail and Insurance-based with regulations, the Board is reliant on the knowledge and expertise of the
Investment Product Regulations, the Listing Rules, Disclosure Guidance and Manager. However, where necessary, the Board engages the service of external
Transparency Rules and Prospectus Rules) could result in fines, loss of advisers. In addition, all Directors are encouraged to attend relevant
reputation, reduced demand for the Company's shares and potentially loss of an training courses.
advantageous tax regime.
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.
Operational (including cyber-crime) - the Company is reliant on services Agreements. Written agreements are in place defining the roles and
provided by third parties (in particular those of the Manager and the responsibilities of all third party service providers.
Depositary) and any control gaps and failures in their operations could expose
the Company to loss or damage. 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 Board and Manager awareness. Geo-political events over which the Company has
result in losses to the Company. 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.
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 Aberdeen 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
Literature section of the Company's website.
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.
Aberdeen Group plc is a signatory to 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 11.4.22(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 in the
Strategic Report 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.
· The level of share buy backs carried out during the year and
subsequent to the year end.
· Although the Company's stated investment policy contains a
maximum gearing limit of 30% of the net asset value 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 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 statement below.
On behalf of the Board
David Barron
Chairman
14 April 2025
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 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 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 The Investment Manager's Review details the key investment decisions taken
(and Investment Manager) 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 Bank of America, N.A., 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.
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 2025. Each of
these decisions was made after taking into account the short and long term
benefits for stakeholders.
Investment Objective and Portfolio (including sustainable and responsible
investing criteria)
The Investment Manager's Review details the key investment decisions taken
during the year, including adherence to the Company's sustainable and
responsible investing criteria.
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 adherence to 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.
Sustainable Disclosure Requirements ("SDR")
During the year, the Board considered the UK's Sustainable Disclosure
Requirements, including the Naming and Marketing rules that come into force on
2 December 2024. No changes were made to the Company's investment strategy or
the investment process as a result of the new rules.
The Company adopted a sustainable investment overlay to its investment
objective in 2021. The move reflected an evolution of the investment process
and formalised the Investment Manager's approach to quality investing, which
incorporates an assessment of long term environmental, social and governance
risks and opportunities.
In November 2023, as part of its improvements to the regulation of sustainable
products domiciled in the UK, the FCA confirmed that it would be possible for
investment companies which met certain qualifying criteria to apply one of
four sustainable investment labels as well as a fifth category of unlabelled
but with sustainability characteristics under its new naming and labelling
regime.
During the year, the Manager advised the Board that, although the Company's
investment objective explicitly referenced sustainable and responsible
investing criteria, the objective itself did not constitute a sustainability
objective. Therefore, in its current form, the Company's investment policy and
the broader investment process would be unlikely to satisfy the FCA's
requirements for a label without making some changes. As a result, the Board
decided that the Company would not seek to apply a sustainability label under
UK SDR for the time being but instead would adopt the category 'unlabelled but
with sustainability characteristics'.
Dividend
Following the payment of the final dividend for the year, of 4.60p per
Ordinary share, total dividends for the year will amount to 14.20p per
Ordinary share. This represents an increase of 3.3% compared to the previous
year. This will be the 41st year out of the past 45 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 America, N.A., London
Branch. The facility replaced the expiring £30 million multi-currency
revolving credit facility and will expire in August 2027.
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 consent.
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 11,223,856 Ordinary shares to be held
in treasury, at a cost of £31.5 million, 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 which was held in
London. The AGM will be held in Edinburgh this year. The Board receives
feedback from the Stockbroker and the Manager following meetings with
shareholders and the Charman is available to meet with the Company's larger
shareholders. Shareholder letters addressed to the Board are shared with all
Directors and responded to directly by the Charman.
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 11.00am on Wednesday 7 May 2025. 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.
In addition, the Chairman and the Manager recorded podcasts during the year
which are available on the Company's website, providing updates on performance
and the outlook for markets.
The Board considers that it is important to maintain an ongoing dialogue with
shareholders to properly understand their views and to communicate the actions
of the Board.
Board Succession
As explained in the Chairman's Statement the Directors' Report, as part of the
Board's succession planning, and following a search process that began during
the financial year, Arun Kumar Sarwal was appointed as an independent
non-executive Director on 1 February 2025.
David Barron and Jasper Judd joined the Board in February 2016 and will both
retire as Directors at the AGM. Howard Williams will succeed David Barron as
Chairman of the Board and Arun Kumar Sarwal will be appointed as Chairman of
the Audit Committee in place of Jasper Judd.
It is the Board's intention to recruit a further Director later in 2025 to
bring the number of Directors back to five.
New Board appointments seek to achieve a good balance of skills, experience,
gender and ethnicity. The Board believes that shareholders' interests are best
served by ensuring a smooth and orderly refreshment of the Board which serves
to provide continuity and maintain the Board's open and collegiate style.
On behalf of the Board
David Barron
Chairman
14 April 2025
Performance
Performance (total return)
1 year 3 year 5 year
% return % return % return
Total return (Capital return plus net dividends reinvested)
Net asset value(AB) 9.0 19.1 28.4
Share price(B) 8.4 5.8 19.1
FTSE All-Share Index 17.1 25.5 37.9
Capital return
Net asset value(A) 4.4 4.3 3.3
Share price 3.3 (8.1) (5.3)
FTSE All-Share Index 12.9 12.4 16.1
(A) Cum-income NAV with debt at fair value.
(B) Considered to be an Alternative Performance Measure
Source: Aberdeen, Factset & Morningstar
Ten Year Financial Record
Year ended 31 January 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total revenue (£'000) 20,359 21,963 22,317 22,263 20,518 18,346 21,518 21,950 22,949 22,550
Per share (p)
Revenue return 12.11 12.55 12.64 12.68 12.08 10.90 12.87 13.02 13.54 13.82
Dividends paid/proposed 11.40 11.70 12.10 12.45 12.70 12.80 12.90 13.10 13.75 14.20
Revenue reserve(A) 9.63 10.51 11.16 11.54 10.94 9.07 9.05 8.97 8.99 9.85
Net asset value(B) 237.48 270.34 290.57 266.83 312.22 297.64 309.03 302.80 308.98 322.47
Total return(C) (28.94) 43.83 30.83 (11.95) 58.57 (1.81) 23.78 1.92 15.45 23.90
Shareholders' funds (£'000) 368,041 415,810 442,384 401,731 469,806 448,293 464,579 448,605 445,815 428,528
(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
The UK market rose strongly in the year to 31 January 2025. The Company's net
asset value ("NAV") total return for the year of 9.0% compared to a total
return of 17.1% from the benchmark, the FTSE All-Share Index. The UK equity
market ended the year at an all-time high, driven by performance of the
largest UK companies in the market. The market was supported by declining
inflation and the Bank of England's ("BoE") first interest rate cuts in four
years. Concurrently, global markets advanced, bolstered by favourable economic
trends, the resilience of the US economy, an artificial intelligence ("AI")
investment cycle, and monetary policy easing by central banks. The UK economy
is anticipated to have achieved modest GDP growth in 2024, and the Office for
Budget Responsibility revised down its growth forecasts for 2025. At the same
time, rises in tax and spending announced in the new Labour government's
autumn Budget damaged investor and business confidence, and threatened to lead
to a slower pace of interest rate cuts in 2025.
Although it is disappointing that the Company's performance did not keep pace
with the strong market performance, this outcome is consistent with our
defensive and quality-focused investment strategy. Our emphasis on
high-quality companies and investments that can deliver both income and
capital growth, while adhering to the Company's sustainable and responsible
investing principles, remains unchanged.
The Company offers a distinctive approach within the UK Equity Income
Investment Trust sector, designed to generate superior long-term returns. The
high conviction portfolio, at the year end comprising 33 holdings with a
strong focus on quality, is highly differentiated from other UK Equity Income
investment trusts. The Company maintains a differentiated positioning relative
to its peers and benchmark, with an overweight allocation to the UK mid and
small cap companies (at 21% of NAV) and an allocation to European companies
(at 22%). Notably, the Company remains the only equity income investment trust
with a formal sustainability approach. This year, the Company updated its
policy and consumer facing documentation to meet the UK Sustainable Disclosure
Regulations, recognising the sustainability characteristics of the portfolio.
Performance
While the absolute NAV total return of the Company in the year was a robust
9.0% , this represented an underperformance of 8.1% against the benchmark
index. There were three main drivers of this. First, our positioning in the
Financials sector to which around half of the underperformance can be
attributed. Secondly the Company's stylistic focus on high-quality companies
and its overweight exposure to more domestically orientated mid and small
caps. Thirdly, a small number of companies that experienced more challenging
trading conditions during the year.
With regards to the Financials sector, the Company has historically run a
large underweight position in the banking sector, given our focus on high
quality businesses and that sector's significant economic sensitivity,
exposure to political and regulatory oversight, earnings heavily linked to the
unpredictable interest rate cycle, and variability in shareholder
distributions, with a poor long-term track record of maintaining and growing
dividends. Over the past few years, we have seen a more supportive environment
for banks with a recovery from Covid lows, rising interest rates supporting
net interest income growth, low levels of provisions and a more settled
regulatory environment which, alongside modest valuations, has driven strong
share price returns. Choosing not to own the likes of HSBC, Standard
Chartered, Lloyds, Barclays and, for much of the year, NatWest has proven to
be a missed opportunity and accounted for most of the headwind from the
sector.
Within financials we have tended to focus instead on high yielding stocks
where we have greater confidence in the maintenance and growth of dividends or
on lower yielding businesses where we see long-term structural growth
opportunities. That has led us to hold M&G and Chesnara where we have high
confidence in the maintenance of very generous yields and steady longer-term
growth. While both companies have their complexities, their business models
are subject to significantly less variability than traditional banks and this
is evidenced by neither company having cut its dividend during its life as a
listed business. Alongside this, we hold positions in lower yielding but
faster growing companies such as Intermediate Capital, Hiscox and London Stock
Exchange where we see very attractive return potential for private markets,
specialist insurance and financial data and services respectively. Over the
long-term, those companies have performed very well and demonstrated the
ability to grow shareholder distributions at attractive rates of return.
Alongside the lack of exposure to banks, one other holding that has proven
more challenging within the Financials sector has been Asian-focussed life
assurer and asset manager Prudential. A combination of regulatory changes in a
number of its end markets, weaker economic performance and some internal
missteps have seen its rate of growth decline. It has also suffered from
association with large exposures to Hong Kong and China where it has been
treated as a proxy for those expressing caution on those end markets.
Prudential, however, remains exposed to end markets with very low levels of
insurance penetration, large unmet need for personal provision in the absence
of state support, strong market share positions and helpful demographic
trends. While timing is never certain, we do see substantial potential upside
for those prepared to be patient.
The second element that held back performance during the year was our
stylistic focus on high-quality companies and overweighting the mid-cap part
of the market. This was very much a year where companies with low starting
valuations were in vogue, materially outperforming those with strong quality
characteristics. The Company's overweight position to UK mid and small cap
companies detracted, with the FTSE 100 Index outperforming the mid cap focused
FTSE 250 Index by 5.2% over the year, with domestically exposed companies
particularly overlooked in the second half of the year as concerns grew over
the state of UK economy and capital focussed on the larger part of the market.
We believe strongly that over, the long-term, an emphasis on high quality
companies will deliver good returns for the Company with both greater
resilience and faster rates of earnings and dividend growth. Likewise, we
continue to see numerous compelling opportunities to invest in UK mid cap
companies, where our research capabilities can give us an edge in what are
often overlooked corners of the market - we consider that the portfolio has a
number of stocks with substantial potential upside.
Finally, there were a small number of companies that detracted from
performance in the year. Edenred, a global services and payments business,
faced several headwinds, including regulatory changes in Italy, declining
Eurozone interest rates and slower revenue growth as inflation benefits wane.
However, despite this, Edenred delivered solid results in 2024, has
successfully navigated similar regulatory pressures in other markets and
continues to deliver strong profit and dividend growth, leveraging its
valuable proposition and extensive portfolio reach. Now trading at a very
modest valuation, we expect trading to steadily improve through the year and
for the company to rebuild confidence with investors. As was the case to a
degree last year, niche lender Close Brothers continued to struggle in the
face of regulatory pressures on its car finance business and the potential
costs of compensation and remediation. We had maintained the holding, looking
for a potential recovery, but the prospects of a rapid resolution to the
regulatory overhang receded and the negative impact on the underlying business
continued to develop, leading us to exit the holding in the second half of the
year. Not holding aerospace engineer Rolls Royce also proved to be a drag as
the company delivered cash generation ahead of expectations driven by a robust
civil aerospace cycle and recovered from a number of years of tough market
conditions and self-inflicted challenges. Our primary rationale for not
holding stems from a lack of dividend, with the company not having paid a
distribution since 2020.
While our focus is quite rightly on what has been challenging during the year.
It is important to emphasise that the headwinds to performance primarily
stemmed from companies we didn't own, during a year where the market return of
17% was relatively high in a historic context. Encouragingly, we saw a
number of the holdings deliver strong returns in the year. Notably Morgan
Sindall published consistently excellent results, as customers looked to
upgrade office space. This substantial profit growth and strong market
position led to a significant increase in dividend payouts and consequently
the share price. Games Workshop, a leading hobbyist retailer, demonstrated
resilience in the face of cautious consumer spending, which has challenged
many consumer facing businesses. The company's strategic partnership with
Amazon, finalised in December, will adapt the Warhammer universe into films
and television series, promising profitable growth opportunities in the coming
years and, alongside the digitalisation of its brand, there remains a long
runway of future growth potential. It has also significantly increased its
dividend payments back to investors. As previously mentioned, Intermediate
Capital Group benefitted from strong fund raising and continued appetite for
private market assets, while London Stock Exchange continued to deliver solid
growth and increasingly demonstrate the value it has been able to extract from
the Refinitiv acquisition.
Revenue Account
We are pleased with the Company's income progression in the year, with the
final outcome of 13.82p representing a 2.1% year on year increase, in line
with our expectations at the start of the year and broadly matching the level
of dividends being distributed by the wider market which, according to
Computershare, increased in 2024 by 2.3% on a headline basis and declined 0.4%
on an underlying basis (adjusting for foreign exchange movements and special
dividends).
We benefitted from special distributions paid by Volvo and Softcat, and
generally dividends were in line with or ahead of our expectations, reflecting
the solid operational performance of the Company's holdings during the period
The one significant dividend cut came from Close Brothers, but this was
already reflected in our expectations for the year. We continued to generate
income from option writing, which represented 10.6% of total income for the
year (2024: 9.0%).
While the actual level of investment income declined during the year (see note
3 to the financial statements), this needs to be seen in the context of
funding the ongoing share buyback programme which reduced the share count by
nearly 8%. Looking at resulting earnings per share performance takes into
account both of these elements and we believe is the best way to judge overall
income performance.
Portfolio Activity
We introduced several new companies to the portfolio over the year. This
included Genuit, a leading manufacturer of piping solutions for water,
climate, and ventilation management. Genuit's strong focus on sustainability
positions it well for long-term structural growth and potential margin
expansion, despite its cyclical nature. Convatec, specialises in advanced
wound care, ostomy care, continence care, and infusion care. The company
benefits from favourable demographic trends, including an aging population and
an increasing incidence of chronic conditions. We believe it has the potential
to accelerate revenues given its focus on product innovation, and enhance its
operating margins - something that is not yet reflected in its valuation. We
invested in Azelis, a Belgian-listed specialty chemical distributor with a
significant presence in the life sciences sector. Azelis operates a
capital-light business model and boasts a network of application laboratories
that provide technical guidance on product development, supporting its
long-term growth prospects. We also acquired a stake in Gaztransport &
Technigaz (GTT), a French-listed industrial engineering design firm renowned
for its membrane designs used in LNG carrier ships. GTT's product leadership
allows for premium pricing and positions it for growth alongside the expanding
global LNG fleet. The company has a net cash balance sheet, generates high
cash conversion rates, and returns excess liquidity to investors, positioning
it well to provide an attractive and growing dividend stream. Lastly, we
introduced NatWest, the UK retail bank, to better balance our Financials
exposure, having sold Nordea earlier in the year, and to help support the
higher income element of the portfolio. NatWest is a relatively simple banking
operation, generates robust returns, has an improving revenue outlook, and
offers a well above-market dividend yield, supported by a strong balance
sheet, which gives us greater confidence in its long-term sustainability.
In line with our strategy to focus on best ideas and maintain a concentrated
portfolio, we exited several holdings. Nordea was sold following the payment
of a special dividend, as we anticipated a weaker interest rate outlook in
Europe. Croda, a specialty chemical business, was divested due to
disappointing results that eroded our confidence in its competitive strengths.
We also exited Moonpig and Marshalls after strong share price recoveries, as
market confidence in their growth prospects rebounded post-Covid. Pets at Home
was also sold as we focused the portfolio on higher quality companies,
reflecting some of the inherent challenges faced by pure domestic retail
franchises amidst substantial cost inflation and subdued consumer demand.
Finally, we exited Close Brothers following a challenging year marked by
uncertainty related to potential financial redress owning to regulatory
investigation into historic discretionary commission payments in the motor
finance loan book.
We took profits from stronger performers whose valuations approached fair
value and reinvested in companies that had lagged but retained compelling
investment cases. For example, we took profits in Intermediate Capital Group,
London Stock Exchange, Games Workshop and Morgan Sindall. We took advantage of
periods of share price weakness in the year to top up Genus, Convatec,
Mercedes Benz, National Grid, Edenred, Sirius Real Estate and Novo-Nordisk.
Outlook
Sentiment towards UK and European equity markets has been influenced by a
complex interplay of factors, from weaker Chinese growth, geopolitical
tensions, inflation concerns, and the threat of tariffs from the United
States. Meanwhile, the UK economy is experiencing anaemic growth, with the
government seeking to stimulate activity within fiscal constraints. Despite
robust household cash flows and record savings rates, UK consumer confidence
remains low, echoing trends in business surveys. The outlook is uncertain,
with risks stemming from trade tensions, moderating global growth, the
efficiency of AI-related capital expenditures and valuations. However, this
complex environment, combined with stabilising real interest rates, should
present a favourable backdrop for stock pickers. We continue to believe that
UK equity income offers attractive characteristics for shareholders, including
potential for real growth in dividends and good rates of capital growth.
Despite these challenges, the UK market performed strongly over the last year,
driven by positive economic surprises, Sterling weakness, and low starting
valuations. Despite recent performance, the UK and European markets, as well
as the holdings in the portfolio, trade on valuations that reflect subdued
expectations that could be exceeded again. Mergers and acquisitions remain a
prominent feature, with numerous UK businesses being approached by private
equity and strategic buyers, with health care real estate company Assura
receiving an approach from private equity after the year end. The balance
sheets of UK corporates are healthy, with many UK listed companies actively
engaging in share buybacks and increasing dividends.
Since the year end, President Trump's implementation of sweeping tariffs, even
though somewhat amended, has caused significant financial market turbulence.
While acknowledging the risks, we maintain an optimistic outlook for the
portfolio. Our investment style and positioning have faced headwinds this
year, but we remain convinced that high-quality, sustainable businesses with
resilient income streams give the Company the potential to perform over the
long term, particularly so in a more challenging global economic environment.
We continue to see compelling investment opportunities across all sizes of UK
companies and are utilising gearing and overseas allocation to enhance
portfolio diversification and return potential. Our focus remains on balancing
protecting downside risks to capital while participating in opportunities for
upside potential.
Ben Ritchie and Rebecca Maclean,
Aberdeen
14 April 2025
Portfolio
At 31 January 2025
Valuation Total Valuation
2025 assets 2024
Company Sector £'000 % £'000
Unilever Personal Care, Drug and Grocery Stores 32,470 6.8 28,205
TotalEnergies Oil, Gas and Coal 29,564 6.2 26,125
National Grid Gas, Water and Multi-utilities 28,807 6.0 17,956
RELX Media 25,008 5.2 23,846
London Stock Exchange Finance and Credit Services 22,874 4.8 23,696
AstraZeneca Pharmaceuticals and Biotechnology 22,179 4.6 32,517
Diageo Beverages 19,205 4.0 22,711
Chesnara Life Insurance 15,599 3.3 15,510
NatWest Banks 15,361 3.3 -
Sage Software and Computer Services 14,624 3.1 12,769
Ten largest investments 225,691 47.3
Genus Pharmaceuticals and Biotechnology 13,180 2.8 6,865
Convatec Medical Equipment and Services 13,086 2.7 -
Prudential Life Insurance 13,060 2.7 13,015
Games Workshop Leisure Goods 12,242 2.6 12,196
Assura Real Estate Investment Trusts 11,880 2.5 10,061
Intermediate Capital Investment Banking and Brokerage Services 11,595 2.4 16,018
M&G Investment Banking and Brokerage Services 11,544 2.4 12,402
Volvo Industrial Transportation 11,375 2.4 11,466
Sirius Real Estate Real Estate Investment Trusts 11,334 2.4 11,433
Hiscox Non-life Insurance 10,555 2.2 10,043
Twenty largest investments 345,542 72.4
Telecom Plus Telecommunications Service Providers 10,303 2.2 8,970
Weir Group Industrial Engineering 10,166 2.1 10,471
Mercedes-Benz Automobiles & Parts 10,154 2.1 9,893
Edenred Industrial Support Services 10,136 2.1 10,040
Softcat Software and Computer Services 9,994 2.1 7,269
Gaztransport & Technigaz Oil, Gas and Coal 9,913 2.1 -
Genuit Construction and Materials 9,889 2.1 -
Azelis Industrial Support Services 9,788 2.1 -
ASML Technology Hardware and Equipment 9,785 2.0 13,067
Taylor Wimpey Household Goods and Home Construction 9,607 2.0 15,075
Thirty largest investments 445,277 93.3
Morgan Sindall Construction and Materials 9,541 2.0 11,166
Novo-Nordisk Pharmaceuticals and Biotechnology 9,126 1.9 9,009
Oxford Instruments Electronic and Electrical Equipment 8,708 1.9 9,228
Total investments 472,652 99.1
Net current assets(A) 4,535 0.9
Total assets less current liabilities(A) 477,187 100.0
(A) Excluding bank loan falling due within one year of £18,907,000 (2024 -
£13,307,000).
Sector Analysis
As at 31 January 2025
FTSE All-Share Portfolio Portfolio
Index weighting weighting weighting
2025 2025 2024
% % %
Energy Oil, Gas and Coal 9.6 8.3 5.3
9.6 8.3 5.3
Basic Materials Chemicals 0.4 - -
Industrial Metals and Mining 5.4 - 1.9
Precious Metals & Mining 0.2 - -
6.0 - 1.9
Industrials Aerospace & Defence 4.1 - -
Construction and Materials 0.4 4.1 4.1
Electronic and Electrical Equipment 1.1 1.8 1.9
General Industrials 1.4
Industrial Engineering 0.6 2.1 2.1
Industrial Support Services 3.3 4.2 2.1
Industrial Transportation 1.2 2.4 2.3
12.1 14.6 12.5
Consumer Discretionary Automobiles & Parts 0.1 2.1 2.0
Consumer Services 1.9 - -
Household Goods and Home Construction 1.0 2.0 3.1
Leisure Goods 0.2 2.6 2.5
Media 4.4 5.2 4.9
Personal Goods 0.2 - -
Retailers 1.5 - 2.9
Travel & Leisure 2.3 - -
11.6 11.9 15.4
Health Care Medical Equipment and Services 0.5 2.7 -
Pharmaceuticals and Biotechnology 10.6 9.3 9.9
11.1 12.0 9.9
Consumer Staples Beverages 2.4 4.0 4.6
Food Producers 0.6 - -
Personal Care, Drug and Grocery Stores 7.7 6.8 5.8
Tobacco 3.5 - -
14.2 10.8 10.4
Real Estate Real Estate Investment Trusts 2.3 4.9 4.4
2.3 4.9 4.4
Utilities Electricity 0.9 - 2.8
Gas, Water and Multi-utilities 2.8 6.0 3.7
3.7 6.0 6.5
Financials Banks 11.8 3.3 3.6
Closed End Investments 6.0 - -
Finance and Credit Services 2.6 4.8 4.8
Investment Banking and Brokerage Services 3.5 4.8 5.8
Life Insurance 2.1 6.0 5.8
Non-life Insurance 0.9 2.2 2.1
26.9 21.1 22.1
Technology Software and Computer Services 1.4 5.2 4.1
Technology Hardware and Equipment - 2.1 2.7
1.4 7.3 6.8
Telecommunications Telecommunications Service Providers 1.1 2.2 1.8
1.1 2.2 1.8
Total investments 100.0 99.1 97.0
Net current assets before borrowings(A) - 0.9 3.0
Total assets less current liabilities(A) 100.0 100.0
(A) Excluding bank loan falling due within one year of £18,907,000 (2024 -
£13,307,000).
Directors' Report (extract)
Directors present their report and the audited financial statements for the
year ended 31 January 2025.
Results and Dividends
The financial statements for the year ended 31 January 2025 are contained
below. First, second and third interim dividends, each of 3.20p per Ordinary
share, were paid on 30 August 2024, 29 November 2024 and 28 February 2025
respectively. The Directors recommend a final dividend of 4.60p per Ordinary
share, payable on 30 May 2025 to shareholders on the register on 2 May 2025.
The ex-dividend date is 1 May 2025. 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. The
Directors are of the opinion that the Company has conducted its affairs for
the year ended 31 January 2025 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
The Board has previously 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, will be donated to
charity. Accordingly, the Company made a donation of £20,000 (2024: £19,000)
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 Aberdeen Group and
provides oversight and guidance for its charitable giving activities.
Capital Structure and Voting Rights
The issued Ordinary share capital at 31 January 2025 consisted of 134,949,033
Ordinary shares of 25p and 18,728,902 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 Aberdeen Group 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 2025.
Shareholder Number of shares held % held
Interactive Investor 33,310,409 24.7
Hargreaves Lansdown 16,767,409 12.4
AJ Bell 6,531,239 4.8
1607 Capital Partners 6,164,502 4.6
EFG Harris Allday 5,868,678 4.3
HSDL Stockbrokers 4,841,838 3.6
WM Thomson 4,747,208 3.5
Charles Stanley 4,582,393 3.4
Canaccord Genuity Wealth Management 4,180,790 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.
Arun Kumar Sarwal was appointed as an independent non-executive Director on 1
February 2025 and will stand for election at the Annual General Meeting.
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, Howard Williams and
Christine Montgomery will retire at the Annual General Meeting and, being
eligible, offer themselves for re-election. Having served as Directors for
nine years, David Barron and Jasper Judd will not seek re-election and will
retire from the Board at the conclusion of the Annual General Meeting.
The Board believes that all the Directors seeking election/re-election are
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.
All of the Directors have demonstrated that they have sufficient time and
commitment to fulfil their directorial roles with the Company. The Board
therefore recommends the election/re-election of each of the Directors at the
Annual General Meeting.
The Directors attended scheduled Board and Committee meetings during the year
ended 31 January 2025 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 5 (5) - (-)(A) 1 (1) 1 (1)
Gay Collins 5 (5) 2 (2) 1 (1) 1 (1)
Jasper Judd 5 (5) 2 (2) 1 (1) 1 (1)
Christine Montgomery 5 (5) 2 (2) 1 (1) 1 (1)
Howard Williams 5 (5) 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.
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 2025
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 n/a n/a
(note 3) (note 3) (note 3)
Women 2 40% (note 1)
Not specified/prefer not to say - -
Table for reporting on ethnic background as at 31 January 2025
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
White British or other White 5 100% n/a n/a n/a
(including minority-white groups)
(note 3) (note 3) (note 3)
Minority ethnic - - (note 2)
Not specified/prefer not to say - -
Notes:
1. Meets target that at least 40% of Directors are women as set out
in LR 6.6.6R (9)(a)(i).
2. Does not meet target that at least one Director is from a minority
ethnic background as set out in LR 6.6.6R (9)(a)(iii) (see paragraph below).
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
& 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 6.6.6R (9)(a)(ii) .
As shown in the above table, as at 31 January 2025 the Company did not meet
the target set out in LR 6.6.6R (9)(a)(iii) that at least one Director is from
a minority ethnic background. Since the year end, Mr Arun Kumar Sarwal, who
identifies as a minority ethnic individual (Asian/Asian British), has been
appointed as a Director and this target has now been met.
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).
These provisions are not repeated in the AIC Code and the Board therefore
considers that they 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.
The Board is conscious of the FRC's updates to the UK Corporate Governance
Code, and the corresponding updates to the AIC Code, some of which will apply
to the Company's financial year beginning on 1 February 2025. It is the
Board's intention that the Company will comply with all relevant provisions of
the new codes.
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.
Having taken these matters into account, 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 Aberdeen
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 InterContinental Edinburgh, The
George, 19-21 George Street, Edinburgh EH2 2PB.
By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
14 April 2025
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
14 April 2025
Statement of Comprehensive Income
Year ended 31 January 2025 Year ended 31 January 2024
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments 10 - 16,405 16,405 - 4,712 4,712
Currency profit - 175 175 - 267 267
Income 3 22,550 - 22,550 22,949 - 22,949
Investment management fee 4 (691) (1,036) (1,727) (696) (1,044) (1,740)
Administrative expenses 5 (898) - (898) (1,072) - (1,072)
Net return before finance costs and taxation 20,961 15,544 36,505 21,181 3,935 25,116
Finance costs 6 (827) (1,240) (2,067) (757) (1,116) (1,873)
Return before taxation 20,134 14,304 34,438 20,424 2,819 23,243
Taxation 7 (510) - (510) (410) - (410)
Return after taxation 19,624 14,304 33,928 20,014 2,819 22,833
Return per Ordinary share (pence) 9 13.82 10.08 23.90 13.54 1.91 15.45
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 2025 31 January 2024
Notes £'000 £'000
Non-current assets
Investments at fair value through profit or loss 10 472,652 474,087
Current assets
Debtors 11 3,292 2,925
Cash and cash equivalents 2,329 12,868
5,621 15,793
Creditors: amounts falling due within one year
Bank loan 12 (18,907) (13,307)
Other creditors 12 (1,086) (1,013)
(19,993) (14,320)
Net current (liabilities)/assets (14,372) 1,473
Total assets less current liabilities 458,280 475,560
Creditors: amounts falling due after more than one year 13 (29,752) (29,745)
Net assets 428,528 445,815
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 359,775 376,996
Revenue reserve 16 23,820 23,886
Equity shareholders' funds 428,528 445,815
Net asset value per Ordinary share (pence) 17 317.55 304.99
The financial statements were approved and authorised for issue by the Board
of Directors on 14 April 2025 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 2025
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2024 38,419 4,908 1,606 376,996 23,886 445,815
Return after taxation - - - 14,304 19,624 33,928
Repurchase of shares for Treasury - - (31,525) - (31,525)
Dividends paid 8 - - - - (19,690) (19,690)
Balance at 31 January 2025 38,419 4,908 1,606 359,775 23,820 428,528
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
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 2025 31 January 2024
Notes £'000 £'000
Operating activities
Net return before finance costs and taxation 36,505 25,116
Adjustment for:
Gains on investments (16,405) (4,712)
Currency gains (175) (267)
Decrease in accrued dividend income 116 196
(Increase)/decrease in other debtors excluding tax (20) 15
(Decrease)/increase in other creditors (226) 109
Overseas withholding tax (970) (1,093)
Net cash flow from operating activities 18,825 19,364
Investing activities
Purchases of investments (115,323) (91,372)
Sales of investments 133,163 100,244
Net cash from investing activities 17,840 8,872
Financing activities
Interest paid (2,007) (1,916)
Dividends paid 8 (19,710) (19,961)
Buyback of Ordinary shares for treasury (31,261) (5,571)
Drawdown of Loan 5,856 -
Net cash used in financing activities (47,122) (27,448)
(Decrease)/increase in cash and cash equivalents (10,457) 788
Analysis of changes in cash and cash equivalents during the year
Opening balance 12,868 12,267
Effect of exchange rate fluctuations on cash held (82) (187)
(Decrease)/increase in cash as above (10,457) 788
Closing balance 2,329 12,868
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 2025
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.
Having taken these matters into account, 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
2025 2024
£'000 £'000
Income from investments
UK dividend income 13,458 14,970
Overseas dividends 6,623 5,843
20,081 20,813
Other income
Income on derivatives 2,390 2,060
Interest on tax reclaims - 3
Deposit Interest 36 73
Other Income 43 -
2,469 2,136
Total income 22,550 22,949
During the year, the Company earned premiums totalling £2,390,000 (2024 -
£2,060,000) in exchange for entering into derivative transactions. The
Company had no open positions in derivative contracts at 31 January 2025 (2024
- no open positions). Losses realised on the exercise of derivative
transactions are disclosed in note 10.
4. Management fee
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fee 691 1,036 1,727 696 1,044 1,740
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 £274,000 (2024 -
£289,000). 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 2025 (2024 - none).
The management agreement may be terminated by either party on six months'
written notice.
5. Administrative expenses
2025 2024
£'000 £'000
Directors' fees 170 161
Auditor's remuneration (excluding VAT):
- fees payable to the Company's Auditor for the audit of the Company's annual 39 34
accounts
Irrecoverable VAT 58 64
Promotional activities 200 246
Registrar's fees 53 46
Share plan fees - 149
Other expenses 378 372
898 1,072
Expenses of £200,000 (2024 - £246,000) were paid to aFML in respect of the
promotional activities of the Company. The balance outstanding at the year end
was £17,000 (2024 - £79,000).
6. Finance costs
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Bank loan 343 516 859 263 394 657
Loan Notes - repayable after more than five years 480 720 1,200 479 718 1,197
Amortised Loan Notes issue expenses 3 4 7 3 4 7
Bank overdraft 1 - 1 12 - 12
827 1,240 2,067 757 1,116 1,873
Finance costs (excluding bank overdraft interest) are allocated 40% to revenue
and 60% to capital.
7. Taxation
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(a) Analysis of charge for the year
Overseas tax suffered 2,277 - 2,277 1,203 - 1,203
Overseas tax reclaimable (1,767) - (1,767) (793) - (793)
Total tax charge for the year 510 - 510 410 - 410
(b) Factors affecting the tax charge for the year. The UK corporation tax rate is
25% (2024 - 25%). The tax assessed for the year is lower than the rate of
corporation tax. The differences are explained below:
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return before taxation 20,134 14,304 34,438 20,424 2,819 23,243
Corporation tax at 25% (2024 - effective rate of 24%) 5,034 3,576 8,610 4,902 677 5,579
Effects of: -
Non-taxable UK dividend income (3,342) - (3,342) (3,406) - (3,406)
Capital gains on investments not taxable - (4,102) (4,102) - (1,123) (1,123)
Expenses not deductible for tax purposes - - - 1 - 1
Currency gains not taxable - (43) (43) - (73) (73)
Overseas taxes 510 - 510 410 - 410
Non-taxable overseas dividends (1,493) - (1,493) (1,402) - (1,402)
Excess management expenses (199) 569 370 (95) 519 424
Total tax charge 510 - 510 410 - 410
(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 £137,155,000 (2024 - £135,671,000). 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.
8. Ordinary dividends on equity shares
2025 2024
£'000 £'000
Amounts recognised as distributions paid during the year:
Third interim dividend for 2024 - 3.20p (2023 - 3.00p) 4,678 4,448
Final dividend for 2024 - 4.15p (2023 - 4.10p) 5,996 6,079
First interim dividend for 2025 - 3.20p (2024 - 3.20p) 4,569 4,744
Second interim dividend for 2025 - 3.20p (2024 - 3.20p) 4,467 4,709
Return of unclaimed dividends(A) (20) (19)
19,690 19,961
(A) Unclaimed dividends returned to the Company during the year ended 31
January 2025 have been donated to charity (see note 22).
A third interim dividend of 3.20p per Ordinary share was declared on 11
December 2024, payable on 28 February 2025 to shareholders on the register on
7 February 2025 and has not been included as a liability in these financial
statements. The final dividend of 4.60p per Ordinary share was approved by the
Board on 14 April 2025, payable on 30 May 2025 to shareholders on the register
on 2 May 2025 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 £19,598,000
(2024 - £20,014,000).
2025 2024
£'000 £'000
First interim dividend for 2025 - 3.20p (2024 - 3.20p) 4,569 4,744
Second interim dividend for 2025 - 3.20p (2024 - 3.20p) 4,467 4,709
Third interim dividend for 2025 - 3.20p (2024 - 3.20p) 4,309 4,678
Final dividend for 2025 - 4.60p (2024 - 4.15p) 5,971 6,019
19,316 20,150
The final dividend is based on the latest share capital of 129,801,974
Ordinary shares excluding those held in treasury.
9. Return per Ordinary share
2025 2024
£'000 p £'000 p
Revenue return 19,624 13.82 20,014 13.54
Capital return 14,304 10.08 2,819 1.91
Total return 33,928 23.90 22,833 15.45
Weighted average number of Ordinary shares in issue 141,967,627 147,764,075
10. Investments at fair value through profit or loss
2025 2024
£'000 £'000
Opening book cost 409,443 424,815
Investment holdings gains 64,644 54,080
Opening fair value 474,087 478,895
Analysis of transactions made during the year
Purchases 115,323 90,723
Sales - proceeds (133,163) (100,243)
Gains on investments 16,405 4,712
Closing fair value 472,652 474,087
Closing book cost 397,456 409,443
Closing investment holdings gains 75,196 64,644
Closing fair value 472,652 474,087
The Company received £133,163,000 (2024 - £100,243,000) from investments
sold in the year. The book cost of these investments when they were purchased
was £127,311,000 (2024 - £105,411,000). 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 £563,000 (2024 - £1,251,000). Premiums received of
£2,390,000 (2024 - £2,060,000) 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:
2025 2024
£'000 £'000
Purchases 463 333
Sales 82 55
545 388
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
2025 2024
£'000 £'000
Net dividends and interest receivable 454 568
Tax recoverable 2,799 2,340
Other loans and receivables 39 17
3,292 2,925
12. Creditors: amounts falling due within one year
2025 2024
(a) Bank loan £'000 £'000
EUR 15,600,000 - 11 February 2024 - 13,307
EUR 22,600,000 - 13 February 2025 18,907 -
18,907 13,307
The Company has a £30 million multi-currency revolving credit facility
("RCF") with The Bank of America N.A., London Branch committed until 8 August
2027. 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 million to £40 million at any time, should further investment
opportunities be identified. The RCF is secured by a floating charge over the
whole of the assets of the Company. As at 31 January 2025 €22,600,000 had
been drawn down at a rate of 3.93% (2024 - €15,600,000 at a rate of 5.13%),
which matured on 13 February 2025. At the date this Report was approved
€22,600,000 had been drawn down at a rate of 3.50%, maturing on 14 April
2025. The terms of the loan facility contain covenants that total net
borrowings shall not exceed 33% of the net asset value and that the minimum
net assets of the Company are £200 million.
2025 2024
(b) Other creditors £'000 £'000
Loan Notes and bank loan interest 220 209
Amount due to brokers 368 92
Sundry creditors 498 712
1,086 1,013
13. Creditors: amounts falling due after more than one year
2025 2024
£'000 £'000
3.99% Loan Notes 2045 30,000 30,000
Unamortised Loan Note issue expenses (248) (255)
29,752 29,745
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 2025 was £23,114,000 (2024
- £23,916,000), the valuation methodology is disclosed 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
2025 2024
£'000 £'000
Allotted, called up and fully paid:
134,949,033 (2024 - 146,172,889) Ordinary shares of 25p each - equity 33,737 36,543
Treasury shares:
18,728,902 (2024 - 7,505,046) Ordinary shares of 25p each - equity 4,682 1,876
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 repurchased 11,223,856 (2024 - 2,091,781) ordinary
shares at a cost of £31,525,000, including expenses (2024 - £5,662,000,
including expenses). All of the shares were placed in treasury. Subsequent to
the year end the company repurchased a further 5,147,059 Ordinary shares at a
total cost of £14,673,000.
15. Analysis of changes in financing during the year
2025 2024
Equity Equity
share capital share capital
(including Loan (including Loan
premium) Notes premium) Notes
£'000 £'000 £'000 £'000
Opening balance at 31 January 2024 43,327 29,745 43,327 29,738
Movement in unamortised Loan Notes issue expenses - 7 - 7
Closing balance at 31 January 2025 43,327 29,752 43,327 29,745
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.
2025 2024
Revenue reserve (£'000) 23,820 23,886
Number of Ordinary shares in issue at year end 134,949,033 146,172,889
Revenue reserve per Ordinary share (p) 17.65 16.34
Less: - third interim dividend (p) (3.20) (3.20)
- final dividend (p) (4.60) (4.15)
Revenue reserve per Ordinary share (p) as per the Companies Act 9.85 8.99
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:
2025 2024
Net assets attributable (£'000) 428,528 445,815
Number of Ordinary shares in issue at year end(A) 134,949,033 146,172,889
Net asset value per Ordinary share 317.55p 304.99p
· · (A) Excluding shares held in treasury. · ·
Adjusted net assets 2025 2024
Net assets attributable (£'000) as above 428,528 445,815
Unamortised Loan Note issue expenses (note 13) (248) (255)
Adjusted net assets attributable (£'000) 428,280 445,560
Number of Ordinary shares in issue at year end(A) 134,949,033 146,172,889
Adjusted net asset value per Ordinary share 317.36p 304.82p
(A) Excluding shares held in treasury.
Net assets - debt at fair value £'000 £'000
Net assets attributable 428,528 445,815
Amortised cost Loan Notes 29,752 29,745
Market value Loan Notes (23,114) (23,916)
Net assets attributable 435,166 451,644
Number of Ordinary shares in issue at the period end(A) 134,949,033 146,172,889
Net asset value per Ordinary share (debt at fair value) 322.47p 308.98p
(A) Excluding shares held in treasury.
18. Analysis of changes in net debt
At Currency Non-cash At
31 January 2024 differences Cash flows movements 31 January 2025
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 12,868 (82) (10,457) - 2,329
Debt due within one year (13,307) 256 (5,856) - (18,907)
Debt due after more than one year (29,745) - - (7) (29,752)
(30,184) 174 (16,313) (7) (46,330)
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)
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 £563,000 (2024 - £1,251,000). As disclosed in note 3, the premium
received and fair value changes in respect of options written in the year was
£2,390,000 (2024 - £2,060,000). The largest position in derivative contracts
held during the year at any given time was £1,028,000 (2024 - £905,000). The
Company had no open positions in derivative contracts at 31 January 2025 (2024
- 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 Aberdeen 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 Investments 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 Aberdeen, 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 2025 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 2025 Years % £'000 £'000
Assets
Sterling - - - 2,329
Total assets - - - 2,329
Liabilities
Bank loans 0.08 3.93 (18,907) -
Loan Notes 20.87 3.99 (29,752) -
Total liabilities - - (48,659) -
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) -
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 2025. 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 2025 31 January 2024
Net Total Net Total
monetary currency monetary currency
Investments assets exposure Investments assets exposure
£'000 £'000 £'000 £'000 £'000 £'000
Euro 90,674 (16,222) 74,452 57,491 (11,208) 46,283
Swiss Francs - - - - 96 96
Danish Krone 9,126 72 9,198 9,009 109 9,118
Norwegian Krone - 11 11 13,067 11 13,078
Swedish Krona 11,375 - 11,375 22,478 - 22,478
Sterling 361,477 (27,985) 333,492 372,042 (17,280) 354,762
Total 472,652 (44,124) 428,528 474,087 (28,272) 445,815
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
2025 would have increased by £47,265,000 (2024 - increase of £47,409,000)
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 2025 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Bank loans 18,907 - - - - - 18,907
Loan Notes - - - - - 30,000 30,000
Interest cash flows on bank loans and loan notes 1,259 1,197 1,197 1,197 1,197 19,152 25,199
Cash flows on other creditors 866 - - - - - 866
21,032 1,197 1,197 1,197 1,197 49,152 74,972
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
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 2025 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 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 2025 and 31 January 2024 the amortised
cost of the Company's Loan Notes was £29,752,000 and £29,745,000
respectively. At 31 January 2025 and 31 January 2024 the Company's bank loans
amounted to £18,907,000 and £13,307,000 respectively. The facility is
committed until 8 August 2027.
(iii) 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 Aberdeen 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:
2025 2024
Balance Maximum Balance Maximum
Sheet exposure Sheet exposure
£'000 £'000 £'000 £'000
Non-current assets
Investments at fair value through profit or loss 472,652 - 474,087 -
Current assets
Cash and short term deposits 2,329 2,329 12,868 12,868
474,981 2,329 486,955 12,868
None of the Company's financial assets is past due or impaired.
Fair values of financial assets and financial liabilities. The fair value of
borrowings has been calculated at £42,021,000 as at 31 January 2025 (2024 -
£37,223,000) compared to an accounts value in the financial statements of
£48,659,000 (2024 - £43,052,000) (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.
20. 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 classifications:
Level 1: unadjusted quoted prices in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are
observable (ie developed using market data) for the asset or liability, either
directly or indirectly.
Level 3: inputs are unobservable (ie for which market data is unavailable) for
the asset or liability.
The financial assets and liabilities measured at fair value in the 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 January 2025 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 472,652 - - 472,652
Total 472,652 - - 472,652
Level 1 Level 2 Level 3 Total
As at 31 January 2024 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 474,087 - - 474,087
Total 474,087 - - 474,087
a) Quoted equities. The fair value of the Company's investments in quoted
equities has been determined by reference to their quoted bid prices at the
reporting date. Quoted equities included in Fair Value Level 1 are actively
traded on recognised stock exchanges.
21. Capital management policies and procedures
The Company's capital management objectives are:
- to ensure that the Company will be able to continue as a going concern; and
- to maximise the return to its equity shareholders through an appropriate
balance of equity capital and debt.
The capital of the Company consists of equity, comprising issued capital,
reserves and retained earnings.
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.
22. Related party transactions and transactions with the Manager
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.
Transactions with the Manager. The Company has an agreement with the Aberdeen
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.
During the year, the Company received £20,000 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 Aberdeen Group and provides oversight and
guidance for its charitable giving activities.
23. Subsequent events
Subsequent to the year end, the Company's NAV has decreased in common with
falls in equity markets globally. At the date of this Report the latest
published NAV per share was 290.21p as at the close of business on 11 April
2025, a decline of 8.6% compared to the NAV per share of 317.55p at the year
end.
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.
2025 2024
Revenue return per share a 13.80p 13.54p
Dividends per share b 14.20p 13.75p
Dividend cover a/b 0.97 0.98
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.
2025 2024
Borrowings (£'000) a 48,659 43,052
Cash (£'000) b 2,329 12,868
Amounts due to brokers (£'000) c 368 92
Amounts due from brokers (£'000) d - -
Shareholders' funds (£'000) e 428,528 445,815
Net gearing (a-b+c-d)/e 10.90% 6.79%
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.
2025 2024
NAV per Ordinary share (p) (see note 17) a 322.47p 308.98p
Share price (p) b 285.00p 276.00p
Discount (a-b)/b 11.62% 10.67%
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.
2025 2024
Investment management fees (£'000) 1,727 1,740
Administrative expenses (£'000) 898 1,073
Less: non-recurring charges (£'000) (104) (17)
Ongoing charges (£'000) 2,521 2,796
Average net assets (£'000) 446,732 448,512
Ongoing charges ratio (excluding look-through costs) 0.56% 0.62%
Look-through costs(A) - 0.02%
Ongoing charges ratio (including look-through costs) 0.56% 0.64%
(A) 2024 is 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.
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 2025 NAV Price
Opening at 1 February 2024 a 309.0p 276.0p
Closing at 31 January 2025 b 322.5p 285.0p
Price movements c=(b/a)-1 4.4% 3.3%
Dividend reinvestment(A) d 4.6% 5.1%
Total return c+d +9.0% +8.4%
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 reinvestment(A) d 4.7% 4.5%
Total return c+d +6.7% -1.60%
(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 InterContinental Edinburgh The
George, 19-21 George Street, Edinburgh EH2 2PB at 12 noon on Thursday 22 May
2025.
The Annual Financial Report Announcement is not the Company's statutory
accounts. The above results for the year ended 31 January 2025 are an
abridged version of the Company's full accounts, which have been approved and
audited with an unqualified report. The 2024 and 2025 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 2024 is derived
from the statutory accounts for the year ended 31 January 2024 which have been
delivered to the Registrar of Companies. The accounts for the year ended 31
January 2025 will be filed with the Registrar of Companies in due course.
The Annual Report and Accounts will be posted to shareholders 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
14 April 2025
* 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.
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