REG - Murray Intnl Trust - Annual Financial Report
03/03/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230303:nRSC7410Ra&default-theme=true
RNS Number : 7410R Murray International Trust PLC 03 March 2023
MURRAY INTERNATIONAL TRUST PLC
Legal Entity Identifier (LEI): 549300BP77JO5Y8LM553
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2022
Performance Highlights
Net asset value total return(AB) - 2022 Share price total return(AB) - 2022
+8.8% +20.6%
2021 +14.1% 2021 +7.2%
Reference Index total return(BC) - 2022 Premium/(discount) to net asset value(AD) - 2022
-7.3% +3.1%
2021 +20.0% 2021 -6.8%
Dividends per share(BE) - 2022 Revenue return per share(B) - 2022
56.0p 60.1p
2021 55.0p 2021 51.7p
Retail Price Index(B) - 2022 Ongoing charges ratio(AD)
+13.4% 0.52%
2021 7.5% 2021 0.59%
(A) Alternative Performance Measure
(B) For the year to 31 December.
(C) Reference Index is FTSE All World TR Index.
(D) As at 31 December.
(E) Dividends declared for the year to which they relate.
Financial Calendar
Payment dates of future quarterly dividends 5 May 2023
16 August 2023
17 November 2023
16 February 2024
Financial year end 31 December
Online Shareholder Presentation Monday 3 April 2023 at 11.00 a.m.
Annual General Meeting (Glasgow) Friday 21 April 2023 at 12:30 p.m.
Record date for the Share Split and disablement in CREST of the existing ISIN 6:00 p.m. on 21 April 2023
for settlement
Listing and Admission of the New Ordinary Shares expected to commence 8:00 a.m. on 24 April 2023
Expected date for crediting CREST accounts with New Ordinary Shares (where 24 April 2023
applicable)
Expected date by which certificates in respect of New Ordinary Shares are to By 5 May 2023
be dispatched to certificated shareholders
Dividends
Rate Ex-dividend date Record date Payment date
1st interim 12.0p 7 July 2022 8 July 2022 16 August 2022
2nd interim 12.0p 6 October 2022 7 October 2022 18 November 2022
3rd interim 12.0p 5 January 2023 6 January 2023 17 February 2023
Proposed final 20.0p 6 April 2023 11 April 2023 5 May 2023
Total dividends 56.0p
Financial Highlights
31 December 2022 31 December 2021 % change
Total assets(A) £1,816.6m £1,760.9m +3.2
Net assets £1,616.8m £1,561.1m +3.6
Market capitalisation £1,667.7m £1,455.0m +14.6
Net Asset Value per Ordinary share(B) 1,293.3p 1,240.3p +4.3
Share price per Ordinary share (mid market)(B) 1,334.0p 1,156.0p +15.4
Premium/(discount) to Net Asset Value per Ordinary share(C) 3.1% -6.8%
Net gearing(C) 11.2% 12.2%
Revenue return per share 60.1p 51.7p +16.3
Dividends per share(D) 56.0p 55.0p +1.8
Dividend cover (including proposed final dividend)(C) 1.07x 0.94x
Dividend yield(C) 4.2% 4.8%
Revenue reserves(E) £69.2m £63.0m
Ongoing charges ratio(C) 0.52% 0.59%
(A) The total assets less current liabilities as shown in the balance sheet
with the addition of prior charges.
(B) Capital values.
(C) Considered to be an Alternative Performance Measure
(D) The figure for dividends per share reflects the years to which their
declaration relates (see note 8) and assuming approval of the final dividend
of 20.0p (2021 - final dividend of 19.0p).
(E) The revenue reserve figure does not take account of the third interim and
final dividends amounting to £15,002,000 and £25,003,000 respectively (2021
- third interim dividend of £15,103,000 and final dividend of £23,813,000).
STRATEGIC REPORT
Chairman's Statement
Performance
I am pleased to report that, despite the well-reported and widespread
turbulence of global financial markets during 2022, the Company's net asset
value ("NAV") posted a total return for the year ended 31 December 2022 (i.e.
with net income reinvested) of +8.8%. The Company has no benchmark but this
performance compares favourably with a total return for the Reference Index,
the FSTE ALL World TR Index, of -7.3%. However, the Company's performance
could not match an abnormal rise over the same period of +13.4% for the UK
Retail Price Index (RPI). The share price posted a higher total return of
+20.6%. Increased income per share amounted to 60.1p for the year (2021:
51.7p), enabling an ongoing improvement in the level of dividend and a return
to a fully covered dividend.
It is also satisfying to note that the longer-term picture has improved.
Over three years, RPI has increased +23.5%, the Reference Index has returned
+19.0% and the Company's NAV total return stands at +25.3%.
The Manager's investment focus continues to emphasise both geographical and
sector diversification across a broad range of quality companies as we
continue to seek both long-term income and capital growth. Such
characteristics tend not to be represented in the more concentrated Reference
Index where a small number of growth stocks have tended to dominate in recent
years. For this reason, relative performance in any shorter time period can,
and does, deviate significantly on a comparative basis.
Dividends
Three interim dividends of 12.0p per share (2021: three interims of 12.0p)
have been declared during the year. Your Board is now recommending an
increased final dividend of 20.0p per Ordinary 25p share (2021: final dividend
of 19.0p). If approved at the Annual General Meeting, this final dividend will
be paid on 5 May 2023 to holders of Ordinary 25p shares on the register on 11
April 2023 (ex dividend 6 April 2023). If the final dividend is approved,
total Ordinary dividends for the year will amount to 56.0p (2021: 55.0p), an
increase over the previous year of 1.8%. The level of increase reflects the
fact that the Company already pays a competitively high dividend yield which
stood at 4.2% at year end. This represents the 18(th) year of dividend
increases for the Company, which remains an AIC 'Next Generation Dividend
Hero'.
As a long-established investment trust, the Company had the benefit of £69.2
million of distributable reserves on its balance sheet at 31 December 2022,
which have been accumulated by the Company over many years from retained
earnings. The payment of the final dividend, if approved, will result in the
movement of £5.2 million to the revenue reserves to strengthen them for the
future. The dividend cover at year end was 1.07x (2021: 0.94x). The
replenishment of reserves this year is in line with the policy that we have
highlighted to shareholders in previous years. The Board intends to maintain
the Company's progressive dividend policy. This means that, in some years,
revenue will be added to reserves while, in others, some revenue may be taken
from reserves to supplement revenue earned during that year, in order to pay
the annual dividend. Shareholders should not be surprised or concerned by
either outcome as, over time, the Company will aim to pay out what the
underlying portfolio earns in sterling terms.
Currency fluctuations may also have an impact on income and therefore the
level of dividend. The Board, however, is maintaining the present policy not
to hedge the sterling translation risk of revenue arising from non-UK assets.
Gearing
At the year end, total borrowings amounted to £200 million, representing net
gearing (calculated by dividing the total borrowings less cash by
shareholders' funds) of 11.2% (2021: 12.2%), all of which is drawn in
sterling. In May 2022, the Company utilised part of its £200m Loan Note
Shelf Facility, of which £50m had already been drawn down, through the
issuance of a £60 million 15 year Senior Unsecured Loan Note at an
all-in-rate of 2.83%. The proceeds of the issue were used to repay the
Company's £60 million fixed rate loan that matured at that time. Under the
terms of the Loan Note Agreement, dated May 2021, up to an additional £90
million will also be available for drawdown by the Company until May 2026.
The Board's current intention is to only use this additional amount to repay
the Company's existing debt as it falls due over the coming years.
The Company is now considering options to replace the next fixed rate loan
which amounts to £60m and is due to expire in May 2023. The Company will
update shareholders in due course.
Ongoing Charges Ratio ("OCR")
The Board remains focused on controlling costs and on delivering value to
shareholders. The OCR for 2022 has continued to trend downwards ending the
year on 0.52% (2021: 0.59%). The continued improvement reflects the benefit
of the reduction in management fee agreed with effect from 1 January 2022.
Online Presentation and Annual General Meeting ("AGM")
In 2022 the Board for the second time held an online shareholder presentation
in advance of the AGM. It was very well attended again and we hope that
shareholders found it informative. It also provided a useful opportunity for
the Board to receive feedback and views from shareholders and to answer your
questions. Given the success of the online event, the Board has decided to
repeat the exercise again in 2023. We will hold another interactive online
shareholder presentation at 11.00 a.m. on Monday 3 April 2023. This is in
addition to the in-person AGM. At the online presentation, shareholders will
receive updates from me, as Chairman, and the Investment Manager, and there
will be an interactive question and answer session. Full details on how to
join the online shareholder presentation can be found in my accompanying
letter and further information on how to register for the event can be found
at https://www.workcast.com/register?cpak=4678784364872362.
Following the online presentation, shareholders will still have almost three
weeks during which to submit their proxy votes prior to the AGM and I would
encourage all shareholders (whether or not they intend to attend the AGM in
person) to lodge their votes in advance in this manner.
The AGM has been convened for 12:30 p.m. on 21 April 2023, at the Glasgow
Royal Concert Hall, and will be followed by light refreshments and an
opportunity to meet the Board and the investment management team.
Ahead of the online presentation and AGM, I would encourage shareholders to
send in any questions that they may have for either forum to:
murray-intl@abrdn.com.
Management of Discount and Premium
At the AGM held in April 2022, shareholders renewed the annual authorities to
issue up to 10% of the Company's issued share capital for cash at a premium
and to buy back up to 14.99% of the issued share capital at a discount to the
prevailing NAV. During the year, 848,963 Ordinary shares were purchased for
Treasury, representing 0.7% of the issued share capital. The Board will be
seeking approval from shareholders to renew the buyback authority together
with the authority to allot new shares or sell shares from Treasury at the AGM
in 2023. As in previous years, new or Treasury shares will only be issued or
sold at a premium to NAV and shares will only be bought back at a discount to
NAV. Resolutions to this effect will be proposed at the AGM and the Directors
strongly encourage shareholders to support these proposals.
Your Board continues to believe that it is appropriate to seek to address
temporary imbalances of supply and demand for the Company's shares which might
otherwise result in a recurring material discount or premium. The Board
believes that this process is in all shareholders' interests as it seeks to
reduce volatility in the discount or premium to underlying NAV whilst also
making a small positive contribution to the NAV. At the latest practicable
date, the NAV (excluding income) per share was 1339.0p and the share price was
1339.0p, equating to a discount of 0.1% per Ordinary share compared to a
premium of 3.1% per Ordinary share at the year end.
Proposed Sub-division of Ordinary Shares
The market price of the Company's existing Ordinary shares ("existing Ordinary
shares") has increased in recent years to the point where the Ordinary shares
regularly trade at a market price of over 1300 pence. In order to assist
monthly savers, those who reinvest their dividends and those who are looking
to invest smaller amounts such as younger investors, the Directors believe
that it is appropriate to propose the sub-division of each of the existing
Ordinary shares of 25 pence each into five new Ordinary shares of 5 pence each
(the 'new Ordinary shares') (the "Sub-division"), thereby resulting in a lower
market price per Ordinary share. The Sub-division will not itself affect the
overall value of any shareholder's holding in the Company. The Directors
believe the Sub-division may also improve the liquidity in and marketability
of the Company's Ordinary shares, which will benefit all shareholders.
There will be no interruption to trading in the Ordinary shares on the London
Stock Exchange when the Sub-division takes place. The new Ordinary shares will
rank equally with each other and will carry the same rights and be subject to
the same restrictions (save as to nominal value) as the existing Ordinary
shares, including the same rights to participate in dividends paid by the
Company.
The Sub-division requires the approval of shareholders and, accordingly,
Resolution 12 in the Notice of AGM seeks this approval. The Sub-division is
conditional on the new Ordinary shares being admitted to the Official List of
the Financial Conduct Authority and to trading on the London Stock Exchange's
main market for listed securities. If Resolution 12 is passed, the
Sub-division will become effective on admission. Further details of the
proposed Sub-division are set out in the Directors' Report on pages 61 and 62
of the published Annual Report and financial statements for the year ended 31
December 2022.
Environmental, Social and Governance ("ESG") and Climate Change
The Company is not an ESG fund. However, as part of its responsible
stewardship of shareholders' assets, your Board continues to engage actively
with the Manager with regard to the ongoing assessment and further integration
of ESG factors into the Manager's investment process. The Board receives
regular assessments of the Company's holdings and portfolio, including a MSCI
fund ratings report which currently gives the Company's portfolio a rating of
'AA' (2021: 'AA'). Further information on the important work undertaken on ESG
and climate change by the Manager is provided in the 'Information About the
Manager' section on pages 113 to 115 of the published Annual Report for the
year ended 31 December 2022.
Without becoming prescriptive on specific investment criteria, the Board's
desire is for the Manager to continue to incrementally improve the portfolio's
ESG credentials and to seek to exploit opportunities arising from a net zero
economy, in so far as this is consistent with the Company's investment
objective. A key ingredient in building such a portfolio is meaningful,
regular and continuing dialogue between the Manager and investee companies,
with a view not only to understanding the risk exposure and evolving business
models better but also to influencing corporate behaviour.
Succession Planning
In June 2022, we welcomed Virginia Holmes to the Board as an independent
non-executive Director following the culmination of an extensive search
process using the services of an independent recruitment consultant. Virginia
is the former CEO of AXA Investment Managers Limited and has brought
significant senior asset management expertise and experience to the Board. She
is currently Chair of Trustees at the Unilever UK Pension Fund, Senior
Independent Director at both Syncona and European Opportunities Trust and
Chair of the Remuneration Committee at Intermediate Capital Group plc. She was
previously Chair of USS Investment Management and of BA Pension Trustees, a
founder Director of the Investor Forum, Non Executive Director of Standard
Life Investments plc and Chair of the Investment Committee at Alberta
Investment Management Corporation.
This year marks the completion of my period of tenure on the Board following
my appointment as a Director in 2014 and subsequent selection as Chairman in
2021, after the sad and untimely death of Simon Fraser. At the time of the
AGM, I will have been on the Board of the Company for almost 9 years and the
Board has asked me to remain as Chairman for a short while in order to
complete the Board's succession planning exercise.
Excellent progress has been made and we expect to announce two new
appointments to the Board over the coming months. I shall be standing down
from the Board on 31 December 2023 and I am delighted to report that Virginia
Holmes will take on the Chair role from that date. Following these changes,
the Board is expected to return to its previous complement of six and is
expected to be in compliance with the recommendations of the Parker Review on
diversity in the UK boardroom.
abrdn Name Changes
In line with the Manager's ongoing rebranding exercise, during the year our
Alternative Investment Fund Manager changed its name from Aberdeen Standard
Fund Managers Limited to abrdn Fund Managers Limited, our Investment Manager
became abrdn Investments Limited (from Aberdeen Asset Managers Limited) and
our Company Secretary changed its name from Aberdeen Asset Management PLC to
abrdn Holdings Limited. There is no intention to change the name of the
Company.
Outlook
Looking forward, deep-rooted macroeconomic difficulties are likely to continue
to impact the direction of financial markets. Seldom has the economic outlook
seemed so uncertain. Numerous heavily indebted nations and corporates are
confronted with significantly higher borrowing costs that will ultimately
constrain future growth. The task of controlling inflation may exert
significant damage on already fragile economies, suggesting that policymakers
negotiating the treacherous tightrope between recovery and recession have
little room for error. Whilst prices of goods and services should moderate as
supply / demand dynamics normalise, wage inflation may prove more problematic.
Meanwhile, businesses must quickly adapt to the unfolding backdrop of higher
input, labour and capital costs occurring simultaneously with softening
consumer demand and changes to global supply chains.
From a portfolio perspective, the Company's unconstrained global mandate
continues to enable great investment flexibility under constantly changing
circumstances. The past twelve months bears testimony to that. The
re-emergence of inflation that unleashed a raft of negative surprises on so
many unprepared companies in the West is not so unfamiliar elsewhere in the
world. Inevitably attractive investment opportunities will emerge as asset
prices readjust. Identifying companies that can exert some degree of pricing
power, have favourable industry dynamics and seasoned management familiar with
evolving realities will be key. Strict adherence to tried and trusted
investment principles as always gives a degree of comfort during periods of
such investment flux. The Manager believes strongly in its disciplined
investment process as a means by which to identify appropriate opportunities
to deliver the capital and income strategies of our mandate. Current portfolio
positioning reflects this, with high conviction, diversified exposures
designed to deliver the Company's long-term objectives.
Finally, as I wrote last year, your views matter. Your Board greatly values
shareholder comments and I encourage you to email me with your views at:
DavidHardie.Chairman@abrdn.com.
David Hardie
Chairman
2 March 2023
Investment Manager's Review
Background
Thrift and abstinence are rarely recognised as advantageous attributes of
contemporary investment management. In the current dynamic, digital world of
conspicuous consumption and instant gratification, such pragmatic
peculiarities regularly attract sanctimonious scorn from those at the vanguard
of innovation and change. Incompatible with justifying the unjustifiable, such
'constraining characteristics' invariably attract maximum vitriol during
periods of excessive exuberance when prevailing valuations reach unwarranted
levels. Irrational expectations simply cannot entertain the reality of common
sense when the next new investment paradigm is being unequivocally venerated.
Yet thrift and abstinence feature prominently in long-term sustainable wealth
creation. Perhaps even more so in wealth preservation! The sobering reality of
the past twelve months simply reinforced that yet again "it's not different
this time". Economics, commerce, business, social interaction and lifestyles
constantly change and adapt but, when reflected in valuations of equities and
bonds, what consistently matters most are ultimately profits, cash flows and
interest rates. Unfolding financial events throughout 2022 looked no further
than the past for vindication. Anyone remotely familiar with previous
periods of inflation-induced policy tightening understands the consequences
such actions have on prevailing market insanities. For seasoned investors well
versed in macroeconomic history, the song remained very much the same.
With prices rising at the fastest pace in forty years, inflationary pressures
were already well established long before the Russian invasion of Ukraine in
late February 2022. Escalating conflict between two key global commodity
producers undoubtably poured fresh fuel on the fire of soaring food and energy
prices, but the Developed World's mutating inflation problem harboured deeper
historical heritage. Twenty years of Central Bank-orchestrated financial
repression was about to be exposed as the untenable sham it always was. For
centuries, printing money bequeaths inflation. Two decades spent doing exactly
that, appeasing financial markets, inflating asset prices and abdicating
responsibility for managing long-term price stability defines the incompetent
legacy of recent Central Bank custodians. Throughout the period, excessive
unconventional monetary policy postponed painful adjustment, providing
superficial respite from harsh realities. But, having effectively monetised
each and every financial crisis of the current century, huge unsustainable
debt legacies were about to become increasingly scrutinised through the lens
of rising bond yields. With spiralling debt-servicing costs inherent in higher
interest rate and inflationary conditions, spending without restraint comes
with serious economic and financial consequences. As the penny dropped, the
retrospective wisdom of policymakers and politicians alike proved deafening.
Experiencing an epiphany of belated inflation realisation, consensus opinion
abruptly disposed of 'temporary' and 'transitory' from the popular lexicon.
Hitherto transient inflation was allegedly now in danger of becoming
entrenched, so drastic action ensued. As policymakers embarked on the most
brutal series of interest-rate hikes for fifty years, it was hardly surprising
significant wealth destruction occurred. Both fixed income and equity markets
endured a torrid twelve months. Without their buyers of last resort
(Governments), bond markets plunged. Investors, fearful of nominal fixed
returns being eroded in an inflationary world, exited at seemingly any price.
Beyond bond markets, the myth of non-profitable growth companies constantly
performing in a rising yield environment crumbled in the face of such
adversity. Having boomed for over a decade, speculative asset classes such as
unlisted securities, private equity and cash-burning business models of the
so-called 'new economy' were confronted with the new reality. The price of
money was going up. For those followers of fashion, to whom present valuation
is ignored in favour of future growth potential, the crushing weight of
history was closing in. When liquidity contracts, such unproven investment
requires strong stomachs. We are yet to find out just how strong.
Refusal to recognise macroeconomic realities and Covid induced distortions
remained noticeably absent from progressive policies being pursed elsewhere in
the world. Here fiscal and monetary restraint generally prevailed. Indeed the
stark contrast between reactive interest rate rises throughout 2022 in the
debt dependent Developed World and proactive monetary tightening enacted
twelve months previously in 2021 across the Developing World couldn't have
been more pronounced. With local interest rates free to price risk
accordingly, pre-emptive policy actions in Asia and Latin America prevented
undue inflationary concerns, providing a platform for imminent monetary
easing. Out-with the arguably over-valued technology sectors in China and
Taiwan, most Emerging Markets trod water over the period. International risk
appetite remained unsurprisingly paralysed given events unfolding elsewhere,
but subdued sentiment can rapidly change. China's year-end U turn on Covid
policy undoubtably enhances prospects for the country and region, should
consumer demand accelerate and domestic property markets stabilise. Unburdened
by punitive debt obligations and free from unrealistic expectations, Asia and
Latin America emerged relatively unscathed from the financial havoc unfolding
elsewhere.
Nurturing high hopes of post Covid normalisation, the year began with investor
optimism over promises, progress and prosperity. By period end, conventional
wisdom had been battered, bruised and burned by the all too familiar
investment bogeymen of inflation, rates and recession. Having been brought
back to economic and financial sobriety, investor focus once again
recalibrated from tomorrow's possibilities to today's profits. Given evolving
global macroeconomic issues and rising geo-political uncertainty, such
pragmatism is welcomed.
Portfolio Activity
Portfolio turnover was 11% of gross assets relative to 12% in 2021 and
reflects a continuing decline to more normal levels over the twelve month
period. Although market volatility occasionally spiked higher, most notably
during the Russian invasion of Ukraine and the UK's politically induced
meltdown of late September, periods of extended price distortions seldom
prevailed. That said, the former presented opportunities to increase exposure
to European equities, the latter to reflect on the beauty of the Trust's
unconstrained, globally diversified mandate!
Exposure to Emerging Market Bonds continued to be reduced, thereby increasing
overall equity exposure by year end to 103.1% compared to 102.5% at financial
year-end 2021.
North American exposure decreased by the greatest amount on selective
divestment of three established positions which had performed extremely well
and were deemed to be fully valued. Consequently Nutrien, Pepsico and
Schlumberger were sold outright, with a new purchase of leading global
pharmaceutical company Merck slightly offsetting overall regional reduction.
Latin American exposure once again witnessed significant profit taking purely
for reasons of valuation and strong performance. The reduction of Chilean
lithium producer Sociedad Quimica (SQM) and Mexican airport operator Grupo
Asur echoed similar capital re-allocation trades made last year, but large
residual positions remain reflecting positive, long-term prospects for both
companies.
Overall Asian exposure slightly declined on a net basis, with outright sales
of Castrol India and Indocement. Profit taking in Taiwan Semiconductor and
GlobalWafers also raised cash which was partially offset by additional
investment in existing holdings of Hon Hai Precision and Samsung Electronics
plus a newly established position in Woodside Energy in Australia.
European exposure increased significantly with the lion's share of re-cycled
profits invested in the region. New positions were established in Dutch
technology company BE Semiconductor, in leading global industrial conglomerate
Siemens of Germany and in worldwide food processing company, Danone in France.
Various existing holdings, such as Nordea, Zurich Insurance and Enel were
added to during periods of weakness. Over the period there were no
transactions within UK equities. Two bond holdings were fully divested, namely
Mexican communications company America Movil and the shorter-dated Indian
corporate ICICI Bank, taking the total number of equity and bond holdings at
year end to 51 and 18 respectively.
From an overall investment perspective, the emphasis continues to favour
diversified asset exposures in companies deemed beneficiaries of the evolving
backdrop, maintaining a "barbell" strategy of owning both growth and cyclical
stocks. Structurally higher inflation is supportive of companies owning real
assets and those possessing pricing power, whilst selective growth companies
should benefit from accelerating trends in industrial automation,
semiconductor miniaturisation and digital communications. The greatest
potential for positive cyclical momentum upside surprises can still be
identified in Asia and other countries where substantial pent up demand from
prolonged Covid effects still exists. Corporate earnings may be under
recessionary threat elsewhere, but scope exists for upwards earnings and
dividends revisions in Latin America and Asia. In such regions, sectors and
businesses the portfolio remains meaningfully invested.
Performance
The NAV total return for the year to 31 December 2022 with net dividends
reinvested was +8.8%. This compared favourably with the Reference Index (FTSE
All World) total return of -7.3%. The top five and bottom five stock
contributors are detailed below:
Top Five Stock Contributors %* Bottom Five Stock Contributors %*
SQM 1.8 GlobalWafers -1.8
Grupo Asur 1.7 Taiwan Semiconductor -0.5
AbbVie 1.0 Samsung Electronic -0.4
Schlumberger 0.9 Telenor -0.2
Vale 0.9 CME Group -0.2
* % relates to the percentage contribution to return relative to the Reference
Index (FTSE All World TR Index)
Over the full financial year, the high single-digit total return on gross
assets was welcomed although, in real terms the exceptionally high 13.4% rate
of UK Retail Price Inflation proved a tough hurdle to match. Overall global
equity market weakness was not reflected in the total gross asset return
primarily due to broad portfolio diversification and strong defensive stock
performance. In capital terms, Latin America delivered by far the strongest
regional index returns in what proved to be a very tough year for capital
growth. This was very much reflected in portfolio returns with a +38%
contribution to overall performance from the Latin American region. Although
the UK equity market proved to be the only other 'region' to deliver a
positive return over the twelve month period, the portfolio's regional
exposures faired much better with positive contributions recorded from five of
the six regional asset areas. Strong stock selection prevailed in most areas,
with only Asian holdings marginally declining in absolute terms. Sterling
weakness against most portfolio currencies was modestly supportive, most
noticeably against the US Dollar. European markets suffered the negative
ripple effect consequences of war in Ukraine and Russian energy dependency,
whilst Asia also declined in Sterling terms as China's zero Covid policy kept
most investors cautious on equity markets. North America witnessed its weakest
market returns for over a decade, with the Technology heavy Nasdaq declining
-25.0% in Sterling terms. A positive North American portfolio return of +13.9%
was achieved through high quality, defensive stock selection. Despite
significant reductions to Emerging Market Bond exposures since the outbreak of
Covid, portfolio returns in Sterling terms also continued to be positive. In
what proved a particularly, problematic period for over-extended markets and
growth stocks, it was gratifying to record robust individual stock performance
across a variety of sectors and industries. Companies operating in Basic
Materials, Energy, Healthcare, Consumer Staples, Real Estate and Financials
all contributed to overall positive returns, once again emphasising the
importance of the diversified, quality-focused strategy.
Predicting dividend income over the financial year proved slightly more
straight-forward than in the preceding two Covid-infected financial periods.
As supply-side interruptions waned, some semblance of corporate normality was
restored, albeit with business conditions constantly being impacted by higher
wage and input costs plus growing fears over recession. Positive cash
flows became an increasingly precious commodity, particularly when faced by
equity markets beginning to be squeezed by tighter liquidity. Currency
movements against Sterling experienced relatively normal volatility within an
historical context (outwith the farcical forty-four days of the Truss
Premiership), with the usual unpredictability of magnitude and direction.
Sterling weakness against practically all portfolio currencies over the
period proved modestly positive in translation of dividend income accrued
from the portfolio's diversified global holdings. Dividend increases from
portfolio companies generally exceeded conservative estimates, with 80%
falling into this category. Whilst notoriously difficult to predict, sectors
such as Basic Materials and Energy experienced familiar fluctuating income
expectations, yet over the financial period the net effect from positive and
negative "surprises" was negligible. Overall gross income accrued increased
+12.8% year-on-year, with earnings per share growth of +16.3% reflecting the
positive impact of share buybacks during the period.
Attribution Analysis
The attribution analysis below details the various influences on portfolio
performance. In summary, of the 1650 basis points (before expenses) of
performance above the Reference Index, asset allocation added 410 basis points
and stock selection contributed 1240 basis points. Structural effects,
relating to the fixed income portfolio and gearing net of borrowing costs,
added 40 basis points of relative performance.
Company Reference index(A) Contribution from:
Asset Stock
Weight Return Weight Return Allocation Selection Total
% % % % % % %
UK 7.7 36.6 3.8 5.3 -0.1 0.9 0.8
Europe ex UK 25.6 5.2 13.0 -9.6 0.1 3.4 3.5
North America 28.2 13.9 61.4 -8.8 0.5 6.7 7.2
Japan - - 6.3 -4.8 -0.2 - -0.2
Asia Pacific ex Japan 24.6 -5.1 12.8 -5.9 0.4 0.2 0.6
Other International 13.9 18.0 2.7 30.4 3.4 1.2 4.6
Gross equity portfolio return 100.0 9.2 100.0 -7.3 4.1 12.4 16.5
Fixed income 0.6
Gross portfolio return 9.8
Management fees and admin expenses. -0.6
Tax charge -0.6
Finance costs -0.2
Technical differences 0.4
Total return 8.8 -7.3
(A) Reference Index - FTSE All World TR Index
Notes to Performance Analysis
Asset Allocation effect - measures the impact of over or underweighting each
asset category, relative to the benchmark weights.
Stock Selection effect - measures the effect of security selection within each
category.
Technical differences - the impact of different return calculation methods
used for NAV and portfolio performance
Source: abrdn & BNP Paribas Securities Services Limited. Figures may
appear not to add up due to rounding.
Global Review
The deeply distorted business backdrop that greeted the onset of 2022
concealed the chasm of macroeconomic honesty and integrity that exists
throughout the world. The transparent monetary orthodoxy prevailing in
Developing economies versus the opaque policy unorthodoxy complicit with
persistent profligacy in the so-called Developed World. Unrepentantly pursuing
interest-rate policy inertia to cover up the cracks of unsustainable debt
dependency, unjustified prosperity entitlement and widespread structural
demise, a rude awakening belatedly descended on policymakers in the Developed
World. Inflation was alive, well and most definitely unwelcome to Wall Street
and those with their heads firmly in the sand.
What transpired in the United States exemplified yet again the financial pain
that accompanies disrobing of delusions. The largest annual upward move in the
US Federal Reserve's benchmark lending rate since 1973 caused US mortgage
rates to soar. Widespread bond market weakness proved an inevitable
consequence. Both domestic equity and bond markets sharply declined, the first
such 'in tandem' occurrence for fifty years. Sanctuaries of capital
preservation were unsurprisingly few and far between. The plunge caused
significant value destruction to technology titans of the past decade, the new
economy stocks of the Covid lockdowns, cryptocurrencies and numerous other
unproven business concepts that so often characterise the final stages of a
speculative bull market. Yet most events that defined 2022 in the United
States came straight out of a macro-economic textbook! Unfortunately for
bruised and battered investors the logical progression from here makes
uncomfortable reading. Higher bond yields, a collapse in money supply,
tightening affordability in the housing market and contracting manufacturing
all point to at best recession, at worst, stagflation. Longer-term, financial
markets still have many problems to digest. Corporate earnings expectations
remain totally detached from reality; asset quality is likely to deteriorate
as economic growth contracts; poor risk management, over-optimism and
incompetence has led to the usual gross mis-allocation of capital into
non-profitable, liquidity dependent businesses unlikely to survive in a higher
interest rate environment. Irresponsible Federal Reserve policy directed at
managing asset prices rather than price stability has created an enormous debt
legacy needing to be addressed; in doing so, upward pressure on bond yields
may constrain growth and prosperity beyond the confines of any normal business
cycle. With US equity and bond markets increasingly expecting policymakers to
once again capitulate and do "whatever it takes" to appease short-term
interests, great scope for disappointment exists in the medium-term outlook
for US financial assets.
The UK and European financial markets faced similar issues related to
belatedly recognising resurgent inflation and its accompanying consequences.
Desperately detached from economic realities, The Bank of England and
European Central Bank proved powerless to maintain their veneer of
credibility. Frantically hiking interest rates retrospectively in response to
spiralling prices fooled no one - bond markets sold off sharply and equities
struggled to preserve capital. Whilst the narrow UK FTSE 100 ended in positive
territory, broader indices of UK companies endured double-digit declines. The
perceived "defensive" nature of the UK equity market primarily equates to
significant index presence of Consumer Staples and Healthcare companies and
their dividend paying culture. Yet globally such opportunities can
increasingly be found elsewhere, often with higher growth characteristics and
superior dividend potential. Historically the UK's energy and commodity
sectors that remain over-represented in the market have tended not to provide
robust downside protection when recession strikes. Consequently the current
low portfolio weighting to the UK is unlikely to change. Perhaps somewhat
paradoxically, given the ongoing war in Ukraine and evidence of increasingly
strained EU political dynamics, the investment outlook for portfolio holdings
in Europe is arguably more transparent. European Industrials such as Epiroc,
Atlas Copco, Siemens and BE Semiconductor endured an extremely tough 2022.
Constant downward earnings revisions, contracting equity price-earnings
multiples and cautious trading statements prevailed throughout. But, at
current valuations, future risk-reward prospects are undoubtably compelling,
especially with sentiment being ubiquitously negative. Shunned by global
investors in a world until recently infatuated with US Technology stocks,
Europe offers intriguing opportunities against the current backdrop of higher
interest rates and uncertainty.
Unburdened by systemic vulnerability and unfettered by secular, short-term
interests, policy directives in the Developing World remained appropriate and
prudent. All too familiar with how high inflation disproportionally decimates
the purchasing power of low-income earners, policymakers throughout Asia and
Latin America had anticipated the majority of 2022 developments. Significant
proactive interest rate hikes in 2021 prepared the economic landscape for
escalating inflationary pressures witnessed in 2022, consequently such
foresight had prices controlled and declining by period end. Having anchored
expectations, bond markets remained sanguine over future prospects and equity
markets weathered storms raging elsewhere. The one noticeable exception was
China. Strict adherence to a zero Covid policy constrained Chinese economic
growth for most of the period. Geo-political tensions with the United States
also materially escalated at times and for the most part international
investors divested Chinese assets amidst ongoing uncertainties. Yet by period
end the outlook had materially changed. China's abrupt U turn on its zero
Covid policy in December arguably enhances the outlook significantly,
presenting numerous potential growth benefits for the country, region and
beyond. Amongst potential beneficiaries are global commodity markets,
Taiwanese manufacturers of semiconductors and electronic components, not to
mention exporters of consumer goods desired by China's rapidly expanding
middle income population. Whilst improvement is unlikely to be instantaneous,
the direction of travel looks encouraging.
For Latin America, where significant capital and income returns continue to
contribute greatly to portfolio performance, the outlook remains as
interesting as ever. The region delivered the best performance in Sterling
terms in 2022 of any global geographical region, the ninth time this has
happened in the past twenty years. Business prospects continue to flourish,
whilst investment opportunities prosper often at discounted valuations given
Mexico, Brazil and Chile unjustly remain ignored in an increasingly
passive-investment obsessed world. With sustainable declining inflation in
sight, let the monetary easing begin.
Summary of Investment Changes During the Year
Valuation Appreciation/ Valuation
31 December 2021 (depreciation) Transactions 31 December 2022
£'000 % £'000 £'000 £'000 %
Equities
UK 85,872 5.0 14,533 (31,634) 68,771 3.9
Europe ex UK 304,887 17.5 (1,512) 144,960 448,335 25.1
North America 496,896 28.6 44,285 (72,697) 468,484 26.2
Asia Pacific ex Japan 503,319 28.9 (41,459) (17,557) 444,303 24.9
Latin America 184,065 10.6 57,512 (22,777) 218,800 12.3
Africa 15,794 0.9 (3,355) - 12,439 0.7
1,590,833 91.5 70,004 295 1,661,132 93.1
Preference shares
UK 7,637 0.4 (1,368) - 6,269 0.3
7,637 0.4 (1,368) - 6,269 0.3
Bonds
Europe ex UK 6,023 0.4 737 11 6,71 0.4
Asia Pacific ex Japan 52,526 3.0 (1,173) (4,274) 47,079 2.6
Latin America 66,703 3.8 (1,806) (17,107) 47,790 2.7
Africa 15,590 0.9 7 182 15,779 0.9
140,842 8.1 (2,235) (21,188) 117,419 6.6
Total Investments 1,739,312 100.0 66,401 (20,893) 1,784,820 100.0
Outlook
For disciples of pragmatic financial fundamentalism, forecasting future
prospects remain anchored in well-trodden historical paths. Whilst innovation,
invention and change will always dictate improvement, advancement and growth,
the investment valuations ascribed along the way invariably reflect the
bi-polar extremes of human emotions. Therein lies the most toxic cocktail
within investment management. When feelings and finance entwine, poor
judgement tends to prevail. Endemic to each and every mania, panic and
financial crash throughout the course of history is irrational valuation based
ultimately on emotion. Having recently endured yet another prolonged period of
such eccentric absurdity, some financial markets remain bloated with
unsustainable excess. Through the unprejudiced prism of the past it is
possible to assess some possible prospects for the future
In simplistic terms, what to avoid, and what to assert? Assuming inflation,
recession and interest rates remain as influential as ever, some observations
are worth emphasising. Global commodity prices are as unpredictable as they
are volatile, so projecting peaks and troughs is futile. Such "cyclical"
inflation comes and goes, but structural inflation found in wages, rents and
index-linked government spending seldom subsides painlessly. Increasingly
vulnerable to the latter, the debt-laden Developed World is perilously close
to being deeply infected by such intransigence. Stronger inflation-fighting
credentials by Central Banks in the Developing World suggest less ambiguity
ahead. Similarly, sharply higher interest rates carry acutely divergent
consequences for respective economies. Where there are deficits, debt and
distrust, the odds of avoiding recession are slim. Paralysis of purchasing
power and collapsing consumer confidence see to that. Where savings culture
prevails and favourable demographics fuel growth, temporary tighter monetary
policies prove less disruptive. Focusing on businesses in countries with such
characteristics remains forefront to the Company's investment strategy.
Finally, the question of legacy must be addressed in any projected outlook. It
would be naïve to ignore the past when considering the future. From the vast
library of financial mistakes made throughout history, certain trends are
clearly apparent. Acute equity market shocks tend to repair quickly when only
one specific sector was excessively valued. Previous Energy and Consumer
Staples-led dislocations are examples of this. Considerably more time is
required to emerge from financial market crises related to systemic failures
such as Asia in the late 1990s and the banking failures of 2007/08. Most
ominously, recession-linked asset bubbles fuelled by artificially manipulated
interest rates and fixed income markets require long, slow and painful
readjustment to cleanse the system of financial excess. Current evidence
suggests the Developed World is descending towards the latter. With global
Central Banks increasingly devoid of policy options and tarnished by
diminishing credibility, the outlook has rarely been so opaque. The Company's
high conviction investment strategy will remain focused on avoiding the
pitfalls of previous valuation excesses and emphasising unaffected
opportunities where realistic growth and income prevails.
Bruce Stout
Senior Investment Director
Martin Connaghan, Investment Director
Samantha Fitzpatrick, Investment Director
abrdn Investments Limited
2 March 2023
The Manager's Investment Process Including ESG
The Company's Alternative Investment Fund Manager is abrdn Fund Managers
Limited ("aFML") which is authorised and regulated by the Financial Conduct
Authority. Day-to-day management of the portfolio is delegated to abrdn
Investments Limited ("aIL"). aIL and aFML are collectively referred to as the
"Investment Manager" or the "Manager". The ultimate parent of aIL and aFML
is abrdn plc.
The Manager believes that deep fundamental research into companies, mediated
through team debate and a rigorous stock selection process, is the key to
unlocking investment insight and driving investment returns for clients such
as the Company. The Manager utilises a truly bottom-up, fundamental
stock-picking approach, where sector, regional and country allocations are a
consequence of the bottom-up stock selection decisions, constrained by
appropriate risk controls. The Manager operates a comprehensive risk system
with tools that provide better insights for its individual fund managers and a
more complete understanding of all risk exposures in the portfolios to ensure
that the managers only take the sort of risk that the Manager is comfortable
with and can back with insight from extensive first hand research.
The Manager takes a long-term quality approach by focusing on companies that
the research analysts identify as high quality. This involves assessing each
company on five key factors, namely the durability of the business model and
moat, the attractiveness of the industry, the strength of the financials, the
capability of management, and assessment of the company's ESG credentials. In
the assessment of what is an appropriate valuation for a company, the Manager
focuses primarily on earnings yields, free cashflow yields and dividend
yields, set against expected long-term growth rates for those elements. The
Manager targets a double digit implied annual return.
The Investment Process, Philosophy and Style
Idea Generation
The Manager's scale affords coverage of a wide and dynamic universe, with
in-depth, locally-sourced insights with over 1,000 investment professionals
across the world supporting fundamental stock research and insight generation.
Research coverage is organised by region and on a sector basis, with analysts
developing deep expertise which enables them to identify investment
opportunities through fundamental knowledge at both the sector and stock
level. The Manager has excellent access to the companies which it researches,
through structured meetings and regular conversations with key decision-makers
and conducts several thousand company meetings per year, in addition to the
many ESG engagements undertaken with companies. The Manager conducts over
6,000 company meetings each year and maintains a global coverage list of over
2,000 stocks.
Research
The Manager has developed a proprietary research platform used by all its
equity, credit and ESG teams, giving instant access to research globally. The
research is focused on four key areas:
- Foundations - the Manager analyses how the company makes money,
the attractiveness and characteristics of its industry, and the strength and
sustainability of the economic 'moat'. This includes a thorough evaluation of
the ESG risks and opportunities of the company. Face-to-face meetings anchor
how the Manager understands and challenges the key elements of a company's
fundamentals: the evolution and growth of the business; the sustainable
competitive advantage; management's track record of execution and managing
risk; past treatment of minority shareholders; the balance sheet and
financials; and ESG risks and opportunities of the company in question.
- Dynamics - the shorter- and longer-term dynamics of the
business that will be the key determinants of its corporate value over time.
Specifically the Manager looks for changes in the factors driving the market
price of a stock, identifying the drivers that the wider market may not be
pricing in. Understanding the dynamics behind these drivers allows the Manager
to focus on the factors that will drive shareholder returns from a particular
stock.
- Financials and Valuation - the Manager examines the strengths
and weaknesses of the company's financials including a thorough analysis of
the balance sheet, cash flow and accounting, the market's perception of the
company's future prospects and value, and its own forecasts of future
financials and how the stock should be priced. This includes significant focus
on the dividend paying capability of each business, the potential for dividend
growth and the sustainability of the payout.
- Investment insight and risk - the Manager articulates its
investment thesis, explaining how it views a stock differently from the market
consensus and how the Manager expects to crystallise value from the holding
over time.
Integrated ESG and Climate Change Analysis
Whilst ESG factors are not the over-riding criteria in relation to the
investment decisions taken by the Manager for the Company, significant
attention is given to ESG and climate related factors throughout the Manager's
investment process. The Manager gives particular weight to ESG factors when
they are material to the investment case being made for an investee company.
In the Manager's view, companies that successfully manage climate change risks
will perform better in the long term. It is important that the Manager
assesses the financial implications of material climate change risks across
all asset classes, including real assets, to make portfolios more resilient to
climate risk.
The detailed analysis of the Manager's embedded ESG process is contained on
pages 113 to 115 of the published Annual Report for the year ended 31 December
2022.
Idea Capture
To ensure that the Manager captures the best ideas from the global research
platform, the Global Equity Team is fully integrated into the regional
research process. The Team mirrors the sector specialisms across the various
regional desks and they contribute to, and participate in, the investment
debate of the stocks in their sector. Being fully integrated allows the Team
to be present at all stages along the investment journey and build their own
conviction into the underlying investment cases.
The Team attends company meetings as well as the regional teams' sector review
meetings, facilitating deep knowledge of the companies and the degree of
conviction underpinning the investment insights. This allows the Team to
capture effectively the highest conviction ideas and the most important news
flow across the research platform.
Peer Review
Having a common investment language facilitates effective communication and
comparison of investment ideas through peer review which is a critical part of
the process. All investment ideas are subject to rigorous peer review, both at
regular meetings and on an ad hoc basis - and all team members debate stocks,
meet companies from all industries, and given their dual fund manager /
analyst role are incentivised to fully participate in the entire process.
Portfolio Construction/Risk Controls
Portfolios are built from the bottom up, prioritising high conviction stock
ideas in a risk aware framework, giving clients access to the best investment
ideas. Portfolio risk budgets are derived from clients' investment
objectives and required outcomes. Peer review is an essential component of the
construction process with dedicated portfolio construction pods (smaller
dedicated groups of senior team members that have clear accountability for the
strategy) debating stock holdings, portfolio structure and risk profiles.
As an active equity investor the Manager has adopted a principled portfolio
construction process which actively takes appropriate and intentional risk to
drive return. The largest component of the active risk will be stock-specific
risk, along with appropriate levels of diversification. Risk systems monitor
and analyse risk exposures across multiple perspectives breaking down the risk
within the portfolio by industry and country factors, by currency and macro
factors, and by other fundamental factors (quality, momentum, etc.).
Consideration of risk starts at the stock level with the rigorous company
research helping the Manager to avoid stock specific errors. The Manager
ensures that any sector or country risk is appropriately sized and managed
relative to the overall objectives of the Company.
Operational Risk and Independent Governance Oversight
Risk management is an integral part of the Manager's management process and
portfolios are formally reviewed on a regular basis with the Manager's Global
Head of Equities, the Portfolio Managers, the Manager's Investment Governance
& Oversight Team (IGO) and members of the Manager's Investment Risk Team.
This third party oversight both monitors portfolio risk and also oversees
operational risk to ensure client objectives are met.
Delivering the Investment Policy
Day-to-day management of the Company's assets has been delegated to the
Manager. The Manager invests in a diversified range of international companies
and securities in accordance with the investment objective.
The team is led by Bruce Stout with dedicated support from Martin Connaghan
and Samantha Fitzpatrick. The management team utilises a "Global Coverage
List" which is constructed by each of the specialist country management teams.
This list contains all buy (and hold) recommendations for each management
team, which are then used by the portfolio manager as the Company's investment
universe. From this pool of companies the Manager looks to construct a focused
portfolio of 40 - 60 companies, selecting those companies that have the most
attractive quality and valuation characteristics, offering the best expected
risk adjusted returns, within a diversified portfolio. Position sizes
typically range from 1% to 5% of the portfolio and are considered on an
absolute, rather than benchmark relative basis. Stock selection is the major
source of added value over time.
Top-down investment factors are secondary in the Manager's portfolio
construction, with stock diversification rather than formal controls guiding
stock and sector weights. Market capitalisation is not a primary concern.
In addition to equity exposures, the investment mandate provides the
flexibility to invest in fixed income securities. The process of identifying,
selecting and monitoring both sovereign and corporate bonds follows exactly
the same structure and methodology as that for equity investment, fully
utilising the global investment resources of the Manager. As in the case of
equity exposure, the total amount, geographical preference, sector bias and
specific securities will ultimately depend upon relative valuation and future
prospects.
At the year end, the Company's portfolio consisted of 51 equity and 18 bond
holdings. The Manager is authorised by the Board to hold between 45 and 150
holdings in the portfolio.
A comprehensive analysis of the Company's portfolio is disclosed on pages 41
to 43 of the published Annual Report for the year ended 31 December 2022
including a description of the ten largest investments, the portfolio of
investments by value and a sector and geographical analysis of investments.
The portfolio attribution analysis is contained in the Manager's Review.
abrdn Investments Limited
2 March 2023
Key Performance Indicators (KPIs)
The Board uses a number of financial and operating performance measures to
assess the Company's success in achieving its investment objective and to
determine the progress of the Company in pursuing its investment policy. The
main KPIs identified by the Board in relation to the Company which are
considered at each Board meeting are as follows:
KPI Description
Dividend Absolute Growth: The Board's aim is to seek to increase the Company's revenues
over time in order to maintain an above average dividend yield. Dividends paid
over the past 10 years are set out on page 26 with a graph showing dividend
growth against inflation on page 27 of the published Annual Report for the
year ended 31 December 2022.
Relative Yield: The Board also measures NAV total return performance against
the Reference Index and performance relative to investment trusts within the
Company's peer group over a range of time periods, taking into consideration
the differing investment policies and objectives employed by those companies.
NAV Performance Absolute Performance: The Board considers the Company's NAV total return
figures to be the best indicators of performance over time and these are
therefore the main indicators of performance used by the Board.
Relative Performance: The Board also measures NAV total return performance
against the Reference Index and performance relative to investment trusts
within the Company's peer group over a range of time periods, taking into
consideration the differing investment policies and objectives employed by
those companies.
A graph showing the NAV and Reference Index total returns is shown on page 27
of the published Annual Report for the year ended 31 December 2022.
Share Price Performance Absolute Performance: The Board monitors the share price absolute return.
Relative Performance: The Board also monitors the price at which the Company's
shares trade relative to the Reference Index on a total return basis over time
A graph showing absolute, relative and share price performance is shown on
page 27 of the published Annual Report for the year ended 31 December 2022 and
further commentary on the performance of the Company is contained in the
Chairman's Statement and Investment Manager's Review.
Share Price Discount/ The discount/premium relative to the NAV per share represented by the share
price is closely monitored by the Board. The objective is to avoid large
Premium to NAV fluctuations in the discount/premium by the use of share buybacks and the
issuance of new shares or the sale of Treasury shares, subject to market
conditions. A graph showing the share price premium/(discount) relative to
the NAV is shown on page 27 of the published Annual Report for the year ended
31 December 2022.
Gearing The Board's aim is to ensure that gearing as a percentage of NAV is kept
within the Board's guidelines issued to the Manager as disclosed on page 28 of
the published Annual Report for the year ended 31 December 2022.
Competitive Ongoing Charges Ratio Absolute Performance: The Board monitors the longer-term trend of the
Company's OCR in absolute terms.
Relative Performance: the Board also monitors the relative trend of the OCR
versus the Company's peer group, taking into consideration the differing
investment policies and objectives employed by those companies.
Details of the annual OCR trend are disclosed on page 26 of the published
Annual Report for the year ended 31 December 2022.
Performance Track Record
In accordance with the investment objective, the Company's performance is
measured over the long term and annualised data covering the last ten years is
presented below.
Total Return
1 year 3 year 5 year 10 year
% return % return % return % return
Share price(AB) +20.6 +22.5 +33.0 +99.6
Net asset value per Ordinary share(A) +8.8 +25.3 +30.2 +108.1
UK RPI +13.4 +23.5 +29.6 +46.0
Reference Index(C) -7.3 +19.0 +36.6 +158.9
(A) Considered to be an Alternative Performance Measure.
(B) Mid to mid.
(C) Reference Index comprising 60% FTSE World ex UK Index/40% FTSE World UK
Index up to April 2020 and 100% FTSE All World TR Index from May 2020.
Source: abrdn, Morningstar & Lipper
Ten Year Financial Record
Year end 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Total revenue (£'000) 63,717 62,609 67,020 77,333 79,471 77,105 82,417 68,918 78,737 88,745
Per Ordinary share (p):
Net asset value 981.0 966.6 849.0 1,135.7 1,251.4 1,107.8 1,190.0 1,138.2 1,240.3 1,293.3
Share price 1,052.0 1,026.0 829.5 1,188.0 1,268.0 1,132.0 1,260.0 1,130.0 1,156.0 1,334.0
Net revenue return(A) 43.8 40.8 45.7 51.2 51.8 49.6 54.1 46.6 51.7 60.1
Dividends(B) 43.0 45.0 46.5 47.5 50.0 51.5 53.5 54.5 55.0 56.0
Dividend cover 1.03x 0.91x 0.99x 1.08x 1.04x 0.96x 1.01x 0.86x 0.94x 1.07x
Revenue reserves (£'000) 68,120 64,690 64,767 70,963 75,252 73,563 75,747 66,764 62,967 69,239
Shareholders' funds (£'000) 1,236,718 1,240,537 1,091,019 1,447,879 1,599,129 1,419,588 1,539,055 1,461,827 1,561,066 1,616,750
Ongoing charges ratio(%)(C) 0.66 0.73 0.75 0.68 0.64 0.69 0.65 0.68 0.59 0.52
(A) Net revenue return per Ordinary share has been based on the average
Ordinary share capital during each year (see note 9 ).
(B) The figure for dividends per share reflects the years to which their
declaration relates and not the years they were paid.
(C) Considered to be an Alternative Performance Measure.
Investment Objective and Investment Policy
Investment trusts, such as the Company, are long-term investment vehicles.
Typically, investment trusts are externally managed, have no employees, and
are overseen by an independent non-executive board of directors. Your
Company's Board of Directors sets the investment mandate, monitors the
performance of all service providers (including the Manager) and is
responsible for reviewing strategy on a regular basis. All this is done with
the aim of preserving and enhancing shareholder value over the longer-term.
Reference Index
The Company does not have a Benchmark. However, performance is measured
against a number of measures including a Reference Index, the FTSE All World
TR Index, which was adopted in April 2020. Given the composition of the
portfolio and the Manager's investment process, it is likely that the
Company's investment performance may diverge, possibly significantly, from
this Reference Index. Performance prior to April 2020 is measured against a
blend of the old composite Benchmark (40% of the FTSE World UK Index and 60%
of the FTSE World ex-UK Index) up to 27 April 2020 and the FTSE All World TR
Index thereafter.
Investment Objective
The aim of the Company is to achieve an above average dividend yield, with
long-term growth in dividends and capital ahead of inflation, by investing
principally in global equities.
Investment Policy
There are a number of elements set out in the investment policy delegated to
the Manager which are set out below:
Asset Allocation
The Company's assets are currently invested in a diversified portfolio of
international equities and fixed income securities spread across a range of
industries and economies. The Company's investment policy is flexible and it
may, from time to time, hold other securities including (but not limited to)
index-linked securities, convertible securities, preference shares, unlisted
securities, depositary receipts and other equity-related securities. The
Company may invest in derivatives for the purposes of efficient portfolio
management in the furtherance of its investment objective. The Company's
investment policy does not impose any geographical, sectoral or industrial
constraints upon the Manager. The Board has set guidelines which the Manager
is required to work within. It is the investment policy of the Company to
invest no more than 15% of its gross assets in other listed investment
companies (including listed investment trusts), at the time of purchase. The
Company currently does not have any investments in other investment
companies. The Manager is authorised to enter into stocklending contracts
and the Company plans to undertake limited stocklending activity in the future
following the completion of the administrative set-up process.
Risk Diversification
The Manager actively monitors the Company's portfolio and attempts to mitigate
risk primarily through diversification. The Company is permitted to invest up
to 15% of its investments by value in any single holding (at the time of
purchase) although, typically, individual investments do not exceed 5% of the
total portfolio.
Gearing
The Board considers that returns to shareholders can be enhanced by the
judicious use of borrowing. The Board is responsible for the level of gearing
in the Company and reviews the position on a regular basis. Any borrowing,
except for short-term liquidity purposes, is used for investment purposes or
to fund the purchase of the Company's own shares.
Total gearing will not in normal circumstances exceed 30% of net assets with
cash deposits netted against the level of borrowings. At the year end, there
was net gearing of 11.2% (calculated in accordance with Association of
Investment Companies guidance). Particular care is taken to ensure that any
bank covenants permit maximum flexibility in investment policy.
Changes to Investment Policy
Any material change to the investment policy will require the approval of the
shareholders by way of an ordinary resolution at a general meeting.
Ten Largest Investments
As at 31 December 2022
Aeroporto del Sureste AbbVie
Holding: 4.4% Holding: 3.3%
Grupo Aeroporto del Sureste operates airports in Mexico. The company holds AbbVie Inc is a global pharmaceutical company, producing a broad range of
long-term concessions to manage airports in leading tourist resorts and major drugs for use in speciality therapeutic areas such as immunology, chronic
cities. kidney disease, oncology and neuroscience.
Philip Morris International Broadcom Corporation
Holding: 3.2% Holding: 3.1%
Spun out from the Altria Group in 2008, Philip Morris International is one of Broadcom designs, develops and markets digital and analogue semiconductors
the world's leading global tobacco companies. It manufactures and sells worldwide. The company offers wireless components, storage adaptors,
leading recognisable brands such as Marlboro, Parliament and Virginia Slims. networking processors, switches, fibre optic modules and optical sensors.
Taiwan Semiconductor Manufacturing TotalEnergies
Holding: 3.0% Holding: 2.9%
Taiwan Semiconductor Manufacturing is one of the largest integrated circuit The Company produces, transports and supplies crude oil, natural gas and low
manufacturers in the world. The company is involved in component design, carbon electricity as well as refining petrochemical products. TotalEnergies
manufacturing, assembly, testing and mass production of integrated circuits. also owns and manages gasoline filling stations worldwide.
Unilever Oversea-Chinese Bank
Holding: 2.6% Holding: 2.5%
Unilever is a multinational consumer goods group which is focused in the areas Oversea-Chinese Banking Corporation offers a comprehensive range of financial
of home care, beauty & personal care and food products. services spread across four main business segments. These include Global
Consumer/Private Banking: Global Wholesale Banking; Global Treasury &
Markets; plus Insurance.
CME Group Samsung Electronics
Holding: 2.3% Holding: 2.2%
Based in Chicago, USA CME Group operates a derivatives exchange that trades Korean based Samsung Electronics manufactures a wide range of consumer and
futures contracts and options, interest rates, stock indexes, foreign exchange industrial electronic equipment and products such as semiconductors,
and commodities. computers, monitors, peripherals, televisions and home appliances. The company
also has significant global market share of mobile phone handsets.
List of Investments
Valuation Total Valuation
2022 assets(A) 2021(B)
Company Country £'000 % £'000
Aeroporto del Sureste Mexico 79,049 4.4 70,058
AbbVie USA 60,465 3.3 44,985
Philip Morris International USA 58,914 3.2 49,097
Broadcom Corporation USA 55,777 3.1 58,956
Taiwan Semiconductor Manufacturing Taiwan 54,589 3.0 82,058
TotalEnergies France 52,036 2.9 37,471
Unilever(C) UK 47,964 2.6 45,390
Oversea-Chinese Bank Singapore 45,297 2.5 37,459
CME Group USA 41,931 2.3 57,349
Samsung Electronics Korea 40,735 2.2 44,298
Top ten investments 536,757 29.5
Sociedad Quimica Y Minera de Chile Chile 39,819 2.2 29,780
Zurich Insurance Switzerland 39,743 2.2 25,956
Bristol-Myers Squibb USA 38,868 2.1 29,922
Tryg Denmark 38,504 2.1 35,496
Vale do Rio Doce Brazil 37,561 2.1 27,540
Johnson & Johnson USA 36,277 2.0 25,254
British American Tobacco UK 36,097 2.0 30,041
BHP Group Australia 35,980 2.0 30,786
Verizon Communications USA 32,754 1.8 38,362
Hon Hai Precision Industry Taiwan 32,425 1.8 27,753
Top twenty investments 904,785 49.8
Merck USA 32,279 1.8 -
Telus Canada 32,040 1.8 34,824
Siemens Germany 31,792 1.8 -
Cisco Systems USA 31,683 1.7 37,423
Shell Netherlands 31,634 1.7 22,065
BE Semiconductor Netherlands 31,001 1.7 -
Taiwan Mobile Taiwan 29,425 1.6 30,688
Danone France 29,090 1.6 -
GlobalWafers Taiwan 28,907 1.6 71,090
Singapore Telecommunications Singapore 28,673 1.6 22,870
Top thirty investments 1,211,309 66.7
Kimberly Clark de Mexico Mexico 28,164 1.6 22,331
Woodside Energy Australia 27,948 1.5 -
Sanofi France 27,898 1.5 26,027
Nordea Bank Sweden 26,750 1.5 22,552
Epiroc Sweden 26,728 1.5 31,306
China Resources Land China 26,655 1.5 21,743
Atlas Copco Sweden 26,578 1.5 32,574
Roche Holdings Switzerland 26,098 1.4 30,719
Enel Italy 26,018 1.4 23,660
Enbridge Canada 24,347 1.3 21,651
Top forty investments 1,478,493 81.4
Telkom Indonesia Indonesia 24,031 1.3 25,114
TC Energy Canada 23,149 1.3 24,029
SCB X Thailand 23,114 1.3 25,262
Banco Bradesco Brazil 20,714 1.1 19,859
Ping An Insurance China 19,805 1.1 19,143
China Vanke China 18,512 1.0 18,875
Republic of South Africa 7% 28/02/31(D) South Africa 15,779 0.9 15,590
Republic of Indonesia 6.125% 15/05/28(D) Indonesia 15,670 0.9 15,799
United Mexican States 5.75% 05/03/26(D) Mexico 15,422 0.8 13,601
Telefonica Brasil Brazil 13,493 0.7 14,497
Top fifty investments 1,668,182 91.8
MTN South Africa 12,439 0.7 15,794
Republic of Indonesia 8.375% 15/03/34(D) Indonesia 11,709 0.7 11,618
Telenor Norway 11,593 0.6 17,406
Republic of Dominica 6.85% 27/01/45(D) Dominican Republic 10,777 0.6 12,191
Petroleos Mexicanos 6.75% 21/09/47(D) Mexico 10,589 0.6 13,031
Lotus Retail Growth Thailand 8,173 0.5 16,687
HDFC Bank 7.95% 21/09/26(D) India 7,603 0.4 7,928
Vodafone Group UK 7,582 0.4 10,096
Power Finance Corp 7.63% 14/08/26(D) India 7,529 0.4 7,825
Petroleos Mexicanos 5.5% 27/06/44(D) Mexico 5,786 0.3 7,275
Top sixty investments 1,761,962 97.0
Republic of Indonesia 10% 15/02/28(D) Indonesia 4,568 0.2 4,710
Republic of Turkey 8% 12/03/25(D) Turkey 3,460 0.2 2,962
Republic of Turkey 9% 24/07/24(D) Turkey 3,311 0.2 3,061
General Accident 7.875% Cum Irred Pref(D) UK 3,164 0.2 3,612
Santander 10.375% Non Cum Pref(D) UK 3,105 0.2 4,025
Republic of Ecuador 0.5% 31/07/35(D) Ecuador 2,448 0.1 3,101
Republic of Ecuador 0.5% 31/07/30(D) Ecuador 2,062 0.1 2,372
Republic of Ecuador 0.5% 31/07/40(D) Ecuador 508 - 644
Republic of Ecuador 0.0% 31/07/30(D) Ecuador 198 - 253
Indocement Tunggal Prakarsa Indonesia 34 - 12,432
Top seventy investments 1,784,820 98.2
Total investments 1,784,820 98.2
Net current assets(A) 31,796 1.8
Total assets 1,816,616 100.0
(A) Excluding bank loans.
(B) The 2021 column denotes the Company's holding at 31 December 2021.
(C) The 2021 holding comprises UK and Netherlands securities, split
£23,670,000 and £21,720,000 respectively.
(D) Quoted preference share or bond.
Summary of Net Assets
Valuation Valuation
31 December 2022 31 December 2021
£'000 % £'000 %
Equities 1,661,132 102.7 1,590,833 101.9
Preference shares 6,269 0.4 7,637 0.5
Bonds 117,419 7.3 140,842 9.0
Total investments 1,784,820 110.4 1,739,312 111.4
Net current assets 31,796 2.0 21,568 1.4
Total assets 1,816,616 112.4 1,760,880 112.8
Prior charges (199,866) (12.4) (199,814) (12.8)
Net assets 1,616,750 100.0 1,561,066 100.0
Sector/Geographical Analysis
Asia
United North Europe Pacific Latin 2022 2021
Kingdom America ex UK ex Japan America Africa Total Total
Sector/Geographical Analysis % % % % % % % %
Energy - 2.6 4.6 1.5 - - 8.7 7.0
Oil Gas and Coal - 2.6 4.6 1.5 - - 8.7 7.0
Basic Materials - - - 2.0 4.3 - 6.3 7.4
Chemicals - - - - 2.2 - 2.2 4.1
Industrial Metals and Mining - - - 2.0 2.1 - 4.1 3.3
Industrials - - 4.8 - 4.4 - 9.2 8.4
Construction & Materials - - - - - - - 0.7
General industrials - - 1.8 - - - 1.8 -
Industrial Engineering - - 3.0 - - - 3.0 3.7
Industrial Transportation - - - - 4.4 - 4.4 4.0
Consumer Staples 4.6 3.2 1.6 - 1.6 - 11.0 10.1
Beverages - - - - - - - 1.8
Food Producers - - 1.6 - - - 1.6 -
Personal Care Drug and Grocery Stores 2.6 - - - 1.6 - 4.2 3.8
Tobacco 2.0 3.2 - - - - 5.2 4.5
Health Care - 9.2 2.9 - - - 12.1 8.9
Pharmaceuticals & Biotechnology - 9.2 2.9 - - - 12.1 8.9
Telecommunications 0.4 5.3 0.6 4.5 0.7 0.7 12.2 14.0
Telecommunications Service Providers 0.4 3.6 0.6 4.5 0.7 0.7 10.5 11.9
Telecommunications Equipment - 1.7 - - - - 1.7 2.1
Utilities - - 1.4 - - - 1.4 1.3
Electricity - - 1.4 - - - 1.4 1.3
Financials - 2.3 5.8 4.9 1.1 - 14.1 13.8
Banks - - 1.5 3.8 1.1 - 6.4 5.9
Investment Banking and Brokerage Services - 2.3 - - - - 2.3 3.3
Life Insurance - - - 1.1 - - 1.1 1.1
Nonlife Insurance - - 4.3 - - - 4.3 3.5
Real Estate - - - 3.0 - - 3.0 3.2
Real Estate Investment and Services - - - 3.0 - - 3.0 2.3
Real Estate Investment Trusts - - - - - - - 0.9
Technology - 3.1 1.7 8.6 - - 13.4 16.2
Technology Hardware & Equipment - 3.1 1.7 8.6 - - 13.4 16.2
Total equities 5.0 25.7 23.4 24.5 12.1 0.7 91.4 90.3
Preference shares and bonds 0.4 - 0.4 2.6 2.5 0.9 6.8 8.5
Total investments 5.4 25.7 23.8 27.1 14.6 1.6 98.2 98.8
Net current assets 1.8 1.2
Total assets 100.0 100.0
Directors' Report
The Directors present their report and the audited financial statements for
the year ended 31 December 2022.
Results and Dividends
Details of the Company's results and proposed dividends are shown above.
Investment Trust Status
The Company is registered as a public limited company (registered in Scotland
No. SC006705) and has been accepted by HM Revenue & Customs as an
investment trust subject to the Company continuing to meet the relevant
eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the
ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for
all financial years commencing on or after 1 January 2012. The Directors are
of the opinion that the Company has conducted its affairs for the year ended
31 December 2022 so as to enable it to comply with the ongoing requirements
for investment trust status.
Individual Savings Accounts
The Company has conducted its affairs so as to satisfy the requirements as a
qualifying security for Individual Savings Accounts. The Directors intend that
the Company will continue to conduct its affairs in this manner.
Share Capital
The Company's capital structure is summarised in note 14 to the financial
statements. At 31 December 2022, there were 125,012,893 fully paid Ordinary
shares of 25p each (2021 - 125,861,856 Ordinary shares) in issue. At the
year end there were 4,399,110 Ordinary shares held in Treasury (2021 -
3,550,147).
During the year 848,963 Ordinary shares were bought back for Treasury
representing 0.6% of the Company's total issued share capital (2021 -
2,576,806 representing 2.0% of the Company's total issued share capital).
Further details on buybacks are provided in note 14 to the financial
statements.
Share Rights
Ordinary shareholders are entitled to vote on all resolutions which are
proposed at general meetings of the Company. The Ordinary shares carry a right
to receive dividends and, on a winding up, after meeting the liabilities of
the Company, the surplus assets will be paid to Ordinary shareholders in
proportion to their shareholdings.
Management and Secretarial Arrangements
The Company has appointed abrdn Fund Managers Limited ("aFML"), a wholly owned
subsidiary of abrdn plc, as its alternative investment fund manager under the
terms of an investment management agreement dated 14 July 2014 (as amended).
Under the terms of the agreement, the Company's portfolio is managed by abrdn
Investments Limited ("aIL") by way of a group delegation agreement in place
between aFML and aIL. Investment management services are provided to the
Company by aFML. Company secretarial, accounting and administrative services
have been delegated by aFML to abrdn Holdings Limited.
Up to 31 December 2021, the annual management fee was charged on net assets
(ie excluding borrowings for investment purposes), averaged over the six
previous quarters ("Net Assets") on the following tiered basis: 0.5% of Net
Assets up to £1,200m and 0.425% of Net Assets above £1,200m.
With effect from 1 January 2022, the management fee has been charged at the
rate of 0.5% per annum of Net Assets up to £500m and 0.4% per annum of Net
Assets above £500m. Save for the aforementioned changes, all other terms and
conditions contained in the Company's Management Agreement dated 14 July 2014
(as amended) remain unaltered.
A fee of 1.5% per annum remains chargeable on the value of any unlisted
investments. The investment management fee is chargeable 30% against revenue
and 70% against realised capital reserves in line with the Board's long-term
expectation of returns from revenue and capital. No fees are charged in the
case of investments managed or advised by the abrdn Group.
The management agreement may be terminated by either party on the expiry of
six months' written notice. On termination, the Manager would be entitled to
receive fees which would otherwise have been due up to that date.
The Board considers the continued appointment of the Manager on the terms
agreed to be in the interests of the shareholders as a whole because the abrdn
Group has the investment management, secretarial, promotional and
administrative skills and expertise required for the effective operation of
the Company.
The Board
The Board currently consists of five non-executive Directors.
The names and biographies of the current Directors are disclosed on pages 50
to 52 of the published Annual Report for the year ended 31 December 2022
indicating their range of experience as well as length of service. Ms Holmes
was appointed to the Board on 22 June 2022.
The Directors will retire at the AGM in April 2023 and, with the exception of
Ms Holmes, each Director will stand for re-election (with Ms Holmes standing
for election).
The Board considers that there is a balance of skills and experience within
the Board relevant to the leadership and direction of the Company and that all
the Directors contribute effectively. The reasons for the re-election, where
relevant, of the individual Directors are set out on pages 50 to 52 of the
published Annual Report for the year ended 31 December 2022.
In common with most investment trusts, the Company has no employees.
Directors' & Officers' liability insurance cover has been maintained
throughout the year at the expense of the Company. The Company's Articles of
Association provide an indemnity to the Directors out of the assets of the
Company against any liability incurred in defending proceedings or in
connection with any application to the Court in which relief is granted.
Board Diversity
As indicated in the Strategic Report, the Board recognises the importance of
having a range of skilled, experienced individuals with the right knowledge
represented on the Board in order to allow it to fulfil its obligations. The
Board also recognises the benefits and is supportive of, and will give due
regard to, the principle of diversity in its recruitment of new Board members.
The Board will not display any bias for age, gender, race, sexual orientation,
socio-economic background, religion, ethnic or national origins or disability
in considering the appointment of Directors. The Board will continue to ensure
that all appointments are made on the basis of merit against the specification
prepared for each appointment. The Board takes account of the targets set out
in the FCA's Listing Rules, which are set out below.
As an externally managed investment company, the Board employs no executive
staff, and therefore does not have a chief executive officer (CEO) or a chief
financial officer (CFO)- both of which are deemed senior board positions by
the FCA. However, the Board considers the Chair of the Audit and Risk
Committee to be a senior board position and the following disclosure is made
on this basis. Other senior board positions recognised by the FCA are chair
of the board and senior independent director (SID). In addition, the Board
has resolved that the Company's year end date be the most appropriate date for
disclosure purposes.
The following information has been voluntarily disclosed by each Director and
is correct as at 31 December 2022. The Board expects the Company to be in
compliance with the recommendations of the Parker Review on diversity in the
UK boardroom by the end of the current financial year.
Board as at 31 December 2022
Number of Board Members Percentage of the Board Number of Senior Positions
on the Board
Men 2 40% 1
Women 3 60% 2
Prefer not to say - - -
White British or other White 5 100% 3
(including minority-white groups)
Minority Ethnic 0 0 0
Prefer not to say - - -
The Role of the Chairman and Senior Independent Director
The Chairman is responsible for providing effective leadership to the Board,
by setting the tone of the Company, demonstrating objective judgement and
promoting a culture of openness and debate. The 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 leads the evaluation of the Board and individual
Directors, and acts upon the results of the evaluation process by recognising
strengths and addressing any weaknesses. The Chairman also engages with major
shareholders and ensures 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 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.
Management of Conflicts of Interest
No Director has a service contract with the Company although Directors are
issued with letters of appointment upon appointment. The Directors' interests
in contractual arrangements with the Company are as shown in note 21 to the
financial statements and the Directors' Remuneration Report. No Directors had
any other interest in contracts with the Company during the period or
subsequently.
The Board has a procedure in place to deal with a situation where a Director
has a conflict of interest, as required by the Companies Act 2006. As part of
this process, the Directors are required to disclose 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 their
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. All proposed significant external appointments are also
required to be approved, in advance, by the Chairman and then communicated to
other Directors for information.
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 Corporate Governance Statement forms part of the Directors' Report. 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);
- previous experience of the chairman of a remuneration committee
(provision 32); and
- executive directors' remuneration (provisions 33 and 36 to 40).
The Board considers that these provisions are not relevant to the position of
the Company, being an externally managed investment company. In particular,
all of the Company's day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no executive
directors, employees or internal operations. The Company has therefore not
reported further in respect of these provisions.
The full text of the Company's Corporate Governance Statement can be found on
the Company's website, murray-intl.co.uk.
The table below details Directors' attendance at scheduled Board and Committee
meetings held during the year ended 31 December 2022 (with eligibility to
attend the relevant meeting in brackets). In addition there were a number of
other ad hoc Board meetings held during the year.
Statement of Directors' Responsibilities
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice, the requirements of the Companies Act 2006 and applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law)
including FRS 102 'The Financial Reporting Standard applicable in the UK and
Republic of Ireland'. Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss for the
Company for that period.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and accounting estimates that are reasonable and
prudent;
- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will continue in
business; and
- prepare a director's report, a strategic report and director's
remuneration report which comply with the requirements of the Companies Act
2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. In accordance with their responsibilities, the
Directors confirm that, to the best of their knowledge, the Annual Report and
financial statements, taken as a whole, is fair, balanced, and understandable
and provides the information necessary for shareholders to assess the
position, performance, business model and strategy.
Website Publication
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are
published on murray-intl.co.uk, the Company's website, in accordance with
legislation in the United Kingdom governing the preparation and dissemination
of financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company's website is the
responsibility of the Directors. The Directors' responsibility also extends
to the ongoing integrity of the financial statements contained therein.
Directors' Responsibilities Pursuant to DTR4
The Directors confirm to the best of their knowledge:
- The financial statements have been prepared in accordance with
the applicable accounting standards and give a true and fair view of the
assets, liabilities, financial position and profit of the Company; and
- The Annual Report includes a fair review of the development and
performance of the business and the financial position of the company,
together with a description of the principal risks and uncertainties that they
face.
For Murray International Trust PLC
David Hardie
Chairman
2 March 2023
Statement of Comprehensive Income
Year ended 31 December 2022 Year ended 31 December 2021
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments 10 - 66,401 66,401 - 139,637 139,637
Income 3 88,745 - 88,745 78,737 - 78,737
Investment management fees 4 (2,024) (4,724) (6,748) (2,086) (4,867) (6,953)
Currency gains/(losses) - 84 84 - (745) (745)
Administrative expenses 5 (1,651) - (1,651) (1,752) - (1,752)
Net return before finance costs and taxation 85,070 61,761 146,831 74,899 134,025 208,924
Finance costs 6 (1,409) (3,286) (4,695) (1,216) (2,838) (4,054)
Return before taxation 83,661 58,475 142,136 73,683 131,187 204,870
Taxation 7 (8,405) 990 (7,415) (7,554) 798 (6,756)
Return attributable to equity shareholders 75,256 59,465 134,721 66,129 131,985 198,114
Return per Ordinary share (pence) 9 60.1 47.4 107.5 51.7 103.1 154.8
The "Total" column of this statement represents the profit and loss account of
the Company. There is no other comprehensive income and therefore the return
after taxation is also the total comprehensive income for the year. The
'Revenue' and 'Capital' columns represent supplementary information prepared
under guidance issued by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
The accompanying notes are an integral part of these financial statements.
Statement of Financial Position
As at As at
31 December 2022 31 December 2021
Notes £'000 £'000
Non-current assets
Investments at fair value through profit or loss 10 1,784,820 1,739,312
Current assets
Prepayments and accrued income 11 7,195 8,475
Other debtors 11 9,306 6,902
Cash and short-term deposits 18,131 8,705
34,632 24,082
Creditors: amounts falling due within one year
Bank loans 12,13 (59,989) (59,975)
Other creditors 12 (2,836) (2,514)
(62,825) (62,489)
Net current liabilities (28,193) (38,407)
Total assets less current liabilities 1,756,627 1,700,905
Creditors: amounts falling due after more than one year
Bank loans 12,13 (29,982) (89,930)
Loan Notes 12,13 (109,895) (49,909)
Net assets 1,616,750 1,561,066
Capital and reserves
Called-up share capital 14 32,353 32,353
Share premium account 362,967 362,967
Capital redemption reserve 8,230 8,230
Capital reserve 15 1,143,961 1,094,549
Revenue reserve 69,239 62,967
Equity shareholders' funds 1,616,750 1,561,066
Net asset value per Ordinary share (pence) 16 1,293.3 1,240.3
The financial statements were approved and authorised for issue by the Board
of Directors on 2 March 2023 and were signed on its behalf by:
David Hardie
Director
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 31 December 2022
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 32,353 362,967 8,230 1,094,549 62,967 1,561,066
Return after taxation - - - 59,465 75,256 134,721
Dividends paid 8 - - - - (68,984) (68,984)
Buy back of shares to Treasury 14 - - - (10,053) - (10,053)
Balance at 31 December 2022 32,353 362,967 8,230 1,143,961 69,239 1,616,750
For the year ended 31 December 2021
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2020 32,353 362,967 8,230 991,513 66,764 1,461,827
Return after taxation - - - 131,985 66,129 198,114
Dividends paid 8 - - - - (69,926) (69,926)
Buy back of shares to Treasury 14 - - - (28,949) - (28,949)
Balance at 31 December 2021 32,353 362,967 8,230 1,094,549 62,967 1,561,066
The accompanying notes are an integral part of these financial statements.
Statement of Cash Flows
Year ended Year ended
31 December 2022 31 December 2021
Notes £'000 £'000
Net return before finance costs and taxation 146,831 208,924
Increase/(decrease) in accrued expenses 265 (8)
Overseas withholding tax (9,945) (9,123)
Decrease in accrued income 1,401 706
Interest paid (4,562) (3,818)
Gains on investments (66,401) (139,637)
Currency (gains)/losses (84) 745
Decrease in other debtors (29) 22
Corporation tax received - 321
Net cash inflow from operating activities 67,476 58,132
Investing activities
Purchases of investments (187,490) (177,090)
Sales of investments 208,417 224,171
Net cash from investing activities 20,927 47,081
Financing activities
Equity dividends paid 8 (68,984) (69,926)
Ordinary shares bought back to Treasury 14 (10,053) (28,949)
Issue of Loan Notes 59,976 49,904
Loan repayment (60,000) (50,000)
Net cash used in financing activities (79,061) (98,971)
Increase in cash 9,342 6,242
Analysis of changes in cash during the year
Opening balance 8,705 3,208
Effect of exchange rate fluctuations on cash held 84 (745)
Increase in cash as above 9,342 6,242
Closing balances 18,131 8,705
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2022
1. Principal activity
The Company is a closed-end investment company, registered in Scotland No
SC006705, with its Ordinary shares being listed on the London Stock Exchange.
2. Accounting policies
(a) Basis of preparation. The financial statements have been prepared in
accordance with Financial Reporting Standard 102 and with the AIC's Statement
of Recommended Practice 'Financial Statements of Investment Trust Companies
and Venture Capital Trusts' ("AIC SORP") 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 Directors have undertaken a robust review of the Company's viability
(refer to statement on page 37 of the published Annual Report for the year
ended 31 December 2022) and ability to continue as a going concern. The
Company's assets consist of a diverse portfolio of listed equity shares and
bonds. The equities and a majority of the bond portfolio are, in most
circumstances, realisable within a very short timescale.
The Company has a £60 million loan facility which is due to mature in May
2023. The Directors are currently reviewing options to replace the facility
including the use of the Loan Note Shelf Facility. Should the Board decide not
to replace the facility any maturing debt would be repaid through the proceeds
of equity and/or bond sales.
The Directors are mindful of the principal risks and uncertainties disclosed
on pages 35 and 36 of the published Annual Report for the year ended 31
December 2022 including the continuing global economic disruption caused by
the uncertainty from the Russian invasion of Ukraine and have reviewed
forecasts detailing revenue and liabilities. Notwithstanding the continuing
uncertain economic environment, the Directors believe that the Company has
adequate financial resources to continue its operational existence for the
foreseeable future and at least 12 months from the date of this Annual Report.
Accordingly, the Directors continue to adopt the going concern basis in
preparing these financial statements.
Significant accounting judgements, estimates and assumptions. 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 and are
continually evaluated. The areas requiring most significant judgement and
assumption in the financial statements are: the determination of the fair
value hierarchy classification of quoted preference shares and bonds which
have been assessed as being Level 2 as they are not considered to trade in
active markets; and also the determination of whether special dividends
received are considered to be revenue or capital in nature on a case by case
basis. The Directors do not consider there to be any significant estimates
within the financial statements.
(b) Income. Dividends receivable on equity shares are treated as revenue for the
year on an ex-dividend basis. Where no ex-dividend date is available dividends
are recognised on their due date. Provision is made for any dividends not
expected to be received. Special dividends are credited to capital or revenue,
according to their circumstances.
In some jurisdictions, investment income and capital gains are subject to
withholding tax deducted at the source of the income. The Company presents the
withholding tax separately from the gross investment income in the Statement
of Comprehensive Income under taxation.
The fixed returns on debt securities are recognised on a time apportionment
basis so as to reflect the effective yield on the debt securities.
Interest receivable from cash and short-term deposits is accrued to the end of
the year.
(c) Expenses. All expenses are accounted for on an accruals basis and are charged
to the Statement of Comprehensive Income. Expenses are charged against revenue
except as follows:
- transaction costs on the acquisition or disposal of investments are charged
against capital in the Statement of Comprehensive Income; and
- expenses are treated as a capital item in the Statement of Comprehensive
Income and ultimately recognised in the capital reserve where a connection
with the maintenance or enhancement of the value of the investments can be
demonstrated. In this respect the investment management fee has been allocated
30% to revenue and 70% to the capital reserve to reflect the Company's
investment policy and prospective income and capital growth.
(d) Taxation. The tax expense represents the sum of tax currently payable and
deferred tax. Any tax payable is based on the taxable profit for the year.
Taxable profit differs from net return as reported in the Statement of
Comprehensive Income because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are
never taxable or deductible. The Company's liability for current tax is
calculated using tax rates that were applicable at the Statement of Financial
Position date.
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the Statement of Financial Position date, where
transactions or events that result in an obligation to pay more tax in the
future or right to pay less tax in the future have occurred at the Statement
of Financial Position date. This is subject to deferred tax assets only being
recognised if it is considered more likely than not that there will be
suitable profits from which the future reversal of the underlying timing
differences can be deducted. Timing differences are differences arising
between the Company's taxable profits and its results as stated in the
financial statements which are capable of reversal in one or more subsequent
periods. Deferred tax is measured on a non-discounted basis at the tax rates
that are expected to apply in the periods in which timing differences are
expected to reverse, based on tax rates and laws enacted or substantively
enacted at the Statement of Financial Position date.
Due to the Company's status as an investment trust company and the intention
to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided deferred tax on any capital
gains and losses arising on the revaluation or disposal of investments.
The tax effect of different items of income/gain and expenditure/loss is
allocated between capital and revenue within the Statement of Comprehensive
Income on the same basis as the particular item to which it relates using the
Company's effective rate of tax for the year, based on the marginal basis.
(e) Investments. The Company has chosen to apply the recognition and measurement
provisions of IAS 39 Financial Instruments: Recognition and Measurement and
investments have been designated upon initial recognition at fair value
through profit or loss. This is done because all investments are considered to
form part of a group of financial assets which is evaluated on a fair value
basis, in accordance with the Company's documented investment strategy, and
information about the grouping is provided internally on that basis.
Investments are recognised and de-recognised at trade date where a purchase or
sale is under a contract whose terms require delivery within the timeframe
established by the market concerned, and are measured at fair value. For
listed investments, the valuation of investments at the year end is deemed to
be bid market prices or closing prices on recognised stock exchanges.
Gains and losses arising from changes in fair value are treated in net profit
or loss for the period as a capital item in the Statement of Comprehensive
Income and are ultimately recognised in the capital reserve.
(f) Cash and cash equivalents. Cash comprises cash in hand and demand deposits.
Cash equivalents includes short-term, highly liquid investments, that are
readily convertible to known amounts of cash and that are subject to an
insignificant risk of change in value.
(g) Short-term debtors and creditors. Both short-term debtors and creditors are
measured at amortised cost and not subject to interest charges.
(h) Borrowings. Borrowings, which comprise interest bearing bank loans and
unsecured loan notes are recognised initially at the fair value of the
consideration received, net of any issue expenses, and subsequently at
amortised cost using the effective interest method. The finance costs of such
borrowings are accounted for on an accruals basis using the effective interest
rate method and are charged 30% to revenue and 70% to capital in the Statement
of Comprehensive Income to reflect the Company's investment policy and
prospective income and capital growth.
(i) 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. This reserve is
not distributable.
Share premium account. The balance classified as share premium includes the
premium above nominal value from the proceeds on issue of any equity share
capital comprising Ordinary shares of 25p and the proceeds of sales of shares
held in Treasury in excess of the weighted average purchase price paid by the
Company to repurchase the shares. This reserve is not distributable.
Capital redemption reserve. The capital redemption reserve arose when Ordinary
shares were cancelled, at which point an amount equal to the par value of the
Ordinary share capital was transferred from the share capital account to the
capital redemption reserve. This reserve is not distributable.
Capital reserve. This reserve reflects any gains or losses on investments
realised in the period along with any movement in the fair value of
investments held that have been recognised in the Statement of Comprehensive
Income. These include gains and losses from foreign currency exchange
differences. Additionally, expenses, including finance costs, are charged to
this reserve in accordance with (c) and (h) above. This reserve is
distributable for the purpose of funding share buybacks and paying dividends
to the extent that gains are deemed realised.
When the Company purchases its Ordinary shares to be held in Treasury, the
amount of the consideration paid, which includes directly attributable costs,
is recognised as a deduction from the capital reserve.
Revenue reserve. This reserve reflects all income and costs which are
recognised in the revenue column of the Statement of Comprehensive Income. The
revenue reserve represents the amount of the Company's reserves distributable
by way of dividend.
(j) Foreign currency. Assets and liabilities in foreign currencies are translated
at the rates of exchange ruling on the Statement of Financial Position date.
Transactions involving foreign currencies are converted at the rate ruling on
the date of the transaction. Gains and losses on dividends receivable are
recognised in the Statement of Comprehensive Income and are reflected in the
revenue reserve. Gains and losses on the realisation of foreign currencies are
recognised in the Statement of Comprehensive Income and are then transferred
to the capital reserve.
(k) Segmental reporting. The Directors are of the opinion that the Company is
engaged in a single segment of business activity, being investment business.
Consequently, no business segmental analysis is provided.
(l) Dividends payable. 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.
3. Income
2022 2021
£'000 £'000
Income from investments (all listed)
UK dividend income 10,607 8,547
Overseas dividends 66,536 58,240
Overseas interest 11,417 11,945
88,560 78,732
Other income
Deposit interest 49 1
Stock lending income 136 -
Interest on corporation tax reclaim - 4
Total income 88,745 78,737
4. Investment management fees
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fees 2,024 4,724 6,748 2,086 4,867 6,953
The Company has an agreement with abrdn Fund Managers Limited ("aFML") for the
provision of investment management, secretarial, accounting and administration
and promotional activity services.
With effect from 1 January 2022, the management fee has been charged on net
assets (i.e. excluding borrowings for investment purposes) averaged over the
six previous quarters at a rate of 0.5% per annum up to £500 million and 0.4%
per annum thereafter. Prior to this, the management fee has been charged on
net assets (i.e. excluding borrowings for investment purposes) averaged over
the six previous quarters at a rate of 0.5% per annum up to £1,200 million
and 0.425% per annum thereafter. A fee of 1.5% per annum is chargeable on
the value of any unlisted investments. The investment management fee is
chargeable 30% against revenue and 70% against realised capital reserves.
During the year £6,748,000 (2021 - £6,953,000) of investment management fees
was payable to the Manager, with a balance of £1,704,000 (2021 - £1,797,000)
being due at the year end.
No fees are charged in the case of investments managed or advised by the abrdn
Group. The management agreement may be terminated by either party on the
expiry of six months' written notice. On termination the Manager is entitled
to receive fees which would otherwise have been due up to that date.
5. Administrative expenses
2022 2021
£'000 £'000
Promotional activities(A) 400 400
Registrars' fees 147 133
Directors' remuneration 157 167
Bank charges and custody fees 411 606
Depositary fees 157 149
Stock exchange fees 97 86
Printing and postage 59 60
Irrecoverable VAT - 14
Auditor's fees for:
- Statutory Audit 44 32
- Other assurance services 3 3
Other expenses 176 102
1,651 1,752
(A) In 2022 £400,000 (2021 - £400,000) was payable to aFML to cover
promotional activities during the year. At the year end £100,000 (2021 -
£100,000) was due to aFML.
6. Finance costs
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Bank loans and overdraft interest 815 1,901 2,716 1,002 2,339 3,341
Loan Notes 594 1,385 1,979 214 499 713
1,409 3,286 4,695 1,216 2,838 4,054
7. Taxation
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(a) Total tax charge
Analysis for the year
Current UK tax 195 - 195 163 - 163
Double taxation relief (195) - (195) (163) - (163)
Tax relief to capital 1,082 (1,082) - 920 (920) -
Irrecoverable overseas tax suffered 10,605 92 10,697 9,081 122 9,203
Overseas tax reclaimable (3,282) - (3,282) (2,447) - (2,447)
Total tax charge for the year 8,405 (990) 7,415 7,554 (798) 6,756
(b) Factors affecting the tax charge for the year. The UK corporation tax rate is
19% (2021 - 19%). The tax assessed for the year is lower than the corporation
tax rate. The differences are explained below:
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return before taxation 83,661 58,475 142,136 73,683 131,187 204,870
Return multiplied by the effective standard rate of corporation tax of 19% 15,896 11,110 27,006 14,000 24,925 38,925
(2021 - 19%)
Effects of:
Non taxable UK dividend income (2,015) - (2,015) (1,624) - (1,624)
Gains on investments not taxable - (12,616) (12,616) - (26,531) (26,531)
Currency (gains)/losses not taxable - (16) (16) - 142 142
Non taxable overseas dividends (12,164) - (12,164) (10,750) - (10,750)
Irrecoverable overseas tax suffered 10,605 92 10,697 9,081 122 9,203
Overseas tax reclaimable (3,282) - (3,282) (2,447) - (2,447)
Double taxation relief (195) - (195) (163) - (163)
Marginal tax relief (440) 440 - (544) 544 -
Expenses not deductible for tax purposes - - - 1 - 1
Total tax charge for the year 8,405 (990) 7,415 7,554 (798) 6,756
The Company has not provided for deferred tax on chargeable gains or losses
arising on the revaluation or disposal of investments as it is exempt from
corporation tax on these items because of its status as an investment trust
company.
The Company has not recognised a deferred tax asset (2021 - same) arising as a
result of there being no excess management expense to be utilised in future
periods.
With effect from 1 April 2023 the standard rate of UK corporation tax will
change from 19% to 25%.
8. Ordinary dividends on equity shares
2022 2021
£'000 £'000
Amounts recognised as distributions paid during the year:
Third interim for 2021 of 12.0p (2020 - 12.0p) 15,103 15,413
Final dividend for 2021 of 19.0p (2020 - 18.5p) 23,813 23,748
First interim for 2022 of 12.0p (2021 - 12.0p) 15,040 15,404
Second interim for 2022 of 12.0p (2021 - 12.0p) 15,028 15,361
68,984 69,926
A third interim dividend was declared on 2 December 2022 with an ex date of 5
January 2023. This dividend of 12.0p was paid on 17 February 2023 and has not
been included as a liability in these financial statements. The proposed final
dividend for 2022 is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these financial
statements.
Set out below are the total dividends paid and proposed in respect of the
financial year, which is the basis on which the requirements of Sections
1158-1159 of the Corporation Tax Act 2010 are considered. The revenue
available for distribution by way of dividend for the year is £75,256,000
(2021 - £66,129,000).
2022 2021
£'000 £'000
Three interim dividends for 2022 of 12.0p (2021 - 12.0p) 45,070 45,868
Proposed final dividend for 2022 of 20.0p (2021 - final dividend of 19.0p) 25,003 23,813
70,073 69,681
The amount reflected above for the cost of the proposed final dividend for
2022 is based on 125,012,893 Ordinary shares, being the number of Ordinary
shares in issue excluding those held in Treasury at the date of this Report.
9. Return per Ordinary share
2022 2021
£'000 p £'000 p
Returns are based on the following figures:
Revenue return 75,256 60.1 66,129 51.7
Capital return 59,465 47.4 131,985 103.1
Total return 134,721 107.5 198,114 154.8
Weighted average number of Ordinary shares 125,306,203 127,971,051
10. Investments at fair value through profit or loss
2022 2021
£'000 £'000
Opening book cost 1,330,337 1,324,155
Opening investment holdings gains 408,975 322,250
Opening fair value 1,739,312 1,646,405
Analysis of transactions made during the year
Purchases at cost 187,490 177,090
Sales proceeds received (208,590) (224,171)
Gains on investments 66,401 139,637
Accretion of fixed income book cost 207 351
Closing fair value 1,784,820 1,739,312
Closing book cost 1,363,483 1,330,337
Closing investment gains 421,337 408,975
Closing fair value 1,784,820 1,739,312
The Company received £208,590,000 (2021 - £224,171,000) from investments
sold in the period. The book cost of these investments when they were
purchased was £154,551,000 (2021 - £171,259,000). 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.
2022 2021
The portfolio valuation £'000 £'000
Listed on stock exchanges:
United Kingdom:
- equities 100,405 85,872
- preference shares 6,269 7,637
Overseas:
- equities 1,560,727 1,504,961
- fixed income 117,419 140,842
Total 1,784,820 1,739,312
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 on
investments in the Statement of Comprehensive Income. The total costs were as
follows:
2022 2021
£'000 £'000
Purchases 199 322
Sales 198 185
397 507
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.
2022 2021
Stock Lending £'000 £'000
Aggregate value of securities on loan at the year end - N/A
Maximum aggregate value of securities on loan during the year 81,723 N/A
Fee income from stock lending 136 N/A
During the year to 31 December 2022, the Company commenced stock lending.
Stock lending is the temporary transfer of securities by a lender to a
borrower, with an agreement by the borrower to return equivalent securities to
the lender at an agreed date. Fee income is received for making the
investments available to the borrower. The principal risks and rewards of
holding the investments, namely the market movements in share prices and
dividend income, are retained by the Company. In all cases the securities lent
continue to be recognised on the Statement of Financial Position.
All stocks lent under these arrangements are fully secured by collateral. The
value of the collateral held at 31 December 2022 was £nil.
11. Debtors: amounts falling due within one year
2022 2021
£'000 £'000
Amounts due from brokers 173 -
Corporation tax refund 136 136
Overseas withholding tax 8,965 6,722
Prepayments 84 43
Other debtors 32 44
Accrued income 7,111 8,432
16,501 15,377
None of the above amounts is overdue or impaired.
12. Creditors
2022 2021
£'000 £'000
Amounts falling due within one year:
Bank loans (note 13) 59,989 59,975
Investment management fees 1,704 1,797
Administrative expenses 639 280
Interest on bank loans and loan notes 493 437
62,825 62,489
2022 2021
£'000 £'000
Amounts falling due after more than one year:
Bank loans (note 13) 29,982 89,930
Loan notes (note 13) 109,895 49,909
139,877 139,839
All financial liabilities are measured at amortised cost.
13. Borrowings
2022 2021
£'000 £'000
Unsecured bank loans repayable within one year:
Fixed rate term loan facilities
- £60,000,000 at 1.714% - 31 May 2022 - 59,975
- £60,000,000 at 2.328% - 31 May 2023 59,989 -
Unsecured bank loans repayable in more than one year but less than five years:
Fixed rate term loan facilities
- £60,000,000 at 2.328% - 31 May 2023 - 59,962
- £30,000,000 at 2.25% - 16 May 2024 29,982 29,968
Unsecured loan notes repayable in more than five years:
- £50,000,000 at 2.24% - 13 May 2031 49,918 49,909
- £60,000,000 at 2.83% - 31 May 2037 59,977 -
199,866 199,814
The terms of these loans and loan notes permit early repayment at the
borrower's option which may give rise to additional amounts being either
payable or repayable in respect of fluctuations in interest rates since
drawdown. Since the Directors currently have no intention of repaying the
loans and loan notes early, then no such charges are included in the cash
flows used to determine their effective interest rate.
In May 2022, the Company utilised part of its £200m Shelf Facility, of which
£50m had already been drawn down, through the issuance of a £60 million 15
year Senior Unsecured Loan Note at an all-in-rate of 2.83%. The proceeds of
the issue were used to repay the Company's £60 million fixed rate loan with
the Royal Bank of Scotland International Limited, London Branch "RBSI" that
matured at that time. Under the terms of the Loan Note Agreement, dated May
2021, up to an additional £90 million will also be available for drawdown by
the Company for a five year period and the Board's current intention is to
only use this additional amount to repay the Company's existing RBSI debt as
it falls due over the coming years. Financial covenants contained within the
loan note agreement provide, inter alia, that borrowings shall at no time
exceed 35% of net assets, that the Company must hold 40 investments or more
and that the net assets must exceed £650 million. At 31 December 2022 the
Company held 71 investments, net assets were £1,616,750,000 and borrowings
were 12.4% thereof. The Company has complied with all financial covenants
throughout the year.
The Company also has two fixed rate term loan facilities with RBSI, both of
which are fully drawn down and have maturity dates of 31 May 2023 and 16 May
2024 respectively. Financial covenants contained within the relevant loan
agreements provide, inter alia, that borrowings shall at no time exceed 40% of
net assets and that the net assets must exceed £650 million. At 31 December
2022 net assets were £1,616,750,000, and borrowings were 12.4% thereof. The
Company has complied with all financial covenants throughout the year.
14. Share capital
2022 2021
Number £'000 Number £'000
Allotted, called up and fully paid Ordinary shares of 25p each:
Balance brought forward 125,861,856 31,466 128,438,662 32,110
Ordinary shares bought back to Treasury in the year (848,963) (212) (2,576,806) (644)
Balance carried forward 125,012,893 31,254 125,861,856 31,466
Treasury shares:
Balance brought forward 3,550,147 887 973,341 243
Ordinary shares bought back to Treasury in the year 848,963 212 2,576,806 644
Balance carried forward 4,399,110 1,099 3,550,147 887
At 31 December 2022, shares held in Treasury represented 3.5% (2021 - 2.8%) of
the Company's total issued share capital.
During the year 848,963 Ordinary shares were bought back to Treasury
representing 0.6% of the Company's total issued share capital (2021 -
2,576,806 representing 2.0% of the Company's total issued share capital) at a
total cost of £10,053,000 (2021 - £28,949,000) net of expenses. Subsequent
to the year end there have been no further issues or buybacks of Ordinary
shares.
On a winding up of the Company, any surplus assets available after payment of
all debts and satisfaction of all liabilities of the Company shall be applied
in repaying the Ordinary shareholders the amounts paid up on such shares. Any
surplus shall be divided among the holders of Ordinary shares according to the
amount paid up on such shares respectively.
Voting rights. In accordance with the Articles of Association of the Company,
on a show of hands, every member (or duly appointed proxy) present at a
general meeting of the Company has one vote; and, on a poll, every member
present in person or by proxy shall have one vote for every 25p nominal amount
of Ordinary shares held.
15. Capital reserve
2022 2021
£'000 £'000
At 31 December 2021 1,094,549 991,513
Movement in fair value gains 66,401 139,637
Capital expenses (including taxation) (7,020) (6,907)
Buy back of shares to Treasury (10,053) (28,949)
Currency gains/(losses) 84 (745)
At 31 December 2022 1,143,961 1,094,549
Included in the total above are investment holdings gains at the year end of
£421,337,000 (2021 - £408,975,000).
16. Net asset value per share
The net asset value per share and the net asset value attributable to the
Ordinary shares at the year end, calculated in accordance with the Articles of
Association and FRS 102, were as follows:
As at As at
31 December 2022 31 December 2021
Attributable net assets (£'000) 1,616,750 1,561,066
Number of Ordinary shares in issue (excluding Treasury) 125,012,893 125,861,856
Net asset value per share (pence) 1,293.3 1,240.3
17. Analysis of changes in net debt
At At
31 December Currency Cash Non-cash 31 December
2021 differences flows movements(A) 2022
£'000 £'000 £'000 £'000 £'000
Cash and short-term deposits 8,705 84 9,383 - 18,172
Debt due within one year (59,975) - 60,000 (60,014) (59,989)
Debt due after more than one year (139,839) - (59,976) 59,938 (139,877)
(191,109) 84 9,407 (76) (181,694)
At At
31 December Currency Cash Non-cash 31 December
2020 differences flows movements(A) 2021
· £'000 £'000 £'000 £'000 £'000
Cash and short-term deposits 3,208 (745) 6,242 - 8,705
Debt due within one year (50,000) - 50,000 (59,975) (59,975)
Debt due after more than one year (149,805) - (49,904) 59,870 (139,839)
(196,597) (745) 6,338 (105) (191,109)
(A) Figures reflect a movement in maturity dates and amortisation of finance
costs.
A statement reconciling the movement in net funds to the net cash flow has not
been presented as there are no differences from the above analysis.
18. Financial instruments 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 listed equities and debt
securities, 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 may enter into
derivative transactions for the purpose of managing market risks arising from
the Company's activities in the form of swap contracts, forward foreign
currency contracts, futures and options.
The Board has delegated the risk management function to abrdn Fund Managers
Limited ("aFML") under the terms of its management agreement with aFML
(further details of which are included in the Directors' Report). 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.
Risk management framework. The directors of aFML collectively assume
responsibility for aFML's obligations under the AIFMD including reviewing
investment performance and monitoring the Company's risk profile during the
year.
aFML is a fully integrated member of the abrdn Group ("the Group"), which
provides a variety of services and support to aFML in the conduct of its
business activities, including in the oversight of the risk management
framework for the Company. The AIFM has delegated the day to day
administration of the investment policy to abrdn Limited, which is responsible
for ensuring that the Company is managed within the terms of its investment
guidelines and the limits set out in its pre-investment disclosures to
investors (details of which can be found on the Company's website). The AIFM
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 Officer 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 Officer and to the Audit
Committee of the Group's Board of Directors. The Internal Audit Department is
responsible for providing an independent assessment of the Group's control
environment.
The Group's corporate governance structure is supported by several committees
to assist the board of directors of abrdn plc, 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, foreign
currency risk and price risk), (ii) liquidity risk and (iii) credit risk.
(i) Market risk. The fair value and future cash flows of a financial instrument
held by the Company may fluctuate because of changes in market prices. This
market risk comprises three elements - interest rate risk, foreign currency
risk and price risk.
(i)(a) Interest rate risk. Interest rate risk is the risk that interest rate
movements will affect:
- the fair value of the investments in fixed interest rate securities; and
- the level of income receivable on cash deposits.
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 reviews the values of the fixed interest rate securities on a
regular basis.
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 facilities, which are used to finance opportunities at low rates.
Current bank covenant guidelines are detailed in note 13.
Interest rate 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
period for Weighted Non-
which average Fixed Floating interest
rate is fixed interest rate rate rate bearing
At 31 December 2022 Years % £'000 £'000 £'000
Assets
Sterling - - 6,269 17,090 136,385
US Dollar 21.05 5.55 32,368 759 541,270
Indian Rupee 3.67 7.79 15,132 - -
Indonesian Rupiah 7.48 7.50 31,947 - 24,065
Mexican Peso 3.18 5.75 15,422 - 107,213
South African Rand 8.17 7.00 15,779 - 12,439
Turkish Lira 1.89 8.49 6,771 - -
Other - - - 282 839,760
Total assets 123,688 18,131 1,661,132
Liabilities
Bank loans 0.74 2.30 (89,971) - -
Loan Notes 11.67 2.56 (109,895) - -
Total liabilities (199,866) - -
Weighted
average
period for Weighted Non-
which average Fixed Floating interest
rate is fixed interest rate rate rate bearing
At 31 December 2021 Years % £'000 £'000 £'000
Assets
Sterling - - 7,637 8,143 116,658
US Dollar 22.06 5.52 38,866 267 527,077
Indian Rupee 4.18 7.71 20,399 2 17,061
Indonesian Rupiah 8.45 7.51 32,128 - 37,546
Mexican Peso 2.52 6.11 27,836 - 92,390
South African Rand 9.17 7.00 15,590 - 15,794
Turkish Lira 2.88 8.51 6,023 - -
Other - - - 293 784,307
Total assets 148,479 8,705 1,590,833
Liabilities
Bank loans 1.22 2.07 (149,905) - -
Loan Notes 9.37 2.24 (49,909) - -
Total liabilities (199,814) - -
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 and loan notes are based on the interest rate payable, weighted by
the total value of the bank loans and loan notes. The maturity dates of the
Company's bank loans and loan notes are shown in note 13 to the financial
statements.
The fixed rate assets represents quoted preference shares and bonds.
The floating rate assets consist of cash deposits on call earning interest at
prevailing market rates.
The non-interest bearing assets represent the equity element of the portfolio.
Short-term debtors and creditors have been excluded from the above tables as
they are not considered to be exposed to interest rate risk.
Interest rate sensitivity. The sensitivity analyses below have been determined
based on the exposure to interest rates for non-derivative instruments at the
Statement of Financial Position date and the stipulated change taking place at
the beginning of the financial year and held constant throughout the reporting
period in the case of instruments that have floating rates.
If interest rates had been 100 basis points higher or lower (based on the
current parameter used by the Manager's Investment Risk Department on risk
assessment) and all other variables were held constant, the Company's
revenue return for the year ended 31 December 2022 would increase/decrease by
£181,000 (2021 - increase/decrease by £87,000). This is mainly attributable
to the Company's exposure to interest rates on its floating rate cash
balances. These figures have been calculated based on cash positions at each
year end.
The capital return would decrease/increase by £5,183,000 (2021 -
increase/decrease by £6,830,000) using VaR ("Value at Risk") analysis based
on 100 observations of weekly VaR computations of fixed interest portfolio
positions at each year end.
(i)(b) Foreign currency risk. A significant proportion of the Company's investment
portfolio is invested overseas whose values are subject to fluctuation due to
changes in foreign exchange rates. In addition, the impact of changes in
foreign exchange rates upon the profits of investment holdings 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. The Manager seeks, when
deemed appropriate, to manage exposure to currency movements on borrowings by
using forward foreign currency contracts as a hedge against potential foreign
currency movements. At 31 December 2022 the Company did not have any forward
foreign currency contracts (2021 - none).
The revenue account is subject to currency fluctuation arising on overseas
income. The Company does not hedge this currency risk.
Currency risk exposure. Currency risk exposure (excluding fixed interest
securities) by currency of denomination:
31 December 2022 31 December 2021
UK and UK and
overseas Net Total overseas Net Total
equity monetary currency equity monetary currency
investments assets(A) exposure investments assets(A) exposure
£'000 £'000 £'000 £'000 £'000 £'000
US Dollar 541,270 759 542,029 527,077 267 527,344
Euro 220,707 9 220,716 108,878 12 108,890
Taiwan Dollar 145,346 310 145,656 211,589 281 211,870
Mexican Peso 107,213 - 107,213 92,390 - 92,390
Swedish Krone 80,056 - 80,056 86,431 - 86,431
Canadian Dollar 79,536 (37) 79,499 105,794 - 105,794
Singapore Dollar 73,970 - 73,970 60,329 - 60,329
Swiss Franc 65,841 - 65,841 56,674 - 56,674
Hong Kong Dollar 64,972 - 64,972 59,761 - 59,761
Danish Krone 38,504 - 38,504 35,496 - 35,496
Thailand Baht 31,287 - 31,287 41,949 - 41,949
Australian Dollar 27,948 - 27,948 - - -
Indonesian Rupiah 24,065 - 24,065 37,546 - 37,546
South African Rand 12,439 - 12,439 15,794 - 15,794
Norwegian Krone 11,593 - 11,593 17,406 - 17,406
Indian Rupee - - - 17,061 2 17,063
1,524,747 1,041 1,525,788 1,474,175 562 1,474,737
Sterling 136,385 (182,776) (46,391) 116,658 (191,671) (75,013)
Total 1,661,132 (181,735) 1,479,397 1,590,833 (191,109) 1,399,724
(A) Reflects cash, short-term deposits and bank borrowings.
The asset allocation between specific markets can vary from time to time based
on the Manager's opinion of the attractiveness of the individual markets.
Foreign currency sensitivity. The following table details the Company's
sensitivity to a 10% decrease (in the context of a 10% increase the figures
below should all be read as negative) in sterling against the major foreign
currencies in which the Company has exposure (based on exposure >5% of
total exposure). The sensitivity analysis includes foreign currency
denominated monetary items and adjusts their translation at the year end for a
10% change in foreign currency rates, being a reasonable range of fluctuations
for the period.
2022 2021
Capital(A) Capital(A)
£'000 £'000
US Dollar 54,203 52,734
Euro 22,072 10,889
Taiwan Dollar 14,566 21,187
Mexican Peso 10,721 9,239
Swedish Krone 8,006 8,643
Canadian Dollar 7,950 10,579
Total 117,518 113,271
(A) Represents equity exposures to the relevant currencies.
(i)(c) Price risk. Other price risks (ie changes in market prices other than those
arising from interest rate or currency risk) may affect the value of the
quoted investments. The Company's stated objective is to achieve an above
average dividend yield, with long-term growth in dividends and capital ahead
of inflation by investing principally in global equities.
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 country or sector. The allocation of assets
to international markets and the stock selection process, as detailed on pages
19 to 21 of the published Annual Report for the year ended 31 December 2022,
both act to reduce market risk. The Manager actively monitors market prices
throughout the year and reports to the Board, which meets regularly in order
to review investment strategy. The investments held by the Company are listed
on various stock exchanges worldwide.
Price risk sensitivity. If market prices at the Statement of Financial
Position date had been 10% higher or lower, which is a reasonable range of
annual price fluctuations, while all other variables remained constant, the
return attributable to Ordinary shareholders for the year ended 31 December
2022 would have increased/decreased by £166,113,000 (2021 - increase/decrease
of £159,083,000) and equity would have increased/decreased by the same
amount.
(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.
Within Within Within Within Within More than
1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
At 31 December 2022 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Bank loans 60,000 30,000 - - - - 90,000
Loan Notes - - - - - 110,000 110,000
Interest cash flows on bank loans 1,371 337 - - - - 1,708
Interest cash flows on Loan Notes 2,818 2,818 2,818 2,818 2,818 20,051 34,141
Cash flows on other creditors 2,343 - - - - - 2,343
66,532 33,155 2,818 2,818 2,818 130,051 238,192
Within Within Within Within Within More than
1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
At 31 December 2021 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Bank loans 60,000 60,000 30,000 - - - 150,000
Loan Notes - - - - - 50,000 50,000
Interest cash flows on bank loans 2,585 1,371 337 - - - 4,293
Interest cash flows on Loan Notes 1,120 1,120 1,120 1,120 1,120 5,040 10,640
Cash flows on other creditors 2,077 - - - - - 2,077
65,782 62,491 31,457 1,120 1,120 55,040 217,010
Management of the risk. Liquidity risk is not considered to be significant as
the Company's assets comprise mainly readily realisable securities, which can
be sold to meet funding commitments if necessary. Short-term flexibility is
achieved through the use of loan and overdraft facilities (note 13).
(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
- where the Manager makes an investment in a bond, corporate or otherwise, the
credit ratings of the issuer are taken into account so as to manage the risk
to the Company of default;
- investments in quoted bonds are made across a variety of industry sectors
and geographic markets so as to avoid concentrations of credit risk;
- transactions involving derivatives are entered into only with investment
banks, the credit rating of which is taken into account so as to minimise the
risk to the Company of default;
- investment transactions are carried out with a 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 daily review of failed trade reports. In addition,
both stock and cash reconciliations to the custodian's records are performed
daily to ensure discrepancies are investigated in a timely manner. The
Manager's Compliance department carries out periodic reviews of the
custodian's operations and reports its finding to the Manager's Risk
Management Committee;
- cash is held only with reputable banks with acceptable credit quality. It is
the Manager's policy to trade only with A- and above (Long-term rated) and
A-1/P-1 (Short-term rated) counterparties.
Credit risk exposure. In summary, compared to the amounts in the Statement of
Financial Position, the maximum exposure to credit risk at 31 December 2022
was as follows:
2022 2021
Balance Maximum Balance Maximum
Sheet exposure Sheet exposure
£'000 £'000 £'000 £'000
Non-current assets
Quoted preference shares and bonds at fair value through profit or loss 123,688 123,688 148,479 148,479
Current assets
Amounts due from brokers 173 173 - -
Other debtors 32 32 44 44
Accrued income 7,111 7,111 8,432 8,432
Cash and short-term deposits 18,131 18,131 8,705 8,705
149,135 149,135 165,660 165,660
·
None of the Company's financial assets is secured by collateral or other
credit enhancements.
Credit ratings. The table below provides a credit rating profile using Moodys
credit ratings for the quoted preference shares and bonds at 31 December 2022
and 31 December 2021:
2022 2021
£'000 £'000
A3 - 14,235
Ba1 3,105 4,025
Baa1 - 13,601
Ba2 15,779 15,590
Baa2 47,369 32,127
Ba3 10,777 32,497
B1 16,375 -
Non-rated 30,283 36,404
123,688 148,479
Whilst a substantial proportion of the fixed interest portfolio does not have
a rating provided by Moodys, the Manager undertakes an ongoing review of their
suitability for inclusion within the portfolio as set out in "Investment
Process" and "Delivering the Investment Policy" on page 21 of the published
Annual Report for the year ended 31 December 2022. At 31 December 2022 Moodys
credit ratings agency did not provide a rating for Ecuador bonds, Indian
bonds, Turkish bonds and Irredeemable preference shares (2021 - Ecuador bonds,
Indian bonds, Turkish bonds and Irredeemable preference shares) held by the
Company and were accordingly categorised as non-rated in the table above. It
was noted however that Fitch credit ratings agency does provide a B- rating
for Ecuador bonds with a value of £5,216,000 (2021 - £6,370,000 with a B-
rating) and a B rating for Turkish bonds with a value of £6,771,000 (2021 -
£6,023,000 with a BB- rating).
Fair values of financial assets and financial liabilities. The fair value of
borrowings has been calculated at £175,464,000 as at 31 December 2022 (2021 -
£201,783,000) compared to a carrying amount in the financial statements of
£199,866,000 (2021 - £199,814,000) (note 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. The
carrying value of all other assets and liabilities is an approximation of fair
value.
19. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy shall have 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 in 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 December 2022 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 1,661,132 - - 1,661,132
Quoted preference shares b) - 6,269 - 6,269
Quoted bonds b) - 117,419 - 117,419
Total 1,661,132 123,688 - 1,784,820
Level 1 Level 2 Level 3 Total
As at 31 December 2021 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 1,590,833 - - 1,590,833
Quoted preference shares b) - 7,637 - 7,637
Quoted bonds b) - 140,842 - 140,842
Total 1,590,833 148,479 - 1,739,312
a) Quoted equities. The fair value of the Company's investments in quoted
equities has been determined by reference to their quoted bid prices at the
reporting date. Quoted equities included in Fair Value Level 1 are actively
traded on recognised stock exchanges.
b) Quoted preference shares and bonds. The fair value of the Company's
investments in quoted preference shares and bonds has been determined by
reference to their quoted bid prices at the reporting date. Investments
categorised as Level 2 are not considered to trade in active markets.
20. Capital management policies and procedures
The investment objective of the Company is to achieve an above average
dividend yield, with long-term growth in dividends and capital ahead of
inflation by investing principally in global equities.
The capital of the Company consists of bank borrowings and equity, comprising
issued capital, reserves and retained earnings. The Company manages its
capital to ensure that it will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and
equity balance.
The Board monitors and reviews the broad structure of the Company's capital on
an ongoing basis. This review includes:
- the planned level of gearing which takes into account the Investment
Manager's views on the market;
- the level of equity shares in issue; and
- the extent to which revenue in excess of that which is required to be
distributed should be retained.
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding accounting period.
Details of the Company's gearing facilities and financial covenants are
detailed in note 13 of the financial statements. The Company does not have any
other externally imposed capital requirements.
21. Related party transactions and transactions with the Manager
Directors' fees and interests. Fees payable during the year to the Directors
and their interests in shares of the Company are disclosed within the
Directors' Remuneration Report on page 65 of the published Annual Report for
the year ended 31 December 2022.
Transactions with the Manager. The Company has agreements with aFML for the
provision of management, accounting and administration services and
promotional activities. Details of transactions during the year and balances
outstanding at the year end are disclosed in notes 4 and 5.
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has no immediate or ultimate controlling party.
The Annual Financial Report Announcement is not the Company's statutory
accounts. The above results for the year ended 31 December 2022 are an
abridged version of the Company's full Annual Report and financial statements,
which have been approved and audited with an unqualified report. The 2021 and
2022 statutory accounts received unqualified reports from the Company's
auditors 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 s.498 of the Companies Act 2006. The financial
information for 2022 is derived from the statutory accounts for 2022 which
have been delivered to the Registrar of Companies. The 2022 financial
statements will be filed with the Registrar of Companies in due course.
The Annual Report will be posted to shareholders in March 2023 and additional
copies will be available from the registered office of the Company and on the
Company's website, murray-intl.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 and may be affected by exchange rate movements. Investors may not get
back the amount they originally invested.
*Neither the content of 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.
For Murray International Trust PLC
Abrdn Holdings Limited, Company Secretary
2 March 2023
Securities Financing Transactions Disclosure (unaudited)
The Company engages in Securities Financing Transactions (SFTs) (as defined in
Article 3 of Regulation (EU) 2015/2365, SFTs include repurchase transactions,
securities or commodities lending and securities or commodities borrowing,
buy-sell back transactions or sell-buy back transactions and margin lending
transactions). In accordance with Article 13 of the Regulation, the Company's
involvement in and exposures related to securities lending for the accounting
period are detailed below:
% of % of
Absolute value of assets engaged in SFTs £'000 lendable assets net assets
31 December 2022
Securities lending - - -
31 December 2021
Securities lending N/A N/A N/A
Top ten collateral issuers and collateral received
Based on market value of collateral received.
For all issuers, only equity securities with a main market listing were lent
and the custodian was BNY Mellon.
2022 £'000 2021 £'000
None - N/A N/A
- N/A
2022 2021
Proportion held Proportion held
Market value in segregated Market value in segregated
of collateral held accounts of collateral held accounts
Collateral held per custodian £'000 % £'000 %
BNY Mellon - - N/A N/A
One custodian is used to hold the collateral, which is in a segregated
account.
Market value
of collateral received
2022 2021
Collateral analysed by currency £'000 £'000
None - N/A
Total collateral received - N/A
Market value Countries of
Securities lending of securities lending counterparty Settlement
Top Ten Counterparties per type of SFT(A) £'000 establishment and clearing
31 December 2022
None - - -
Total market value of securities lending - -
31 December 2021
N/A N/A N/A N/A
Total market value of securities lending N/A
(A) All counterparties are shown
Maturity Tenor of SFTs (remaining period to maturity)
31 December 2022
Securities lending
The lending and collateral transactions are on an open basis and can be
recalled on demand. As at 31 December 2022 there were no securities on loan
(31 December 2021 - N/A).
The Company does not engage in any re-use of collateral.
2022 2021
Return and cost per type of SFT £'000 % £'000 %
Securities lending
Gross return 160 115 N/A N/A
Direct operational costs (securities lending agent costs)(B) (24) (15) N/A N/A
Total costs (24) (15) N/A N/A
Net return 136 100 N/A N/A
(B) The unrounded direct operational costs and fees incurred for securities
lending for the 12 months to 31 December 2022 is £23,993.
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.
Discount to net asset value per Ordinary share
The premium/(discount) is the amount by which the share price is higher or
lower than the net asset value per share at the year end, expressed as a
percentage of the net asset value.
2022 2021
NAV per Ordinary share (p) a 1,293.3 1,240.3
Share price (p) b 1,334.0 1,156.0
Discount (b-a)/a 3.1% -6.8%
Dividend cover
Dividend cover measures the revenue return per share divided by total
dividends per share, expressed as a ratio.
2022 2021
Revenue return per share (p) a 60.1 51.7
Dividends per share (p) b 56.0 55.0
Dividend cover a/b 1.07x 0.94x
Dividend yield
The annual dividend per Ordinary share divided by the share price at the year
end, expressed as a percentage.
2022 2021
Dividends per share (p) a 56.0 55.0
Share price (p) b 1,334.0 1,156.0
Dividend yield a/b · 4.2% 4.8%
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents
divided by shareholders' funds, expressed as a percentage. Under AIC reporting
guidance cash and cash equivalents includes amounts due to and from brokers at
the year end as well as cash and cash equivalents.
2022 2021
Borrowings (£'000) a 199,866 199,814
Cash (£'000) b 18,131 8,705
Amounts due from brokers (£'000) c (173) -
Shareholders' funds (£'000) d 1,616,750 1,561,066
Net gearing (a-b+c)/d 11.2% 12.2%
Ongoing charges ratio (OCR)
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and recurring
administrative expenses, expressed as a percentage of the average daily net
asset values with debt at fair value published throughout the year.
2022 2021
Investment management fees (£'000) 6,748 6,953
Administrative expenses (£'000) 1,651 1,752
Less: non-recurring charges(A) (£'000) (72) (74)
Ongoing charges (£'000) 8,327 8,631
Average net assets (£'000) 1,604,867 1,510,301
Ongoing charges ratio (excluding look-through costs) 0.52% 0.57%
Look-through costs(B) - 0.02%
Ongoing charges ratio (including look-through costs) 0.52% 0.59%
(A) Professional services comprising new Director recruitment costs and legal
fees considered unlikely to recur.
(B)Calculated in accordance with AIC guidance issued in October 2020 to
include the Company's share of costs of holdings in investment companies on a
look-through basis.
The ongoing charges ratio provided in the Company's Key Information Document
is calculated in line with the PRIIPs regulations, which includes amongst
other things, the cost of borrowings and transaction costs.
Total return
NAV and share price total returns show how the NAV and share price have
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 December 2022 NAV Price
Opening at 1 January 2022 a 1,240.3p 1,156.0p
Closing at 31 December 2022 b 1,293.3p 1,334.0p
Price movements c=(b/a)-1 4.3% 15.4%
Dividend reinvestment(A) d 4.5% 5.2%
Total return c+d +8.8% +20.6%
Share
Year ended 31 December 2021 NAV Price
Opening at 1 January 2021 a 1,138.2p 1,130.0p
Closing at 31 December 2021 b 1,240.3p 1,156.0p
Price movements c=(b/a)-1 9.0% 2.3%
Dividend reinvestment(A) d 5.1% 4.9%
Total return c+d +14.1% +7.2%
(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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SSUFUEEDSEEDRecent news on Murray International Trust
See all newsREG - Aberdeen Invs.Trusts - Net Asset Value(s)
AnnouncementREG - Murray Intnl Trust - Net Asset Value(s)
AnnouncementREG - Aberdeen Invs.Trusts - Month End Net Asset Value(s)
AnnouncementREG - Murray Intnl Trust - Month End Net Asset Value(s)
AnnouncementREG - Aberdeen Invs.Trusts - Net Asset Value(s)
Announcement