REG - Murray Intnl Trust - Annual Financial Report
01/03/2024 07:00
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RNS Number : 0629F Murray International Trust PLC 01 March 2024
MURRAY INTERNATIONAL TRUST PLC
Legal Entity Identifier (LEI): 549300BP77JO5Y8LM553
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
Performance Highlights
Net asset value total return(AB) - 2023 Share price total return(AB) - 2023
+8.6% +1.1%
2022 +8.8% 2022 +20.6%
Reference Index total return(BC) - 2023 (Discount)/premium to net asset value(AD) - 2023
+15.7% -4.0%
2022 -7.3% 2022 +3.1%
Dividends per share(BEF) - 2023 Revenue return per share(BF) - 2023
11.5p 12.1p
2022 11.2p 2022 12.0p
Retail Prices Index(B) - 2023 Ongoing charges ratio(AD)
+5.2% 0.53%
2022 +13.4% 2022 0.52%
(A) Alternative Performance Measure (see below).
(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 and assuming
shareholder approval of final dividend.
(F) Figures for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
Financial Calendar
Payment dates of future quarterly dividends 20 May 2024
16 August 2024
18 November 2024
17 February 2025
Financial year end 31 December
Online Shareholder Presentation Friday 5 April 2024 at 11.00 a.m.
Annual General Meeting (London) Friday 19 April 2024 at 12:30 p.m.
Dividends
Rate Ex-dividend date Record date Payment date
1st interim 2.4p 6 July 2023 7 July 2023 16 August 2023
2nd interim 2.4p 5 October 2023 6 October 2023 17 November 2023
3rd interim 2.4p 4 January 2024 5 January 2024 16 February 2024
Proposed final 4.3p 25 April 2024 26 April 2024 20 May 2024
Total dividends 11.5p
Financial Highlights
31 December 2023 31 December 2022 % change
Total assets(A) £1,808.8m £1,816.6m -0.4
Net assets £1,668.9m £1,616.8m +3.2
Market capitalisation £1,601.8m £1,667.7m -4.0
Net Asset Value per Ordinary share(BC) 268.8p 258.7p +3.9
Share price per Ordinary share (mid market)(BC) 258.0p 266.8p -3.3
(Discount)/premium to Net Asset Value per Ordinary share(D) -4.0% 3.1%
Net gearing(D) 8.0% 11.2%
Revenue return per share(C) 12.1p 12.0p +0.8
Dividends per share(CE) 11.5p 11.2p +2.7
Dividend cover (including proposed final dividend)(D) 1.05x 1.07x
Dividend yield(D) 4.5% 4.2%
Revenue reserves(F) £75.1m £69.2m
Ongoing charges ratio(D) 0.53% 0.52%
(A) See definition on page 122 of the published Annual Report and Financial
Statements for the year ended 31 December 2023.
(B) Capital values.
(C) Figures for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
(D) Considered to be an Alternative Performance Measure as defined below.
(E) 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 4.3p (2022 - final dividend of 4.0p).
(F) The revenue reserve figure does not take account of the third interim and
final dividends amounting to £14,890,000 and £26,592,000 respectively (2022
- third interim dividend of £15,002,000 and final dividend of £25,003,000).
STRATEGIC REPORT
Chair's Statement
I am pleased to present this Annual Report following my appointment as Chair
on 31 December 2023 and would like to take this opportunity to reiterate, on
behalf of the Board, all our thanks to David Hardie for his contribution to
the Company, particularly in his willingness to take on the role of Chair
following the sad death of his predecessor, Simon Fraser.
Background
The disparity that so often exists between economic fundamentals and financial
market performance proved extremely pronounced in 2023. The impacts of sharply
rising interest rates, which had begun in earnest in early 2022, began to have
a negative impact on most global economies. Scrutinised by sceptical bond
markets, Central Banks remained vigilant about ongoing inflationary pressures.
Interest rates continued to rise, debt servicing costs increased further and
economic stagnation remained a constant threat. Whilst most countries
experienced decelerating rates of inflation, overall prices continued to rise,
putting further pressure on already stretched household budgets. With no
tangible relief in the cost-of-living crisis throughout the indebted Developed
World, it was no surprise that global consumption struggled to support growth.
Corporate profit margins also succumbed to input cost increases, revenue
declines and general wage pressures. The overall environment of tighter
liquidity, constrained earnings and fragile confidence could hardly have been
described as positive for financial markets. Yet what transpired most
definitely defied expectations. Whilst economic fundamentals generally tend to
reflect reality, global financial fundamentals are always open to a variety of
interpretations. So it proved once again. Global equity markets treaded water
for most of the year, but markets' performance during the final two months of
2023 was nothing short of remarkable. Fuelled by a resurgence in positive
sentiment towards a perceived end to interest rate hikes, global equity
markets surged higher. Such positive market momentum towards year end,
combined with ongoing robustness in the Company's income statement, delivered
another year of strong total returns on net assets. It is also pleasing to
report that once again the proposed increase in the Company's dividend is
fully covered by the net revenue generated from the portfolio.
Performance
The Company's net asset value ("NAV") posted a total return for the year (i.e.
with net income reinvested) of 8.6%. Although the Company does not use a
benchmark, it is worth noting that over the same period the UK Retail Prices
Index rose 5.2% and the Reference Index (the FTSE All World TR Index)
increased 15.7%. The share price posted a lower total return of 1.1% (2022:
20.6%), reflecting a widening in the discount to NAV. Revenue return per share
generated from the Company's portfolio amounted to 12.1p for the year (2022:
12.0p, restated for the share subdivision in April 2023), enabling the ongoing
improvement in the total level of dividend. The Manager's investment focus
continues to emphasise both geographical and sector diversification across a
broad range of quality companies in order to deliver both income and capital
growth. Such characteristics tend not to be represented in more concentrated
indices where fashionable growth stocks are inclined to dominate.
Dividends
Three interim dividends of 2.4p per share (2022: three interims of 2.4p as
restated) have been declared during the year. Your Board is recommending an
increased final dividend of 4.3p per Ordinary 5p share (2022: 4.0p as
restated). If approved at the Annual General Meeting, this final dividend will
be paid on 20 May 2024 to Shareholders on the register on 26 April 2024 (ex
dividend 25 April 2024). If the final dividend is approved, the total Ordinary
dividend for the year will amount to 11.5p (2022: 11.2p as restated), an
increase over the previous year of 2.7%. This represents the 19th year of
dividend increases for the Company, which remains an AIC 'Next Generation
Dividend Hero'.
As a long-established investment trust, the Company has the benefit of over
£75 million of distributable revenue reserves on its balance sheet at 31
December 2023 (2022: £69.2m), 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 over £4 million to the revenue
reserves, to strengthen them for future years, and dividend cover at year end
of 1.05x (2022: 1.07x).
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.
Manager Succession
As we reported in the Half Yearly Report in August 2023, Bruce Stout, the
Company's lead investment manager since 16 June 2004, has announced that he
will be retiring from abrdn in June 2024.
During his time as lead manager, Bruce has been assisted by Martin Connaghan
and Samantha Fitzpatrick who have worked together with Bruce for over 20
years. In recent years, Martin and Samantha's input into the management of
the portfolio, and the Company itself, has increased and many of you may have
met or heard from them at meetings or presentations, including AGMs and online
webinars. We are delighted to confirm that Martin and Samantha have assumed
co-managerial responsibility for the Company's investments alongside Bruce in
order to ensure the smoothest of handovers and no change in abrdn's approach
to the investment management of the Company going forward. On behalf of the
Board, I would like to thank Bruce sincerely for all his efforts, expertise
and insights. Shareholders will have the opportunity to thank Bruce in
person at the forthcoming Annual General Meeting.
Online Presentation and Annual General Meeting ("AGM")
Following the success of similar events over the last few years, the Board has
decided to hold another online presentation this year, at 11.00 a.m. on Friday
5 April 2024. This is in addition to the in-person AGM. During the online
presentation, shareholders will receive updates from me, as Chair, and the
investment management team, and there will be an interactive question and
answer session. We see this as an opportunity for shareholders, who may be
unable to attend the AGM, to hear directly from the Board and the investment
team and to pose any questions that they may have. 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
www.murray-intl.co.uk.
Following the online presentation, shareholders will still have plenty of time
in which to submit their proxy votes prior to the AGM. 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. Shareholders on the main register can
do this by completing and returning the proxy form which has been sent to
them. If you hold your shares on a platform via a nominee, please note that
the Association of Investment Companies has provided helpful information on
how to vote investment company shares held on some of the major platforms.
This information can be found at www.theaic.co.uk/how-to-vote-your-shares.
The AGM has been convened for 12:30 p.m. on 19 April 2024, at Wallacespace
Spitalfields, 15 Artillery Lane, London E1 7HA, and will be followed by a
buffet lunch 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 Share Capital
At the AGM held in April 2023, shareholders approved the five for one
subdivision of Ordinary shares of 25p each into Ordinary shares of 5p each
which became effective on 24 April 2023.
During the year, the Board acted to reduce the volatility of the share price
as it fluctuated between a premium and a discount to the net asset value.
During May 2023, while the Company was trading at a premium, the Company sold
1,050,000 Ordinary shares of 5p each from Treasury at a weighted average
premium of 2.5%, raising almost £2.8 million. This represented an increase in
the issued share capital of 0.2%.
In line with most of the investment trust sector, the discount of the Company
widened from mid-July to 9.6% by late October, when the industry average
discount reached over 16%, the widest reported since the Global Financial
Crisis in 2008, before narrowing towards the end of the year. As its discount
widened in the second half of the year, the Company bought back 5,248,133
Ordinary Shares of 5p for Treasury at a total cost of £12.4 million and at a
weighted average discount of 5.7%, representing 0.8% of the issued share
capital.
At the AGM in 2024 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. 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, in normal market conditions, 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 262.77p and the share price was 244.25p, equating to a discount of
-7.1% per Ordinary share compared to a discount of -4.0% per Ordinary share at
the year end.
Gearing
At the year end, total borrowings amounted to £140 million (2022: £200m),
representing net gearing (calculated by dividing the total borrowings less
cash by shareholders' funds) of 8.0% (2022: 11.2%), all of which is drawn in
sterling. In May 2023, the Company repaid its maturing £60m fixed rate loan
using the proceeds of sales from the portfolio. At the time, the Board
considered options to replace this loan but acceptable commercial terms were
not available.
The Company is now considering options for the next fixed rate loan which is
due to expire in May 2024 and amounts to £30m. 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 2023 was broadly flat ending the year at 0.53%
(2022: 0.52%).
The Board has been monitoring developments in the field of cost disclosure
regulations and fully supports the industry-led initiative that is seeking to
exclude listed closed ended investment companies from regulations that have
created an uneven playing field both domestically and internationally.
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
'A'. Further information on the important work undertaken on ESG and climate
change by the Manager is provided in the 'ESG and Climate Related Factors'
section on pages 114 to 116 of the published Annual Report and Financial
Statements for the year ended 31 December 2023.
Board of Directors
As part of the ongoing succession planning Gregory Eckersley joined the Board
on 1 May 2023 and Wendy Colquhoun joined on 1 September 2023. With a
background in equity investment and a professional career in asset management
and leadership roles within the financial sector, Gregory has already
contributed significantly to the Board's deliberations. In addition, Wendy's
legal background as a former partner in CMS Cameron McKenna with over 25
years' experience in corporate transactional, and regulatory matters places
the Board in a strong position following David Hardie's retirement from the
Board on 31 December 2023.
The Board recognises the benefits and is supportive of, and gives due regard
to, the principle of diversity when recruiting new Directors whilst ensuring
that Board appointments are always made on merit. The Company is compliant
with the recommendations of the Parker Review on diversity in the UK
boardroom.
Outlook
Trying to make sense of financial markets is difficult even at the best of
times. Contradictions invariably present themselves, for example, between
evaluating historical precedents, considering country-specific dynamics,
acknowledging global conflicts of interest and accepting financial constraints
from sometimes polarised political priorities. It is not surprising that
attempts to predict the future are so often doomed to failure. The outlook
for your Company is rooted in the more tangible variables of corporate
fundamentals. This means identifying the key drivers of businesses across a
broad and diversified range of sectors, focusing on key concepts such as
positive cash flows, robust earnings, growing dividends and strong balance
sheets, and then investing from a "bottom up" basis, in good quality, growing
companies that are held for the long term to maximise potential positive
upside. Through the vagaries of numerous business cycles, global catastrophes
and financial market dislocations this investment style has served the Company
well. Despite mounting global uncertainties in what currently appears to be an
increasingly divided and fractious world, the Manager remains deeply committed
to the Company's investment strategy, believing such a proven investment
process will continue to identify appropriate opportunities to deliver the
Company's objectives.
Your Board greatly values shareholder comments and I encourage you to email me
with your views at: VirginiaHolmes.Chair@abrdn.com.
Virginia Holmes
Chair
29 February 2024
Investment Manager's Review
Background
"Sir Isaac Newton tells us why,
an apple falls down from the sky,
And from this fact it's very plain,
all other objects do the same,
A bolt, a bar, a brick, a cup,
invariably fall down, not up.…..!"
Defying gravity best describes the behaviour of global equity markets over the
past twelve months. Seemingly no amount of economic despair, political
discord, policy disharmony, geopolitical disunity nor rational doubt was
enough to dampen the animal spirits of unquestioning market exuberance.
Confronted with enough economic evidence to chill the spine of even the most
optimistic investor, positive equity market returns bore no reflection of
underlying ubiquitous strife. "Gravitational" forces associated with higher
interest rates pulled down disposable incomes, inflation rates, house prices
and overall economic activity. The weight of increasing protectionism and
escalating geopolitical tensions constrained global trade and investment.
Consumer credit creaked under pressure from increasing financing costs.
Government balance sheets, bloated over decades by the grotesque largesse of
printed money, buckled under similar dynamics. Gravity also finally caught up
with fiscal spending, cutting budgets as future funding costs became
prohibitive. Confronted by such realism it might appear incredible for global
equity markets to anticipate amelioration amongst such angst. Yet against any
rational expectations that is exactly what happened. Towards the year end,
markets hastily equated positive policy statements suggesting an end to
monetary tightening with unquestioning acceptance of imminent interest rate
reductions. Surging global bond and equity markets reflected this temporary
shift in sentiment, but such simplistic causational logic implies "laws of
inevitable consequences" that need not materialise in practice.
Deep down, do global equity markets really believe speculative excesses
accumulated over decades can be painlessly erased by simply reigniting credit
growth? Such naivety beggars belief. Superficially, declining inflationary
trends witnessed throughout the Developed World in 2023 undoubtably generated
widespread complacency. Financial market participants were desperate to
believe policymakers had successfully conquered inflation. Yet scratching
below the surface revealed a seismic shift in global protectionism, wage
expectations, immobility of labour, debt-servicing dynamics plus a host of
additional rigidities to effective free market pricing. Short-term respite in
food and energy costs temporarily tempered the tourniquet on consumer
purchasing power but no evidence emerged of a sustainable end to pricing
pressures. For an investment generation nurtured on global disinflation for
the past twenty years, accepting the inevitable end to such favourable
circumstances was never going to be easy. Such misplaced market euphoria
towards the year end was testimony to that.
Decelerating economic activity dominated most global economies over the
period. Personal consumption bore the brunt of the higher interest rate
environment. Dwindling savings, combined with soaring mortgage and debt costs
dramatically reduced disposable incomes. Economic growth was constantly
constrained, although outright contractions (recessions) were miraculously
avoided by remarkable resilience in labour markets. "Hoarding" labour until
painful retention costs become too acute is nothing new in economic history.
When the painful contraction begins, the dramatic rise in redundancies is
invariably more pronounced. Should the events of previous business cycles
repeat themselves, then higher unemployment throughout 2024 looks inevitable.
Bond markets generally endured a torrid twelve months against a backdrop of
constantly rising interest rates. On course for a third consecutive year of
negative returns, until the fourth quarter rally restored some semblance of
respectability, an obvious irony escaped most investors' attention.
Mountainous, unsustainable debt liabilities in the Developed World suggest
neither inflation nor interest rates will continue as the predominant
influence over future bond market pricing. Absent their buyer of last resort,
(Governments) - solely culpable in distorting bond yields over the past twenty
years - the price of future debt (bonds) becomes hostage to unforgiving market
forces. Enormous excess supply and deteriorating credit-worthiness of issuers
is a toxic, unpalatable cocktail for such historically "low risk" assets to
swallow. Like it or not, deteriorating asset quality remains the single most
unquantifiable "skeleton" still lurking in the cupboard of recent interest
rate tightening. Uncovering such bones of bankrupt businesses suggests
additional grim realities for markets to digest.
As the Western World waits for "Godot", financial fundamentals elsewhere paint
a very different picture. Unburdened by aging demographics, excessive systemic
debt and free to benefit from prudent, long-term orthodox economics, the
Developing World evolves without its delusions and the psychological baggage
of false entitlement. Most of all, from an investment perspective, modest
expectations are achievable. Lessons learned throughout Asia and Latin America
over many decades suggest a healthy aversion to banking risk, credit risk,
corporate leverage and dollar dependency. International risk appetite towards
most Emerging Market assets remained largely indifferent last year, impaired
by high profile problems emanating from China and geopolitical tensions
impacting currencies. Positive sentiment towards the asset class remained a
scarce commodity as investors were generally rewarded in passive investment
vehicles. Yet numerous historical examples exist where such complacency can
rapidly change. The catalyst invariably emerges unexpectedly, but escalating
concerns over increasingly narrow, excessively valued stockmarkets in the
Developed World may prove the decisive factor this time.
Trying to make sense of financial markets is always problematic. The gravity
defying antics of the past twelve months present cognitive contradictions for
even the most seasoned rational investors. That global financial fundamentals
are always open to a variety of interpretations is irrefutable, but the sense
of wishful thinking that permeated the so called current consensus by the year
end has seldom been so acute. Expectations and reality deviated markedly,
never a comfortable combination when the weight of history suggests otherwise.
Global Review
With populist politicians throughout the Developed World scrambling to take
credit for "the halving" of inflation during the period, it seemed
extraordinary that dissenting voices did not assert the blatantly obvious.
Politicians took no blame for causing the re-emergence of inflation since
2021, so how could they claim credence for containing it! Such crass
contentions featured prominently in political rhetoric, as did contradictory
communications from policymakers. Central Banks preached tough
inflation-fighting credentials with commitment to interest rate rises, but not
one admitted responsibility for causing inflation in the first place. Printing
money before and during the Covid pandemic unequivocally fuelled the
resurgence of inflation. As the world witnessed money in circulation turn
negative for only the second time in forty years, inflation seemed to be
miraculously tamed! Yet again, deception and deceit dominated public debate
with the inevitable erosion of trust.
Events evolving in the United States over the past twelve months emphasised
the familiar ongoing polarisation between reality and delusion. Whilst Main
Street muddled through the malaise associated with contracting purchasing
power and deteriorating living standards, Wall Street fantasised over history
repeating itself: in essence, a year of division between fundamentals and
froth. The former confronted numerous hurdles instantly recognisable as direct
consequences of the rising interest rate environment. Declining property
prices and potentially rising credit delinquencies cast a dark shadow over
consumer confidence. More ominously, irresponsible balance sheet management by
commercial banks exposed just how fragile financial stability invariably can
be to sharply rising bond yields. Depositor panic ensued. The spectacle of
queues outside branches returned, emphasising the vulnerability of the US
banking system following years of gratuitous excess. Quickly brushed under the
carpet, the US Central Bank deployed its classic Pavlovian responses: more
money printing and aggressive arm twisting to "ensure" rescue bids were
forthcoming. Stability was grudgingly restored, but not before three of the
five largest bank failures in history had occurred. Most worrisome of all,
financial markets barely batted an eye. Drowning in debt and stagnating
without stimulus, the US economy constantly buckled during the period.
Seemingly what mattered most to investors was that it did not quite break - at
least not yet! Superficially freed from facing fundamental facts, financial
markets frothed with anticipation of better times ahead. Sharply declining
bond yields from October 2023 onwards were interpreted by equity markets that
nirvana lay ahead. By the year end surging US stock prices had priced in
numerous imminent interest rate cuts, no economic recession, double-digit
profit growth for 2024 and inflation dead and buried! In the absence of such
perfection materialising, suffice to say great scope exists for disappointment
in the outlook for US financial assets over the medium term.
For European financial markets, similar dynamics between current fundamentals
and future expectations dragged investor sentiment across polar extremes of
the mood spectrum. Growth-wise, most European economies certainly provided
little to cheer about. Germany just managed to dodge outright recession,
France stagnated at virtually zero GDP growth all year, and Italy endured
decelerating economic momentum throughout. On the periphery, Spain managed a
modicum of growth, but the Celtic Tiger of Ireland suffered spectacular
contractions in activity following many years of being Europe's poster child.
Yet despite such depressing domestic economic fundamentals, investment
opportunities initiated since the darkest days of Covid continued to perform
well. High quality industrial companies, leading global energy providers and
conservatively managed financials feature prominently amongst Europe's
corporate titans. Unburdened by unrealistic expectations, often overlooked by
prejudiced perceptions, such European exposures contributed significantly
(again) to overall performance and total return. Conversely, numerous
structural and cyclical frailties continued to erode investors' confidence in
the UK. Popular acclamations that "the market was cheap" and "the market's
attractive defensive nature and dividend paying culture" fell on deaf ears.
Yet again UK equities failed to match the performance and growth opportunities
found elsewhere in the world. Outwith the confines of the City of London this
should come as no surprise. Losing its status as a centre for raising capital,
be it by constant political instability in Westminster, the Brexit debacle,
pension fund diversification, increased red tape or whatever, the relentless
malaise continues. Regardless of whatever the prime factors of disillusionment
are, the hard facts depict a beleaguered, shrinking market plagued with
constant outflows now reduced to a total market capitalisation less than US
technology giant, Apple (which also continues to defy gravity as its market
cap reaches £2.3 trillion!). Twenty years ago 40% of the portfolio assets
were in UK equities: by the end of 2023 this figure was just 4%. Given current
UK investment opportunities for global growth and income objectives remain
constantly surpassed by what is available elsewhere, this current position is
unlikely to change any time soon.
Conversely, prospects brightened for numerous developing nations throughout
the Developing World. Economic orthodoxy, firmly established by proactive
policy initiatives in response to Covid related dislocations, began to bear
fruit. Given the superior quality of Government and household balance sheets,
Central Banks and policymakers across Asia and Latin America remained credible
entities comfortably in control of current circumstances. As pricing pressures
abated, relief from belt-tightening began. Both Brazil and Chile cut interest
rates during 2023. Korea, Indonesia, India and Mexico witnessed inflation
rates falling back to below targeted levels, suggesting evolving fundamentals
firmly supportive of imminent rate cuts in these nations too. As always,
individual market performance varied significantly across the Developing World
over the twelve months. For the tenth time in twenty years, Latin America
delivered the strongest performance of any global region! Constantly
underappreciated by the wider global investor audience blinkered by aversion,
apathy and animosity, such ill-informed scepticism remains baffling. From a
self-interested portfolio perspective, long may this continue, with superior
growth and dividend opportunities, not to mention diversification benefits,
positively contributing to delivering the investment mandate. Elsewhere,
whilst fundamentals in Asia also improved, the one noticeable exception was
China. Suffering from fragile confidence and negative property prices, Asia's
largest economy struggled to shrug off its post Covid hangover. With inflation
periodically flirting with negative rates (deflation) concerns were expressed
that Chinese fundamentals were turning "Japanese". Whilst Japanese history
shows just how destructive a deflationary mindset can impact a consumer
economy, it is premature to resign China to such a fate just yet. The
Government's measures to stimulate policies to positively impact Chinese
growth, are gaining momentum, but the world will watch future developments
with more than a modicum of trepidation.
Performance
The NAV total return for the year to 31 December 2023 with net dividends
reinvested was +8.6%. This compared with the Reference Index (FTSE All World)
total return of 15.7%. The top five and bottom five stock contributors are
detailed below:
Top Five Stock Contributors %* Bottom Five Stock Contributors %*
BE Semiconductor 2.1 Bristol Myers -0.9
Broadcom 2.1 Sociedad Quimica Y Minera -0.8
Grupo Asur 0.4 British America Tobacco -0.7
Kimberley Clark de Mexico 0.3 China Vanke -0.7
Enel 0.3 Philip Morris -0.7
* % relates to the percentage contribution to return relative to the Reference
Index (FTSE All World TR Index)
Over the full financial year, the 8.6% NAV total return was welcomed, marking
a return to real growth given the moderating UK Retail Prices inflation rate
of 5.2%. Whereas overall global equity index strength tended to be extremely
concentrated in just a handful of large US technology stocks, the portfolio's
positive performance in total return terms was spread across numerous regions,
sectors and businesses. For the second consecutive year, Latin America
delivered by far the strongest regional index returns. This was partially
reflected in portfolio returns with a +16% contribution to overall total
return from the region. Whilst mining exposures to iron ore and lithium in
Brazil and Chile struggled to make much progress in a world of falling
commodity prices, consumer focused businesses such as Grupo Asur, Kimberly
Clark de Mexico, Walmex and Banco Bradesco all performed strongly. The
strongest regional portfolio performance was recorded from Europe with a +22%
total return from the diversified asset exposure. A combination of strong
earnings and dividend growth relative to muted expectations provided the
impetus for above average returns from Swedish industrials Epiroc and Atlas
Copco, German conglomerate Siemens, Italian electric utility Enel and BE
Semiconductor in the Netherlands. In what proved to be a particularly
profitable period for European exposures, only Swiss pharmaceutical company
Roche lost any noticeable value.
Less impressive, yet still positive, total returns were also delivered by
North American and Asian exposures. The majority of holdings in the United
States contributed positively to total returns, with the portfolio's largest
holding, technology giant Broadcom, being the standout performer.
Unfortunately negative absolute performance from Canadian holdings constrained
overall regional performance. Severely constrained by negative sentiment
towards China (where existing portfolio holdings suffered yet another
turbulent year), exposures to Asia ex Japan experienced the brunt of
negative sentiment despite relatively robust fundamentals. A total return of
just +3% was heavily skewed towards income contributions from holdings in
Singapore, Thailand and Australia with only Samsung Electronics in South Korea
and GlobalWafers in Taiwan contributing any meaningful capital performance.
Whilst the UK equity market delivered a positive return over the twelve month
period, the three UK portfolio holdings confronted tough operating conditions
which proved punitive to overall performance and contributions. Lastly the
residual Emerging Market Bond exposures witnessed the full brunt of Sterling's
strength but still managed a positive +3% return for the year as bond markets
rallied towards the year end. With a current running yield of 8.2% and many
holdings still priced below par, it is expected that current exposures will be
maintained.
Predicting dividend income over the financial year proved relatively
straightforward notwithstanding the usual difficulties associated with
accurately estimating dividends from cyclical businesses involved in energy,
commodities and technology. Whilst positive cash flows on which dividends
depend are arithmetically uncomplicated to identify, the "willingness to pay"
remains very much in the hands of the pursekeeper. Thankfully the majority of
holdings did not disappoint. Dividend increases from portfolio holdings
generally matched conservative estimates, with 80% falling into this category.
Over the period the net effect from positive surprises (Oversea-Chinese Bank
Corp, Grupo Asur, Tryg Insurance) versus negative surprises (BE Semiconductor,
Sociedad Quimica Y Minera) was negligible. Overall gross income accrued
marginally increased year-on-year, with earnings per share growth of +1.7%
reflecting fewer shares outstanding than the previous period.
Attribution Analysis
The attribution analysis below details the various influences on portfolio
performance. In summary, of the 530 basis points (before expenses) of
performance below the Reference Index, asset allocation detracted 130 basis
points and stock selection detracted 400 basis points. Structural effects,
relating to the fixed income portfolio and gearing net of borrowing costs,
added 20 basis points of relative performance.
Company Reference Index(A) Contribution from:
Asset Stock
Weight Return Weight Return Allocation Selection Total
% % % % % % %
UK 4.6 -12.8 3.4 8.5 -0.1 -1.1 -1.2
Europe ex UK 28.4 22.1 12.8 15.7 0.1 1.5 1.6
North America 28.1 6.4 63.3 19.4 -1.1 -3.1 -4.2
Japan - - 6.3 13.3 0.1 - 0.1
Asia Pacific ex Japan 25.5 3.1 11.7 2.3 -1.7 0.2 -1.5
Latin America 13.4 15.6 1.2 29.3 1.3 -1.4 -0.1
Africa & Middle East - -11.5 1.3 -1.8 0.1 -0.1 -
Gross equity portfolio return 100.0 9.6 100.0 15.7 -1.3 -4.0 -5.3
Fixed Interest, cash and gearing effect -
Gross portfolio return 9.6
Management fees and admin expenses. -0.6
Tax charge -0.6
Technical differences 0.2
Total return 8.6 15.7
(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. Figures may appear not to add up due to rounding.
Portfolio Activity
Portfolio turnover of 7% of gross assets over the period continued its recent
decline to more normal levels. In a year when extended price distortions
seldom prevailed, the lack of volatility in global markets limited new
investment opportunities. Choosing to repay a £60m fixed rate loan that
matured on 31 May 2023 reduced the overall level of outstanding loans to £140
million. Borrowing rates above 6% were deemed too expensive for five year
equity gearing and hence not in our shareholders' best interests. This
translated into gross asset exposure as a percentage of total exposure
declining to 108% from 111%. Consequently overall equity gearing declined from
103% to 101% over the period.
European exposure witnessed a reduction in investment at the transaction level
with profit taking in Swedish industrials Epiroc and Atlas Copco plus the
outright sale of Swedish bank Nordea only partially offset by the new purchase
of the French global drinks manufacturer Pernod Ricard. It is worth noting,
however, that total gross asset exposure to Europe actually increased over the
period due to strong European stock performance. In the UK, the proceeds from
the outright sale of Vodafone were reinvested very gradually in a new position
in Diageo, another leading global drinks distributor but with a distinctly
different product portfolio and market focus than its French counterpart.
Overall UK exposure declined to its lowest level in over four decades based on
adjudged better growth and income opportunities elsewhere in the world.
Finally within Developed Markets, portfolio activity in the North American
region was extremely muted. Close to 1% of gross assets was raised from
top-slicing Broadcom as exceptionally strong stock performance kept pushing
the portfolio's largest holding above the 5% maximum investment guideline for
any one position. Periodic weakness in global pharmaceuticals provided the
opportunity to reinvest some of this cash into building up the existing
position in leading global pharmaceutical company, Merck.
Portfolio activity in Developing Markets reflected changes in relative
valuations and stock preferences. Overall Asian exposure declined slightly,
featuring outright sales of Taiwan Mobile and Lotus Retail in Thailand coupled
with the exit of MTN Corp in South Africa. All three divestments were prompted
by rising concerns over the sustainability of future dividend growth. One new
holding was established in Asia with the purchase of Hong Kong Exchanges, one
of the world's leading securities trading companies. As regards Latin America,
proceeds raised from profit taking in Grupo Asur in Mexico, to keep the
holding size below 5%, and the outright sale of Kimberly Clark de Mexico, a
long-term holding deemed to be more than fully valued, were reinvested in a
new position in Walmex, a leading multi merchandise retailer in Mexico 70%
owned by US Walmart. Finally, exposure to Emerging Market Bonds was marginally
reduced with the outright sales of Ecuadorian Government Bonds due to a
restructuring tender of the country's debt.
From an overall investment perspective, the emphasis continues to favour
diversified asset exposures in companies deemed to be beneficiaries of the
evolving backdrop, maintaining a "barbell" strategy of owning both growth and
cyclical stocks. Selective growth companies, where yields tend to be lower,
should continue to 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 infrastructure
spending and pent up consumer demand exist. Corporate earnings may be under
recessionary threat in many parts of the world, but upwards earnings and
dividend revisions in Latin America and Asia will likely emerge as domestic
interest rates decline. In such regions, sectors and businesses the portfolio
remains
meaningfully invested.
Summary of Investment Changes During the Year
Valuation Appreciation/ Valuation
31 December 2022 (depreciation) Transactions 31 December 2023
£'000 % £'000 £'000 £'000 %
Equities
UK 68,771 3.9 (14,378) 2,212 56,605 3.2
Europe ex UK 448,335 25.1 67,350 (19,266) 496,419 27.8
North America 468,484 26.2 8,975 (6,853) 470,606 26.3
Asia Pacific ex Japan 444,303 24.9 (8,732) (9,145) 426,426 23.8
Latin America 218,800 12.3 17,598 (12,307) 224,091 12.5
Africa & Middle East 12,439 0.7 (1,803) (10,636) - -
1,661,132 93.1 69,010 (55,995) 1,674,147 93.6
Preference shares
UK 6,269 0.3 148 - 6,417 0.4
6,269 0.3 148 - 6,417 0.4
Bonds
Europe ex UK 6,771 0.4 (3,354) (125) 3,292 0.2
Asia Pacific ex Japan 47,079 2.6 (2,454) 174 44,799 2.5
Latin America 47,790 2.7 926 (3,877) 44,839 2.5
Africa & Middle East 15,779 0.9 (1,438) 28 14,369 0.8
117,419 6.6 (6,320) (3,800) 107,299 6.0
Total Investments 1,784,820 100.0 62,838 (59,795) 1,787,863 100.0
Outlook
Forty years of relentlessly rising bond markets up until 2020 suggests very
few current investment practitioners can lay claim to having witnessed a bear
market in bonds. At least not in the Developed World. But even Sir Isaac
Newton would not argue that the force that pulled yields downwards for four
decades was in any way gravitational. The explanation here is more
straightforward, the answer to be found in the abhorrent practice of printing
money rather than the pages of a quantum physics textbook! Now, as every
discredited Central Bank in the Developed World moves centre stage again in
what financial markets currently view as crunch time for policy "leadership",
expectations are sky high. Having reacquainted themselves with the most
intoxicating financial stimulant of all - hope - equity markets expect nothing
less than recent history repeating itself. Such naivety simply inflates
expectations without recourse to reality.
Throughout 2023 the compulsion to hang firmly onto the belief in a return to
the 2% 'inflationary mean' of the past decade remained all consuming. Such a
delusion was not confined to just financial markets and investors either.
Central Bankers in the Developed World remained evangelical in their
unwavering commitment towards 'returning to the 2% trend'. Perhaps even more
incredulously, the widespread belief persisted that this would be engineered
without causing economic recessions, without raising unemployment, without
deteriorating asset quality and without financial dislocations despite the
previous decade of misappropriate capital allocation. The harsh reality is an
evolving economic and financial backdrop in which a 2% target remains totally
unrealistic short of orchestrating enormous economic pain and suffering.
Political practicalities of general elections across the globe in 2024 are
unlikely to entertain even the thought!
Meanwhile the sheer magnitude of leverage in the Developed World's Government
sector drives over-extended balance sheets towards breaking point, leaving
Central Banks paralysed due to dwindling policy options. Such enormous
leverage exposes maturing bonds to be priced by markets, where real rates of
return are essential. Any compromise or attempted fudge on inflation targeting
is likely to send yields spiking higher regardless of movements in short
rates. Despite the market euphoria of late 2023, the transition from printing
money to prudent money remains the single most important, and necessary,
change to monetary conditions going forward. The money supply contractions
currently being witnessed in major global economies suggest the process is
already under way. Such practice has broad implications for long-term equity
multiples (lower), prevailing bond yields (higher) and optimal stock
selection. It is reasonable to assume equity valuations adjust to reflect real
tangible value ascribed to profitability, cash flows and dividends. The
implications might be lower overall returns from financial assets for the next
decade simply because risk-based assets would need to compete with the
not-yet-recognised costs of the stunning rise in government debt. The
practicalities of securing positive real returns in such an environment could
prove demanding, but through focusing on quality, real assets and broad global
and sector diversification the Company maintains the flexibility to achieve
its investment objectives.
Bruce Stout, Senior Investment Director
Samantha Fitzpatrick, Investment Director
Martin Connaghan, Investment Director
abrdn Investments Limited
29 February 2024
The Manager's Investment Process
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 management team comprises Bruce Stout, Martin Connaghan and
Samantha Fitzpatrick who form part of abrdn's 16 strong income team (or 'pod')
providing investment strategies that aim to provide premium, sustainable
yields and strong risk-adjusted total returns driven through investing in
equities.
The Manager is dedicated to finding compelling investment opportunities across
the world through first-hand, forward-looking, fundamental research.
By rigorously assessing companies on their business model, sustainability and
competitive advantage, the Manager seeks out the current and potential leaders
and innovators in their industries, which can help deliver long-term returns
for investors. The Manager aims to identify performance drivers that are not
yet understood by the market and are mispriced - or spot imminent change that
is set to transform a company's prospects.
As well as delivering a financial return, the Manager is committed to using
equity investment and corporate engagement to make a positive difference to
society and the wider world. The Manager actively engages with companies to
raise standards of environmental, social and governance practice (ESG) - and
identify those companies leading the global transition to net zero carbon
emissions.
The Investment Process, Philosophy and Style
Idea Generation
When searching for investments for the Company's portfolio, the management
team benefits from the insights and ideas from the Manager's c.60-strong
Developed Markets Equity division and Global Emerging Market and Asian Equity
teams, and cross-asset class insights from conversations held between the
management team and other teams such as Credit, Real Estate, Multi-Asset,
Quant and Risk as well as the macro-economic research from the abrdn Research
Institute.
Analyst recommendations on every stock under coverage are quantitively
measured, recognising company insights are a critical component of alpha
generation in portfolios over time.
The Manager's reputation as a responsible long-term investor in these markets
means that the management team has first-rate access to the companies under
research. Through structured meetings and regular conversations, the Manager
gathers insights from both executive management teams and non-executive
directors.
Research
To leverage fully the benefits of the Manager's considerable research
resource, the management team uses a common investment language and research
framework that structures how the Manager expresses its thinking on companies.
This facilitates the effective and unambiguous articulation of research
insights. The Manager has also developed a proprietary research platform used
by all its Equity, Credit and ESG teams. This gives instant access to research
globally. The analysts are supported by a number of other proprietary tools
and ongoing improvements and refinements that are made to the research. The
company research focuses on three key pillars:
Putting quality first. To ensure proper context when completing company
research, the Manager captures key business fundamentals through the lens of
its quality assessment, using its five aspects of quality. The Manager looks
to uncover strong business models, clear competitive advantages, and industry
leaders and innovators. In short, business quality is established first. A
quality score ('Q score') is given to every company under coverage from one to
five (where a score of one denotes the highest quality and a score of five,
the lowest), both at an overall level and on five distinct criteria: (i)
financials; (ii) business model and moat; (iii) management; (iv) industry
background; and (v) ESG. Assessing quality will determine if the Manager
believes a company is appropriate for investment, and the view of changing
dynamics and the company's valuation drive the timing of that investment.
Always looking forward. The Manager aims to understand what lies ahead for the
business and the factors that will determine corporate value over time. By
understanding what is changing, both in terms of the fundamentals of a
business and market sentiment towards it, the Manager ensures it is always
well positioned for the future. This means that opportunities for
outperformance can be found where there is a mismatch between consensus and
the Manager's own analysis.
Valuation. Having understood the foundations of the business and how key
drivers are changing, the Manager focuses on valuing the company's shares. The
aim being to understand what the equity market is pricing in (both in terms of
the expected earnings trajectory and what valuation multiples reveal about how
the market is thinking), and then the Manager builds its own assessment of how
the stock should be priced based on its fundamental insights. The Manager uses
a wide range of valuation techniques and metrics in order to gauge the upside
potential, as well as to evaluate potential downside scenarios.
Integrated ESG and Climate Change Analysis
Whilst ESG factors are not the over-riding criteria in relation to the
investment decisions taken by the management team for the Company, significant
attention is given to ESG and climate related factors throughout the
investment process. The primary goal is to generate the best long-term
outcomes possible for the Company. By embedding ESG analysis into the active
equity investment process the Manager aims to enhance potential value for
shareholders, reducing risk and investing in companies that can contribute
positively to the world. As well as better-informed investment decisions the
Company also benefits from active ownership of its assets.
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 114 to 116.
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
and meet companies from all industries.
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 returns. 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 built by the Portfolio Managers are formally reviewed on a regular
basis with the Manager's Global Head of Equities, 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 management team comprises Bruce Stout, Martin Connaghan and Samantha
Fitzpatrick. The 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, which are then used by the portfolio managers as
the Company's investment universe. From this pool of companies, the management
team looks to construct a focused portfolio of 40 - 60 companies, selecting
companies with the most attractive quality and valuation characteristics,
offering the best expected risk-adjusted returns within a diversified
portfolio. There is a barbell approach to balancing the positioning in the
portfolio. In delivering the investment objective, there is a need for
exposure to companies with high dividend yields, where the management team
will be scrutinising characteristics including dividend growth, dividend
cover, free cash flows and balance sheet strength. There is also a desire for
exposure to businesses where the absolute level of dividend yield may be lower
but where the opportunity for growth in the dividend and capital via the share
price may be higher. Continuous analysis of revenue forecasts and current
revenue positioning by the management team allows for accurate insights into
the appropriate allocation. Top-down investment factors are secondary in the
portfolio construction process, 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 49 equity and 14
bond/preference share 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 40 to 47 of the published Annual
Report and Financial Statements for the year ended 31 December 2023 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 on page 16 of the published Annual Report and
Financial Statements for the year ended 31 December 2023.
abrdn Investments Limited
29 February 2024
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 (refer to glossary on page 120 of the published Annual Report and
Financial Statements for the year ended 31 December 2023 for definitions)
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. The Board
measures average yield against the rate of RPI and against other investment
options including the average of the peer group. Dividends paid over the past
10 years are set out on page 26 together with a chart showing the peer group
and reference index long term yields. There is also a graph showing dividend
growth against inflation on page 27 of the published Annual Report and
Financial Statements for the year ended 31 December 2023.
Relative Yield: The Board also monitors the yield level against the Reference
Index, the rate of RPI and other investment trusts' yields 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 and Financial Statements for the year ended 31
December 2023.
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 and Financial Statements for the year
ended 31 December 2023 and further commentary on the performance of the
Company is contained in the Chair's Statement and Investment Manager's Review.
Share Price Discount/Premium to NAV 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
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 and Financial
Statements for the year ended 31 December 2023.
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 and Financial Statements for the year ended 31
December 2023.
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.
Performance Track Record
Total Return
% Return 1 year 3 year 5 year 10 year
Share price(AB) +1.1 +30.8 +44.2 +93.7
Net asset value per Ordinary share(A) +8.6 +34.9 +52.9 +116.0
UK RPI +5.2 +28.3 +32.7 +49.6
Reference Index(C) +15.7 +28.7 +66.8 +147.1
(A) Considered to be an Alternative Performance Measure (see below for more
details).
(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 (A) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Total revenue (£'000) 62,609 67,020 77,333 79,471 77,105 82,417 68,918 78,737 88,745 88,833
Per Ordinary share (p):
Net asset value 193.3 169.8 227.1 250.3 221.6 238.0 227.6 248.1 258.7 268.8
Share price 205.2 165.9 237.6 253.6 226.4 252.0 226.0 231.2 266.8 258.0
Net revenue return(B) 8.2 9.1 10.2 10.4 9.9 10.8 9.3 10.3 12.0 12.1
Dividends(C) 9.0 9.3 9.5 10.0 10.3 10.7 10.9 11.0 11.2 11.5
Dividend cover 0.91x 0.99x 1.08x 1.04x 0.96x 1.01x 0.86x 0.94x 1.07x 1.05x
Revenue reserves (£'000) 64,690 64,767 70,963 75,252 73,563 75,747 66,764 62,967 69,239 75,132
Shareholders' funds (£'bn) 1.241 1.091 1.448 1.599 1.420 1.539 1.462 1.561 1.617 1.669
Ongoing charges ratio(%)(D) 0.73 0.75 0.68 0.64 0.69 0.65 0.68 0.59 0.52 0.53
(A) Figures for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
(B) Net revenue return per Ordinary share has been based on the average
Ordinary share capital during each year (see note 9 on page 90).
(C) The figure for dividends per share reflects the years to which their
declaration relates and not the years they were paid.
(D) Considered to be an Alternative Performance Measure a - see below for more
details.
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 of 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 considered
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. Longer term performance 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 undertakes limited stocklending activity.
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 8.0% (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 2023
Broadcom Corporation Aeroporto del Sureste
Holding: 4.8% Holding: 4.6%
Broadcom designs, develops and markets digital and analogue semiconductors Grupo Aeroporto del Sureste operates airports in Mexico. The company holds
worldwide. The company offers wireless components, storage adaptors, long-term concessions to manage airports in leading tourist resorts and major
networking processors, switches, fibre optic modules and optical sensors. cities.
BE Semiconductor Taiwan Semiconductor Manufacturing
Holding: 4.0% Holding: 3.8%
BE Semiconductor Industries N.V produces integrated semiconductor assembly Taiwan Semiconductor Manufacturing is one of the largest integrated circuit
equipment. The business designs, develops, builds, markets and services manufacturers in the world. The company is involved in component design,
machines that manufacture semiconductor packages. BE also produces automated manufacturing, assembly, testing and mass production of integrated circuits.
moulding and plating machines and manufactures leadframes.
AbbVie TotalEnergies
Holding: 3.0% Holding: 2.9%
AbbVie Inc is a global pharmaceutical company, producing a broad range of The Company produces, transports and supplies crude oil, natural gas and low
drugs for use in speciality therapeutic areas such as immunology, chronic carbon electricity as well as refining petrochemical products. TotalEnergies
kidney disease, oncology and neuroscience. also owns and manages gasoline filling stations worldwide.
Philip Morris International CME Group
Holding: 2.9% Holding: 2.7%
Philip Morris International is one of the world's leading global tobacco Based in Chicago, USA CME Group operates a derivatives exchange, that trades
companies. It manufactures and sells leading recognisable brands such as futures contracts and options, interest rates, stock indexes, foreign exchange
Marlboro, Parliament and Virginia Slims. and commodities.
Oversea-Chinese Bank Samsung Electronics
Holding: 2.6% Holding: 2.5%
Oversea-Chinese Banking Corporation offers a comprehensive range of financial Korean based Samsung Electronics manufactures a wide range of consumer and
services spread across four main business segments. These include Global industrial electronic equipment and products such as semiconductors,
Consumer/Private Banking: Global Wholesale Banking; Global Treasury & computers, monitors, peripherals, televisions and home appliances. The company
Markets; plus Insurance. also has a significant share of the global mobile phone handset market.
List of Investments
Valuation Total Valuation
2023 assets(A) 2022(B)
Company Country £'000 % £'000
Broadcom Corporation USA 87,573 4.8 55,777
Aeroporto del Sureste Mexico 83,062 4.6 79,049
BE Semiconductor Netherlands 73,070 4.0 31,001
Taiwan Semiconductor Manufacturing Taiwan 68,091 3.8 54,589
AbbVie USA 54,711 3.0 60,465
TotalEnergies France 53,377 2.9 52,036
Philip Morris International USA 51,665 2.9 58,914
CME Group USA 49,563 2.7 41,931
Oversea-Chinese Bank Singapore 46,314 2.6 45,297
Samsung Electronics Korea 44,818 2.5 40,735
Top ten investments 612,244 33.8
Unilever(C) UK & Netherlands 43,698 2.4 47,964
Zurich Insurance Switzerland 40,962 2.3 39,743
Siemens Germany 40,703 2.3 31,792
Merck USA 38,484 2.1 32,279
BHP Group Australia 37,653 2.1 35,980
GlobalWafers Taiwan 37,509 2.1 28,907
Walmart de Mexico Mexico 36,376 2.0 -
Shell Netherlands 34,945 1.9 31,634
Enel Italy 33,978 1.9 26,018
Danone France 33,743 1.9 29,090
Top twenty investments 990,295 54.8
Tryg Denmark 33,264 1.8 38,504
Vale do Rio Doce Brazil 33,103 1.8 37,561
Hon Hai Precision Industry Taiwan 31,898 1.8 32,425
Cisco Systems USA 31,704 1.7 31,683
Johnson & Johnson USA 30,369 1.7 36,277
Verizon Communications USA 29,565 1.6 32,754
Sociedad Quimica Y Minera de Chile Chile 28,334 1.6 39,819
Telus Canada 28,008 1.5 32,040
Sanofi France 27,207 1.5 27,898
Atlas Copco Sweden 26,675 1.5 26,578
Top thirty investments 1,290,422 71.3
Singapore Telecommunications Singapore 26,333 1.5 28,673
Bristol-Myers Squibb USA 26,152 1.4 38,868
British American Tobacco UK 25,240 1.4 36,097
Epiroc Sweden 24,701 1.4 26,728
Hong Kong Exchanges Hong Kong 24,194 1.3 -
Telkom Indonesia Indonesia 24,149 1.3 24,031
Banco Bradesco Brazil 23,753 1.3 20,714
Woodside Energy Australia 23,268 1.3 27,948
Roche Holdings Switzerland 22,783 1.3 26,098
SCB X Thailand 21,822 1.2 23,114
Top forty investments 1,532,817 84.7
TC Energy Canada 21,529 1.2 23,149
Enbridge Canada 21,283 1.2 24,347
China Resources Land China 19,655 1.1 26,655
Telefonica Brasil Brazil 19,463 1.1 13,493
United Mexican States 5.75% 05/03/26(D) Mexico 17,084 1.0 15,422
Pernod-Ricard France 16,606 0.9 -
Republic of Indonesia 6.125% 15/05/28(D) Indonesia 15,078 0.8 15,670
Republic of South Africa 7% 28/02/31(D) South Africa 14,369 0.8 15,779
Telenor Norway 13,504 0.7 11,593
Ping An Insurance China 12,766 0.7 19,805
Top fifty investments 1,704,154 94.2
Republic of Dominica 6.85% 27/01/45(D) Dominican Republic 11,702 0.6 10,777
Republic of Indonesia 8.375% 15/03/34(D) Indonesia 11,374 0.6 11,709
Petroleos Mexicanos 6.75% 21/09/47(D) Mexico 10,264 0.6 10,589
Diageo UK 8,568 0.5 -
China Vanke China 7,956 0.5 18,512
HDFC Bank 7.95% 21/09/26(D) India 7,053 0.4 7,603
Power Finance Corp 7.63% 14/08/26(D) India 7,020 0.4 7,529
Petroleos Mexicanos 5.5% 27/06/44(D) Mexico 5,789 0.3 5,786
Republic of Indonesia 10% 15/02/28(D) Indonesia 4,274 0.2 4,568
General Accident 7.875% Cum Irred Pref(D) UK 3,220 0.2 3,164
Top sixty investments 1,781,374 98.5
Santander 10.375% Non Cum Pref(D) UK 3,197 0.1 3,105
Republic of Turkey 9% 24/07/24(D) Turkey 1,715 0.1 3,311
Republic of Turkey 8% 12/03/25(D) Turkey 1,577 0.1 3,460
Total investments 1,787,863 98.8
Net current assets(A) 20,900 1.2
Total assets(E) 1,808,763 100.0
(A) Excluding bank loan.
(B) The 2022 column denotes the Company's holding at 31 December 2022.
(C) The 2023 holding comprises UK and Netherlands securities, split
£22,797,000 (2022 - £25,092,000) and £20,901,000 (2022 - £22,872,000)
respectively.
(D) Quoted preference share or bond.
(E) See definition on page 122 of the published Annual Report and Financial
Statements for the year ended 31 December 2023.
Summary of Net Assets
Valuation Valuation
31 December 2023 31 December 2022
£'000 % £'000 %
Equities 1,674,147 100.3 1,661,132 102.7
Preference shares 6,417 0.4 6,269 0.4
Bonds 107,299 6.4 117,419 7.3
Total investments 1,787,863 107.1 1,784,820 110.4
Net current assets(A) 20,900 1.3 31,796 2.0
Total assets(B) 1,808,763 108.4 1,816,616 112.4
Borrowings(C) (139,901) (8.4) (199,866) (12.4)
Net assets 1,668,862 100.0 1,616,750 100.0
(A) Excluding bank loan.
(B) See definition on page 122. of the published Annual Report and Financial
Statements for the year ended 31 December 2023
(C) See note 13.
Sector/Geographical Analysis
Asia Africa
United North Europe Pacific Latin & Middle 2023 2022
Kingdom America ex UK ex Japan America East Total Total
Sector/Geographical Analysis % % % % % % % %
Energy - 2.4 4.8 1.3 - - 8.5 8.7
Oil, Gas and Coal - 2.4 4.8 1.3 - - 8.5 8.7
Basic Materials - - - 2.1 3.4 - 5.5 6.3
Chemicals - - - - 1.6 - 1.6 2.2
Industrial Metals and Mining - - - 2.1 1.8 - 3.9 4.1
Industrials - - 5.2 - 4.6 - 9.8 9.2
General Industrials - - 2.3 - - - 2.3 1.8
Industrial Engineering - - 2.9 - - - 2.9 3.0
Industrial Transportation - - - - 4.6 - 4.6 4.4
Consumer Staples 3.1 2.9 4.0 - - - 10.0 11.0
Beverages 0.5 - 0.9 - - - 1.4 -
Food Producers - - 1.9 - - - 1.9 1.6
Personal Care, Drug and Grocery Stores 1.2 - 1.2 - - - 2.4 4.2
Tobacco 1.4 2.9 - - - - 4.3 5.2
Consumer Discretionary - - - - 2.0 - 2.0 -
Retailers - - - - 2.0 - 2.0 -
Health Care - 8.2 2.8 - - - 11.0 12.1
Pharmaceuticals & Biotechnology - 8.2 2.8 - - - 11.0 12.1
Telecommunications - 4.8 0.7 5.3 1.1 - 11.9 12.2
Telecommunications Service Providers - 3.1 0.7 2.8 1.1 - 7.7 10.5
Telecommunications Equipment - 1.7 - 2.5 - - 4.2 1.7
Utilities - - 1.9 - - - 1.9 1.4
Electricity - - 1.9 - - - 1.9 1.4
Financials - 2.7 4.1 5.8 1.3 - 13.9 14.1
Banks - - - 3.8 1.3 - 5.1 6.4
Investment Banking and Brokerage Services - 2.7 - 1.3 - - 4.0 2.3
Life Insurance - - - 0.7 - - 0.7 1.1
Nonlife Insurance - - 4.1 - - - 4.1 4.3
Real Estate - - - 1.6 - - 1.6 3.0
Real Estate Investment and Services - - - 1.6 - - 1.6 3.0
Technology - 4.8 4.0 7.7 - - 16.5 13.4
Technology Hardware & Equipment - 4.8 4.0 7.7 - - 16.5 13.4
Total equities 3.1 25.8 27.5 23.8 12.4 - 92.6 91.4
Preference shares and bonds 0.3 - 0.2 2.4 2.5 0.8 6.2 6.8
Total investments 3.4 25.8 27.7 26.2 14.9 0.8 98.8 98.2
Net current assets 1.2 1.8
Total assets(A) 100.0 100.0
(A) See definition on page 122. of the published Annual Report and Financial
Statements for the year ended 31 December 2023
Directors' Report
The Directors present their report and the audited financial statements for
the year ended 31 December 2023.
Results and Dividends
Details of the Company's results and proposed dividend are shown on pages 8
and 9 of the published Annual Report and Financial Statements for the year
ended 31 December 2023.
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 2023 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. On 24 April 2023, the Company confirmed the completion of the
sub-division of the Ordinary shares of 25 pence each into new Ordinary shares
of 5 pence each on a five for one basis which had been approved by
shareholders at the Company's AGM held on 21 April 2023. The new Ordinary
shares of 5p continue to be listed and trading on the London Stock Exchange,
albeit under a new ISIN and SEDOL, as follows:
New ISIN: GB00BQZCCB79
New SEDOL: BQZCCB7
The ticker for the New Ordinary Shares remained the same (MYI).
At 31 December 2023, there were 620,866,332 fully paid Ordinary shares of 5p
each (2022 - 625,064,465 Ordinary shares - restated for subdivision) in
issue. At the year end there were 26,193,683 (2022 - 21,995,550 - restated
for subdivision) Ordinary shares held in Treasury.
During the year 5,248,133 Ordinary shares were bought back for Treasury
representing 0.8% of the Company's total issued share capital (2022 -
4,244,815 Ordinary shares - restated). Further details on buybacks are
provided in note 14 to the financial statements. In addition, 1,050,000
Ordinary shares were sold from Treasury at a premium to NAV (2022 - nil).
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.
The management fee is 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. In addition, 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 six non-executive Directors.
The names and biographies of the current Directors are disclosed on pages 50
to 52 of the published Annual Report and Financial Statements for the year
ended 31 December 2023 indicating their range of experience as well as length
of service. Mr Eckersley was appointed to the Board on 1 May 2023 and Ms
Colquhoun was appointed to the Board on 1 September 2023.
All Directors will retire at the AGM in April 2024 and, with the exception of
Mr Eckersley and Ms Colquhoun, each Director will stand for re-election (with
Mr Eckersley and Ms Colquhoun both 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 or
election of the individual Directors are set out on pages 50 to 52 of the
published Annual Report and Financial Statements for the year ended 31
December 2023.
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 2023. The Board confirms that the Company is in
compliance with the recommendations of the Parker Review on diversity in the
UK boardroom.
Board as at 31 December 2023
Number of Board Members Percentage of the Board Number of Senior Positions
on the Board
Men 2 33% 0
Women (Note 1) 4 67% 3
Prefer not to say - -
White British or other White (including minority-white groups) 5 83% 3
Minority Ethnic (Note 2) 1 17% 0
Prefer not to say - - -
1. Meets target that at least 40% of Directors are women as set out in LR
9.8.6R (9)(a)(i).
2. Meets target that at least one Director is from a minority ethnic
background as set out in LR 9.8.6R (9)(a)(iii).
The Role of the Chair and Senior Independent Director
The Chair of the Company is responsible for providing effective leadership to
the Board, by setting the tone of the Company, demonstrating objective
judgement and promoting a culture of openness and debate. The Chair
facilitates the effective contribution, and encourages active engagement, by
each Director. In conjunction with the Company Secretary, the Chair ensures
that Directors receive accurate, timely and clear information to assist them
with effective decision-making. The Chair 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 Chair also engages
with major shareholders and ensures that all Directors understand shareholder
views.
The Senior Independent Director acts as a sounding board for the Chair 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 Chair, and leads the
annual appraisal of the Chair'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 Chair 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 chair 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 Board is cognisant of the
recently published updated Corporate Governance Code 2024, effective for
financial years commencing on or after 1 January 2025 and, during 2024, will
consider any implications on operations and governance.
The table below details Directors' attendance at scheduled Board and Committee
meetings held during the year ended 31 December 2023 (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.
Scheduled Audit Nom. MEC Rem.
Board Com Com Com
V. Holmes (A) 6 (6) 3 (3) 2 (2) 1 (1) 1 (1)
C. Binyon 6 (6) 3 (3) 2 (2) 1 (1) 1 (1)
W. Colquhoun (B) 2 (2) 1 (1) n/a n/a 1 (1)
G. Eckersley (C) 4 (4) 2 (2) n/a n/a 1 (1)
A. Mackesy 6 (6) 3 (3) 2 (2) 1 (1) 1 (1)
N. Melhuish 6 (6) 3 (3) 2 (2) 1 (1) 1 (1)
D. Hardie (D) 6 (6) n/a 2 (2) 1 (1) n/a
(A) Ms Holmes was appointed Chair on 31 December 2023
(B) Ms Colquhoun joined the Board on 1 September 2023
(C) Mr Eckersley joined the Board on 1 May 2023
(D) Mr Hardie retired from the Board on 31 December 2023 and was not a member
of either the Audit and Risk Committee or the Remuneration Committee but
attended all Committee meetings by invitation
Board Committees
Terms of Reference
The terms of reference of all the Board Committees may be found on the
Company's website murray-intl.co.uk and copies are available from the Company
Secretary upon request. The terms of reference are reviewed and re-assessed by
the Board for their adequacy on an
annual basis.
Audit and Risk Committee
The Report of the Audit and Risk Committee is on pages 65 and 66 of the
published Annual Report and Financial Statements for the year ended 31
December 2023.
Management Engagement Committee ("MEC")
The MEC comprises all of the Directors and is chaired by Ms Holmes. The
Committee reviews the performance of the Manager and its compliance with the
terms of the management and secretarial agreement. The terms and conditions of
the Manager's appointment, including an evaluation of fees, are reviewed by
the Committee on an annual basis. The Committee believes that the continuing
appointment of the Manager on the terms that have
been agreed is in the interests of shareholders as a whole. The Committee is
also responsible for the oversight and annual review of all other key service
provider relationships.
Nomination Committee
All appointments to the Board of Directors are considered by the Nomination
Committee which comprises the entire Board and is chaired by Ms Holmes. The
Board's overriding priority in appointing new Directors to the Board is to
identify the candidate with the best range of skills and experience to
complement existing Directors. The Board also recognises the benefits of
diversity and its policy on diversity is referred to in the Strategic Report
on page 30 of the published Annual Report and Financial Statements for the
year ended 31 December 2023. When Board positions become available as a
result of retirement or resignation, the Company ensures that a diverse group
of candidates is considered.
The Board's policy on tenure is that continuity and experience are considered
to add significantly to the strength of the Board. The Board also takes the
view that independence is not necessarily compromised by length of tenure on
the Board. However, in compliance with the provisions of the AIC Code, it is
expected that Directors will serve in accordance with the time limits laid
down by the AIC Code. It is the policy of the Board that the Chair of the
Company should retire once he or she has served as a Director for nine years
in line with current best practice of the Financial Reporting Council. However
there could be circumstances where it might be appropriate to ask a Chair to
stay on for a limited period and in this case the reasons for the extension
would be fully explained to shareholders and a timetable for the departure of
the Chair clearly set out.
During the year the Board conducted separate searches for the appointment of
Ms Colquhoun and Mr Eckersley using the services of Fletcher Jones and
Longwater Partners respectively, both being independent external recruitment
consultants that have no other connections or conflicts with the Company.
The Committee has put in place the necessary procedures to conduct, on an
annual basis, an appraisal of the Chair of the Board, Directors' individual
self-evaluation and a performance evaluation of the Board as a whole. An
external evaluation was undertaken during the year using the services of
Lintstock, an independent external board evaluation service provider that does
not have any other connections with the Company. This external evaluation
included the completion of questionnaires covering the Board, individual
Directors, the Chair and the Audit and Risk Committee Chair. The detailed
findings were then considered by the Board and the Chair discussed the
responses individually with each Director and the Senior Independent Director
provided appraisal feedback to the Chair.
In accordance with Principle 23 of the AIC's Code of Corporate Governance
which recommends that all directors of investment companies should be subject
to annual re-election by shareholders, all the members of the Board, will
retire at the forthcoming Annual General Meeting and will offer themselves for
re-election (Mr Eckersley and Ms Colquhoun will be offering themselves for
election). The Committee has reviewed each of the proposed reappointments
and concluded that each of the Directors has the requisite high level and
range of business and financial experience and recommends their re-election at
the forthcoming AGM. Details of the contributions provided by each Director
during the year are disclosed on pages 50 and 52 of the published Annual
Report and Financial Statements for the year ended 31 December 2023.
Remuneration Committee
The level of fees payable to Directors is considered by the Remuneration
Committee which comprises the entire Board excluding the Chair who attends by
invitation and which is chaired by Mr Melhuish.
The Company's remuneration policy is to set remuneration at a level to attract
individuals of a calibre appropriate to the Company's future development.
Further information on remuneration is disclosed in the Directors'
Remuneration Report on pages 61 to 64 of the published Annual Report and
Financial Statements for the year ended 31 December 2023.
Going Concern
The Directors have undertaken a robust review of the Company's viability
(refer to statement on page 37 of the published Annual Report and Financial
Statements for the year ended 31 December 2023) and ability to continue as a
going concern and consider that there are no material uncertainties. 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 and the Company itself
has a strong balance sheet with considerable levels of distributable reserves.
The Company has a £30 million fixed rate loan facility which is due to mature
in May 2024. The Directors are currently reviewing options to replace the
facility including the use of the Loan Note Shelf Facility. If acceptable
terms are available, the Company expects to continue to access a similarly
sized level of gearing. However, 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 and Financial Statements for
the year ended 31 December 2023 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 12 months from the date of
this Annual Report. Accordingly, the Directors continue to adopt the going
concern basis in preparing these financial statements.
Accountability and Audit
Each Director confirms that, so far as he or she is aware, there is no
relevant audit information of which the Company's auditor is unaware, and he
or she has taken all the steps that they ought to have taken as a Director in
order to make themselves aware of any relevant audit information and to
establish that the Company's auditor is aware of that information.
Independent Auditor
BDO LLP was appointed independent auditor to the Company with effect from the
AGM on 27 April 2020. BDO LLP has expressed its willingness to continue to be
the Company's independent auditor and a Resolution to re-appoint BDO LLP as
the Company's auditor will be put to the forthcoming AGM, along with a
separate Resolution to authorise the Directors to fix the auditor's
remuneration.
Internal Controls and Risk Management
Details of the financial risk management policies and objectives relative to
the use of financial instruments by the Company including information on
exposure to price risk, credit risk, liquidity risk and cash flow risk are set
out in note 18 to the financial statements. The Board of Directors is
ultimately responsible for the Company's system of internal control and for
reviewing its effectiveness. Following the Financial Reporting Council's
publication of "Guidance on Risk Management, Internal Controls and Related
Financial and Business Reporting" (the "FRC Guidance"), the Directors confirm
that there is an ongoing process for identifying, evaluating and managing the
significant risks faced by the Company. This process has been in place for the
full year under review and up to the date of approval of the financial
statements, and this process is regularly reviewed by the Board and accords
with the relevant sections of the FRC Guidance.
The Board has reviewed the effectiveness of the system of internal control
and, in particular, it has reviewed the process for identifying and evaluating
the significant risks faced by the Company and the policies and procedures by
which these risks are managed.
The Directors have delegated the investment management of the Company's assets
to aFML within overall guidelines and this embraces implementation of the
system of internal control, including financial, operational and compliance
controls and risk management. Internal control systems are monitored and
supported by aFML's internal audit function which undertakes periodic
examination of business processes, including compliance with the terms of the
management agreement, and ensures that recommendations to improve controls are
implemented.
Risks are identified and documented through a risk management framework by
each function within the Manager's activities. Risk is considered in the
context of the FRC Guidance and includes financial, regulatory, market,
operational and reputational risk. This helps the Manager's internal audit
risk assessment model to identify those functions for review. Any relevant
weaknesses identified through internal audit's review are reported to the
Board and timetables are agreed for implementing improvements to systems,
processes and controls. The implementation of any remedial action required is
monitored and feedback provided to the Board.
The key components designed to provide effective internal control for the year
under review and up to the date of this Report are outlined below:
- the Manager prepares forecasts and management accounts which allow
the Board to assess the Company's activities and review its investment
performance;
- the Board and Manager have agreed clearly defined investment
criteria;
- there are specified levels of authority and exposure limits.
Reports on these issues, including performance statistics and investment
valuations, are regularly submitted to the Board. The Manager's investment
process and financial analysis of the companies concerned include detailed
appraisal and due diligence;
- as a matter of course the internal audit and compliance
departments of aFML continually review the Manager's operations;
- written agreements are in place which specifically define the
roles and responsibilities of the Manager and other third party service
providers and monitoring reports are received from these providers when
required;
- the Board has considered the need for an internal audit function
but, because of the compliance and internal control systems in place at the
Manager, has decided to place reliance on the Manager's systems and internal
audit procedures; and
- twice a year, at its Board meetings, the Board carries out an
assessment of the effectiveness of internal controls and risk management by
considering documentation from the Manager, including its internal audit and
compliance functions and taking account of events since the relevant period
end.
In addition the Manager operates a 'three lines of defence' model over its
activities with the abrdn business units responsible for adhering to
applicable rules and regulations; the compliance team is then responsible for
checking that the rules are being followed and then internal audit is
responsible for independently reviewing these arrangements.
The Manager ensures that clearly documented contractual arrangements exist in
respect of any activities that have been delegated to external professional
organisations. The Board meets annually with representatives from BNY Mellon
and reviews a control report covering the activities of the depositary and
custodian.
Representatives from the Internal Audit Department of the Manager report six
monthly to the Audit and Risk Committee of the Company and have direct access
to the Directors at any time.
The Board has reviewed the effectiveness of the Manager's system of internal
control including its annual internal controls report prepared in accordance
with the International Auditing and Assurance Standards Board's International
Standard on Assurances Engagements ("ISAE") 3402, "Assurance Reports on
Controls at a Service Organisation". The Board has also reviewed the Manager's
process for identifying and evaluating the significant risks faced by the
Company and the policies and procedures by which these risks are managed.
The internal control systems are designed to meet the Company's particular
needs and the risks to which it is exposed. Accordingly, the internal control
systems are designed to manage rather than eliminate the risk of failure to
achieve business objectives and, by their nature, can provide reasonable but
not absolute assurance against material misstatement or loss.
Future Developments
A detailed outlook for the Company including any likely future developments is
provided in the Chair's Statement.
There have been no post balance sheet events to report.
Substantial Interests
The Board is aware of the following shareholders that owned 3% or more of the
issued Ordinary share capital of the Company at 31 December 2023:
Shareholder No. of Ordinary shares held % held
Interactive Investor (A) 104,193,649 16.8
Hargreaves Lansdown (A) 75,276,506 12.1
Rathbones 58,596,744 9.4
Evelyn Partners 36,170,190 5.8
Charles Stanley 34,254,245 5.5
AJ Bell 25,389,050 4.1
(A) Non-beneficial interests
On 28 February 2024, Evelyn Partners notified the Company that its total
holding of Ordinary shares was 30,978,688 representing 5.01%. There have
been no other significant changes notified in respect of the above holdings
between 31 December 2023 and 29 February 2024.
The UK Stewardship Code and Proxy Voting
Responsibility for actively monitoring the activities of portfolio companies
has been delegated by the Board to the AIFM which has sub-delegated that
authority to the Manager.
The Manager is a tier 1 signatory of the UK Stewardship Code which aims to
enhance the quality of engagement by investors with investee companies in
order to improve their socially responsible performance and the long-term
investment return to shareholders.
Business of the Annual General Meeting
Issue of Shares
In terms of the Companies Act 2006 (the "Act"), the Directors may not allot
shares unless so authorised by the shareholders. Resolution 12 in the Notice
of Annual General Meeting which will be proposed as an Ordinary Resolution
will, if passed, give the Directors the necessary authority to allot shares up
to an aggregate nominal amount of £3,104,332 (equivalent to 62,086,633
Ordinary shares of 5p or 10% of the Company's existing issued share capital at
29 February 2024, the latest practicable date prior to the publication of this
Annual Report). Such authority will expire on the date of the 2025 Annual
General Meeting or on 30 June 2025, whichever is earlier. This means that the
authority will have to be renewed at the next Annual General Meeting.
When shares are to be allotted for cash, Section 561 of the Act provides that
existing shareholders have pre-emption rights and that the new shares must be
offered first to such shareholders in proportion to their existing holding of
shares. However, shareholders can, by special resolution, authorise the
Directors to allot shares otherwise than by a pro rata issue to existing
shareholders. Special Resolution 13 will, if passed, also give the Directors
power to allot for cash equity securities up to an aggregate nominal amount of
£3,104,332 (equivalent to 62,086,633 Ordinary shares of 5p or 10% of the
Company's existing issued share capital at 29 February 2024, the latest
practicable date prior to the publication of this Annual Report), as if
Section 561 of the Act does not apply. This is the same nominal amount of
share capital which the Directors are seeking the authority to allot pursuant
to Resolution 12. This authority will also expire on the date of the 2025
Annual General Meeting or on 30 June 2025, whichever is earlier. This
authority will not be used in connection with a rights issue by the Company.
The Directors intend to use the authority given by Resolutions 12 and 13 to
allot shares and disapply pre-emption rights only in circumstances where this
will be clearly beneficial to shareholders as a whole. Accordingly, issues
will only be made where shares can be issued at a premium of 0.5% or more to
NAV and there will never be any dilution for existing shareholders. The
issue proceeds will be available for investment in line with the Company's
investment policy. No issue of shares will be made which would effectively
alter the control of the Company without the prior approval of shareholders in
general meeting. Resolution 13 will also disapply pre-emption rights on the
sale of Treasury shares as envisaged above. Once again, the pre-emption rights
would only be disapplied where the Treasury shares are sold at a premium to
NAV of not less than 0.5%.
Share Buybacks
At the Annual General Meeting held on 21 April 2023, shareholders approved the
renewal of the authority permitting the Company to repurchase its Ordinary
shares.
The Directors wish to renew the authority given by shareholders at the last
Annual General Meeting. The principal aim of a share buyback facility is to
enhance shareholder value by acquiring shares at a discount to NAV, as and
when the Directors consider this to be appropriate. The purchase of shares,
when they are trading at a discount to NAV per share, should result in an
increase in the NAV per share for the remaining shareholders. This authority,
if conferred, will only be exercised if to do so would result in an increase
in the NAV per share for the remaining shareholders and if it is in the best
interests of shareholders generally. Any purchase of shares will be made
within guidelines established from time to time by the Board. It is proposed
to seek shareholder authority to renew this facility for another year at the
Annual General Meeting.
Under the Listing Rules, the maximum price that may be paid on the exercise of
this authority must not be more than the higher of (i) an amount equal to 105%
of the average of the middle market quotations for a share taken from the
London Stock Exchange Daily Official List for the five business days
immediately preceding the day on which the share is purchased; and (ii) the
higher of the last independent trade and the current highest independent bid
on the trading venue where the purchase is carried out. The minimum price
which may be paid is the nominal value of the share. It is currently proposed
that any purchase of shares by the Company will be made from the capital
reserve of the Company. The purchase price will normally be paid out of the
cash balances held by the Company from time to time.
Special Resolution 14 will permit the Company to buy back shares and any
shares bought back by the Company may be cancelled or held as Treasury shares.
The benefit of the ability to hold Treasury shares is that such shares may be
resold. This should give the Company greater flexibility in managing its share
capital and improve liquidity in its shares. The Company would only sell on
Treasury shares at a premium to NAV. When shares are held in Treasury, all
voting rights are suspended and no distribution (either by way of dividend or
by way of a winding up) is permitted in respect of Treasury shares. If the
Directors believe that there is no likelihood of re-selling shares bought
back, such shares would be cancelled. During the year to 31 December 2023 the
Directors have successfully used the share buyback authority to acquire
5,248,133 shares for Treasury.
Special Resolution 14 in the Notice of Annual General Meeting will renew the
authority to purchase in the market a maximum of 14.99% of shares in issue at
the date of the Annual General Meeting (amounting to 93,067,863 Ordinary
shares of 5p as at 29 February 2024). Such authority will expire on the date
of the 2025 Annual General Meeting or on 30 June 2025, whichever is earlier.
This means in effect that the authority will have to be renewed at the next
Annual General Meeting or earlier if the authority has been exhausted.
Recommendation
The Directors consider that the authorities requested above are in the best
interests of the shareholders taken as a whole and recommend that all
shareholders vote in favour of the resolutions, as the Directors intend to in
respect of their own beneficial holdings of Ordinary shares amounting in
aggregate to 80,065 shares, representing approximately 0.01% of the Company's
issued share capital as at 29 February 2024.
By order of the Board of Murray International Trust PLC
abrdn Holdings Limited
Secretary
1 George Street, Edinburgh EH2 2LL
29 February 2024
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
Virginia Holmes
Chair
29 February 2024
Statement of Comprehensive Income
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments 10 - 62,838 62,838 - 66,401 66,401
Income 3 88,833 145 88,978 88,745 - 88,745
Investment management fees 4 (2,079) (4,850) (6,929) (2,024) (4,724) (6,748)
Currency (losses)/gains - (336) (336) - 84 84
Administrative expenses 5 (1,790) - (1,790) (1,651) - (1,651)
Net return before finance costs and taxation 84,964 57,797 142,761 85,070 61,761 146,831
Finance costs 6 (1,240) (2,892) (4,132) (1,409) (3,286) (4,695)
Return before taxation 83,724 54,905 138,629 83,661 58,475 142,136
Taxation 7 (7,829) 1,047 (6,782) (8,405) 990 (7,415)
Return attributable to equity shareholders 75,895 55,952 131,847 75,256 59,465 134,721
Return per Ordinary share (pence)(A) 9 12.1 9.0 21.1 12.0 9.5 21.5
(A) Figures for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14 o.
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 2023 31 December 2022
Notes £'000 £'000
Fixed assets
Investments at fair value through profit or loss 10 1,787,863 1,784,820
Current assets
Prepayments and accrued income 11 8,069 7,195
Other debtors 11 10,151 9,306
Cash at bank and in hand 5,878 18,131
24,098 34,632
Creditors: amounts falling due within one year
Bank loans 12,13 (29,996) (59,989)
Other creditors 12 (3,198) (2,836)
(33,194) (62,825)
Net current liabilities (9,096) (28,193)
Total assets less current liabilities 1,778,767 1,756,627
Creditors: amounts falling due after more than one year
Bank loans 12,13 - (29,982)
Loan Notes 12,13 (109,905) (109,895)
Net assets 1,668,862 1,616,750
Capital and reserves
Called-up share capital 14 32,353 32,353
Share premium account 363,461 362,967
Capital redemption reserve 8,230 8,230
Capital reserve 15 1,189,686 1,143,961
Revenue reserve 75,132 69,239
Equity shareholders' funds 1,668,862 1,616,750
Net asset value per Ordinary share (pence)(A) 16 268.8 258.7
(A) Figures for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
The financial statements were approved and authorised for issue by the Board
of Directors on 29 February 2024 and were signed on its behalf by:
Virginia Holmes
Director
Company Number: SC006705.
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 31 December 2023
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2022 32,353 362,967 8,230 1,143,961 69,239 1,616,750
Return after taxation - - - 55,952 75,895 131,847
Dividends paid 8 - - - - (70,002) (70,002)
Issue of shares from Treasury 14 - 494 - 2,295 - 2,789
Buy back of shares to Treasury 14 - - - (12,522) - (12,522)
Balance at 31 December 2023 32,353 363,461 8,230 1,189,686 75,132 1,668,862
For the year ended 31 December 2022
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'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
The accompanying notes are an integral part of these financial statements.
Statement of Cash Flows
Year ended Year ended
31 December 2023 31 December 2022
Notes £'000 £'000
Net return before finance costs and taxation 142,761 146,831
Increase in accrued expenses 307 265
Overseas withholding tax (7,652) (9,945)
(Increase)/decrease in accrued income (1,516) 1,401
Interest paid (4,216) (4,562)
Gains on investments (62,838) (66,401)
Overseas dividends - capital (145) -
Currency losses/(gains) 336 (84)
Decrease/(increase) in other debtors 55 (29)
Corporation tax received 136 -
Return of capital included in investment income 145 -
Net cash inflow from operating activities 67,373 67,476
Investing activities
Purchases of investments (95,353) (187,490)
Sales of investments 155,624 208,417
Net cash from investing activities 60,271 20,927
Financing activities
Equity dividends paid 8 (70,002) (68,984)
Ordinary shares issued from Treasury 14 2,789 -
Ordinary shares bought back to Treasury 14 (12,348) (10,053)
Issue of Loan Notes - 59,976
Loan repayment (60,000) (60,000)
Net cash used in financing activities (139,561) (79,061)
(Decrease)/increase in cash and cash equivalents (11,917) 9,342
Analysis of changes in cash and cash equivalents during the year
Opening balance 18,131 8,705
Effect of exchange rate fluctuations on cash held (336) 84
(Decrease)/increase in cash as above (11,917) 9,342
Closing cash and cash equivalents 5,878 18,131
Represented by:
Cash at bank and in hand 5,878 18,131
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2023
1. Principal activity
The Company is a closed-end investment company, registered in Scotland No
SC006705, with its Ordinary shares being listed in the premium segment market
of 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 Statement of Financial Position headings of "non-current assets" and "cash
and short-term deposits" have been amended to "fixed assets" and "cash at bank
and in hand" to conform with those required by the statutory format for the
Statement of Financial Position.
The Directors have undertaken a robust review of the Company's viability
(refer to statement on page 37 of the published Annual Report and Financial
Statements for the year ended 31 December 2023) and ability to continue as a
going concern and consider that there are no material uncertainties. 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 £30 million fixed rate loan facility which is due to mature
in May 2024. The Directors are currently reviewing options to replace the
facility including the use of the Loan Note Shelf Facility. If acceptable
terms are available, the Company expects to continue to access a similarly
sized level of gearing. However, 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 and Financial Statements for
the year ended 31 December 2023and 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 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 valued at
£113,716,000 (2022 - £123,688,000) 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. As permitted under FRS 102, 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 5p (2022 - 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
2023 2022
£'000 £'000
Income from investments (all listed)
UK dividend income 9,082 10,607
Overseas dividends 70,457 66,536
Overseas dividends - capital 145 -
Overseas interest 8,856 11,417
88,540 88,560
Other income
Deposit interest 203 49
Stock lending income 227 136
Interest on tax reclaim 8 -
Total income 88,978 88,745
4. Investment management fees
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fees 2,079 4,850 6,929 2,024 4,724 6,748
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.
The management fee is 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. 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 £6,929,000 (2022 - £6,748,000) of
investment management fees was payable to the Manager, with a balance of
£1,740,000 (2022 - £1,704,000) 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
2023 2022
£'000 £'000
Promotional activities(A) 400 400
Registrars' fees 202 147
Directors' remuneration 208 157
Bank charges and custody fees 451 411
Depositary fees 155 157
Stock exchange fees 123 97
Printing and postage 61 59
Auditor's fees for:
- Statutory Audit 48 44
- Other assurance services 4 3
Other expenses 138 176
1,790 1,651
(A) In 2023 £400,000 (2022 - £400,000) was payable to aFML to cover
promotional activities during the year. At the year end £200,000 (2022 -
£100,000) was due to aFML.
6. Finance costs
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Bank loans and overdraft interest 391 912 1,303 815 1,901 2,716
Loan Notes 849 1,980 2,829 594 1,385 1,979
1,240 2,892 4,132 1,409 3,286 4,695
7. Taxation
2023 2022
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
Double taxation relief - - - (195) - (195)
Marginal tax relief 956 (956) - 1,082 (1,082) -
Overseas tax suffered 9,959 (91) 9,868 10,605 92 10,697
Overseas tax reclaimable (3,086) - (3,086) (3,282) - (3,282)
Total tax charge for the year 7,829 (1,047) 6,782 8,405 (990) 7,415
(b) Factors affecting the tax charge for the year. The UK corporation tax rate was
19% until 31 March 2023 and 25% from 1 April 2023, giving a effective rate of
23.5% (2022 - standard rate of 19%). The tax assessed for the year is lower
than the corporation tax rate. The differences are explained below:
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return before taxation 83,724 54,905 138,629 83,661 58,475 142,136
Return multiplied by the effective rate of corporation tax of 23.5% (2022 - 19,675 12,903 32,578 15,896 11,110 27,006
standard rate of 19%)
Effects of:
Non taxable UK dividend income (2,134) (34) (2,168) (2,015) - (2,015)
Gains on investments not taxable - (14,767) (14,767) - (12,616) (12,616)
Currency losses/(gains) not taxable - 79 79 - (16) (16)
Non taxable overseas dividends (15,542) - (15,542) (12,164) - (12,164)
Overseas tax suffered 9,959 (91) 9,868 10,605 92 10,697
Overseas tax reclaimable (3,086) - (3,086) (3,282) - (3,282)
Tax effect of expensed double taxation relief (245) - (245) - - -
Double taxation relief - - - (195) - (195)
Marginal tax relief 956 (956) - (440) 440 -
Expenses not deductible for tax purposes (1,754) 1,819 65 - - -
Total tax charge for the year 7,829 (1,047) 6,782 8,405 (990) 7,415
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 (2022 - same). At the year
end, the Company has, for taxation purposes only, accumulated unrelieved
management expenses and loan relationship deficits of £74,422,000 (2022 -
£nil). A deferred tax asset at the standard rate of corporation of 25% (2022
- 25%) of £70,000 (2022 - £nil) has not been recognised and these expenses
will only be utilised if the Company has profits chargeable to corporation tax
in the future. It is considered highly unlikely that the Company will generate
such profits and therefore no deferred tax asset has been recognised.
8. Ordinary dividends on equity shares
2023 2022
£'000 £'000
Amounts recognised as distributions paid during the year:
Third interim for 2022 of 2.4p (2021 - 2.4p) 15,001 15,103
Final dividend for 2022 of 4.0p (2021 - 3.8p) 25,003 23,813
First interim for 2023 of 2.4p (2022 - 2.4p) 15,027 15,040
Second interim for 2023 of 2.4p (2022 - 2.4p) 14,971 15,028
70,002 68,984
A third interim dividend was declared on 1 December 2023 with an ex date of 4
January 2024. This dividend of 2.4p was paid on 16 February 2024 and has not
been included as a liability in these financial statements. The proposed final
dividend for 2023 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 £75,895,000
(2022 - £75,256,000).
2023 2022
£'000 £'000
Three interim dividends for 2023 of 2.4p (2022 - 2.4p) 44,896 45,070
Proposed final dividend for 2023 of 4.3p (2022 - 4.0p) 26,592 25,003
71,488 70,073
The amount reflected above for the cost of the proposed final dividend for
2023 is based on 618,412,080 Ordinary shares, being the number of Ordinary
shares in issue excluding those held in Treasury at the date of this Report.
The rates disclosed for the prior year have been restated to reflect the 5:1
sub-division as disclosed in note 14.
9. Return per Ordinary share
2023 2022
£'000 p £'000 p
Returns are based on the following figures:
Revenue return 75,895 12.1 75,256 12.0
Capital return 55,952 9.0 59,465 9.5
Total return 131,847 21.1 134,721 21.5
Weighted average number of Ordinary shares 624,513,971 626,531,015
The returns per share figures for 2022 have been restated to reflect the 5:1
sub-division as disclosed in note 14.
10. Investments at fair value through profit or loss
2023 2022
£'000 £'000
Opening book cost 1,363,483 1,330,337
Opening investment holdings gains 421,337 408,975
Opening fair value 1,784,820 1,739,312
Analysis of transactions made during the year
Purchases at cost 95,353 187,490
Sales proceeds received (155,451) (208,590)
Gains on investments 62,838 66,401
Accretion of fixed income book cost(A) 303 207
Closing fair value 1,787,863 1,784,820
(A) In accordance with the AIC SORP guidance
Closing book cost 1,331,325 1,363,483
Closing investment gains 456,538 421,337
Closing fair value 1,787,863 1,784,820
The Company received £155,451,000 (2022 - £208,590,000) from investments
sold in the period. The book cost of these investments when they were
purchased was £127,814,000 (2022 - £154,551,000). 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.
2023 2022
The portfolio valuation £'000 £'000
Listed on stock exchanges:
United Kingdom:
- equities 56,605 100,405
- preference shares 6,417 6,269
Overseas:
- equities 1,617,542 1,560,727
- fixed income 107,299 117,419
Total 1,787,863 1,784,820
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:
2023 2022
£'000 £'000
Purchases 190 199
Sales 195 198
385 397
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.
2023 2022
Stock Lending £'000 £'000
Aggregate value of securities on loan at the year end 40,676 -
Maximum aggregate value of securities on loan during the year 105,339 81,723
Fee income from stock lending 227 136
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 2023 was £42,840,000 (2022 -
£nil).
11. Debtors: amounts falling due within one year
2023 2022
£'000 £'000
Amounts due from brokers - 173
Corporation tax refund - 136
Overseas withholding tax 10,131 8,965
Prepayments 41 84
Other debtors 20 32
Accrued income 8,028 7,111
18,220 16,501
None of the above amounts is overdue or impaired.
12. Creditors
2023 2022
£'000 £'000
Amounts falling due within one year:
Bank loans (note 13) 29,996 59,989
Amounts due to brokers 174 -
Investment management fees 1,740 1,704
Administrative expenses 910 639
Interest on bank loans and loan notes 374 493
33,194 62,825
2023 2022
£'000 £'000
Amounts falling due after more than one year:
Bank loans (note 13) - 29,982
Loan notes (note 13) 109,905 109,895
109,905 139,877
All financial liabilities are measured at amortised cost.
13. Borrowings
2023 2022
£'000 £'000
Unsecured bank loans repayable within one year:
Fixed rate term loan facilities
- £60,000,000 at 2.328% - 31 May 2023 - 59,989
- £30,000,000 at 2.25% - 16 May 2024 29,996 -
Unsecured bank loans repayable in more than one year but less than five years:
Fixed rate term loan facilities
- £30,000,000 at 2.25% - 16 May 2024 - 29,982
Unsecured loan notes repayable in more than five years:
- £50,000,000 at 2.24% - 13 May 2031 49,927 49,918
- £60,000,000 at 2.83% - 31 May 2037 59,978 59,977
139,901 199,866
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 2023, the Company repaid its maturing £60 million 5 year fixed rate
loan with The Royal Bank of Scotland International Limited, London Branch
"RBSI".
At 31 December 2023, the Company had utilised £110 million of its £200
million Shelf Facility. 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. 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 2023 the
Company held 64 investments, net assets were £1,668,862,000 and borrowings
were 8.4% thereof. The Company has complied with all financial covenants
throughout the year.
The Company also has a fixed rate term loan facility with RBSI, which is fully
drawn down and has a maturity date 16 May 2024. 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 2023 net assets were £1,668,862,000, and borrowings
were 8.4% thereof. The Company has complied with all financial covenants
throughout the year.
14. Share capital
2023 2022
Number £'000 Number £'000
Allotted, called up and fully paid Ordinary shares of 5p
Balance brought forward(A) 625,064,465 31,254 629,309,280 31,466
Ordinary shares issued from Treasury in the year 1,050,000 52 - -
Ordinary shares bought back to Treasury in the year (5,248,133) (263) (4,244,815) (212)
Balance carried forward 620,866,332 31,043 625,064,465 31,254
Treasury shares:
Balance brought forward(A) 21,995,550 1,099 17,750,735 887
Ordinary shares issued from Treasury in the year (1,050,000) (52) - -
Ordinary shares bought back to Treasury in the year 5,248,133 263 4,244,815 212
Balance carried forward 26,193,683 1,310 21,995,550 1,099
(A) The prior year has been restated to reflect the 5:1 sub-division as
disclosed below.
On 24 April 2023 there was a sub-division of each existing Ordinary 25p share
into five Ordinary shares of 5p each. As at 31 December 2022, there were
125,012,893 allotted, called up and fully paid Ordinary shares of 25p each
(restated - 625,064,465 allotted, called up and fully paid Ordinary shares of
5p each).
At 31 December 2023, shares held in Treasury represented 4.0% (2022 - 3.5%) of
the Company's total issued share capital.
During the year 1,050,000 Ordinary shares were issued from Treasury
representing 0.2% of the Company's total issued share capital (2022 - nil).
All these shares were issued at a premium to net asset value, enhancing net
assets per share for existing shareholders. The issue prices ranged from 265p
to 267p. In addition, 5,248,133 Ordinary shares were bought back to Treasury
representing 0.8% of the Company's total issued share capital (2022 -
4,244,815 representing 0.6% of the Company's total issued share capital) at a
total cost of £12,522,000 (2022 - £10,053,000) net of expenses. Subsequent
to the year a further 2,454,252 Ordinary shares have been bought back to
Treasury at a cost of £6,027,000.
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 5p nominal amount
of Ordinary shares held.
15. Capital reserve
2023 2022
£'000 £'000
At 31 December 2022 1,143,961 1,094,549
Movement in fair value gains 62,838 66,401
Overseas dividends capital 145 -
Capital expenses (including taxation) (6,695) (7,020)
Buy back of shares to Treasury (12,522) (10,053)
Issue of shares from Treasury 2,295 -
Currency (losses)/gains (336) 84
At 31 December 2023 1,189,686 1,143,961
Included in the total above are investment holdings gains at the year end of
£456,538,000 (2022 - £421,337,000), which is not considered distributable.
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 2023 31 December 2022
Attributable net assets (£'000) 1,668,862 1,616,750
Number of Ordinary shares in issue (excluding Treasury)(A) 620,866,332 625,064,465
Net asset value per share (pence)(A) 268.8 258.7
(A) Figures for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
17. Analysis of changes in net debt
At At
31 December Currency Cash Non-cash 31 December
2022 differences flows movements(A) 2023
£'000 £'000 £'000 £'000 £'000
Cash and short-term deposits 18,131 (336) (11,917) - 5,878
Debt due within one year (59,989) - 60,000 (30,007) (29,996)
Debt due after more than one year (139,877) - - 29,972 (109,905)
(181,735) (336) 48,083 (35) (134,023)
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 9,342 - 18,131
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 9,366 (76) (181,735)
(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 2023 Years % £'000 £'000 £'000
Assets
Sterling - - 6,417 5,032 129,203
US Dollar 21.95 6.53 27,755 291 549,257
Indian Rupee 2.67 7.79 14,073 91 -
Indonesian Rupiah 6.50 7.50 30,726 - 24,149
Mexican Peso 2.18 5.75 17,084 - 119,438
South African Rand 7.17 7.00 14,369 - -
Turkish Lira 0.87 8.52 3,292 - -
Other - - - 464 852,100
Total assets 113,716 5,878 1,674,147
Liabilities
Bank loans 0.38 2.25 (29,996) - -
Loan Notes 10.67 2.56 (109,905) - -
Total liabilities (139,901) - -
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) - -
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 2023 would increase/decrease by
£59,000 (2022 - increase/decrease by £181,000). 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 £4,014,000 (2022 -
increase/decrease by £5,183,000) 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 2023 the Company did not have any forward
foreign currency contracts (2022 - 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 2023 31 December 2022
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 549,257 291 549,548 541,270 759 542,029
Euro 299,585 - 299,585 220,707 9 220,716
Taiwan Dollar 137,498 - 137,498 145,346 310 145,656
Mexican Peso 119,438 - 119,438 107,213 - 107,213
Singapore Dollar 72,647 - 72,647 73,970 - 73,970
Canadian Dollar 70,820 - 70,820 79,536 (37) 79,499
Hong Kong Dollar 64,571 - 64,571 64,972 - 64,972
Swiss Franc 63,745 - 63,745 65,841 - 65,841
Swedish Krone 51,376 464 51,840 80,056 - 80,056
Danish Krone 33,264 - 33,264 38,504 - 38,504
Indonesian Rupiah 24,149 - 24,149 24,065 - 24,065
Australian Dollar 23,268 - 23,268 27,948 - 27,948
Thailand Baht 21,822 - 21,822 31,287 - 31,287
Norwegian Krone 13,504 - 13,504 11,593 - 11,593
Indian Rupee - 91 91 - - -
South African Rand - - - 12,439 - 12,439
1,544,944 846 1,545,790 1,524,747 1,041 1,525,788
Sterling 129,203 (134,869) (5,666) 136,385 (182,776) (46,391)
Total 1,674,147 (134,023) 1,540,124 1,661,132 (181,735) 1,479,397
(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.
2023 2022
Capital(A) Capital(A)
£'000 £'000
US Dollar 54,955 54,203
Euro 29,959 22,072
Taiwan Dollar 13,750 14,566
Mexican Peso 11,944 10,721
Swedish Krone - 8,006
Canadian Dollar - 7,950
Total 110,608 117,518
(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
20 to 22 of the published Annual Report and Financial Statements for the year
ended 31 December 2023, 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
2023 would have increased/decreased by £167,415,000 (2022 - increase/decrease
of £166,113,000) 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 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Bank loans 30,000 - - - - - 30,000
Loan Notes - - - - - 110,000 110,000
Interest cash flows on bank loans 337 - - - - - 337
Interest cash flows on Loan Notes 2,818 2,818 2,818 2,818 2,818 17,233 31,323
Cash flows on other creditors 2,824 - - - - - 2,824
35,979 2,818 2,818 2,818 2,818 127,233 174,484
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
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 2023
was as follows:
2023 2022
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 113,716 113,716 123,688 123,688
Current assets
Amounts due from brokers - - 173 173
Other debtors 20 20 32 32
Accrued income 8,028 8,028 7,111 7,111
Cash and short-term deposits 5,878 5,878 18,131 18,131
127,642 127,642 149,135 149,135
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 2023
and 31 December 2022:
2023 2022
£'000 £'000
Ba1 3,197 3,105
Ba2 14,369 15,779
Baa2 47,810 47,369
Ba3 11,702 10,777
B1 16,053 16,375
Non-rated 20,585 30,283
113,716 123,688
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 22 of the published
Annual Report and Financial Statements for the year ended 31 December 2023. At
31 December 2023 Moodys credit ratings agency did not provide a rating for
Indian bonds, Turkish bonds and Irredeemable preference shares (2022 - 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 Turkish bonds with a value of £3,292,000 (2022 - £6,771,000 with a B
rating) and at 31 December 2022 they provided a B- rating for the Ecuador
bonds with a value of £5,216,000, which are no longer held.
Fair values of financial assets and financial liabilities. The fair value of
borrowings has been calculated at £119,497,000 as at 31 December 2023 (2022 -
£175,464,000) compared to a carrying amount in the financial statements of
£139,901,000 (2022 - £199,866,000) (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 2023 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 1,674,147 - - 1,674,147
Quoted preference shares b) - 6,417 - 6,417
Quoted bonds b) - 107,299 - 107,299
Total 1,674,147 113,716 - 1,787,863
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
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 pages 63 and 64 of the published Annual
Report and Financial Statements for the year ended 31 December 2023.
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 2023 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 2022 and
2023 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 2023 financial
statements will be filed with the Registrar of Companies in due course.
The Annual Report will be posted to shareholders in March 2024 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
29 February 2024
Securities Financing Transactions Disclosure
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 Fund'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 2023
Securities lending 40,676 2.28 2.44
31 December 2022
Securities lending - - -
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.
2023 £'000 2022 £'000
US Treasury 41,895 None -
Government of Australia 945
42,840 -
2023 2022
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 42,840 100 - -
One custodian is used to hold the collateral, which is in a segregated
account.
Market value
of collateral received
2023 2022
Collateral analysed by currency £'000 £'000
US Dollar 41,895 -
Australian Dollar 945
Total collateral received 42,840 -
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 2023
Goldman Sachs 39,798 USA Tri-party
UBS 878 Switzerland Tri-party
Total market value of securities lending 40,676 -
31 December 2022
None - - -
Total market value of securities lending -
(A) All counterparties are shown
Maturity Tenor of SFTs (remaining period to maturity)
31 December 2023
Securities lending
The lending and collateral transactions are on an open basis and can be
recalled on demand. As at 31 December 2023 there were no securities on loan
(31 December 2022 - none).
The Company does not engage in any re-use of collateral.
2023 2022
Return and cost per type of SFT £'000 % £'000 %
Securities lending
Gross return 267 115 160 115
Direct operational costs (securities lending agent costs)(B) (40) (15) (24) (15)
Total costs (40) (15) (24) (15)
Net return 227 100 136 100
(B) The unrounded direct operational costs and fees incurred for securities
lending for the 12 months to 31 December 2023 is £40,038 (2022 - £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)/premium to net asset value per Ordinary share
The (discount)/premium 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.
2023 2022(A)
NAV per Ordinary share (p) a 268.8 258.7
Share price (p) b 258.0 266.8
(Discount)/premium (b-a)/a -4.0% 3.1%
(A) Rates for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
Dividend cover
Dividend cover measures the revenue return per share divided by total
dividends per share, expressed as a ratio.
2023 2022(A)
Revenue return per share (p) a 12.1 12.0
Dividends per share (p) b 11.5 11.2
Dividend cover a/b 1.05x 1.07x
(A) Rates for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
Dividend yield
The annual dividend per Ordinary share divided by the share price at the year
end, expressed as a percentage.
2023 2022(A)
Dividends per share (p) a 11.5 11.2
Share price (p) b 258.0 266.8
Dividend yield a/b 4.5% 4.2%
(A) Restated to reflect the 5:1 sub-division as disclosed in note 14.
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.
2023 2022
Borrowings (£'000) a 139,901 199,866
Cash (£'000) b 5,878 18,131
Amounts due to/(from) brokers (£'000) c 174 (173)
Shareholders' funds (£'000) d 1,668,862 1,616,750
Net gearing (a-b+c)/d 8.0% 11.2%
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.
2023 2022
Investment management fees (£'000) 6,929 6,748
Administrative expenses (£'000) 1,790 1,651
Less: non-recurring charges(A) (£'000) (64) (72)
Ongoing charges (£'000) 8,655 8,327
Average net assets (£'000) 1,638,136 1,604,867
Ongoing charges ratio (excluding look-through costs) 0.53% 0.52%
Look-through costs(B) - -
Ongoing charges ratio (including look-through costs) 0.53% 0.52%
(A) Professional services comprising new Director recruitment costs and legal
and advisory fees considered unlikely to recur. The current year also includes
costs relating to the sub-division of shares.
(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 2023 NAV Price
Opening at 1 January 2023 a 258.7p 266.8p
Closing at 31 December 2023 b 268.8p 258.0p
Price movements c=(b/a)-1 3.9% -3.3%
Dividend reinvestment(A) d 4.7% 4.4%
Total return c+d +8.6% +1.1%
Share
Year ended 31 December 2022(B) NAV Price
Opening at 1 January 2022 a 248.1p 231.2p
Closing at 31 December 2022 b 258.7p 266.8p
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%
(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.
(B) Rates for 2022 have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
abrdn Holdings Limited
Company Secretary
29 February 2024
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