REG - Shires Income PLC - Annual Financial Report
29/05/2025 07:00
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RNS Number : 5008K Shires Income PLC 29 May 2025
SHIRES INCOME PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2025
Legal Entity Identifier (LEI): 549300HVCIHNQNZAYA89
The Company
Shires Income PLC (the "Company") is an investment trust. Its Ordinary shares
are listed on the main market of the London Stock Exchange.
Investment Objective
The Company's investment objective is to provide shareholders with a high
level of income, together with the potential for growth of both income and
capital, from a diversified portfolio substantially invested in UK equities
but also in preference shares, convertibles and other fixed income securities.
Benchmark
The Company's benchmark is the FTSE All-Share Index (total return).
Website
Up to date information can be found on the Company's website:
www.shiresincome.co.uk
Performance Highlights
Net asset value per Ordinary share total return(A) Share price total return(A)
2025 +9.4% 2025 +22.4%
2024 +5.1% 2024 -5.7%
Benchmark index total return Earnings per share (revenue)
2025 +10.5% 2025 14.80p
2024 +8.4% 2024 14.75p
Dividends per Ordinary share Dividend yield(A)
2025 14.80p 2025 5.8%
2024 14.40p 2024 6.5%
Discount to net asset value per Ordinary share(A)
2025 3.7%
2024 13.3%
(A) Alternative Performance Measure.
For further information please contact:
Paul Finlayson
abrdn Fund Managers Limited
07990 130 451
Financial Calendar
Online Shareholder Presentation 24 June 2025
Annual General Meeting 8 July 2025
Expected payment dates of quarterly dividends 31 July 2025
31 October 2025
30 January 2026
30 April 2026
Half year end 30 September 2025
Expected announcement of results for the six months ending 30 September 2025 November 2025
Financial year end 31 March 2026
Expected announcement of results for year ending May 2026
31 March 2026
Highlights
31 March 2025 31 March 2024
Total assets £125,686,000 £124,920,000
Shareholders' funds £106,711,000 £105,957,000
Market capitalisation(A) £102,748,000 £91,840,000
Net asset value per Ordinary share(B) 265.23p 256.00p
Share price 255.50p 222.00p
Discount to NAV (cum-income)(C) 3.7% 13.3%
Net gearing(C) 16.5% 16.4%
Dividend and earnings
Revenue return per share(D) 14.80p 14.75p
Dividend per share(E) 14.80p 14.40p
Dividend cover(C) 1.00 1.02
Revenue reserves(F) £7,538,000 £7,388,000
Dividend yield(C) 5.8% 6.5%
Operating costs
Ongoing charges ratio (excluding look-through costs)(C) 1.00% 1.09%
Ongoing charges ratio (including look-through costs)(C) 1.00% 1.10%
(A) Represents the number of Ordinary shares in issue in the Company
multiplied by the Company's share price.
(B) Net asset value per Ordinary share is calculated after the repayment of
the capital paid up on Cumulative Preference shares (see note 16).
(C) Considered to be an Alternative Performance Measure
(D) Measures the revenue earnings for the year divided by the weighted average
number of Ordinary shares in issue (see Statement of Comprehensive Income).
(E) The figures for dividend per share reflect the years in which they were
earned (see note 9).
(F) The revenue reserve figure does not take account of payment of the third
interim or final dividend amounting to £3,369,000 (2024 - £3,310,000)
combined.
Chairman's Statement
Highlights
· Increase of 2.8% in the dividend to 14.80p per share, providing a yield
of 5.8% based on the year end share price.
· NAV total return of 9.4%.
· Share Price total return of 22.4%, reflecting a narrowing of the
Company's discount to 3.7% at the year end, helped by an active use of share
buy backs.
Performance
In a positive year for global equity markets, the Company's net asset value
("NAV") total return for the year ended 31 March 2025 was 9.4%. The share
price total return was an encouraging 22.4%, reflecting a significant
narrowing of the discount at which the share price trades to the NAV, to 3.7%.
These returns compare to a total return of 10.5% from the FTSE All-Share
Index.
While the performance of the equity portfolio lagged the benchmark return, the
Company benefited from its holding of fixed interest securities which
delivered a total return of 17.5%. These holdings represent around 20% of the
portfolio and are an attractive differentiating factor for the Company. During
the year, the Company continued to make use of its ability to invest outside
the UK, with 4.8% of the portfolio invested in overseas equities at the
financial year end.
More detailed information on performance for the year and investment activity
within the portfolio, as well as the investment style adopted for the
portfolio, are contained in the Investment Manager's Review.
Earnings and Dividends
The Company's revenue earnings per share for the year were 14.80p (2024:
14.75p). Income from the Company's investments over the year to 31 March 2025
increased by 13.1% from the previous financial year. This was attributable
largely to the increased level of income from a larger portfolio of assets,
following the Company's combination with abrdn Smaller Companies Income Trust
plc ("aSCIT") in December 2023, which resulted in an issue of some 11.3
million new shares.
The changes in allocation of management fees and finance costs which have been
charged to revenue and capital in the ratio of 40:60 since 1 April 2024
(previously 50:50) had a positive impact on net revenue earnings. The Company
also benefited from the flexibility of having a direct allocation to smaller
and mid cap companies and no longer relying on the holding in aSCIT for its
exposure to UK small cap investments.
The Company has paid three interim dividends of 3.20p per Ordinary share
(2024: 3.20p). Taking account of the revenue outcome for the year and the
outlook for the forthcoming year, the Board is pleased to propose a final
increased dividend of 5.20p per Ordinary share (2024: 4.80p). The final
dividend will be paid on 31 July 2025 to shareholders on the register on 4
July 2025, subject to shareholder approval at the AGM. The final dividend
brings total dividends for the year to 14.80p per share, an increase on last
year's dividend of 2.8% and ahead of CPI of 2.6% for the 12 months to the end
of March 2025. Based on the year end share price of 255.5p, the total
dividends equate to a dividend yield of 5.8%, one of the higher yields
available from the UK Equity Income Sector and one which the Board believes
should be attractive in the current interest rate environment.
With the total dividends for the year covered by earnings, revenue reserves
will stand at 70% (2024: 69%) of the current dividend cost, giving a buffer if
income were to fall in future periods. The Board believes that sustaining (and
growing) dividends is an important feature of the Company and considers not
only the annual payout but what reserves (revenue and realised capital) might
be deployed in the future to give shareholders an attractive and competitive
level of income from a quality portfolio of investments, without sacrificing
the potential for capital growth or chasing an unnaturally high yield.
The rate of interim dividend was last adjusted in 2021. The Board is mindful
that increases in the overall dividend means that the final dividend has
become an increased proportion of the total annual payment. In respect of the
year ending 31 March 2026, the Board has therefore decided to increase the
rate of each of the next three interim dividends from 3.20p to 3.45p per share
to create a more even balance between the rates of the interim and final
dividends. The amount of final dividend will continue to be determined once
the annual results are known and taking into account the outlook for the next
year. In common with other income funds, we encourage investors to consider
the reinvestment of dividends as the impact of compounded total return can be
significant over time. Irrespective of reinvestment, we hope that an increase
in dividends and a balance between the quarterly payments should be well
received by those who use the income from the Company as part of their annual
financial planning.
Cancellation of Share Premium Account
Following shareholder approval at the Company's AGM on 5 July 2024, the
Company received court approval, by way of a court order dated 13 August 2024.
for cancellation of the Share Premium Account. The court order was registered
at Companies House on 16 August 2024 at which point cancellation of the Share
Premium Account became effective. Approximately £50 million previously
standing to the credit of the Share Premium Account, and undistributable, has
been transferred to a newly created distributable special reserve which is
available to fund the cost of share buy backs and future dividend payments, if
required.
The Board believes that it is in the Company's interest to have this
flexibility in its reserves, although the Board has no current intention of
using the new reserve for dividend payments which will continue to be
resourced through net revenue and revenue reserves.
Discount and Share Buy Backs
At the end of the Company's financial year in 2024, the discount at which its
shares traded to NAV stood at 13.3%. Some of this widening reflected headwinds
across the investment trust sector in general and some was a result of
dislocation when the Aberdeen share plans moved to Interactive Investor in
2023. The Board was uncomfortable with the Company's rating, which had
typically been close to NAV and, having initiated a buyback programme for the
first time in the Company's history in 2023, continued modest buybacks in
2024.
In accordance with the share buy-back authority provided by shareholders at
the Annual General Meeting, the Company bought back 1.2 million Ordinary
shares during the year (2.8% of the issued share capital) at a cost of £2.8
million. This provided an enhancement to NAV of approximately 0.3% for
continuing shareholders. All shares bought back are held in treasury.
With an average discount of 10.1% over the financial year, we are pleased to
report that, by providing liquidity in the Company's shares described above,
whilst also purchasing amounts appropriate to the Company's size, the
Company's discount to NAV tightened to 3.7% at the year-end and at the time of
writing continues to be below 5%.
The Board will seek renewal of the share buyback authority at the AGM and will
continue to buy back shares if it considers it is in the best interests of
shareholders to do so.
Gearing
The Company has a £20 million loan facility of which £19 million was drawn
down at the year end. Net of cash, this represented gearing of 16.5%, compared
to 16.4% at the start of the year. The weighted average borrowing cost at the
year-end was 4.9% (31 March 2024: 5.3%) and the gearing provided a positive
contribution to performance during the year.
The Board monitors the level of gearing regularly. Strategically, the view is
taken that the borrowings are notionally invested in the less volatile fixed
income part of the portfolio which generates a higher and more secure level of
income, giving the Investment Manager greater scope to invest in a range of
equity stocks with lower yields and higher growth prospects. The Board
believes that this combination puts the Company in the best position to
achieve a high and potentially growing level of dividend and to deliver some
capital appreciation for shareholders - as has been the case in the past.
Board and Governance
As reflected in the governance statements later in the Annual Report, the
Board has functioned well, both in constructive engagement with the Manager
and in exploring ways to improve shareholder value. There have been some
changes to the ways in which the Board delegates to Board committees and to
the individual responsibilities of Board members. These are designed to make
this small board as effective as possible, and to utilise the experience on
the Board with regards to specific areas of governance and oversight.
The Board and the Company continue to be well-supported by the Manager in
terms of portfolio management and administration. The Board has been exploring
with the Manager how to engage more directly with private investors, who form
a large part of the Company's ownership, to understand better what they want
from their investment in the Company, and to encourage investment in the
Company's shares. The Board welcomes comments and questions from investors, or
prospective investors, which can be posed through the Company Secretary at:
shires.income@aberdeenplc.com (mailto:shires.income@aberdeenplc.com)
Annual General Meeting ("AGM") and Online Shareholder Presentation
The Company's AGM will take place at 12 noon on Tuesday 8 July 2025 at
Aberdeen's London office, 18 Bishops Square, London E1 6EG and all
shareholders are warmly invited to attend. As well as the formal business of
the meeting, the Investment Manager will provide a short presentation on the
Company and there will be an opportunity for shareholders to ask questions of
the Manager and the Board.
Irrespective of whether you can attend, we encourage all shareholders to
complete and return the Proxy Form enclosed with the Annual Report to ensure
that your votes are represented at the meeting. If you hold your shares via a
platform or through a nominee holding and would like to attend and / or vote
at the AGM, then you will need to make arrangements with the administrator of
your platform or nominee.
Our Online Shareholder Presentation has been a popular informal forum for
shareholders and we are pleased to hold another online presentation on Tuesday
24 June 2025 at 11.00am. The event will feature a chat between the Chairman
and Investment Manager and will be followed by a live question and answer
session. Full details on how to register for the event can be found on the
Company's website at: shiresincome.co.uk
Should you be unable to attend the online event, it will be made available on
the Company's website shortly afterwards. For those wishing to submit
questions in advance, you can do so using the following email address:
shires.income@aberdeenplc.com (mailto:shires.income@aberdeenplc.com)
Outlook
We are pleased to report a good performance over this financial year and an
increase in the Company's dividend (above CPI). The Company's focus continues
to be on delivering a high level of income and capital growth for
shareholders. We believe that the Investment Manager is well positioned to
achieve this, as has also been the case during some other turbulent market
periods in the last decade or so, caused often by exogenous events such as
Covid or changing interest rates - or, as now, geopolitical uncertainty. We
will continue to use the buy back authority when appropriate if the share
price rating falters, to endeavour to offer secondary market liquidity. We
would also like to grow the Company by issuing more shares, as we have done in
the past, if it is practical and there is demand to do so.
We cannot predict how global markets will fare over the coming 12 months.
However, with the volatility we have seen, particularly in the US market, the
UK may be seen as a more attractive market to invest in than previously. With
a high level of income compared to other markets, our UK focus can offer
resilient income for investors. This is one of the attractions of investing in
a closed-ended company, with modest equity gearing, which can provide above
average income for shareholders from a well-diversified portfolio of quality
investments.
Robin Archibald
Chairman
28 May 2025
Overview of Strategy
Business Model
The business of the Company is that of an investment company which qualifies
as an investment trust for tax purposes. The Directors do not envisage any
change in this activity in the foreseeable future.
Benchmark
In assessing its performance, the Company compares its returns with those of
the FTSE All-Share Index (total return).
Investment Objective
The Company's investment objective is to provide shareholders with a high
level of income, together with the potential for growth of both income and
capital, from a diversified portfolio substantially invested in UK equities
but also in preference shares, convertibles and other fixed income securities.
Investment Policy
The Company's investment policy is to invest principally in the ordinary
shares of UK quoted companies, and in preference shares, convertibles and
other fixed income securities with above average yields. The Company generates
income primarily from ordinary shares, preference shares, convertibles and
other fixed income securities. It may also use derivatives to enhance income
generation.
Gearing
The Directors are responsible for determining the gearing strategy of the
Company. Gearing is used with the intention of enhancing long-term returns. It
is subject to a maximum equity gearing level of 35% of net assets at the time
of drawdown. Any borrowing except in relation to short-term liquidity
requirements is used for investment purposes.
Diversification of Risk and Investment Restrictions
In order to ensure adequate diversification, limits are set within the
investment policy which the AIFM and Investment Manager must operate. All of
these limits are measured at the point of acquisition of investments, unless
otherwise stated, as follows:
General Investment Limits
· a maximum of 20% of total assets may be invested in the equity securities
of overseas companies;
· a maximum of 7.5% of total assets may be invested in the securities of
one company;
· any investment must not represent more than 5% of a quoted investee
company's ordinary shares; and
· a maximum of 10% of total assets may be invested directly in AIM
holdings.
Limits in Relation to Preference Shares
· a maximum of 7.5% of total assets may be invested in the preference
shares of any one company; and
· the Company may not hold more than 10% of any investee company's
preference shares.
Limits in Relation to Traded Option Contracts
There are principal guidelines put in place to manage the risks associated
with these contracts, including:
· call options written are to be covered by stock;
· put options written are to be covered by net current assets/borrowing
facilities;
· call options are not to be written on more than 10% of the equity
portfolio; and
· put options are not to be written on more than 10% of the equity
portfolio.
There was no option premium income generated during the year ended 31 March
2025.
The Board assesses on a regular basis with the Investment Manager the
applicability of these investment limits, the use of gearing and risk
diversification, whilst aiming to meet the overall investment objectives of
the Company.
In accordance with the Listing Rules, the Company will not make any material
change to its published investment policy without the prior approval of the
FCA and the approval of its shareholders by ordinary resolution.
Promoting the Success of the Company
The Board's statement below describes how the Directors have discharged their
duties and responsibilities over the course of the financial year under
section 172 (1) of the Companies Act 2006 and how they have promoted the
success of the Company for the benefit of the members as a whole.
Key Performance Indicators ("KPIs")
The Board uses a number of financial performance measures to assess the
Company's success in achieving its objective and determining the progress of
the Company in pursuing its investment policy. The main KPIs identified by
the Board in relation to the Company, which are considered at each Board
meeting, are shown in the table below:
KPI Description
Performance against benchmark index The Board measures performance over the medium to long-term, on a total return
basis against the benchmark index - the FTSE All-Share Index (total return).
Share price performance The Board monitors the performance of the Company's share price on a total
return basis.
Premium/discount to NAV The premium/discount relative to the NAV per share represented by the share
price is closely monitored by the Board.
Revenue return per Ordinary share The Board monitors the Company's net revenue return (earnings per share) as a
measure of growth in revenue and revenue cover against dividends paid.
Dividend per share The Board monitors the Company's annual dividends per Ordinary share and the
extent to which dividends are covered by current net revenue and revenue
reserves. The Board gives active consideration to growth in the Company's
dividend given that this forms part of the Company's investment objective.
Ongoing charges The Board monitors the Company's operating costs carefully.
Principal and Emerging Risks and Uncertainties
The Board carries out a regular review of the risk environment in which the
Company operates, changes to that environment and to individual risks. The
Board also identifies emerging risks which might impact the Company. The Board
has carried out a robust assessment of the Company's principal and emerging
risks, which include those that would threaten its business model, future
performance, solvency, liquidity or reputation and has endeavoured to find
means of mitigating those risks, wherever practical.
There are a number of other risks which, if realised, could have a material
adverse effect on the Company and its financial condition, performance and
prospects.
The principal risks and uncertainties faced by the Company are reviewed by the
Audit Committee in the form of a risk matrix. The assessment of risks and
their mitigation continues to be an area of significant focus for the Audit
Committee. The principal risks and uncertainties facing the Company at the
current time, together with a description of the mitigating actions the Board
has taken, are set out in the table below.
In addition to these risks, the conflicts in Ukraine, the Middle East and
other geo-political tensions continue to present exogenous risks as does the
recent introduction of trade tariffs and the impact that has on global trade
and financial markets.
The most significant direct issue that the Company faced during the year was
the increasing discounts to net asset value that have affected the entire
investment company sector, including income funds, resulting from selling
pressure and lack of investor demand, although this has been partially
mitigated by increased use of share buy backs and other capital mechanisms.
The principal risks associated with an investment in the Company's shares are
published monthly in the Company's factsheet and they can be found in the
pre-investment disclosure document ("PIDD") published by the Manager, both of
which are available on the Company's website.
Description Mitigating Actions
Strategic objectives and investment policy - a lack of demand for the The Board formally reviews the Company's objectives and strategies for
Company's shares due to its objectives becoming unattractive to investors, or achieving them on an annual basis, or more regularly if appropriate.
a negative perception of investment trusts, could result in a fall in the
value of its shares and a widening of the discount of the share price to its The Board is cognisant of the importance of regular communication with
underlying NAV. shareholders and knowledge of what encourages investment in the Company.
Directors attend meetings with shareholders where practical, host the Annual
General Meeting as a forum for shareholder contact and regularly discuss
shareholder investment behaviour with the Manager, including trends on
investment platforms and shareholder themes. The Board reviews shareholder
feedback through reports provided by the Manager's Investor Relations team and
also receives feedback from the Company's Stockbroker.
The Board and Manager keep the level of discount under constant review, as
well as changes to the Company's shareholder register. There has been regular
review in the last year culminating in the use of share buy backs as
appropriate.
Investment performance - The Board meets the Manager on a regular basis and keeps investment
performance under close review. This includes performance attribution by
the appointment or continuing appointment of an investment manager with sector and stock, and liquidity analysis, as well as the degree of
inadequate resources, skills or experience could lead to poor performance of diversification in the portfolio and income sustainability through examination
the portfolio when measured against the benchmark. of forward income projections.
Representatives of the Investment Manager attend all Board meetings and a
detailed formal appraisal of the Aberdeen Group is carried out annually by the
Management Engagement Committee.
The Board sets, and monitors, the investment restrictions and guidelines, and
receives regular reports which include performance reporting on the
implementation of the investment policy, the investment process, risk
management and application of the guidelines.
Investment risk within the portfolio is managed in four ways:
· Adherence by the Investment Manager to the investment process in order to
minimise investments in poor quality companies and/or overpaying for
investments.
· Diversification of investment - seeking to invest in a wide variety of
companies with strong balance sheets and the earnings power to pay increasing
dividends. In addition, investments are diversified by sector in order to
reduce the risk of a single large exposure. The Company invests mainly in
equities and preference shares.
· Adherence by the Investment Manager to the investment limits set by the
Board.
· Examination of changes to the portfolio and emerging investment themes,
including relative to benchmark constituents and in order to provide income.
Investment in preference shares
The Company has longstanding holdings in a number of preference shares with no
fixed redemption dates (representing 19.0% of the Company's portfolio as at 31
March 2025). The Directors regularly review these investments, which are held
primarily to enhance the income generation of the Company. By their nature,
their price movements will be subject to a number of factors, including
prevailing and changing interest rates, and, in normal market conditions, will
tend to respond less to pricing movements in equity markets. Issue sizes of
these preference shares are normally relatively small and with associated low
secondary market liquidity by comparison with the equity component of the
portfolio. The Board also considers the long-term nature of these investments
and the impact of any potential changes on the duration of the portfolio and
its returns, as well as the sustainability of the dividends paid.
Failure to maintain, and grow the dividend over the longer term - The Directors review detailed income forecasts at each Board meeting and
discuss the Investment Manager's outlook for dividends. The Company has
the level of the Company's dividends and future dividend growth will depend on revenue reserves which it can draw upon should there be a shortfall in revenue
the performance of the underlying portfolio. returns in a year, and also has the ability to pay dividends from the special
reserve created during the year under review and realised capital reserves,
but would only resort to this in circumstances where there was an unexpected
fall in net income. The Board regularly reviews forward net revenue
projections and takes into account revenue reserves in setting quarterly
dividend levels.
Share price and shareholder relations - the adoption of an inappropriate The Board monitors the Company's Ordinary share price relative to the NAV per
marketing strategy, failure to address shareholder concerns or other factors, share and keeps the level of premium or discount at which the Company's shares
including the setting of an unattractive strategic investment proposition, trade under review. The Board also keeps the investment objective and policy
changing investor sentiment and investment underperformance, may lead to a under review and holds an annual strategy meeting where it reviews investor
decrease in demand for the Company's shares and a widening of the difference relations reports and updates from the Manager and the Company's Stockbroker.
between the share price and the NAV per share.
The Directors are updated at each Board meeting on the composition of, and any
movements in, the shareholder register, which is retail investor dominated.
The Board annually agrees a marketing and communications programme and budget
with the Manager, and receives updates regularly on both marketing and
investor relations.
The Board has a close focus on investor platform activity which has been the
dominant change over recent years in how retail investors choose to acquire
and hold their shares. This includes contact with the platform operators
through the Manager. Where it can, the Board encourages retail investors to
vote their shares at general meetings of the Company to ensure that their
views are represented.
Gearing - a fall in the value of the Company's investment portfolio could be The Board sets the gearing limits within which the Investment Manager can
exacerbated by the impact of gearing. It could also result in a breach of loan operate. Gearing levels and compliance with loan covenants are monitored on an
covenants and the forced sale of investments. ongoing basis by the Manager and at scheduled Board meetings, or between Board
meetings if required. In the event of a possible impending covenant breach,
appropriate action would be taken to reduce borrowing levels. The financial
covenants attached to the Company's borrowings currently provide for
significant headroom. The maximum equity gearing level is 35% of net assets at
the time of drawdown, which constrains the amount of gearing that can be
invested in equities which are more volatile than the fixed interest part of
the portfolio. The use of gearing has been an important facilitator of the
income returns from the portfolio, particularly in financing the high yield
preference share proportion of the portfolio which has historically provided
significant dividend income for the Company.
The Company's gearing includes a revolving credit facility which can be
reduced without any significant financial penalties for early repayment and at
relatively short notice.
Accounting and financial reporting - inadequate controls over financial record At each Board meeting, the Directors review management accounts and receive a
keeping and forecasting could result in inaccurate financial reporting, the report from the Administrator, detailing any breaches during the period under
Company being unable to meet its financial obligations or inability to pay a review. The Company's annual financial statements are audited. The Audit
dividend, losses to the Company and impact its ability to continue trading as Committee receives bi-annual compliance and internal reports from the Manager
a going concern. and meets a representative from its Internal Audit team on at least an annual
basis and discusses any findings and recommendations relevant to the Company.
Regulatory - failure to comply with relevant laws and regulations could result The Board and Manager monitor changes in government policy and legislation
in fines, loss of reputation and potentially loss of an advantageous tax which may have an impact on the Company, and the Audit Committee monitors
regime. compliance with regulations by reviewing internal control reports from the
Manager. There is also a regular review of adherence to governance guidelines
that affect investment companies and how the Company is meeting existing or
proposed guidelines.
The Board is kept aware of proposed changes to laws and regulations, considers
the changes and applies them as appropriate, if they are not already being
met. The Board and Manager actively lobby UK regulatory bodies when they
believe current regulations need reforming.
From time to time the Board employs external advisers to advise on specific
regulatory and governance matters.
Operational - the Company is dependent on third parties for the provision of The Board receives reports from the Manager on its internal controls and risk
all systems and services (in particular, those of the Aberdeen Group) and any management processes and receives assurances from the Manager and all its
control failures and gaps in their systems and services, including in relation other significant service providers on at least an annual basis, including on
to cyber security, could result in a loss or damage to the Company. matters relating to operational resilience and cyber security. Written
agreements are in place with all third party service providers. The Manager
monitors closely the control environments and quality of services provided by
third parties, including those of the Depositary, through service level
agreements, regular meetings and key performance indicators.
The Board - inappropriate Board composition or committee structure, conflicts A formal induction process is arranged by the Manager for all new Directors,
of interest or an inappropriate remuneration structure could lead to poor including details of Board policies and relevant regulations, including
oversight and governance of the Company resulting in reputation damage, procedures for Directors' dealings in the Company's shares. The Board conducts
regulatory fines or censures. a formal annual review of its performance, and of the Board committees and
individual Directors. The Nomination and Remuneration Committee conducts an
annual review of the level of Directors' fees and has access to external
consultants if required. All Directors are encouraged to attend relevant
training courses.
All Directors stand for annual re-appointment by shareholders at the Annual
General Meeting.
Exogenous risks such as health, social, financial, economic, climate and In common with most commercial operations, exogenous risks over which the
geo-political - the financial impact of such risks, associated with the Company has no control are always a risk. At any given time, the Company has
portfolio or the Company itself, could result in losses to sufficient cash resources and a highly liquid equity portfolio to meet its
the Company. operating requirements. The diversified nature of the portfolio and a managed
level of gearing both serve to provide a degree of protection in times of
market volatility.
The financial and economic risks associated with the Company include market
risk, liquidity risk and credit risk, all of which the Investment Manager
seeks to mitigate. Further details of the steps taken to mitigate the
financial risks associated with the portfolio are set out in note 18 to the
financial statements.
External Agencies
In addition to the services provided to the Company by the Aberdeen Group, the
Board has contractually delegated certain services to external service
suppliers, including: depositary services (which include the safekeeping of
the Company's assets) (BNP Paribas Trust Corporation UK Limited) and share
registration services (Equiniti Limited). Each of these services was entered
into after full and proper consideration by the Board of the quality and cost
of services offered. In addition, day-to-day accounting and administration
services are provided, through delegation by the Manager, by the
Administrator, BNP Paribas Securities Services.
Promotional Activities
The Board recognises the importance of promoting the Company to prospective
investors both for improving liquidity and enhancing the rating of the
Company's shares. The Board believes one effective way to achieve this is
through subscription to, and participation in, the promotional programme run
by the Aberdeen Group on behalf of a number of investment trusts under its
management. The Company's financial contribution to the programme is matched
by the Aberdeen Group. The Company also supports the Manager's investor
relations programme which involves regional roadshows to existing and
potential shareholders, promotional and public relations campaigns. The
Manager's promotional and investor relations teams report to the Board on a
quarterly basis giving analysis of the promotional activities as well as
updates on the shareholder register and any changes in the make up of that
register.
The purpose of the promotional and investor relations programmes is both to
communicate effectively with existing shareholders and to gain new
shareholders, with the aim of improving liquidity and enhancing the value and
rating of the Company's shares. Communicating the long-term attractions of the
Company is key. The promotional programme includes commissioning independent
paid for research on the Company, most recently from Kepler Trust
Intelligence. A copy of the latest research note is available from the
Company's website.
The Board continues to explore with the Manager ways to support retail
investment through platforms and improved communication with the underlying
holders, as well as voting participation in general meetings.
Environmental, Social and Human Rights Issues
The Company has no employees as the Board has delegated the day-to-day
management and administrative functions to the Manager. There are therefore no
disclosures to be made in respect of employees or environmental matters.
Modern Slavery Act
Due to the nature of the Company's business, being a company that does not
offer goods and services to customers, the Board considers that it is not
within the scope of the Modern Slavery Act 2015 because it has no turnover.
The Company is therefore not required to make a slavery and human trafficking
statement. In any event, the Board considers the Company's supply chains,
dealing predominantly with professional advisers and service providers in the
financial services industry, to be low risk in relation to this matter.
Environmental, Social and Governance ("ESG") Matters
The Board is supportive of the Investment Manager's approach to ESG issues,
including climate change, and welcomes its active engagement with company
management.
Sustainability Disclosure Requirements ("SDR")
In November 2023, the Financial Conduct Authority ("FCA") published its
sustainability disclosure requirements and investment labels regime ("SDR") to
address concerns about misleading sustainability claims. SDR includes an
opt-in labelling regime for sustainable investment products, additional
disclosure requirements and restrictions on the use of sustainability terms.
It also establishes anti-greenwashing ("AGW") rules. Investment trusts and
their managers are in scope of the SDR. Although investment trusts are not
directly in scope of the AGW requirements, the rules apply indirectly to them,
mostly via obligations imposed on their managers.
Although Environmental, Social and Governance ("ESG") factors are taken into
consideration by the Investment Manager as part of its investment analysis,
the Company itself does not have an explicit sustainability objective and so
under SDR is categorised as "Non-labelled" rather than "Labelled" or "Other".
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emissions producing sources under
the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations
2013.
Under Listing Rule 11.4.22(R), the Company, as a closed ended investment
company, is exempt from complying with the Task Force on Climate-related
Financial Disclosures.
The UK Stewardship Code and Proxy Voting
The Company supports the UK Stewardship Code, and seeks to play its role in
supporting good stewardship of the companies in which it invests.
Responsibility for actively monitoring the activities of portfolio companies
has been delegated by the Board to the Manager which has sub-delegated that
authority to the Investment Manager. Aberdeen is a signatory to the UK
Stewardship Code which aims to enhance the quality of engagement by investors
with investee companies in order to improve their socially responsible
performance and the long-term investment return to shareholders. While
delivery of stewardship activities has been delegated to the Manager, the
Board acknowledges its role in setting the tone for the effective delivery of
stewardship on the Company's behalf.
The Board has also given discretionary powers to the Manager to exercise
voting rights on resolutions proposed by the investee companies within the
Company's portfolio. The Manager reports on a quarterly basis on stewardship
(including voting) issues.
Board Diversity
The Board's disclosures in relation to its diversity are included in the Report of the Directors below.
Viability Statement
The Board considers the Company, with no fixed life, to be a long-term
investment vehicle but, for the purposes of this viability statement, has
decided that three years is an appropriate period over which to report,
irrespective of any exogenous risks that the Company may face. The Board
considers that this period reflects a balance between a longer-term investment
horizon, the inherent uncertainties within equity markets and the specifics of
a closed-end investment company where its central purpose is different from
other listed commercial and industrial companies.
In assessing the viability of the Company over the review period, the
Directors have focused upon the following factors:
· The principal risks and uncertainties detailed above and the steps taken
to mitigate these risks.
· The ongoing relevance of the Company's investment objective.
· The liquidity of the Company's portfolio. The majority of the portfolio
is invested in readily realisable listed securities.
· The level of ongoing expenses. The Company's annual revenue expenses,
excluding the cost of the dividend, are expected to continue to be covered by
investment income.
· The level of gearing. This is closely monitored and stress testing is
carried out by the Manager. The financial covenants attached to the Company's
borrowings provide for significant headroom.
· Regulatory or market changes.
· The robustness of the operations of the Company's third party service
providers.
· The operation of share buy backs undertaken by the Company.
In making its assessment, the Board has considered that there are other
matters that could have an impact on the Company's prospects or viability in
the future, including the current geo-political uncertainty associated with
the imposition of global tariffs and an escalating trade war between China and
the USA, economic shocks, significant stock market volatility, and changes
in regulation or investor sentiment, including to income levels.
Taking into account the Company's current position and the potential impact of
its principal risks and uncertainties and emerging risks, the Directors have a
reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due for a period of three years from the
date of approval of this Report.
Outlook
The Board's view on the general outlook for the Company can be found in the
Chairman's Statement whilst the Investment Manager's views on the outlook for
the portfolio are included in the Investment Manager's Review.
On behalf of the Board
Robin Archibald
Chairman
28 May 2025
Promoting the Success of the Company
How the Board Meets its Obligations Under Section 172 of the Companies Act
The Board is required to describe to the Company's shareholders how the
Directors have discharged their duties and responsibilities over the course of
the financial year under section 172 (1) of the Companies Act 2006 (the
"Section 172 Statement"). The Board provides below an explanation of how the
Directors have promoted the success of the Company for the benefit of its
members as a whole, taking into account, amongst other things, the likely
long-term consequences of decisions, the need to foster business relationships
with all stakeholders and the impact of the Company's operations on the
environment.
The Purpose of the Company and Role
of the Board
The purpose of the Company is to act as an investment vehicle to provide, over
time, financial returns (both income and capital) to its shareholders.
Investment trusts, such as the Company, are long-term investment vehicles and
are typically externally managed, have no employees, and are overseen by an
independent non-executive board of directors.
The Board, which, at the year end, comprised five independent non-executive
Directors with a broad range of skills and experience across all major
functions that affect the Company, retains responsibility for taking all
decisions relating to the Company's investment objective and policy, gearing,
corporate governance and strategy, and for monitoring the performance of the
Company's service providers.
The Board's philosophy is that the Company should operate in a transparent
culture where all parties are treated with respect and provided with the
opportunity to offer practical challenge and participate in positive debate
which is focused on the aim of achieving the expectations of shareholders and
other stakeholders alike. The Board reviews the culture and manner in which
the Manager and Investment Manager operate at its regular meetings and
receives regular reporting and feedback from the other key service providers.
The Board is very conscious of the ways it promotes the Company's culture and
ensures as part of its regular oversight that the integrity of the Company's
affairs is foremost in mind in the way that the activities are managed and
promoted. The Board works very closely with the Manager and Investment Manager
in reviewing how stakeholder issues are handled, ensuring good governance and
responsibility in managing the Company's affairs, as well as visibility and
openness in how the affairs are conducted.
The Company's main stakeholders have been identified as its shareholders, the
Manager/Investment Manager, service providers, investee companies, its debt
provider and, more broadly, the investment community.
How the Board Engages with Stakeholders
The Board considers its stakeholders at Board meetings and receives feedback
on the Manager's interactions with them.
The Board and Manager also continue to consider how best to engage with
private investors who invest through platforms, not least to increase voting
participation at general meetings of the Company and to try and increase
investor demand for diversified income from retail investors.
Stakeholder How We Engage
Shareholders Shareholders are key stakeholders and the Board places great importance on
communication with them. The Board welcomes all shareholders' views and aims
to act fairly between all shareholders. The Company's shareholder register is
retail dominated. The Manager and Company's Stockbroker regularly meet with
current and prospective shareholders from the wealth management community to
discuss performance. Shareholder feedback is discussed by the Directors at
each Board meeting. The Company subscribes to the Manager's investor relations
programme in order to maintain communication channels with shareholders.
The Board is updated on and responds to developments in the wider investment
company sector, which has been instructive in how share buy backs have been
applied in the last year or so by the Company.
Regular updates are provided to shareholders through the Annual Report,
Half-Yearly Report, monthly factsheets, Company announcements, including daily
NAV announcements, and through the Company's website, which includes up to
date information on the Company. The Company's Annual General Meeting provides
a forum, both formal and informal, for shareholders to meet and discuss issues
with the Directors and Manager. The Board encourages as many shareholders as
possible to attend the Company's Annual General Meeting and to provide
feedback on the Company. In addition to the Annual General Meeting, there will
be an Online Shareholder Presentation again this year following a favourable
response in the past to this informal on-line event. The Board welcomes
contact with shareholders and has various ways of receiving shareholder
questions and responding to them, including through the Company Secretary.
During the year, the Investment Manager held meetings with a number of the
Company's larger shareholders to update them on the Company and to receive any
feedback or concerns.
The Board is keen to have increased shareholder voting at general meetings of
the Company and reviews ways in which there can be greater communication with
the largely retail investor shareholder base.
Manager/Investment Manager The Investment Manager's Review details the key investment decisions taken
during the year. The Investment Manager has continued to manage the Company's
assets in accordance with the mandate agreed with the Company, with the
oversight of the Board.
The Board regularly reviews the Company's performance against its investment
objective and undertakes an annual strategy review meeting to ensure that the
Company is positioned well for the future delivery of its objective for its
shareholders. The Board receives presentations from the Investment Manager at
every Board meeting to help it to exercise effective oversight of the
Investment Manager and the Company's strategy.
The Board, through the Management Engagement Committee, formally reviews the
performance of the Manager and Investment Manager at least annually.
Service Providers The Board seeks to maintain constructive relationships with the Company's
suppliers either directly or through the Manager with regular communications
and meetings.
The Management Engagement Committee conducts an annual review of the
performance, terms and conditions of the Company's main service providers to
ensure they are performing in line with Board expectations, undertaking their
responsibilities and providing value for money.
Investee Companies Responsibility for actively monitoring the activities of portfolio companies
has been delegated by the Board to the Manager which has sub-delegated that
authority to the Investment Manager.
The Board has also given discretionary powers to the Manager to exercise
voting rights on resolutions proposed by the investee companies within the
Company's portfolio. The Manager reports to the Board on a quarterly basis on
stewardship (including voting) issues. Through engagement and exercising
voting rights, the Investment Manager actively works with companies to improve
corporate standards, transparency and accountability. Aberdeen is a signatory
to the UK Stewardship Code.
The Board monitors investments made and divested and questions the rationale
for investment and voting decisions.
Debt Provider On behalf of the Board, the Manager maintains a positive working relationship
with the provider of the Company's loan facility, and provides regular updates
to the Board on business activity and compliance with its loan covenants.
Gearing is an important component of the Company's
capital structure.
Investment Community The Board and Manager are committed to investing in a responsible manner and
the Investment Manager embeds Environmental, Social and Governance ("ESG")
considerations into its research and analysis as part of the investment
decision-making process.
Specific Examples of Stakeholder Consideration During the Year
While the importance of giving due consideration to the Company's stakeholders
is not a new requirement, and is considered during every Board decision, the
Directors were particularly mindful of stakeholder considerations during the
following decisions undertaken during the year ended 31 March 2025.
Management of the Portfolio
The Investment Manager's Review details the key investment decisions taken
during the year. The overall shape and structure of the investment portfolio
is an important factor in delivering the Company's stated investment
objective.
During the year, the Board, through the Management Engagement Committee,
decided that the continuing appointment of the Manager was in the best
interests of shareholders.
Dividend
Following the payment of the final dividend for the year, of 5.20p per
Ordinary share, total dividends for the year will amount to 14.80p per
Ordinary share, representing a dividend yield of 5.8% based on the share price
of 255.5p at the end of the financial year. This is in accordance with the
Company's objective to provide shareholders with a high level of income.
In deciding on the level of dividend for the year, the Board took into account
the revenue earnings per Ordinary share for the year, forecast revenues for
subsequent years and the level of revenue reserves as well as the impact of
share buy backs.
Through meetings with shareholders and feedback from the Manager and the
Company's Stockbroker, the Board remains conscious of the importance that
shareholders place on the level, and sustainability, of dividends paid by the
Company.
Allocation of Costs
As explained in last year's Annual Report, the Board decided that, with effect
from 1 April 2024, management fees and finance costs would be charged 40% to
Revenue and 60% to Capital (previously 50% to Revenue and 50% to Capital).
Following the completion of the merger of the Company with abrdn Smaller
Companies Income Trust PLC in December 2023, the Board considered that this
allocation better reflects the expected long-term view of the nature of the
future investment returns of the enlarged portfolio and is consistent with the
treatment adopted by other UK Equity Income investment trusts. The Board
therefore considers that this change is in the best interests of shareholders.
Share Buy Backs
During the year, the Company bought back 1,154,946 Ordinary shares to be held
in treasury, providing a small accretion to the NAV per share and a degree of
liquidity to the market at times when the discount to the NAV per share had
widened in normal market conditions. The Board liaises closely with the
Manager and Stockbroker in how buy backs might be applied in light of supply
and demand for shares on a retail register such as the Company has. It is the
view of the Board that this policy of periodically using buy back powers, but
not in a mechanical fashion, is in the interest of all shareholders.
Cancellation of Share Premium Account
Following shareholder approval at the Company's AGM on 5 July 2024, the
Company received court approval by way of a court order dated 13 August 2024
for cancellation of the Share Premium Account. The court order was registered
at Companies House on 16 August 2024 at which point cancellation of the Share
Premium Account became effective. Consequently, the amount of approximately
£50 million previously standing to the credit of the Share Premium Account
was transferred to a newly created distributable reserve which is available to
fund the cost of share buy backs and dividend payments. The Board considers
that it is in shareholders' interests for the Company to have this
flexibility, although it has no current intention of making use of the new
reserve for dividend payments which will continue to be resourced through net
revenue and revenue reserves.
Online Shareholder Presentation
As explained in the Chairman's Statement, to encourage and promote interaction
and engagement with the Company's shareholders, the Board has again decided to
hold an interactive Online Shareholder Presentation which will be held at
11.00am on 24 June 2025. The event will feature a chat between the Chairman
and Investment Manager and will be followed by a live question and answer
session. The online presentation is being held ahead of the Annual General
Meeting in order to allow shareholders to submit their proxy votes prior to
the meeting.
On behalf of the Board
Robin Archibald
Chairman
28 May 2025
Performance
Performance (Total Return)
1 year 3 year 5 year
% return % return % return
Net asset value(A) +9.4 +12.5 +67.8
Share price(A) (based on mid-market) +22.4 +9.1 +69.6
FTSE All-Share Index +10.5 +23.3 +76.6
(A) Considered to be an Alternative Performance Measure.
All figures are for total return and assume re-investment of net dividends
excluding transaction costs.
Source: Aberdeen plc, Morningstar & Factset
Dividends
Rate per share XD date Record date Payment date
First interim dividend 3.20p 3 October 2024 4 October 2024 31 October 2024
Second interim dividend 3.20p 2 January 2025 3 January 2025 31 January 2025
Third interim dividend 3.20p 3 April 2025 4 April 2025 30 April 2025
Proposed final dividend 5.20p 3 July 2025 4 July 2025 31 July 2025
2024/25 14.80p
First interim dividend 3.20p 5 October 2023 6 October 2023 27 October 2023
Second interim dividend 3.20p 4 January 2024 5 January 2024 31 January 2024
Third interim dividend 3.20p 4 April 2024 5 April 2024 30 April 2024
Final dividend 4.80p 4 July 2024 5 July 2024 31 July 2024
2023/24 14.40p
Ten Year Financial Record
Year to 31 March 2016 2017 2018 2019 2020 2021* 2022* 2023* 2024* 2025*
Revenue available for ordinary dividends (£'000) 3,617 3,925 4,106 3,920 3,961 3,796 4,379 4,584 5,068 6,097
Per share (p)
Net revenue earnings 12.1 13.1 13.7 13.1 13.0 12.3 14.2 14.8 14.8 14.8
Net dividends paid/proposed 12.25 12.75 13.00 13.20 13.20 13.20 13.80 14.20 14.40 14.80
Net total earnings (17.8) 54.5 9.4 10.3 (45.4) 68.2 29.5 (6.6) (4.3) 23.2
Net asset value 229.4 271.6 268.2 265.5 207.4 262.4 278.3 257.9 256.0 265.2
Share price (mid-market) 202.0 243.3 260.0 267.0 200.5 248.0 279.0 250.0 222.0 255.5
Shareholders' funds (£m) 68.8 81.5 80.5 80.1 63.9 80.9 85.8 79.9 106.0 106.7
* Net asset value per share is calculated after the repayment of the capital
paid up on Cumulative Preference shares (see note 16).
Cumulative Performance
Rebased to 100 at 31 March 2015
As at 31 March 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Net asset value 100.0 88.4 104.7 103.4 102.3 79.9 101.1 107.3 99.4 98.7 102.2
Net asset value total return(A) 100.0 93.0 115.8 119.6 124.4 102.0 136.6 152.1 148.7 156.4 171.1
Share price performance 100.0 80.2 96.5 103.2 106.0 79.6 98.4 110.7 99.2 88.1 101.4
Share price total return(A) 100.0 84.6 107.8 121.0 130.6 102.9 135.0 159.9 151.1 142.6 174.5
Benchmark performance 100.0 92.7 108.9 106.3 108.6 84.8 104.6 114.3 113.5 118.4 126.2
Benchmark total return(A) 100.0 96.1 117.2 118.6 126.2 102.9 130.4 147.4 151.7 164.5 181.7
(A) Total return figures are based on reinvestment of net income.
Investment Manager's Review
Highlights
· NAV total return of 9.4% over the year ended 31 March 2025, compared to a
total return of 10.5% from the FTSE All-Share Index.
· The portfolio slightly lagged the benchmark, as we would expect given the
defensive and income focused nature of the portfolio and the weighting to
fixed income. However, it delivered the target of positive growth of income
and capital in absolute terms.
· Revenue return per share increased to 14.80p per share (2024: 14.75p).
Portfolio Strategy
We take a long term approach to investing, believing that, whilst there might
be volatility in the short and even medium term, share prices should
ultimately reflect the fundamental value of a company. Consequently, there has
been no change to our approach to the construction of the portfolio during the
year under review. The Company's investment portfolio is invested in equities,
preference shares and other fixed income instruments. At the year end, 81% of
the portfolio was invested in equities and 19% was invested in fixed income,
roughly in line with the weightings at the end of the prior year.
While the portfolio is primarily focused on UK listed companies, we have the
ability to invest up to 20% of the assets in overseas companies, with the aim
of improving diversification and finding opportunities not available to
investors in the UK market. The limit was increased from 10% to 20% during the
year in order to increase flexibility. However, we see valuations in the UK as
particularly attractive and it is notable that overseas exposure has actually
reduced compared to the prior year. As at the year end we held four overseas
companies, making up 4.8% of the portfolio, compared to eight positions and
9.4% at the prior year end.
Equity Market Review
The year to the end of March 2025 was a good one for equity markets globally.
The MSCI World index delivered a total return of 7.5%, even though it fell by
almost 7% from its highs in the middle of February to the end of March. US
markets continued to perform well, with the S&P 500 returning 8.5% over
the period, but equity market performance was much more consistent across the
world last year than it has been for some time. Europe almost kept pace with a
7.5% return from the MSCI Europe Index and the MSCI Emerging Markets Index
also did well, returning 8.6% in US Dollar terms. Notwithstanding the amount
of negative press around UK equities, the UK market as measured by the FTSE
All-Share Index performed even better, returning 10.5% for the year.
While performance for different equity markets was more balanced over the 12
months, this reflected different winners and losers at different points in the
year. For much of the period, the US led the way, with large cap technology
stocks such as Nvidia leading the market higher. Continued strong earnings and
flows into US index trackers supported share prices, with the election of
Donald Trump as President in November giving the US market a push into the
calendar year end. However, this reversed in early 2025. Growing concerns over
trade policy in the US, combined with high valuations, led to a pullback in US
equities. At the same time, the removal of government borrowing restrictions
in Germany provided a potential source of stimulus for the European economy,
boosting European markets and causing a rotation out of US into European
equities. Between January and March, Europe outperformed the US by around 10%.
We had been hoping for a broadening out of equity returns away from a
concentrated set of companies in the US for some time and the rotation is a
welcome, and healthy, development for markets.
Within the UK market, financial stocks were the stand-out performers, with
banks up by 56% and the insurance sector up by 20%. Over the year, interest
rates and bond yields remained at high levels, boosting bank returns, while
the market has slowly understood the strength of the UK banks hedge position,
which helps protect them from falling interest rates over the next few years.
The combination of earnings upgrades for the sector and valuations which
remain low compared to history has been a powerful combination. Another sector
that has performed well has been capital goods, with defence stocks performing
well and also UK construction and industrial companies as activity levels have
remained robust. The outlook for increased government spending has supported
construction companies.
The sectors that have lagged the market have been the more cyclical ones.
Shares in consumer goods have been weak, reflecting concerns about the UK
domestic economy, while materials and energy have also lagged as global growth
has slowed, especially in China which drives much of the world's commodity
demand. While some sectors have benefitted from higher interest rates, the
reverse has also been true for sectors that correlate negatively with yields.
Healthcare was up slightly, but lagged the market, while the real estate
sector fell 10% over the period.
Investment Performance
The net asset value ("NAV") total return for the year was 9.4%, a strong
return. This compares to a total return of 10.5% from the FTSE All-Share
Index.
The largest negative impact on performance over the period was the weighting
towards smaller companies. Over the long term, small and mid-cap companies in
the UK have delivered markedly superior returns to large caps. They are more
likely to grow and, in turn, to deliver dividend growth. As an active manager,
we see more ability to deliver differentiated returns from small and mid-cap
companies, given they are less well analysed and understood by market
participants. Furthermore, we have a genuinely size agnostic approach to
investing. That means that the portfolio is more likely to have an underweight
exposure to large companies and an overweight exposure to small companies
compared to the benchmark. However, this weighting towards smaller companies
did not work well during the year as returns within the benchmark were heavily
skewed towards larger companies. The FTSE 100 Index returned 11.9%, but the
mid-cap FTSE 250 Index returned only 1.1%, an unusually wide spread between
the two.
Why was this the case? We don't see compelling fundamental reasons - earnings
revisions from the FTSE 250 have been comparable to the FTSE 100. But we do
see an impact from lower liquidity in the UK market and there is a clear
correlation with negative sentiment on the UK and investor caution. The FTSE
250 is slightly more domestically focused and is seen as higher risk by
investors. However, it very rarely trades at a valuation discount to the FTSE
100, with the most recent occurrences during the Covid-19 pandemic and
immediately following the Brexit vote in 2016, yet it currently trades at an
approximate 10% discount on a price to earnings multiple. Smaller companies
tend to underperform when UK bond yields rise, as investors are more risk
averse, and growth is discounted to a greater extent. Our hope would be that,
as interest rates come down and sentiment towards the UK improves, we will see
a recovery in UK mid cap stocks.
On an individual stock basis, the top performers included Morgan Sindall,
which returned 50% as it continued to deliver strong earnings upgrades,
benefiting from tightness in the fit-out market and robust construction demand
in the UK. Imperial Brands (+72%) delivered improved cashflows and was helped
by a consistent high level of share buybacks through the year. Banks in
general were particularly strong, boosted by higher for longer interest rates
and low starting valuations. Within the portfolio, NatWest (+83%), HSBC
(+54%), Standard Chartered (+74%), and OSB (+30%) all delivered notably
positive returns. Games Workshop (+46%), was another smaller-cap holding that
delivered earnings upgrades and re-rated over the course of the year.
The greatest detractors from performance this year were companies where there
were unexpected, company specific events. Wood Group (-79%) fell sharply after
announcing an investigation into internal accounting procedures. Two potential
bids for the company demonstrated the attractions of the underlying business,
but uncertainty and bad timing meant these did not complete, leaving the
company in a weak position. We retain a small position in the portfolio and
the company remained in discussions with one potential acquirer as at the year
end. Close Brothers (-33%) also fell as the company dealt with the fall out of
an FCA investigation into historical motor finance loans. We see the impact of
this as reflected in the price and hope for some relief on an outcome of a
recent Supreme Court hearing. Novo-Nordisk (-40%) was another detractor, due
to increased competition to its GLP-1 weight loss drugs. We have been reducing
the holding for some time after a period of strong performance, and the
holding has still had a positive contribution to performance over the last
five years. Conduit (-30%) underperformed due to exposure to the fires in Los
Angeles at the start of 2025, while Melrose Industrials (-30%) was impacted by
concerns over global trade and the pace at which free cashflow is generated.
Gearing and Fixed Income Portfolio
Gearing (net of cash) was stable over the year, moving from 16.4% to 16.5%.
The gearing is notionally invested in the portfolio of preference shares and
fixed interest securities. At the year end these securities had a value of
£23.5 million, materially in excess of net indebtedness which stood at £17.7
million.
The fixed income portfolio delivered a return of 17.5% over the period. Values
were helped by the stabilisation of bond yields and by strong underlying
performance of the issuing companies which are primarily in the banking and
insurance sectors. Although this portion of the portfolio has generally very
low turnover, there were some changes during the year. This was largely driven
by the tender offer for the RSA preference shares in July 2024. A change of
capital rules for insurance companies means that preference shares are less
valuable to issuers, making it more attractive for insurers such as RSA to
retire them. From our point of view, the tender offer came at attractive
terms, with an implied yield of 6% resulting in an uplift in the value of
around 10% and pricing the preference shares at a level last seen in a much
lower interest rate environment.
We reinvested the proceeds of the RSA tender offer into Nationwide Building
Society perpetual debt at a 7.8% yield, thereby delivering an increase in
income generation for shareholders alongside the gain in capital value.
Overall, this is a positive development, and it sets an encouraging precedent
for terms on any future tender offers. So far in 2025 we have also seen Aviva
tender to redeem outstanding General Accident preference shares at terms we
see as similarly attractive for holders.
Revenue Account
This year marks the first full year post the merger with abrdn Smaller
Companies Income Trust PLC at the end of 2023 and, as such, the period
reflects greater income generation from a larger portfolio, offset by the
higher share count following the completion of the merger. The income
generation from the portfolio was resilient through the year, despite an
increased use of buybacks by UK companies and the resultant slowing of
dividend growth and lower special dividends.
The following table details the Company's main sources of income over the last
five years.
2025 2024 2023 2022 2021
% % % % %
Ordinary dividends 77.0 63.0 62.8 66.5 57.2
Preference dividends 16.8 25.7 29.1 26.9 33.2
abrdn Smaller Companies Income Trust - 9.4 6.6 5.2 5.7
Fixed interest and bank interest 4.9 1.4 0.2 - -
Traded option premiums - 0.5 1.3 1.4 3.9
Other income 1.3 - - - -
Total 100.0 100.0 100.0 100.0 100.0
Total income (£'000s) 7,296 6,429 5,673 5,239 4,529
Portfolio Activity
The year under review was an active period for the portfolio. Although we
invest for the long term, we always try to remain active, deploying capital to
enhance income and to react to market events and changes in valuation. If we
feel a company is fairly valued, or if the outlook has deteriorated, we should
not be slow to act and to redeploy capital to more attractive opportunities.
The impetus to make changes has felt particularly strong this year, with an
uncertain and somewhat volatile outlook. With UK equity valuations low and
many companies attractively valued, it is sensible to be active and take
advantage of opportunities. Looking back to the portfolio at the end of the
prior financial year, 21 positions have been exited completely, with 17 new
holdings replacing them.
The majority of trading during the year was in response to company specific
factors, although the one common driver of trading decisions was the need to
protect and enhance income generation. The primary aim of Shires Income is
clear: to deliver a high, and over time growing, level of income to
shareholders. At a time when we see market levels as relatively high and the
importance of income for total return as increasing, many decisions during the
year were made to enhance income. Below, we briefly discuss the new positions
and portfolio exits in chronological order through the course of the year.
While this is extensive, it is hopefully a useful insight into the decisions
made on your behalf and how the portfolio is run.
In April, we added a new position in construction contractor Kier Group. The
company has delivered significant balance sheet improvement in recent years
and was about to resume paying dividends. We like the company given
structurally supportive industry trends, high cash generation and still low
valuation, despite a period of outperformance. The free cash flow yield at
close to 20% supports dividend growth and continued deleveraging. The shares
trade on a 6x price to earnings multiple compared to peers on 9-10x. Another
trade was to switch the holding in Mondi into Smurfit Westrock. This reflected
our preference in the paper and packaging sector, and we see greater upside in
the medium term from Smurfit Westrock as it delivers on a significant
acquisition in the US market, with material self-help potential.
In May we started a new position in Reckitt Benckiser. The portfolio has
generally had an underweight exposure to the consumer staples sector in recent
years, given unattractive valuations, low yields and limited genuine growth. A
recent sell-off in the shares offered an opportunity to gain sector exposure
at a material discount to the peer group and with a yield over 4.5%. The
company has struggled operationally in recent years, but there are signs of a
turnaround under new management and the underlying brands remain high quality.
We also sold out of IT distributor SoftCat in May. This had been in the
portfolio for two years and it grew over that time. The shares had re-rated
and traded in excess of 25x price to earnings, while the dividend yield had
compressed to just 2% at the point of sale. It remains a well-run company with
growth potential, but there was more obvious value elsewhere.
We exited one position in June, Greggs. The company had performed very well
since it was added to the portfolio in November 2023, and we continue to like
the business model and the potential for strong medium-term growth as it
expands its offering and rolls out more stores. However, with the yield
compressed and the shares trading at over 21x earnings, this was another one
we saw as more fairly valued.
In July we started a new position in UK reinsurance company Conduit. This is a
relatively new reinsurance business which is set to deliver earnings growth as
its book matures and it benefits from positive market trends. The company has
recently demonstrated strong premium growth and improved underwriting
profitability. The shares had a 6% dividend yield at the time of purchase and
the position helped to diversify the portfolio. At the same time, we sold out
of AXA. The French insurer had performed very well since purchase, but had no
further income this financial year.
In August we sold out of the position in Lloyds, again reflecting the timing
of dividends and the need to generate income through the year. Capital was
reallocated to NatWest. Similarly, we switched the holding in BHP into Rio
Tinto, a company with very similar drivers but more near-term income. A more
meaningful trade in August was to start a position in Dutch technology company
ASML. When adding overseas companies to the portfolio, we generally look for
something that can't be found in the UK market, and ASML is a prime example of
this. The company designs and manufactures the lithography machines essential
in the production of today's cutting-edge semiconductors. It has extremely
high technical barriers to entry, making products that are essential for one
of the highest growth parts of the market and is a genuine diversifier in the
portfolio. While it screens as relatively expensive, a recent pullback in its
share price means it has de-rated in the last few months and we expect growth
to make it look much more reasonably priced a few years from now. We should
not forget that the company's end markets are cyclical, but it is one to hold
for the long term. The purchase was funded by selling the position in French
utility company Engie. This had been an excellent performer since its
introduction into the portfolio but we had downgraded it and it had no more
income this year - time to take profit.
At the other end of the market cap spectrum, we started a new position in ME
Group. This UK mid-cap company operates automated photo booths and
laundromats. A somewhat niche market, but one with high returns on capital and
plenty of room for growth as it rolls out the self-service, high capacity,
laundry model into Europe and Asia. It is a company that our small-cap team
like and is a great example of Aberdeen teams working together to find
interesting and differentiated income opportunities. We also started a new
position in UK property REIT London Metric in August. This is a liquid
property company with a high-quality management team and solid performance
through the economic cycle. It has an excellent track record of delivering
dividend growth and the recent 19% year-on-year increase in dividend takes it
to a very attractive 5.9% yield. The purchase was funded by selling the
holding in Dutch bank ING. Since purchase in April 2023, the holding had
delivered a total return of 65%, outperforming the benchmark by 50%. However,
with no income in the next six months we again chose to prioritise other
ideas. Another overseas exit this month was Mercedes-Benz. Again, the driver
was a lack of income in the near term but very much combined with some
difficult trends in auto markets which made us less optimistic on the
near-term prospects for the company.
There was only one meaningful trade in September, switching UK housebuilder
Berkeley Group into peer Barratt. The move came ahead of Barratt going
ex-dividend, so we captured some additional income, but the investment
primarily reflected the fact that Barratt had lagged the sector following its
deal to buy Redrow.
The remaining holding in GSK was sold in October. This is our least preferred
large-cap pharma company and, while the recent Zantac litigation progress has
been positive, this has been offset by some uncertainty on vaccine sales
rates.
In November, one new holding was added, French listed Gaztransport Et
Technigaz ("GTT"), with the position funded by selling TotalEnergies to
maintain the weight to energy. GTT provides the membrane containment
technology to liquefied natural gas ("LNG") carriers, which ship cooled gas
between international markets. This is a growing market as LNG import and
export capacity expands. The market will require greater tanker capacity and
GTT dominates this space with high technological barriers to entry. It has a
strong order book, and we expect that, as the tanker fleet ages in the next
few years, we will see a growing replacement market, supporting long term
cashflows. The company has a strong balance sheet, provides a high return on
capital and pays a high dividend yield. This switch also reduces commodity
price leverage in the portfolio. Given a mixed outlook for energy demand in
2025, we don't think that is a bad thing.
In December the weight in Standard Chartered was reduced, with the capital
used to buy back into ING. ING was only sold in August, but Standard Chartered
outperformed it by 30% in the four months since, and with a defensive mix and
high yield it looked attractive. The other notable trade in the month was to
exit animal genetics provider Genus. While Genus remains a high-quality
business with high barriers to entry, underperformance meant it had fallen
below our minimum position size, forcing the question of "up or out". With
risks to the timing of its disease resistant genetics and low yield we chose
to move on.
At the start of January, we started a new position in UK bank Barclays. The
position was funded by selling down some of the holding in NatWest which had
performed very well. The move helped to diversify the exposure to UK banks and
to increase exposure to capital markets where we saw more potential for
positive surprise in 2025. During January we also switched the position in
Aviva preference shares into the equity. The preference shares deliver a
reliable, high yield, but equities generally have better long-term growth
prospects. In the case of Aviva, the equity also offered a premium yield to
the preference shares and there is an opportunity for the company to extract
meaningful synergies from the recent acquisition of Direct Line, resulting in
some earnings upgrades. That makes the equity relatively more attractive. The
position in Italian utility Enel was also sold during the month. The share had
risen by approximately 30% since the addition to the portfolio in mid-2023 and
we had become less attracted to the company.
During February there were changes to the UK consumer discretionary exposure,
with the holding in Dr. Martens sold and the proceeds reinvested into Dunelm.
Although we see good long-term potential from Dr. Martens under new
management, the share price had rallied and the shares do not deliver a
meaningful income. By contrast, Dunelm had de-rated due to concerns around the
UK consumer and remains a high quality, cash generative, retailer. With a
special dividend coming up and a business model that continues to win market
share through the cycle, we saw it as a better balance of risk and reward in
the current environment. The exposure to UK housebuilders was also changed in
February, switching from Barratt Redrow into Taylor Wimpey. The change
reflected a materially higher dividend yield from Taylor Wimpey, making it a
more attractive way to gain exposure to market improvement for the portfolio.
Finally, we also switched holdings in European banks during the month, selling
ING and buying Italian bank Intesa Sanpaolo. Intesa Sanpaolo has a higher
dividend yield and its weighting to investment services offers stronger long
term growth and better protection for income if interest rates move lower in
Europe.
Closing the year, March was an active month for trading. At the start of the
month, we sold out of the remaining position in 4Imprint, reflecting potential
headwinds from higher tariffs and slower economic activity in the US. We like
the company, but saw it as fairly priced at those levels, with the dividend
yield only marginally above the benchmark level. We also started a new
position in self-storage provider Safestore. The shares have been very weak
recently and now offer a yield of over 5%. The shares are trading at a
material discount to asset value, providing downside protection. We also sold
out of the remaining position in Novo-Nordisk. This has been a great holding
over recent years but has moved down our order of preference in the healthcare
sector as competition has increased and it offers limited yield.
At the end of the month, we switched UK bank exposure back from NatWest to
Lloyds. This provided an income benefit due to dividend timing and there is
potential for some near-term catch-up for Lloyds on clarity over
investigations into historic motor finance deals. We also bought back into
4Imprint - an unusually quick turnaround! Since we sold the position, the
share price had fallen on US activity concerns and all the reasons we like the
company for the long term continue to apply. Having sold the shares 30% higher
earlier in the month we were happy to buy them back with concerns more
reflected, even if we are likely to see some more tariff turbulence in the
short term. The purchase was funded by selling Games Workshop. This is a great
company, but we consider that the shares are now more reasonably priced having
more than doubled since the position was added to the portfolio.
Stewardship
We believe that, as long-term owners of the businesses in which we are
invested, it is not sufficient merely to seek out assets that we believe to be
undervalued. It is also incumbent upon us to take a proactive approach to our
stewardship of these companies. Therefore, we engage extensively with investee
companies. We have attended a range of meetings with chairmen, non-executive
directors and other stakeholders. Topics covered have included the composition
of the board, environmental and social issues, and remuneration. Risk is a
very broad subject that is interpreted in varying manners by different
companies. However, by engaging on this subject, we secure a deeper
understanding of how the boards of investee companies perceive and seek to
manage these issues. Such interactions also enable us to push for improved
disclosure and better management practices and, on occasion, different
decisions where appropriate. We have had conversations regarding companies'
financing choices. We find that it is always worthwhile communicating our
preference for conservatively structured balance sheets that place a company's
long-term fortunes ahead of possible short term share price gains. Such
activity is by its nature time consuming, but we regard it as an integral
aspect of our role as long term investors.
Consideration of Environmental, Social and Governance ("ESG") factors form an
important part of our process. Whilst the management of the Company's
investments is not undertaken with any specific instructions to exclude
certain asset types or classes, we take these factors into account as part of
the investment process. ESG investment is about active engagement with the
goal of improving the performance of assets held by the Company. We aim to
make the best possible investments for the Company by understanding the whole
picture of the investments - before, during and after an investment is made.
That includes understanding the ESG risks and opportunities they present, and
how these could affect longer term performance and valuation.
Outlook
The 2025/2026 financial year has certainly started with a high degree of
volatility. A very active new US administration has turned global trade
relations upside down in recent weeks, causing markets to swing one way or the
other depending on the latest statements. As such, by the time we reach our
AGM in July any outlook statement may be more redundant than usual!
Despite the short term unpredictability of markets, we are seeing some events
happen that have been well flagged. After an almost unprecedented period of
market leadership, US equities are struggling this year as concerns build
around the strength of the domestic economy and the consumer in particular.
While the potential for inflationary tariffs have acted as a catalyst for
this, it would be no surprise if we saw a US downturn after such a strong
period of growth. At the same time, international markets have held up well,
helped by government stimulus in Europe and by much lower starting valuations.
Given the extent of US outperformance in the last decade and the still extreme
weighting of global equity funds to the US, we consider there is significant
runway for this trend to continue. Diversification for all investors should be
at the top of the agenda. Any holder of a global index tracker has around 70%
of their assets in US large cap companies and April's changes should be a
trigger to look closely at that allocation.
Any change in equity allocation should favour UK markets - a small outflow
from the US becomes a big inflow if it crosses the Atlantic. UK companies
remain cheap on any objective measure and the high level of distributions
should prove very attractive to investors at a time when market directions are
uncertain. Our focus today is to lean into UK domestic markets and continue to
find those companies with resilient cashflows supporting high distributions
through the economic cycle. While the portfolio is style agnostic, the
opportunities in value stocks remain compelling in our view and we continue to
steer in this direction. Low starting values protect the downside in the event
of a recession while providing the potential for higher returns in the
eventual cyclical upturn - even if great care is needed to avoid the value
traps.
An important part of the portfolio positioning remains having an overweight
exposure to UK small and mid-cap companies. This has not worked so far in
2025, with rising bond yields at the start of the year acting as a headwind to
this part of the market. However, we remain convinced this is the place to be.
The fundamentals for UK mid-caps have been robust and there are bargains to be
found, with quality companies at very reasonable prices. The expectation is
that we will see a faster pace of interest rate cuts from the Bank of England
this year, and that will help government finances, allow bond yields to move
lower and act as a tailwind. Following the merger with abrdn Smaller
Companies Income Trust in 2023 we are able to take more small-cap exposure
directly, increasing the allocation to high conviction ideas and maximising
income generation from this segment of the market. However, we continue to
work closely with our small-cap team to identify opportunities.
A return to international and mid-cap outperformance would also likely benefit
active management. While benchmarks and passive index trackers think in terms
of market capitalisation, active managers tend to think about the opportunity
set as more equally weighted. This matters - in the UK, the large cap FTSE 100
Index makes up over 85% of the FTSE All-Share Index by market-cap, but only
20% of the constituents. There are plenty of opportunities out there for the
year ahead. Our focus remains squarely on meeting the income objective and
growing income over time, while also preserving capital and maintaining the
potential for long term growth.
Iain Pyle
Aberdeen
28 May 2025
Investment Portfolio - Equities
As at 31 March 2025
Valuation Total Valuation
2025 portfolio 2024
Company FTSE All-Share Index Sector £'000 % £'000
AstraZeneca Pharmaceuticals and Biotechnology 4,914 4.0 5,440
HSBC Holdings Banks 4,910 4.0 3,232
Shell Oil, Gas and Coal 4,854 3.9 4,674
Morgan Sindall Construction and Materials 3,660 3.0 3,642
National Grid Gas, Water and Multiutilities 3,184 2.6 2,283
Diversified Energy Oil, Gas and Coal 2,790 2.3 2,292
Rio Tinto Industrial, Metals and 2,741 2.2 2,637
Mining
Imperial Brands Tobacco 2,725 2.2 1,362
Energean Oil, Gas and Coal 2,662 2.1 3,333
Assura Real Estate Investment Trusts 2,597 2.1 1,487
Ten largest investments 35,037 28.4
Telecom Plus Telecommunications Service Providers 2,545 2.1 2,161
SSE Electricity 2,517 2.0 2,265
Chesnara Life Insurance 2,494 2.0 2,399
Lloyds Banking Banks 2,460 2.0 1,779
Taylor Wimpey Construction and Materials 2,430 2.0 -
Aviva Non-life Insurance 2,411 2.0 -
Standard Chartered Banks 2,404 1.9 1,771
M&G Investment Banking and Brokerage 2,394 1.9 1,723
Services
Intermediate Capital Group Investment Banking and Brokerage 2,310 1.9 3,234
Services
Balfour Beatty Construction and Materials 2,212 1.8 1,780
Twenty largest investments 59,214 48.0
Inchcape Industrial Support 2,152 1.7 2,931
Services
Reckitt Benckiser Group Personal Care Drug and Grocery Stores 2,097 1.7 -
BP Oil, Gas and Coal 2,036 1.6 3,281
Barclays Banks 1,993 1.6 -
Safestore Real Estate Investment Trusts 1,949 1.6 -
Anglo American Industrial, Metals and 1,940 1.6 2,384
Mining
Sirius Real Estate Real Estate Investment Trusts 1,726 1.4 1,991
Melrose Industrials General Industrials 1,710 1.4 1,614
MONY Group Software and Computer Services 1,704 1.4 -
Intesa Sanpaolo Banks 1,675 1.4 -
Thirty largest investments 78,196 63.4
Kier Construction and Materials 1,673 1.4 -
Drax Electricity 1,505 1.2 809
Gaztransport Et Technigaz Oil, Gas and Coal 1,338 1.1 -
Convatec Health Care Equipment and Services 1,263 1.0 1,563
LondonMetric Real Estate Investment Trusts 1,194 1.0 -
ASML Holdings Technology Hardware and Equipment 1,180 1.0 -
OSB Finance and Credit Services 1,177 1.0 1,035
4Imprint Group Media 1,170 0.9 2,637
Hollywood Bowl Travel and Leisure 1,128 0.9 2,334
Hunting Oil Equipment Services and Distribution 1,125 0.9 1,410
Forty largest investments 90,949 73.8
Bodycote Industrial Metals and Mining 1,108 0.9 627
ME Group Leisure Goods 1,033 0.8 -
Dunelm General Retailers 950 0.8 -
Serica Energy Oil, Gas and Coal 946 0.8 -
Conduit Holdings Non-life Insurance 910 0.7 -
IP Group Investment Banking and Brokerage 832 0.7 975
Services
RS Group Industrial Support Services 815 0.7 -
Smurfit Westrock General Industrials 774 0.6 -
Ashmore Investment Banking and Brokerage 666 0.5 875
Services
Close Brothers Banks 479 0.4 721
Fifty largest investments 99,462 80.7
Wood Group Oil Equipment Services and Distribution 408 0.3 781
Total equity investments 99,870 81.0
Investment Portfolio - Other Investments
As at 31 March 2025
Valuation Total Valuation
2025 portfolio 2024
Company £'000 % £'000
Preference shares and Fixed Interest investments(A)
Ecclesiastical Insurance Office 8 5/8% 6,241 5.1 5,837
Nationwide 10.25% 4,966 4.0 -
Santander 10.375% 4,771 3.9 4,244
Standard Chartered 8.25% 3,474 2.8 3,197
General Accident 7.875% 2,028 1.6 4,116
Lloyds Bank 11.75% 990 0.8 960
R.E.A. Holdings 9% 717 0.6 686
Standard Chartered 7.375% 286 0.2 256
Total Preference shares and fixed interest investments 23,473 19.0
Total Investments 123,343 100.0
(A) None of the preference shares and fixed interest investments listed above
have a fixed redemption date.
Distribution of Assets and Liabilities
Movement during the year
Valuation at Valuation at
31 March 2024 Purchases Sales Gains 31 March 2025
£'000 % £'000 £'000 £'000 £'000 %
Listed investments
Equities 97,974 92.5 53,889 (54,086) 2,093 99,870 93.6
Preference shares and Fixed Interest investments 24,195 22.8 4,983 (8,084) 2,379 23,473 22.0
Total investments 122,169 115.3 58,872 (62,170) 4,472 123,343 115.6
Current assets 3,242 3.1 2,980 2.8
Current liabilities (491) (0.5) (637) (0.6)
Non-current liabilities (18,963) (17.9) (18,975) (17.8)
Net assets 105,957 100.0 106,711 100.0
Net asset value per Ordinary share 256.0p 265.2p
Directors' Report (extract)
The Directors present their report and audited financial statements for the
year ended 31 March 2025.
Results and Dividends
The financial statements for the year ended 31 March 2025 are contained below.
Dividends paid and proposed for the year amounted to 14.80p per Ordinary
share.
First, second and third interim dividends for the year, each of 3.20p per
Ordinary share, were paid on 31 October 2024, 31 January 2025 and 30 April
2025 respectively. The Directors recommend a final dividend of 5.20p per
Ordinary share, payable on 31 July 2025 to shareholders on the register on 4
July 2025. The ex-dividend date is 3 July 2025. Under UK-adopted international
accounting standards the third interim and final dividends will be accounted
for in the financial year ended 31 March 2026. A resolution in respect of the
final dividend will be proposed at the forthcoming Annual General Meeting.
Investment Trust Status
The Company is registered as a public limited company (registered in England
and Wales No. 00386561) and is an investment company within the meaning of
Section 833 of the Companies Act 2006. The Company has been approved by HM
Revenue & Customs as an investment trust subject to it continuing to meet
the relevant eligibility conditions of Section 1158 of the Corporation Tax Act
2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument
2011/2999. The Directors are of the opinion that the Company has conducted its
affairs for the year ended 31 March 2025 so as to enable it to comply with the
ongoing requirements for investment trust status.
Individual Savings Accounts
The Company satisfies 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.
Capital Structure
The issued Ordinary share capital as at 31 March 2025 comprised 40,214,596
Ordinary shares of 50p each and 2,018,478 Ordinary shares held in treasury.
The Company also has 50,000 3.5% Cumulative Preference shares of £1 each.
During the year the Company bought back 1,154,946 Ordinary shares at a
discount to net asset value, to hold in treasury.
Voting Rights
Each Ordinary and Cumulative Preference share carries one vote at general
meetings of the Company. The Cumulative Preference shares carry a right to
receive a fixed rate of dividend and, on a winding up of the Company, to the
payment of such fixed cumulative preferential dividends to the date of such
winding up and to the repayment of the capital paid up on such shares in
priority to any payment to the holders of the Ordinary shares.
The Ordinary shares, excluding any treasury shares, carry a right to receive
dividends and, on a winding up or other return of capital, after meeting the
liabilities of the Company, the surplus assets will be paid to Ordinary
shareholders in proportion to their shareholdings.
There are no restrictions on the transfer of Ordinary or Cumulative Preference
shares in the Company other than certain restrictions which may from time to
time be imposed by law.
Management Agreement
The Company has appointed abrdn Fund Managers Limited ("aFML"), a wholly owned
subsidiary of Aberdeen Group plc, as its alternative investment fund manager.
aFML has been appointed to provide investment management, risk management,
administration, company secretarial services and promotional activities to the
Company. The Company's portfolio is managed by abrdn Investments Limited by
way of a group delegation agreement in place between aFML and abrdn
Investments Limited. In addition, aFML has sub-delegated administrative and
company secretarial services to abrdn Holdings Limited and promotional
activities to abrdn Investments Limited. Details of the management fee and
fees payable for promotional activities are shown in notes 4 and 5 to the
financial statements.
The management agreement is terminable on not less than six months' notice. In
the event of termination by the Company on less than the agreed notice period,
compensation is payable to the Manager in lieu of the unexpired notice period.
Substantial Interests
Information provided to the Company by major shareholders pursuant to the
FCA's Disclosure Guidance and Transparency Rules is published by the Company
via a Regulatory Information Service.
The table below sets out the interests in 3% or more of the issued share
capital of the Company, of which the Board was aware as at 31 March 2025.
Shareholder Number of Ordinary shares held % of Ordinary shares held
Interactive Investor 12,347,051 30.7
Hargreaves Lansdown 8,423,367 20.9
AJ Bell 2,888,463 7.2
HSDL 2,226,971 5.5
There have been no changes notified to the Company between the year end and
the date of approval of this Report.
Directors
At the end of the year the Board comprised four non-executive Directors, each
of whom is considered by the Board to be independent of the Company and the
Manager. Robert Talbut retired as a Director at the Annual General Meeting on
5 July 2024.
The Directors attended scheduled Board and Committee meetings during the year
ended 31 March 2025 as follows (relevant meetings in brackets):
Director Board Audit Committee Management Engagement Committee Nomination &
Remuneration Committee
Robin Archibald 5 (5) 2 (2) 1 (1) 1 (1)
Jane Pearce 5 (5) 2 (2) 1 (1) 1 (1)
Helen Sinclair 5 (5) 2 (2) 1 (1) 1 (1)
Robert Talbut(A) 2 (2) 1 (1) - (-) - (-)
Simon White 5 (5) 2 (2) 1 (1) 1 (1)
(A) Retired as a Director on 5 July 2024
The Board meets more frequently when business needs require and has regular
dialogue between formal Board meetings, including with the Manager. During the
year, there were an additional four Board/Board Committee meetings held,
principally in relation to share buy backs, the approval of the Annual and
Half Yearly Reports and the Company's positioning in light of sector issues.
Under the terms of the Company's Articles of Association, Directors must
retire and be subject to appointment at the first Annual General Meeting after
their appointment by the Board, and be subject to re-appointment every three
years thereafter. However, the Board has decided that all Directors will seek
annual re-appointment after initial appointment to the Board.
The Board believes that all the Directors seeking re-appointment remain
independent of the Manager and free from any relationship which could
materially interfere with the exercise of their judgement on issues of
strategy, performance, resources and standards of conduct. The Board believes
that each Director has the requisite high level and range of business,
investment and financial experience which enables the Board to provide clear
and effective leadership, oversight and proper governance of the Company.
Following formal performance evaluations, each Director's performance
continues to be effective and demonstrates commitment to the role, and their
individual performances contribute to the long-term sustainable success of the
Company. All of the Directors have demonstrated that they have sufficient time
and commitment to fulfil their directorial roles with the Company. The Board
therefore recommends the re-appointment of each of the Directors at the Annual
General Meeting.
Board's Policy on Tenure
In normal circumstances, it is the Board's expectation that Directors will not
serve beyond the Annual General Meeting following the ninth anniversary of
their appointment. However, the Board takes the view that independence of
individual Directors is not necessarily compromised by length of tenure on the
Board and that continuity and experience can add significantly to the Board's
strength. The Board believes that recommendation for re-election should be on
an individual basis following a rigorous review which assesses the
contribution made by the Director concerned, but also taking into account the
need for regular refreshment and diversity, as well as providing continuity of
experience of the Company.
It is the Board's policy that the Chairman of the Board will not normally
serve as a Director beyond the Annual General Meeting following the ninth
anniversary of his/her appointment to the Board. However, this may be extended
in certain circumstances including the facilitation of effective succession
planning and the development of a diverse Board. In such a situation the
reasons for the extension will be fully explained to shareholders and a
timetable for the departure of the Chairman clearly set out.
The Role of the Chairman and Senior Independent Director
The Chairman is responsible for providing effective leadership to the Board,
by setting the tone of the Company, demonstrating objective judgement and
promoting a culture of openness and debate. The Chairman facilitates the
effective contribution and encourages active engagement by each Director. In
conjunction with the Company Secretary, the Chairman ensures that Directors
receive accurate, timely and clear information to assist them with effective
decision-making. The Chairman acts upon the results of the Board evaluation
process by recognising strengths and addressing any weaknesses and also
ensures that the Board engages with major shareholders and that all Directors
understand shareholder views.
The Senior Independent Director acts as a sounding board for the Chairman and
acts as an intermediary for other Directors, when necessary. Working closely
with the other Directors, the Senior Independent Director takes responsibility
for an orderly succession process for the Chairman, and leads the annual
appraisal of the Chairman's performance. The Senior Independent Director is
also available to shareholders to discuss any concerns they may have.
Directors' and Officers' Liability Insurance
The Company maintains insurance in respect of Directors' and Officers'
liabilities in relation to their acts on behalf of the Company. In addition,
the Company has entered into a separate deed of indemnity with each of the
Directors reflecting the scope of the indemnity in the Articles of
Association. Under the Articles of Association, each Director is entitled to
be indemnified out of the assets of the Company to the extent permitted by law
against any loss or liability incurred by him or her in the proper execution
of his or her duties in relation to the affairs of the Company.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation where a Director
has a conflict of interest. As part of this process, each Director prepares a
list of other positions held and all other conflict situations that may need
to be authorised either in relation to the Director concerned or his or her
connected persons. The Board considers each Director's situation and decides
whether to approve any conflict, taking into consideration what is in the best
interests of the Company and whether the Director's ability to act in
accordance with his or her wider duties is affected. Each Director is required
to notify the Company Secretary of any potential, or actual, conflict
situations that will need authorising by the Board. Authorisations given by
the Board are reviewed at each Board meeting.
No Director has a service contract with the Company although all Directors are
issued with letters of appointment, which may be amended from time to time to
reflect regulatory and other changes. Other than the deeds of indemnity
referred to above and the Directors' letters of appointment, there were no
contracts during, or at the end of the year, in which any Director was
interested.
The Company has a policy of conducting its business in an honest and ethical
manner. The Company takes a zero-tolerance approach to bribery and corruption
and has procedures in place that are proportionate to the Company's
circumstances to prevent them. The Manager also adopts a group-wide
zero-tolerance approach and has its own detailed policy and procedures in
place to prevent bribery and corruption. Copies of the Manager's anti-bribery
and corruption policies are available on its website.
In relation to the corporate offence of failing to prevent tax evasion, it is
the Company's policy to conduct all business in an honest and ethical manner.
The Company takes a zero-tolerance approach to facilitation of tax evasion
whether under UK law or under the law of any foreign country and is committed
to acting professionally, fairly and with integrity in all its business
dealings and relationships.
Board Diversity
The Board recognises the importance of having a range of skilled and
experienced individuals with the right knowledge, including of the Company,
represented on the Board in order to allow it to fulfil its obligations. The
Board also recognises the benefits and is supportive of the principle of
diversity in its recruitment of new Board members. 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 its Directors. In view of its size, the Board will continue to
ensure that all appointments are made on the basis of merit against the
specification prepared for each appointment. In doing so, the Board will take
account of the targets set out in the FCA's Listing Rules, which are set out
in the tables below.
The Board has resolved that the Company's year end date is the most
appropriate date for disclosure purposes. The following information has been
provided by each Director through the completion of questionnaires. There have
been no changes since the year end.
Table for reporting on gender as at 31 March 2025
Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, Chair and SID) Number in executive management Percentage of executive management
Men 2 50% n/a n/a n/a
(note 3) (note 3) (note 3)
Women 2 50%
(note 1)
Not specified/prefer not to say - -
Table for reporting on ethnic background as at 31 March 2025
Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, Chair and SID) Number in executive management Percentage of executive management
White British or other White 4 100% n/a n/a n/a
(including minority-white groups)
(note 3) (note 3) (note 3)
Minority ethnic - -
(note 2)
Not specified/prefer not to say - -
Notes:
1. Meets target that at least 40% of Directors are women as set out
in LR 6.6.6R (9)(a)(i).
2. Does not meet target that at least one Director is from a minority
ethnic background as set out in LR 6.6.6R (9)(a)(iii). The Directors will take
this into account when making future Board appointments.
3. This column is not applicable as the Company is externally managed
and does not have any executive staff. Specifically, it does not have either a
CEO or CFO. The Company considers that the roles of Chairman of the Board,
Senior Independent Director and Chair of the Audit Committee are Senior Board
Positions and, accordingly, that the Company meets in spirit the requirement
that at least one of the Senior Board Positions is held by a woman as set out
in LR 6.6.6R (9)(a)(ii).
Corporate Governance
The Company is committed to high standards of corporate governance and the
Board is accountable to the Company's shareholders for good governance. The
Board has 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 Corporate
Governance Code as published by the FRC in July 2018 (the "UK Code"), as well
as setting out additional provisions on issues that are of specific relevance
to investment trusts.
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 than if it had adopted the UK Code. The AIC Code
is available on the AIC's website: theaic.co.uk. It includes an explanation of
how the AIC Code adapts the principles and provisions set out in the UK Code
to make them relevant for investment trusts.
The Board confirms that, during the year, the Company complied with the
principles and provisions of the AIC Code.
Further details of the Company's compliance with the AIC Code can be found on
its website.
The Board is conscious of the FRC's recent updates to the UK Corporate
Governance Code, and the corresponding updates to the AIC Code, some of which
will apply to the Company's financial year beginning on 1 April 2025. It is
the Board's intention that the Company will comply with all relevant
provisions of the new codes.
Going Concern
The Company's assets consist mainly of equity shares in companies listed on
the London Stock Exchange. The Board has performed stress testing and
liquidity analysis on the portfolio and considers that, in the absence of
unforeseen circumstances, the majority of the Company's investments are
realisable within a relatively short timescale.
The Board has set limits for borrowing and regularly reviews actual exposures,
cash flow projections and compliance with banking covenants, including the
headroom available. At the year end, the Company had a £20 million loan
facility which is due to mature in April 2027.
Having taken these factors into account, the Directors believe that the
Company has adequate resources to continue in operational existence for the
foreseeable future and has the ability to meet its financial obligations as
they fall due for the period to 30 June 2026, which is at least twelve months
from the date of approval of this Report. For these reasons, they continue to
adopt the going concern basis of accounting in preparing the financial
statements.
Accountability and Audit
Each Director confirms that, so far as he or she is aware, there is no
relevant audit information of which the Company's Auditor is unaware, and they
have taken all the steps that they could reasonably be expected to have taken
as Directors in order to make themselves aware of any relevant audit
information and to establish that the Company's Auditor is aware of that
information.
Independent Auditor
The Company's Auditor, Ernst & Young LLP, has indicated its willingness to
remain in office. The Board will place resolutions before the Annual General
Meeting to re-appoint Ernst & Young LLP as Auditor for the ensuing year
and to authorise the Directors to determine its remuneration.
Relations with Shareholders
The Directors place a great deal of importance on communications with
shareholders. Shareholders and investors may obtain up to date information on
the Company through its website.
The Board's policy is to communicate directly with shareholders and their
representative bodies without the involvement of the management group
(including the Company Secretary or the Manager) in situations where direct
communication is required, and representatives from the Manager meet with
major shareholders on at least an annual basis in order to gauge their views.
In addition, the Company Secretary only acts on behalf of the Board, not the
Manager, and there is no filtering of communication. At each Board meeting the
Board receives full details of any communication from shareholders to which
the Chairman responds personally as appropriate.
Directors make themselves available to attend meetings with the Company's
largest shareholders and meet other shareholders at the Annual General Meeting
and, as explained in the Chairman's Statement, the Company will hold an Online
Shareholder Presentation in advance of the Annual General Meeting this year
including the opportunity for an interactive question and answer session.
The notice of the Annual General Meeting is, where practicable, sent out at
least 20 working days in advance of the meeting. All shareholders have the
opportunity to put questions to the Board and Manager at the meeting. Further
details regarding the arrangements for this year's Annual General Meeting and
separate Online Shareholder Presentation are set out in the Chairman's
Statement.
Annual General Meeting
The Annual General Meeting will be held at 18 Bishops Square, London E1 6EG on
Tuesday 8 July 2025 at 12 noon.
By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
28 May 2025
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements, in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year, and under that law they have chosen to prepare the financial
statements in accordance with UK-adopted international accounting standards.
The financial statements are required by law to give a true and fair view of
the state of affairs of the Company and of the profit or loss of the Company
for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies in accordance with IAS 8 'Accounting
Policies, Changes in Accounting Estimates and Errors' and then apply them
consistently;
· make judgments and estimates that are reasonable and prudent;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in UK-adopted international accounting standards is insufficient
to enable users to understand the impact of particular transactions, other
events and conditions on the Company's financial position and financial
performance;
· state whether the financial statements have been prepared in accordance
with UK-adopted international accounting standards subject to any material
departures disclosed and explained in the notes to the financial statements;
and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with
the Companies Act 2006. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Statement of Corporate Governance that comply with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website, but not
for the content of any information included on the website that has been
prepared or issued by third parties. Legislation in the UK governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Board confirms that to the best of its knowledge:
· the financial statements have been prepared in accordance with applicable
accounting standards and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company;
· in the opinion of the Directors, the Annual Report taken as a whole, is
fair, balanced and understandable and it provides the information necessary to
assess the Company's position and performance, business model and strategy;
and
· the Strategic Report and Directors' Report include a fair review of the
development and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties that the
Company faces.
On behalf of the Board
Robin Archibald
Chairman
28 May 2025
Statement of Comprehensive Income
Year ended Year ended
31 March 2025 31 March 2024
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments at fair value 11 - 4,472 4,472 - (5,748) (5,748)
Currency losses - (5) (5) - (56) (56)
Income 3
Income from investments 7,196 - 7,196 6,361 - 6,361
Other income from investment activity 100 - 100 68 - 68
7,296 4,467 11,763 6,429 (5,804) 625
Expenses
Management fee 4 (261) (392) (653) (210) (210) (420)
Administrative expenses 5 (428) (19) (447) (505) (24) (529)
Finance costs 7 (402) (603) (1,005) (502) (502) (1,004)
(1,091) (1,014) (2,105) (1,217) (736) (1,953)
Profit/(loss) before taxation 6,205 3,453 9,658 5,212 (6,540) (1,328)
Taxation 8 (108) - (108) (144) - (144)
Profit/(loss) attributable to equity holders of the Company 6,097 3,453 9,550 5,068 (6,540) (1,472)
Earnings per Ordinary share (pence) 10 14.80 8.38 23.18 14.75 (19.03) (4.28)
The Company does not have any income or expense that is not included in profit
for the year, and therefore the "Profit for the year" is also the "Total
comprehensive income for the year", as defined in IAS 1 (revised).
The total column of this statement represents the Statement of Comprehensive
Income of the Company, prepared in accordance with UK adopted International
Accounting Standards. The revenue and capital columns are supplementary to
this and are prepared under guidance published by the Association of
Investment Companies.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these financial statements.
Balance Sheet
As at As at
31 March 2025 31 March 2024
Notes £'000 £'000
Non-current assets
Ordinary shares 99,870 97,974
Preference shares and Fixed Interest investments 23,473 24,195
Securities at fair value 11 123,343 122,169
Current assets
Other receivables 12 1,658 1,567
Cash at bank 1,322 1,675
2,980 3,242
Creditors: amounts falling due within one year
Other payables (637) (491)
Net current assets/(liabilities) 2,343 2,751
Total assets less current liabilities 125,686 124,920
Non-current liabilities
Revolving credit facility(A) (9,000) (9,000)
Loan due in more than one year 13 (9,975) (9,963)
Net assets 106,711 105,957
Share capital and reserves
Called-up share capital 14 21,166 21,166
Share premium account 2 - 49,952
Special reserve 2 49,952 -
Capital reserve 15 28,055 27,451
Revenue reserve 7,538 7,388
Equity shareholders' funds 106,711 105,957
Net asset value per Ordinary share (pence) 16 265.23 256.00
(A) The prior year balance for the revolving credit facility has been
reclassified from current to non-current liabilities. See note 2 (a).
The financial statements were approved by the Board of Directors and
authorised for issue on 28 May 2025 and were signed on its behalf by:
Robin Archibald
Chairman
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Equity
Year ended 31 March 2025
Share
Share premium Special Capital Revenue
capital account reserve reserve reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
As at 31 March 2024 21,166 49,952 - 27,451 7,388 105,957
Repurchase of Ordinary shares for treasury - - - (2,849) - (2,849)
Cancellation of share premium account 2 - (49,952) 49,952 - - -
Profit for the year - - - 3,453 6,097 9,550
Equity dividends 9 - - - - (5,947) (5,947)
As at 31 March 2025 21,166 - 49,952 28,055 7,538 106,711
Year ended 31 March 2024
Share
Share premium Special Capital Revenue
capital account reserve reserve reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
As at 31 March 2023 15,532 21,411 - 35,930 7,040 79,913
Issue of shares on the aSCIT transaction 22 5,634 29,594 - - - 35,228
Cost of shares issued in respect of the aSCIT transaction 22 - (1,053) - - - (1,053)
Repurchase of Ordinary shares for treasury - - - (1,939) - (1,939)
(Loss)/profit for the year - - - (6,540) 5,068 (1,472)
Equity dividends 9 - - - - (4,720) (4,720)
As at 31 March 2024 21,166 49,952 - 27,451 7,388 105,957
The Company has aggregate realised and distributable reserves of £81,873,000
as at 31 March 2025 (2024 - £32,219,000), comprising a special reserve of
£49,952,000, the realised gains element of the capital reserve of
£24,383,000 (2024 - £24,831,000) and a revenue reserve of £7,538,000 (2024
- £7,388,000).
The accompanying notes are an integral part of these financial statements.
Cash Flow Statement
Year ended Year ended
31 March 2025 31 March 2024
£'000 £'000
Net cash inflow from operating activities
Dividend income received 7,183 6,171
Interest income received 8 31
Options premium received - 35
Interest received from money market funds 31 31
Management fee paid (439) (397)
Other cash expenses (483) (539)
Cash generated from operations 6,300 5,332
Interest paid (1,008) (991)
Overseas tax paid (119) (140)
Net cash inflows from operating activities 5,173 4,201
Cash flows from investing activities
Purchases of investments (58,872) (43,873)
Sales of investments 62,170 44,372
Net cash inflow from investing activities 3,298 499
Cash flows from financing activities
Equity dividends paid (5,947) (4,720)
Repurchase of Ordinary shares to Treasury (2,872) (1,838)
Net cash acquired and received following the aSCIT transaction - 3,444
Cost of shares issued in respect of the aSCIT transaction - (1,031)
Net cash outflow from financing activities (8,819) (4,145)
(Decrease)/increase in cash and cash equivalents (348) 555
Reconciliation of net cash flow to movements in cash and cash equivalents
(Decrease)/increase in cash and cash equivalents as above (348) 555
Net cash and cash equivalents at start of year 1,675 1,176
Effect of foreign exchange rate changes (5) (56)
Net cash and cash equivalents at end of year 1,322 1,675
Notes to the Financial Statements
For the year ended 31 March 2025
1. Principal activity.
The Company is a closed-end investment company, registered in England and
Wales No. 00386561, with its Ordinary shares listed on the London Stock
Exchange.
2. Accounting policies
(a) Basis of accounting. The financial statements of the Company have been
prepared in accordance with UK adopted International Accounting Standards
("IAS") .
In preparing these financial statements the Directors have considered the
impact of climate change risk as an emerging risk and have concluded that it
does not have a material impact on the Company's investments. In line with
IAS, investments are valued at fair value, which for the Company are quoted
bid prices for investments in active markets at the Balance Sheet date and
therefore reflect market participants view of climate change risk.
The Company's financial statements are presented in sterling, which is also
the functional currency as it is the currency in which shares are issued and
expenses are generally paid. All values are rounded to the nearest thousand
pounds (£'000) except when otherwise indicated.
Where presentational guidance set out in the Statement of Recommended Practice
("SORP"): 'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' issued by the Association of Investment Companies ("AIC"), is
consistent with the requirements of IAS, the Directors have sought to prepare
the financial statements on a basis compliant with the recommendations of the
SORP issued in July 2022.
Going concern. The Company's assets consist mainly of equity shares in
companies listed on the London Stock Exchange. The Board has performed stress
testing and liquidity analysis on the portfolio and considers that, in most
foreseeable circumstances, the majority of the Company's investments are
realisable within a relatively short timescale. The Board has set limits for
borrowing and regularly reviews actual exposures, cash flow projections and
compliance with banking covenants, including the headroom available. At the
year end, the Company had a £20 million loan facility which is due to mature
in May 2027. Having taken these factors into account, the Directors believe
that the Company has adequate resources to continue in operational existence
for the foreseeable future and has the ability to meet its financial
obligations as they fall due for the period to 30 June 2026, which is at least
twelve months from the date of approval
of this Report. For these reasons, they continue to adopt the going concern
basis of accounting in preparing the
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 Directors do not consider there to be any
significant judgements and estimates within the financial statements for the
year ended
31 March 2025. Special dividends are assessed and credited to capital or
revenue according to their circumstances.
New and amended accounting standards and interpretations. At the date of
authorisation of these financial statements, the following amendments to
Standards and Interpretations were assessed to be relevant and are all
effective for annual periods beginning on or after 1 January 2024:
- IAS 1 Amendments (Classification of Liabilities as Current or Non-Current)
(effective from 1 January 2024) This has led to classifying the Company's
revolving credit facility as non-current. Accordingly, the prior year balance
of £9,000,000 has been reclassified from current to non-current.
- IAS 1 Amendments (Non-Current Liabilities with Covenants) (effective from
1 January 2024)
Future new standards and amendments to standards and interpretations. At the
date of authorisation of these financial statements, the following amendments
to Standards and Interpretations were assessed to be relevant and are all
effective for annual periods beginning on or after 1 January 2025;
- Annual Improvements 2023-24 (Minor amendments to IFRS 1, 7, 9, 10 and IAS 7)
(effective from 1 January 2026)
- IFRS 7 and 9 Amendments (Classification and Measurement of Financial
Instruments) (effective from 1 January 2026)
- IFRS 18 (Presentation and Disclosure in Financial Statements) (effective
from 1 January 2027)
The Company intends to adopt the Standards and Interpretations in the
reporting period when they become effective and the Board does not anticipate
that the adoption of these Standards and Interpretations in future periods
will materially impact the Company's financial results in the period of
initial application although there may be revised presentations to the
Financial Statements and additional disclosures.
(b) Investments. All investments are evaluated and managed on a fair value basis
and are therefore classified as FVTPL ("Fair Value Through Profit or Loss").
Investments are recognised and de-recognised at the 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, this is deemed to be bid market closing prices for
SETS (London Stock Exchange's electronic trading service) stocks sourced from
the London Stock Exchange.
Gains and losses arising from the changes in fair value are included in net
profit or loss for the period as a capital item. Transaction costs are treated
as a capital cost.
(c) Income. Dividend income from equity investments, which have a discretionary
dividend, is recognised when the shareholders' rights to receive payment have
been established, normally the ex-dividend date. Special dividends are
allocated to revenue or capital based on their individual merits.
If a scrip dividend is taken in lieu of a cash dividend, the net amount of the
cash dividend declared is credited to the revenue account. Any excess in the
value of the shares received over the amount of the cash dividend foregone is
recognised as capital.
Interest from deposits and interest from debt securities which do not have a
discretionary dividend are accounted for on an accruals basis.
The premium received from traded options and other income, including fees
receivable, is recognised in the revenue column of the Statement of
Comprehensive Income.
(d) Expenses. All expenses are accounted for on an accruals basis. In respect of
the analysis between revenue and capital items presented within the Statement
of Comprehensive Income, all expenses have been presented as revenue items
except those where a connection with the maintenance or enhancement of the
value of the investments held can be demonstrated. With effect from 1 April
2024, the management fee and finance costs have been allocated 40% to revenue
and 60% to capital, previously 50% to revenue and 50% to capital, in order to
reflect the Directors' expected long-term view of the nature of the future
investment returns of the Company following the merger with abrdn Smaller
Companies Investment Trust plc.
(e) Borrowings. Both short-term and long-term borrowings, which comprise interest
bearing bank loans are initially recognised at cost, being the fair value of
the consideration received, net of any issue expenses and subsequently
measured at amortised cost using the effective interest method. The finance
costs, being the difference between the net proceeds of borrowings and the
total amount of payments that require to be made in respect of those
borrowings, are amortised over the life of the borrowings.
(f) Taxation. The tax payable is based on the taxable profit for the year. Taxable
profit differs from net profit as reported in the Statement of Comprehensive
Income because it excludes items of income or expenditure that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Company has no liability for current tax.
Deferred tax is recognised in respect of all temporary differences at the
Balance Sheet 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 Balance Sheet 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 temporary
differences can be deducted. Deferred tax assets and liabilities are measured
at the rates applicable to the legal jurisdictions in which they arise, using
tax rates that are expected to apply at the date the deferred tax position is
unwound.
Owing to the Company's status as an investment trust, and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company has not provided deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.
(g) Foreign currencies. Monetary assets and liabilities, comprising current
assets, current liabilities and non-current liabilities and non-monetary
assets comprising non-current assets held at fair value which are denominated
in foreign currencies are converted into sterling at the rate of exchange
ruling at the reporting date. Transactions during the year in foreign
currencies are converted at the rate of exchange ruling at the transaction
date. Gains or losses on monetary assets and liabilities arising from a change
in exchange rates subsequent to the date of a transaction are included as a
currency gain or loss in revenue or capital column of the Statement of
Comprehensive Income, depending on whether the gain or loss is of a revenue or
capital nature. Non-monetary assets that are measured at fair value and gains
or losses arising from a change in exchange rates subsequent to the date of a
transaction are included as a gain or loss on investments in the capital
column of the Statement of Comprehensive Income.
(h) Derivatives. The Company may enter into certain derivatives (e.g. traded
options). Traded option contracts are restricted to writing out-of-the-money
options with a view to generating income. Premiums received on traded option
contracts are recognised as income evenly over the period from the date they
are written to the date when they expire or are exercised or assigned. Losses
on any movement in the fair value of open contracts at the year end and on the
exercise of the contracts are recorded in the capital column of the Statement
of Comprehensive Income as they arise.
(i) Cash and cash equivalents. Cash and cash equivalents comprise cash in hand and
at banks and short-term deposits with an original maturity of less than 90
days.
(j) Other receivables. Financial assets classified as loans and receivables are
held to collect contractual cash flows and give rise to cash flows
representing solely payments of principal and interest. As such they are
measured at amortised cost. Other receivables do not carry any interest, they
have been assessed for any expected credit losses over their lifetime due to
their short-term nature.
(k) Other payables. Payables are non-interest bearing and are stated at their
undiscounted cash flows.
(l) Dividends payable. Final dividends are recognised from the date on which they
are approved by shareholders. Interim dividends are recognised when paid.
(m) Nature and purpose of reserves
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. This reserve was cancelled during the
year.
Special reserve. During the year, the Court approved the creation of a special
reserve by way of cancelling the balance in the share premium account of
£49,952,000. This reserve is available for the Company to distribute to
shareholders, including by way of share buybacks and dividends.
Capital reserve. This reserve reflects any realised gains or losses in the
period together with any unrealised increases and decreases 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 (d)
above.
The capital reserve, to the extent that the gains are deemed realised, is
distributable, including by way of share buybacks and dividends.
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 is distributable, including by way of dividend.
(n) 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.
3. Income
2025 2024
£'000 £'000
Income from listed investments
UK dividend income 5,670 5,254
Overseas dividend income 1,172 1,048
Interest from investment in money market funds 31 31
UK fixed interest investment income 323 28
7,196 6,361
Other income from investment activity
Deposit interest 8 34
Traded option premiums - 34
Other income 92 -
Total income 7,296 6,429
4. Management fees
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fees 261 392 653 210 210 420
The management fee is based on 0.45% per annum up to £100 million and 0.40%
over £100 million, by reference to the net assets of the Company and
including any borrowings up to a maximum of £30 million, and excluding
commonly managed funds, calculated monthly and paid quarterly. In addition,
with effect from 1 December 2023, a further fee of £120,000 per annum is
charged for other services provided under the terms of the management
agreement. The fee is allocated 40% to revenue and 60% to capital (31 March
2024 - 50% to revenue and 50% to capital). The management agreement is
terminable on not less than six months' notice. For the period 1 December 2023
to 30 May 2024, there was a management fee waiver in place as a result of the
transaction with abrdn Smaller Companies Income Trust plc ("aSCIT"). For this
period the fee was calculated at 0.29% per annum of net assets up to £100
million and 0.26% per annum of net assets over this threshold. After this
waiver period ended the fee returned to the existing fee rates. Should the
Company terminate the management agreement within three years of the date of
the transaction with aSCIT (ie before 1 December 2026), then the Company
undertakes to repay all of the management fees waived by the Manager. For
the period to 31 March 2025 the value of the management fee waiver was
calculated to be £33,000 (2024 - £65,000). The total of the fees paid and
payable during the year to 31 March 2025 was £653,000 (2024 - £420,000) and
the balance due to abrdn Fund Managers Limited ("aFML") at the year end was
£341,000 (2024 - £127,000).
5. Administrative expenses
2025 2024
£'000 £'000
Directors' remuneration 149 141
Auditor's remuneration: fees payable to the Company's Auditor for the audit of 57 60
the Company's annual accounts
Promotional activities 55 50
Professional fees 2 25
Directors' & Officers' liability insurance 11 11
Trade subscriptions 32 29
Share plan costs - 30
Registrar's fees 47 39
Printing, postage and stationery 12 28
Custody fees 12 11
Other administrative expenses 51 81
428 505
Capital administrative expenses - professional fees 19 24
447 529
The management agreement with aFML also provides for the provision of
promotional activities, which aFML has delegated to abrdn Investments Limited.
The total fees payable under the management agreement in relation to
promotional activities were £55,000 (2024 - £50,000) with a balance due to
aFML at the year end of £15,000 (2024 - £19,000). The Company's management
agreement with aFML also provides for the provision of company secretarial and
administration services to the Company. No separate fee is charged to the
Company in respect of these services, which have been delegated to abrdn
Holdings Limited. Share plan costs for the year decreased to £nil following
the cessation of the Aberdeen share plan during the year ended 31 March 2024.
6. Directors' remuneration
The Company had no employees during the year (2024 - none). No pension
contributions were paid for Directors (2024 - £nil). Further details on
Directors' Remuneration can be found in the Directors' Remuneration Report.
7. Finance costs
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
On bank loans 402 603 1,005 502 502 1,004
8. Taxation
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(a) Analysis of the charge for the year
Overseas tax 108 - 108 144 - 144
Total tax charge 108 - 108 144 - 144
(b) Factors affecting the tax charge for the year. The tax assessed for the year
is lower than the effective rate of corporation tax in the UK. The differences
are explained in the reconciliation below:
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) before taxation 6,205 3,453 9,658 5,212 (6,540) (1,328)
Corporation tax at an effective rate of 25% (2024 - 25%) 1,551 864 2,415 1,303 (1,635) (332)
Effects of:
Non-taxable UK dividend income (1,448) - (1,448) (1,329) - (1,329)
Excess management expenses not utilised 146 248 394 251 184 435
Expenses not deductible for tax purposes 2 4 6 3 - 3
Overseas withholding tax 108 - 108 144 - 144
Non-taxable overseas dividends (251) - (251) (228) - (228)
(Gains)/losses on investments not taxable - (1,118) (1,118) - 1,437 1,437
Losses on currency movements - 2 2 - 14 14
Total tax charge 108 - 108 144 - 144
At 31 March 2025 the Company had surplus management expenses and loan
relationship debits with a tax value of £8,402,000 based on a corporation tax
rate of 25% (2024 - £8,008,000 based on a corporation tax rate of 25%) in
respect of which a deferred tax asset has not been recognised. This is because
the Company is not expected to generate taxable income in a future period in
excess of the deductible expenses of that future period and, accordingly, it
is unlikely that the Company will be able to reduce future tax liabilities
through the use of existing surplus expenses.
9. Dividends
2025 2024
£'000 £'000
Amounts recognised as distributions to equity holders in the period:
Third interim dividend for 2024 of 3.20p (2023 - 3.20p) per share 1,324 991
Final dividend for 2024 of 4.80p (2023 - 4.60p) per share 1,986 1,425
First two interim dividends for 2025 totalling 6.40p (2024 - 6.40p) per share 2,641 2,308
Refund of unclaimed dividends from previous periods (6) (6)
5,945 4,718
3.5% Cumulative Preference shares 2 2
Total 5,947 4,720
The third interim dividend of 3.20p for the year to 31 March 2025, which was
paid on 30 April 2025, and the proposed final dividend of 5.20p for the year
to 31 March 2025, payable on 31 July 2025, have not been included as
liabilities in these financial statements.
Set out below are the total Ordinary dividends payable 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:
2025 2024
£'000 £'000
Three interim dividends for 2025 totalling 9.60p (2024 - 9.60p) per share 3,926 3,632
Proposed final dividend for 2025 of 5.20p (2024 - 4.80p) per share 2,084 1,986
6,010 5,618
The amount reflected above for the cost of the proposed final dividend for
2025 is based on 40,083,317 Ordinary shares, being the number of Ordinary
shares in issue at the date of this Report.
10. Earnings per Ordinary share
2025 2024
£'000 £'000
Earnings per Ordinary share are based on the following figures:
Revenue return 6,097 5,068
Capital return 3,453 (6,540)
Total return 9,550 (1,472)
Weighted average number of Ordinary shares 41,196,795 34,363,846
During the year and preceding years there were no potentially dilutive shares
in issue.
11. Non-current assets - Securities at fair value
2025 2024
Listed Listed
investments investments
£'000 £'000
Opening book cost 119,549 89,610
Opening investment holdings gains 2,620 7,045
Opening valuation 122,169 96,655
Assets acquired in relation to the aSCIT transaction - 31,761
Purchases 58,872 43,873
Sales - proceeds (62,170) (44,372)
Gains/(losses) on investments 4,472 (5,748)
Total investments held at fair value through profit or loss 123,343 122,169
2025 2024
Listed Listed
investments investments
£'000 £'000
Closing book cost 119,671 119,549
Closing investment holdings gains 3,672 2,620
Total investments held at fair value through profit or loss 123,343 122,169
2025 2024
Gains/(losses) on investments £'000 £'000
Net realised gains/(losses) on sales of investments(A) 3,420 (1,202)
Cost of call options exercised - (121)
Net realised gains/(losses) on sales 3,420 (1,323)
Movement in fair value of investments 1,052 (4,413)
Cost of put options assigned - (12)
4,472 (5,748)
(A) Includes losses realised on the exercise of traded options of £nil (2024
- £133,000) which are reflected in the capital column of the Statement of
Comprehensive Income. There were no call or put options written during the
year ended 31 March 2025.
The cost of exercising of call options and assigning put options is the
difference between the market price of the underlying shares and the strike
price of the options. The premiums earned on options expired, exercised or
assigned of £nil (2024 - £34,000) have been dealt with in the revenue
account.
The movement in the fair value of traded option contracts has been calculated
in accordance with the accounting policy stated in note 2(h) and has been
charged to the capital reserve.
The Company received £62,170,000 (2024 - £44,372,000) from investments sold
in the period. The book cost of these investments when they were purchased was
£58,750,000 (2024 - £45,695,000). 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.
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 losses on investments in the
Statement of Comprehensive Income. The total costs on purchases of investments
in the year was £246,000 (2024 - £182,000). The total costs on sales of
investments in the year was £25,000 (2024 - £15,000). The above transaction
costs are calculated in line with the AIC SORP.
At 31 March 2025 the Company held the following investments comprising more
than 3% of the class of share capital held:
Class
Country of Number of Class of held
Company Incorporation shares held shares held %
Ecclesiastical Insurance Office England 4,490,000 8 5/8% Cum Pref 4.2
12. Other receivables
2025 2024
£'000 £'000
Accrued income and prepayments 1,658 1,567
1,658 1,567
None of the above amounts are overdue.
13. Liabilities
2025 2024
£'000 £'000
Amounts due to brokers relating to buyback of Ordinary shares for Treasury 78 101
Other creditors 559 390
637 491
Included above are the following amounts owed to aFML for management and
savings scheme services and for the promotion of the Company.
2025 2024
£'000 £'000
Other creditors 356 160
2025 2024
Non-current liabilities £'000 £'000
Revolving credit facility 9,000 9,000
Long-term bank loan 10,000 10,000
Loan arrangement fees (25) (37)
18,975 18,963
On 3 May 2022, the Company entered into a five year £20 million loan facility
with The Royal Bank of Scotland International Limited, London Branch. £10
million of the loan facility has been drawn down and fixed at an all-in
interest rate of 3.903% until 30 April 2027. £9 million of the facility has
been drawn down on a short-term basis at an all-in interest rate of 6.12%,
maturing 14 April 2025. At the date this Report was approved £9 million of
the facility had been drawn down on a short-term basis at a rate of 6.122%,
maturing on 16 June 2025.
The terms of The Royal Bank of Scotland International Limited facility contain
covenants that consolidated gross borrowings do not exceed 33% of the adjusted
portfolio value ("Securities at fair value" per the Balance Sheet adjusted for
any ineligible investments) at any time, the number of eligible investments
shall not be less than 30 at any time and the portfolio value shall at all
times be equal to or more than £40 million. The Company met these covenants
during the year and following the year end.
The arrangement expenses incurred on the drawdown of the loan are amortised
over the term of the loan.
14. Called up share capital
2025 2024
Number £'000 Number £'000
Allotted, called up and fully paid Ordinary shares of 50 pence each:
Balance brought forward 41,369,542 20,684 30,964,580 15,482
Ordinary shares issued - - 11,268,494 5,634
Ordinary shares bought back to Treasury in the year (1,154,946) (577) (863,532) (432)
Balance carried forward 40,214,596 20,107 41,369,542 20,684
Allotted, called up and fully paid 3.5% Cumulative Preference shares of £1
each:
Balance brought forward and carried forward 50,000 50 50,000 50
20,157 20,734
Treasury shares:
Balance brought forward 863,532 432 - -
Ordinary shares bought back to Treasury in the year 1,154,946 577 863,532 432
Balance carried forward 2,018,478 1,009 863,532 432
The Company acquired £35,228,000 of net assets from abrdn Smaller Companies
Income Trust plc ("aSCIT") following approval by aSCIT shareholders on 1
December 2023. The transaction resulted in the issue of 11,268,494 new
Ordinary shares to aSCIT shareholders.
During the year 1,154,946 (2024 - 863,532) Ordinary shares were bought back
into Treasury representing 2.8% (2024 - 2.1%) of the Company's total issued
share capital at a total cost of £2,849,000 (2024 - £1,939,000).
Each Ordinary and Cumulative Preference share carries one vote at general
meetings of the Company. The Cumulative Preference shares are considered to be
equity. They have no fixed redemption date, carry a right to receive a fixed
rate of dividend and, on a winding up of the Company, to the payment of such
fixed cumulative preferential dividends to the date of such winding up and to
the repayment of the capital paid up on such shares in priority to any payment
to the holders of the Ordinary shares.
The Ordinary shares, excluding any treasury shares, carry a right to receive
dividends and, on a winding up or other return of capital, after meeting the
liabilities of the Company, the surplus assets will be paid to Ordinary
shareholders in proportion to their shareholdings.
There are no restrictions on the transfer of Ordinary or Cumulative Preference
shares in the Company other than certain restrictions which may from time to
time be imposed by law.
15. Capital reserve
2025 2024
£'000 £'000
At 31 March 2024 27,451 35,930
Net gains/(losses) on sales of investments during year 3,420 (1,323)
Movement in fair value decreases of investments 1,052 (4,425)
Buyback of Ordinary shares for treasury (2,849) (1,939)
Management fees (392) (210)
Administrative expenses (19) (24)
Interest on bank loans (603) (502)
Currency losses (5) (56)
At 31 March 2025 28,055 27,451
The capital reserve includes gains of £3,672,000 (31 March 2024 - gains of
£2,620,000), which relate to the revaluation of investments held at the
reporting date.
16. Net asset value per Ordinary share
The net asset value per share and the net assets attributable to the Ordinary
shareholders at the year end were as follows:
2025 2024
Net assets per Balance Sheet £106,711,000 £105,957,000
3.5% Cumulative Preference shares of £1 each £50,000 £50,000
Attributable net assets £106,661,000 £105,907,000
Number of Ordinary shares in issue 40,214,596 41,369,542
Net asset value per share 265.23p 256.00p
17. Analysis of changes in financial liabilities during the year
At At
31 March Cash Other 31 March
2024 flows movements(A) 2025
Financing activities £'000 £'000 £'000 £'000
Debt due after more than one year (18,963) - (12) (18,975)
(18,963) - (12) (18,975)
At At
31 March Cash Other 31 March
2023 flows movements(A) 2024(B)
Financing activities £'000 £'000 £'000 £'000
Debt due after more than one year (18,951) - (12) (18,963)
(18,951) - (12) (18,963)
(A) The other movements column represents the amortisation of the loan
arrangement fees.
(B) The prior year balance for the revolving credit facility has been
reclassified from current to non-current liabilities. See note 2 (a).
18. Financial instruments
Risk management. The Company's investment activities expose it to various
types of financial risk associated with the financial instruments and markets
in which it invests. The Company's financial instruments comprise securities
and other investments, cash balances, loans and debtors and creditors that
arise directly from its operations; for example, in respect of sales and
purchases awaiting settlement, and debtors for accrued income.
The Company may also, subject to Board approval, enter into derivative
transactions, in the form of traded options, for the purpose of enhancing
income returns and portfolio management. During the previous year, the Company
entered into certain derivative contracts but not in the year ended 31 March
2025. As disclosed in note 3, the premium received and fair value changes in
respect of options written in the previous year were £34,000. Positions
closed during the previous year realised a loss of £133,000. The largest
position in derivative contracts held during the previous year at any given
time was £35,000. The Company had no open positions in derivative contracts
at 31 March 2025 (2024 - nil).
The Board has delegated the risk management function in relation to financial
instruments to abrdn Fund Managers Limited ("aFML") under the terms of its
management agreement with aFML (further details of which are included under
note 4). The Board regularly reviews and agrees policies for managing each of
the key financial risks identified with the Manager. The types of risk and the
Manager's approach to the management of each type of risk, are summarised
below. Such approach has been applied throughout the year and has not changed
since the previous accounting period. The numerical disclosures exclude
short-term debtors and creditors given their relatively low value.
Risk management framework. The directors of aFML collectively assume
responsibility for aFML's obligations under the AIFMD including reviewing
investment performance and monitoring the Company's risk profile during the
year.
aFML is a fully integrated member of the Aberdeen Group (the "Group"), which
provides a variety of services and support to aFML in the conduct of its
business activities, including in the oversight of the risk management
framework for the Company. The AIFM has delegated the day to day
administration of the investment policy to abrdn Investments Limited, which is
responsible for ensuring that the Company is managed within the terms of its
investment guidelines and the limits set out in its pre-investment disclosures
to investors (details of which can be found on the Company's website). The
AIFM has retained responsibility for monitoring and oversight of investment
performance, product risk and regulatory and operational risk for
the Company.
The Group's Internal Audit Department is independent of the Risk Division and
reports directly to the Group's CEO 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 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 Group's CEO. 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 corporate governance structure is supported by several committees
to assist the board of directors of Aberdeen, its subsidiaries and the Company
to fulfil their roles and responsibilities. The Group's Risk Division is
represented on all committees, with the exception of those committees that
deal with investment recommendations. The specific goals and guidelines on the
functioning of those committees are described on the committees' terms of
reference.
Risk management. The main risks the Company faces from its financial
instruments are (i) market risk (comprising interest rate risk, currency risk
and price risk), (ii) liquidity risk and (iii) credit risk.
(i) Market risk. The fair value or 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, currency risk and
other price risk.
Interest rate risk. Interest rate movements may affect:
- the fair value of the investments in convertibles and preference shares;
- the level of income receivable on cash deposits; and
- interest payable on the Company's variable rate borrowings.
Management of the risk. The possible effects on fair value and cash flows that
could arise as a result of changes in interest rates are taken into account
when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure gearing levels are appropriate to
market conditions and reviews these on a regular basis. Borrowings comprise
fixed rate, revolving, and uncommitted facilities. The fixed rate facilities
are used to finance opportunities at low rates and, the revolving and
uncommitted facilities to provide flexibility in the short-term. Current bank
covenants state that the gross borrowings will not exceed one-third of
adjusted portfolio value.
The Board reviews the value of investments in preference shares on a regular
basis.
Interest rate profile. The interest rate risk profile of the portfolio of
financial assets and liabilities (excluding ordinary shares) at the Balance
Sheet date was as follows:
Weighted
average
period Weighted
for which average
rate is interest Fixed Floating
fixed rate rate rate
As at 31 March 2025 Years % £'000 £'000
Assets
UK preference shares - 7.16 23,473 -
Cash and cash equivalents - 4.06 - 1,322
Total assets 23,473 1,322
Liabilities
Revolving credit facility 0.04 6.12 (9,000) -
Long-term bank loan 2.08 3.90 (9,975) -
Total liabilities (18,975) -
Weighted
average
period Weighted
for which average
rate is interest Fixed Floating
fixed rate rate rate
As at 31 March 2024 Years % £'000 £'000
Assets
UK preference shares - 8.62 24,195 -
Cash and cash equivalents - 5.35 - 1,675
Total assets 24,195 1,675
Liabilities
Revolving credit facility 0.01 6.84 (9,000) -
Long-term bank loan 3.09 3.90 (9,963) -
Total liabilities (18,963) -
The weighted average interest rate is based on the current yield of each
asset, weighted by its market value. The weighted average interest rate on
bank loans is based on the interest rate payable, weighted by the total value
of the loans.
The cash assets consist of cash deposits on call earning interest at
prevailing market rates.
The UK preference shares assets have no maturity date.
Short-term debtors and creditors (with the exception of bank loans) have been
excluded from the above tables.
Interest rate sensitivity. The sensitivity analyses below have been determined
based on the exposure to interest rates for non-derivative instruments at the
Balance Sheet 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 200 basis points higher or lower and all other
variables were held constant, the Company's:
- profit before tax for the year ended 31 March 2025 would increase/decrease
by £26,000 (2024 - £34,000). 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 £3,369,000 (2024 -
increase/decrease by £3,300,000) using VaR ("Value at Risk") analysis based
on 100 observations of monthly VaR computations of fixed interest portfolio
positions at each year end.
Currency risk. A small proportion of the Company's investment portfolio is
invested in overseas securities whose values are subject to fluctuation due to
changes in exchange rates.
Management of the risk. The revenue account is subject to currency
fluctuations arising on dividends received in foreign currencies and,
indirectly, due to the impact of foreign exchange rates upon the profits of
investee companies. The Company does not hedge this currency risk. The Company
does not have any exposure to foreign currency liabilities. No currency
sensitivity analysis has been prepared as the Company considers any impact to
be immaterial to the financial statements.
Price risk. 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.
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 sector. The allocation of assets to specific
sectors and the stock selection process 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 recognised stock exchanges.
Price sensitivity. If market prices at the Balance Sheet date had been 20%
higher or lower while all other variables remained constant, the profit before
tax attributable to Ordinary shareholders for the year ended 31 March 2025
would have increased/decreased by £19,974,000 (2024 - increase/decrease of
£19,595,000). This is based on the Company's portfolio of Ordinary shares
held at each year end.
(ii) Liquidity risk. This is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities.
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 facilities, details
of which can be found in note 13. Under the terms of the loan facility, the
Manager provides the lender with loan covenant reports on a monthly basis, to
provide the lender with assurance that the terms of the facility are not being
breached. The Manager will also review the credit rating of a lender on a
regular basis.
The Board imposes borrowing limits to ensure gearing levels are appropriate to
market conditions and reviews these on a regular basis. Borrowings comprise a
revolving loan facility and a fixed term loan facility. The Board has imposed
a maximum equity gearing level of 35% which constrains the amount of gearing
that can be invested in equities which, in normal market conditions, are more
volatile than the preference shares within the portfolio. Details of
borrowings at 31 March 2025 are shown in note 13.
Maturity profile. The maturity profile of the Company's financial liabilities
at the Balance Sheet date, with amounts undiscounted and order by contractual
maturity, was as follows:
Within Within More than
1 year 1-5 years 5 years
At 31 March 2025 £'000 £'000 £'000
Trade and other payables (637) - -
Revolving credit facility (48) (9,000) -
Long-term bank loan (391) (10,482) -
(1,076) (19,482) -
Within Within More than
1 year 1-5 years 5 years
At 31 March 2024 £'000 £'000 £'000
Trade and other payables (491) - -
Revolving credit facility(A) (52) (9,000) -
Long-term bank loan (389) (10,873) -
(932) (19,873) -
(A) The prior year balance for the revolving credit facility has been
reclassified from current to non-current liabilities. See note 2 (a).
(iii) Credit risk. This is the risk of 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. The risk is managed as follows:
- where the Investment Manager makes an investment in a bond, corporate or
otherwise, the credit rating of the issuer is taken into account so as to
minimise the risk to the Company of default;
- 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 large number of brokers,
whose credit-standing is reviewed periodically by the investment manager, and
limits are set on the amount that may be due from any one broker;
- the risk of counterparty exposure due to failed trades causing a loss to the
Company is mitigated by the review of failed trade reports on a daily basis.
In addition, both stock and cash reconciliations to the Custodian's records
are performed on a daily basis to ensure discrepancies are investigated on a
timely basis. The Group's Compliance carries out periodic reviews of the
Custodian's operations and reports its findings to the Aberdeen Group's Risk
Management Committee and to the Board of the Company. This review will also
include checks on the maintenance and security of investments held;
- transactions involving derivatives and other arrangements wherein the
creditworthiness of the entity acting as broker or counterparty to the
transaction is likely to be of sustained interest are subject to rigorous
assessment by the Investment Manager of the credit worthiness of that
counterparty. The Company's aggregate exposure to each such counterparty is
monitored regularly by the Board; and
- cash is held only with reputable banks with high quality external credit
enhancements.
It is the Investment Manager's policy to trade only with A- and above (Long
Term rated) and A-1/P-1 (Short Term rated) counterparties.
None of the Company's financial assets are secured by collateral or other
guarantees or assurances.
Credit risk exposure. In summary, compared to the amounts in the Balance
Sheet, the maximum exposure to credit risk at 31 March 2025 and 31 March 2024
was as follows:
2025 2024
Balance Maximum Balance Maximum
Sheet exposure Sheet exposure
£'000 £'000 £'000 £'000
Non-current assets
Quoted preference shares at fair value through profit or loss 23,473 23,473 24,195 24,195
Current assets
Accrued income 1,658 1,658 1,567 1,567
Cash and cash equivalents 1,322 1,322 1,675 1,675
26,453 26,453 27,437 27,437
None of the Company's financial assets is past its due date.
Fair value of financial assets and liabilities. The fair value of the
long-term loan has been calculated at £9,747,000 as at 31 March 2025 (2024 -
£9,619,000) compared to an accounts value in the financial statements of
£9,975,000 (2024 - £9,963,000) (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
loan is considered to be classed as a Level 2 liability under IFRS 13. The
carrying values of fixed asset investments are stated at their fair values,
which have been determined with reference to quoted market prices. Traded
options contracts are valued at fair value which have been determined with
reference to quoted market values of the contracts. The contracts are
tradeable on a recognised exchange. For all other short-term debtors and
creditors, their book values approximate to fair values because of their
short-term maturity.
19. Fair value hierarchy
IFRS 13 'Financial Value Measurement' requires an entity to classify fair
value measurements using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. The fair value hierarchy has
the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the assets or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The financial assets and liabilities measured at fair value in the Balance
Sheet are grouped into the fair value hierarchy at
31 March 2025 as follows:
Level 1 Level 2 Level 3 Total
As at 31 March 2025 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted investments a) 123,343 - - 123,343
Net fair value 123,343 - - 123,343
Level 1 Level 2 Level 3 Total
As at 31 March 2024 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted investments a) 122,169 - - 122,169
Net fair value 122,169 - - 122,169
a) Quoted investments. The fair value of the Company's quoted investments has
been determined by reference to their quoted bid prices at the reporting date.
Quoted investments included in Fair Value Level 1 are actively traded on
recognised stock exchanges.
20. Capital management policies and procedures
The Company's capital management objectives are:
- to ensure that the Company will be able to continue as a going concern; and
- to maximise the return to its equity shareholders through an appropriate
balance of equity capital and debt.
The capital of the Company consists of equity, comprising issued capital,
reserves and retained earnings.
The Board monitors and reviews the broad structure of the Company's capital.
This review includes the nature and planned level of gearing, which takes
account of the Investment Manager's views on the market and the extent to
which revenue in excess of that which is required to be distributed should be
retained. The Company is not subject to any externally imposed capital
requirements.
21. Related party transactions
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.
Transactions with the Manager. The Company has an agreement with the Aberdeen
Group for the provision of management, secretarial, accounting and
administration services and for the carrying out of promotional activities in
relation to the Company. Details of transactions during the year and balances
outstanding at the year end are disclosed in notes 4 and 5.
22. Transaction with abrdn Smaller Companies Investment Trust plc ("aSCIT")
On 1 December 2023, the Company announced that it had acquired £35,228,000 of
net assets from aSCIT in consideration for the issue of 11,268,494 new
Ordinary shares as part of a recommended s110 Scheme under the Insolvency Act.
The scheme, inter alia, involved the cancellation of the Company's existing
holding in the issued capital of aSCIT, and a formula asset value ("FAV")
calculation to take account the costs of the transaction in computing the
number and value of shares to be issued by the Company and assets transferred
under the Scheme, as well as the value of cash exit for aSCIT shareholders
which was at a discount to the FAV.
Net assets acquired £'000
Investments 31,779
Cash 3,444
Debtors 5
Net assets 35,228
Satisfied by the value of new Ordinary shares issued 35,228
23. Subsequent events
Subsequent to the year end the Company has bought back a further 131,279
Ordinary shares into Treasury at a cost of £333,000
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 IAS and the
AIC SORP. The Directors assess the Company's performance against a range of
criteria which are viewed as particularly relevant for closed-end investment
companies.
Discount to net asset value per Ordinary share
The difference between the share price and the net asset value per Ordinary
share expressed as a percentage of the net asset value per Ordinary share.
2025 2024
NAV per Ordinary share (p) a 265.23 256.00
Share price (p) b 255.50 222.00
Discount (a-b)/a 3.7% 13.3%
Dividend Cover
Dividend cover measures the revenue return per share divided by total
dividends per share, expressed as a ratio.
2025 2024
Revenue return per share a 14.80p 14.75p
Dividends per share b 14.80p 14.40p
Dividend cover a/b 1.00x 1.02x
Dividend Yield
The annual dividend divided by the share price, expressed as a percentage.
2025 2024
Annual dividend per Ordinary share (p) a 14.80p 14.40p
Share price (p) b 255.50p 256.00p
Dividend yield a/b 5.8% 5.6%
Net Gearing
Net gearing measures total borrowings less cash and cash equivalents divided
by shareholders' funds, expressed as a percentage. Under AIC reporting
guidance, cash and cash equivalents includes net amounts due to and from
brokers at the period end as well as cash and short-term deposits.
2025 2024
Borrowings (£'000) a 18,975 18,963
Cash (£'000) b 1,322 1,675
Amounts due to brokers (£'000) c - 101
Amounts due from brokers (£'000) d - -
Shareholders' funds (£'000) e 106,711 105,957
Net gearing (a-b+c-d)/e 16.5% 16.4%
Ongoing Charges Ratio
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and
administrative expenses and expressed as a percentage of the average net asset
values throughout the year.
2025 2024
Investment management fees (£'000) 653 420
Administrative expenses (£'000) 447 529
Less: non-recurring charges(A) (£'000) (6) (24)
Ongoing charges (£'000) 1,094 925
Average net assets (£'000) 109,660 85,134
Ongoing charges ratio (excluding look-through costs) 1.00% 1.09%
Look-through costs(B) - 0.01%
Ongoing charges ratio (including look-through costs) 1.00% 1.10%
(A) Comprises promotional activities fees not expected to recur.
(B) 2024 is calculated in accordance with AIC guidance issued in October 2020
to include the Company's share of costs of holdings in investment companies on
a
look-through basis.
Total Return
NAV and share price total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account both
capital returns and dividends paid to shareholders. Share price and NAV total
returns are monitored against open-ended and closed-ended competitors, and the
Reference Index, respectively.
Share
Year ended 31 March 2025 NAV Price
Opening at 1 April 2024 a 256.00p 222.00p
Closing at 31 March 2025 b 265.23p 255.50p
Price movements c=(b/a)-1 3.6% 15.1%
Dividend reinvestment(A) d 5.8% 7.3%
Total return c+d +9.4% +22.4%
Share
Year ended 31 March 2024 NAV Price
Opening at 1 April 2023 a 257.92p 250.00p
Closing at 31 March 2024 b 256.00p 222.00p
Price movements c=(b/a)-1 -0.7% -11.2%
Dividend reinvestment(A) d 5.5% 5.8%
Total return c+d +4.8% -5.4%
(A) NAV total return involves investing the net dividend in the NAV of the
Company with debt at fair value on the date on which that dividend goes
ex-dividend. Share price total return involves reinvesting the net dividend in
the share price of the Company on the date on which that dividend goes
ex-dividend.
Additional Notes to Annual Financial Report
The Annual General Meeting will be held at 18 Bishops Square, London E1 6EG on
Tuesday 8 July 2025 at 12 noon.
The Annual Financial Report Announcement is not the Company's statutory
accounts. The above results for the year ended 31 March 2025 are an abridged
version of the Company's full accounts, which have been approved and audited
with an unqualified report. The 2025 and 2024 statutory accounts received
unqualified reports from the Company's auditor and did not include any
reference to matters to which the auditor drew attention by way of emphasis
without qualifying the reports, and did not contain a statement under S.498 of
the Companies Act 2006. The financial information for 2024 is derived from the
statutory accounts for 2024 which have been delivered to the Registrar of
Companies. The 2025 accounts will be filed with the Registrar of Companies in
due course.
The Annual Report and Accounts will be posted to shareholders and copies will
be available from the registered office of the Manager and on the Company's
website, www.shiresincome.co.uk (http://www.shiresincome.co.uk) . *
Please note that past performance is not necessarily a guide to the future and
that the value of investments and the income from them may fall as well as
rise. Investors may not get back the amount they originally invested.
By order of the Board
abrdn Holdings Limited
Company Secretary
28 May2025
* Neither the Company's website nor the content of any website accessible from
hyperlinks on the Company's website (or any other website) is (or is deemed to
be) incorporated into, or forms (or is deemed to form) part of this
announcement.
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