THE NORTH AMERICAN INCOME TRUST
PLC
ANNUAL FINANCIAL REPORT FOR THE
YEAR ENDED 31 JANUARY 2024
Legal Entity Identifier (LEI):
5493007GCUW7G2BKY360
Investment Objective
To provide investors with above
average dividend income and long-term capital growth through active
management of a portfolio consisting predominately of S&P 500
US equities.
Financial Results and
Performance
Performance Highlights
Net asset value total
returnAB
|
|
Share price total
returnAB
|
-1.6%
|
|
-0.9%
|
2023
|
+9.6%
|
|
2023
|
+12.4%
|
|
|
|
|
|
Revenue return per
share
|
|
|
Dividends per share
|
|
12.0p
|
|
11.7p
|
2023
|
12.2p
|
|
2023
|
11.0p
|
|
|
|
|
|
Net asset value per Ordinary
share
|
|
|
Total
assetsC
|
|
317.8p
|
|
£475.7m
|
2023
|
337.2p
|
|
2023
|
£513.4m
|
|
|
|
|
|
Dividend
yieldAD
|
|
|
Ongoing
chargesA
|
|
4.0%
|
|
0.99%
|
2023
|
3.60%
|
|
2023
|
0.93%
|
A Considered to be an
Alternative Performance Measure..
|
B Includes dividends
reinvested.
|
|
|
|
|
C Total Assets define
as per the Statement of Financial Position less current
liabilities.
|
|
|
|
|
D Calculated as the
dividend for the year divided by the year end share
price.
|
Financial Calendar, Dividends and
Highlights
Annual General Meeting
(Edinburgh)
|
21 June 2024
|
Half year end
|
31 July 2024
|
Payment dates of quarterly
dividends for financial year ending 31 January 2025
|
August 2024
October 2024
January 2025
May 2025
|
Financial year end
|
31 January 2025
|
Dividends
|
Rate
|
xd
date
|
Record
date
|
Payment
date
|
1st Interim dividend
2024
|
2.60p
|
20 July
2023
|
21 July
2023
|
4
August 2023
|
2nd Interim dividend
2024
|
2.60p
|
12
October 2023
|
13
October 2023
|
27
October 2023
|
3rd Interim dividend
2024
|
2.60p
|
28
December 2023
|
29
December 2023
|
19
January 2024
|
4th interim dividend
2024
|
3.90p
|
11
April 2024
|
12
April 2024
|
3 May
2024
|
Total dividends 2024
|
11.70p
|
|
|
|
1st Interim dividend
2023
|
2.50p
|
21 July
2022
|
22 July
2022
|
5
August 2022
|
2nd Interim dividend
2023
|
2.50p
|
6
October 2022
|
7
October 2022
|
28
October 2022
|
3rd Interim dividend
2023
|
2.50p
|
2
February 2023
|
3
February 2023
|
24
February 2023
|
Final dividend 2023
|
3.50p
|
4 May
2023
|
5 May
2023
|
12 June
2023
|
Total dividends 2023
|
11.00p
|
|
|
|
Highlights
|
31
January 2024
|
31
January 2023
|
%
change
|
Total assets
|
£475.7m
|
£513.4m
|
-7.3
|
Equity shareholders'
funds
|
£436.5m
|
£472.9m
|
-7.7
|
Share price (mid
market)
|
289.00p
|
306.00p
|
-5.6
|
Net asset value per Ordinary
share
|
317.78p
|
337.21p
|
-5.8
|
Discount (difference between share
price and net asset value)AB
|
(9.1%)
|
(9.3%)
|
|
Net gearing
A
|
(4.1%)
|
(2.9%)
|
|
|
|
|
|
Dividends and earnings
|
|
|
|
Revenue return per
share
|
11.95p
|
12.21p
|
-2.1
|
Dividends per share
|
11.70p
|
11.00p
|
+6.4
|
Dividend yield (based on year end
share price)A
|
4.0%
|
3.6%
|
|
Dividend
coverA
|
1.02
|
1.11
|
|
Revenue reserves per
share
|
|
|
|
Prior to payment of fourth interim
dividend
|
16.06
|
N/A
|
|
After payment of fourth interim
dividend
|
12.16
|
N/A
|
|
Prior to payment of third interim
and final dividends
|
N/A
|
17.57p
|
|
After payment of third interim and
final dividends
|
N/A
|
11.57p
|
|
|
|
|
|
Operating costs
|
|
|
|
Ongoing
chargesA
|
0.99%
|
0.93%
|
|
A Considered to be an
Alternative Performance Measure.
|
B Including
undistributed revenue.
|
Strategic Report
Chair's Statement
Market Review
Macroeconomic uncertainty
prevailed during the Company's financial year to 31 January 2024.
Investors were particularly focused on monetary policy
developments, geopolitical tensions and the uncertainty surrounding
the possibility of either a recession or a soft landing for the US
economy.
Against this backdrop, the
Company's net asset value (NAV) total return per share (which
includes dividends reinvested) decreased by 1.6% in sterling terms
compared to a 2.6% rise in the total return of the Company's
primary reference index, the Russell 1000 Value Index, in sterling
terms. The Company's share price total return fell by 0.9% as the
Company's discount to NAV narrowed marginally to 9.1%, from 9.3% at
the previous year end.
The investment trust sector, in
general, experienced a widening of discounts over much of 2023,
exacerbated by global uncertainty and higher interest rates
available for cash which in turn led to increased activity in the
sector in an effort to realise shareholder value. The Company uses
its shareholder authority to buyback its own shares seeking to
limit discount volatility and also provide liquidity in the
Company's shares while signalling our confidence in the intrinsic
value of the Company's portfolio.
Even with the volatility witnessed
in financial markets, US equities recorded gains over the year,
with growth stocks significantly outperforming value stocks. The
Investment Manager's Review goes into further detail on
performance.
The US Federal Reserve (the "Fed")
continued with its monetary tightening measures in the first half
of the financial year, with the central bank increasing the target
range for the federal funds rate to 5.25%-5.50%, a level unseen in
over two decades. In the latter half of the financial year, the Fed
maintained interest rates and the messaging turned more dovish as
price pressures reduced, fuelling expectations of monetary easing.
However, annual core inflation remained above the Fed's 2% target,
while conflicts in the Middle East and Ukraine increased the risk
of an uptick in inflation and, at the end of 2023, the Fed
signalled that it would proceed cautiously.
On a positive note, the US economy
remained strong and avoided the widely anticipated recession after
the Fed's prolonged period of monetary tightening, as well as the
banking sector failures that occurred earlier in 2023. The US
government reached an agreement in June 2023 to suspend its debt
ceiling, thereby avoiding a government shutdown, which helped
markets. As the financial year progressed, investors embraced the
likelihood of a soft landing for the economy, as opposed to a
recession. Nevertheless, as I allude to in the Outlook section, the
Board and Manager are well aware that macroeconomic uncertainty
continues, especially with the ongoing conflicts in the Middle East
and Ukraine and the upcoming US election.
Performance
The Company's portfolio
underperformed its reference benchmark in sterling terms over the
year to 31 January 2024. Stock selection, mainly in the materials
sector, weighed on performance relative to the Russell 1000 Value
Index, the primary reference index. Sector allocation, especially
in the industrials sector, was also negative.
For more details on performance,
refer to the Investment Manager's review.
The Board monitors portfolio
performance regularly and receives quarterly reports from the
Manager on portfolio changes and the decisions behind
them.
Revenue Account
The Company's equity portfolio
generated £17.1 million in revenue during the financial year, close
to the £17.8 million in the previous year. Options continue to be
part of the portfolio and represented 17.2% of the Company's total
gross income, whilst corporate bonds accounted for only 2.6%. The
Company's revenue return per ordinary share dipped marginally to
12.0 pence compared to last year's 12.2 pence.
Dividend
The Board remains committed to the
Company's progressive dividend policy and extending the track
record of thirteen consecutive years of dividend growth. The Board
declared, on 28 March 2024, a fourth interim dividend of 3.9 pence
per share, resulting in total dividends for the year ended 31
January 2024 of 11.7 pence per share (2023 - 11.0p) and
representing annual growth of 6.4%. The fourth interim dividend
will be paid on 3 May 2024 to shareholders on the register on 12
April 2024 (ex-dividend date: 11 April 2024).
In reaching its decision on
dividends, the Board always balances the wish to increase the
amount distributed to shareholders with the recognition that
currency can have a variable impact on earnings per share. The
Investment Manager's continued efforts to build the revenue
reserve, which stands at over one year's cover, gives comfort that
at times of stress the Company can dip into this reserve to
maintain the dividend.
Management of Premium and
Discount
The Company's share price ended
the year at 289.0 pence, a 9.1% discount to the total NAV of 317.8
pence. This compares to a 9.3% discount at the end of the 2023
financial year. The Board continues to work with the Manager in
both promoting the Company's benefits to a wider audience and
providing liquidity to the market through the use of share
buybacks. Over the course of the year, the Company's shares mainly
traded at discounts ranging between 9.0% and 15.0%.
During the year, 2,882,402 shares
were bought back and cancelled at an average price of 275 pence and
an average discount of 11.5%. The total cost was £8.0 million.
Since 31 January 2024, the Company has bought back an additional
1,187,253 Ordinary shares at a cost of £3.3m.
Gearing
The Board believes that the
sensible use of gearing should enhance returns to our shareholders
over the longer term. The Company benefits from its long-term
financing agreements totalling US$50 million with MetLife which
comprise two loans of US$25 million with terms of 10 and 15 years.
These are fixed at 2.7% and 3.0% per annum expiring in December
2030 and 2035 respectively. Net gearing at
31 January 2024 stood at 4.1% (2023: 2.9%).
Promotional Activity
During the last year we have
continued to work with our Manager to strengthen and modernise our
marketing efforts. We aim to keep all shareholders informed and
updated on their investment, particularly during periods of
volatility. Updates include commentary, articles and videos
allowing investors to hear directly from the Investment Manager on
a regular basis - to understand both the outlook and the decisions
being made within the portfolio itself. All of this communication
can be found on the Company's website, northamericanincome.co.uk, and helps
to inform shareholders' investment decisions to ensure they remain
aligned with their individual needs.
You can also follow 'abrdn
Investment Trusts' on LinkedIn and X (previously Twitter) or
register for email updates here: northamericanincome.co.uk/signup
The Board also notes the
announcement by abrdn plc, in December 2023, that it had commenced
a programme whereby it would purchase shares in the Company
equivalent to six months' management fees; as at the date of
approval of this report, 254,476 shares had been purchased by the
Manager at an aggregate cost of £727,000.
Environmental, Social and
Governance ("ESG") Matters
The Investment Manager continues
to engage regularly with the portfolio's holdings to understand
their processes, prospects and reports, including on matters
related to environmental, social and governance issues. More
information regarding the Manager's approach to ESG integration in
Equities can be found in the published Annual Report.
Board Activity
In May 2023, the Board was pleased
to travel to North America and meet with the Investment Manager and
local experts, including analysts, senior management and
economists. Directors also met with one of the investee companies
which provided a deeper level of engagement than can be attained in
the board room. The benefit of these face-to-face meetings is
evident in the follow-up afterwards. Since our visit, the Board has
focused in particular on performance attribution reporting and the
Board keeps under review the most appropriate reference index
against which to measure the performance of the Company. We also
continue to receive updates on people change within the wider abrdn
investment team and developments in these areas are being monitored
with interest.
Also, during the year, Directors
took the opportunity to meet with investors to gain a deeper
understanding of their interests in the Company and address
questions on a more informal basis. As usual, we encourage all
shareholders to contact the Board with any queries by email
to: northamericanincome@abrdn.com.
In the Interim Report, I announced
my intention to retire as a Director of the Company at the
conclusion of the forthcoming Annual General Meeting ("AGM"),
having served for nine years. Since then, the Board has been
reviewing its succession planning, and undertook a thorough process
to appoint the next Chair. This involved the appointment of a
committee to consider the skills required for the role and whether
the Board had any suitable internal candidates or whether an
external search was required in this instance. Charles Park put
himself forward as an internal candidate and the committee,
excluding Charles Park, considered his suitability for the role as
Chair. Charles Park has been a strong contributor since he joined
the Board in 2017 and has significant business experience and
understanding of the Company that make him a preferred candidate
for the role. The committee therefore unanimously recommended the
appointment of Charles Park as the Chair, with effect from the
conclusion of the AGM on 21 June 2024. We are delighted that he has
agreed to accept the role. Patrick Edwardson has agreed to step up
to become the Senior Independent Director with effect from the same
date.
In view of these changes in the
Board composition, the Board plans to conduct an external process
to appoint a new independent Non-Executive Director. The intention
is that the successful candidate will be appointed later this year
and an announcement will be made to the London stock exchange in
due course.
As usual, towards the end of the
year, the Board undertook its board evaluation. Whilst the Board
does not currently consider it appropriate to utilise an external
agent for this process, due to the current size and composition of
the Board, the approach is kept under review. The results of the
board evaluation are outlined in the Statement of Corporate
Governance in the published Annual Report.
Outlook
At the time of writing, investors
expect the Fed to end its rate-hiking cycle and begin monetary
easing in 2024. This is despite the Fed's somewhat conservative
tone as its favoured measure of annual inflation, the core Personal
Consumption Expenditures Price Index, remained above 2%.
Additionally, conflict in the Middle East has increased the risk of
a resurgence in inflation, due to possible oil-supply disruptions
and rising shipping costs.
While a robust US economy helped
the country to avoid a recession in 2023, the risk has not
completely gone. The Board and Investment Manager believe that a
mild recession or soft landing remain in the balance. Meanwhile,
the upcoming US election may add to market volatility, as investors
remain focused on potential changes to government policies. Added
to this, geopolitical issues elsewhere in the world could affect
the global economy and financial markets in general.
It is pleasing therefore to note
that the Investment Manager has designed the Company's portfolio to
include financially robust companies with strong income-generating
potential and sound governance practices. The investment team
continues to review the portfolio and seek opportunities to ensure
its ability to withstand any volatility surrounding the forthcoming
US Presidential election, as well as a possible economic downturn,
as it seeks to protect against downside risks. The Company has made
progressive annual dividend payments for thirteen consecutive
years, including the period through the Covid-19 pandemic. The
Board continues to remain positive on the strategy's ability to
face turbulent times together with the sustainability of the
Company's income and the comfort of the revenue reserve which has
been built up to the equivalent of over one year's full
dividend.
Annual General Meeting ("AGM") and
Online Shareholder Presentation
AGM & Continuation
Vote
The Company's AGM will be held at
12.00 Noon on 21 June 2024, at the Manager's offices at 1 George
Street, Edinburgh, EH2 2LL and, as ever, the Board would welcome
your attendance.
The Company is required to hold a
continuation vote every three years and the next one is at the
forthcoming AGM. The Directors will be voting in favour of
continuation and would encourage shareholders to do likewise in the
belief that the Company has a successful long-term investment
formula. The Board continues to believe that the Company's
investment objective of seeking to provide above average dividend
income and capital growth from investment in a diversified
portfolio of North American securities remains relevant for
shareholders and new investors alike. Our history of annual
dividend increases since 2011 means that we are included in the
Association of Investment Companies 'Next Generation Dividend
Heroes' listing and we hope that this progression
continues.
Online Shareholder
Presentation
In order to encourage as much
interaction as possible with our shareholders, there will also be
an online shareholder presentation at 2.00p.m. on 10 June 2024. At
this event, you will receive a presentation from the Investment
Manager and have the opportunity to ask questions of the Chair and
the Investment Manager. As with last year, the online presentation
is being held ahead of the AGM to allow shareholders to submit
their proxy votes prior to the meeting. Full details on how
to register for this online event are available via the
website.
Shareholders are also encouraged
to submit questions, in advance of both the online shareholder
presentation and the AGM, to the following email address:
northamericanincome@abrdn.com.
If you are unable to attend the
online event, the Investment Manager's presentation will be
available on the Company's website shortly after the presentation.
We encourage all shareholders to complete and return the form of
proxy enclosed with the Annual Report to ensure that your votes are
represented at the meeting (whether or not you intend to attend in
person). If you hold your shares in the Company via a share plan or
a platform and would like to attend and/or vote at the AGM, then
you will need to make arrangements with the administrator of your
share plan or platform.
Dame Susan Rice
Chair
4 April 2024
Overview of Strategy
Introduction
The Company is an investment trust
and its Ordinary shares are listed on the premium segment of the
London Stock Exchange. The Company aims to attract long-term
private and institutional investors wanting to benefit from the
income and growth prospects of North American companies. The Board
does not envisage any change in the Company's activity in the
foreseeable future.
Investment Objective and
Purpose
To provide investors with above
average dividend income and long-term capital growth through active
management of a portfolio consisting predominantly of S&P 500
US equities.
Reference Index
The Board reviews performance
against the index which it considers to be the most relevant, the
Russell 1000 Value Index, together with peer group comparators (in
sterling terms). The aim is to provide investors with above average
dividend income from predominantly US equities which means that
investment performance can diverge, possibly quite materially in
either direction, from this index. The Board also compares
performance against the S&P 500 Index whilst having regard to
the very different make-up of this index and its inclusion of many
of the fast growing tech companies which often do not pay
dividends.
Investment Policy
The Company invests in a portfolio
predominantly comprised of S&P 500 constituents. The Company
may also invest in Canadian stocks and US mid and small
capitalisation companies to provide for diversified sources of
income. The Company may invest up to 20% of its gross assets in
fixed income investments, which may include non-investment grade
debt. The Company's investment policy is flexible, enabling it to
invest in all types of securities, including (but not limited to)
equities, preference shares, debt, convertible securities,
warrants, depositary receipts and other equity-related
securities.
The maximum single investment will
not exceed 10% of gross assets at the time of investment and it is
expected that the portfolio will contain around 50 holdings
(including fixed income investments), with an absolute minimum of
35 holdings. The composition of the Company's portfolio is
not restricted by minimum or maximum market capitalisation, sector
or country weightings.
The Company may borrow up to an
amount equal to 20% of its net assets.
Subject to the prior approval of
the Board, the Company may also use derivative instruments for
efficient portfolio management, hedging and investment purposes.
The Company's aggregate exposure to such instruments for investment
purposes (excluding collateral held in respect of any such
derivatives) will not exceed 20% of the Company's net assets at the
time of the relevant acquisition, trade or borrowing.
The Company does not generally
hedge its exposure to foreign currency. The Company will not
acquire securities that are unlisted or unquoted at the time of
investment (with the exception of securities which are about to be
listed or traded on a stock exchange). However, the Company may
continue to hold securities that cease to be listed or quoted, if
appropriate.
The Company may participate in the
underwriting or sub-underwriting of investments where appropriate
to do so.
The Company may invest in
open-ended collective investment schemes and closed-ended funds
that invest in the North American region. However, the Company will
not invest more than 10%, in aggregate, of the value of its gross
assets in other listed investment companies (including listed
investment trusts), provided that this restriction does not apply
to investments in any such investment companies which themselves
have stated investment policies to invest no more than 15% of their
gross assets in other listed investment companies.
The Company will normally be
substantially fully invested in accordance with its investment
objective but, during periods in which changes in economic
conditions or other factors so warrant, the Company may reduce its
exposure to securities and increase its position in cash and money
market instruments.
Management
The Board has appointed abrdn Fund
Managers Limited ("aFML") to act as the alternative investment fund
manager ("AIFM" or the "Manager").
The Directors are responsible for
determining the investment policy and the investment objective of
the Company. The Company's portfolio is managed on a day-to-day
basis by abrdn Inc. (the "Investment Manager") by way of a
delegation agreement in place between aFML and abrdn
Inc.
The Investment Manager invests in
a range of North American companies, following a bottom-up
investment process based on a disciplined evaluation of companies
through direct visits by its fund managers. Stock selection is the
major source of added value, concentrating on quality first, then
price. The Investment Manager seeks companies that are
well-positioned in their sector with strong balance sheets and cash
generation and proven management through various economic
cycles.
Top-down investment factors are secondary in the Investment
Manager's portfolio construction, with diversification rather than
formal controls guiding stock and sector weights.
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 as follows:
KPI
|
Description
|
Net asset value and share price
performance against the reference index
|
The Board reviews the Company's
NAV and share price total return performance against the Russell
1000 Value Index (in sterling terms). Performance graphs and tables
are provided in the published Annual Report. The Board also reviews
the performance of the Company against its peer group of investment
trusts with similar investment objectives.
|
Revenue return and dividend yield
A
|
The Board monitors the Company's
net revenue return and dividend yield through the receipt of
detailed income forecasts. A graph showing the dividends and yields
over five years is provided in the published Annual
Report.
|
Share price discount/Premium to
net asset value A
|
The discount/premium relative to
the net asset value per share is closely monitored by the Board. A
graph showing the share price discount/premium relative to the net
asset value is shown in the published Annual Report.
|
Ongoing charges ratio ("OCR")
A
|
The Board reviews the Company's
operating costs carefully against its peer group of investment
trusts with similar investment objectives. The Company's OCR is
provided above.
|
A Considered to be an Alternative Performance
Measure..
Principal Risks and
Uncertainties
There are a number of risks which,
if realised, could have a material adverse effect on the Company
and its business model, financial position, performance and
prospects. The Board has in place a robust process to identify,
assess and monitor the principal risks and uncertainties facing the
Company and to identify and evaluate emerging risks, such as
geopolitical developments. This process is supported by a risk
matrix which identifies the key risks for the Company, including
emerging risks, and covers strategy, investment management,
operations, shareholders, regulatory and financial obligations and
third party service providers. This risk matrix is reviewed on a
regular basis. A summary of the principal risks and uncertainties
facing the Company, which have been identified by the Board, is set
out in the following table, together with a description of the
mitigating actions it has taken.
The principal risks associated
with an investment in the Company's shares are published monthly in
the Company's factsheet or they can be found in the pre-investment
disclosure document ("PIDD") published by the Manager, both of
which are on the Company's website.
Description
|
Mitigating Action
|
Market Risk
The risks facing the Company
relate to the Company's investment activities and include market
risk (comprising interest rate risk and other price risk),
liquidity risk and credit risk. The Company is exposed to
variations in share prices and movements in the currency exchange
rate due to the nature of its business. A fall in the market value
of its portfolio would have an adverse effect on shareholders'
funds. Any debt securities that may be held by the Company will be
affected by general changes in interest rates that will in turn
result in increases or decreases in the market value of those
instruments.
|
The day-to-day management of the
Company's assets has been delegated to the Manager under investment
guidelines determined by
the Board. The Board monitors adherence to these guidelines and
receives regular reports from the Manager which include performance
reporting. The Board regularly reviews these guidelines to ensure
they remain appropriate.
Details on financial risks,
including market price volatility, inflation, interest rates,
liquidity and foreign currency risks and the controls in place to
manage these risks are provided in note 18 to the financial
statements.
|
Major Market Event or Geopolitical
Risk
The Company is exposed to stock
market volatility or illiquidity that could result from major
market shocks due to a national or global crisis such as a
pandemic, war, natural disaster, geopolitical developments or
similar. There could also be the resulting impact of disruption on
the operations of the Company and its service providers,
temporarily or for prolonged duration.
|
The Board is cognisant of the
heightened risks arising from geopolitical developments including
stock market instability and economic effects or the potential
impact on the operations of the third-party suppliers, including
the Manager.
The Manager reviews the investment
risks arising from these macro developments on the companies in the
portfolio, including but not limited to: employee absence, reduced
demand, supply chain breakdown, balance sheet strength, ability to
pay dividends, and takes the necessary investment decisions. The
Manager communicates regularly with the underlying investee
companies in order to navigate the Company through the current
challenges.
The Manager has disaster recovery
and business continuity arrangements in place to ensure that it is
able to continue to service its clients, including investment
trusts. The Board monitors third party risk management frameworks
through updates from the Manager.
|
Income and Dividend
Risk
The ability of the Company to pay
dividends and any future dividend growth will depend primarily on
the timing and level of income received from its investments (which
may be affected by currency movements, exchange controls or
withholding taxes imposed by jurisdictions in which the Company
invests). Accordingly, there is no guarantee that the Company's
dividend income objective will continue to be met and the amount of
the dividends paid to Ordinary shareholders may go down as well as
up.
|
The Board monitors this risk
through the regular review of detailed revenue forecasts and
considers the current and forecast level of income at each
meeting.
The Company has built up its
revenue reserves over recent years which provides flexibility in
future years, should the dividend environment become
challenging.
|
In addition to these risks, the
Company is exposed to the impact of geopolitical tensions, such as
Russia's invasion of Ukraine, conflict in the Middle East, ongoing
tension between the US and China or other changes which could have
an adverse impact on stock markets and the Company's
portfolio.
The Board is also conscious of the
elevated threat posed by climate change and continues to monitor,
through reporting from the Investment Manager, the potential risk
that the portfolio investments may fail to adapt to the
requirements imposed by climate change. The investment portfolio
primarily consists of listed equities and corporate bonds and the
quoted market (being bid) price is expected to reflect market
participants' view of climate change risk so the impact of climate
change is not considered to be material to the financial
statements. Further details relating to the Manager's Approach to
ESG Integration in Equities, including consideration of the impact
of climate change, can be found in the published Annual
Report..
The Company's principal risks and
uncertainties have not changed materially since the year
end.
Promoting the Success of the
Company
The Board is required to report on
how it has discharged its duties and responsibilities under section
172 of the Companies Act 2006 (the "s172 Statement"). Under section
172, the Directors have a duty to promote the success of the
Company for the benefit of its members as a whole, taking into
account the likely long-term consequences of decisions, the need to
foster relationships with the Company's stakeholders and the impact
of the Company's operations on the environment.
The Board comprises five Directors
at the time of writing this report and the Company has no employees
or customers in the traditional sense. As the Company has no
employees, the culture of the Company is embodied in the Board of
Directors. The Board seeks to promote a culture of strong
governance and to challenge, in a constructive and respectful way,
the Company's advisers, third parties and other
stakeholders.
The Board's principal concern has
been, and continues to be, the interests of the Company's
shareholders and potential investors. The Manager undertakes an
annual programme of meetings with the largest shareholders and
investors and reports back to the Board on issues raised at these
meetings. The investment managers are based in abrdn's US offices
and regularly present at these meetings either by video conference
or in person when visiting the UK.
The Board encourages all
shareholders to attend and participate in the Company's AGM and
shareholders may contact the Directors via the Company Secretary.
Shareholders and investors can obtain up-to-date information on the
Company through its website and the Manager's information services
and have direct access to the Company through the Manager's
customer services team or the Company Secretary. The Chair offers
to meet with shareholders on at least an annual basis. The Chair
also held a live webinar ahead of the 2023 AGM, taking questions
with the Investment Manager. This was made available on the
Company's website for shareholders to access.
As an investment trust, a number
of the Company's functions are outsourced to third parties. The key
outsourced function is the provision of investment management
services to the Manager and other stakeholders support the Company
by providing secretarial, administration, depositary, custodial,
banking and audit services.
The Board undertakes a robust
evaluation of the Manager to ensure that the Company's objective of
providing sustainable income and capital growth for its investors
is met. The Board typically visits the Manager's offices in the US
on a periodic basis and last visited the Manager in May 2023. This
enables the Board to conduct face to face review meetings with the
fund management and research teams. The portfolio activities
undertaken by the Investment Manager on behalf of the Company can
be found below and details of the Board's relationship with the
Manager and other third party providers, including oversight, is
provided in the Directors' Report in the published Annual
Report.
Key decisions and actions during
the year ended 31 January 2024, which required the Directors to
have greater focus on stakeholders included:
Directorate
The Board is mindful of the
importance of having a well- considered and orderly succession plan
for continuity of performance and delivery of the Company's
strategy. There were no changes made to the Board composition
during the financial year. However, as announced in the 2023
Interim Report, as part of the Board's orderly succession plan,
Dame Susan Rice will retire from the Board at the conclusion of the
2024 AGM and will be succeeded by Charles Park, who has served on
the Board since 2017. Patrick Edwardson will succeed Charles Park
as Senior Independent Director. A search process will be conducted
later this year for a new Director, which will have due regard to
the benefits of diversity.
Marketing strategy
The Board continued to engage with
investors directly this year. This included meeting with investors,
along with the fund manager, and the Company's second webinar in
May 2023, where shareholders had a chance to ask questions prior to
exercising their proxy votes for the 2023 AGM. In addition, the Board worked with the Manager on key
performance indicators for marketing services and additional means
for targeted promotion of the Company.
Dividends paid to
shareholders
During the year, the Board
implemented the revised dividend payment policy approved by
shareholders at the 2023 AGM. Accordingly, four interim dividends
have been proposed for the financial year ending 31 January 2024
(see above for details) and paid at more even quarterly intervals
throughout the year. The Board recognises the importance of
dividends to shareholders and the importance of receiving a regular
income over the long-term.
Share buybacks
During the year the Board bought
back 2.9m Ordinary shares for cancellation. This provided a small
accretion to the NAV and a degree of liquidity to the market in an
effort to manage the discount to the NAV per share.
Management of the
portfolio
As in previous years, the Board
focused on the performance of the Manager in achieving the
Company's investment objective within an appropriate risk framework
and in the context of the wider market environment. As explained in
more detail in the Strategic Report, during the year, the Board
reviewed portfolio and NAV performance against a reference
benchmark and other peers on a regular basis.
Duration
The Company does not have a fixed
winding-up date; however, shareholders are given the opportunity to
vote on the continuation of the Company every three years. The
Company's next continuation vote is scheduled for the forthcoming
AGM in June 2024.
Board Diversity
The Board recognises the
importance of having a range of skilled, experienced individuals
with appropriate knowledge in order to allow the Board to fulfil
its obligations.
Environmental, Social and Human
Rights Issues
The Company has no employees as
the Board has delegated day to day management and administrative
functions to aFML. There are therefore no disclosures to be made in
respect of employees.
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. The Board also 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.
Global Greenhouse Gas Emissions
and Streamlined Energy and Carbon Reporting ("SECR")
All of the Company's activities
are outsourced to third parties. The Company therefore has no
greenhouse gas emissions to report from the operations of its
business other than directors' travel, nor does it have
responsibility for any other emissions producing sources under the
Companies Act 2006 (Strategic Report and Directors' Reports)
Regulations 2013. For the same reasons as set out above, the
Company considers itself to be a low energy user under the SECR
regulations and therefore is not required to disclose energy and
carbon information.
The Investment Manager has access
to a range of ESG tools. These tools allow it to look at the
overall carbon footprint of its portfolios and compare with the
reference index. It also allows them to identify the highest carbon
emissions stocks across portfolios. Furthermore, the carbon
footprint tool has been used to help further guide the Investment
Manager's engagement with companies.
Task Force for Climate-Related
Financial Disclosures ("TCFD")
Under Listing Rule 15.4.29(R), the
Company, as a closed ended investment company, is exempt from
complying with the TCFD. The Manager has, however, produced a
product level report on the Company in accordance with the FCA's
rules and guidance regarding the disclosure of climate-related
financial information consistent with TCFD Recommendations and
Recommended Disclosures. The product level report on the Company is
available on the Manager's website at: invtrusts.co.uk.
Viability Statement
The Company does not have a formal
fixed period strategic plan but the Board does formally consider
risks and strategy on at least an annual basis. The Board considers
the Company to be a long-term investment vehicle but for the
purposes of this Viability Statement has decided that a period of
three years is an appropriate period over which to report. The
Board considers that this period reflects a balance between looking
out over a long-term horizon and the inherent uncertainties of
looking out further than three years.
In assessing the viability of the
Company over the review period the Directors have focused upon the
following factors:
-
The ongoing relevance of the Company's investment objective in the
current environment and recent feedback from the Company's brokers
and shareholders, where available.
- A
resolution for the continuation of the Company to be put to
shareholders at the AGM in June 2024. The Directors recommend that
shareholders vote to approve the resolution, and that the Company
should continue in existence.
-
The principal risks detailed in the strategic report and the steps
taken to mitigate these risks. In particular, the Board has
considered the operational ability of the Company to continue in
the current environment, including the impact of geopolitical
developments, and the ability of the key third party suppliers to
continue to provide essential services to the Company. Third party
services have continued to be provided effectively.
-
The Company is invested in readily realisable listed securities.
Recent stress testing has confirmed that the portfolio can be
easily liquidated, despite the more uncertain and volatile economic
environment.
-
The level of revenue surplus generated by the Company and its
ability to achieve the dividend policy. The Company has continued
to deliver dividend growth whilst building up revenue reserves
which can be used to top up the dividend in tougher
times.
-
The level of gearing is closely monitored by the Board and the
Manager. Covenants are actively reviewed and there is adequate
headroom in place.
-
The availability of long-term gearing facilities. The Company's
gearing comprises $25 million of ten year loan notes (until
December 2030) and $25 million of 15 year loan notes (until
December 2035).
Accordingly, taking into account
the Company's current position and the potential impact of its
principal risks and uncertainties, the Board has 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 this Report. In making this assessment, the
Board has considered that matters such as significant economic or
stock market volatility, a substantial reduction in the liquidity
of the portfolio, or changes in investor sentiment could have an
impact on its assessment of the Company's prospects and viability
in the future.
Dame Susan Rice
Chair
4 April 2024
Results
Performance (total
return)
|
1 year
return
|
3 year
returnA
|
5 year
returnA
|
Total return (Capital return plus
dividends reinvested)
|
%
|
%
|
%
|
Share priceB
|
-0.9
|
+40.0
|
+30.4
|
Net asset value per
shareB
|
-1.6
|
+35.6
|
+34.9
|
Russell 1000 Value Index (in
sterling terms)
|
+2.6
|
+40.5
|
+61.0
|
S&P 500 Index (in sterling
terms)
|
16.8
|
+47.4
|
+101.5
|
A Cumulative
return
|
B Considered to be an
Alternative Performance Measure.
|
Ten Year Financial
Record
Year to 31 January
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
2024
|
Per share (p)
|
|
|
|
|
|
|
|
|
|
|
Net revenue
returnA
|
6.54
|
7.15
|
7.98
|
8.42
|
10.04
|
11.42
|
11.79
|
10.28
|
12.21
|
11.95
|
DividendsA
|
6.00
|
6.60
|
7.20
|
7.80
|
8.50
|
9.50
|
10.00
|
10.30
|
11.00
|
11.70
|
As at 31 January
|
|
|
|
|
|
|
|
|
|
|
Net asset value per
shareA (p)
|
187.8
|
187.1
|
264.7
|
275.5
|
280.4
|
288.9
|
262.5
|
318.8
|
337.2
|
317.8
|
Shareholders' funds
(£'000)
|
309,273
|
280,644
|
379,101
|
391,649
|
398,657
|
413,948
|
375,416
|
448,463
|
472,891
|
436,479
|
A Comparative figures
have been restated due to the sub-division of each existing
Ordinary share of 25p into five Ordinary shares of 5p each on 10
June 2019.
|
Investment Manager's
Review
Market review
US share prices, as measured by
the Company's primary reference index, the Russell 1000 Value
Index, rose in local-currency terms over the year to 31 January
2024 albeit by less in sterling terms as the pound strengthened
against the US dollar by 3.4%.
Faced with a relatively resilient
and robust economy, including a strong labour market, the US
Federal Reserve (Fed) continued to tighten monetary policy through
2023. The Fed raised interest-rates by 25 basis points (bps) at
each of its meetings between February and May, with the last
increase in July 2023 taking the target range for the Fed funds
rate to 5.25-5.50%, the highest level since 2001. At its January
2024 meeting, after eleven rate increases since March 2022, the Fed
finally removed the tightening bias from its statement. That said,
it aims to keep policy restrictive and proceed carefully for now,
continuing with its data-dependent approach as it awaits more
transparency over underlying macroeconomic trends. However, given
the sustained fall in the Fed's targeted inflation measure, three
rate cuts - as forecast by committee members in December's 'dot
plot' - are still possible in 2024. There could also be further
easing to come in 2025 and 2026.
US stock markets rose steadily
over most of the period, even shaking off turmoil in the banking
sector in March 2023, when two regional banks, Silicon Valley Bank
and Signature Bank, collapsed. In particular, investor sentiment
was helped by the long-awaited news in May of an agreement to raise
the US debt ceiling. Investor concern that interest rates would
stay higher for longer led to stocks weakening in August through to
October. However, equities then rebounded notably towards the end
of the year as these fears eased due to more encouraging inflation
trends.
Over the year to 31 January 2024,
growth-focused stocks performed relatively well. In particular,
there was a strong performance from the technology sector,
especially artificial intelligence-related companies, such as
NVIDIA, Microsoft and Alphabet. During the year to 31 January 2024,
the top seven (or "Magnificent Seven") technology stocks
contributed nearly 65% of the total return of the S&P 500
Index. These stocks are more sensitive to the prospect of monetary
tightening coming to an end, which will lower the discount rate
applied to these long duration assets.
The communication services,
technology and industrials sectors were the strongest performers
within the Russell 1000 Value index, while the utilities, materials
and energy sectors were the primary market laggards for the
period.
Performance
The Company returned -1.6% per
share on a net asset value basis in sterling terms for the year
ended 31 January 2024, underperforming the 2.6% return of the
Russell 1000 Value Index. The revenue account remained healthy,
maintaining a level of cover established in prior years.
At a sector level, the main
detractor from the Company's performance was the materials sector
due to negative stock selection. The second-largest detractor was
the industrials sector due to stock selection and, to a lesser
extent, an underweight exposure.
The largest individual stock
detractors from performance included:
-
agricultural sciences company, FMC
Corporation, a producer of crop-protection
chemicals, suffered from inventory destocking which forced
management to materially reduce its guidance. The weakness was
derived from farmers over-ordering crop inputs after being unable
to procure supplies in 2022 due to supply-chain
disruptions.
-
Pharmaceutical firm, Bristol-Myers
Squibb ("Bristol-Myers"), underperformed
due to a combination of new US government pricing measures
affecting the pharmaceutical industry and a pipeline that has not
yet received full approval for launching new drugs.
-
Drugstore chain CVS Health
was another weak performer as it contended with
rising patient utilisation in its managed care segment and
investors debated the cost of its acquisition of Oak Street Health,
a provider of value-based care to the Medicare
population.
On the positive side, the two
largest contributors to the Company's performance at the sector
level were energy and technology due to stock selection.
At a stock level, the largest
individual contributors included:
-
Semiconductor supplier Broadcom
performed strongly, alongside other companies
with artificial intelligence (AI) exposure, after reports indicated
a significant increase in demand for AI solutions. Broadcom
subsequently reported earnings that confirmed these improving
demand trends.
- Phillips 66, the oil refiner,
discussed options to improve operational performance, along with
various strategic alternatives, with activist investor Elliot
Management ("Elliot"). Elliot established a $1 billion position in
Phillips 66, will nominate two new board members, and publicly
outlined a strategy to unlock shareholder value.
- Comcast, the telecommunications
conglomerate, also fared well after reporting earnings that were
better
than expected. The company was able to offset the loss of broadband
subscribers with higher pricing, while the theme parks division
continues to experience robust growth.
The top five contributors and
bottom five contributors over the year ended 31 January 2024 are
detailed below
Top Five Stock
Contributors
|
%*
|
|
Bottom Five Stock
Contributors
|
%*
|
Broadcom Inc
|
1.6
|
|
FMC Corporation
|
-2.4
|
Philips66
|
1.1
|
|
Meta Platforms Inc. #
|
-1.4
|
Pfizer Inc
|
0.5
|
|
Bristol-Myers Squibb
Company
|
-1.2
|
Comcast Corporation
|
0.4
|
|
CVS Health Corporation
|
-0.7
|
Merck & Co
|
0.4
|
|
Gaming and Leisure Properties
Inc.
|
-0.5
|
*% relates to the percentage
contribution to return relative to the Reference Index (Russell
1000 Value Index).
# not owned by the
Company.
|
Portfolio activity
The Company's investments continue
to align with our high-quality stock selection process, which
emphasises generating consistent cash flow. However, market
volatility created opportunities to add quality companies into the
portfolio at compelling prices.
We initiated positions in five
companies during the year.
-
the leading renewable energy and utility company
NextEra Energy: NextEra
Energy owns Florida Power & Light Company, the US's largest
regulated electric utility, serving more than 12 million people.
The utility business is high quality due to the large backlog of
growth projects combined with a constructive regulatory environment
allowing for relatively high returns. The company also owns NextEra
Energy Resources, which is the world's largest generator of
renewable energy from wind and solar assets as well as a leader in
battery storage. Altogether, NextEra Energy combines two excellent
businesses that support peer-leading earnings growth, along with a
secure dividend.
- Genuine Parts Company, a leading
global distributor of automotive and industrial replacement parts.
The company has a track record of consistent execution and prudent
capital allocation, which has driven its profitable growth. It has
established itself as a premier supplier of automotive aftermarket
parts, led by its flagship NAPA brand.
-
Beverage firm Keurig Dr Pepper
has products in both the cold drinks segment (led
by the flagship Dr Pepper brand) and, following the merger with
Keurig, in coffee. Keurig is the dominant player in the
single-serve coffee segment. Historically, the cold drinks business
has grown in line with, or above, the market, benefiting from the
company's strength in (non-cola) flavours and its status as a
preferred distributor and acquiror of niche brands.
- Essential Utilities, a diversified
utility with two-thirds of its earnings from the water business and
one-third from the gas business. In the short run, the gas business
should grow faster given the infrastructure upgrades required.
However, the water business should grow at a comparable pace over
the intermediate term due to several small acquisition
opportunities given that around 85% of the country is served by
small, privately-run municipal operations.
-
The energy infrastructure company Enbridge, a premier midstream
company that operates one of the most advantaged oil pipeline
networks in North America, with a strong collection of natural gas
infrastructure and utility assets and a growing renewable energy
platform. The company's diversified asset portfolio generates
predictable cash flows thanks to its regulated and long-term
contracts with customers.
We sold out of five companies
during the year.
- Home
Depot: as we believe higher interest
rates, elevated inflation and the resumption of student loan
payments will prove to be large headwinds for the consumer,
pressuring earnings estimates over time.
-
Clothing company, VF
Corporation. Despite having a portfolio of
well-admired brands like Vans, The North Face, Timberland, Supreme,
and Dickies, the company has faced multiple setbacks due to its
poor execution.
- Hannon Armstrong Sustainable Infrastructure Capital, after concluding the stock would
remain under pressure in a higher-for-longer interest-rate
environment, with investors becoming increasingly concerned that
higher funding costs would negatively affect the company's return
profile.
- CI
Financial, given the company's management
has become more aggressive from a capital deployment perspective,
with an acceleration in buybacks and the rapid acquisition of US
wealth management businesses. While strategically sound, these
actions are raising leverage at a time of higher interest
rates.
-
Energy infrastructure firm TC
Energy, using the proceeds to fund our
investment in competitor Enbridge. Factors primarily outside TC
Energy's control have created delays on new projects and put upward
pressure on costs, negatively affecting project-level
returns.
Within the Company's corporate
bond portfolio, we initiated several positions over the year to
take advantage of more attractive valuations, as yields climbed
higher due to further monetary tightening together with concerns
over what an economic slowdown could mean for the instruments'
credit quality. We exited some other positions as the valuation of
these bonds traded above what we deemed to be their fair value. We
continue to work closely with abrdn's fixed income specialists to
monitor credits and market conditions for new opportunities and to
manage downside risk.
Dividend growth
The Company's holdings continued
to build upon an established track record of dividend growth during
the review period, with several companies announcing double-digit
increases. Semiconductor suppliers Broadcom and Analog Devices boosted their payouts
by 14% and 13%, respectively. Insurance provider
AIG Group increased its
dividend by 13%. Derivatives exchange operator CME Group, renewable energy
company NextEra Energy, and healthcare provider CVS
each raised their quarterly dividend payouts by
10%.
Additionally, two holdings in the
portfolio announced special dividend payments to shareholders
during the review period. Derivatives exchange operator
CME Group declared an
annual variable dividend of US$5.25 per share in December 2023. The
company uses this approach to facilitate paying out all cash that
it generates over the year beyond a minimum threshold.
Gaming-focused REIT Gaming and Leisure
Properties Inc. declared a special
earnings and profits cash dividend of $0.25 per share.
Outlook
US economic growth has been
resilient, benefiting from several factors such as unwinding
supply-chain pressures, falling energy prices, and higher
productivity growth. Despite tighter credit conditions and greatly
reduced household savings, we believe the chances of a soft landing
versus a mild recession are becoming more balanced as inflation
subsides.
We believe the underlying
companies in the portfolio are well positioned to manage through
potential election year volatility and, equally important, we feel
comfortable with the current valuations of these companies. The
underlying cash flows and balance sheets remain strong and thus we
expect continued dividend growth prospects for 2024.
The portfolio's sector exposure is
modestly defensive and we continue to seek all-weather companies,
where macro tailwinds are not needed for growth.
Fran Radano
abrdn Inc.
4 April 2024
Ten Largest Investments
As at 31 January 2024
MetLife
|
|
CVS Health
|
MetLife provides individual
insurance, employee benefits, and financial services with
operations throughout the United States and the regions of Latin
America, Europe, and
Asia Pacific.
|
|
CVS Health provides health care
and
retail pharmacy services. The company
offers prescription medications, beauty, personal care, cosmetics,
and health care products as well as pharmacy benefit management,
disease management and administrative services.
|
|
|
|
Medtronic
|
|
Merck & Co
|
Medtronic develops therapeutic and
diagnostic medical products for a wide range of conditions,
diseases and disorders.
|
|
Merck & Co. is a global health
care company that delivers health solutions through its
prescription medicines, vaccines, biological therapies, animal
health, and consumer care products, which it markets directly and
through its joint ventures. The company has operations in
pharmaceutical, animal health, and consumer care.
|
|
|
|
Gaming & Leisure
Properties
|
|
Baker Hughes
|
Gaming and Leisure Properties
owns and leases casinos and other entertainment
facilities.
|
|
Baker Hughes provides oilfield
products and services. The company
engages in surface logging, drilling, pipeline operations,
petroleum engineering, and fertilizer solutions, as well as offers
gas turbines, valves, actuators, pumps, flow meters, generators and
motors. Baker Hughes serves oil and gas industries
worldwide.
|
|
|
|
American International
Group ("AIG")
|
|
L3 Harris
Technologies
|
American International Group. is
an international insurance organisation
serving commercial, institutional and individual customers. AIG
provides property-casualty insurance, life insurance, and
retirement services.
|
|
L3 Harris Technologies is an
aerospace and defence technology innovator. The company designs,
develops, and manufactures radio communications products and
systems, including single channel ground and airborne radio
systems.
|
|
|
|
Citigroup
|
|
Comcast
|
Citigroup. is a diversified
financial services holding company that provides a broad range of
financial services to consumer and corporate customers. The company
services include investment banking, retail brokerage, corporate
banking, and cash management products and services. Citigroup
serves customers globally.
|
|
Comcast provides media and
television broadcasting services. The company offers video
streaming, television programming, high-speed Internet, cable
television and communication services. Comcast serves customers
worldwide.
|
List of Investments
As at 31 January
2024
|
|
|
Valuation
|
Total
|
Valuation
|
|
|
2024
|
assets
|
2023
|
Company
|
Industry classification
|
£'000
|
%
|
£'000
|
MetLife
|
Insurance
|
21,774
|
4.6
|
20,166
|
CVS Health
|
Health Care Providers &
Services
|
21,024
|
4.4
|
21,498
|
Medtronic
|
Health Care Equipment &
Supplies
|
20,623
|
4.3
|
13,596
|
Merck & Co
|
Pharmaceuticals
|
19,917
|
4.2
|
20,939
|
Gaming & Leisure
Properties
|
Specialised REITs
|
17,924
|
3.9
|
17,402
|
Baker Hughes
|
Energy Equipment &
Services
|
17,904
|
3.8
|
23,204
|
American International Group
("AIG")
|
Insurance
|
16,375
|
3.4
|
15,406
|
L3 Harris
Technologies
|
Aerospace & Defence
|
16,366
|
3.4
|
13,959
|
Citigroup
|
Banks
|
15,438
|
3.2
|
14,846
|
Comcast
|
Media
|
14,619
|
3.1
|
19,178
|
Ten largest investments
|
|
181,964
|
38.3
|
|
Emerson
Electric
|
Electrical
Equipment
|
14,407
|
3.0
|
14,657
|
Philip Morris
|
Tobacco
|
14,268
|
3.0
|
16,935
|
Air Products &
Chemicals
|
Chemicals
|
14,056
|
3.0
|
7,810
|
Broadcom
|
Semiconductors & Semiconductor
Equipment
|
13,899
|
2.9
|
11,880
|
Phillips 66
|
Oil, Gas & Consumable
Fuels
|
13,599
|
2.9
|
16,290
|
Bristol-Myers Squibb
|
Pharmaceuticals
|
13,432
|
2.8
|
20,654
|
Keurig Dr Pepper
|
Beverages
|
12,344
|
2.6
|
-
|
Restaurant Brands
International
|
Hotels, Restaurants &
Leisure
|
12,263
|
2.6
|
13,048
|
Cogent Communications
|
Diversified
Telecommunication
|
12,125
|
2.5
|
13,924
|
Genuine Parts
|
Distributors
|
12,113
|
2.5
|
-
|
Twenty largest
investments
|
|
314,470
|
66.1
|
|
JPMorgan Chase &
Co.
|
Banks
|
11,638
|
2.4
|
7,958
|
Analog Devices
|
Semiconductors & Semiconductor
Equipment
|
11,329
|
2.4
|
15,321
|
Omega Healthcare
Investors
|
Health Care REITs
|
10,248
|
2.2
|
19,131
|
PNC Financial Services
|
Banks
|
9,499
|
2.0
|
13,438
|
Cisco Systems
|
Communications
Equipment
|
9,457
|
2.0
|
13,837
|
Coca-Cola
|
Beverages
|
9,343
|
1.9
|
7,471
|
CMS Energy
|
Multi-Utilities
|
8,977
|
1.9
|
12,832
|
FMC
|
Chemicals
|
8,826
|
1.9
|
13,517
|
Enbridge
|
Oil, Gas & Consumable
Fuels
|
8,363
|
1.8
|
-
|
CME Group
|
Capital Markets
|
7,274
|
1.5
|
7,892
|
Thirty largest
investments
|
|
409,424
|
86.1
|
|
Essential Utilities
|
Water Utilities
|
7,040
|
1.5
|
-
|
Nextera Energy
|
Electric Utilities
|
6,906
|
1.5
|
-
|
Royal Bank of Canada
|
Banks
|
6,899
|
1.4
|
7,483
|
OneMain
|
Consumer Finance
|
5,981
|
1.3
|
8,760
|
AbbVie
|
Biotechnology
|
5,164
|
1.1
|
12,001
|
Texas Instruments
|
Semiconductors & Semiconductor
Equipment
|
5,029
|
1.0
|
5,758
|
CCO Holdings 7.375%
03/03/31
|
Media
|
1,429
|
0.3
|
-
|
CCO Holdings 4.75%
01/02/32
|
Media
|
1,408
|
0.3
|
1,447
|
Venture Global Calcasie 8.375%
01/06/31
|
Oil, Gas & Consumable
Fuels
|
1,389
|
0.3
|
-
|
NRG Energy 3.625%
15/02/1
|
Multi-Utilities
|
765
|
0.2
|
726
|
Forty largest
investments
|
|
451,434
|
95.0
|
|
Venture Global Calcasie 6.25%
15/01/30
|
Oil, Gas & Consumable
Fuels
|
708
|
0.2
|
746
|
Viatris 2.7%
22/06/30
|
Pharmaceuticals
|
708
|
0.1
|
706
|
NCL 5.875%
15/02/27
|
Consumer Discretionary
|
698
|
0.1
|
682
|
Venture Global Calcasie 3.875%
01/11/33
|
Oil, Gas & Consumable
Fuels
|
693
|
0.1
|
717
|
Graphic Packaging 3.75%
01/02/30
|
Packaging &
Containers
|
691
|
0.1
|
693
|
Total investments
|
|
454,932
|
95.6
|
|
Net current assets
|
|
20,745
|
4.4
|
|
Total assets
|
|
475,677
|
100.0
|
|
Geographical/Sector
Analysis
Geographic Analysis
As at 31 January
2024
|
|
|
2024
|
|
|
2023
|
|
|
Equity
|
Fixed
interest
|
Total
|
Equity
|
Fixed
interest
|
Total
|
Country
|
%
|
%
|
%
|
%
|
%
|
%
|
Canada
|
6.1
|
-
|
6.1
|
8.4
|
-
|
8.4
|
USA
|
92.0
|
1.9
|
93.9
|
90.1
|
1.5
|
91.6
|
|
98.1
|
1.9
|
100.0
|
98.5
|
1.5
|
100.0
|
Investment Case Studies
Phillips 66
Phillips 66 is a diversified
energy company formed in 2012 after ConocoPhillips separated its
upstream and downstream operations. The company's portfolio
consists of Midstream, Refining, Chemicals, Renewable Fuels, and
Retail businesses. More simply, Phillips 66 processes, transports,
stores, and markets fuels and refined products globally via its
twelve refiners, 72,000 miles of pipelines, and over 8,000 retail
locations.
Over the past decade management
has focused on optimising the company's portfolio by divesting
non-core assets, investing in higher growth businesses, and
improving operational efficiency. Together, these initiatives have
better positioned the company competitively, including improving
profitability, reducing earnings volatility, and allowing for
greater shareholder returns. At this point, after years of
investment and portfolio reshaping, the company has completed many
of these initiatives and is now considered one of the largest and
most integrated energy companies globally. This level of
integration and scale is unique within the energy complex creating
competitive advantages that are difficult to replicate. Despite the
progress, Phillips 66 recently embarked on another iteration of
continuous improvement that we believe will add shareholder value
over the long-term.
While many view the energy
transition as a risk, Phillips 66 has taken a proactive approach in
addressing these concerns. The company has spent several billion
dollars on environmental protection and alternative energy projects
since 2015. This includes the "Rodeo Renewed" project in California
which will convert a traditional refinery into one of the largest
renewable fuel facilities in the world. At the same time,
management has established long-term GHG emission reduction targets
with interim goals to track the company's progress. There are
several other partnerships, initiatives, and projects helping
position the company for a lower carbon future, thereby increasing
our confidence in the long-term sustainability of the company's
business model.
JPMorgan Chase & Co
JPMorgan Chase & Co.
("JPMorgan") is a leading financial services firm with nearly $4
trillion in assets, over $300 billion of common equity, and more
than 300,000 employees around the globe. In 2023, JPMorgan
generated over $158 billion in net revenues and earned a 17% return
on its common equity, translating into $50 billion of net income,
an increase of 32% from 2022. JPMorgan has the largest retail
deposit share in the United States, is the largest US credit card
issuer, and is amongst the largest investment banks in the
world.
Between 2004 and 2022, a period
that included the global financial crisis and COVID-19, JPMorgan
grew its tangible book value per share at a compound annual growth
rate of 9%, nearly twice the rate of its five largest peers, a
testament to its diversified business model, fortress balance
sheet, and best-in-class management team. In 2023, tangible book
value per share grew an additional 18% driven by record high
earnings, demonstrating JPMorgan's ability to navigate a
complicated macro-economic environment and the conclusion of the
Federal Reserves' aggressive interest rate tightening
cycle.
In the spring of 2023, JPMorgan
engineered a win-win rescue of First Republic Bank, partnering with
the Federal Deposit Insurance Corporation to acquire the assets and
deposits of the bank after the failure of Silicon Valley Bank
sparked contagion in the regional banking industry as a result of
rapidly rising interest rates. The acquisition helped stem the
crisis and added a valuable franchise focused on affluent customers
to the fold.
In 2021, JPMorgan unveiled its
Sustainable Development Target goal to finance and facilitate $2.5
trillion to support sustainable development and address climate
change through the end of 2030. The bank is off to a strong start,
having achieved $482 billion through the end of 2022, including
$176 billion in green initiatives, $204 billion in development
finance in emerging economies, and $102 billion of community
development in developed markets. In addition, JPMorgan utilises a
Carbon Assessment Framework to include climate considerations in
its business decision making in order to support the global goal of
net-zero emissions by 2050.
Directors' Report
The Company, which was
incorporated in 1902, is registered as a public limited company and
is an investment company within the meaning of Section 833 of the
Companies Act 2006. The Company's registration number is
SC005218.
The Company has been accepted by
HM Revenue & Customs as an investment trust subject to the
Company continuing to meet the relevant eligibility conditions of
Section 1158 of the Corporation Tax Act 2010 and the ongoing
requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for
all financial years commencing on or after 1 February 2012. The
Directors are of the opinion that the Company has conducted its
affairs for the year ended 31 January 2024 so as to enable it to
comply with the ongoing requirements for investment trust
status.
The Company has conducted its
affairs so as to satisfy the requirements as a qualifying security
for Individual Savings Accounts. The Directors intend that the
Company will continue to conduct its affairs in this
manner.
Results and Dividends
The audited financial statements
for the year ended 31 January 2024 may be found below. Details of
dividends for the year to 31 January 2024 can be found
above.
Share Capital and Rights attaching
to the Company's Shares
At 31 January 2024, the Company's
capital structure consisted of 137,352,347 Ordinary shares of 5p
each (2023 - 140, 234,749 Ordinary shares of 5p each). During the
year to 31 January 2024, the Company bought back 2,882,402 Ordinary
shares for cancellation. Since 1 February 2024, 1,187,253 Ordinary
shares have been repurchased for cancellation.
The Ordinary shares carry a right
to receive dividends which are declared from time to time by an
ordinary resolution of the Company (up to the amount recommended by
the Board) and to receive any interim dividends which the Company
may resolve to pay. On a winding-up, after meeting the liabilities
of the Company, the surplus assets will be paid to Ordinary
shareholders in proportion to their shareholdings. On a show of
hands, every shareholder present in person, or by proxy, has one
vote and, on a poll, every Ordinary shareholder present in person
has one vote for each share held and a proxy has one vote for every
share represented.
There are no restrictions
concerning the holding or transfer of the Company's shares and
there are no special rights attached to any of the shares. The
Company is not aware of any agreements between shareholders which
may result in restriction on the transfer of shares or the voting
rights. The rules concerning amendments to the Articles of
Association and powers to issue or buyback the Company's shares are
contained in the Articles of Association of the Company and the
Companies
Act 2006.
Significant Agreements
The Company is not aware of any
significant agreements to which it is a party that take effect,
alter or terminate upon a change of control of the Company
following a takeover and there are no agreements between the
Company and its Directors concerning compensation for loss of
office. Other than the management agreement with the Manager and
the depositary agreement, further details of which are set out
below, the Company is not aware of any contractual or other
agreements which are essential to its business which ought to be
disclosed in the Directors' Report.
Management Agreement
The Company has appointed abrdn
Fund Managers Limited ("aFML" or the "Manager"), a wholly owned
subsidiary of abrdn plc, as its alternative investment fund manager
("AIFM"). aFML has been appointed to provide the Company with
investment management, risk management, administration, company
secretarial services and promotional activities. The Company's
portfolio is managed by abrdn Inc. (the "Investment Manager") by
way of a delegation agreement in place between aFML and abrdn Inc.
In addition, aFML has sub-delegated promotional activities to abrdn
Investments Limited and administrative and secretarial services to
abrdn Holdings Limited. Details of the management agreement,
including notice period and fees paid during the year ended 31
January 2024 are shown in note 5.
Depositary Agreement
The Company has appointed BNP
Paribas Trust Corporation UK Limited ("BNPP") as its
depositary.
Loan Note Agreement
In December 2020, the Company
entered into a long-term financing agreement for US$50 million with
MetLife comprising two loans of US$25 million with terms of ten and
15 years at an all-in cost of 2.70% and 2.96% respectively, giving
a blended rate for ten years of 2.83% (the "Long-Term Financing
Agreement").
Directors
Details of the Directors of the
Company who were in office during the year to 31 January 2024 and
up to the date of this report are shown on the Company's website.
Dame Susan Rice is the Chair and Charles Park is the Senior
Independent Director.
No contract or arrangement existed
during the period in which any of the Directors was materially
interested. No Director has a service contract with the
Company.
Directors' & Officers'
Liability Insurance
The Company maintains insurance in
respect of Directors' and Officers' liabilities in relation to
their acts on behalf of the Company for the year to 31 January 2024
and up to the date of this report. Each Director of the Company
shall be 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 in the execution of his duties in
relation to the affairs of the Company. These rights are included
in the Articles of Association of the Company.
Corporate Governance
The Statement of Corporate
Governance, which forms part of the Directors' Report, is shown in
the published Annual Report.
Substantial Interests
As at 31 January 2024 the Company
had received notification or was aware of the following interests
in its Ordinary shares:
Shareholder
|
Number
of shares held
|
%
held
|
Rathbone Brothers
|
15,650,873
|
11.4
|
Interactive Investor
|
13,549,192
|
9.9
|
RBC Brewin Dolphin
|
9,058,737
|
6.6
|
1607 Capital Partners
|
7,161,186
|
5.2
|
Hargreaves Lansdown
|
7,112,843
|
5.2
|
Canaccord Genuity Wealth
Management
|
6,852,060
|
5.0
|
Allspring Global
Investments
|
5,575,262
|
4.1
|
Charles Stanley
|
4,876,459
|
3.6
|
EFG Harris Allday
|
4,480,436
|
3.3
|
WM Thomson
|
4,379,920
|
3.2
|
In the period between 31 January
2024 and 4 April 2024, the Company was notified that Canaccord
Genuity Wealth Management held 6,834,528 shares (5.0% of shares in
issue) as at 15 March 2024 and 6,802,785 (5.0% of the shares in
issue) as at 20 March 2024. There have been no other changes to the
above interests in the Company's shares notified as at 4 April
2024.
Accountability and
Audit
The Directors who held office at
the date of approval of this Directors' Report confirm that, so far
as they are each aware, there is no relevant audit information of
which the Company's auditor is unaware; and each Director has taken
all the steps that he/she could reasonably be expected to have
taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
The Audit Committee has reviewed
the services provided by the auditor during the year, together with
the auditor's fees and procedures in connection with the provision
of non-audit services. There were no non-audit service fees paid
during the year. The Board remains satisfied that
PricewaterhouseCoopers LLP's objectivity and independence is being
safeguarded.
Going Concern
The Company's assets consist
substantially of securities in companies listed on recognised stock
exchanges and in normal circumstances are realisable within a short
timescale and which can be sold to meet funding commitments if
necessary.
The Board has set gearing limits
and regularly reviews actual exposures, cash flow projections and
compliance with banking covenants.
The Company undertakes a
continuation vote every three years. The last continuation vote was
passed at the AGM held in June 2021 with 98.6% of votes in favour.
Based on feedback from major shareholders, the Directors consider
that it is reasonable to assume that the continuation vote will be
passed at the AGM to be held in June 2024 and therefore that the
Company will continue in existence.
The Board has considered the
impact of geopolitical developments and believes that there will be
a limited resulting financial impact on the Company's portfolio,
its operational resources and existence. Given that the Company's
portfolio comprises primarily "Level One" assets (listed on a
recognisable exchange and realisable within a short timescale), and
the Company's relatively low level of gearing, the Company has the
ability to raise sufficient funds so as to remain within its debt
covenants and pay expenses.
Taking the above factors into
consideration, the Directors have a reasonable expectation that the
Company has adequate financial resources to continue in operational
existence for the foreseeable future and for at least twelve months
from the date of this Report. Accordingly, the Board continues to
adopt the going concern basis in preparing the financial
statements.
Annual General Meeting
The Notice of General Meeting is
included in the published Annual Report. Among the resolutions
being put at the Annual General Meeting ("AGM") of the Company to
be held on 21 June 2024 at 12.00 Noon, the following resolutions
will be proposed as special business:
(i) Aggregate fees payable
to Directors
The Board carried out a review of
the level of Directors' fees during the financial year. The
resulting increases, which were effective from 1 February 2024, are
detailed in the Directors' Remuneration Report in the published
Annual Report.
In view of these increases in
fees, and in order to ensure that the Board has ongoing flexibility
to manage succession planning and attract candidates of appropriate
expertise and calibre to the role, Resolution 3, an ordinary
resolution, will seek shareholders' approval to increase the
maximum aggregate limit of remuneration of the Directors each year
in respect of their services as Directors from £175,000 to
£250,000. Whilst the Board does not intend to rely on this
increase, it is believed to be necessary and appropriate, in line
with peer companies, and will be a more appropriate cap for the
foreseeable future.
(ii) Continuation of the
Company
Resolution 10, which is an
ordinary resolution, will, if approved, allow the Company to
continue as an investment trust company.
(iii) Section 551 Authority to
Allot Shares
Resolution 11, which is an
ordinary resolution, seeks to renew the Directors' authority under
section 551 of the Companies Act to allot shares (excluding
treasury shares) up to an aggregate nominal amount of £2,246,724
or, if less, the number representing 33.33% of the issued Ordinary
share capital of the Company as at the date of the passing of the
resolution. This authority will expire on 31 July 2025 or, if
earlier, at the conclusion of the AGM to be held in 2025 (unless
previously revoked, varied or extended). The Directors will only
exercise this authority if they believe it is advantageous and in
the best interests of shareholders. There are no treasury shares in
issue.
(iv) Dis-application of
Pre-emption Provisions
Resolution 12, which is a special
resolution, seeks to renew the dis-application of statutory
pre-emption rights in relation to the issue of shares (or sale of
shares out of treasury) up to an aggregate nominal amount of
£680,825 or, if less, the number representing 10% of the issued
Ordinary share capital of the Company as at the date of the passing
of the resolution. This authority will expire on 31 July 2025 or,
if earlier, at the conclusion of the AGM to be held in 2025. The
Directors will only exercise this authority if they believe it is
advantageous and in the best interests of shareholders. Ordinary
shares would only be issued for cash at a price not less than the
NAV per share.
(v) Share Repurchases
Resolution 13, which is a special
resolution, seeks to renew the Company's authority for the Company
to make market purchases of its own Ordinary shares, up to a
maximum of 14.99% of the issued Ordinary share capital of the
Company as at the date of the passing of the resolution. Shares so
repurchased will be cancelled or held in treasury.
The principal reasons for share
buybacks are:
- to
enhance net asset value for continuing shareholders by purchasing
shares at a discount to the prevailing net asset value;
and
- to
address any imbalance between the supply of and demand for the
Company's shares that results in a discount of the quoted market
price to the published NAV per share.
Recommendation
The Directors believe that the
resolutions to be proposed at the AGM are in the best interests of
the Company and its shareholders as a whole and recommend that
shareholders vote in favour of the resolutions, as the Directors
intend to do in respect of their own beneficial shareholdings
totalling, in aggregate, 47,718 Ordinary shares, and representing
0.04% of the existing issued Ordinary share capital of the
Company.
By order of the Board
abrdn Holdings Limited
Secretary,
Edinburgh
4 April 2024
Statement of Directors'
Responsibilities
The Directors are responsible for
preparing the Annual Report in accordance with applicable law and
regulations.
Company law requires the Directors
to prepare financial statements for each financial year. Under that
law they are required to prepare the financial statements in
accordance with UK accounting standards, including FRS 102, the
Financial Reporting Standard applicable in the UK and Republic of
Ireland.
Under company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of its profit or loss for that period. In
preparing these financial statements, the Directors are required
to:
-
select suitable accounting policies and then apply them
consistently;
-
make judgements and accounting estimates that are reasonable and
prudent;
-
state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-
assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-
use the going concern basis of accounting unless they either intend
to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for
keeping adequate accounting records that are sufficient to show and
explain the Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such internal
control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and 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 Corporate Governance Statement that complies 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. Legislation in
the
UK
governing the preparation and dissemination of financial statements
may differ from legislation in
other jurisdictions.
Responsibility statement of the
Directors in respect of the annual financial report
We confirm that to the best of our
knowledge:
-
the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company; and
-
the Strategic Report includes a fair review of the development and
performance of the business and the position of the issuer,
together with a description of the principal risks and
uncertainties that they face.
We consider this Annual Report,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
For and on behalf of
The North American Income Trust
plc
Dame Susan Rice
Chair
4 April 2024
Statement of Comprehensive
Income
|
|
Year
ended 31 January 2024
|
Year
ended 31 January 2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Net (losses)/gains on
investments
|
11
|
-
|
(25,504)
|
(25,504)
|
-
|
28,105
|
28,105
|
Net currency
gains/(losses)
|
3
|
-
|
1,375
|
1,375
|
-
|
(1,557)
|
(1,557)
|
Income
|
4
|
21,952
|
620
|
22,572
|
22,295
|
731
|
23,026
|
Investment management
fee
|
5
|
(894)
|
(2,088)
|
(2,982)
|
(947)
|
(2,209)
|
(3,156)
|
Administrative expenses
|
7
|
(943)
|
-
|
(943)
|
(854)
|
-
|
(854)
|
Return before finance costs and
taxation
|
|
20,115
|
(25,597)
|
(5,482)
|
20,494
|
25,070
|
45,564
|
|
|
|
|
|
|
|
|
Finance costs
|
6
|
(368)
|
(858)
|
(1,226)
|
(354)
|
(825)
|
(1,179)
|
Return before taxation
|
|
19,747
|
(26,455)
|
(6,708)
|
20,140
|
24,245
|
44,385
|
|
|
|
|
|
|
|
|
Taxation
|
8
|
(3,079)
|
614
|
(2,465)
|
(3,014)
|
447
|
(2,567)
|
Return after taxation
|
|
16,668
|
(25,841)
|
(9,173)
|
17,126
|
24,692
|
41,818
|
|
|
|
|
|
|
|
|
Return per Ordinary share
(pence)
|
10
|
11.95
|
(18.53)
|
(6.58)
|
12.21
|
17.60
|
29.81
|
|
|
|
|
|
|
|
|
The total column of this statement
represents the profit and loss account of the Company.
|
All revenue and capital items in
the above statement derive from continuing operations.
|
The accompanying notes are an
integral part of the financial statements.
|
Statement of Financial
Position
|
|
As
at
|
As
at
|
|
|
31
January 2024
|
31
January 2023
|
|
Note
|
£'000
|
£'000
|
Fixed assets
|
|
|
|
Investments at fair value through
profit or loss
|
11
|
454,932
|
486,940
|
|
|
|
|
Current assets
|
|
|
|
Prepayments and accrued
income
|
12
|
846
|
784
|
Other debtors
|
12
|
105
|
1,891
|
Cash at bank and in
hand
|
|
21,285
|
26,699
|
|
|
22,236
|
29,374
|
|
|
|
|
Creditors: amounts falling due
within one year
|
|
|
|
Other creditors
|
13
|
(1,491)
|
(2,880)
|
|
|
(1,491)
|
(2,880)
|
Net current assets
|
|
20,745
|
26,494
|
Total assets less current
liabilities
|
|
475,677
|
513,434
|
|
|
|
|
Creditors: amounts falling due
after more than one year
|
|
|
|
Senior Loan Notes
|
14
|
(39,198)
|
(40,543)
|
Net assets
|
|
436,479
|
472,891
|
|
|
|
|
Capital and reserves
|
|
|
|
Called up share capital
|
15
|
6,868
|
7,012
|
Share premium account
|
|
51,806
|
51,806
|
Capital redemption
reserve
|
|
15,748
|
15,604
|
Capital reserve
|
|
340,003
|
373,828
|
Revenue reserve
|
|
22,054
|
24,641
|
Total shareholders'
funds
|
|
436,479
|
472,891
|
|
|
|
|
Net asset value per Ordinary share
(pence)
|
16
|
317.78
|
337.21
|
|
|
|
|
The financial statements were
approved and authorised for issue by the Board on 4 April 2024 and
were signed on its behalf by:
|
Dame Susan Rice
|
|
|
|
Director
|
The accompanying notes are an
integral part of the financial statements.
|
Statement of Changes in
Equity
For the year ended 31 January
2024
|
|
|
Share
|
Capital
|
|
|
|
|
Share
|
premium
|
redemption
|
Capital
|
Revenue
|
|
|
capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 1 February
2023
|
7,012
|
51,806
|
15,604
|
373,828
|
24,641
|
472,891
|
Buyback of Ordinary
shares
|
(144)
|
-
|
144
|
(7,984)
|
-
|
(7,984)
|
Return after taxation
|
-
|
-
|
-
|
(25,841)
|
16,668
|
(9,173)
|
Dividends paid (see note
9)
|
-
|
-
|
-
|
-
|
(19,255)
|
(19,255)
|
Balance at 31 January
2024
|
6,868
|
51,806
|
15,748
|
340,003
|
22,054
|
436,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 January
2023
|
|
|
Share
|
Capital
|
|
|
|
|
Share
|
premium
|
redemption
|
Capital
|
Revenue
|
|
|
capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 1 February
2022
|
7,034
|
51,806
|
15,582
|
350,388
|
23,653
|
448,463
|
Buyback of Ordinary
shares
|
(22)
|
-
|
22
|
(1,252)
|
-
|
(1,252)
|
Return after taxation
|
-
|
-
|
-
|
24,692
|
17,126
|
41,818
|
Dividends paid (see note
9)
|
-
|
-
|
-
|
-
|
(16,138)
|
(16,138)
|
Balance at 31 January
2023
|
7,012
|
51,806
|
15,604
|
373,828
|
24,641
|
472,891
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of the financial statements.
|
Statement of Cash Flows
|
|
Year
ended
|
Year
ended
|
|
|
31
January 2024
|
31
January 2023
|
|
Note
|
£'000
|
£'000
|
Operating activities
|
|
|
|
Net return before
taxation
|
|
(6,708)
|
44,385
|
Adjustments for:
|
|
|
|
Net losses/(gains) on
investments
|
11
|
25,410
|
(27,997)
|
Net (gains)/losses on foreign
exchange transactions
|
|
(1,375)
|
1,557
|
Decrease/(increase) in dividend
income receivable
|
12
|
(60)
|
(54)
|
Increase in fixed interest income
receivable
|
12
|
(2)
|
(134)
|
(Decrease)/increase in
derivatives
|
13
|
(102)
|
240
|
Decrease/(increase) in other
debtors
|
12
|
155
|
(146)
|
(Decrease)/increase in other
creditors
|
13
|
(53)
|
129
|
Tax on overseas income
|
8
|
(2,465)
|
(2,567)
|
Amortisation of senior loan note
expenses
|
6
|
-
|
5
|
Accretion of fixed income book
cost
|
11
|
(94)
|
(1)
|
Net cash inflow from operating
activities
|
|
14,706
|
15,417
|
|
|
|
|
Investing activities
|
|
|
|
Purchases of
investments
|
|
(140,765)
|
(186,765)
|
Sales of investments
|
|
147,854
|
199,772
|
Net cash generated from investing
activities
|
|
7,089
|
13,007
|
|
|
|
|
Financing activities
|
|
|
|
Equity dividends paid
|
9
|
(19,255)
|
(16,138)
|
Buyback of Ordinary
shares
|
|
(7,984)
|
(1,252)
|
Net cash used in financing
activities
|
|
(27,239)
|
(17,390)
|
(Decrease)/increase in cash and
cash equivalents
|
|
(5,444)
|
11,034
|
|
|
|
|
Analysis of changes in cash and
cash equivalents during the year
|
|
|
|
Opening balance
|
|
26,699
|
13,875
|
Effect of exchange rate
fluctuation on cash held
|
3
|
30
|
1,790
|
(Decrease)/increase in cash as
above
|
|
(5,444)
|
11,034
|
Closing balance
|
|
21,285
|
26,699
|
|
|
|
|
Represented by:
|
|
|
|
Cash at bank and in
hand
|
|
21,285
|
26,699
|
|
|
|
|
The accompanying notes are an
integral part of the financial statements.
|
Notes to the Financial
Statements
For the year ended 31 January
2024
1
|
Principal activity
|
|
The Company is a closed-end
investment company, registered in Scotland No.SC005218, with its
Ordinary shares being listed on the London Stock
Exchange.
|
2.
|
Accounting policies
|
|
A summary of the principal
accounting policies, all of which, unless otherwise stated, have
been consistently applied throughout the year and the preceding
year, is set out below.
|
|
(a)
|
Basis of preparation and going
concern. The financial statements have
been prepared in accordance with Financial Reporting Standard 102,
the Companies Act 2006 and with the Statement of Recommended
Practice 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts' issued in July 2022. The financial
statements are prepared in sterling which is the functional
currency of the Company and rounded to the nearest £'000. They have
also been prepared on a going concern basis and on the assumption
that approval as an investment trust will continue to be
granted.
|
|
|
Going concern. The Company's assets consist substantially of securities in
companies listed on recognised stock exchanges and in normal
circumstances are realisable within a short timescale and which can
be sold to meet funding commitments if necessary.
|
|
|
The Board has set gearing limits
and regularly reviews actual exposures, cash flow projections and
compliance with banking covenants.
|
|
|
The Company undertakes a
continuation vote every three years. The last continuation vote was
passed at the AGM held in June 2021 with 98.6% of votes in favour.
Based on feedback from major shareholders, the Directors consider
that it is reasonable to assume that the continuation vote will be
passed at the AGM to be held in June 2024 and therefore that the
Company will continue in existence.
|
|
|
The Board has considered the
impact of geopolitical developments and believes that there will be
a limited resulting financial impact on the Company's portfolio,
its operational resources and existence. Given that the Company's
portfolio comprises primarily "Level One" assets (listed on a
recognisable exchange and realisable within a short timescale), and
the Company's relatively low level of gearing, the Company has the
ability to raise sufficient funds so as to remain within its debt
covenants and pay expenses.
|
|
|
Taking the above factors into
consideration, the Directors have a reasonable expectation that the
Company has adequate financial resources to continue in operational
existence for the foreseeable future and for at least twelve months
from the date of this Report. Accordingly, the Board continues to
adopt the going concern basis in preparing the financial
statements.
|
|
|
Significant estimates and
judgements. Disclosure is required of
judgements and estimates made by management in applying the
accounting policies that have a significant effect on the financial
statements. There are no significant estimates or judgements which
impact these financial statements.
|
|
(b)
|
Income.
Income from investments, including taxes deducted at source, is
included in revenue by reference to the date on which the
investment is quoted ex dividend. Special dividends are credited to
capital or revenue, according to the circumstances. The fixed
returns on debt instruments are recognised using the time
apportioned accruals basis and the discount or premium on
acquisition is amortised or accreted on a straight line
basis.
|
|
|
Interest receivable from cash and
short-term deposits is recognised on the time apportioned accruals
basis.
|
|
(c)
|
Expenses.
All expenses are accounted for on an accruals basis and are charged
to the Statement of Comprehensive Income. Expenses are charged
against revenue except as follows:
|
|
|
- transaction costs on the
acquisition or disposal of investments are charged to capital in
the Statement of Comprehensive Income;
|
|
|
- expenses are charged to capital
where a connection with the maintenance or enhancement of the value
of the investments can be demonstrated. In this respect, the
investment management fee is allocated 30% to revenue and 70% to
capital to reflect the Company's investment policy and prospective
income and capital growth.
|
|
(d)
|
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
expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible (see
note 8 for a more detailed explanation). The Company has no
liability for current tax.
|
|
|
Deferred taxation is provided on
all timing differences, that have originated but not reversed at
the Statement of Financial Position date, where transactions or
events that result in an obligation to pay more or a right to pay
less tax in future have occurred at the Statement of Financial
Position date, measured on an undiscounted basis and based on
enacted tax rates. This is subject to deferred tax assets only
being recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of
the underlying timing differences can be deducted. Timing
differences are differences arising between the Company's taxable
profits and its results as stated in the financial statements which
are capable of reversal in one or more subsequent
periods.
|
|
|
Owing to the Company's status as
an investment trust company, and the intention to continue to meet
the conditions required to obtain approval for the foreseeable
future, the Company has not provided deferred tax on any capital
gains and losses arising on the revaluation or disposal of
investments.
|
|
(e)
|
Investments. The Company has chosen to apply the recognition and
measurement provisions of IAS 39 Financial Instruments: Recognition
and Measurement and investments have been designated upon initial
recognition at fair value through profit or loss. Investments are
recognised and de-recognised at trade date where a purchase or sale
is under a contract whose terms require delivery within the time
frame established by the market concerned, and are initially
measured at fair value. Subsequent to initial recognition,
investments are measured at fair value. For listed investments,
this is deemed to be closing bid market prices. Gains and losses
arising from changes in fair value and disposals are included as a
capital item in the Statement of Comprehensive Income and are
ultimately recognised in the capital reserve.
|
|
(f)
|
Borrowings. Monies borrowed to finance the investment objectives of the
Company are stated at the amount of the net proceeds immediately
after issue plus cumulative finance costs less cumulative payments
made in respect of the debt. The finance costs of such borrowings
are accounted for on an accruals basis using the effective interest
rate method and are charged 30% to revenue and 70% to capital to
reflect the Company's investment policy and prospective income and
capital growth.
|
|
(g)
|
Dividends payable.
Interim and final dividends are recognised in the
period in which they are paid.
|
|
(h)
|
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 capital comprising Ordinary shares of 5p. This reserve is
not distributable.
|
|
|
Capital redemption
reserve. The capital redemption reserve is
used to record the amount equivalent to the nominal value of any of
the Company's own shares purchased and cancelled in order to
maintain the Company's capital. This reserve is not
distributable.
|
|
|
Capital reserve. This reserve reflects any gains or losses on realisation of
investments in the period along with any changes in fair values of
investments held that have been recognised in the Statement of
Comprehensive Income. The costs of share buybacks for treasury are
also deducted from this reserve. This reserve is distributable
although the amount that is distributable is complex to determine
and is not necessarily the full amount of the reserve as disclosed
within these financial statements.
|
|
|
Revenue reserve. This reserve reflects all income and costs which are
recognised in the revenue column of the Statement of Comprehensive
Income. The revenue reserve represents the amount of the Company's
reserves distributable by way of dividend. The amount of the
revenue reserve as at 31 January 2024 may not be available at the
time of any future distribution due to movements between 31 January
2024 and the date of distribution.
|
|
(i)
|
Foreign
currency. Assets and liabilities in foreign
currencies are translated at the rates of exchange ruling on the
Statement of Financial Position date. Transactions involving
foreign currencies are converted at the rate ruling on the date of
the transaction. Gains and losses on the realisation of foreign
currencies are recognised in the Statement of Comprehensive Income
and are then transferred to the capital reserve.
|
|
(j)
|
Traded options. The Company may enter into certain derivative contracts
(e.g. writing traded options). Option contracts are accounted for
as separate derivative contracts and are therefore shown in other
assets or other liabilities at their fair value. The initial fair
value is based on the initial premium which is received/paid on
inception. The premium is recognised in the revenue column over the
life of the contract period. Losses on any movement in the fair
value of open contracts at the year end realised and on the
exercise of the contracts are recorded in the capital column of the
Statement of Comprehensive Income. For written options, where
exercised, losses are treated as a realised loss, including where
it is a component of the cost paid to acquire underlying securities
on a written contract.
|
|
|
In addition, the Company may enter
into derivative contracts to manage market risk and gains or losses
arising on such contracts are recorded in the capital column of the
Statement of Comprehensive Income.
|
|
(k)
|
Cash and cash
equivalents. Cash and cash equivalents
comprise cash at bank.
|
3.
|
Net currency
gains/(losses)
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Gains on cash held
|
30
|
1,790
|
|
Gains/(losses) on Senior Loan
Notes
|
1,345
|
(3,347)
|
|
|
1,375
|
(1,557)
|
4.
|
Income
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Income from overseas listed
investments
|
|
|
|
Dividend income
|
14,879
|
15,570
|
|
REIT income
|
2,817
|
2,816
|
|
Interest income from
investments
|
567
|
167
|
|
|
18,263
|
18,553
|
|
|
|
|
|
Other income from investment
activity
|
|
|
|
Traded option premiums
|
3,781
|
4,170
|
|
Deposit interest
|
528
|
303
|
|
|
4,309
|
4,473
|
|
Total income
|
22,572
|
23,026
|
|
|
|
|
|
During the year, the Company was
entitled to premiums totalling £3,781,000 (2023 - £4,170,000) in
exchange for entering into option contracts. At the year end there
were 6 (2023 - 5) open positions, valued at a liability of £162,000
(2023 - liability of £264,000) as disclosed in note 13. Losses
realised on the exercise of derivative transactions are disclosed
in note 11.
|
5.
|
Investment management
fee
|
|
|
2024
|
2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Investment management
fee
|
894
|
2,088
|
2,982
|
947
|
2,209
|
3,156
|
|
|
|
|
|
|
|
|
|
Management services are provided
by abrdn Fund Managers Limited ("aFML"). The management fee has
been charged at 0.75% of net assets up to £250 million, 0.6%
between £250 million and £500 million, and 0.5% over £500 million,
payable quarterly. Net assets equals gross assets after deducting
current liabilities and borrowings and excluding commonly managed
funds. The balance due to aFML at the year end was £755,000 (2023 -
£810,000). The fee is allocated 30% to revenue and 70% to capital
(2023 - same).
|
|
The management agreement between
the Company and the Manager is terminable by either party on three
months' notice. In the event of a resolution being passed at the
AGM to wind up the Company the Manager shall be entitled to three
months' notice from the date the resolution was passed. In the
event of termination on not less than the agreed notice period,
compensation is payable in lieu of the unexpired notice
period.
|
6.
|
Finance costs
|
|
|
2024
|
2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Bank interest paid
|
33
|
76
|
109
|
1
|
2
|
3
|
|
Senior Loan Notes
|
333
|
778
|
1,111
|
351
|
819
|
1,170
|
|
Amortised Senior Loan Note issue
expenses
|
2
|
4
|
6
|
2
|
4
|
6
|
|
|
368
|
858
|
1,226
|
354
|
825
|
1,179
|
7.
|
Administrative expenses
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Directors' fees
|
155
|
131
|
|
Registrar's fees
|
85
|
104
|
|
Custody and bank
charges
|
25
|
25
|
|
Secretarial fees
|
147
|
129
|
|
Auditors' remuneration:
|
|
|
|
- fees payable to the Company's
auditor for the audit of the annual report
|
55
|
40
|
|
Promotional activities
|
216
|
215
|
|
Printing, postage and
stationery
|
33
|
29
|
|
Fees, subscriptions and
publications
|
66
|
57
|
|
Professional fees
|
45
|
37
|
|
Depositary charges
|
44
|
46
|
|
Other expenses
|
72
|
41
|
|
|
943
|
854
|
|
|
|
|
|
Secretarial and administration
services are provided by abrdn Fund Managers Limited ("aFML") under
an agreement which is terminable on three months' notice. The fee
is payable monthly in advance and based on an index-linked annual
amount of £147,000 (2023 - £129,000). The balance due at the year
end was £12,000 (2023 - £22,000).
|
|
During the year £216,000 (2023 -
£215,000) was paid to aFML in respect of promotional activities for
the Company and the balance due at the year end was £73,000 (2023 -
£72,000).
|
|
With the exception of Auditors'
remuneration for the statutory audit, all of the expenses above
include irrecoverable VAT where applicable. The Auditors'
remuneration for the statutory audit excludes VAT amounting to
£11,000 (2023 - £8,000).
|
8.
|
Taxation
|
|
|
|
2024
|
2023
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
(a)
|
Analysis of charge/(credit) for
the year
|
|
|
|
|
|
|
|
|
UK corporation tax
|
462
|
-
|
462
|
292
|
-
|
292
|
|
|
Double tax relief
|
(330)
|
-
|
(330)
|
(292)
|
-
|
(292)
|
|
|
Overseas tax suffered
|
2,240
|
93
|
2,333
|
2,458
|
109
|
2,567
|
|
|
Tax relief to capital
|
707
|
(707)
|
-
|
556
|
(556)
|
-
|
|
|
Total tax charge/(credit) for the
year
|
3,079
|
(614)
|
2,465
|
3,014
|
(447)
|
2,567
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Factors affecting the tax
charge/(credit) for the year. The UK
corporation tax rate is 24% (2023 - 19%). The tax charge for the
year is higher (2023 - lower) than the corporation tax rate. The
differences are explained in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Net return before
taxation
|
19,747
|
(26,455)
|
(6,708)
|
20,140
|
24,245
|
44,385
|
|
|
|
|
|
|
|
|
|
|
|
Corporation tax at 24% (2023 -
19%)
|
4,739
|
(6,349)
|
(1,610)
|
3,827
|
4,607
|
8,434
|
|
|
Effects of:
|
|
|
|
|
|
|
|
|
Non-taxable overseas
dividends
|
(3,571)
|
(149)
|
(3,720)
|
(2,958)
|
(139)
|
(3,097)
|
|
|
Irrecoverable overseas withholding
tax
|
2,240
|
93
|
2,333
|
2,458
|
109
|
2,567
|
|
|
Expenses not deductible for tax
purposes
|
1
|
-
|
1
|
-
|
-
|
-
|
|
|
Double tax relief
|
(330)
|
-
|
(330)
|
(293)
|
-
|
(293)
|
|
|
Excess management
expenses
|
-
|
-
|
-
|
(20)
|
20
|
-
|
|
|
Non-taxable losses/(gains) on
investments
|
-
|
6,121
|
6,121
|
-
|
(5,340)
|
(5,340)
|
|
|
Non-taxable currency
gains/(losses)
|
-
|
(330)
|
(330)
|
-
|
296
|
296
|
|
|
Total tax
charge/(credit)
|
3,079
|
(614)
|
2,465
|
3,014
|
(447)
|
2,567
|
|
|
|
|
|
|
|
|
|
|
(c)
|
Provision for deferred
taxation
|
|
|
|
|
|
|
|
|
At the year end there is no
unrecognised deferred tax asset (2023 - £nil) in relation to
surplus management expenses.
|
9.
|
Dividends
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Amounts recognised as
distributions to equity holders in the year:
|
|
|
|
3rd interim dividend for 2023 of
2.5p per share (2022 - 2.5p)
|
3,506
|
3,517
|
|
Final dividend for 2023 of 3.5p
per share (2022 - 4.0p)
|
4,902
|
5,609
|
|
1st interim dividend for 2024 of
2.6p per share (2023 - 2.5p)
|
3,642
|
3,506
|
|
2nd interim dividend for 2024 of
2.6p per share (2023 - 2.5p)
|
3,621
|
3,506
|
|
3rd interim dividend for 2024 of
2.6p per share
|
3,584
|
-
|
|
|
19,255
|
16,138
|
|
|
|
|
|
The fourth interim dividend was
unpaid at the year end. Accordingly, this has not been included as
a liability in these financial statements.
|
|
The table below sets out the total
dividends paid and proposed in respect of the financial year, which
is the basis on which the requirements of Sections 1158-1159 of the
Corporation Tax Act 2010 are considered. The revenue available for
distribution by way of dividend for the year is £16,668,000 (2023 -
£17,126,000).
|
|
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
1st interim dividend for 2024 of
2.6p per share (2023 - 2.5p)
|
3,642
|
3,506
|
|
2nd interim dividend for 2024 of
2.6p per share (2023 - 2.5p)
|
3,621
|
3,506
|
|
3rd interim dividend for 2024 of
2.6p per share (2023 - 2.5p)
|
3,584
|
3,506
|
|
4th interim dividend for 2024 of
3.9p per share (2023 - nil)
|
5,314
|
-
|
|
Proposed final dividend for 2024
of nil per share (2023 - 3.5p)
|
-
|
4,902
|
|
|
16,161
|
15,420
|
|
|
|
|
|
The cost of the fourth interim
dividend for 2024 is based on 136,243,680 Ordinary shares in issue,
being the number of Ordinary shares in issue at the date of this
report.
|
10.
|
Return per Ordinary
share
|
|
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
p
|
£'000
|
p
|
|
Based on the following
figures:
|
|
|
|
|
|
Revenue return
|
16,668
|
11.95
|
17,126
|
12.21
|
|
Capital return
|
(25,841)
|
(18.53)
|
24,692
|
17.60
|
|
Total return
|
(9,173)
|
(6.58)
|
41,818
|
29.81
|
|
|
|
|
|
|
|
Weighted average number of
Ordinary shares in issue
|
|
139,474,109
|
|
140,284,541
|
11.
|
Investments at fair value through
profit or loss
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Investments at fair value through profit or
loss
|
|
|
|
Opening book cost
|
438,891
|
425,863
|
|
Opening investment holdings
gains
|
48,049
|
45,111
|
|
Opening fair value
|
486,940
|
470,974
|
|
|
|
|
|
Analysis of transactions made during the
year
|
|
|
|
Purchases at cost
|
139,531
|
184,369
|
|
Sales proceeds received
|
(146,223)
|
(196,401)
|
|
(Losses)/gains on
investmentsA
|
(25,410)
|
27,997
|
|
Accretion of fixed income book
cost
|
94
|
1
|
|
Closing fair value
|
454,932
|
486,940
|
|
|
|
|
|
Closing book cost
|
432,315
|
438,891
|
|
Closing investment holdings
gains
|
22,617
|
48,049
|
|
Closing fair value
|
454,932
|
486,940
|
|
|
|
|
|
Listed on overseas stock
exchanges
|
454,932
|
486,940
|
|
|
|
|
|
Net (losses)/gains on
investments
|
|
|
|
(Losses)/gains on
investmentsA
|
(25,410)
|
27,997
|
|
Investment holding (losses)/gains
on traded optionsB
|
(94)
|
108
|
|
|
(25,504)
|
28,105
|
|
A Includes losses
realised on the exercise of traded options of £3,204,000 (2023 -
£6,511,000) which are reflected in the capital column of the
Statement of Comprehensive Income in accordance with accounting
policy 2(j). Premiums received from traded options totalled
£3,781,000 (2023 - £4,170,000) per note 4.
|
|
B Options associated
are derivative liabilities at the year end.
|
|
|
|
|
|
The Company received £146,223,000
(2023 - £196,401,000) from investments sold in the year. The book
cost of these investments when they were purchased was £146,201,000
(2023 - £171,343,000). 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.
|
|
Transaction costs.
During the year expenses were incurred in
acquiring or disposing of investments classified as fair value
through profit or loss. These have been expensed through capital
and are included within net (losses)/gains on investments in the
Statement of Comprehensive Income. The total costs were as
follows:
|
|
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Purchases
|
65
|
44
|
|
Sales
|
107
|
140
|
|
|
172
|
184
|
|
|
|
|
|
The above transaction costs are
calculated in line with the AIC SORP. The transaction costs in the
Company's Key Information Document are calculated on a different
basis and in line with the PRIIPs regulations.
|
12.
|
Debtors: amounts falling due
within one year
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Accrued income
|
829
|
769
|
|
Prepayments
|
17
|
15
|
|
Other debtors
|
76
|
231
|
|
Amounts due from
brokers
|
29
|
1,660
|
|
|
951
|
2,675
|
13.
|
Creditors: amounts falling due
within one year
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Amounts due to brokers
|
210
|
1,444
|
|
Investment management fee
payable
|
755
|
810
|
|
Traded option contracts
|
162
|
264
|
|
Interest payable
|
127
|
131
|
|
Other creditors
|
237
|
231
|
|
|
1,491
|
2,880
|
14.
|
Senior Loan Notes
|
|
|
|
Creditors: amounts falling due
after more than one year
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
2.70% Senior Loan Notes - 10
years
|
19,632
|
20,307
|
|
2.96% Senior Loan Notes - 15
years
|
19,632
|
20,307
|
|
Unamortised Loan Note issue
expenses
|
(66)
|
(71)
|
|
|
39,198
|
40,543
|
|
|
|
|
|
On 21 December 2020 the Company
issued a US$25 million 10 years Senior Loan Note at an
annualised interest rate of 2.70% and a US$25 million 15 years
Senior Loan Note at an annualised interest rate of 2.96%. The Loan
Notes are unsecured and unlisted. Interest is payable in half
yearly instalments in June and December and the Loan Notes are due
to be redeemed at par on 21 December 2030 and 21 December 2035. The
Company has complied with the Senior Loan Note Purchase Agreement
covenant throughout the period since issue that the ratio of net
assets to gross borrowings must be greater than 3.5:1, that net
assets will not be less than £200,000,000, and that the total
number of Listed Assets is to be more than 35.
|
|
The total fair value of the Senior
Loan Notes at 31 January 2024 was £36,256,000 (2023 - £38,579,000)
comprising £18,277,000 (2023 - £19,278,000) in respect of the 10
years 2.70% Senior Loan Note and £17,979,000 (2023 -
£19,301,000) in respect of the 15 years 2.96% Senior Loan Note. The
fair value of the Senior Loan Notes has been 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.
|
15.
|
Called up share capital
|
|
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Allotted, called-up and fully
paid:
|
|
|
|
Opening balance
|
7,012
|
7,034
|
|
Ordinary shares bought back in the
year
|
(144)
|
(22)
|
|
137,352,347 (2023 - 140,234,749)
Ordinary shares of 5p each
|
6,868
|
7,012
|
|
|
|
|
|
During the year 2,882,402 (2023 -
441,185) Ordinary shares of 5p each were repurchased by the Company
at a total cost, including transaction costs, of £7,984,000 (2023 -
£1,252,000).
|
|
Subsequent to the year end,
1,108,667 Ordinary shares of 5p each have been repurchased by the
Company at a total cost of £3,206,000.
|
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:
|
|
|
|
|
|
|
2024
|
2023
|
|
Net assets attributable
|
£436,479,000
|
£472,891,000
|
|
Number of Ordinary shares in
issueA
|
137,352,347
|
140,234,749
|
|
Net asset value per
share
|
317.78p
|
337.21p
|
|
A 2024 Includes 72,747
Ordinary shares bought back prior to the year end which had not yet
settled.
|
17.
|
Analysis of changes in net
debt
|
|
|
At
|
|
|
|
At
|
|
|
1
February
|
Currency
|
Non-cash
|
Cash
|
31
January
|
|
|
2023
|
differences
|
movement
|
flows
|
2024
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cash and short term
deposits
|
26,699
|
30
|
-
|
(5,444)
|
21,285
|
|
Debt due after more than one
year
|
(40,543)
|
1,345
|
-
|
-
|
(39,198)
|
|
|
(13,844)
|
1,375
|
-
|
(5,444)
|
(17,913)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
|
|
At
|
|
|
1
February
|
Currency
|
Non-cash
|
Cash
|
31
January
|
|
|
2022
|
differences
|
movement
|
flows
|
2023
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cash and short term
deposits
|
13,875
|
1,790
|
-
|
11,034
|
26,699
|
|
Debt due after more than one
year
|
(37,191)
|
(3,347)
|
(5)
|
-
|
(40,543)
|
|
|
(23,316)
|
(1,557)
|
(5)
|
11,034
|
(13,844)
|
|
|
|
|
|
|
|
|
A statement reconciling the
movement in net funds to the net cash flow has not been presented
as there are no differences from the above analysis.
|
18.
|
Financial instruments and risk
management
|
|
The Company's investment
activities expose it to various types of financial risk associated
with the financial instruments and markets in which it invests. The
Company's financial instruments, other than derivatives, 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.
|
|
Subject to Board approval, the
Company also has the ability to enter into derivative transactions,
in the form of traded options, for the purpose of enhancing income
returns and portfolio management. During the year, the Company
entered into certain derivative contracts. As disclosed in note 4,
the premium received in respect of options written in the year was
£3,781,000 (2023 - £4,170,000). Positions closed during the year
realised a loss of £3,204,000 (2023 - £6,511,000). The largest
position in derivative contracts held during the year at any given
time was £454,000 (2023 - £542,000). The Company had 6 (2023 - 5)
open positions in derivative contracts at 31 January 2024 valued at
a liability of £162,000 (2023 - £264,000) as disclosed in note
13.
|
|
The Board has delegated the risk
management function to the Manager under the terms of its
management agreement with aFML (further details which are included
under note 5). 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 an
approach has been applied throughout the year and has not changed
since the previous accounting period. The numerical disclosures
exclude short-term debtors and creditors.
|
|
Risk management framework.
The directors of aFML collectively assume
responsibility for aFML's obligations under the AIFMD including
reviewing investment performance and monitoring the Company's risk
profile during the year.
|
|
aFML is a fully integrated member
of the abrdn plc group of companies (referred to as "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 Inc., which is responsible for ensuring that the Company is
managed within the terms of its investment guidelines and the
limits set out in FUND 3.2.2R (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 AIFM conducts its risk
oversight function through the operation of the Group's risk
management processes and systems which are embedded within the
Group's operations. The Group's Risk Division supports management
in the identification and mitigation of risks and provides
independent monitoring of the business. The Division includes
Compliance, Business Risk, Market Risk, Risk Management and Legal.
The team is headed up by the Group's Chief Risk Officer, who
reports to the Chief Executive Officer of the Group. The Risk
Division achieves its objective through embedding the Risk
Management Framework throughout the organisation using the Group's
operational risk management system ("SHIELD").
|
|
The Group's Internal Audit
Department is independent of the Risk Division and reports directly
to the Group's Chief Executive Officer and the Audit Committee of
the Group's Board of Directors. The Internal Audit Department is
responsible for providing an independent assessment of the Group's
control environment.
|
|
The Group's corporate governance
structure is supported by several committees to assist the board of
directors of abrdn plc, its subsidiaries and the Company to fulfil
their roles and responsibilities. The Group's Risk Division is
represented on all committees, with the exception of those
committees that deal with investment recommendations. The specific
goals and guidelines on the functioning of those committees are
described on the committees' terms of reference.
|
|
Risk management.
The main risks the Company faces from its
financial instruments are (i) market risk (comprising interest rate
risk, currency risk and price risk), (ii) liquidity risk and (iii)
credit risk.
|
|
The Board regularly reviews and
agrees policies for managing each of these risks. The Manager's
policies for managing these risks are summarised below and have
been applied throughout the year. The numerical disclosures exclude
short-term debtors and creditors, other than for currency
disclosures.
|
|
(i)
|
Market risk. 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 fixed interest rate securities;
|
|
|
- the level of income receivable
on cash deposits;
|
|
|
- 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 reviews on a regular
basis the values of the fixed interest rate securities.
|
|
|
The Board imposes borrowing limits
to ensure gearing levels are appropriate to market conditions and
reviews these on a regular basis. Borrowings comprise fixed rate,
revolving and uncommitted facilities. Details of borrowings at 31
January 2024 are shown in note 14 to the financial
statements.
|
|
|
Interest risk profile.
The interest rate risk profile of the portfolio of
financial instruments at the Statement of Financial Position date
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
period
for
|
Weighted
|
|
|
Non-
|
|
|
|
which
|
average
|
Fixed
|
Floating
|
interest
|
|
|
|
rate is
fixed
|
interest rate
|
rate
|
rate
|
bearing
|
|
|
At 31 January 2024
|
Years
|
%
|
£'000
|
£'000
|
£'000
|
|
|
Assets
|
|
|
|
|
|
|
|
Sterling
|
-
|
-
|
-
|
4,892
|
-
|
|
|
US Dollar
|
6.93
|
5.59
|
8,489
|
16,392
|
418,918
|
|
|
Canadian Dollar
|
-
|
-
|
-
|
1
|
27,525
|
|
|
Total assets
|
|
|
8,489
|
21,285
|
446,443
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Loan Notes 21/12/30 -
US$25,000,000
|
6.89
|
2.70
|
19,599
|
-
|
-
|
|
|
Loan Notes 21/12/35 -
US$25,000,000
|
11.89
|
2.96
|
19,599
|
-
|
-
|
|
|
Total liabilities
|
|
|
39,198
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
period
for
|
Weighted
|
|
|
Non-
|
|
|
|
which
|
average
|
Fixed
|
Floating
|
interest
|
|
|
|
rate is
fixed
|
interest rate
|
rate
|
rate
|
bearing
|
|
|
At 31 January 2023
|
Years
|
%
|
£'000
|
£'000
|
£'000
|
|
|
Assets
|
|
|
|
|
|
|
|
Sterling
|
-
|
-
|
-
|
4,599
|
-
|
|
|
US Dollar
|
7.50
|
4.36
|
7,141
|
22,221
|
439,091
|
|
|
Canadian Dollar
|
-
|
-
|
-
|
(121)
|
40,708
|
|
|
Total assets
|
|
|
7,141
|
26,699
|
479,799
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Loan Notes 21/12/30 -
US$25,000,000
|
7.89
|
2.70
|
20,272
|
-
|
-
|
|
|
Loan Notes 21/12/35 -
US$25,000,000
|
12.90
|
2.96
|
20,271
|
-
|
-
|
|
|
Total liabilities
|
|
|
40,543
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
The weighted average interest rate
is based on the current yield of each asset, weighted by its market
value.
|
|
|
The floating rate assets consist
of cash deposits at prevailing market rates.
|
|
|
The non-interest bearing assets
represent the equity element of the portfolio.
|
|
|
Short-term debtors and creditors
have been excluded from the above tables.
|
|
|
Financial Liabilities.
The company has fixed rate borrowings by way of
its senior loan notes, details of which can be found in note
14.
|
|
|
Interest rate
sensitivity. The sensitivity analyses
below have been determined based on the exposure to interest rates
for both derivative and non-derivative instruments at the Statement
of Financial Position date and the stipulated change taking place
at the beginning of the financial year and held constant throughout
the reporting period in the case of instruments that have floating
rates.
|
|
|
If interest rates had been 100
basis points higher or lower (based on current parameter used by
Manager's Investment Risk Department on risk assessment) and all
other variables were held constant, the Company's revenue return
for the year ended 31 January 2024 would increase/decrease by
£213,000 (2023 - decrease/increase by £267,000). This is mainly
attributable to the Company's exposure to interest rates on its
floating rate cash balances.
|
|
|
In the opinion of the Directors,
the above sensitivity analyses are not representative of the year
as a whole, since the level of exposure changes frequently as part
of the interest rate risk management process used to meet the
Company's objectives. The risk parameters used will also fluctuate
depending on the current market perception.
|
|
|
Foreign currency risk.
The Company's portfolio is invested mainly in US
quoted securities and the Statement of Financial Position can be
significantly affected by movements in foreign exchange
rates.
|
|
|
Management of the
risk. It is not the Company's policy to
hedge this risk on a continuing basis but the Company may, from
time to time, match specific overseas investment with foreign
currency borrowings. A significant proportion of the Company's
borrowings, as detailed in note 14, are denominated in foreign
currency. Foreign currency risk exposure by currency denomination
is detailed under Interest Risk Profile.
|
|
|
The revenue account is subject to
currency fluctuation arising on overseas income. The Company does
not hedge this currency risk.
|
|
|
Foreign currency
sensitivity. There is no sensitivity
analysis included as the Company's significant foreign currency
financial instruments are in the form of equity investments, and
they have been included within the other price risk sensitivity
analysis so as to show the overall level of exposure.
|
|
|
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 country or sector.
The allocation of assets to international markets 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 various
stock exchanges.
|
|
|
Price risk sensitivity.
If market prices at the Statement of Financial
Position date had been 10% higher or lower while all other
variables remained constant, the return attributable to Ordinary
shareholders for the year ended 31 January 2024 would have
increased/decreased by £45,493,000 (2023 - increase/decrease of
£48,694,000) and equity reserves would have increased/decreased by
the same amount.
|
|
(ii)
|
Liquidity risk.
This is the risk that the Company will encounter
difficulty in meeting obligations associated with financial
liabilities.
|
|
|
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.
|
|
(iii)
|
Credit risk. This is failure of the counterparty to a transaction to
discharge its obligations under that transaction that could result
in the Company suffering a loss.
|
|
|
Management of the risk
|
|
|
|
|
|
|
|
- where the Manager makes an
investment in a bond, corporate or otherwise, the credit ratings of
the issuer are taken into account so as to manage the risk to the
Company of default;
|
|
|
- investments in quoted bonds are
made across a variety of industry sectors so as to avoid
concentrations of credit risk;
|
|
|
- transactions involving
derivatives are entered into only with investment banks, the credit
rating of which is taken into account so as to minimise the risk to
the Company of default;
|
|
|
- investment transactions are
carried out with a number of brokers, whose credit-standing is
reviewed periodically by the Manager, and limits are set on the
amount that may be due from any one broker;
|
|
|
- the risk of counterparty
exposure due to failed trades causing a loss to the Company is
mitigated by the 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 Manager's Compliance department
carries out periodic reviews of the custodian's operations and
reports its finding to the Manager's Risk Management
Committee;
|
|
|
- cash is held only with reputable
banks with acceptable credit quality. It is the Manager's policy to
trade only with A- and above (Long Term rated) and A-1/P-1 (Short
Term rated) counterparties.
|
|
|
Credit risk exposure.
In summary, compared to the amounts in the
Statement of Financial Position, the exposure to credit risk at 31
January 2024 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
|
Statement of
|
|
Statement of
|
|
|
|
|
|
Financial
|
Maximum
|
Financial
|
Maximum
|
|
|
|
|
Position
|
exposure
|
Position
|
exposure
|
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
Quoted bonds
|
|
8,489
|
8,489
|
7,141
|
7,141
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Amount due from brokers
|
|
29
|
29
|
1,660
|
1,660
|
|
|
Dividends receivable
|
|
829
|
829
|
603
|
603
|
|
|
Interest receivable
|
|
17
|
17
|
166
|
166
|
|
|
Other debtors and
prepayments
|
|
76
|
76
|
246
|
246
|
|
|
Cash and short-term
deposits
|
|
21,285
|
21,285
|
26,699
|
26,699
|
|
|
|
|
30,725
|
30,725
|
36,515
|
36,515
|
|
|
|
|
|
|
|
|
|
|
None of the Company's financial
assets are secured by collateral or other credit
enhancements.
|
|
|
Credit ratings.
The table below provides a credit rating profile
using Standard and Poors credit ratings for the quoted bonds at 31
January 2024 and 31 January 2023:
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
|
|
|
£'000
|
£'000
|
|
|
B+
|
|
|
|
708
|
682
|
|
|
BB+
|
|
|
|
1,401
|
2,898
|
|
|
BB
|
|
|
|
2,845
|
693
|
|
|
BB-
|
|
|
|
2,837
|
2,162
|
|
|
BBB-
|
|
|
|
698
|
706
|
|
|
|
|
|
|
8,489
|
7,141
|
|
|
|
|
|
|
|
|
|
|
Fair values of financial assets
and financial liabilities. The book value
of cash at bank and bank loans and overdrafts included in these
financial statements approximate to fair value because of their
short-term maturity. Investments held as dealing investments are
valued at fair value. The carrying values of fixed asset
investments are stated at their fair values, which have been
determined with reference to quoted market prices. For all other
short-term debtors and creditors, their book values approximate to
fair values because of their short-term maturity.
|
19.
|
Capital management policies and
procedures
|
|
The investment objective of the
Company is to provide investors with above average dividend income
and long term capital growth through active management of a
portfolio consisting predominately of S&P 500 US
equities.
|
|
The capital of the Company
consists of bank borrowings and equity comprising issued capital,
reserves and retained earnings. The Company manages its capital to
ensure that it will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of
the debt and equity balance.
|
|
The Board monitors and reviews the
broad structure of the Company's capital on an ongoing basis. This
review includes:
|
|
- the planned level of gearing
which takes into account the Investment Manager's views on the
market;
|
|
- the level of equity shares in
issue; and
|
|
- the extent to which revenue in
excess of that which is required to be distributed should be
retained.
|
|
The Company's objectives, policies
and processes for managing capital are unchanged from the preceding
accounting period.
|
|
Details of the Company's gearing
facilities and financial covenants are detailed in note 14 of the
financial statements.
|
20.
|
Fair value hierarchy
|
|
FRS 102 requires an entity to
classify fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the
measurements. The fair value hierarchy has the following
classifications:
|
|
Level 1:
unadjusted quoted prices in an active market for identical assets
or liabilities that the entity can access at the measurement
date.
|
|
Level 2: inputs other than quoted prices included within Level 1 that
are observable (ie developed using market data) for the asset or
liability, either directly or indirectly.
|
|
Level 3: inputs are unobservable (ie for which market data is
unavailable) for the asset or liability.
|
|
The financial assets and
liabilities measured at fair value in the Statement of Financial
Position are grouped into the fair value hierarchy at the reporting
date as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
As at 31 January 2024
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Financial assets at fair value
through profit or loss
|
|
|
|
|
|
|
|
Quoted equities
|
|
a)
|
446,443
|
-
|
-
|
446,443
|
|
Quoted bonds
|
|
b)
|
-
|
8,489
|
-
|
8,489
|
|
|
|
|
446,443
|
8,489
|
-
|
454,932
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair
value through profit or loss
|
|
|
|
|
|
|
|
Derivatives
|
|
c)
|
-
|
(162)
|
-
|
(162)
|
|
Net fair value
|
|
|
446,443
|
8,327
|
-
|
454,770
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
As at 31 January 2023
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Financial assets at fair value
through profit or loss
|
|
|
|
|
|
|
|
Quoted equities
|
|
a)
|
479,799
|
-
|
-
|
479,799
|
|
Quoted bonds
|
|
b)
|
-
|
7,141
|
-
|
7,141
|
|
|
|
|
479,799
|
7,141
|
-
|
486,940
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair
value through profit or loss
|
|
|
|
|
|
|
|
Derivatives
|
|
c)
|
-
|
(264)
|
-
|
(264)
|
|
Net fair value
|
|
|
479,799
|
6,877
|
-
|
486,676
|
|
|
|
|
|
|
|
|
|
a)
|
Quoted equities.
The fair value of the Company's investments in
quoted equities has been determined by reference to their quoted
bid prices at the reporting date. Quoted equities included in Fair
Value Level 1 are actively traded on recognised stock
exchanges.
|
|
b)
|
Quoted bonds. The fair value of the Company's investments in quoted bonds
has been determined by reference to their quoted bid prices at the
reporting date. Investments categorised as Level 2 are not
considered to trade in active markets.
|
|
c)
|
Derivatives. The Company's investment in exchange traded options have been
fair valued using quoted prices and have been classified as Level 2
as they are not considered to trade in active markets.
|
|
The fair value of the senior loan
notes has been calculated as £36,256,000 (2023 - £38,579,000),
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, compared to carrying amortised cost of £39,198,000 (2023 -
£40,543,000).
|
|
|
|
|
|
|
|
| |
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 in the published Annual Report.
|
|
Transactions with the Manager. The
Company has an agreement with the Manager for the provision of
investment management, secretarial, accounting and administration
and promotional activity services.
|
|
Details of transactions during the
year and balances outstanding at the year end are disclosed in
notes 5 and 7.
|
Alternative Performance
Measures
Alternative performance measures
are numerical measures of the Company's current, historical or
future performance, financial position or cash flows, other than
financial measures defined or specified in the applicable financial
framework. The Company's applicable financial framework includes
FRS 102 and the AIC SORP. The Directors assess the Company's
performance against a range of criteria which are viewed as
particularly relevant for closed-end investment
companies.
|
Discount to net asset value
|
The discount is the amount by
which the share price is lower than the net asset value per share
with debt at fair value, expressed as a percentage of the net asset
value with debt at fair value.
|
|
|
|
|
|
|
2024
|
2023
|
NAV per Ordinary share
|
a
|
317.78p
|
337.21p
|
Share price
|
b
|
289.00p
|
306.00p
|
Discount
|
(a-b)/a
|
9.1%
|
9.3%
|
|
|
|
|
Dividend cover
|
|
|
|
Dividend cover measures the
revenue return per share divided by total dividends per share,
expressed as a ratio.
|
|
|
|
|
|
|
2024
|
2023
|
Revenue return per
share
|
a
|
11.95p
|
12.21p
|
Dividends per share
|
b
|
11.70p
|
11.00p
|
Dividend cover
|
a/b
|
1.02
|
1.11
|
|
|
|
|
Dividend yield
|
Dividend yield is calculated using
the Company's annual dividend per Ordinary share divided by the
share price, expressed as a percentage.
|
|
|
|
|
|
|
2024
|
2023
|
Annual dividend per Ordinary
share
|
a
|
11.70p
|
11.00p
|
Share price
|
b
|
289.00p
|
306.00p
|
Dividend yield
|
a/b
|
4.0%
|
3.6%
|
|
|
|
|
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.
|
|
|
|
|
|
|
2024
|
2023
|
Borrowings (£'000)
|
a
|
39,198
|
40,543
|
Cash (£'000)
|
b
|
21,285
|
26,699
|
Amounts due to brokers
(£'000)
|
c
|
210
|
1,444
|
Amounts due from brokers
(£'000)
|
d
|
29
|
1,660
|
Shareholders' funds
(£'000)
|
e
|
436,479
|
472,891
|
Net gearing
|
(a-b+c-d)/e
|
4.1%
|
2.9%
|
|
|
|
|
Ongoing charges ratio
|
Ongoing charges ratio is
considered to be an alternative performance measure. The ongoing
charges ratio has been calculated in accordance with guidance
issued by the AIC which is defined as the total of investment
management fees and administrative expenses and expressed as a
percentage of the average daily net asset values with debt at fair
value published throughout the year.
|
|
|
|
|
|
|
2024
|
2023
|
Investment management fees
(£'000)
|
|
2,982
|
3,156
|
Administrative expenses
(£'000)
|
|
943
|
854
|
Less: non recurring charges
A (£'000)
|
|
-
|
(8)
|
Ongoing charges (£'000)
|
|
3,925
|
4,002
|
Average net assets
(£'000)
|
|
439,152
|
458,929
|
Ongoing charges ratio (excluding
look-through costs)
|
|
0.89%
|
0.87%
|
Look-through
costsB
|
|
0.10%
|
0.06%
|
Ongoing charges ratio (including
look-through costs)
|
|
0.99%
|
0.93%
|
A Professional services
considered unlikely to recur.
|
B Calculated in
accordance with AIC guidance issued in October 2020 to include the
Company's share of costs of holdings in investment companies on a
look-through basis.
|
|
|
|
|
The ongoing charges ratio provided
in the Company's Key Information Document is calculated in line
with the PRIIPs regulations which includes finance costs and
transaction charges.
|
Total return
|
NAV and share price total returns
show how the NAV and share price has performed over a period of
time in percentage terms, taking into account both capital returns
and dividends paid to shareholders. Share price and NAV total
returns are monitored against open-ended and closed-ended
competitors, and the Reference Index, respectively.
|
|
|
|
|
|
|
|
Share
|
Year ended 31 January
2024
|
|
NAV
|
Price
|
Opening at 1 February
2023
|
a
|
337.2p
|
306.0p
|
Closing at 31 January
2024
|
b
|
317.8p
|
289.0p
|
Price movements
|
c=(b/a)-1
|
-5.8%
|
-5.6%
|
Dividend
reinvestmentA
|
d
|
4.2%
|
4.7%
|
Total return
|
c+d
|
-1.6%
|
-0.9%
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
Year ended 31 January
2023
|
|
NAV
|
Price
|
Opening at 1 February
2022
|
a
|
318.8p
|
283.0p
|
Closing at 31 January
2023
|
b
|
337.2p
|
306.0p
|
Price movements
|
c=(b/a)-1
|
5.8%
|
8.1%
|
Dividend
reinvestmentA
|
d
|
3.8%
|
4.3%
|
Total return
|
c+d
|
+9.6%
|
+12.4%
|
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 THE ANNUAL
FINANCIAL REPORT
This Annual Financial Report is
not the Company's statutory accounts for the year ended 31 January
2024. The statutory accounts for the year ended 31 January 2023
received an audit report which was unqualified. The financial
information set out above does not constitute the Company's
statutory accounts for the years ended 31 January 2024 or 31
January 2023 but is derived from those accounts.
Statutory accounts for 31 January
2023 have been delivered to the registrar of companies, and those
for 31 January 2024 will be delivered in due course. The auditor
has reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
The statutory accounts for the
financial year ended 31 January 2024 were approved by the Directors
on 4 April 2024.
The Company's Annual General
Meeting will be held at 12 Noon on 21 June 2024 in the offices of
abrdn plc, 1 George Street, Edinburgh EH2 2LL.
The Annual Report will be posted
to shareholders in April 2024 and will be available from the
Company's website: www.northamericanincome.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.
For The North American Income
Trust plc
abrdn Holdings Limited
Secretaries
END