Annual Financial Report

RNS Number : 2784J

Dunedin Income Growth Inv Tst PLC

09 April 2020

 

DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

Legal Entity Identifier (LEI):  549300PPXLZPR5JTL763

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2020

Investment Objective

The Company's objective is to achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom. 

Benchmark

The Company's benchmark is the FTSE All-Share Index (total return). Performance is measured on a net asset value total return basis over the long-term.

Management

The Company's Manager is Aberdeen Standard Fund Managers Limited ("ASFML", the "AIFM" or the "Manager") which has delegated the investment management of the Company to Aberdeen Asset Managers Limited ("AAML" or the "Investment Manager"). Both companies are wholly owned subsidiaries of Standard Life Aberdeen plc. Aberdeen Standard Investments is a brand of the investment business of the merged entity.

COMPANY OVERVIEW - FINANCIAL HIGHLIGHTS

Net asset value total return A B		Earnings per share (revenue)		Share price total return A
2020	+22.2%	2020	12.08p	2020	+28.8%
2019	(3.9)%	2019	12.68p	2019	(0.8)%
Ongoing charges A		Discount to net asset value A B		Dividends per Ordinary share
2020	0.59%	2020	3.59%	2020	12.70p
2019	0.63%	2019	9.31%	2019	12.45p
A Alternative Performance Measure
B With debt at fair value, dividends reinvested

For further information, please contact:

Ben Ritchie/Louise Kernohan

Aberdeen Standard Fund Managers Limited  0207 463 6000

William Hemmings

Aberdeen Standard Fund Managers Limited  0207 463 6223

Stephanie Hocking

Aberdeen Standard Fund Managers Limited  0207 463 6403

STRATEGIC REPORT - CHAIRMAN'S STATEMENT

Introduction

I am writing this statement against a backdrop of significant declines in equity markets since the end of the Company's financial year, and a time of extreme market volatility, caused by the spread of the Coronavirus around the world.  I refer to this in more detail below.

During the year ended 31 January 2020, your company delivered a strong absolute and relative return against a positive backdrop for UK equities. The Company's net asset value ("NAV") increased by 22.2% on a total return basis, outperforming the FTSE All-Share Index which produced a total return of 10.7%. The share price total return for the year was 28.8% reflecting a significant narrowing of the discount to NAV. As well as outperforming the benchmark and our peers we are pleased to announce an increase in the dividend per share ahead of the rate of inflation. The stronger performance delivered by the Company during the year is now reflected in the longer-term performance numbers, with the NAV and share price total return performance over the three and five year periods to 31 January 2020 also materially ahead of the FTSE-All Share Index.

Importantly, the portfolio continued to evolve over the year in line with our strategy of seeking to create a more active, better quality and higher growth investment proposition. The repayment of our long-standing high coupon debenture in April 2019 and the sale of the bond portfolio at the same time has also simplified the capital structure and significantly lowered the headline level of gearing. 

The Board believes that this positions your company over the medium term to deliver both faster dividend growth and better capital performance. The substantial reduction in the discount at which the Company's shares trade is, we believe, recognition that the strategy we have pursued is the right one and is beginning to bear fruit. 

One other area of significant note has been the increasing focus from investors on Environmental, Social and Governance ("ESG") issues. Many companies exposed to the positive aspects of this trend have outperformed, while companies whose activities are deemed to be harmful to both society and the environment have generally underperformed as the risk inherent in their business is recognised by investors. We believe that this is probably just the start of a much longer term change in behaviour. With ESG analysis fully embedded into the Investment Manager's process, the Company is well positioned to navigate this change in investor perception, looking to both take advantage of investment opportunities and to avoid any pitfalls that may arise as a result.

Performance

As I have noted above, the Company's NAV total return of 22.2% outperformed the total return of 10.7% from the FTSE All-Share Index during the year. This was driven by out-performance from the portfolio, primarily due to stock selection and the benefit of financial gearing on rising asset prices. Whilst gearing levels were relatively modest during the year, its impact contributed 2.3% to the outperformance of 11.5%

Within the portfolio the Company again benefitted from a strong performance from the kind of companies to which the Investment Manager has been seeking to expand our exposure. Namely, high quality businesses with cash flows and balance sheets capable of providing reasonable levels of dividend yield but, critically, combined with good long-term growth prospects. 

The Company also benefitted from a strong performance from a number of our overseas holdings, which once again added value while further broadening the opportunity set for the Investment Manager to pick from and diversifying our income streams. In addition, a number of the new smaller market cap investments made a useful contribution. 

With the Company's greater emphasis on growth, the Investment Manager now has more flexibility. The signs so far are encouraging that this will facilitate the delivery of consistent positive returns from stock selection over the medium term. 

Earnings and Dividends

Income declined by 7.8% during the year. However, this decline was amplified by the sale of the bond portfolio to fund the repayment of the debenture. The resulting reduction in finance costs meant that, overall, the revenue return per share declined on a "like-for-like" basis by only 4.7% to 12.08p. This progression is very much in line with our strategy to focus the portfolio more towards income growth and potential higher total return investments. 

The Company has paid three quarterly dividends of 3.0p per share, following changes we made in the last financial year to distribute income more evenly throughout the year. We are declaring a fourth interim dividend of 3.7p per share, payable on 29 May 2020 to shareholders on the register on 11 May 2020. This will make a total dividend of 12.7p per share for the year, an increase of 2.0% on last year and slightly ahead of the rate of inflation. This will be the 36^th year out of the past 40 that the Company has grown its dividend, with the distribution maintained in the other four years. 

Once the fourth interim dividend has been paid, this will utilise 0.60p of the Company's revenue reserves (equating to approximately 5% of the reserve) leaving a further 10.94p per share to support future distributions, representing 86% of the current annual dividend cost. This is a level which, we believe, well supports your company's financial position. 

Due to uncertainties regarding the arrangements for the Company's Annual General Meeting ("AGM") as explained below, the Board has decided that for this year, due to these exceptional circumstances, it will declare a fourth interim dividend instead of proposing a final dividend for approval by shareholders. This will avoid any uncertainty regarding the payment of the dividend in the event that the AGM is postponed. The Board will put a resolution to shareholders at the AGM for shareholders to approve the payment of four interim dividends in respect of the year. This will give shareholders the opportunity to ratify the dividend policy, if not the payment of the final dividend.  The Board would propose to revert to a pattern of three interims and a final dividend in the next financial year.

In the Annual Report last year we stated that, as a result of reduced exposure in the portfolio to higher yielding, lower growth companies, it was likely that the revenue per share would fall over the coming year. Indeed that is precisely what we have seen, in line with our planning assumptions. However, this strategy should enhance the Company's longer term potential for both faster dividend growth and better capital performance, whilst taking advantage of the flexibility that investment trusts have to utilise revenue reserves. Our distribution policy remains to grow the dividend faster than the rate of inflation over the medium term and, notwithstanding the recent deterioration in the broader outlook for corporate profitability, this remains our aim. We have robust revenue reserves and a flexible investment mandate, both of which are positive, but we are now operating in a more uncertain world.   

Discount

The discount at which the price of the Company's shares trade relative to the NAV narrowed from 9.3 % at the beginning of the year to 3.6 % as at 31 January 2020 (on an cum-income basis with borrowings stated at fair value). Your Company's discount has narrowed significantly relative to its peers: the weighted average discount at which other investment trusts in the UK Equity Income sector trade widened slightly from 3.3% to 3.8% over the same period.

The Company's shares continued to trade at a relatively wide discount for the first few months of the financial year. During this time the Company purchased 105,550 shares to hold in treasury, at a cost of £0.3 million, providing a small accretion to the NAV per share.  

We will again seek shareholders' permission at the forthcoming AGM to buy back shares and are prepared to continue to use this measure in the light of both the Company's absolute level of discount and that relative to those of its peer group.

The Board has consistently stated that the successful implementation by the Investment Manager of the investment strategy would be the key driver of a narrower discount. Notwithstanding the current dislocation in markets, it remains our aspiration to see continuing progress on the rating of the Company's shares.

Gearing

Your Board believes that the sensible use of modest financial gearing, whilst amplifying market movements in the short term, will enhance returns of both capital and income over the long term. We also recognise the benefit that having a reasonable proportion of long-term fixed rate funding provides to managing the Revenue Account, through greater certainty over financing costs. 

The Company currently employs two sources of gearing: the £30 million loan notes maturing in 2045, and a £15 million multi-currency revolving credit facility that expires in July 2021. Under the terms of the facility, the Company has the option to increase the level of the commitment from £15 million to £30 million at any time, subject to the lender's credit approval. A Sterling equivalent of £11.0 million was drawn down at the year end. 

In April, we repaid the £28.6 million debenture on its maturity date and exited from our bond holdings which had been put in place in 2015 to broadly match the value and duration of the debenture. This significantly reduced the headline level of gearing and simplified the asset side of the balance sheet. This marks an important step in reasserting the solidity of the Company's balance sheet.   

With debt valued at par, the Company's net gearing decreased from 16.2% to 5.1% during the year and, on a pure equity basis, after netting off cash and bonds, gearing fell from 8.8% to 4.8%. The Board believes this remains a relatively conservative level of gearing and, with part of the revolving credit facility undrawn, this provides the Company with financial flexibility should opportunities to deploy additional capital arise. 

Board Composition

As previously announced, Christine Montgomery was appointed as an independent non-executive Director on 1 February 2020. Christine has over 30 years of investment management experience, most recently as Head of Global Equities at AustralianSuper in Melbourne from 2016 to 2019. Christine will stand for election at the AGM.

Having served as a Director since February 2011, Catherine Claydon will retire from the Board at the AGM. On behalf of the Board I would like to thank Catherine for her contribution to the Board over this time. 

Annual General Meeting

The Board has been considering how best to deal with the potential impact of the Coronavirus pandemic on arrangements for the Company's upcoming AGM. The Company is required by law to hold an AGM and the Board had been working on the basis that the Company's AGM would be held on 21 May 2020 as previously scheduled.

However, in the light of the Coronavirus pandemic and the developing Government guidance, including the rules on staying at home, social distancing and avoiding public gatherings of more than two people ("Stay at Home Measures"), introduced on 23 March 2020, the Board has decided to delay the holding of the Company's AGM for this year until 16 July 2020. Given the possibility that some measure of restriction on public gatherings and maintaining social distancing will remain in place in July, the Board has also resolved to amend the format of the AGM for this year. Therefore, whilst the formal business of the AGM will be considered, the meeting will be functional only, and will follow the minimum legal requirements for an AGM. There will be no presentation from the investment managers, Ben Ritchie and Louise Kernohan, and no refreshments will be offered. If the Stay at Home Measures remain in place in July, shareholders are strongly discouraged from attending the meeting and indeed entry may be refused if the law and/or Government guidance so requires. In such circumstances, arrangements will be made by the Company to ensure that the minimum number of shareholders required to form a quorum will attend the meeting in order that the meeting may proceed and the business concluded. The Board considers these revised arrangements to be in the best interests of shareholders in the current circumstances.

In light of the developing situation and the revised format of this year's meeting, shareholders are encouraged to raise any questions in advance of the AGM with the Company Secretary at [e-mail] (please include 'DIGIT AGM' in the subject heading). Questions must be received by 5.00pm on 14 July 2020. Any questions received will be replied to by either the Manager or Board via the Company Secretary either before or after the AGM.

In light of the outbreak and evolving Government guidance, the Company will continue to keep arrangements for the AGM under review and it is possible the arrangements will need to change. We will keep shareholders updated of any changes through the Company's website (dunedinincomegrowth.co.uk) and announcements to the London Stock Exchange. We trust that shareholders will be understanding of this approach.

The Board strongly encourages all shareholders to exercise their votes in respect of the meeting in advance by completing the enclosed form of proxy, or letter of direction for those who hold shares through the Aberdeen Standard Investments savings plans. This should ensure that your votes are registered in the event that physical attendance at the AGM is not possible or restricted.

In taking these steps, the Board is trying to balance the requirement under company law to hold an AGM within six months of the Company's year end so that the matters that it needs to seek shareholder approval for can be considered, whilst operating in a rapidly changing environment where public gatherings are restricted. The Board recognises that the AGM is an important occasion where shareholders can meet and question the Manager and the Board and, subject to restrictions being relaxed sufficiently, would propose to organise a separate event later in the year at which shareholders will have the opportunity to attend a presentation by the Manager and to put questions to the Manager and the Board.

Amendments to the Articles of Association

The Board will seek approval from shareholders at the AGM to adopt new Articles of Association (the "New Articles") in order to update the Company's current Articles of Association (the "Existing Articles"). The changes introduced in the New Articles are primarily to reflect changes in law and regulation, and developments in market practice and include enabling the Company to hold virtual and hybrid general meetings (including annual general meetings) in the future.

While the New Articles will allow for general meetings to be held and conducted in such a way that persons who are not present together at the same physical location may attend, speak and vote at the meeting by electronic means, the Directors have no present intention of holding wholly virtual meetings. These provisions will only be used where the Directors consider it is in the best interests of shareholders for a virtual or hybrid meeting to be held. Nothing in the New Articles will prevent the Company from continuing to hold physical general meetings.

Recent Market Moves

Since the Company's year-end, the outbreaks of the Coronavirus around the world have unnerved markets. This has led to significant falls in the value of shares, including those of the Company, reflecting real concern about the disruption to, and lower levels of, economic activity as a result of the Coronavirus and the public health policy responses. These do not in our view undermine the strategy we have implemented in recent years, but clearly point to heightened uncertainty about the future.

The consequences of employees not being able to get to work or of businesses not being able to meet demand for goods and services have already been evidenced in pressures on cash flows and balance sheets, especially for leveraged businesses. In addition, consumer demand is likely to continue to weaken as people are unable to go out and some parts of the economy close down. Historic monetary policy responses aimed at stimulating aggregate demand, and easing liquidity, have already been implemented, even though interest rates were close to zero in many economies. Further policy responses to support business and preserve incomes have been introduced rapidly. The effectiveness of all these measures is hard to gauge, particularly if the social distancing measures, which restrict economic activity, remain in place for a prolonged period.

The UK stockmarket has fallen by approximately 25% since the beginning of 2020 as the impact of the Coronavirus pandemic and the measures to try to control it (whilst taking measures to manage the long-term economic impact) are assessed. Against a backdrop that is significantly more uncertain than at the Company's year end, it is worth restating the Company's investment policy which is to "invest in high quality companies with strong income potential". Our Investment Managers continue to focus on investing in companies with strong balance sheets, good cash flows and sound business models that can deliver good, growing dividends with the prospect of capital growth. Whilst there may be significant volatility ahead, we believe this approach should reward shareholders over the longer term.  

Outlook

The Company has undergone a significant change in its portfolio over the past few years. We believe this leaves us relatively well positioned amidst a very uncertain economic and political environment, and one in which the outlook is increasingly challenging.

As a result of lower levels of activity in significant parts of the global economy, and the total shutdown of other parts, following the actions of governments in many countries to try to control the Coronavirus pandemic, many companies will report much lower profits in the years ahead. As a consequence there is likely to be real pressure on corporate cash flow. We have already seen several UK companies either passing or cutting dividend payments, even after dividends have been declared. For some UK companies, there may be government, social or regulatory pressure to suspend payments to shareholders. For all companies, careful stewardship of cash resources has become significantly more relevant than it was only a month ago. Distributions to equity investors may rank as being comparatively less important for some time. Against this backdrop, the outlook for dividends for many companies is materially less clear, for the next financial year, and possibly longer. 

As an actively managed company with a flexible mandate, we are relatively well placed to identify those companies whose dividends are more secure and whose shares have potential for capital growth. In addition, the Company can use its revenue reserves to supplement the net revenue return in any financial year. It is the Company's objective to grow the dividend in real terms over the medium term and, as we have demonstrated this year, the Board is willing to use the revenue reserve in the achievement of this objective. 

We do not know the length or depth of the downturn in the global economy, and many businesses continue to operate strongly, with robust balance sheets. There will be clear corporate winners and losers as a consequence of the Coronavirus pandemic with business weakness being exposed more rapidly than in the past.  Economic and political conditions are likely to be quite different but, as always after a significant economic dislocation, there will be real opportunities. With a clear strategy and skilful execution, we believe your Company can continue to prosper.

Our ambition remains to be recognised as one of the leading investment trusts in the UK market and to deliver capital and income performance that our shareholders can rely on. We believe we have made a good start on this journey but there is much more to deliver.

David Barron

Chairman

8 April 2020

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Business

The Company is an investment trust with a premium listing on the London Stock Exchange.

Investment Objective

The Company's objective is to achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom. 

Investment Policy

In pursuit of its objective, the Company's investment policy is to invest in high quality companies with strong income potential and providing an above-average portfolio yield. 

Risk Diversification 

The Company maintains a diversified portfolio consisting, substantially, of equity or equity-related securities, and it can invest in other financial instruments. The Company is invested mainly in companies listed or quoted in the United Kingdom and can invest up to 20% of its gross assets overseas.

It is the policy of the Company to invest no more than 15% of its gross assets in other listed investment companies and no more than 15% of its gross assets in any one company.

Gearing

The Board is responsible for determining the gearing strategy for the Company, with day-to-day gearing decisions being made by the Manager within the remit set by the Board. The Board has set its gearing limit at a maximum of 30% of the net asset value at the time of draw down. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent considered appropriate.

Delivering the Investment Objective

The Directors are responsible for determining the Company's investment objective and investment policy. Day-to-day management of the Company's assets has been delegated, via the AIFM, to the Investment Manager.

Investment Process

The Investment Manager believes that company fundamentals ultimately drive stock prices but are often priced inefficiently. They believe that in-depth company research delivers insights that can be used to exploit these market inefficiencies.

Benchmark

The Company's benchmark is the FTSE All-Share Index (total return). Performance is measured on a net asset value total return basis over the long-term.

Promoting the Success of the Company

The Board's statement below describes how the Directors have discharged their duties and responsibilities over the course of the financial year under section 172 (1) of the Companies Act 2006 and how they have promoted the success of the Company. That statement forms part of the Strategic Report. 

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determining the progress of the Company in pursuing its investment policy.  The main KPIs are shown in the table below.

KPI	Description
Performance	The Board considers the Company's NAV total return figures to be the best single indicator of performance over time.
Performance of NAV against benchmark index and  comparable investment trusts	The Board measures the Company's NAV total return performance against the total return of the benchmark index - the FTSE All-Share Index. The Board also monitors performance relative to a peer group of investment trusts which have similar objectives, policies and yield characteristics.
Revenue return per  Ordinary share	The Board monitors the Company's net revenue return.
Dividend per Ordinary share	The Board monitors the Company's annual dividends per Ordinary share.
Share price performance	The Board monitors the performance of the Company's share price on a total return basis.
Discount/premium to NAV	The discount/premium of the share price relative to the NAV per share is monitored by the Board.
Ongoing charges	The Board monitors the Company's operating costs carefully.

 

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has carried out a robust assessment of the Company's principal and emerging risks, which include those that would threaten its business model, future performance, solvency, liquidity or reputation.

The principal risks and uncertainties faced by the Company are reviewed by the Audit Committee in the form of a risk matrix and the Committee also gives consideration to the emerging risks facing the Company. The assessment of risks and their mitigation continues to be an area of significant focus for the Audit Committee.

The principal risks and uncertainties facing the Company at the current time, together with a description of the mitigating actions the Board has taken, are set out in the table below.

The principal risks associated with an investment in the Company's shares are published monthly in the Company's factsheet and they can be found in the pre-investment disclosure document ("PIDD") published by the Manager, both of which are available on the Company's website.

Risk

Mitigating Action

Investment objectives - a lack of demand for the Company's shares due to its objectives becoming unattractive to investors could result in a widening of the discount of the share price to its underlying NAV and a fall in the value of its shares.

Board review. The Board formally reviews the Company's objectives and strategies for achieving them on an annual basis, or more regularly if appropriate. Shareholder communication . The Board is cognisant of the importance of regular communication with shareholders. Directors attend meetings with the Company's largest shareholders and meet other shareholders at the Annual General Meeting. The Board reviews shareholder correspondence and investor relations reports and also receives feedback from the Company's broker. Discount monitoring. The Board, through the Manager, keeps the level of discount under constant review. The Board is responsible for the Company's share buy back policy and is prepared to authorise the use of share buy backs to provide liquidity to the market and try to limit any widening of the discount.

Risk	Mitigating Action
Investment strategies - the Company adopts inappropriate investment strategies in pursuit of its objectives which could result in investors avoiding the Company's shares, leading to a widening of the discount and poor investment performance.	Adherence to investment guidelines. The Board sets investment guidelines and restrictions which the Manager follows, covering matters such as asset allocation, diversification, gearing, currency exposure, use of derivatives etc. These guidelines are reviewed regularly and the Manager reports on compliance with them at Board meetings. In order to ensure adequate diversification, the Board has set absolute limits on maximum holdings and exposures in the portfolio at the time of investment, which are in addition to the limits contained in the Company's investment policy, including the following: · No more than 10% of gross assets to be invested in any single stock; and · The top five holdings should not account for more than 40% of gross assets. Regular shareholder communication and discount monitoring, as above.
Investment performance - the appointment or continuing appointment of an investment manager with inadequate resources, skills or expertise or which makes poor investment decisions. This could result in poor investment performance, a loss of value for shareholders and a widening discount.	Monitoring of performance. The Board meets the Manager on a regular basis and keeps under close review (inter alia) its resources, adherence to investment processes, the adequacy of risk controls, and investment performance. Management Engagement Committee. A detailed formal appraisal of the Manager is carried out annually by the Management Engagement Committee.
Income/dividends - the Company adopts an unsustainable dividend policy resulting in cuts to or suspension of dividends to shareholders, or one which fails to meet investor demands.	Revenue forecasting and monitoring. The Manager presents detailed forecasts of income and expenditure covering both the current and subsequent financial years at Board meetings. Dividend income received is compared to forecasts and variances analysed. Use of reserves. The Company has built up significant revenue reserves which are available to smooth dividend distributions to shareholders should there be a shortfall in revenue returns.
Financial/market - insufficient oversight or controls over financial risks, including market risk, foreign currency risk, liquidity risk and credit risk could result in losses to the Company.	Management controls . The Manager has a range of procedures and controls relating to the Company's financial instruments, including a review of investment risk parameters by its Investment Risk department and a review of credit worthiness of counterparties by its Counterparty Credit Risk team.  Foreign currency hedging. It is not the Company's policy to hedge foreign currency exposure but the Company may, from time to time, partially mitigate it by drawing down borrowings in foreign currencies. Board review. As stated above, the Board sets investment guidelines and restrictions which are reviewed regularly and the Manager reports on compliance with them at Board meetings. Further details of the Company's financial instruments and risk management are included in note 19 to the financial statements.

Risk	Mitigating Action
Gearing - gearing accentuates the effect of rises or falls in the market value of the Company's investment portfolio on its NAV. An inappropriate level of gearing at a time of falling values could result in a significant fall in the value of the Company's net assets and share price. Such a fall in the value of the Company's net assets could result in a breach of loan covenants and trigger demands for early repayment or require investments to be sold to meet any shortfall. This could result in further losses.	Gearing restrictions . The Board sets gearing limits within which the Manager can operate. Monitoring. Both the limits and actual levels of gearing are monitored on an ongoing basis by the Manager and at regular Board meetings. In the event of a possible impending covenant breach, appropriate action would be taken to reduce borrowing levels. Scrutiny of loan agreements . The Board takes advice from the Manager and the Company's lawyers before approving details of loan agreements. Care is taken to ensure that covenants are appropriate and unlikely to be breached. Limits on derivative exposure. The Board has set limits on derivative exposures and positions are monitored at regular Board meetings.
Regulatory - changes to, or failure to comply with, relevant regulations (including the Companies Act, The Financial Services and Markets Act, The Alternative Investment Fund Managers Directive, accounting standards, investment trust regulations, the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules) could result in fines, loss of reputation, reduced demand for the Company's shares and potentially loss of an advantageous tax regime.	Board awareness. The Directors have an awareness of the more important regulations and are provided with information on changes by the Association of Investment Companies. In terms of day to day compliance with regulations, the Board is reliant on the knowledge and expertise of the Manager. However, where necessary, the Board engages the service of external advisers.  Management controls. The Manager's company secretariat and accounting teams use checklists to aid compliance and these are backed by the Manager's compliance monitoring programme and risk based internal audit investigations.
Operational - the Company is reliant on services provided by third parties (in particular those of the Manager and the Depositary) and any control gaps and failures in their operations could expose the Company to loss or damage.	Agreements. Written agreements are in place defining the roles and responsibilities of all third party service providers. Internal control systems of the Manager . The Board receives reports on the operation and efficacy of the Manager's IT and control systems, including those relating to cyber crime, and its internal audit and compliance functions. These have been supplemented by regular and frequent updates on the implications for the Manager's operations of the Coronavirus pandemic. Safekeeping of assets . The Depositary is ultimately responsible for the safekeeping of the Company's assets and its records are reconciled to those of the Manager on a regular basis.  Through a delegation by the Depositary, the Company's investments and cash balances are held in segregated accounts by the Custodian.  Monitoring of other third party service providers . The Manager monitors closely the control environments and quality of services provided by third parties, including those of the Depositary. This includes controls relating to cyber crime and is conducted through service level agreements, regular meetings and key performance indicators. The Directors review reports on the Manager's monitoring of third party service providers on a periodic basis.

In addition to the risks stated in the table above, the Board is conscious of the impact on financial markets since the end of the financial year caused by the outbreak of the Coronavirus around the world. The Board is also conscious of the ongoing negotiations regarding the UK's departure from the EU. The Board considers that each of these issues are emerging risks that could have further implications for financial markets or on the operating environment of the Company.

Promotional Activities

The Board recognises the importance of promoting the Company to existing and prospective investors. The Board believes an effective way to achieve this is through subscription to and participation in the promotional programme run by the Manager on behalf of a number of investment trusts under its management. The Company's financial contribution to the programme is matched by the Manager. The Manager's marketing and investor relations teams report to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make up of that register.

The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of the Company is key and therefore the Company also supports the Manager's investor relations programme which involves regional roadshows, promotional and public relations campaigns. 

Board Diversity Policy

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow it to fulfil its obligations. The Board also recognises the benefits and is supportive of the principle of diversity in its recruitment of new Board members. The Board will not display any bias for age, gender, race, sexual orientation, religion, ethnic or national origins, or disability in considering the appointment of its Directors. In view of its size, the Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment and the Board does not therefore consider it appropriate to set measurable objectives in relation to its diversity. 

At 31 January 2020, there were three male and two female Directors on the Board.

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated the day to day management and administrative functions to the Manager. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is set out below.

Modern Slavery Act

Due to the nature of its business, being a company that does not offer goods and services to customers, the Board considers that the Company is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Environmental, Social and Governance ("ESG") Factors

The Investment Manager considers social, environmental and governance factors which may affect the performance or value of the Company's investments as part of its investment process. Each company under the Investment Manager's research coverage is scored on ESG factors by both the investment team and the central ESG function, comprising more than 50 ESG specialists around the world. ESG considerations are therefore embedded in the Investment Manager's investment activities within a disciplined framework.

The Investment Manager works actively with companies, through engagement and exercising voting rights, to improve their corporate standards, transparency and accountability. The Investment Manager also engages with governments, industry bodies and NGOs (non-governmental organisations).

The Board believes it is important to consider ESG matters which can materially impact corporate performance and understands there are significant risks associated with investments in companies which fail to conduct business in a socially responsible manner. The Company's investment mandate includes no ESG-related investment restrictions.

The UK Stewardship Code and Proxy Voting

The Company supports the UK's Stewardship Code, and seeks to play its role in supporting good stewardship of the companies in which it invests. Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager.

The full text of the Company's response to the Stewardship Code may be found on its website.

The Board has also given discretionary powers to the Manager to exercise voting rights on resolutions proposed by the investee companies within the Company's portfolio.  The Manager reports on a quarterly basis on stewardship (including voting) issues. 

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Viability Statement

The Board considers that the Company, which does not have a fixed life, is a long term investment vehicle and, for the purposes of this statement, has decided that five years is an appropriate period over which to consider its viability. The Board considers that this period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than five years.

Taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of five years from the date of this Report.

In assessing the viability of the Company over the review period, the Directors have focused upon the following factors:

-  The principal risks and uncertainties detailed above and the steps taken to mitigate these risks.

-  The relevance of the Company's investment objective, especially in the current low yield environment.

-  The Company is invested in readily-realisable listed securities.

-  Share buy backs carried out in the past have not resulted in significant reductions to the capital of the Company.

-  Although the Company's stated investment policy contains a maximum gearing limit of 30% of the net asset value at the time of draw down, the Board's policy is to have a relatively modest level of equity gearing and the financial covenants attached to the Company's borrowings provide for significant headroom.

-  Current market conditions caused by the global spread of the Coronavirus.

In making its assessment, the Board is also aware that there are other matters that could have an impact on the Company's prospects or viability in the future, including a greater than anticipated economic impact of the spread of the Coronavirus, economic shocks or significant stock market volatility caused by other factors, and changes in regulation or investor sentiment.

Outlook

The Board's view on the general outlook for the Company can be found in the Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included in its statement.

On behalf of the Board

David Barron

Chairman

8 April 2020

STRATEGIC REPORT - PROMOTING THE SUCCESS OF THE COMPANY

 

How the Board Meets its Obligations under Section 172 of the Companies Act

The Board is required to describe to the Company's shareholders how the Directors have discharged their duties and responsibilities over the course of the financial year under section 172 (1) of the Companies Act 2006 (the "Section 172 Statement").  This provides an explanation of how the Directors have promoted the success of the Company for the benefit of its members as a whole, taking into account the likely long term consequences of decisions, the need to foster relationships with all stakeholders and the impact of the Company's operations on the environment.

The Purpose of the Company and Role of the Board

The purpose of the Company is to act as a vehicle to provide, over time, financial returns (both income and capital) to its shareholders. Investment trusts, such as the Company, are long-term investment vehicles and are typically externally managed, have no employees, and are overseen by an independent non-executive board of directors.

The Board, which during the year comprised five independent non-executive Directors with a broad range of skills and experience across all major functions that affect the Company, retains responsibility for taking all decisions relating to the Company's investment objective and policy, gearing, corporate governance and strategy, and for monitoring the performance of the Company's service providers.

The Board's philosophy is that the Company should operate in a transparent culture where all parties are provided with respect as well as the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike.  The Board reviews the culture and manner in which the Manager operates at its regular meetings and receives regular reporting and feedback from the other key service providers. 

The Company's main stakeholders are Shareholders, the Manager, Investee Companies, Service Providers, Debt Providers and the Environment and Community.

How the Board Engages with Stakeholders

The Board considers its stakeholders at Board meetings and receives feedback on the Manager's interactions with them.

Stakeholder	How We Engage
Shareholders	Shareholders are key stakeholders and the Board places great importance on communication with them. The Board welcomes all shareholders' views and aims to act fairly between all shareholders. The Manager and Company's broker regularly meet with current and prospective shareholders to discuss performance and shareholder feedback is discussed by the Directors at Board meetings. In addition, Directors attend meetings with the Company's largest shareholders and meet other shareholders at the Annual General Meeting. Regular updates are provided to shareholders through the Annual Report, Half Yearly Report, monthly factsheets, company announcements, including daily net asset value announcements, and the Company's website. The Company's Annual General Meeting provides a forum, both formal and informal, for shareholders to meet and discuss issues with the Directors and Manager. The Board encourages as many shareholders as possible to attend the Company's Annual General and to provide feedback on the Company.
Manager	The Investment Manager's Review details the key investment decisions taken during the year. The Investment Manager has continued to manage the Company's assets in accordance with the mandate provided by shareholders, with the oversight of the Board. The Board regularly reviews the Company's performance against its investment objective and the Board undertakes an annual strategy review meeting to ensure that the Company is positioned well for the future delivery of its objective for its stakeholders. The Board receives presentations from the Investment Manager at every Board meeting to help it to exercise effective oversight of the Investment Manager and the Company's strategy. The Board, through the Management Engagement Committee, formally reviews the performance of the Manager at least annually.
Investee Companies	Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager. The Board has also given discretionary powers to the Manager to exercise voting rights on resolutions proposed by the investee companies within the Company's portfolio.  The Manager reports on a quarterly basis on stewardship (including voting) issues.  Through engagement and exercising voting rights, the Investment Manager actively works with companies to improve corporate standards, transparency and accountability.
Service Providers	The Board seeks to maintain constructive relationships with the Company's suppliers either directly or through the Manager with regular communications and meetings. The Management Engagement Committee conducts an annual review of the performance, terms and conditions of the Company's main service providers to ensure they are performing in line with Board expectations and providing value for money.
Debt Providers	On behalf of the Board, the Manager maintains a positive working relationship with Scotiabank, the provider of the Company's multi-currency loan facility, and provides regular updates on business activity and compliance with its loan covenants. The Manager also provides regular covenant compliance certificates to the holders of the Company's £30 million Loan Notes.
Environment and Community	The Board and Manager are committed to investing in a responsible manner and the Investment Manager embeds Environmental, Social and Governance ("ESG") considerations into the research and analysis as part of the investment decision-making process.

Specific Examples of Stakeholder Consideration During the Year

While the importance of giving due consideration to the Company's stakeholders is not a new requirement, and is considered during every Board decision, the Directors were particularly mindful of stakeholder considerations during the following decisions undertaken during the year ended 31 January 2020.

Portfolio

The Investment Manager's Review details the key investment decisions taken during the year. The Investment Manager has continued to execute its strategy of reducing the Company's dependence on higher yielding, lower growth companies. This strategy should enhance the Company's longer term potential for faster dividend growth and better capital performance.

In addition, at its annual Strategy Review Meeting, the Board considered in detail how the Investment Manager incorporates Environmental, Social and Governance ("ESG") issues into its  research and analysis work that forms part of the investment decision process.

 

Dividend

Following the payment of the fourth interim dividend for the year, of 3.7p per Ordinary share, total dividends for the year will amount to 12.7p per Ordinary share. This represents an increase of 2.0% compared to the previous year and compares to the rate of inflation of 1.8% as measured by the Consumer Prices Index.  This will be the 36^th year out of the past 40 that the Company has grown its dividend, and is in accordance with its policy to grow total annual dividends in real terms over the medium term. 

 

Share Buy Backs

During the year the Company bought back 105,550 Ordinary shares to be held in treasury, providing a small accretion to the NAV per share and a degree of liquidity to the market at times when the discount to the NAV per share has widened in normal market conditions. It is the view of the Board that this policy is in the interest of all shareholders. 

 

Directorate

The Board has continued to progress its succession plans during the year resulting in the decision to appoint Christine Montgomery as an independent non-executive Director on 1 February 2020. Further details are provided in the Chairman's Statement. Shareholders' interests are best served by ensuring a smooth and orderly refreshment of the Board which serves to provide continuity and maintain the Board's open and collegiate style.

STRATEGIC REPORT - RESULTS

FINANCIAL HIGHLIGHTS

	31 January 2020	31 January 2019	% change
Total assets	£510,537,000	£471,480,000	+8.28
Equity shareholders' funds	£469,806,000	£401,731,000	+16.95
Market capitalisation	£446,043,000	£358,868,000	+24.29
Net asset value per Ordinary share	317.04p	270.90p	+17.03
Net asset value per Ordinary share with debt at fair value A	312.22p	263.83p	+18.34
Share price (mid)	301.00p	242.00p	+24.38
FTSE All-Share Index	4,057.47	3,825.62	+6.06
Discount (difference between share price and net asset value)
Discount where borrowings are deducted at fair value A	(3.59)%	(9.31)%
Gearing
Net gearing A	5.08%	16.21%
Equity gearing A	4.75%	8.81%
Dividends and earnings
Total return per share	58.57p	(11.95p)
Revenue return per share	12.08p	12.68p	-4.73
Total dividend per share for the year	12.70p	12.45p	+2.01
Dividend cover A	0.95	1.02
Revenue reserves
Prior to payment of third and fourth interim dividends B	17.64p	17.99p
After payment of third and fourth interim dividends B C	10.94p	11.54p
Operating costs
Ongoing charges A	0.59%	0.63%
A   Considered to be an Alternative Performance Measure
B   Calculated by dividing the revenue reserve per the Statement of Financial Position by the number of shares in issue at the reporting date per note 14
C   Third interim dividend for the year ended 31 January 2020 of 3.00p per share (2019 - 3.00p). Fourth interim dividend for the year ended 31 January 2020 of 3.70p per share (2019 - final dividend of 3.45p). See note 16 for further details.

PERFORMANCE

	% return	% return	% return
Total return (Capital return plus net dividends reinvested)
Net asset value A B	+22.2%	+31.6%	+38.8%
Share price B	+28.8%	+42.7%	+43.7%
FTSE All-Share Index	+10.7%	+18.4%	+35.6%
Capital return
Net asset value A	+18.3%	+15.5%	+11.6%
Share price	+24.4%	+23.6%	+13.2%
FTSE All-Share Index	+6.1%	+5.2%	+12.0%
A Cum-income NAV with debt at fair value.
B Considered to be an Alternative Performance Measure
Source: Standard Life Aberdeen, Factset & Morningstar

TEN YEAR FINANCIAL RECORD

Year ended 31 January	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Total revenue (£'000)	16,904	19,173	18,866	20,750	20,994	20,359	21,963	22,317	22,263	20,518
	_____	_____	_____	_____	_____	_____	_____	_____	_____	_____
Per share (p)
Revenue return	10.15	11.00	10.77	11.89	11.90	12.11	12.55	12.64	12.68	12.08
Dividends paid/proposed	10.25	10.65	10.75	11.10	11.25	11.40	11.70	12.10	12.45	12.70
Revenue reserve A	7.06	7.42	7.45	8.22	8.89	9.63	10.51	11.16	11.54	10.94
Net asset value B	226.81	222.88	251.48	262.34	279.66	237.48	270.34	290.57	266.83	312.22
Total return	39.00	6.50	41.30	22.24	27.76	(28.94)	43.83	30.83	(11.95)	58.57
	_____	_____	_____	_____	_____	_____	_____	_____	_____	_____
Shareholders' funds (£'000)	346,927	341,280	385,605	403,526	428,702	368,041	415,810	442,384	401,731	469,806
	_____	_____	_____	_____	_____	_____	_____	_____	_____	_____
A After payment of third interim and fourth interim dividends (see note 16 for further details).
B With debt at fair value.

DIVIDENDS

Dividend per share	Rate	xd date	Record date	Payment date
Fourth interim dividend 2020	3.70p	7 May 2020	11 May 2020	29 May 2020
Third interim dividend 2020	3.00p	6 February 2020	7 February 2020	28 February 2020
Second interim dividend 2020	3.00p	7 November 2019	8 November 2019	29 November 2019
First interim dividend 2020	3.00p	1 August 2019	2 August 2019	23 August 2019
	_____
Total dividend 2020	12.70p
	_____
Dividend per share	Rate	xd date	Record date	Payment date
Final dividend 2019	3.45p	2 May 2019	3 May 2019	29 May 2019
Third interim dividend 2019	3.00p	31 January 2019	1 February 2019	22 February 2019
Second interim dividend 2019	3.00p	1 November 2018	2 November 2018	23 November 2018
First interim dividend 2019	3.00p	2 August 2018	3 August 2018	24 August 2018
	_____
Total dividend 2019	12.45p
	_____

STRATEGIC REPORT - INVESTMENT MANAGER'S REVIEW

Introduction

We are pleased to have delivered another year of progress for your company. You will recall from our previous reports that, over the past three and a half years, we have looked to increase the focus on growth of both capital and income and to differentiate the Company in what is a highly competitive sector. We are pleased that this strategy is producing tangible results, with continued positive relative performance whilst also improving both the underlying quality of the portfolio and its income growth potential.

Market Background

The year under review was surprisingly strong for equity markets given a generally weakening backdrop for the global economy. Investors continued to place more store in the prospect of lower interest rates for longer, with most major global central banks loosening monetary policy, than in the outlook for corporate earnings which remains challenging. In the latter part of the year, investors were also cheered by a phase one trade agreement between The United States and China and the agreement of withdrawal terms between the UK and the EU. Both deals helped to reduce areas of market uncertainty. Within the UK market we saw a significant outperformance from the mid-cap part of the market and in particular those companies more exposed to the domestic economy. 

Despite the recovery in equity markets, the global economic picture looked very similar to that which we commented on last year. In general terms, conditions deteriorated over the course of 2019. In particular, China continued to slow due to the impact of both domestic policies and the uncertainty caused by ongoing trade disputes. This in turn had a continued knock on effect on the European economy with export related growth declining sharply. While the US economy remained relatively strong, even there the signs were that growth was cooling as the impact of President Donald Trump's 2017 tax cuts faded.  

Meanwhile, the UK economy continued to prove relatively resilient despite the ongoing political travails and the uncertainty posed by withdrawal from the EU. Employment data remained strong and we started to see signs of higher rates of income growth. The election of a government with a substantial majority and the agreement of a withdrawal deal from the EU helped to boost corporate confidence. However, uncertainty over the shape of Britain's trading relationship with both the EU and rest of the world is likely to persist for some considerable time, as will the impact of the Coronavirus. 

Performance

From a relative return perspective the portfolio outperformed the FTSE All-Share Index by 9.8%, producing a total return of 20.5% against a 10.7% return for the benchmark. This level of outperformance was greater than we would normally expect against such a strong market given our relatively defensive positioning. However, it was simply driven by a combination of a good number of companies in the portfolio showing very strong performance and a lack of significant underperformers to offset this. In addition, our underweight exposure to the oil and gas sector was a tailwind as the sector underperformed.

In terms of income performance it was a sound year against the context of our reorientation of the portfolio over the past few years. Total income declined by 7.8% compared to the previous year which was in line with our expectations. It is once again important to stress that maximisation of income in the near term has not been a priority as we have reduced holdings in higher yielding businesses, cutting near term earnings in order to increase investments in lower yielding but faster growing companies. Option writing contributed 7.8% of the total income for the year with higher levels of volatility and a desire to implement more strategic changes continuing to present opportunities to generate option premium.  The Company benefited from a number of holdings paying dividends that exceeded our expectations, for example Aveva, Marshalls, Countryside Properties, BHP Group and Rio Tinto alongside an additional special dividend from Rio Tinto . This was partly offset by Vodafone's dividend reduction, which we had thought likely to happen. Overall, despite selling down some of our higher yielding names which has reduced the level of total income generated, we continue to generate a healthy amount of income and the dividend of the Company is well underpinned by revenue reserves. We expect to rebuild dividend cover over the upcoming years driven by the underlying income growth of the holdings.

Notable outperformers during the year included Countryside Properties which delivered strong operational results and benefited from a more supportive trading environment for UK housebuilders with the easing of political uncertainty in the second half of the year. Aveva, which specialises in design software for large capital projects, saw strong demand from customers looking to digitise their workflow and continued to benefit from the merger with Schneider Software. Assura's   share price performed strongly, with the market rewarding it for the attractions of its long duration leases with effective government backing, augmented by the favourable dynamics of the primary healthcare sector. Our underweight position in oil and gas, which helped performance, is driven by the lack of dividend growth from these companies and the relatively capital intensive and cyclical nature of the industry. Given high yields, we retain some exposure to both Total and Royal Dutch Shell but, considering our strategy, this area is likely to remain a modest weighting relative to the large benchmark exposure. Once again, performance was enhanced by the overseas holdings which made a further useful contribution to performance. Notable contributors included French food voucher company Edenred, Italian hearing aid retailer Amplifon and Danish pharmaceutical Novo-Nordisk .

Portfolio Activity

It was another relatively busy year for portfolio activity as we continued to upgrade the holdings in terms of quality and growth prospects and this is reflected in further improved returns and stronger balance sheets in aggregate. Market volatility, combined with new investment ideas coming to the fore from our 16-strong UK Equity team, have provided opportunities to find investment ideas that enhance the portfolio at attractive valuations, although activity is quietening somewhat from the previous two and a half years given that our positioning is now closer to where we ultimately want to be.

We introduced a number of new holdings into the portfolio. We gave details in the Half Yearly Report of the five companies we introduced in the first half of the year, which were ASML, Mowi, Sirius Real Estate, Smith & Nephew and WH Smith. Each of these businesses offer resilient growth prospects and, importantly, add further differentiated exposure to the portfolio. In addition, these companies sit well with our investment process where we have a well-resourced team investing the time to uncover and research investment ideas that often go unnoticed by others. In the second half of the year we added three additional new holdings which also share these desirable characteristics: AstraZeneca, Games Workshop   and Ubisoft.

In AstraZeneca , we are attracted by the strong performance of its newly launched drugs, the strength of its pipeline and the upcoming inflection point in cash generation with a return to a growing dividend looking likely in the foreseeable future. Games Workshop   has a strong business model in an attractive niche with loyal customers and attractive financial characteristics that can be seen through high margins, returns and cash conversion. It has significant growth opportunity as it continues to expand internationally and offers the security of a net cash balance sheet with attractive prospects for growth of both capital and income. Ubisoft is a French-listed computer games publisher that owns the rights to a number of leading game franchises as well as its own production studios. A recent disappointing product launch gave the opportunity to buy into a strong long-term prospect at an attractive price.

We also added capital selectively to existing positions. For example, we topped up the holdings of Euromoney, Chesnara, Close Brothers, Prudential   and Heineken   on relative share price weakness. In addition we participated in a share placing for WH Smith   that accompanied its purchase of North American travel retailer Marshall Retail.

To fund these purchases we exited a number of holdings. We detailed the rationales behind our exiting of Vodafone , Brunello Cucinelli, Ultra Electronics and Unibail Rodamco Westfield   at the interim stage. In the second half of the year we further exited GrandVision, Hansteen, Just Eat, Kone, Rentokil and Spirax Sarco.

We exited our long standing position in industrial commercial property owner Hansteen   following an agreed bid from Blackstone. This has been a great store of value for the Company over the years, delivering substantial dividends and capital returns in a low risk and dependable way. With Just Eat,   the prospect of a dividend was looking unlikely meaning that it no longer met our original investment case, so with it trading at a healthy premium to the cash offer from Prosus we decided to exit the small position we held. Kone, Rentokil and Spirax Sarco are each fantastic businesses executing their strategies well, however very strong performances had stretched their valuations beyond our comfort zone so we decided to exit.

Corporate Engagement

A central part of the responsibility of share ownership is corporate stewardship and engagement. Addressing the governance and risk controls of the companies we hold is an aspect of investing that we embrace at Aberdeen Standard Investments and it aligns well with our long term investment horizon. The investment team takes full responsibility with dedicated on-desk resource and helped by expert advisers within the organisation. In addition to the hundreds of meetings each year with executive teams, we frequently engage with non-executive board members, risk officers and other relevant personnel from the companies in which we invest.

Environmental, Social and Governance ("ESG") analysis is embedded in our day to day investment process and is the responsibility of the investment team as opposed to sitting in a separate unit.  Our assessment of a company's strength in managing its environmental and social impact is incorporated into our assessment of company quality and, as a result, we only invest in companies that rate highly in this respect. This means we have an equivalent focus on these matters to that which we have long applied to other aspects of company quality. We are increasingly finding that companies which manage these issues well and place high importance on their environmental impact and responsible business practices are those that are setting themselves up best to produce positive long term financial results.

Outlook

Looking ahead, as we write this, the outlook is particularly uncertain with the Coronavirus dominating news headlines and concern over the extent of the economic impact has caused a sharp correction in equities. With such buoyant equity markets in 2019 leading to relatively full valuations against a backdrop of weak economic conditions across much of the world, it is perhaps not too surprising that equities have found themselves vulnerable. With the length and depth of the impact still an unknown, but with central banks cutting rates and potential Global stimulus measures, it is particularly difficult to take a directional view as to how equity markets will develop in the near term.

However, what we do have confidence in is that your company is well positioned against this uncertain backdrop, with a low level of gearing, substantial revenue reserves and a positive outlook for underlying earnings evolution. We remain committed to a long term perspective, where we focus on holding high quality businesses whose market positions, competitive advantages, growth prospects and balance sheets allow them the best opportunity to prosper despite more challenging market conditions. We expect that continued market volatility will provide us with opportunities to find investment ideas that will further enhance the portfolio at attractive valuations.

Ben Ritchie and Louise Kernohan

Aberdeen Asset Managers Limited

8 April 2020

DIRECTORS' REPORT (EXTRACT)

The Directors present their report and the audited financial statements for the year ended 31 January 2020.

Results and Dividends

The financial statements for the year ended 31 January 2020 are contained below. First, second and third interim dividends, each of 3.0p per Ordinary share, were paid on 23 August 2019, 29 November 2019 and 28 February 2020 respectively. The Directors have declared a fourth interim dividend of 3.7p per Ordinary share, payable on 29 May 2020 to shareholders on the register on 11 May 2020. The ex-dividend date is 7 May 2020. As explained in the Chairman's Statement, the Board has this year decided to declare a fourth interim dividend instead of proposing a final dividend for approval by shareholders. The Board will put a resolution to shareholders at the Annual General Meeting for shareholders to approve the payment of four interim dividends in respect of the year.

Investment Trust Status

The Company is registered as a public limited company (registered in Scotland No. SC000881) and is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company has been approved by HM Revenue & Customs as an investment trust subject to it continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 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 2020 so as to enable it to comply with the ongoing requirements for investment trust status.

Individual Savings Accounts

The Company has conducted its affairs in such a way as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.

Capital Structure

The issued Ordinary share capital at 31 January 2020 consisted of 148,187,119 Ordinary shares of 25p and 5,490,816 Ordinary shares held in treasury. During the year, the Company purchased 105,550 Ordinary shares to be held in treasury. There have no share buy backs since the end of the year.

Voting Rights

Each Ordinary share holds one voting right and shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares, excluding treasury shares, carry a right to receive dividends.  On a winding up or other return of capital, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

There are no restrictions on the transfer of Ordinary shares in the Company other than certain restrictions which may from time to time be imposed by law.

Management Agreement

The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML"), a wholly owned subsidiary of Standard Life Aberdeen plc, as its alternative investment fund manager. ASFML has been appointed to provide investment management, risk management, administration and company secretarial services and promotional activities to the Company. The Company's portfolio is managed by Aberdeen Asset Managers Limited ("AAML") by way of a group delegation agreement in place between ASFML and AAML.  In addition, ASFML has sub-delegated administrative and secretarial services to Aberdeen Asset Management PLC and promotional activities to AAML. Details of the management fees and fees payable for promotional activities are shown in notes 4 and 5 to the financial statements.

The management agreement is terminable on not less than six months' notice. In the event of termination by the Company on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period.

Substantial Interests

As at 31 January 2020, the following interests in the issued Ordinary share capital of the Company had been disclosed in accordance with the requirements of the FCA's Disclosure Guidance and Transparency Rules:

Shareholder	Number of shares held	% heldB
Aberdeen Asset Managers Limited Retail PlansA	34,853,628	23.5
1607 Capital Partners, LLC	16,279,307	11.0

^A   Non-beneficial interest

^B   Based on 148,187,119 Ordinary shares in issue as at 31 January 2020

There have been no changes notified to the Company as at the date of approval of this Report.

 

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code as published in July 2018 (the "UK Code"),  which is available on the Financial Reporting Council's (the "FRC") website: frc.org.uk .

The Board has also considered the principles and provisions of the AIC Code of Corporate Governance as published in February 2019 (the "AIC Code").  The AIC Code addresses the principles and provisions set out in the UK Code, as well as setting out additional provisions on issues that are of specific relevance to the Company. The AIC Code is available on the AIC's website: theaic.co.uk.

The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the FRC, provides more relevant information to shareholders.

The Board confirms that, during the year, the Company complied with the principles and provisions of the AIC Code and the relevant provisions of the UK Code, except as set out below.

The UK Code includes provisions relating to:

-  interaction with the workforce (provisions 2, 5 and 6); 

-  the role and responsibility of the chief executive (provisions 9 and 14);

-  previous experience of the chairman of a remuneration committee (provision 32); and

-  executive directors' remuneration (provisions 33 and 36 to 40).

The Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. 

The full text of the Company's Corporate Governance Statement can be found on its website.

 

Directors

Throughout the year, the Board comprised five non-executive Directors, each of which is considered by the Board to be independent of the Company and the Manager. David Barron is the Chairman and Catherine Claydon is the Senior Independent Director.

The Directors attended scheduled Board and Committee meetings during the year ended 31 January 2020 as follows (with their eligibility to attend the relevant meetings in brackets):

	Scheduled Board Meetings	Audit Committee  Meetings	Management Engagement Committee Meetings	Nomination and Remuneration Committee Meetings
David Barron	5 (5)	2 (2)	1 (1)	2 (2)
Catherine Claydon	5 (5)	2 (2)	1 (1)	2 (2)
Jasper Judd	5 (5)	2 (2)	1 (1)	2 (2)
Elisabeth Scott	5 (5)	2 (2)	1 (1)	2 (2)
Howard Williams	5 (5)	2 (2)	1 (1)	2 (2)

The Board meets more frequently when business needs require.

Under the terms of the Company's Articles of Association, Directors are subject to election at the first Annual General Meeting after their appointment and are required to retire and be subject to re-election at least every three years thereafter. However, the Board has decided that all Directors will retire annually.

Jasper Judd, Elisabeth Scott, Howard Williams and David Barron will retire at the Annual General Meeting and, being eligible, offer themselves for re-election.  As explained in more detail in the Chairman's Statement, Catherine Claydon will retire at the Annual General Meeting and will not seek re-election.

The Board believes that all the Directors seeking re-election remain independent of the Manager and free from any relationship which could materially interfere with the exercise of their judgement on issues of strategy, performance, resources and standards of conduct. The Board believes that each Director has the requisite high level and range of business, investment and financial experience which enables the Board to provide clear and effective leadership and proper governance of the Company. Following formal performance evaluations, each Director's performance continues to be effective and demonstrates commitment to the role, and their individual performances contribute to the long-term sustainable success of the Company. The Board therefore recommends the re-election of each of the Directors at the Annual General Meeting.

As explained in the Chairman's Statement, Christine Montgomery was appointed as an independent non-executive Director on 1 February 2020. Ms Montgomery will stand for election at the Annual General Meeting. 

Board's Policy on Tenure

In normal circumstances, it is the Board's expectation that Directors will not serve beyond the Annual General Meeting following the ninth anniversary of their appointment. However, the Board takes the view that independence of individual Directors is not necessarily compromised by length of tenure on the Board and that continuity and experience can add significantly to the Board's strength. The Board believes that recommendation for re-election should be on an individual basis following a rigorous review which assesses the contribution made by the Director concerned, but also taking into account the need for managed succession and diversity. 

It is the Board's policy that the Chairman of the Board will not serve as a Director beyond the Annual General Meeting following the ninth anniversary of his appointment to the Board. However, this may be extended in exceptional circumstances or to facilitate effective succession planning and the development of a diverse Board. In such a situation the reasons for the extension will be fully explained to shareholders and a timetable for the departure of the Chairman clearly set out.

The Role of the Chairman and Senior Independent Director

The Chairman is responsible for providing effective leadership to the Board, by setting the tone of the Company, demonstrating objective judgement and promoting a culture of openness and debate. The Chairman facilitates the effective contribution and encourages active engagement by each Director. In conjunction with the Company Secretary, the Chairman ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chairman acts upon the results of the Board evaluation process by recognising strengths and addressing any weaknesses and also ensures that the Board engages with major shareholders and that all Directors understand shareholder views.

The Senior Independent Director acts as a sounding board for the Chairman and acts as an intermediary for other directors, when necessary. Working closely with the Nomination and Remuneration Committee, the Senior Independent Director takes responsibility for an orderly succession process for the Chairman, and leads the annual appraisal of the Chairman's performance. The Senior Independent Director is also available to shareholders to discuss any concerns they may have.

Directors' and Officers' Liability Insurance

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. Each Director is entitled to be indemnified out of the assets of the Company to the extent permitted by law against any loss or liability incurred by him or her in the execution of his or her duties in relation to the affairs of the Company.  These rights are included in the Articles of Association of the Company.

Management of Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, each Director prepares a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his or her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his or her wider duties is affected. Each Director is required to notify the Company Secretary of any potential, or actual, conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

No Director has a service contract with the Company although all Directors are issued with letters of appointment. There were no contracts during, or at the end of the year, in which any Director was interested.

The Company has a policy of conducting its business in an honest and ethical manner. The Company takes a zero-tolerance approach to bribery and corruption and has procedures in place that are proportionate to the Company's circumstances to prevent them. The Manager also adopts a group-wide zero-tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption. Copies of the Manager's anti-bribery and corruption policies are available on its website.

In relation to the corporate offence of failing to prevent tax evasion, it is the Company's policy to conduct all business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion whether under UK law or under the law of any foreign country and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships.

Going Concern

The Company's assets consist mainly of equity shares in companies listed on the London Stock Exchange and in most circumstances, including in the current market environment, are considered to be realisable within a short timescale.  The Board has set limits for borrowing and derivative contract positions and regularly reviews actual exposures, cash flow projections and compliance with loan covenants. 

Having given careful consideration to market developments since the end of the financial year, the Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of this Report. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Accountability and Audit

Each Director confirms that, so far as he or she is aware, there is no relevant audit information of which the Company's auditor is unaware, and they have taken all the steps that they could reasonably be expected to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Independent Auditor

The Company's auditor, Deloitte LLP, has indicated its willingness to remain in office. The Board will propose resolutions at the Annual General Meeting to appoint Deloitte LLP as auditor for the ensuing year and to authorise the Directors to determine its remuneration.

Relations with Shareholders

The Directors place a great deal of importance on communications with shareholders. Shareholders and investors may obtain up to date information on the Company through its website and the Manager's information service.

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the management group (including the Company Secretary or the Manager) in situations where direct communication is required, and representatives from the Board and Manager meet with major shareholders on at least an annual basis in order to gauge their views. In addition, the Company Secretary only acts on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds personally as appropriate.

The notice of the Annual General Meeting is sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Manager at the meeting.

Disclosures in Strategic Report

In accordance with Section 414 C (11) of the Companies Act 2006, the following information otherwise required to be set out in the Directors' Report has been included in the Strategic Report: risk management objectives and policies and likely future developments in the business.

Annual General Meeting

The Annual General Meeting will be held at Bow Bells House, 1 Bread Street, London EC4M 9HH on Thursday 16 July 2020 at 12 noon.

By order of the Board

Aberdeen Asset Management PLC

Company Secretary

1 George Street

Edinburgh EH2 2LL

8 April 2020

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.  Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 'The Financial Reporting Standard Applicable in the UK and Republic of Ireland'.

Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. 

In preparing these financial statements, the Directors are required to: 

-  select suitable accounting policies and then apply them consistently; 

-  make judgments and estimates that are reasonable and prudent;

-  state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and 

-  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. 

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, but not for the content of any information included on the website that has been prepared or issued by third parties. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that to the best of their knowledge:

-  the financial statements have been prepared in accordance with applicable accounting standards and  give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-  the Annual Report taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's position and performance, business model and strategy; and

-  the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

On behalf of the Board

David Barron

Chairman
8 April 2020

STATEMENT OF COMPREHENSIVE INCOME

		Year ended 31 January 2020			Year ended 31 January 2019
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments	10	-	70,552	70,552	-	(33,446)	(33,446)
Currency profit/(loss)		-	505	505	-	(40)	(40)
Income	3	20,518		20,518	22,263	-	22,263
Investment management fee	4	(688)	(1,031)	(1,719)	(668)	(1,001)	(1,669)
Administrative expenses	5	(875)	-	(875)	(942)	-	(942)
		______	______	______	______	______	______
Net return before finance costs and taxation		18,955	70,026	88,981	20,653	(34,487)	(13,834)
Finance costs	6	(752)	(1,119)	(1,871)	(1,450)	(2,165)	(3,615)
		______	______	______	______	______	______
Return before taxation		18,203	68,907	87,110	19,203	(36,652)	(17,449)
Taxation	7	(300)	-	(300)	(332)	-	(332)
		______	______	______	______	______	______
Return after taxation		17,903	68,907	86,810	18,871	(36,652)	(17,781)
		______	______	______	______	______	______
Return per Ordinary share (pence)	9	12.08	46.49	58.57	12.68	(24.63)	(11.95)
		______	______	______	______	______	______
The column of this statement headed "Total" represents the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.

STATEMENT OF FINANCIAL POSITION  

		As at	As at
		31 January 2020	31 January 2019
	Notes	£'000	£'000
Non-current assets
Equity securities		492,115	437,108
Fixed interest securities		-	28,214
		_________	_________
Investments at fair value through profit or loss	10	492,115	465,322
		_________	_________
Current assets
Debtors	11	5,106	3,708
Cash and cash equivalents		13,754	3,548
		_________	_________
		18,860	7,256
		_________	_________
Creditors: amounts falling due within one year
Bank loan	12	(11,013)	(11,427)
Debenture Stock	12	-	(28,597)
Other creditors	12	(438)	(1,098)
		_________	_________
		(11,451)	(41,122)
		_________	_________
Net current assets/(liabilities)		7,409	(33,866)
		_________	_________
Total assets less current liabilities		499,524	431,456
Creditors: amounts falling due after more than one year	13	(29,718)	(29,725)
		_________	_________
Net assets		469,806	401,731
		_________	_________
Capital and reserves
Called-up share capital	14	38,419	38,419
Share premium account		4,619	4,619
Capital redemption reserve		1,606	1,606
Capital reserve		399,028	330,402
Revenue reserve	16	26,134	26,685
		_________	_________
Equity shareholders' funds		469,806	401,731
		_________	_________
Net asset value per Ordinary share (pence)	17	317.04	270.90
		_________	_________
The accompanying notes are an integral part of the financial statements.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 January 2020
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2019		38,419	4,619	1,606	330,402	26,685	401,731
Return after taxation		-	-	-	68,907	17,903	86,810
Dividends paid	8	-	-	-	-	(18,454)	(18,454)
Buyback of Ordinary shares for treasury		-	-	-	(281)	-	(281)
		______	______	______	______	______	______
Balance at 31 January 2020		38,419	4,619	1,606	399,028	26,134	469,806
		______	______	______	______	______	______
For the year ended 31 January 2019
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2018		38,419	4,619	1,606	370,634	27,106	442,384
Return after taxation		-	-	-	(36,652)	18,871	(17,781)
Dividends paid	8	-	-	-	-	(19,292)	(19,292)
Buyback of Ordinary shares for treasury		-	-	-	(3,580)	-	(3,580)
		______	______	______	______	______	______
Balance at 31 January 2019		38,419	4,619	1,606	330,402	26,685	401,731
		______	______	______	______	______	______
The Revenue reserve and the part of the Capital reserve represented by realised capital gains represent the amount of the Company's reserves distributable by way of dividend.
The accompanying notes are an integral part of the financial statements.

STATEMENT OF CASH FLOWS

		Year ended	Year ended
		31 January 2020	31 January 2019
	Notes	£'000	£'000
Operating activities
Net return before finance costs and taxation		88,981	(13,834)
Adjustment for:
(Gains)/losses on investments		(70,552)	33,446
Currency (gains)/losses		(505)	40
Decrease/(increase) in accrued dividend income		1,007	(243)
Increase in accrued interest income		-	(253)
Stock dividends included in dividend income		(930)	(956)
Amortisation of fixed income book cost		154	633
(Increase)/decrease in other debtors excluding tax		(18)	6
(Decrease)/increase in other creditors		(90)	220
Net tax paid		(658)	(438)
		______	______
Net cash flow from operating activities		17,389	18,621
Investing activities
Purchases of investments		(83,350)	(198,438)
Sales of investments		125,856	203,936
		______	______
Net cash from investing activities		42,506	5,498
Financing activities
Interest paid		(2,445)	(3,593)
Dividends paid	8	(18,454)	(19,292)
Buyback of Ordinary shares for treasury		(281)	(3,580)
Repayment of Debenture Stock		(28,600)	-
		______	______
Net cash used in financing activities		(49,780)	(26,465)
		______	______
Increase/(decrease) in cash and cash equivalents		10,115	(2,346)
		______	______
Analysis of changes in cash and cash equivalents during the year
Opening balance		3,548	5,983
Effect of exchange rate fluctuations on cash held		91	(89)
Increase/(decrease) in cash as above		10,115	(2,346)
		______	______
Closing balance		13,754	3,548
		______	______
The accompanying notes are an integral part of the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 JANUARY 2020

1.	Principal activity. The Company is a closed-end investment company, registered in Scotland No. SC000881, with its Ordinary shares being listed on the London Stock Exchange.

2.	Accounting policies
	(a)	Basis of preparation and going concern. The financial statements have been prepared under the historical cost convention, modified to include fixed asset investments at fair value, in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in October 2019.  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.
		The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is included in the Directors' Report (unaudited).
		Critical accounting judgements and key sources of estimation uncertainty. The preparation of financial statements requires the use of certain significant accounting judgements, estimates and assumptions which requires management to exercise its judgement in the process of applying the accounting policies and are continually evaluated. The Board considers that there are no accounting judgements, estimates and assumptions which would significantly impact the financial statements.
	(b)	Revenue, expenses and interest payable. Income from equity investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to revenue or capital according to the circumstances. Foreign income is converted at the exchange rate applicable at the time of receipt. Interest receivable on short term deposits and expenses are accounted for on an accruals basis. Income from underwriting commission is recognised as earned. Interest payable is calculated on an effective yield basis. Stock lending income is recognised on an accruals basis.
		The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities.
		Underwriting commission is taken to revenue, unless any shares underwritten are required to be taken up, in which case the proportionate commission received is deducted from the cost of the investment.
		Expenses are charged to capital when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect, the investment management fee and relevant finance costs including the amortisation of expenses and premium related to the debenture issue and loan note placement are allocated between revenue and capital in line with the Board's expectation of returns from the Company's investments over the long-term of 40% to revenue and 60% to capital.
	(c)	Investments. Investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are recognised at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE All-Share and the most liquid AIM constituents. Gains or losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income.
	(d)	Dividends payable. Final dividends payable to equity shareholders are recognised in the financial statements when they have been approved by Shareholders and become a liability of the Company. Interim dividends are recognised in the financial statements in the period in which they are paid.
	(e)	Nature and purpose of reserves
		Called-up share capital. The Ordinary share capital on the Statement of Financial Position relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, is a transfer made to the capital redemption reserve.
		Share premium account. The balance classified as share premium includes the premium above the nominal value from the proceeds on issue of any equity share capital comprising Ordinary shares of 25p.
		Capital redemption reserve. The capital redemption reserve is used to record the amount equivalent to the nominal value of any of the Company's own shares purchased and cancelled in order to maintain the Company's capital.
		Capital reserve. Gains or losses on the disposal of investments and changes in the fair values of investments are transferred to the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. The part of this reserve represented by realised capital gains is available for distribution by way of dividend.
		The costs of share buybacks to be held in treasury are also deducted from this reserve.
		Revenue reserve. Income and expenses which are recognised in the revenue column of the Statement of Comprehensive Income are transferred to the revenue reserve. The revenue reserve is available for distribution by way of dividend.
	(f)	Taxation. The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes.
		Owing to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
	(g)	Foreign currency. Monetary assets and liabilities and non-monetary assets held at fair value denominated in foreign currencies are converted into sterling at the rate of exchange ruling at the reporting date. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Gains or losses arising from a change in exchange rates subsequent to the date of a transaction are included as a currency gain or loss in revenue or capital in the Statement of Comprehensive Income, depending on whether the gain or loss is of a revenue or capital nature. The Company receives a proportion of its investment income in foreign currency. These amounts are translated at the rate ruling on the date of receipt.
	(h)	Traded options. The Company may enter into certain derivative contracts (e.g. options). Option contracts are accounted for as separate derivative contracts and are therefore shown in other assets or other liabilities at their fair value. The initial fair value is based on the initial premium, which is recognised upfront. The premium received and fair value changes in the open position which occur due to the movement in underlying securities are recognised in the revenue column, losses realised on the exercise of the contracts are recorded in the capital column of the Statement of Comprehensive Income.
		In addition, the Company may enter into derivative contracts to manage market risk and gains or losses arising on such contracts are recorded in the capital column of the Statement of Comprehensive Income.
	(i)	Borrowings. Borrowings are measured initially at the fair value of the consideration received, net of any issue expenses, and subsequently at amortised cost using the effective interest method. The finance costs of such borrowings are accounted for on an accruals basis using the effective interest rate method and are charged 40% to revenue and 60% to capital in the Statement of Comprehensive Income to reflect the Company's investment policy and prospective income and capital growth. The methodology used in previous years was a straight line basis and the change to an effective interest rate basis brings the Company in line with accounting standards. The financial impact caused by this change is immaterial.

3.	Income
		2020	2019
		£'000	£'000
	Income from investments
	UK dividend income	14,213	15,706
	Overseas dividends	3,650	3,160
	Fixed income	105	946
	Stock dividends	931	956
		______	______
		18,899	20,768
		______	______
	Other income
	Income on derivatives	1,605	1,495
	Deposit interest	2	-
	Interest from money market funds	12	-
		______	______
		1,619	1,495
		______	______
	Total income	20,518	22,263
		______	______
	During the year, the Company earned premiums totalling £1,605,000 (2019 - £1,495,000) in exchange for entering into derivative transactions. The Company had no open positions in derivative contracts at 31 January 2020 (2019 - no open positions). Losses realised on the exercise of derivative transactions are disclosed in note 10.

4.	Management fee
		2020			2019
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Management fee	688	1,031	1,719	668	1,001	1,669
		______	______	______	______	______	______
	The Company has an agreement with Aberdeen Standard Fund Managers Limited ("ASFML") for the provision of investment management, risk management, accounting, administrative and secretarial services. The management fee is calculated and charged, on a monthly basis, at 0.45% per annum on the first £225 million, 0.35% per annum on the next £200 million and 0.25% per annum on amounts over £425 million of the net assets of the Company, with debt at par and excluding commonly managed funds. The balance due at the year end was £151,000 (2019 - £128,000). The management fee is allocated 40% to revenue and 60% to capital. There were no commonly managed funds held in the portfolio during the year to 31 January 2020 (2019 - none).
	The management agreement may be terminated by either party on six months' written notice.

5.	Administrative expenses
			2020	2019
			£'000	£'000
	Directors' fees		133	132
	Auditor's remuneration (excluding irrecoverable VAT):
	fees payable to the Company's auditor for the audit of the Company's annual accounts		21	20
	fees payable to the Company's auditor for other services
		- interim review	7	6
		- other services	-	2
	Promotional activities		372	372
	Registrar's fees		53	47
	Share plan fees		1	87
	Printing and postage		47	48
	Other expenses		241	228
			______	______
			875	942
			______	______
	Expenses of £372,000 (2019 - £372,000) were paid to ASFML in respect of the promotion of the Company. The balance outstanding at the year end was £31,000 (2019 - £124,000).
	All of the expenses above, with the exception of auditor's remuneration, include irrecoverable VAT where applicable. The VAT charged on the auditor's remuneration is disclosed within other expenses.

6.	Finance costs
		2020			2019
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Bank loan	46	69	115	54	82	136
	Debenture Stock	223	335	558	901	1,351	2,252
	Amortised Debenture Stock premium and issue expenses	1	2	3	5	8	13
	Loan Notes - repayable after more than 5 years	479	718	1,197	479	718	1,197
	Amortised Loan Notes issue expenses	(3)	(5)	(8)	4	6	10
	Bank overdraft	6	-	6	7	-	7
		______	______	______	______	______	______
		752	1,119	1,871	1,450	2,165	3,615
		______	______	______	______	______	______
	Finance costs (excluding bank overdraft interest) are allocated 40% to revenue and 60% to capital.

7.	Taxation
			2020			2019
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of charge for the year
		Overseas tax suffered	586	-	586	551	-	551
		Overseas tax reclaimable	(286)	-	(286)	(219)	-	(219)
			______	______	______	______	______	______
		Total tax charge for the year	300	-	300	332	-	332
			______	______	______	______	______	______
	(b)	Factors affecting the tax charge for the year. The UK corporation tax rate is 19% (2019 - effective rate of 19%). The tax assessed for the year is lower than the rate of corporation tax. The differences are explained below:
			2020			2019
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Return before taxation	18,203	68,907	87,110	19,203	(36,652)	(17,449)
			______	______	______	______	______	______
		Corporation tax at 19% (2019 - 19%)	3,459	13,092	16,551	3,649	(6,964)	(3,315)
		Effects of:
		Non-taxable UK dividend income	(2,701)	-	(2,701)	(2,925)	-	(2,925)
		Non-taxable stock dividends	(143)	-	(143)	(182)	-	(182)
		Capital losses/(gains) on investments not taxable	-	(13,405)	(13,405)	-	6,355	6,355
		Expenses not deductible for tax purposes	1	-	1	1	-	1
		Currency losses not taxable	-	(96)	(96)	-	8	8
		Overseas taxes	300	-	300	332	-	332
		Non-taxable overseas dividends	(609)	-	(609)	(558)	-	(558)
		Excess management expenses	(7)	409	402	15	601	616
			______	______	______	______	______	______
		Total tax charge	300	-	300	332	-	332
			______	______	______	______	______	______
	(c)	Factors that may affect future tax charges. At the year end, the Company has, for taxation purposes only, accumulated unrelieved management expenses and loan relationship deficits of £128,536,000 (2019 - £126,416,000). A deferred tax asset in respect of this has not been recognised and these unrelieved expenses will only be utilised if the Company has profits chargeable to corporation tax in the future.

8.	Ordinary dividends on equity shares
		2020	2019
		£'000	£'000
	Amounts recognised as distributions paid during the year:
	Third interim dividend for 2019 - 3.00p (2018 - 2.575p)	4,449	3,854
	Final dividend for 2019 - 3.45p (2018 - 4.375p)	5,113	6,540
	First interim dividend for 2020 - 3.00p (2019 - 3.00p)	4,446	4,464
	Second interim dividend for 2020 - 3.00p (2019 - 3.00p)	4,446	4,449
	Return of unclaimed dividends	-	(15)
		______	______
		18,454	19,292
		______	______
	A third interim dividend of 3.00p per Ordinary share was declared on 5 December 2019, payable on 28 February 2020 to shareholders on the register on 7 February 2020 and has not been included as a liability in these financial statements. The fourth interim dividend of 3.70p per Ordinary share was declared 8 April 2020, payable on 29 May 2020 to shareholders on the register on 11 May 2020 and has not been included as a liability in the financial statements.
	The table below sets out the total dividends paid and proposed in respect of the financial year, which is the basis upon which the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered. The net revenue available for distribution by way of dividend for the year is £17,903,000 (2019 - £18,871,000).
		2020	2019
		£'000	£'000
	First interim dividend for 2020 - 3.00p (2019 - 3.00p)	4,446	4,464
	Second interim dividend for 2020 - 3.00p (2019 - 3.00p)	4,446	4,449
	Third interim dividend for 2020 - 3.00p (2019 - 3.00p)	4,446	4,449
	Fourth interim dividend for 2020 - 3.70p (2019 - 3.45p)	5,483	5,115
		______	______
		18,821	18,477
		______	______
	The fourth interim dividend is based on the latest share capital of 148,187,119 Ordinary shares excluding those held in treasury.

9.	Return per Ordinary share
		2020		2019
		£'000	p	£'000	p
	Revenue return	17,903	12.08	18,871	12.68
	Capital return	68,907	46.49	(36,652)	(24.63)
	Total return	86,810	58.57	(17,781)	(11.95)
		______	______	______	______
	Weighted average number of Ordinary shares in issue		148,211,835		148,838,510
			_________		_________

		2020	2019
10.	Investments at fair value through profit or loss	£'000	£'000
	Opening book cost	408,635	379,098
	Investment holdings gains	56,687	126,163
		______	______
	Opening fair value	465,322	505,261
		______	______
	Analysis of transactions made during the year
	Purchases	84,127	198,533
	Sales - proceeds	(127,886)	(205,026)
	Gains/(losses) on investments	70,552	(33,446)
		______	______
	Closing fair value	492,115	465,322
		______	______
	Closing book cost	380,538	408,635
	Closing investment holdings gains	111,577	56,687
		______	______
	Closing fair value	492,115	465,322
		______	______
	The Company received £127,886,000 (2019 - £205,026,000) from investments sold in the year.  The book cost of these investments when they were purchased were £112,225,000 (2019 -  £168,996,000).  These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
	The realised gains figure above includes losses realised on the exercise of traded options of £48,000 (2019 - £356,000).  Premiums received of £1,605,000 (2019 - £1,495,000) are included within income per note 3.
	Transaction costs. During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within (losses)/gains on investments in the Statement of Comprehensive Income. The total costs were as follows:
		2020	2019
		£'000	£'000
	Purchases	366	837
	Sales	52	59
		______	______
		418	896
		______	______
	The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.

11.	Debtors: amounts falling due within one year
		2020	2019
		£'000	£'000
	Net dividends and interest receivable	876	1,882
	Tax recoverable	1,073	714
	Amounts due from brokers	3,117	1,090
	Other loans and receivables	40	22
		______	______
		5,106	3,708
		______	______

12.	Creditors: amounts falling due within one year
			2020	2019
	(a)	Bank loan	£'000	£'000
		EUR 13,100,000 - 14 February 2019	-	11,427
		EUR 13,100,000 - 17 February 2020	11,013	-
			______	______
			11,013	11,427
			______	______
		The Company has a multi-currency revolving credit facility agreement (which expires 13 July 2021) with Scotiabank for £15,000,000, with the ability to increase to £30,000,000. At 31 January 2020 €13,100,000 had been drawn down at a rate of 0.9% (2019 - €13,100,000 at a rate of 0.9%), which matured on 17 February 2020. At the date this Report was approved €4,000,000 had been drawn down at a rate of 0.9%, maturing on 17 April  2020. The terms of the loan facility contain covenants that the adjusted asset coverage is not be less than 4.00 to 1.00 and that the minimum net assets of the Company are £200 million.
			2020	2019
	(b)	Debenture Stock	£'000	£'000
		7⅞% Debenture Stock 2019	28,600	28,600
		Unamortised Debenture Stock premium and issue expenses	-	(3)
		Redemption of Debenture Stock	(28,600)	-
			______	______
		Amortised cost of Debenture Stock	-	28,597
			______	______
		The 7⅞% Debenture Stock that was issued in 1997 and was redeemed at par on 30 April 2019.  The Company complied with the Debenture Stock Trust Deed covenant up to the redemption date.
			2020	2019
	(c)	Other creditors	£'000	£'000
		Debenture Stock, Loan Notes and bank loan interest	182	751
		Sundry creditors	256	347
			______	______
			438	1,098
			______	______

13.	Creditors: amounts falling due after more than one year
		2020	2019
		£'000	£'000
	3.99% Loan Notes 2045	30,000	30,000
	Unamortised Loan Note issue expenses	(282)	(275)
		______	______
	Amortised cost of Loan Notes	29,718	29,725
		______	______
	Total	29,718	29,725
		______	______
	The 3.99% Loan Notes were issued in December 2015 and are due to be redeemed at par on 8 December 2045. Interest is payable in half-yearly instalments in June and December. The Loan Notes are secured by a floating charge over the whole of the assets of the Company. The Company has complied with the Loan Note Trust Deed covenant that total net borrowings (ie. after the deduction of cash balances) should not exceed 33% of the Company's net asset value and that the Company's net asset value should not be less than £200 million.
	The fair value of the Loan Notes as at 31 January 2020 was £36,851,000 (2019 - £35,391,000), the value being calculated per the disclosure in note 18. The effect on the net asset value of deducting the Loan Notes at fair value rather than at par is disclosed in note 17.

14.	Called-up share capital
		2020	2019
		£'000	£'000
	Allotted, called up and fully paid:
	148,187,119 (2019 - 148,292,669) Ordinary shares of 25p each - equity	37,047	37,073
	Treasury shares:
	5,490,816 (2019 - 5,385,266) Ordinary shares of 25p each - equity	1,372	1,346
		______	______
		38,419	38,419
		______	______
	The Ordinary share capital on the Statement of Financial Position relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, is a transfer made to the capital redemption reserve.
	During the year the Company repurchased 105,550 Ordinary shares (2019 - 1,387,018) at a cost of £281,000 including expenses (2019 - £3,580,000). All of these shares were placed in treasury.

15.	Analysis of changes in financing during the year
		2020			2019
		Equity			Equity
		share capital			share capital
		(including	Loan	Debenture	(including	Loan	Debenture
		premium)	Notes	stock	premium)	Notes	stock
		£'000	£'000	£'000	£'000	£'000	£'000
	Opening balance at 31 January 2019	43,038	29,725	28,597	43,038	29,715	28,584
	Movement in unamortised Debenture Stock discount and issue expenses	-	-	3	-	-	13
	Movement in unamortised Loan Notes issue expenses	-	(7)	-	-	10	-
	Redemption of Debenture loan stock	-	-	(28,600)
		______	______	______	______	______	______
	Closing balance at 31 January 2020	43,038	29,718	-	43,038	29,725	28,597
		______	______	______	______	______	______

16.	Revenue reserve per share. The following information is presented supplemental to the financial statements to show the Companies Act position at the year end.
			2020	2019
	Revenue reserve(£'000)		26,134	26,685
	Number of Ordinary shares in issue at year end		148,187,119	148,292,669
	Revenue reserve per Ordinary share		17.64p	17.99p
	Less:	- 3rd interim dividend	(3.00)p	(3.00)p
		- 4th interim dividend/final dividend	(3.70)p	(3.45)p
			______	______
	Revenue reserve per Ordinary share		10.94p	11.54p
			______	______

17.	Net asset value per share. Equity shareholders' funds have been calculated in accordance with the provisions of FRS 102. The analysis of equity shareholders' funds on the face of the Statement of Financial Position does not reflect the rights under the Articles of Association of the Ordinary shareholders on a return of assets. These rights are reflected in the net asset value and the net asset value per share attributable to Ordinary shareholders at the year end, adjusted to reflect the deduction of the Debenture Stock and Loan Notes at par. A reconciliation between the two sets of figures is as follows:
		2020	2019
	Net assets attributable (£'000)	469,806	401,731
	Number of Ordinary shares in issue at year end A	148,187,119	148,292,669
	Net asset value per Ordinary share	317.04p	270.90p
		______	______
	A Excluding shares held in treasury.
	Adjusted net assets	2020	2019
	Net assets attributable (£'000) as above	469,806	401,731
	Unamortised Debenture Stock premium and issue expenses (note 12)	-	(3)
	Unamortised Loan Note issue expenses (note 13)	(282)	(275)
		______	______
	Adjusted net assets attributable (£'000)	469,524	401,453
		______	______
	Number of Ordinary shares in issue at year end A	148,187,119	148,292,669
	Adjusted net asset value per Ordinary share	316.85p	270.72p
	A Excluding shares held in treasury.	______	______
	Net assets - debt at fair value	£'000	£'000
	Net assets attributable	469,806	401,731
	Amortised cost Debenture Stock	-	28,597
	Amortised cost Loan Notes	29,718	29,725
	Market value Debenture Stock	-	(28,969)
	Market value Loan Notes	(36,851)	(35,391)
		______	______
	Net assets attributable	462,673	395,693
		______	______
	Number of Ordinary shares in issue at the period end A	148,187,119	148,292,669
	Net asset value per Ordinary share (debt at fair value)	312.22p	266.83p
	A Excluding shares held in treasury.	______	______
	Net assets - debt at fair value - adjusted A	£'000	£'000
	Net assets attributable	469,806	401,731
	Amortised cost Debenture Stock	-	28,597
	Amortised cost Loan Notes	29,718	29,725
	Market value Debenture Stock	-	(28,969)
	Market value Loan Notes	(36,851)	(35,391)
		______	______
	Net assets attributable	462,673	395,693
		______	______
	Number of Ordinary shares in issue at the period end B	148,187,119	148,292,669
		______	______
	Net asset value per Ordinary share (debt at fair value)	312.22p	266.83p
	Less: 3rd interim dividend	-	(3.00)p
		______	______
	Net asset value per Ordinary share (debt at fair value) - adjusted	312.22p	263.83p
		______	______
	A   Cum-income NAV with debt at fair value, adjusted to exclude the third interim dividend for the year ended 31 January 2019 which went ex-dividend on 31 January 2019 but was not paid until 22 February 2019 due to the difference in recognition of dividends payable on an ex-dividend date basis under AIC reporting guidelines and upon payment under accounting standards.
	B   Excluding shares held in treasury.

18.	Analysis of changes in net debt
		At				At
		31 January 2019	Currency differences	Cash flows	Non-cash movements	31 January 2020
		£'000	£'000	£'000	£'000	£'000
	Cash and cash equivalents	3,548	91	10,115	-	13,754
	Debt due within one year	(40,024)	414	28,600	(3)	(11,013)
	Debt due after more than one year	(29,725)	-	-	7	(29,718)
		______	______	______	______	______
		(66,201)	505	38,715	4	(26,977)
		______	______	______	______	______
		At				At
		31 January 2018	Currency differences	Cash flows	Non-cash movements	31 January 2019
		£'000	£'000	£'000	£'000	£'000
	Cash and cash equivalents	5,983	(89)	(2,346)	-	3,548
	Debt due within one year	(11,476)	49	-	(28,597)	(40,024)
	Debt due after more than one year	(58,299)	-	-	28,574	(29,725)
		______	______	______	______	______
		(63,792)	(40)	(2,346)	(23)	(66,201)
		______	______	______	______	______
	A statement reconciling the movement in net funds to the net cash flow has not been presented as there are no differences from the above analysis.

19.

Financial instruments and risk management. The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company also has the ability to enter into derivative transactions in the form of option contracts for the purpose of generating income and futures/options for hedging market exposures.

During the year, the Company entered into certain options contracts for the purpose of generating income. Positions closed during the year realised a loss of £48,000 (2019 - £356,000). As disclosed in note 3, the premium received and fair value changes in respect of options written in the year was £1,605,000 (2019 - £1,495,000). The largest position in derivative contracts held during the year at any given time was £1,716,000 (2019 - £955,000). The Company had no open positions in derivative contracts at 31 January 2020 (2019 - none).

The Board relies on Aberdeen Standard Fund Managers Limited ("ASFML" or the "Manager") for the provision of risk management activities under the terms of its management agreement with ASFML (further details of which are included under note 4). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors on the grounds that they are not considered to be material.

The Company's Manager has an independent Investment Risk department for reviewing the investment risk parameters of all core equity, fixed income and alternative asset classes on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models.

Risk management framework. The directors of ASFML collectively assume responsibility for ASFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.

ASFML is a fully integrated member of the Standard Life Aberdeen Group (the "Group") which provides a variety of services and support to ASFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. ASFML has delegated the day to day administration of the investment policy to Aberdeen Asset Managers Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). ASFML has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.

The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Chief Executive Officers of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SHIELD").

The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group's Chief Executive Officers and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.

The Group's corporate governance structure is supported by several committees to assist the board of directors of Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.

Risk Management. The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk.

The Board regularly reviews and agrees policies for managing each of these risks. The Group's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors, other than for currency disclosures.

(i)

Market risk. Market risk comprises three elements - interest rate risk, currency risk and price risk.

Interest rate risk. Interest rate movements may affect:

- the fair value of the investments in fixed interest rate securities;

- the level of income receivable on cash deposits; and

- interest payable on the Company's variable rate borrowings.

Management of the risk. The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. Details of borrowings at 31 January 2020 are shown in notes 12 and 13.

Interest risk profile. The interest rate risk profile of the portfolio of financial assets and liabilities at the Statement of Financial Position date was as follows:

Weighted

average

Weighted

period for

average

which

interest

Fixed

Floating

rate is fixed

rate

rate

rate

At 31 January 2020

Years

%

£'000

£'000

Assets

Sterling

-

-

-

13,754

______

______

______

______

Total assets

-

-

-

13,754

______

______

______

______

Liabilities

Bank loans

0.08

0.90

(11,013)

-

Loan Notes

25.87

3.99

(29,718)

-

______

______

______

______

Total liabilities

-

-

(40,731)

-

______

______

______

______

Weighted

average

Weighted

period for

average

which

interest

Fixed

Floating

rate is fixed

rate

rate

rate

At 31 January 2019

Years

%

£'000

£'000

Assets

Sterling

8.57

5.38

28,214

3,548

______

______

______

______

Total assets

-

-

28,214

3,548

______

______

______

______

Weighted

average

Weighted

period for

average

which

interest

Fixed

Floating

rate is fixed

rate

rate

rate

Years

%

£'000

£'000

Liabilities

Bank loans

0.08

0.90

(11,427)

-

Loan Notes

26.87

3.99

(29,725)

-

Debenture Stock

0.25

7.87

(28,597)

______

______

______

______

Total liabilities

-

-

(69,749)

-

______

______

______

______

The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. The maturity dates of the Company's borrowings are shown in notes 12 and 13 to the financial statements.

The floating rate assets consist of cash deposits all earning interest at prevailing market rates.

The Company's equity portfolio and short-term debtors and creditors (excluding bank loans) have been excluded from the above tables. All financial liabilities are measured at amortised cost.

Interest rate sensitivity . Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit.

Foreign currency risk. A proportion of the Company's investment portfolio is invested in overseas securities whose values are subject to fluctuation due to changes in exchange rates. In addition, the impact of changes in foreign exchange rates upon the profits of investee companies can result, indirectly, in changes in their valuations. Consequently the Statement of Financial Position can be affected by movements in exchange rates.

Management of the risk. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. A proportion of the Company's borrowings, as detailed in note 12, is in foreign currency as at 31 January 2020. The revenue account is subject to currency fluctuations arising on dividends received in foreign currencies and, indirectly, due to the impact of foreign exchange rates upon the profits of investee companies. The Company does not hedge this currency risk.

Foreign currency risk exposure by currency of denomination:

31 January 2020

31 January 2019

Net

Total

Net

Total

monetary

currency

monetary

currency

Investments

assets

exposure

Investments

assets

exposure

£'000

£'000

£'000

£'000

£'000

£'000

Euro

48,902

(9,211)

39,691

60,068

(11,289)

48,779

Swiss Francs

10,991

633

11,624

9,979

573

10,552

Danish Krone

12,490

61

12,551

8,308

47

8,355

Norwegian Krone

7,436

13

7,449

-

-

-

Sterling

412,296

(13,805)

398,491

386,967

(52,922)

334,045

______

______

______

______

______

______

Total

492,115

(22,309)

469,806

465,322

(63,591)

401,731

______

______

______

______

______

______

The asset allocation between specific markets can vary from time to time based on the Manager's opinion of the attractiveness of the individual stocks in these markets.

Foreign currency sensitivity . There is no sensitivity analysis included as the Board believes the amount exposed to foreign currency denominated monetary assets to be immaterial. Where the Company's equity investments (which are non-monetary items) are priced in a foreign currency, they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.

Price risk . Price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments and traded options.

Management of the risk . It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular company or sector. Both the allocation of assets and the stock selection process act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges in the UK and Europe.

Price risk sensitivity . If market prices at the Statement of Financial Position date had been 10% higher while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 January 2020 would have increased by £49,212,000 (2019 - increase of £46,532,000) and equity reserves would have increased by the same amount. Had market prices been 10% lower the converse would apply.

(ii)

Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities as they fall due in line with the maturity profile analysed below.

More

Within

Within

Within

Within

Within

than

1 year

1-2 years

2-3 years

3-4 years

4-5 years

5 years

Total

At 31 January 2020

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Bank loans

11,013

-

-

-

-

-

11,013

Loan Notes

-

-

-

-

30,000

30,000

Interest cash flows on bank loans, debentures and loan notes

1,197

1,197

1,197

1,197

1,197

25,137

31,122

Cash flows on other creditors

256

-

-

-

-

-

256

______

______

______

______

______

______

______

12,466

1,197

1,197

1,197

1,197

55,137

72,391

______

______

______

______

______

______

______

More

Within

Within

Within

Within

Within

than

1 year

1-2 years

2-3 years

3-4 years

4-5 years

5 years

Total

At 31 January 2019

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Bank loans

11,427

-

-

-

-

-

11,427

Debenture Stock

28,600

-

-

-

-

-

28,600

Loan Notes

-

-

-

-

-

30,000

30,000

Interest cash flows on bank loans, debentures and loan notes

1,769

1,197

1,197

1,197

1,197

26,334

32,891

Cash flows on other creditors

347

-

-

-

-

-

347

______

______

______

______

______

______

______

42,143

1,197

1,197

1,197

1,197

56,334

103,265

______

______

______

______

______

______

______

Management of the risk. The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise Debenture Stock, Loan Notes and a revolving facility. The Debenture Stock and Loan Notes provide secure long-term funding while short term flexibility is achieved through the borrowing facility. It is the Board's policy to maintain a gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of less than 30% at all times. Details of borrowings at 31 January 2020 are shown in notes 12 and 13.

Liquidity risk is not considered to be significant as the Company's assets comprise mainly cash and listed securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of loan and overdraft facilities, details of which can be found in note 12. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis. Details of the Board's policy on gearing are shown in the interest rate risk section of this note.

Liquidity risk exposure. At 31 January 2020 and 31 January 2019 the amortised cost of the Company's Debenture Stock was £nil and £28,597,000 respectively. This was redeemed at par on 30 April 2019. At 31 January 2020 and 31 January 2019 the amortised cost of the Company's Loan Notes was £29,718,000 and £29,725,000 respectively. At 31 January 2020 and 31 January 2019 the Company's bank loans amounted to £11,013,000 and £11,427,000 respectively. The facility is committed until 13 July 2021.

(iii)

Credit risk. This is failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

Management of the risk . 'Investment transactions are carried out with a large number of brokers, whose credit standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker;

-  the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the custodians' records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. The Group's Compliance department carries out periodic reviews of the custodian's operations and reports its finding to the Aberdeen Group's Risk Management Committee. This review will also include checks on the maintenance and security of investments held;

-  cash is held only with reputable banks whose credit ratings are monitored on a regular basis.

There are internal exposure limits to cash balances placed with counterparties. The credit worthiness of counterparties is also reviewed on a regular basis.

None of the Company's financial assets are secured by collateral or other credit enhancements.

Credit risk exposure. In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 31 January was as follows:

2020

2019

Balance

Maximum

Balance

Maximum

Sheet

exposure

Sheet

exposure

£'000

£'000

£'000

£'000

Non-current assets

Investments at fair value through profit or loss

492,115

-

465,322

28,214

Current assets

Cash and short term deposits

13,754

13,754

3,548

3,548

______

______

______

______

505,869

13,754

468,870

31,762

______

______

______

______

None of the Company's financial assets is past due or impaired.

Credit ratings. The fixed interest portfolio was sold out during the year, however, the table below provides a credit rating profile using Standard & Poors credit ratings for the quoted bonds at 31 January 2019:

2020

2019

£'000

£'000

A

-

1,981

A-

-

5,892

BBB+

-

4,683

BBB

-

7,894

BBB-

-

3,637

Non-rated A

-

4,127

______

______

-

28,214

______

______

A   Porterbrook Rail Finance 5.5% 20/04/19 does not have a rating from Standard & Poors but has been rated Baa2 by Moody's.

Fair values of financial assets and financial liabilities. The fair value of borrowings has been calculated at £47,864,000 as at 31 January 2020 (2019 - £75,787,000) compared to an accounts value in the financial statements of £40,731,000 (2019 - £69,749,000) (notes 12 and 13). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. All other assets and liabilities of the Company are included in the Statement of Financial Position at fair value.

20.	Fair value hierarchy. FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:
	Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
	Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.
	Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
	The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
				Level 1	Level 2	Level 3	Total
	As at 31 January 2020		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	492,115	-	-	492,115
				______	______	______	______
	Total			492,115	-	-	492,115
				______	______	______	______
				Level 1	Level 2	Level 3	Total
	As at 31 January 2019			£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	437,108	-	-	437,108
	Quoted bonds		b)	-	28,214	-	28,214
				______	______	______	______
	Total			437,108	28,214	-	465,322
				______	______	______	______
	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. Bonds included in Fair Value Levels 2 are Corporate Bonds. Investments categorised as Level 2 are not considered to trade in active markets.

21.	Capital management policies and procedures. The Company's capital management objectives are:
	- to ensure that the Company will be able to continue as a going concern; and
	- to maximise the return to its equity shareholders through an appropriate balance of equity capital and debt.
	The capital of the Company consists of equity, comprising issued capital, reserves and retained earnings.
	The Board monitors and reviews the broad structure of the Company's capital. This review includes the nature and planned level of gearing, which takes account of the Manager's views on future expected returns and the extent to which revenue in excess of that which is required to be distributed should be retained. The Company is not subject to any externally imposed capital requirements.

22.	Related party transactions and transactions with the Manager
	Directors' fees and interests. Fees payable during the year to the Directors and their interest in shares of the Company are disclosed within the Directors' Remuneration Report.
	Transactions with the Manager. The Company has an agreement with the Standard Life Aberdeen Group for the provision of management, secretarial, accounting and administration services and also for the provision of promotional activities. Details of transactions during the year and balances outstanding at the year end are disclosed in notes 4 and 5.

23.

Subsequent events. Subsequent to the year end, the Company's NAV has suffered as a result of a decline in stockmarket values. At the date of this Report the latest NAV per share was 255.62p as at the close of business on 7 April 2020, a decline of 19.4% compared to the NAV per share of 317.04p at the year end.

ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
Total return. NAV total return involves investing the same net dividend in the NAV of the Company with debt at fair value on the date on which that dividend was earned. Share price total return involves reinvesting the net dividend on the date that the share price goes ex-dividend.
The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the years ended 31 January 2020 and 31 January 2019.
	Dividend			Share
2020	rate		NAV	price
31 January 2019	3.00p		263.83p	242.00p
2 May 2019	3.45p		287.09p	253.00p
1 August 2019	3.00p		300.63p	275.00p
7 November 2019	3.00p		293.84p	275.00p
31 January 2020	N/A		312.22p	301.00p
			______	______
Total return			+22.2%	+28.8%
			______	______
	Dividend			Share
2019	rate		NAV A	price
31 January 2018	N/A		290.57p	243.50p
1 February 2018	2.575p		285.03p	256.00p
3 May 2018	4.375p		282.72p	253.00p
2 August 2018	3.000p		290.12p	257.00p
1 November 2018	3.000p		265.44p	242.00p
31 January 2019	3.000p		263.83p	242.00p
			______	______
Total return			(3.9)%	(0.8)%
			______	______
A   2019 Cum-income NAV with debt at fair value, adjusted to exclude the third interim dividend for the year ended 31 January 2019 which went ex-dividend on 31 January 2019 but was not paid until 22 February 2019 due to the difference in recognition of dividends payable on an ex-dividend date basis under AIC reporting guidleines and upon payment under accounting standards.
Discount to net asset value per share with debt at fair value. The discount is the amount by which the share price of 301.00p (2019 - 242.00p) is lower than the net asset value per share with debt at fair value of 312.22p (2019 - 263.83p), expressed as a percentage of the net asset value with debt at fair value.
Dividend cover. Revenue return per share of 12.08p (2019 - 12.68p) divided by dividends per share of 12.70p (2019 - 12.45p) expressed as a ratio.
Net gearing. Net gearing measures the total borrowings of £40,731,000 (31 January 2019 - £69,749,000) less cash and cash equivalents of £16,871,000 (31 January 2019 - £4,635,000) divided by shareholders' funds of £469,806,000 (31 January 2019 - £401,731,000), expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes net amounts due from brokers at the year end of £3,117,000 (31 January 2019 - £1,090,000) as well as cash and short term deposits of £13,754,000 (31 January 2019 - £3,545,000).
Equity gearing. Equity gearing is calculated as the amount by which the total value of equity securities of £492,115,000 (2019 - £437,108,000) exceeds shareholders' funds of £469,806,000 (2019 - £401,731,000), expressed as a percentage of shareholders' funds.
Ongoing charges. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year.
		2020		2019
Investment management fees (£'000)		1,719		1,669
Administrative expenses (£'000)		875		942
Less: non-recurring charges (£'000)		(36)		(11)
		______		______
Ongoing charges (£'000)		2,558		2,600
		______		______
Average net assets (£'000)		434,571		412,064
		______		______
Ongoing charges ratio		0.59%		0.63%
		______		______
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which amongst other things, includes the cost of borrowings and transaction costs.

Additional Notes to Annual Financial Report

The Annual General Meeting will be held at  Bow Bells House, 1 Bread Street, London EC4M 9HH on 16 July 2020.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 January 2020 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2019 and 2020 statutory accounts received unqualified reports from the Company's auditor and did not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under S498 of the Companies Act 2006. The financial information for 2019 is derived from the statutory accounts for the year ended 31 January 2019 which have been delivered to the Registrar of Companies. The accounts for the year ended 31 January 2020 will be filed with the Registrar of Companies in due course.

The Annual Report and Accounts will be posted to shareholders in April 2020 and copies will be available from the registered office of the Company and on the Company's website, www.dunedinincomegrowth.co.uk.*

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested.

By order of the Board

Aberdeen Asset Management PLC

Company Secretary

8 April 2020

* Neither the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

 

END

 

 

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