Annual Financial Report

RNS Number : 3758V

North American Income Trust (The)

05 April 2023

 

THE NORTH AMERICAN INCOME TRUST PLC

 

ANNUAL FINANCIAL REPORT ANNOUNCEMENT FOR THE YEAR ENDED
31 JANUARY 2023

 

Investment Objective

To provide investors with above average dividend income and long-term capital growth through active management of a portfolio consisting predominately of S&P 500 US equities. 

Financial Results and Performance

Performance Highlights

Net asset value total returnAB			Share price total returnAB
+9.6%			+12.4%
2022	+25.7%		2022	+25.6%
Revenue return per share			Dividends per share
12.2p			11.0p
2022	10.28p		2022	10.30p
Net asset value per Ordinary share			Total assetsC
337.2p			£513.4m
2022	318.8p		2022	£485.7m
Dividend yieldAD			Ongoing chargesA
3.6%			0.93%
2022	3.6%		2022	0.95%
A Considered to be an Alternative Performance Measure. See below for more information.
B Includes dividends reinvested.
C As defined on page 100.
D Calculated as the dividend for the year divided by the year end share price.

Financial Calendar, Dividends and Highlights

Annual General Meeting (Edinburgh)	8 June 2023
Half year end	31 July 2023
Payment dates of quarterly dividends for financial year ending 31 January 2024	August 2023 October 2023 January 2024 May 2024
Financial year end	31 January 2024

Dividends

	Rate	xd date	Record date	Payment date
1st Interim dividend 2023	2.50p	21 July 2022	22 July 2022	5 August 2022
2nd Interim dividend 2023	2.50p	6 October 2022	7 October 2022	28 October 2022
3rd Interim dividend 2023	2.50p	2 February 2023	3 February 2023	24 February 2023
Proposed final dividend 2023	3.50p	4 May 2023	5 May 2023	12 June 2023
Total dividends 2023	11.00p
1st Interim dividend 2022	1.90p	22 July 2021	23 July 2021	6 August 2021
2nd Interim dividend 2022	1.90p	7 October 2021	8 October 2021	29 October 2021
3rd Interim dividend 2022	2.50p	3 February 2022	4 February 2022	25 February 2022
Final dividend 2022	4.00p	5 May 2022	6 May 2022	13 June 2022
Total dividends 2022	10.30p

Highlights

	31 January 2023	31 January 2022	% change
Total assets (as defined on page 100)	£513.4m	£485.7m	+5.7
Equity shareholders' funds	£472.9m	£448.5m	+5.4
Share price (mid market)	306.00p	283.00p	+8.1
Net asset value per Ordinary share	337.21p	318.79p	+5.8
Discount (difference between share price and net asset value)AB	(9.3%)	(11.2%)
Net gearing A	(2.9%)	(4.9%)
Dividends and earnings
Revenue return per share	12.21p	10.28p	+18.8
Dividends per share	11.00p	10.30p	+6.8
Dividend yield (based on year end share price)A	3.6%	3.6%
Dividend coverA	1.11	1.00
Revenue reserves per share
Prior to payment of third interim and final dividends	17.57p	16.81p
After payment of third interim and final dividends	11.57p	10.31p
Operating costs
Ongoing chargesA	0.93%	0.95%
A Considered to be an Alternative Performance Measure. See below for further information.
B Including undistributed revenue.

Strategic Report

Chair's Statement

Market Review

North American equity market indices fell significantly over the year ended 31 January 2023. A combination of higher interest rates and surging inflation caused North American share prices to fall sharply from early 2022 onwards. Overall, however, North American equities ended higher in sterling terms on a total return basis as the US dollar strengthened against the pound. Please refer to your Manager's Review on pages 22 to 24 of the 2023 Annual Report for an in-depth review of the market.

Performance

Over the year ended 31 January 2023, the Company's net asset value ("NAV") total return per share was 9.6% outperforming the 8.5% total return in sterling terms for the Russell 1000 Value Index, the Company's primary reference index, while the share price total return was 12.4%.  The discount at which the share price traded relative to the NAV narrowed over the year from 11.2% to 9.3%. While it is pleasing to report outperformance, it is important to note that most of the absolute increase in the value of the portfolio can be ascribed to the strengthening of the US dollar by 12.2% year over year, which boosted the valuations on the balance sheet in sterling terms. By way of illustration, the Russell 1000 Value Index delivered a total return in US dollar terms of -0.4%.

The outperformance was attributable mainly to stock selection in the materials and real estate sectors although allocation was a small negative in the latter. The Company's performance relative to the reference index was hampered by stock selection in the consumer discretionary and energy sectors although allocation within those segments partially offset the negative impact.

A more detailed review of portfolio activity and performance can be found in the Manager's Review on pages 22 to 24 of the 2023 Annual Report.

Revenue Account

Total revenue from portfolio's equity holdings over the period under review was £17.8 million (2022 - £15.0 million). This was against a background which saw most of the Company's equity holdings continue their established record of dividend growth and the US dollar strengthen from a weighted average of $1.37 to the pound in 2022 to a weighted average of $1.22 to the pound in the current year. During the year ended 31 January 2023, the Company received premiums totalling £4.2 million (2022 - £3.9 million) in exchange for entering into stock option transactions. This option income, the generation of which remains consistent with the Manager's company-focused investment process, represented 18.1% of total income (2022 - 19.8%). As the Company's exposure to corporate bonds has decreased over recent years, interest income from bonds was 0.5% of total income (2022 - 0.6%). Bond coupons and option premiums will remain secondary sources of income in the belief that dividends must remain the overwhelming source of income available for distribution. The resulting revenue return per Ordinary share rose by 18.8% to 12.2 pence per share for the year ended 31 January 2023 compared to 10.3 pence per share for the year ended 31 January 2022. This comprised an increase in the dividend income of 17.6% in sterling terms and an increase in option income of over 7.6%. Further details of the portfolio are shown on pages 31 to 32 of the 2023 Annual Report.

Dividend

In light of the above, the Board has declared a final dividend of 3.5 pence per share, resulting in total dividends for the year ended 31 January 2023 of 11.0 pence per share (2022 - 10.3p) - a 6.8% increase. The proposed final dividend is payable on 12 June 2023 to shareholders on the register on 5 May 2023 (ex-dividend date: 4 May 2023).

In reaching its decision, the Board balanced the wish to increase the amount distributed to shareholders with the recognition that most of the increase in revenue was due to the US dollar strengthening against the sterling during the year, a situation which could reverse at any time, with maintaining revenue reserves at the equivalent of one full year's dividend payout. 

The Board remains committed to its progressive dividend policy and extending its track record of twelve consecutive years of dividend growth. To that end, the Board intends, in the absence of any unforeseen developments, to pay three quarterly dividends of 2.6 pence per share for the financial year ending 31 January 2024, with the fourth interim dividend being determined once the full-year results are known.

During the year the Board reviewed the schedule of dividend payments and has decided to put a resolution to the shareholders for them to approve the dividend policy in future, rather than approving the final dividend. The effect of this will be to allow the Board to accelerate the payment of the final distribution for the year and to make the quarterly payments more evenly spaced over the year, for the benefit of shareholders. If approved, the changes, illustrated by way of example in the table on page 9 of the 2023 Annual Report, will take effect for the year ending 31 January 2024.

	Dividend Payment Date
	Year to Jan 2023	Year to Jan 2024*
1st interim	5 August 2022	4 August 2023
2nd interim	28 October 2022	27 October 2023
3rd interim	24 February 2023	19 January 2024
Final / 4th interim	12 June 2023	4 May 2024

* indicative date only

Management of Premium and Discount

The Company's share price rose by 8.1% to 306.0 pence per share and ended the year at a 9.3% discount to total NAV, compared with a 11.2% discount at the end of the 2022 financial year. The Board continues to work with the Manager in both promoting the Company's benefits to a wider audience and providing liquidity to the market through the use of share buybacks. Over the course of the year, the Company's shares mainly traded at discounts ranging between 6.0% and 10.0%.

During the year, 441,185 shares were bought back and cancelled at a weighted average price of 281.90p and a weighted average discount of 11.7%. The total cost was £1.3 million. The Company has not bought back any additional Ordinary shares since 31 January 2023.

Gearing

The Board believes that sensible use of gearing should enhance returns to our shareholders over the longer term. In December 2020, the Company entered into a long-term financing agreement for US$50 million with MetLife comprising two loans of US$25 million with terms of ten and 15 years. As a result, net gearing at 31 January 2023 stood at 2.9% (2022: 4.9%).

Promotional Activity

The Board continues to promote the Company through the Manager's investment trust share plan, which provides a series of savings schemes through which savers can invest in the Company in a low-cost and convenient manner (see page 95 of the 2023 Annual Report).

During the last year we have worked with our Manager to refine our messaging and provide clarity to shareholders around our investment objectives. This includes introducing a new descriptor line as seen on the front cover of this report: Seeking resilient growth and rising income from North American equities.

Through our marketing efforts we aim to keep all shareholders informed and updated on their investments, particularly during periods of volatility. Updates include commentary, articles and videos allowing investors to hear directly from the Investment Manager on a regular basis - to understand both the outlook and the decisions being made within the portfolio itself. All of this communication can be found on the Company's website northamericanincome.co.uk and helps to inform shareholders' investment decisions to ensure they remain aligned with their individual needs.

You can also follow 'abrdn Investment Trusts' on LinkedIn and Twitter or register for email updates here: northamericanincome.co.uk/signup

Board Activity

In April 2022, for the first time since 2019 due to the travel restrictions that the pandemic had placed upon us, the Board was pleased to travel to North America and meet with the Investment Manager and local experts face-to-face. The benefit of these meetings is evident in the engagement that follows. Since then, the Board has focused in particular on matters of sustainability and how they are perceived and approached by North American companies, as well as the economic pressures in the US, as distinct from those in the UK. We continue to monitor developments in these areas with interest. More information on the Manager's approach to ESG integration in its investment process can be found on pages 25 to 27 of the 2023 Annual Report.

On 1 July 2022 Patrick Edwardson was appointed as an independent Non-Executive Director of the Company. Patrick has a wealth of investment management experience, including managing the Scottish American Investment Company plc for ten years, having worked for Baillie Gifford for 27 years. The Board is already benefitting from Patrick's experience. He will stand for election as a Director for the first time at the Company's Annual General Meeting ("AGM") in June 2023.

Also, during the year, after my first AGM as Chair of the Company, I took the opportunity to meet with investors in the UK, on behalf of the Board, to gain a deeper understanding of their interests in the Company and address questions on a more informal basis. As usual, we encourage all shareholders to contact the Board with any queries using contact details on page 109 of the 2023 Annual Report.

Towards the end of the year, the Board undertook its board evaluation. Whilst the Board does not consider it appropriate to utilise an external agent for this, due to the current size and composition of the Board, the Board does take a more thorough approach to its evaluation every other year. The results of the board evaluation are outlined in the Statement of Corporate Governance on pages 44 to 46 of the 2023 Annual Report.

Outlook

The Federal Reserve (the "Fed") accompanied its rate hike at the start of December 2022 with a slightly less hawkish message around future policy, a near-term positive for equity markets. Indeed, a majority of policymakers are now forecasting an easing in the pace of future rate hikes. Also, following major central banks' rapid monetary tightening to combat high inflation, certain banks' balance sheets came under severe pressure in March 2023 as the value of their fixed income portfolios fell and customers withdrew deposits. Technology-focused Silicon Valley Bank (SVB), as well as cryptocurrency-industry lenders Signature Bank and Silvergate Capital, collapsed. SVB's demise was the largest banking failure since the Global Financial Crisis of 2007-2008. A consortium of US banks also injected $30 billion into regional lender First Republic Bank. In Europe, UBS mounted a $3.3 billion government-backed takeover of Credit Suisse after the latter ran into financial difficulties. These events, which led to major central banks boosting dollar liquidity to ease strains in funding markets, have caused fears of a global banking crisis and deep recession.

While, as a result, investors have lowered their expectations of further monetary tightening, the Federal Open Market Committee remains determined to tame inflation, even if this comes at the cost of a recession.  The continued strength of employment suggests that wage growth will continue to run at rates well in excess of those consistent with the Fed's inflation target. The strength of wage growth has clearly contributed to surging services inflation, alongside very aggressive increases in rent measures and rebounding services demand as Covid-19 headwinds fade and in March 2023, the Fed increased rates again by 25bps as inflation hit 6% year-on-year in February. Your Manager's view is that this will lead to further tightening by the Fed over the coming months as policy remains restrictive, adding to its conviction that the economy will enter a downturn in the middle of this year.

So, what does this mean for equity markets going forward? Despite the recent rise in markets, sentiment has remained under pressure due to the ongoing banking crisis, hawkish Federal Reserve comments and further negative macroeconomic readings, with equity levels still materially lower than their recent peak. The economic outlook, both in the US and abroad, remains challenging and earnings downgrades have continued to come through since the end of the third-quarter earnings season. Nonetheless, US equity levels now appear to have priced in a strong probability of slowing economic growth and that inflation has peaked. On that basis, your Manager is now seeing some target companies trading on attractive multiples and increasingly appealing valuation points for long-term investors, such as ourselves, and has, therefore, become cautiously optimistic on the outlook for US equities in particular as an asset class.

Annual General Meeting ("AGM") and Online Shareholder Presentation

AGM

The AGM is scheduled to be held at 2:00 pm on 8 June 2023 at the offices of abrdn at 1 George Street, Edinburgh, EH2 2LL. We encourage all shareholders to complete and return the form of proxy enclosed with the Annual Report to ensure that your votes are represented at the meeting (whether or not you intend to attend in person). If you hold your shares in the Company via a share plan or a platform and would like to attend and/or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform. For this purpose, investors who hold their shares in the Company via the abrdn Investment Plan for Children, Share Plan or ISA will find a Letter of Direction enclosed. abrdn Planholders are encouraged to complete and return the Letter of Direction in accordance with the instructions.

The Notice of Meeting can be found on pages 102 to 106 of the 2023 Annual Report .

Online Shareholder Presentation

In order to encourage as much interaction as possible with our shareholders, there will also be an online shareholder presentation at 2:30 pm on 22 May 2023. At this event, you will receive a presentation from the Investment Manager and have the opportunity to ask questions of the Chair and the Investment Manager. The online presentation is being held ahead of the AGM to allow shareholders to submit their proxy votes prior to the meeting.

Full details on how to register for this event will be available on the Company's website. Shareholders are also encouraged to submit questions in advance of the online shareholder presentation and the AGM at the following email address: [e-mail].

If you are unable to attend the online event, the Investment Manager's presentation will be available on the Company's website shortly after the presentation.

As usual, the Board strongly encourages all shareholders to exercise their votes in respect of the AGM in advance of the meeting, and to appoint the Chair of the meeting as their proxy, by completing the enclosed Form of Proxy (or Letter of Direction for those who hold shares through the abrdn savings plans).

Dame Susan Rice
Chair
4 April 2023

Overview of Strategy

Introduction

The Company is an investment trust and its Ordinary shares are listed on the premium segment of the London Stock Exchange. The Company aims to attract long-term private and institutional investors wanting to benefit from the income and growth prospects of North American companies. The Board does not envisage any change in the Company's activity in the foreseeable future. 

Investment Objective and Purpose

To provide investors with above average dividend income and long-term capital growth through active management of a portfolio consisting predominately of S&P 500 US equities.

Reference Index

The Board reviews performance against relevant indices, including the Russell 1000 Value Index (in sterling terms) and the S&P 500 Index (in sterling terms) as well as peer group comparisons. The aim is to provide investors with above average dividend income from predominantly US equities which means that investment performance can diverge, possibly quite materially in either direction, from these indices.

Investment Policy

The Company invests in a portfolio predominantly comprised of S&P 500 constituents. The Company may also invest in Canadian stocks and US mid and small capitalisation companies to provide for diversified sources of income. The Company may invest up to 20% of its gross assets in fixed income investments, which may include non-investment grade debt. The Company's investment policy is flexible, enabling it to invest in all types of securities, including (but not limited to) equities, preference shares, debt, convertible securities, warrants, depositary receipts and other equity-related securities.

The maximum single investment will not exceed 10% of gross assets at the time of investment and it is expected that the portfolio will contain around 50 holdings (including fixed income investments), with an absolute minimum of 35 holdings.  The composition of the Company's portfolio is not restricted by minimum or maximum market capitalisation, sector or country weightings.

The Company may borrow up to an amount equal to 20% of its net assets.

Subject to the prior approval of the Board, the Company may also use derivative instruments for efficient portfolio management, hedging and investment purposes. The Company's aggregate exposure to such instruments for investment purposes (excluding collateral held in respect of any such derivatives) will not exceed 20% of the Company's net assets at the time of the relevant acquisition, trade or borrowing.

The Company does not generally hedge its exposure to foreign currency. The Company will not acquire securities that are unlisted or unquoted at the time of investment (with the exception of securities which are about to be listed or traded on a stock exchange). However, the Company may continue to hold securities that cease to be listed or quoted, if appropriate.

The Company may participate in the underwriting or sub-underwriting of investments where appropriate to do so.

The Company may invest in open-ended collective investment schemes and closed-ended funds that invest in the North American region. However, the Company will not invest more than 10%, in aggregate, of the value of its gross assets in other listed investment companies (including listed investment trusts), provided that this restriction does not apply to investments in any such investment companies which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed investment companies.

The Company will normally be substantially fully invested in accordance with its investment objective but, during periods in which changes in economic conditions or other factors so warrant, the Company may reduce its exposure to securities and increase its position in cash and money market instruments.

Management

The Board has appointed abrdn Fund Managers Limited ("aFML") to act as the alternative investment fund manager ("AIFM" or the "Manager").

The Directors are responsible for determining the investment policy and the investment objective of the Company. The Company's portfolio is managed on a day-to-day basis by abrdn Inc. (the "Investment Manager") by way of a delegation agreement in place between aFML and abrdn Inc.

The Investment Manager invests in a range of North American companies, following a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value, concentrating on quality first, then price. Top-down investment factors are secondary in the Investment Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights.

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determining the progress of the Company in pursuing its investment policy. The main KPIs identified by the Board in relation to the Company which are considered at each Board meeting are as follows:

KPI	Description
Net asset value and share price performance against the reference indices	The Board reviews the Company's NAV and share price total return performance against the reference indices, the Russell 1000 Value and the S&P 500 (both in sterling terms). Performance graphs and tables are provided on pages 19 to 21 of the 2023 Annual Report . The Board also reviews the performance of the Company against its peer group of investment trusts with similar investment objectives.
Revenue return and dividend yield A	The Board monitors the Company's net revenue return and dividend yield through the receipt of detailed income forecasts. A graph showing the dividends and yields over five years is provided on page 20 of the 2023 Annual Report .
Share price discount/Premium to net asset value A	The discount/premium relative to the net asset value per share is closely monitored by the Board. A graph showing the share price discount/premium relative to the net asset value is shown on page 13 of the 2023 Annual Report .
Ongoing charges ratio ("OCR") A	The Board reviews the Company's operating costs carefully against its peer group of investment trusts with similar investment objectives. The Company's OCR is provided on page 90 of the 2023 Annual Report .

^A Considered to be an Alternative Performance Measure. See below for more information^.

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its business model, financial position, performance and prospects. The Board has in place a robust process to identify, assess and monitor the principal risks and uncertainties facing the Company and to identify and evaluate newly emerging risks, such as climate change and geopolitical developments. This process is supported by a risk matrix which identifies the key risks for the Company, including emerging risks, and covers strategy, investment management, operations, shareholders, regulatory and financial obligations and third party service providers. This risk matrix is reviewed on a regular basis. A summary of the principal risks and uncertainties facing the Company, which have been identified by the Board, is set out in the following table, together with a description of the mitigating actions it has taken.

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

Description	Mitigating Action
Market Risk The risks facing the Company relate to the Company's investment activities and include market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. The Company is exposed to the effect of variations in share prices and movements in the currency exchange rate due to the nature of its business. A fall in the market value of its portfolio would have an adverse effect on shareholders' funds. Any debt securities that may be held by the Company will be affected by general changes in interest rates that will in turn result in increases or decreases in the market value of those instruments.	The day-to-day management of the Company's assets has been delegated to the Manager under investment guidelines determined by the Board. The Board monitors these guidelines and receives regular reports from the Manager which include performance reporting. The Board regularly reviews these guidelines to ensure they remain appropriate. Details on financial risks, including market price, inflation liquidity and foreign currency risks and the controls in place to manage these risks are provided in note 18 to the financial statements.
Major Market Event or Geopolitical Risk The Company is exposed to stockmarket volatility or illiquidity that could result from major market shock due to a national or global crisis such as a pandemic, war, natural disaster, geopolitical developments or similar. There could also be the resulting impact of disruption on the operations of the Company and its service providers, temporarily or for prolonged duration.	The Board is cognisant of the risks arising from recent bank failures,  geopolitical developments such as Russia's invasion of Ukraine or tensions between US and China, including stockmarket instability and longer term economic effects or the potential impact on the operations of the third-party suppliers, including the Manager. The Manager assesses and reviews the investment risks arising from these macro developments on the companies in the portfolio, including but not limited to: employee absence, reduced demand, supply chain breakdown, balance sheet strength, ability to pay dividends, and takes the necessary investment decisions. The Manager communicates regularly with the underlying investee companies in order to navigate and guide the Company through the current challenges. The Manager has business continuity procedures and contingency arrangements in place to ensure that it is able to continue to service their clients, including investment trusts. The services from third parties, including the Manager, have continued to be supplied effectively during the current market environment. The Board will continue to monitor third party risk management through regular updates from the Manager.
Income and Dividend Risk The ability of the Company to pay dividends and any future dividend growth will depend primarily on the level of income received from its investments (which may be affected by currency movements, exchange controls or withholding taxes imposed by jurisdictions in which the Company invests) and the timing of receipt of such income by the Company. Accordingly, there is no guarantee that the Company's dividend income objective will continue to be met and the amount of the dividends paid to Ordinary shareholders may fluctuate and may go down as well as up.	The Board monitors this risk through the regular review of detailed revenue forecasts and considers the level of income at each meeting. The Company has built up its revenue reserves over recent years which provides flexibility in future years, should the dividend environment become challenging.

Operational The Company is reliant on services provided by third parties (in particular those of the Manager). Failure by any service provider to carry out its contractual obligations could expose the Company to loss or damage and have a detrimental impact on the Company, including disruption caused by information technology breakdown or other cyber-related issue.	Written agreements are in place defining the roles and responsibilities of all third party service providers. The Board reviews reports on the operation and efficacy of the Manager's risk management and control systems, including those relating to cyber-crime. The Board also reviews regular reports from internal audit as well as third party control reports. The Manager monitors the control environment and quality of services provided by other third party service providers through due diligence reviews, service level agreements, regular meetings and key performance indicators. The Board reviews reports on the Manager's monitoring of third party service providers on a periodic basis.
Regulatory Risk 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.	Directors are aware of the relevant regulations and are provided with information on changes by the Association of Investment Companies, as well as the Manager. The Manager provides six-monthly reports to the Audit Committee on its internal control systems, which monitor compliance with relevant regulations.  In addition, the Board will use the services of its professional advisers when necessary, to monitor compliance with regulatory requirements. The Manager and depositary provide reports to the Audit Committee on their operations to evidence that the AIFMD regulations are complied with. The Manager has implemented procedures to ensure compliance with the provisions of the Corporation Tax Act 2010 and reports results to the Board.
Gearing Risk Gearing is used to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. Gearing has the effect of accentuating market falls and market gains. The ability of the Company to meet its financial obligations, or an increase in the level of gearing, could result in the Company becoming over-geared or unable to take advantage of potential opportunities and result in a loss of value to the Company's shares.	In order to manage the level of gearing, the Board has set a maximum gearing ratio of 20% of net assets. The Board receives regular updates from the Manager on the Company's net gearing levels and its compliance with loan covenants. As at 31 January 2023 the Company had £40.5 million of borrowings and net gearing was 2.9% at the year end. More details are provided on page 90 of the 2023 Annual Report.
Discount volatility Investment company shares can trade at discounts to their underlying net asset values, although they can also trade at premia.	In an effort to minimise the impact of share price volatility, where shares are trading at a significant discount, the Company operates a share buyback programme. The share price, NAV and discount are monitored daily by the Manager. The Board monitors the discount level of the Company's shares and will exercise discretion to undertake share buybacks, within shareholder authorities, when it is deemed to be in the best interest of shareholders.
Derivatives The Company uses derivatives primarily to enhance the income generation of the Company.  Derivatives are difficult to value and exposed to counterparty risk.	The risks associated with derivatives contracts are managed within guidelines and limits set by the Board.
Potential Impact of Environmental, Social and Governance ("ESG") Investment Principles Applying ESG and sustainability criteria in the investment process may result in the exclusion of assets in which the Company might otherwise invest. The Manager also monitors and responds to ESG and sustainability risks at portfolio companies as they evolve over time. This may have a positive or negative impact on performance.	The Board supports and encourages the ESG analysis incorporated by the Manager as part of its investment decision making process and understands that over the short-term companies with weak ESG compliance may appear to perform strongly. Over the long term the Board believes companies that carefully understand and proactively manage the ESG issues relevant to their businesses will prove more resilient and capture emerging opportunities for growth. The Manager also actively engages with investee companies in relation to ESG and sustainability issues that it deems material.

In addition to these risks, the Company is exposed to the impact of continued geopolitical tensions or changes, including recent banking failures, which could have an adverse impact on stockmarkets and the Company's portfolio.

In all other respects, the Company's principal risks and uncertainties have not changed materially since the year end.

Promoting the Success of the Company

The Board is required to report on how it has discharged its duties and responsibilities under section 172 of the Companies Act 2006 (the "s172 Statement"). Under section 172, the Directors have a duty to promote the success of the Company for the benefit of its members as a whole, taking into account the likely long-term consequences of decisions, the need to foster relationships with the Company's stakeholders and the impact of the Company's operations on the environment.

The Board comprises five Directors at the time of writing this report and the Company has no employees or customers in the traditional sense. As the Company has no employees, the culture of the Company is embodied in the Board of Directors. The Board seeks to promote a culture of strong governance and to challenge, in a constructive and respectful way, the Company's advisers and other stakeholders.

The Board's principal concern has been, and continues to be, the interests of the Company's shareholders and potential investors. The Manager undertakes an annual programme of meetings with the largest shareholders and investors and reports back to the Board on issues raised at these meetings. The Investment Manager, who is based in the Manager's Philadelphia office, will attend such meetings.

The Board encourages all shareholders to attend and participate in the Company's and can contact the Directors via the Company Secretary. Shareholders and investors can obtain up-to-date information on the Company through its website and the Manager's information services and have direct access to the Company through the Manager's customer services team or the Company Secretary. The Chairman also held a live webinar ahead of the 2022 AGM, taking questions with the Investment Manager. This was made available on the Company's website for shareholders. 

As an investment trust, a number of the Company's functions are outsourced to third parties. The key outsourced function is the provision of investment management services to the Manager and other stakeholders support the Company by providing secretarial, administration, depositary, custodial, banking and audit services.

The Board undertakes a robust evaluation of the Manager, including investment performance and responsible ownership, to ensure that the Company's objective of providing sustainable income and capital growth for its investors is met. The Board typically visits the Manager's offices in the US on a periodic basis and last visited the Manager in April 2022. This enables the Board to conduct face to face review meetings with the fund management and research teams. The portfolio activities undertaken by the Investment Manager on behalf of the Company can be found on page 22 to 24 of the 2023 Annual Report and details of the Board's relationship with the Manager and other third party providers, including oversight, is provided in the Statement of Corporate Governance on page 42 of the 2023 Annual Report. 

Key decisions and actions during the year ended 31 January 2023, which required the Directors to have greater focus on stakeholders included: 

Directorate

The Board is mindful of the importance of having a well- considered and orderly succession plan for continuity of performance and delivery of the Company's strategy. The search process for a new director was concluded in the first half of 2022, resulting in the appointment of Patrick Edwardson in July 2022. The Board believes that its composition is well placed to promote the success of the Company and to oversee the Manager's activities.

Marketing Strategy

With the Board Changes last year, the Board considered it an opportune time to engage with investors directly. This included direct meetings with the Chair and the Company's first webinar in May 2022, where shareholders had a chance to ask questions prior to exercising their proxy votes for the 2022 AGM. 

In addition, the Board worked with the Manager to refine the Company's corporate narrative to provide clarity to shareholders around the Company's investment objectives. 

Dividends paid to shareholders

During the year, the Board reviewed the dividend payment policy. It concluded that it would propose a revised dividend calendar, with quarterly interim dividend payment dates spread more evenly throughout the year, instead of three interim dividends and a final dividend. Subject to shareholder approval of the proposed dividend policy, four interim dividends will be proposed for the financial year ending 31 January 2024 (see page 9 of the 2023 Annual Report for more details). The Board recognises the importance of dividends to shareholders and the importance of receiving a regular income.

Management of the portfolio

As in previous years, the Board focused on the performance of the Manager in achieving the Company's investment objective within an appropriate risk framework.

As explained in more detail on page 46 of the 2023 Annual Report, during the year, the Management Engagement Committee decided that the continuing appointment of the Manager was in the best interests of shareholders.

Duration

The Company does not have a fixed winding-up date; however, shareholders are given the opportunity to vote on the continuation of the Company every three years at the AGM. The Company's continuation vote held in 2021 was supported by shareholders and the next continuation vote is scheduled at the AGM in 2024.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the appropriate knowledge in order to allow the Board to fulfil its obligations. At 31 January 2023 the Board comprised two men and three women with diverse and relevant expertise and perspectives. 

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated day to day management and administrative functions to aFML. There are therefore no disclosures to be made in respect of employees. Further information on socially responsible investment can be found on pages 25 to 27 of the 2023 Annual Report.

Global Greenhouse Gas Emissions and Streamlined Energy and Carbon Reporting ("SECR")

All of the Company's activities are outsourced to third parties. The Company therefore has no greenhouse gas emissions to report from the operations of its business other than directors' travel, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. For the same reasons as set out above, the Company considers itself to be a low energy user under the SECR regulations and therefore is not required to disclose energy and carbon information.

The Investment Manager has access to a range of ESG tools, two of which are climate-related. These tools allow the Company's Investment Manager to look at the overall carbon footprint of their portfolios and compare with the reference index. It also allows them to identify the highest carbon emissions stocks across portfolios. Furthermore, the carbon footprint tool has been used to help further guide the Investment Manager's engagement with companies (for example, including the top three carbon-emitting stocks in the priority engagement process).

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board does formally consider risks and strategy on at least an annual basis. The Board considers the Company to be a long-term investment vehicle but for the purposes of this Viability Statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long-term horizon and the inherent uncertainties of looking out further than three years.

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

-  The ongoing relevance of the Company's investment objective in the current environment and recent feedback from the Company's brokers and shareholders, where available.

-  A resolution for the continuation of the Company was passed at the AGM in June 2021 showing ongoing support from shareholders for the Company's mandate.

-  The principal risks detailed in the strategic report on pages 13 to 16 of the 2023 Annual Report and the steps taken to mitigate these risks. In particular, the Board has considered the operational ability of the Company to continue in the current environment, including the impact of geopolitical developments, and the ability of the key third party suppliers to continue to provide essential services to the Company. Third party services have continued to be provided effectively.

-  The Company is invested in readily realisable listed securities. Recent stress testing has confirmed that shares can be easily liquidated, despite the more uncertain and volatile economic environment.

-  The level of revenue surplus generated by the Company and its ability to achieve the dividend policy. The Company has continued to deliver dividend growth whilst building up revenue reserves (see pages 2 and 4 of the 2023 Annual Report) which can be used to top up the dividend in tougher times.

-  The level of gearing is closely monitored by the Board and the Manager. Covenants are actively reviewed and there is adequate headroom in place.

-  The availability of long-term gearing facilities. The Company's gearing comprises $25 million of ten year loan notes (until December 2030) and $25 million of 15 year loan notes (until December 2035). 

Accordingly, taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report. In making this assessment, the Board has considered that matters such as significant economic or stockmarket volatility, a substantial reduction in the liquidity of the portfolio, or changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future.

Dame Susan Rice
Chair
4 April 2023

Results

Performance (total return)

	1 year return	3 year returnA	5 year returnA
Total return (Capital return plus dividends reinvested)	%	%	%
Share priceB	+12.4	+17.9	+39.8
Net asset value per shareB	+9.6	+30.0	+43.7
Russell 1000 Value Index (in sterling terms)	+8.5	+36.9	+61.5
S&P 500 Index (in sterling terms)	0.0	+42.1	+82.2
A Cumulative return
B Considered to be an Alternative Performance Measure. See below for more information.

Ten Year Financial Record

Year to 31 January	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
Per share (p)
Net revenue returnA	5.96	6.54	7.15	7.98	8.42	10.04	11.42	11.79	10.28	12.21
DividendsA	5.40	6.00	6.60	7.20	7.80	8.50	9.50	10.00	10.30	11.00
As at 31 January
Net asset value per shareA (p)	163.1	187.8	187.1	264.7	275.5	280.4	288.9	262.5	318.8	337.2
Shareholders' funds (£'000)	271,952	309,273	280,644	379,101	391,649	398,657	413,948	375,416	448,463	472,891
A Comparative figures have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 10 June 2019.

Investment Manager's Review

Market review

North American equity market indices were volatile over the year ended 31 January 2023, however, ended higher in sterling terms on a total return basis as the US dollar strengthened against the pound, from a weighted average of $1.37 to the pound in 2022 to a weighted average of $1.22 to the pound in the current year. This inflated the valuations on the balance sheet in sterling terms.

A combination of higher interest rates and surging inflation - due in part to a booming jobs market - caused North American share prices to fall sharply from early 2022 onwards. Growth-focused stocks, such as technology companies, which had been among the strongest stock market performers in the years leading up to 2022, were particularly hard hit. These stocks are more sensitive to higher interest rates. As US inflation hit a 40-year high, the Federal Reserve ("Fed") became increasingly aggressive in its response. It raised its main interest rate by 0.25% in March 2022, 0.50% in May 2022 and by 0.75% at each of its next four meetings. Signs of progress in the battle against inflation emerged in November 2022 when the annual consumer inflation figure (for the twelve months to October) showed an unexpected drop to 7.7%. Further falls in the annual consumer inflation rate increased investor confidence that price pressures in the US were subsiding. Accordingly, the Fed increased its main interest rate by a more measured 0.50% in December, down from the 0.75% rate hikes of previous months. 

The energy, materials and healthcare sectors were the strongest performers within the Russell 1000 Value index, the Company's primary reference index, while the information technology, communication services and real estate sectors were the primary market laggards for the period.

Performance

The Company returned 9.60% on a NAV basis in sterling terms for the year ended 31 January 2023, outperforming the 8.51% return of its primary reference index, the Russell 1000 Value Index (total return) in sterling terms. The revenue account remained in good shape, building upon the record established in prior years.

At a sector level, the largest contributor to the Company's performance was information technology due to stock selection and, to a lesser extent, having an underweight exposure. The second-largest contributor was real estate, thanks to stock selection, which was partially offset by a small negative effect from being overweight in the sector.

Looking at individual stock contributors to performance included real estate investment trust Gaming & Leisure Properties , its shares rerating higher after the company made some acquisitions of regional casinos. Pharmaceutical company Bristol-Myers Squibb was also a positive. Cash flows remained strong and there were some signs of early successes in the company's drugs pipeline. The pharmaceutical sector, where Bristol-Myers Squibb is our largest position, was rerated over the period. Oil refiner, Phillips 66 , was also a positive for the Company. The diversified energy company benefited from extremely strong refining margins following Russia's invasion of Ukraine. Also, Phillips 66 completed two acquisitions that increased the company's exposure to a more stable part of the energy value chain while also growing the earnings power of the company.

On the negative side, the main detractor from the Company's performance at a sector level was consumer discretionary, due to stock selection and, to a lesser extent, having an overweight exposure. The second-largest detractor was energy, with weaker stock selection that was partially offset by a positive effect from being overweight to the sector.

The largest individual stock detractors from performance were clothing companies HanesBrands and VF Corporation . Shares in HanesBrands were weak due to a delay in the company's new management implementing changes during a period when excessive apparel inventories pressurised all stocks in the industry. Meanwhile, VF Corporation suffered from a continued lack of traction and a subsequent change of management at its important Vans brand. Also, China's strict 'zero-Covid' policy adversely affected both demand for VF Corporation's products and the company's supply chain.

Canadian financial services company CI Financial was also a detractor over the period. Its shares de-rated as investors were worried about the company's increased leverage after its acquisition of several high-quality registered investment advisors.

Portfolio activity

The investments in the Company's portfolio remained consistent with our investment process which aims to identify high-quality, cash generative companies. During the year, market volatility created opportunities to add quality companies into the portfolio at compelling prices. The changes in the portfolio are summarised below.

We re-initiated a position in Home Depot as a best-in-class retailer, led by a high-quality management team. At the time that we re-initiated, the shares were caught in a collective market drawdown that meaningfully detached Home Depot's shares from their intrinsic value. The company has a strong real estate position from a location standpoint, best-in-class execution and a culture that has led to far superior sales per square foot metrics than its closest peer. Home Depot operates in a near duopoly with rational pricing.

We believe that CVS Health ("CVS") is making significant improvements to the quality of the business, pivoting it towards more attractive, structurally growing areas of healthcare. The key strategic initiative is to lower the retail pharmacy footprint and invest in primary care delivery. In the latter area, there is a significant opportunity for growth as 30% of Americans do not have a primary care provider and the industry is moving towards value-based care, which offers more attractive returns. CVS can build on the existing range of basic services offered at its HealthHUBs and MinuteClinics to bring a more affordable model of care delivery.

We believe PNC Financial Services ("PNC") can continue to take deposit and loan market share over time as the bank's scale gives it capacity to invest in technology as banking moves further into the digital world. In addition, we think there is a long runway for growth from PNC's BBVA acquisition that will create additional upside. PNC historically has a good underwriting track record and we believe it will hold up well relative to peers in a tough market environment.

We initiated a position in Merck , with the view that its modest valuation captures concerns on both the potential to overpay for large scale M&A as well as the concentration in Keytruda, which will lose patent protection in 2028. We believe that Merck has other growth drivers that will help offset this view. For example, Gardasil's capacity expansion, beginning in 2023, will help as will additional M&A that capitalises on opportunities like the Acceleron deal. Further information on the company can be found in the case study on page 35 of the 2023 Annual Report.

We sold the position in Nutrien after a rally in fertiliser prices drove the company's earnings to unsustainably high levels. We expect earnings to revert lower over time, along with the stock price.

We disposed of the holding in Class I railroad operator Union Pacific given multiple quarters of mixed performance. The company has faced operational challenges, combined with a high relative valuation that embeds faster growth over the next year than we believe is attainable. Union Pacific remains a high-quality operator, but, at current valuations, better opportunities can be found elsewhere within cyclicals.

We sold out of the holding in Genuine Parts Company , a high-quality distributor that focuses on two distinct segments - the automotive aftermarket parts and a broad industrial offering. The company's valuation expanded from a market multiple to a 30-40% premium on peak earnings.

We sold the position in Huntington Bancshares on fears that consensus expense expectations for 2023 were too low and needed to be adjusted upwards.

We disposed of the holding in Gilead Sciences on the view that the company's recent acquisitions will not provide quite the level of commercial upside that was originally hoped for. Therefore, upside is dependent on success in some clinical trials, where the outlook is more limited. While Gilead continues to execute reasonably well on its base business, this appears to be fairly well captured by the stock's current valuation. Gilead remains a solid, quality company, but M&A deals that were needed to rejuvenate interest in the stock may struggle to generate attractive returns.

We sold the position in HanesBrands due to management's inability to improve the company's weakened operations given the demand drop that affected cash flows. While the company's turnaround plan to reduce complexity, focus on the most profitable products and grow the Champion brand had strong merits, the unwinding of demand tailwinds from the pandemic has proved to be too strong. We sold the holding, as the timing of any recovery did not justify the embedded risk of retaining a position.

We sold the position in utility CMS Energy early in the period on valuation concerns but bought it back later on, as a pullback in the company's shares gave us the opportunity to re-establish a holding in a company that we regard as a best-in-class operator in its sector.

Dividend growth

The Company's strong track record of dividend growth continued over the review period. A number of holdings grew their dividends above our long-term average, with several announcing increases in the double digits.

The highest increase was PNC Financial Services Group , which increased its dividend by 20%. Other notable increases came from home-improvement retailer Home Depot , which increased its dividend by 15%; oil refiner Philips 66, with a 12% increase; Broadcom , a provider of semiconductor and infrastructure software services, which increased the payout by 12% and telecommunications equipment firm Cogent Communications , which raised its dividend by 11%.

Three other companies that increased dividends by 10% were CVS Health , the owner of several healthcare brands, Analog Devices , the semiconductor manufacturer, and Royal Bank of Canada . 

Additionally, one holding announced special payments to shareholders during the review period. Derivatives exchange operator CME Group declared an annual variable dividend of US$4.50 per share in December 2022. The company uses this approach to facilitate paying out all cash that it generates over the year beyond a minimum threshold. This compares favourably to the prior year variable dividend of $3.3.

Outlook

With major central banks, led by the Fed, continuing to tighten monetary policy in an effort to control inflation, the risk of an economic slowdown remains. However, the likelihood of a US recession seems to have fallen lately, helped by a relatively robust labour market. Although corporate earnings are still being revised down, we see some interesting investment opportunities at current levels and, as a result, have become more constructive on equities as an asset class.   We continue to see improvement in supply chains globally and continued advancement on this front will be one component on reducing inflation.

Fran Radano
abrdn Inc.
4 April 2023

Ten Largest Investments

As at 31 January 2023

Baker Hughes		CVS Health
Baker Hughes Company provides oilfield products and services. The Company engages in surface logging, drilling, pipeline operations, petroleum engineering, and fertilizer solutions, as well as offers gas turbines, valves, actuators, pumps, flow meters, generators and motors. Baker Hughes serves oil and gas industries worldwide.		CVS Health Corporation provides health care and retail pharmacy services. The Company offers prescription medications, beauty, personal care, cosmetics, and health care products as well as pharmacy benefit management, disease management and administrative services.
Merck & Co		Bristol-Myers Squibb
Merck & Co., Inc. is a global health care company that delivers health solutions through its prescription medicines, vaccines, biological therapies, animal health, and consumer care products, which it markets directly and through its joint ventures. The Company has operations in pharmaceutical, animal health, and consumer care.		Bristol-Myers Squibb Company is a global biopharmaceutical company. The Company develops, licenses, manufactures, markets, and sells pharmaceutical and nutritional products.
MetLife		Comcast
MetLife, Inc. provides individual insurance, employee benefits, and financial services with operations throughout the United States and the regions of Latin America, Europe, and Asia Pacific.		Comcast Corporation provides media and television broadcasting services. The company offers video streaming, television programming, high-speed Internet, cable television and communication services. Comcast serves customers worldwide.
Omega Healthcare Investors		Gaming & Leisure Properties
Omega Healthcare Investors, Inc is a real estate investment trust (REIT). The Company invests in and provides financing to the long-term care industry. Omega operates healthcare facilities in the United States which are operated by independent healthcare operating companies.		Gaming and Leisure Properties, Inc. owns and leases casinos and other entertainment facilities.
Philip Morris		Phillips 66
Philip Morris International Inc., through its subsidiaries, manufactures and sells cigarettes and other tobacco products.		Phillips 66 is a downstream energy company. The Company's operations include oil refining, marketing and transportation.

List of Investments

As at 31 January 2023
		Valuation	Total	Valuation
		2023	assets	2022
Company	Industry classification	£'000	%	£'000
Baker Hughes	Energy Equipment & Services	23,204	4.5	13,294
CVS Health	Health Care Providers & Services	21,498	4.2	-
Merck & Co	Pharmaceuticals	20,939	4.1	-
Bristol-Myers Squibb	Pharmaceuticals	20,654	4.0	20,797
MetLife	Insurance	20,166	3.9	14,995
Comcast	Media	19,178	3.8	19,561
Omega Healthcare Investors	Equity Real Estate Investment Trusts (REITs)	19,131	3.7	14,078
Gaming & Leisure Properties	Equity Real Estate Investment Trusts (REITs)	17,402	3.4	16,837
Philip Morris	Tobacco	16,935	3.3	19,165
Phillips 66	Oil, Gas & Consumable Fuels	16,290	3.2	15,800
Ten largest investments		195,397	38.1
American International	Insurance	15,406	3.0	12,913
Analog Devices	Semiconductors & Semiconductor Equipment	15,321	3.0	4,889
Citigroup	Banks	14,846	2.9	19,415
Emerson Electric	Electrical Equipment	14,657	2.9	13,707
L3 Harris Technologies	Aerospace & Defense	13,959	2.7	12,480
Cogent Communications	Diversified Telecommunication	13,924	2.7	11,853
Cisco Systems	Communications Equipment	13,837	2.7	14,523
Medtronic	Health Care Equipment & Supplies	13,596	2.6	15,427
FMC	Chemicals	13,517	2.6	12,340
PNC Financial Services	Banks	13,438	2.6	-
Twenty largest investments		337,898	65.8
Restaurant Brands International	Hotels, Restaurants & Leisure	13,048	2.5	8,344
CMS Energy	Multi-Utilities	12,832	2.5	11,996
AbbVie	Biotechnology	12,001	2.3	25,508
Broadcom	Semiconductors & Semiconductor Equipment	11,880	2.3	6,550
TC Energy	Oil, Gas & Consumable Fuels	10,470	2.1	15,388
CI Financial	Capital Markets	9,707	1.9	9,701
OneMain	Consumer Finance	8,760	1.7	9,626
VF	Textiles, Apparel & Luxury Goods	8,168	1.6	11,665
JPMorgan Chase & Co.	Banks	7,958	1.6	8,861
CME Group	Capital Markets	7,892	1.5	6,842
Thirty largest investments		440,614	85.8
Air Products & Chemicals	Chemicals	7,810	1.5	10,514
Royal Bank of Canada	Banks	7,483	1.5	7,645
Coca-Cola	Beverages	7,471	1.4	8,185
Texas Instruments	Semiconductors & Semiconductor Equipment	5,758	1.1	6,020
Hannon Armstrong Sustainable	Mortgage Real Estate Investment Trusts (REITs)	5,397	1.1	6,183
Home Depot	Specialty Retail	5,266	1.0	-
CCO Holdings 4.75% 01/02/32	Media	1,447	0.3	-
Venture Global Calcasie 6.25% 15/01/30	Oil, Gas & Consumable Fuels	746	0.2	-
NRG Energy 3.625% 15/02/31	Multi-Utilities	726	0.2	-
Venture Global Calcasie 3.875% 01/11/33	Oil, Gas & Consumable Fuels	717	0.2	-
Forty largest investments		483,435	94.3
Goodyear Tire & Rubber 5% 15/07/29	Consumer Durables	715	0.1	745
Howmet Aerospace 3% 15/01/29	Aerospace & Defense	709	0.1	-
Viatris 2.7% 22/06/30	Pharmaceuticals	706	0.1	-
Graphic Packaging 3.75% 01/02/30	Packaging & Containers	693	0.1	-
NCL 5.875% 15/02/27	Consumer Discretionary	682	0.1	-
Total investments		486,940	94.8
Net current assets		26,494	5.2
Total assets		513,434	100.0

Geographical/Sector Analysis

Geographic Analysis

As at 31 January

		2023			2022
	Equity	Fixed interest	Total	Equity	Fixed interest	Total
Country	%	%	%	%	%	%
Canada	8.4	-	8.4	9.8	-	9.8
USA	90.1	1.5	91.6	89.8	0.4	90.2
	98.5	1.5	100.0	99.6	0.4	100.0

Investment Case Studies

Merck & Co

Dividend yield: 2.8%

Merck & Co (MRK) is a global biopharmaceutical company with strong leadership in the immuno-oncology space. It generated nearly $60 billion in sales in 2022 with a 37% operating margin resulting in very strong cash flow generation which has led to the company consistently growing its dividend by 5-6% in recent years. A key driver for these sales has been uptake of Keytruda with its impressive profile for use against an array of cancers. This drug generated $20 billion in sales in 2022 and is expected to grow until it loses patent protection in 2028.

The position in Merck was taken when the multiple on future earnings post the 2028 patent loss on Keytruda appeared undemanding, while at the same time the expectations for other growth drivers had increased, which would bolster the post 2028 earnings stream. Since then, outstanding Phase 3 data for a drug in peripheral arterial hypertension has been presented that supports a multi-billion dollar opportunity. In addition, manufacturing capacity for Gardasil, an HPV vaccine that prevents certain cancers, will come online in 2023 for a product that has been capacity constrained for the last few years. Finally, excellent Phase 2b data for an oral cholesterol lowering drug supports the Phase 3 development and points to a multi-billion dollar opportunity as Merck expects to price the drug at a level that will optimize payer coverage. Confidence that Merck will generate longer term growth has increased, suggesting that efforts to improve margins by the company should be successful. 

Merck has a strong history where it has been on the forefront of efforts to enable patient access to drugs. The company focuses on developing drugs that can reach 75% of the world, with a view towards enabling access from developing countries and underserved populations in the US.  Merck has targeted enabling 100 million people to gain access to its medicines by 2025 through a variety of strategies, solutions, and partnerships.  And Merck is specifically trying to reach 30 million people from lower and middle income countries as well as underserved US populations with its social investments.  The company provides annual updates to measure progress against these goals.

Analog Devices

Dividend yield: 1.9%

Analog Devices (ADI) is a semiconductor company focused on the analog market selling a wide range of products (over 75,000) into a diversified set of more than 125,000 customers. The analog semiconductor market is the most attractive part of the industry, as the products are in most cases designed specifically for particular end-customer products and add a significant part of the value of the end product but are a very small part of the end cost. This results in ADI's products typically having a long life cycle (over 7 years) and also pricing (as the cost is small and replacement is difficult). ADI's largest two end markets are industrial equipment and autos, both of which have structural growth drivers. In industrial equipment, newer generations of machinery have significantly more functionality built into them at the machine level (rather than the remote computer systems that control them), and in autos, the move towards Electric Vehicles is driving a step change in semiconductor content. These trends should drive 7-10% revenue growth per annum over the cycle, providing a supportive medium term revenue backdrop.

Analog semiconductors have properties which do not require leading edge manufacturing capability, which enables ADI to have strong cash generation and attractive gross margins (74% in 2022). In addition, ADI has pioneered technology sharing arrangements with leading Taiwan based fabrication company, Taiwan Semiconductor Manufacturing Company (TSMC), such that ADI does around half of its own manufacturing and outsources the other half to TSMC. The manufacturing processes used are interchangeable, which enables ADI to take back a larger share of production in house in periods of weaker demand, hereby significantly lowering margin volatility over the cycle. We believe that ADI's strong margins and ongoing cash generation are sustainable and with strong medium term growth outlook driven by the structural drivers in its end markets.

ADI has robust management of its main ESG risks, over a five year period the company reduced water usage by 7% despite 70% revenue growth, and management have targets to increase the rate of water recycling in its operations. It also targets 50% reduction in Greenhouse Gas emissions by 2025. The company also stands to benefit substantially from the ongoing growth in Electric Vehicles, which is a significant driver of increased semiconductor content in cars.

Directors' Report

The Company, which was incorporated in 1902, is registered as a public limited company and is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company's registration number is SC005218. 

The Company has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 February 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 January 2023 so as to enable it to comply with the ongoing requirements for investment trust status.

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

Results and Dividends

The audited financial statements for the year ended 31 January 2023 are contained on pages 66 to 88 of the 2023 Annual Report. Details of dividends for the year to 31 January 2023 can be found on page 4 of the 2023 Annual Report.

Share Capital and Rights attaching to the Company's Shares

At 31 January 2023, the Company's capital structure consisted of 140,234,749 Ordinary shares of 5p each (2022 - 140, 675,934 Ordinary shares of 5p each). During the year to 31 January 2023, the Company bought back 441,185 Ordinary shares for cancellation. There were no Ordinary shares repurchased for cancellation subsequent to the year end.

The Ordinary shares carry a right to receive dividends which are declared from time to time by an ordinary resolution of the Company (up to the amount recommended by the Board) and to receive any interim dividends which the Company may resolve to pay. On a winding-up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings. On a show of hands, every shareholder present in person, or by proxy, has one vote and, on a poll, every Ordinary shareholder present in person has one vote for each share held and a proxy has one vote for every share represented. 

There are no restrictions concerning the holding or transfer of the Company's shares and there are no special rights attached to any of the shares. The Company is not aware of any agreements between shareholders which may result in restriction on the transfer of shares or the voting rights. The rules concerning amendments to the Articles of Association and powers to issue or buyback the Company's shares are contained in the Articles of Association of the Company and the Companies Act 2006. 

Significant Agreements

The Company is not aware of any significant agreements to which it is a party that take effect, alter or terminate upon a change of control of the Company following a takeover and there are no agreements between the Company and its Directors concerning compensation for loss of office. Other than the management agreement with the Manager and the depositary agreement, further details of which are set out below, the Company is not aware of any contractual or other agreements which are essential to its business which ought to be disclosed in the Directors' Report.

Directors

Details of the Directors of the Company who were in office during the year and up to the date of this report are shown on pages 38 to 39 of the 2023 Annual Report. Patrick Edwardson was appointed on 1 July 2022. 

No contract or arrangement existed during the period in which any of the Directors was materially interested. No Director has a service contract with the Company.

Directors' & Officers' Liability Insurance

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company for the year to 31 January 2023 and up to the date of this report. Each Director of the Company shall be entitled to be indemnified out of the assets of the Company to the extent permitted by law against any loss or liability incurred by him in the execution of his duties in relation to the affairs of the Company. These rights are included in the Articles of Association of the Company.

Corporate Governance

The Statement of Corporate Governance, which forms part of the Directors' Report, is shown on pages 44 to 46 of the 2023 Annual Report.

Principal Agreements

Management Agreement

The Company has appointed abrdn Fund Managers Limited ("aFML" or the "Manager"), a wholly owned subsidiary of abrdn plc, as its alternative investment fund manager ("AIFM"). aFML has been appointed to provide the Company with investment management, risk management, administration, company secretarial services and promotional activities. The Company's portfolio is managed by abrdn Inc. (the "Investment Manager") by way of a delegation agreement in place between aFML and abrdn Inc. In addition, aFML has sub-delegated promotional activities to abrdn Investments Limited and administrative and secretarial services to abrdn Holdings Limited. Details of the management agreement, including notice period and fees paid during the year ended 31 January 2023 are shown in note 5 to the financial statements.

Depositary Agreement

The Company has appointed BNP Paribas Trust Corporation UK Limited ("BNPP") as its depositary. During the period, the Depositary was also BNP Paribas Securities Services, London Branch. The depositary agreement was novated to BNPP on 30 June 2022.

Loan Note Agreement

In December 2020, the Company entered into a long-term financing agreement for US$50 million with MetLife comprising two loans of US$25 million with terms of ten and 15 years at an all-in cost of 2.70% and 2.96% respectively, giving a blended rate for ten years of 2.83% (the "Long-Term Financing Agreement").

Substantial Interests

As at 31 January 2023 the Company had received notification or was aware of the following interests in its Ordinary shares:

Shareholder	Number of shares held	% held
Rathbone Brothers	16,928,507	12.1
RBC Brewin Dolphin	11,230,382	8.1
abrdn Retail Plans	10,033,987	7.2
Interactive Investor	6,742,141	4.8
Hargreaves Lansdown	6,496,770	4.6
Canaccord Genuity Wealth Management	6,296,642	4.5
Charles Stanley	5,096,204	3.6
1607 Capital Partners	4,987,174	3.6
WM Thomson	4,357,105	3.1
EFG Harris Allday	4,306,065	3.1
Allspring Global Investments	4,236,597	3.0

As at the date of this Report, no changes to the above interests had been notified to the Company.

Accountability and Audit

The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each Director has taken all the steps that he/she could reasonably be expected to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

The Audit Committee has reviewed the services provided by the auditor during the year, together with the auditor's fees and procedures in connection with the provision of non-audit services. There were no non-audit service fees paid during the year. The Board remains satisfied that PricewaterhouseCoopers LLP's objectivity and independence is being safeguarded.

Going Concern

The Company's assets consist substantially of securities in companies listed on recognised stock exchanges and in normal circumstances are realisable within a short timescale and which can be sold to meet funding commitments if necessary. 

The Board has set gearing limits and regularly reviews actual exposures, cash flow projections and compliance with banking covenants.

The Company undertakes a continuation vote every three years. The last continuation vote was passed at the AGM held in June 2021 with 98.6% of votes in favour.

The Board has considered the impact of recent market events, such as geopolitical developments and believes that there will be a limited resulting financial impact on the Company's operational resources and existence. Given that the Company's portfolio comprises primarily "Level One" assets (listed on a recognisable exchange and realisable within a short timescale), and the Company's relatively low level of gearing, the Company has the ability to raise sufficient funds so as to remain within its debt covenants and pay expenses. 

Taking the above factors into consideration, the Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of this Report. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

Annual General Meeting

The Notice of General Meeting is included at pages 102 to 106 of the 2023 Annual Report. Among the resolutions being put at the Annual General Meeting ("AGM") of the Company to be held on 8 June 2023 at 2.00pm, the following resolutions will be proposed as special business:

 (i) Section 551 Authority to Allot Shares

Resolution 13, which is an ordinary resolution, seeks to renew the Directors' authority under section 551 of the Companies Act to allot shares (excluding treasury shares) up to an aggregate nominal amount of £2,313,873 or, if less, the number representing 33.33% of the issued Ordinary share capital of the Company as at the date of the passing of the resolution. This authority will expire on 31 July 2024 or, if earlier, at the conclusion of the AGM to be held in 2024 (unless previously revoked, varied or extended). The Directors will only exercise this authority if they believe it is advantageous and in the best interests of shareholders. There are no treasury shares in issue.

(ii) Dis-application of Pre-emption Provisions

Resolution 14, which is a special resolution, seeks to renew the dis-application of statutory pre-emption rights in relation to the issue of shares (or sale of shares out of treasury) up to an aggregate nominal amount of £701,174 or, if less, the number representing 10% of the issued Ordinary share capital of the Company as at the date of the passing of the resolution. This authority will expire on 31 July 2024 or, if earlier, at the conclusion of the AGM to be held in 2024. The Directors will only exercise this authority if they believe it is advantageous and in the best interests of shareholders. Ordinary shares would only be issued for cash at a price not less than the NAV per share.

(iii) Share Repurchases

Resolution 15, which is a special resolution, seeks to renew the Company's authority for the Company to make market purchases of its own Ordinary shares, up to a maximum of 14.99% of the issued Ordinary share capital of the Company as at the date of the passing of the resolution. Shares so repurchased will be cancelled or held in treasury. The principal reasons for share buybacks are:

-  to enhance net asset value for continuing shareholders by purchasing shares at a discount to the prevailing net asset value; and

-  to address any imbalance between the supply of and demand for the Company's shares that results in a discount of the quoted market price to the published NAV per share.

Recommendation

The Directors believe that the resolutions to be proposed at the AGM are in the best interests of the Company and its shareholders as a whole and recommend that shareholders vote in favour of the resolutions, as the Directors intend to do in respect of their own beneficial shareholdings totalling, in aggregate, 47,718 Ordinary shares, and representing 0.03% of the existing issued Ordinary share capital of the Company.

By order of the Board
abrdn Holdings Limited
Secretary, Edinburgh
4 April 2023

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. 

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with UK accounting standards, including FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland. 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period.  In preparing these financial statements, the Directors are required to: 

-  select suitable accounting policies and then apply them consistently; 

-  make judgements and estimates that are reasonable and prudent; 

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

-  assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and 

-  use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006.  They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

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

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.  Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report 

We confirm that to the best of our knowledge: 

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

-  the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face. 

We consider this Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

For and on behalf of The North American Income Trust plc
Dame Susan Rice
Chair
4 April 2023

Statement of Comprehensive Income

		Year ended 31 January 2023			Year ended 31 January 2022
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Net gains on investments	11	-	28,105	28,105	-	81,766	81,766
Net currency losses	3	-	(1,557)	(1,557)	-	(558)	(558)
Income	4	22,295	731	23,026	19,040	604	19,644
Investment management fee	5	(947)	(2,209)	(3,156)	(910)	(2,123)	(3,033)
Administrative expenses	7	(854)	-	(854)	(735)	-	(735)
Return before finance costs and taxation		20,494	25,070	45,564	17,395	79,689	97,084
Finance costs	6	(354)	(825)	(1,179)	(316)	(737)	(1,053)
Return before taxation		20,140	24,245	44,385	17,079	78,952	96,031
Taxation	8	(3,014)	447	(2,567)	(2,522)	363	(2,159)
Return after taxation		17,126	24,692	41,818	14,557	79,315	93,872
Return per Ordinary share (pence)	10	12.21	17.60	29.81	10.28	56.00	66.28
The total column of this statement represents the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes on pages 70 to 88 of the 2023 Annual Report are an integral part of the financial statements.
Proposed final dividend. The Board is proposing a final dividend of 3.50p per share (£4,908,000), making a total dividend of 11.00p per share (£15,426,000) for the year to 31 January 2023 which, if approved, will be payable on 12 June 2023 (see note 9). For the year ended 31 January 2022, a final dividend of 4.00p per share was paid (£5,609,000) making a total dividend of 10.30p per share (£14,495,000).

Statement of Financial Position

		As at	As at
		31 January 2023	31 January 2022
	Note	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	11	486,940	470,974
Current assets
Debtors and prepayments	12	2,675	5,712
Cash and short term deposits		26,699	13,875
		29,374	19,587
Creditors: amounts falling due within one year
Other creditors	13	(2,880)	(4,907)
		(2,880)	(4,907)
Net current assets		26,494	14,680
Total assets less current liabilities		513,434	485,654
Creditors: amounts falling due after more than one year
Senior Loan Notes	14	(40,543)	(37,191)
Net assets		472,891	448,463
Capital and reserves
Called up share capital	15	7,012	7,034
Share premium account		51,806	51,806
Capital redemption reserve		15,604	15,582
Capital reserve		373,828	350,388
Revenue reserve		24,641	23,653
Total shareholders' funds		472,891	448,463
Net asset value per Ordinary share (pence)	16	337.21	318.79
The financial statements on pages 66 to 88 were approved and authorised for issue by the Board on 4 April 2023 and were signed on its behalf by:
Dame Susan Rice
Director
The accompanying notes on pages 70 to 88 of the 2023 Annual Report are an integral part of the financial statements.

Statement of Changes in Equity

For the year ended 31 January 2023
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 February 2022	7,034	51,806	15,582	350,388	23,653	448,463
Buyback of Ordinary shares	(22)	-	22	(1,252)	-	(1,252)
Return after taxation	-	-	-	24,692	17,126	41,818
Dividends paid (see note 9)	-	-	-	-	(16,138)	(16,138)
Balance at 31 January 2023	7,012	51,806	15,604	373,828	24,641	472,891
For the year ended 31 January 2022
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 February 2021	7,151	51,806	15,465	277,403	23,591	375,416
Buyback of Ordinary shares	(117)	-	117	(6,330)	-	(6,330)
Return after taxation	-	-	-	79,315	14,557	93,872
Dividends paid (see note 9)	-	-	-	-	(14,495)	(14,495)
Balance at 31 January 2022	7,034	51,806	15,582	350,388	23,653	448,463
The accompanying notes on pages 70 to 88 of the 2023 Annual Report are an integral part of the financial statements.

Statement of Cash Flows

		Year ended	Year ended
		31 January 2023	31 January 2022
	Note	£'000	£'000
Operating activities
Net return before taxation		44,385	96,031
Adjustments for:
Net gains on investments	11	(27,997)	(81,710)
Net losses on foreign exchange transactions		1,557	558
(Increase)/decrease in dividend income receivable	12	(54)	265
(Increase)/decrease in fixed interest income receivable	12	(134)	66
Increase/(decrease) in derivatives	13	240	(120)
(Increase)/decrease in other debtors	12	(146)	1
Increase/(decrease) in other creditors	13	129	(828)
Tax on overseas income	8	(2,567)	(2,159)
Amortisation/(accretion) of senior loan note expenses	6	5	(1)
Accretion of fixed income book cost	11	(1)	(2)
Net cash inflow from operating activities		15,417	12,101
Investing activities
Purchases of investments		(186,765)	(193,847)
Sales of investments		199,772	206,909
Net cash generated from investing activities		13,007	13,062
Financing activities
Equity dividends paid	9	(16,138)	(14,495)
Buyback of Ordinary shares		(1,252)	(6,330)
Net cash used in financing activities		(17,390)	(20,825)
Increase in cash and cash equivalents		11,034	4,338
Analysis of changes in cash and cash equivalents during the year
Opening balance		13,875	9,239
Effect of exchange rate fluctuation on cash held	3	1,790	298
Increase in cash as above		11,034	4,338
Closing balance		26,699	13,875
The accompanying notes on pages 70 to 88 of the 2023 Annual Report are an integral part of the financial statements.

Notes to the Financial Statements

For the year ended 31 January 2023

1	Principal activity
	The Company is a closed-end investment company, registered in Scotland No. SC005218, with its Ordinary shares being listed on the London Stock Exchange.

2.	Accounting policies
	A summary of the principal accounting policies, all of which, unless otherwise stated, have been consistently applied throughout the year and the preceding year is set out below.
	(a)	Basis of preparation and going concern . The financial statements have been prepared in accordance with Financial Reporting Standard 102, the Companies Act 2006 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in July 2022. The financial statements are prepared in sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.
		Going concern . The Company's assets consist substantially of securities in companies listed on recognised stock exchanges and in normal circumstances are realisable within a short timescale and which can be sold to meet funding commitments if necessary. The Board has set gearing limits and regularly reviews actual exposures, cash flow projections and compliance with banking covenants. The Company replaced its Long-Term Financing Agreement in December 2020. The Company undertakes a continuation vote every three years. The last continuation vote was passed at the AGM held in June 2021 with 98.6% of votes in favour. The Board has considered the impact of recent market events, such as geopolitical developments and believes that there will be a limited resulting financial impact on the Company's operational resources and existence. Given that the Company's portfolio comprises primarily "Level One" assets (listed on a recognisable exchange and realisable within a short timescale), and the Company's relatively low level of gearing, the Company has the ability to raise sufficient funds so as to remain within its debt covenants and pay expenses. Taking the above factors into consideration, the Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of this Report. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.
		Significant estimates and judgements. Disclosure is required of judgements and estimates made by management in applying the accounting policies that have a significant effect on the financial statements. There are no significant estimates or judgements which impact these financial statements.
	(b)	Income . Income from investments, including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex dividend. Special dividends are credited to capital or revenue, according to the circumstances. The fixed returns on debt instruments are recognised using the time apportioned accruals basis and the discount or premium on acquisition is amortised or accreted on a straight line basis.
		Interest receivable from cash and short-term deposits is recognised the time apportioned accruals basis.
	(c)	Expenses . All expenses are accounted for on an accruals basis and are charged to the Statement of Comprehensive Income. Expenses are charged against revenue except as follows:
		- transaction costs on the acquisition or disposal of investments are charged to capital in the Statement of Comprehensive Income;
		- expenses are charged to capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect, the investment management fee is allocated 30% to revenue and 70% to capital to reflect the Company's investment policy and prospective income and capital growth.
	(d)	Taxation . The tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible (see note 8 for a more detailed explanation). The Company has no liability for current tax.
		Deferred taxation is provided on all timing differences, that have originated but not reversed at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Statement of Financial Position date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods.
		Owing to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

	(e)	Investments. The Company has chosen to apply the recognition and measurement provisions of IAS 39 Financial Instruments: Recognition and Measurement and investments have been designated upon initial recognition at fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured at fair value. Subsequent to initial recognition, investments are measured at fair value. For listed investments, this is deemed to be bid market prices. Gains and losses arising from changes in fair value and disposals are included as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserve.
	(f)	Borrowings . Monies borrowed to finance the investment objectives of the Company are stated at the amount of the net proceeds immediately after issue plus cumulative finance costs less cumulative payments made in respect of the debt. The finance costs of such borrowings are accounted for on an accruals basis using the effective interest rate method and are charged 30% to revenue and 70% to capital to reflect the Company's investment policy and prospective income and capital growth.
	(g)	Dividends payable. Interim and final dividends are recognised in the period in which they are paid.
	(h)	Nature and purpose of reserves
		Share premium account. The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity capital comprising Ordinary shares of 5p. This reserve is not distributable.
		Capital redemption reserve. The capital redemption reserve is used to record the amount equivalent to the nominal value of any of the Company's own shares purchased and cancelled in order to maintain the Company's capital. This reserve is not distributable.
		Capital reserve. This reserve reflects any gains or losses on realisation of investments in the period along with any changes in fair values of investments held that have been recognised in the Statement of Comprehensive Income. The costs of share buybacks for treasury are also deducted from this reserve. This reserve is distributable although the amount that is distributable is complex to determine and is not necessarily the full amount of the reserve as disclosed within these financial statements.
		Revenue reserve. This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. The amount of the revenue reserve as at 31 January 2023 may not be available at the time of any future distribution due to movements between 31 January 2023 and the date of distribution.

	(i)	Foreign currency. Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Statement of Financial Position date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on the realisation of foreign currencies are recognised in the Statement of Comprehensive Income and are then transferred to the capital reserve.
	(j)	Traded options. The Company may enter into certain derivative contracts (e.g. writing traded options). Option contracts are accounted for as separate derivative contracts and are therefore shown in other assets or other liabilities at their fair value. The initial fair value is based on the initial premium which is received/paid on inception. The premium is recognised in the revenue column over the life of the contract period. Losses on any movement in the fair value of open contracts at the year end realised and on the exercise of the contracts are recorded in the capital column of the Statement of Comprehensive Income.
		In addition, the Company may enter into derivative contracts to manage market risk and gains or losses arising on such contracts are recorded in the capital column of the Statement of Comprehensive Income.
	(k)	Cash and cash equivalents. Cash and cash equivalents comprise cash at bank.

3.	Net currency losses
		2023	2022
		£'000	£'000
	Gains on cash held	1,790	298
	Losses on Senior Loan Notes	(3,347)	(856)
		(1,557)	(558)

4.	Income
		2023	2022
		£'000	£'000
	Income from overseas listed investments
	Dividend income	15,570	13,424
	REIT income	2,816	2,218
	Interest income from investments	167	112
		18,553	15,754
	Other income from investment activity
	Traded option premiums	4,170	3,890
	Deposit interest	303	-
		4,473	3,890
	Total income	23,026	19,644
	During the year, the Company was entitled to premiums totalling £4,170,000 (2022 - £3,890,000) in exchange for entering into option contracts. At the year end there were 5 (2022-2) open positions, valued at a liability of £264,000 (2022 - liability of £24,000) as disclosed in note 13. Losses realised on the exercise of derivative transactions are disclosed in note 11.

5.	Investment management fee
		2023			2022
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fee	947	2,209	3,156	910	2,123	3,033
	Management services are provided by abrdn Fund Managers Limited ("aFML"). With effect from 1 May 2021 the management fee has been charged at 0.75% of net assets up to £250 million, 0.6% between £250 million and £500 million, and 0.5% over £500 million, payable quarterly. Prior to this the management fee was charged at 0.75% of net assets up to £350 million, 0.6% between £350 million and £500 million and 0.5% over £500 million, payable quarterly. Net assets equals gross assets after deducting current liabilities and borrowings and excluding commonly managed funds. The balance due to aFML at the year end was £810,000 (2022 - £773,000). The fee is allocated 30% to revenue and 70% to capital (2022 - same).
	The management agreement between the Company and the Manager is terminable by either party on three months' notice. In the event of a resolution being passed at the AGM to wind up the Company the Manager shall be entitled to three months' notice from the date the resolution was passed. In the event of termination on not less than the agreed notice period, compensation is payable in lieu of the unexpired notice period.

6.	Finance costs
		2023			2022
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Bank interest paid	1	2	3	2	5	7
	Senior Loan Notes	351	819	1,170	313	730	1,043
	Amortised Senior Loan Note issue expenses	2	4	6	1	2	3
		354	825	1,179	316	737	1,053

7.	Administrative expenses
		2023	2022
		£'000	£'000
	Directors' fees	131	129
	Registrar's fees	104	51
	Custody and bank charges	25	27
	Secretarial fees	129	120
	Auditor's remuneration:
	- fees payable to the Company's auditor for the audit of the annual report	40	31
	Promotional activities	215	177
	Printing, postage and stationery	29	31
	Fees, subscriptions and publications	57	51
	Professional fees	37	55
	Depositary charges	46	43
	Other expenses	41	20
		854	735
	Secretarial and administration services are provided by abrdn Fund Managers Limited ("aFML") under an agreement which is terminable on three months' notice. The fee is payable monthly in advance and based on an index-linked annual amount of £129,000 (2022 - £120,000). The balance due at the year end was £22,000 (2022 - £20,000).
	During the year £215,000 (2022 - £177,000) was paid to aFML in respect of promotional activities for the Company and the balance due at the year end was £72,000 (2022 - £18,000).
	With the exception of Auditor's remuneration for the statutory audit, all of the expenses above include irrecoverable VAT where applicable. The Auditor's remuneration for the statutory audit excludes VAT amounting to £8,000 (2022 - £6,000).

8.	Taxation
			2023			2022
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of charge for the year
		UK corporation tax	292	-	292	152	-	152
		Double tax relief	(292)	-	(292)	(152)	-	(152)
		Overseas tax suffered	2,458	109	2,567	2,067	91	2,158
		Tax relief to capital	556	(556)	-	454	(454)	-
		Corporation tax prior year adjustment	-	-	-	1	-	1
		Total tax charge for the year	3,014	(447)	2,567	2,522	(363)	2,159
	(b)	Factors affecting the tax charge for the year . The UK corporation tax rate is 19% (2022 - 19%). The tax charge for the year is lower (2022 - lower) than the corporation tax rate. The differences are explained in the following table.
			2023			2022
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Net return before taxation	20,140	24,245	44,385	17,079	78,952	96,031
		Corporation tax at 19% (2022 - 19%)	3,827	4,607	8,434	3,245	15,001	18,246
		Effects of:
		Non-taxable overseas dividends	(2,958)	(139)	(3,097)	(2,550)	(115)	(2,665)
		Irrecoverable overseas withholding tax	2,458	109	2,567	2,067	91	2,158
		Expenses not deductible for tax purposes	-	-	-	1	-	1
		Double tax relief	(293)	-	(293)	(152)	-	(152)
		Corporation tax prior year adjustment	-	-	-	1	-	1
		Excess management expenses	(20)	20	-	(90)	90	-
		Non-taxable gains on investments	-	(5,340)	(5,340)	-	(15,536)	(15,536)
		Non-taxable currency losses	-	296	296	-	106	106
		Total tax charge	3,014	(447)	2,567	2,522	(363)	2,159
	(c)	Provision for deferred taxation
		At the period end there is no unrecognised deferred tax asset (2022 - £nil) in relation to surplus management expenses.

9.	Dividends
		2023	2022
		£'000	£'000
	Amounts recognised as distributions to equity holders in the year:
	3rd interim dividend for 2022 of 2.5p per share (2021 - 1.9p)	3,517	2,718
	4th interim dividend for 2022 of 4.0p per share (2021 - 4.5p)	5,609	6,408
	1st interim dividend for 2023 of 2.5p per share (2022 - 1.9p)	3,506	2,693
	2nd interim dividend for 2023 of 2.5p per share (2022 - 1.9p)	3,506	2,676
		16,138	14,495
	The third interim dividend and proposed final dividend were unpaid at the year end. Accordingly, neither have been included as a liability in these financial statements.
	The table below sets out the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £17,126,000 (2022 - £14,557,000).
		2023	2022
		£'000	£'000
	1st interim dividend for 2023 of 2.5p per share (2022 - 1.9p)	3,506	2,693
	2nd interim dividend for 2023 of 2.5p per share (2022 - 1.9p)	3,506	2,676
	3rd interim dividend for 2023 of 2.5p per share (2022 - 2.5p)	3,506	3,517
	Proposed final dividend for 2023 of 3.5p per share (2022 - 4.0p)	4,908	5,609
		15,426	14,495
	The cost of the proposed final dividend for 2023 is based on 140,234,749 Ordinary shares in issue, being the number of Ordinary shares in issue at the date of this report.

10.	Return per Ordinary share
		2023		2022
		£'000	p	£'000	p
	Based on the following figures:
	Revenue return	17,126	12.21	14,557	10.28
	Capital return	24,692	17.60	79,315	56.00
	Total return	41,818	29.81	93,872	66.28
	Weighted average number of Ordinary shares in issue		140,284,541		141,265,873

11.	Investments at fair value through profit or loss
		2023	2022
		£'000	£'000
	Investments at fair value through profit or loss
	Opening book cost	425,863	395,289
	Opening investment holdings gains	45,111	8,972
	Opening fair value	470,974	404,261
	Analysis of transactions made during the year
	Purchases at cost	184,369	195,379
	Sales proceeds received	(196,401)	(210,378)
	Gains on investmentsA	27,997	81,710
	Accretion of fixed income book cost	1	2
	Closing fair value	486,940	470,974
	Closing book cost	438,891	425,863
	Closing investment holdings gains	48,049	45,111
	Closing fair value	486,940	470,974
	Listed on overseas stock exchanges	486,940	470,974
	Net gains on investments
	Gains on investmentsA	27,997	81,710
	Investment holding gains on traded optionsB	108	56
		28,105	81,766
	A Includes losses realised on the exercise of traded options of £6,511,000 (2022 - £3,250,000) which are reflected in the capital column of the Statement of Comprehensive Income in accordance with accounting policy 2(j). Premiums received from traded options totalled £4,170,000 (2022 - £3,890,000) per note 4.
	B Options associated are derivative liabilities at the year end.
	The Company received £196,401,000 (2022 - £210,378,000) from investments sold in the year. The book cost of these investments when they were purchased was £171,343,000 (2022 - £164,807,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
	Transaction costs. During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Statement of Comprehensive Income. The total costs were as follows:
		2023	2022
		£'000	£'000
	Purchases	44	81
	Sales	140	142
		184	223
	The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.

12.	Debtors and prepayments
		2023	2022
		£'000	£'000
	Dividends receivable	603	549
	Interest receivable	166	32
	Other debtors	246	100
	Amount due from brokers	1,660	5,031
		2,675	5,712

13.	Creditors: amounts falling due within one year
		2023	2022
		£'000	£'000
	Amounts due to brokers	1,444	3,840
	Investment management fee payable	810	773
	Traded option contracts	264	24
	Interest payable	131	120
	Other creditors	231	150
		2,880	4,907

14.	Senior Loan Notes
	Creditors: amounts falling due after more than one year
		2023	2022
		£'000	£'000
	2.70% Senior Loan Notes - 10 years	20,307	18,634
	2.96% Senior Loan Notes - 15 years	20,307	18,634
	Unamortised Loan Note issue expenses	(71)	(77)
		40,543	37,191
	On 21 December 2020 the Company issued a US$25 million 10 years Senior Loan Note at an annualised interest rate of 2.70% and a US$25 million 15 years Senior Loan Note at an annualised interest rate of 2.96%. The Loan Notes are unsecured and unlisted. Interest is payable in half yearly instalments in June and December and the Loan Notes are due to be redeemed at par on 21 December 2030 and 21 December 2035. The Company has complied with the Senior Loan Note Purchase Agreement covenant throughout the period since issue that the ratio of net assets to gross borrowings must be greater than 3.5:1, that net assets will not be less than £200,000,000, and that the total number of Listed Assets is to be more than 35.
	The total fair value of the Senior Loan Notes at 31 January 2023 was £38,579,000 (2022 - £41,348,000) comprising £19,278,000 (2022 - £20,065,000) in respect of the 10 years 2.70% Senior Loan Note and £19,301,000 (2022 - £21,283,000) in respect of the 15 years 2.96% Senior Loan Note. The fair value of the Senior Loan Notes has been determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time.

15.	Called up share capital
		2023	2022
		£'000	£'000
	Allotted, called-up and fully paid:
	Opening balance	7,034	7,151
	Ordinary shares bought back in the year	(22)	(117)
	140,234,749 (2022 - 140,675,934) Ordinary shares of 5p each	7,012	7,034
	During the year 441,185 (2022 - 2,353,212) Ordinary shares of 5p each were repurchased by the Company at a total cost, including transaction costs, of £1,252,000 (2022 - £6,330,000).
	Subsequent to the year end, no Ordinary shares of 5p each have been repurchased by the Company.

16.	Net asset value per Ordinary share
	The net asset value per share and the net assets attributable to the Ordinary shareholders at the year end were as follows:
		2023	2022
	Net assets attributable	£472,891,000	£448,463,000
	Number of Ordinary shares in issueA	140,234,749	140,675,934
	Net asset value per share	337.21p	318.79p
	A 2022 Includes 66,395 Ordinary shares bought back prior to the year end which had not yet settled.

17.	Analysis of changes in net debt
		At				At
		1 February	Currency	Non-cash	Cash	31 January
		2022	differences	movement	flows	2023
		'000	'000	'000	'000	'000
	Cash and short term deposits	13,875	1,790	-	11,034	26,699
	Debt due after more than one year	(37,191)	(3,347)	(5)	-	(40,543)
		(23,316)	(1,557)	(5)	11,034	(13,844)
		At				At
		1 February	Currency	Non-cash	Cash	31 January
		2021	differences	movement	flows	2022
		'000	'000	'000	'000	'000
	Cash and short term deposits	9,239	298	-	4,338	13,875
	Debt due after more than one year	(36,336)	(856)	1	-	(37,191)
		(27,097)	(558)	1	4,338	(23,316)
	A statement reconciling the movement in net funds to the net cash flow has not been presented as there are no differences from the above analysis.

18.	Financial instruments and risk management
	The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments, other than derivatives, comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income.
	Subject to Board approval, the Company also has the ability to enter into derivative transactions, in the form of traded options, for the purpose of enhancing income returns and portfolio management. During the year, the Company entered into certain derivative contracts. As disclosed in note 4, the premium received in respect of options written in the year was £4,170,000 (2022 - £3,890,000). Positions closed during the year realised a loss of £6,511,000 (2022 - £3,250,000). The largest position in derivative contracts held during the year at any given time was £542,000 (2022 - £613,000). The Company had 5 (2022 - 2) open positions in derivative contracts at 31 January 2023 valued at a liability of £264,000 (2022 - £24,000) as disclosed in note 13.
	The Board has delegated the risk management function to the Manager under the terms of its management agreement with aFML (further details which are included under note 5). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such an approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors.
	Risk management framework. The directors of aFML collectively assume responsibility for aFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.
	aFML is a fully integrated member of the abrdn plc group of companies (referred to as "the Group"), which provides a variety of services and support to aFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to abrdn Inc., which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in FUND 3.2.2R (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.
	The AIFM conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Chief Risk Officer, who reports to the Chief Executive Officer of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SHIELD").
	The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group's Chief Executive Officer and the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.
	The Group's corporate governance structure is supported by several committees to assist the board of directors of abrdn plc, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.
	Risk management . The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.
	The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors, other than for currency disclosures.
	(i)	Market risk. The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.
		Interest rate risk . Interest rate movements may affect:
		- the fair value of the investments in fixed interest rate securities;
		- the level of income receivable on cash deposits;
		- interest payable on the Company's variable rate borrowings.
		Management of the risk . The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
		The Board reviews on a regular basis the values of the fixed interest rate securities.
		The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving and uncommitted facilities. Details of borrowings at 31 January 2023 are shown in note 14 on page 79 of the 2023 Annual Report.

		Interest risk profile . The interest rate risk profile of the portfolio of financial instruments at the Statement of Financial Position date was as follows:
			Weighted
			average
			period for	Weighted			Non-
			which	average	Fixed	Floating	interest
			rate is fixed	interest rate	rate	rate	bearing
		At 31 January 2023	Years	%	£'000	£'000	£'000
		Assets
		Sterling	-	-	-	4,599	-
		US Dollar	7.50	4.36	7,141	22,221	439,091
		Canadian Dollar	-	-	-	(121)	40,708
		Total assets			7,141	26,699	479,799
		Liabilities
		Loan Notes- US$25,000,000	7.89	2.70	20,272	-	-
		Loan Notes- US$25,000,000	12.90	2.96	20,271	-	-
		Total liabilities			40,543	-	-
			Weighted
			average
			period for	Weighted			Non-
			which	average	Fixed	Floating	interest
			rate is fixed	interest rate	rate	rate	bearing
		At 31 January 2022	Years	%	£'000	£'000	£'000
		Assets
		Sterling	-	-	-	4,982	-
		US Dollar	8.00	7.00	1,642	8,711	423,051
		Canadian Dollar	-	-	-	182	46,281
		Total assets			1,642	13,875	469,332
		Liabilities
		Loan Notes- US$25,000,000	9.00	3.00	18,596	-	-
		Loan Notes- US$25,000,000	14.00	3.00	18,595	-	-
		Total liabilities			37,191	-	-
		The weighted average interest rate is based on the current yield of each asset, weighted by its market value.
		The floating rate assets consist of cash deposits at prevailing market rates.
		The non-interest bearing assets represent the equity element of the portfolio.
		Short-term debtors and creditors have been excluded from the above tables.
		Financial Liabilities. The company has fixed rate borrowings by way of its senior loan notes, details of which can be found in note 14.

		Interest rate sensitivity . The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the Statement of Financial Position date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.
		If interest rates had been 100 basis points higher or lower (based on current parameter used by Manager's Investment Risk Department on risk assessment) and all other variables were held constant, the Company's revenue return for the year ended 31 January 2023 would increase/decrease by £267,000 (2022 - decrease/increase by £139,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances.
		In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. The risk parameters used will also fluctuate depending on the current market perception.
		Foreign currency risk . The Company's portfolio is invested mainly in US quoted securities and the Statement of Financial Position can be significantly affected by movements in foreign exchange rates.
		Management of the risk . It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. A significant proportion of the Company's borrowings, as detailed in note 14, are denominated in foreign currency. Foreign currency risk exposure by currency denomination is detailed under Interest Risk Profile.
		The revenue account is subject to currency fluctuation arising on overseas income. The Company does not hedge this currency risk.
		Foreign currency sensitivity . There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments, and they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.
		Price risk . Price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
		Management of the risk . It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process, as detailed on page 94, both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges.
		Price risk sensitivity . If market prices at the Statement of Financial Position date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 January 2023 would have increased/decreased by £48,694,000 (2022 - increase/decrease of £47,097,000) and equity reserves would have increased/decreased by the same amount.

	(ii)	Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
		Management of the risk . Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary.
	(iii)	Credit risk. This is failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.
		Management of the risk
		- where the Manager makes an investment in a bond, corporate or otherwise, the credit ratings of the issuer are taken into account so as to manage the risk to the Company of default;
		- investments in quoted bonds are made across a variety of industry sectors so as to avoid concentrations of credit risk;
		- transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Company of default;
		- investment transactions are carried out with a number of brokers, whose credit-standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker;
		- the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the custodian's records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. The Manager's Compliance department carries out periodic reviews of the custodian's operations and reports its finding to the Manager's Risk Management Committee;
		- cash is held only with reputable banks with acceptable credit quality. It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties.
		Credit risk exposure . In summary, compared to the amounts in the Statement of Financial Position, the exposure to credit risk at 31 January 2023 was as follows:
				2023		2022
				Statement of		Statement of
				Financial	Maximum	Financial	Maximum
				Position	exposure	Position	exposure
				£'000	£'000	£'000	£'000
		Non-current assets
		Quoted bonds		7,141	7,141	1,642	1,642
		Current assets
		Amount due from brokers		1,660	1,660	5,031	5,031
		Dividends receivable		603	603	549	549
		Interest receivable		166	166	32	32
		Other debtors and prepayments		246	246	100	100
		Cash and short-term deposits		26,699	26,699	13,875	13,875
				36,515	36,515	21,229	21,229
		None of the Company's financial assets are secured by collateral or other credit enhancements.
		Credit ratings . The table below provides a credit rating profile using Standard and Poors credit ratings for the quoted bonds at 31 January 2023 and 31 January 2022:
						2023	2022
						£'000	£'000
		B+				682	-
		BB+				2,898	-
		BB				693	897
		BB-				2,162	745
		BBB-				706	-
						7,141	1,642
		Fair values of financial assets and financial liabilities . The book value of cash at bank and bank loans and overdrafts included in these financial statements approximate to fair value because of their short-term maturity. Investments held as dealing investments are valued at fair value. The carrying values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. For all other short-term debtors and creditors, their book values approximate to fair values because of their short-term maturity.

19.	Capital management policies and procedures
	The investment objective of the Company is to provide investors with above average dividend income and long term capital growth through active management of a portfolio consisting predominately of S&P 500 US equities.
	The capital of the Company consists of bank borrowings and equity comprising issued capital, reserves and retained earnings. The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
	The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:
	- the planned level of gearing which takes into account the Investment Manager's views on the market;
	- the level of equity shares in issue; and
	- the extent to which revenue in excess of that which is required to be distributed should be retained.
	The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
	Details of the Company's gearing facilities and financial covenants are detailed in note 14 of the financial statements.

20.	Fair value hierarchy
	FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:
	Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
	Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.
	Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
	The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
					Level 1	Level 2	Level 3	Total
	As at 31 January 2023			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities			a)	479,799	-	-	479,799
	Quoted bonds			b)	-	7,141	-	7,141
					479,799	7,141	-	486,940
	Financial liabilities at fair value through profit or loss
	Derivatives			c)	-	(264)	-	(264)
	Net fair value				479,799	6,877	-	486,676
					Level 1	Level 2	Level 3	Total
	As at 31 January 2022			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities			a)	469,332	-	-	469,332
	Quoted bonds			b)	-	1,642	-	1,642
					469,332	1,642	-	470,974
	Financial liabilities at fair value through profit or loss
	Derivatives			c)	-	(24)	-	(24)
	Net fair value				469,332	1,618	-	470,950
	a)	Quoted equities. The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b)	Quoted bonds. The fair value of the Company's investments in quoted bonds has been determined by reference to their quoted bid prices at the reporting date. Investments categorised as Level 2 are not considered to trade in active markets.
	c)	Derivatives. The Company's investment in exchange traded options have been fair valued using quoted prices and have been classified as Level 2 as they are not considered to trade in active markets.
	The fair value of the senior loan notes has been calculated as £38,579,000 (2022 - £41,348,000), determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time, compared to carrying amortised cost of £40,543,000 (2022 - £37,191,000).

21.	Related party transactions
	Directors' fees and interests . Fees payable during the year to the Directors and their interests in shares of the Company are disclosed within the Directors' Remuneration Report on page 52 of the 2023 Annual Report .
	Transactions with the Manager. The Company has an agreement with the Manager for the provision of investment management, secretarial, accounting and administration and promotional activity services.
	Details of transactions during the year and balances outstanding at the year end are disclosed in notes 5 and 7.

Alternative Performance Measures

Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
Discount to net asset value
The discount is the amount by which the share price is lower than the net asset value per share with debt at fair value, expressed as a percentage of the net asset value with debt at fair value.
		2023	2022
NAV per Ordinary share (p)	a	337.21p	318.79p
Share price (p)	b	306.00p	283.00p
Discount	(a-b)/a	9.3%	11.2%
Dividend cover
Dividend cover measures the revenue return per share divided by total dividends per share, expressed as a ratio.
		2023	2022
Revenue return per share	a	12.21p	10.28p
Dividends per share	b	11.00p	10.30p
Dividend cover	a/b	1.11	1.00
Dividend yield
Dividend yield is calculated using the Company's annual dividend per Ordinary share divided by the share price, expressed as a percentage.
		2023	2022
Annual dividend per Ordinary share (p)	a	11.00p	10.30p
Share price (p)	b	306.00p	283.00p
Dividend yield	a/b	3.6%	3.6%
Net gearing
Net gearing measures total borrowings less cash and cash equivalents divided by shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes net amounts due to and from brokers at the period end as well as cash and short-term deposits.
		2023	2022
Borrowings (£'000)	a	40,543	37,191
Cash (£'000)	b	26,699	13,875
Amounts due to brokers (£'000)	c	1,444	3,840
Amounts due from brokers (£'000)	d	1,660	5,031
Shareholders' funds (£'000)	e	472,891	448,463
Net gearing	(a-b+c-d)/e	2.9%	4.9%
Ongoing charges ratio
Ongoing charges ratio is considered to be an alternative performance measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC which is defined as the total of investment management fees and administrative expenses and expressed as a percentage of the average daily net asset values with debt at fair value published throughout the year.
		2023	2022
Investment management fees (£'000)		3,156	3,033
Administrative expenses (£'000)		854	735
Less: non recurring charges A (£'000)		(8)	(10)
Ongoing charges (£'000)		4,002	3,758
Average net assets (£'000)		458,929	429,283
Ongoing charges ratio (excluding look-through costs)		0.87%	0.88%
Look-through costsB		0.06%	0.07%
Ongoing charges ratio (including look-through costs)		0.93%	0.95%
A Professional services considered unlikely to recur.
B Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which includes finance costs and transaction charges.
Total return
NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-ended and closed-ended competitors, and the Reference Index, respectively.
			Share
Year ended 31 January 2023		NAV	Price
Opening at 1 February 2022	a	318.8p	283.0p
Closing at 31 January 2023	b	337.2p	306.0p
Price movements	c=(b/a)-1	5.8%	8.1%
Dividend reinvestmentA	d	3.8%	4.3%
Total return	c+d	+9.6%	+12.4%
			Share
Year ended 31 January 2022		NAV	Price
Opening at 1 February 2021	a	262.5p	234.0p
Closing at 31 January 2022	b	318.8p	283.0p
Price movements	c=(b/a)-1	21.5%	20.9%
Dividend reinvestment	d	4.2%	4.7%
Total return	c+d	+25.7%	+25.6%
A NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.

ADDITIONAL NOTES TO THE ANNUAL FINANCIAL REPORT

This Annual Financial Report announcement is not the Company's statutory accounts for the year ended 31 January 2023. The statutory accounts for the year ended 31 January 2022 received an audit report which was unqualified.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 January 2023 or 2022 but is derived from those accounts. Statutory accounts for 2022 have been delivered to the registrar of companies, and those for 2023 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The statutory accounts for the financial year ended 31 January 2023 were approved by the Directors on 4 April 2023 but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which is to be held at 2.00 pm on 8 June 2023.

The Annual Report will be posted to shareholders later in April 2023 and additional copies will be available from the Manager (Investor Helpline - Tel. [phone]) or by download from the Company's webpage

( northamericanincome.co.uk )

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

For The North American Income Trust plc

abrdn Holdings Limited, Company Secretary

 

END

 

 

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