shiresincome.co.uk
Shires Income PLC
Annual Report 31 March 2024
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Shires Income PLC 1
“The year to 31 March 2024 was good for equities
globally, with growing expectations of interest rate
reductions during the course of 2024 which
provides a positive outlook for the year ahead.”
Robert Talbut, Chairman
“The NAV total return for the year was 5.1%. The
Company lagged a rising market as we would
expect, given the defensive and income focused
nature of the portfolio holdings.”
Iain Pyle and Charles Luke,
abrdn Investments Limited
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2 Shires Income PLC
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR
IMMEDIATE ATTENTION. If you are in any doubt about the
action you should take, you are recommended to seek
your own financial advice from your stockbroker, bank
manager, solicitor, accountant or other financial adviser
authorised under the Financial Services and Markets Act
2000 (as amended by the Financial Services Act 2012) if
you are in the United Kingdom or, if not, from another
appropriately authorised financial adviser.
If you have sold or otherwise transferred all your Ordinary
shares in Shires Income PLC, please forward this
document, together with the accompanying documents
immediately to the purchaser or transferee, or to the
stockbroker, bank or agent through whom the sale or
transfer was effected for transmission to the purchaser
or transferee.
Overview
Performance Highlights 3
Financial Calendar and Highlights 4
Strategic Report
Chairman’s Statement 8
Overview of Strategy 12
Promoting the Success of the Company 20
Performance 24
Investment Manager’s Review 28
Investment Case Studies 33
The Investment Manager’s Approach to ESG 35
Portfolio
Ten Largest Investments 42
Investment Portfolio - Equities 43
Investment Portfolio - Other Investments 46
Distribution of Assets and Liabilities 47
Sector Analysis 48
Governance
Board of Directors 52
Directors’ Report 55
Directors’ Remuneration Report 64
Audit Committee’s Report 68
Statement of Directors’ Responsibilities 72
Independent Auditor’s Report to the
Members of Shires Income PLC 73
Financial Statements
Statement of Comprehensive Income 82
Balance Sheet 83
Statement of Changes in Equity 84
Cash Flow Statement 85
Notes to the Financial Statements 86
Corporate Information
Information about the Investment Manager 108
Investor Information 111
Glossary of Terms 113
Alternative Performance Measures 116
AIFMD Disclosures (Unaudited) 119
General
Notice of Annual General Meeting 121
Appendix to Notice of Annual General Meeting 127
Contact Addresses 129
Contents
Shires Income PLC 3
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Net asset value per Ordinary share
total return
A
Share price total return
A
+5.1%
–5.7%
2023
–2.2%
2023
–5.5%
Benchmark index total return Earnings per share (revenue)
+8.4%
14.75p
2023
+2.9%
2023
14.83p
Dividends per Ordinary share Dividend yield
A
14.40p
6.5%
2023
14.20p
2023
5.7%
A
Alternative Performance Measure (see pages 116 to 118).
Net asset value per
Ordinary share*
Ordinary share price*
Dividends per
Ordinary share
At 31 March – pence
At 31 March – pence
Year ended 31 March – pence
207.4
262.4
278.3
257.9
256.0
20 21 22 23 24
200.5
248.0
279.0
250.0
222.0
20 21 22 23 24
13.20
13.20
13.80
14.20
14.40
20 21 22 23 24
*excludes dividend reinvestment
Performance Highlights
4 Shires Income PLC
Financial Calendar
Online Shareholder Presentation
25 June 2024
Annual General Meeting
5 July 2024
Expected payment dates of quarterly dividends
31 July 2024
31 October 2024
31 January 2025
30 April 2025
Half year end
30 September 2024
Expected announcement of results for the six months
ending 30 September 2024
November 2024
Financial year end
31 March 2025
Expected announcement of results for year ending
31 March 2025
May 2025
Financial Calendar and Highlights
Shires Income PLC 5
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Highlights
31 March 2024
31 March 2023
Total assets (as defined on page 115)
£124,920,000
£98,864,000
Shareholders’ funds
£105,957,000
£79,913,000
Market capitalisation
A
£91,840,000
£77,411,000
Net asset value per Ordinary share (as defined on page (114)
B
256.00p
257.92p
Share price
222.00p
250.00p
Discount to NAV (cum-income)
C
13.3%
3.1%
Net gearing
C
16.4%
22.2%
Dividend and earnings
Revenue return per share
D
14.75p
14.83p
Dividend per share
E
14.40p
14.20p
Dividend cover
C
1.02
1.04
Revenue reserves
F
£7,388,000
£7,040,000
Dividend yield
C
6.5%
5.7%
Operating costs
Ongoing charges ratio (excluding look-through costs)
C
1.09%
1.03%
Ongoing charges ratio (including look-through costs)
C
1.10%
1.17%
A
Represents the number of Ordinary shares in issue in the Company multiplied by the Company’s share price.
B
Net asset value per Ordinary share is calculated after the repayment of the capital paid up on Cumulative Preference shares (see
note 16 on page 98).
C
Considered to be an Alternative Performance Measure, as defined on pages 116 and 117.
D
Measures the revenue earnings for the year divided by the weighted average number of Ordinary shares in issue (see Statement of
Comprehensive Income).
E
The figures for dividend per share reflect the years in which they were earned (see note 9 on pages 92 and 93).
F
The revenue reserve figure does not take account of payment of the third interim or final dividend amounting to £3,310,000 (2023 –
£2,415,000) combined.
6 Shires Income PLC
Strategic
Report
Shires Income PLC 7
The Company’s investment objective
is to provide shareholders with a high
level of income, together with the
potential for growth of both income
and capital, from a diversified
portfolio substantially invested in UK
equities but also in preference
shares, convertibles and other fixed
income securities.
The Company has a largely retail
investor shareholder base.
Regular updates are provided
through the Company’s website at
www.shiresincome.co.uk
8 Shires Income PLC
Highlights
· Successful completion of the combination with abrdn
Smaller Companies Income Trust plc (“aSCIT”).
· Increased dividend of 14.40p per Ordinary share,
providing a dividend yield of 6.5% based on the year end
share price.
· Confidence that the dividend remains sustainable.
· NAV total return of 5.1%, compared to a total return of
8.4% from the FTSE All-Share Index.
Markets and Performance
The year to 31 March 2024 was good for equities globally,
with growing expectations of interest rate reductions
during the course of 2024. The UK market, as represented
by the FTSE All-Share Index, delivered a total return of
8.4%. The Company’s net asset value (“NAV”) total return
for the year was lower, at 5.1%. Although lagging the
market return, the performance for the year is in line with
what we would expect, given the defensive and income
focused nature of the portfolio, and delivered the
Company’s objective of providing shareholders with a high
level of income, together with the potential for growth of
both income and capital.
Revenue earnings per share for the year were broadly
similar to last year and the total dividends for the year
have been increased to 14.40p per Ordinary share. This
represents a dividend yield of 6.5% based on the year end
share price.
The share price performance for the year was
disappointing, with a negative total return of 5.7%,
reflecting a significant widening of the discount, to 13.3%
at the year end. Discount widening has been exhibited
across much of the investment trust universe. The
persistence of higher interest rates is a factor, as is
decreased demand for collective funds generally, but, in
the case of Shires, the decision of abrdn to transfer its in-
house savings scheme to Interactive Investor certainly
contributed to some short-term selling of our shares. The
Board’s view was that this unprecedented level of discount
was unwarranted, and, to address this imbalance of
supply and demand for the Company’s shares, the
Company made use of its share buy back authority during
the year and will continue to make use of this authority
going forward if considered appropriate.
More detailed information on performance for the year
and investment activity within the portfolio are contained
within the Investment Manager’s Review.
Earnings and Dividends
The Company’s revenue earnings per share for the year
were 14.75p (2023 – 14.83p). Investment income was
13.7% higher than last year, due mainly to the impact of a
larger portfolio following the aSCIT transaction, including a
special dividend of £445,000 from aSCIT at the time of the
transaction. The transaction also resulted in a larger share
capital base meaning that the per share revenue earnings
for the year were broadly unchanged.
The Company has paid three interim dividends of 3.20p
per Ordinary share (2023: 3.20p). The Board is proposing a
final dividend of 4.80p per Ordinary share (2023: 4.60p),
which will be paid on 31 July 2024 to shareholders on the
register on 5 July 2024. This final dividend brings total
Ordinary share dividends for the year to 14.40p per share.
“The final dividend brings total
Ordinary share dividends for the year
to 14.40p per share, representing a
dividend yield of 6.5%.”
With the total dividends for the year covered by earnings,
revenue reserves will stand at 0.69 times (2023 – 1.05
times) the current annual Ordinary share dividend cost.
The reduction in reserve cover during the year is as a
result of the larger capital base following the aSCIT
transaction, but it should still allow the Company to
support future dividend payments in times of reduced
earnings. In addition, the Company also has the flexibility
to pay dividends from its realised capital reserves,
although the Board has no current intention of making use
of this flexibility. As explained below, we propose to create
greater flexibility through cancelling the amount standing
to the credit of the Company’s Share Premium Account.
Through the proposed changes to the investment policy
described below and the cancellation of the Share
Premium Account, together with the already healthy level
of revenue reserves, shareholders should take comfort
that maintaining and potentially growing the dividend
remains realistic.
Chairman’s Statement
Shires Income PLC 9
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Allocation of Costs
The Company has historically allocated management
fees and finance costs 50% to Revenue and 50% to Capital
in the Statement of Comprehensive Income. Following a
review of this allocation after the completion of the aSCIT
transaction, the Board has decided that, with effect from 1
April 2024, these costs will be charged 40% to Revenue
and 60% to Capital. The Board considers that this
allocation better reflects the expected long-term view of
the nature of the future investment returns of the enlarged
portfolio and is consistent with the treatment adopted by
other UK Equity Income investment trusts.
Discount and Share Buy Backs
The discount at which the price of the Company’s
Ordinary shares traded relative to the NAV widened
during the period, to 13.3% as at 31 March 2024 compared
to 3.1% at the start of the year. While it is disappointing to
see the Company’s discount widen, this is consistent with
what we have seen in the investment trust sector more
generally. It is important to note that Shires, as a high yield,
relatively risk averse, company is seen by some as in more
direct competition with cash deposits than many of its
peers. Recent interest rate rises have made cash
investments more attractive and we suspect that this
has had a detrimental effect on demand for the
Company’s shares.
Market forecasts of reductions in interest rates later this
year should make Shires relatively more attractive to
investors. In the meantime, we believe that what the Board
sees as the quite secure dividend and the potential for
capital growth and inflation protection provided by the
Company, makes it a much more compelling option
compared to cash.
The Board has recently used share buybacks for the first
time in the Company’s history to address the liquidity of
the Company’s shares - excess supply being one of the
factors which can impact the discount level. The extent of
buybacks is somewhat limited by the size of the Company
and its gearing. It is in all interests to grow the Company
over time in order to spread fixed costs and increase
liquidity. Buying back shares acts against this and so has
been used with caution.
The Company bought back 863,532 Ordinary shares
during the year at a cost of £1.9 million and an average
discount of 9.3%, thereby providing a modest
enhancement to the NAV. All shares bought back are
held in treasury for potential future resale at a premium
to the NAV.
The Board will seek the renewal of the share buy back
authority at the AGM and will make use of this authority if it
considers it in the best interests of shareholders to do so.
It is encouraging to see that the discount has started to
narrow since the year end.
Proposed Changes to Investment Policy
Following a review by the Board and Manager of the
Company’s investment policy we propose to seek
shareholder approval at the AGM, principally to increase
the limit on exposure to overseas companies from 10% of
total assets to 20% of total assets. At the year end, 9.2% of
the Company’s total assets were invested in the equity
securities of overseas companies. The Board considers
that this change will provide the Investment Manager with
greater flexibility to achieve the Company’s investment
objective. The Company will remain in the AIC’s UK Equity
Income Sector following the change.
The full text of the proposed amendments may be found
in the Appendix to the Notice of Annual General Meeting
on page 127.
Proposed Cancellation of Share Premium
Account
Following the issue of new Ordinary shares to
shareholders of aSCIT, the value of the Company’s Share
Premium Account now amounts to £50.0 million. This
reserve cannot be used for distributions, including share
buy backs or the payment of dividends, although the
Company is permitted to use its realised capital reserve,
which amounted to £27.5 million at the year end, for
these purposes.
The Board will propose a special resolution at the AGM to
cancel the amount standing to the credit of the Share
Premium Account. The cancellation will also require court
approval which will be sought following the AGM. Once
this exercise is complete, the newly created distributable
reserve will be available to fund the cost of share buy
backs and dividend payments. The Board considers that it
is in shareholders’ interests for the Company to have this
flexibility, although it has no current intention of making
use of it for dividend payments which will continue to be
resourced through net revenue and revenue reserves.
10 Shires Income PLC
Gearing
The Company has a £20 million loan facility of which £19
million was drawn down at the year end. Net of cash, this
represented gearing of 16.4%, compared to 22.2% at the
start of the year. The reduction is due mainly to the impact
of the aSCIT transaction, with the Company having the
same value of borrowings but a larger asset base. The
weighted average borrowing cost at the year end was
5.3% (31 March 2023 - 4.7%).
The Board continually monitors the level of gearing and
takes the view that the borrowings are notionally invested in
the less volatile fixed income part of the portfolio which
generates a high level of income, giving the Investment
Manager greater ability to invest in a range of equity stocks
with lower yields and higher growth prospects. The Board
believes that this combination should enable the Company
to achieve a high and potentially growing level of dividend,
and also deliver some capital appreciation for shareholders.
Manager’s Fee Re-Investment Programme
The Board notes the announcement by abrdn plc in
December 2023 of the initiation of a programme to invest
up to six months’ worth of the management fees received
from the UK investment trusts it manages, in the
underlying companies’ shares.
We welcome this proposal as it demonstrates
commitment by abrdn to the Company and the
investment trust sector.
aSCIT Transaction
On 26 July 2023, the Company announced that it had
agreed terms with the Board of aSCIT for a proposed
combination of the assets of the Company with those of
aSCIT (the “aSCIT transaction”). This was achieved by a
scheme of reconstruction and winding up of aSCIT, where
assets were transferred to the Company in exchange for
the issue of new Ordinary shares to aSCIT shareholders. A
cash exit was also available under the scheme. aSCIT and
Shires shareholders approved the scheme on 20
November 2023 and it completed on 1 December. Shires
issued 11,268,494 new Ordinary shares to aSCIT
shareholders, with the new shares admitted to trading on
4 December 2023. The terms of the scheme were such
that Shires shareholders did not suffer any dilution in their
interests from the costs of the scheme, and an important
component of the scheme offsetting these costs was the
elimination of the discount to net asset value on the
Company’s holding in aSCIT via the switch to directly held
smaller companies, which are now valued at their
market price.
The transaction increased the size of Shires by more than
35%, to net assets of £101 million at the point when aSCIT’s
assets transferred. Other than as highlighted above, the
Company will continue with its existing investment policy
and management arrangements, and now has a focused
and direct exposure to UK smaller companies rather than
obtaining its exposure through investing in aSCIT. This
provides an additional benefit of allowing the Investment
Manager to spread risk amongst a number of investments
rather than all risk being concentrated in one vehicle. In
addition, as a result of the transaction, the Company’s
gearing ratio has fallen as explained above.
Board Composition
The Board is pleased to welcome Simon White as an
independent non-executive Director of the Company with
effect from 1 January 2024. Simon has a background in UK
equity fund management and significant experience in
the investment trust sector. He was, until June 2022, Co-
Head of Investment Trusts at BlackRock where he was
responsible for overseeing the company secretarial, sales,
marketing and third-party administration services. Simon
has an excellent understanding of the investment trust
sector and we believe he will make a significant
contribution to the Board going forward.
As previously announced, I shall be stepping down from
the Board at the AGM in July, having served for nine years.
Robin Archibald, who is the current Chair of the Audit
Committee and Senior Independent Director, will replace
me as Chairman, Jane Pearce will become the new Chair
of the Audit Committee and Helen Sinclair will become the
new Senior Independent Director.
I would like to thank my colleagues on the Board for their
support during my time as Chairman. I am confident that
the Board has the appropriate collective skills and
experience to take the Company forward and I wish the
Company every success in the future.
“An online shareholder presentation
will be held at 10.00am on Tuesday
25 June 2024.”
Chairman’s Statement
Continued
Shires Income PLC 11
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Online Shareholder Presentation and Annual
General Meeting (“AGM”)
Given the popularity of our Online Shareholder
Presentation in previous years, we have decided to hold
another online presentation this year, in addition to the
AGM. This will be held at 10.00am on Tuesday 25 June
2024. A presentation will be given by the Investment
Manager, and those in attendance will be given the
opportunity to ask questions of the Chairman and
Investment Manager both during the presentation and in
advance. Full details on how to register for the event can
be found at: https://bit.ly/Shires-Income. Details are also
contained on the Company’s website. Should you be
unable to attend the online event, it will be made available
on the Company’s website shortly afterwards. For those
wishing to submit questions in advance, you can do this at
the following email address: shires.income@abrdn.com
The Company’s AGM will take place at 12 noon on Friday
5 July 2024 at the offices of abrdn plc, 18 Bishops Square,
London E1 6EG, and will be followed by lunch. As well as
the formal business of the meeting, the Investment
Manager will provide a short presentation on the
Company and there will be an opportunity for
shareholders to ask questions of the Manager and the
Board. Irrespective of whether you are able to attend, we
do encourage all shareholders to complete and return the
Proxy Form enclosed with the Annual Report to ensure
that your votes are represented at the meeting. If you hold
your shares 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.
The Notice of the Meeting is contained on pages
121 to 127.
Outlook
There remain a number of geo-political uncertainties that
could impact stock markets over the months ahead,
including the continuing impact of the conflicts in Ukraine
and the Middle East, as well as the outcomes of the
elections in the US and the UK. It seems likely that interest
rates in the UK and globally have peaked and will be
reduced later in the year, which should be a positive for
equity market valuations. The Board also believes that this
will be beneficial for the rating of the Company’s shares,
which is something that we will continue to monitor
very carefully.
“The Investment Manager has a strong
long term track record of delivering
the Company’s income and capital
growth objective.”
In this environment, good stock selection will continue to
be key. The Investment Manager has a strong long term
track record of delivering the Company’s income and
capital growth objective. Despite the various macro
uncertainties, the Board remains confident in the
Company’s ability, to continue to achieve its objective
going forward.
Robert Talbut
Chairman
22 May 2024
12 Shires Income PLC
Business Model
The business of the Company is that of an investment
company which qualifies as an investment trust for tax
purposes. The Directors do not envisage any change in
this activity in the foreseeable future.
Benchmark
In assessing its performance, the Company compares its
returns with the returns of the FTSE All-Share Index
(total return).
Investment Objective
The Company’s investment objective is to provide
shareholders with a high level of income, together with the
potential for growth of both income and capital, from a
diversified portfolio substantially invested in UK equities but
also in preference shares, convertibles and other fixed
income securities.
Investment Policy
The Company’s investment policy is to invest principally in
the ordinary shares of UK quoted companies, and in
preference shares, convertibles and other fixed income
securities with above average yields. The Company
generates income primarily from ordinary shares,
preference shares, convertibles and other fixed income
securities. It also generates income by writing call and put
options on shares owned, or shares the Company would
like to own. By doing so, the Company generates
premium income.
Gearing
The Directors are responsible for determining the gearing
strategy of the Company. Gearing is used with the
intention of enhancing long-term returns. It is subject to a
maximum equity gearing level of 35% of net assets at the
time of drawdown. Any borrowing except in relation to
short-term liquidity requirements is used for investment
purposes.
Diversification of Risk and Investment Restrictions
In order to ensure adequate diversification, limits are set
within the investment policy which the AIFM and
Investment Manager must operate. All of these limits are
measured at the point of acquisition of investments, unless
otherwise stated, as follows:
General Investment Limits
· a maximum of 10% of total assets may be invested in
the equity securities of overseas companies;
· a maximum of 7.5% of total assets may be invested in
the securities of one company (historically excluding
abrdn Smaller Companies Income Trust plc);
· any investment must not represent more than 5% of a
quoted investee company’s ordinary shares (historically
excluding abrdn Smaller Companies Income Trust plc);
and
· a maximum of 10% of total assets may be invested
directly in AIM holdings.
Limits in Relation to Preference Shares
· a maximum of 7.5% of total assets may be invested in
the preference shares of any one company; and
· the Company may not hold more than 10% of any
investee company’s preference shares.
Limits in Relation to Traded Option Contracts
There are principal guidelines put in place to manage the
risks associated with these contracts, including:
· call options written are to be covered by stock;
· put options written are to be covered by net current
assets/borrowing facilities;
· call options are not to be written on more than 10% of
the equity portfolio; and
· put options are not to be written on more than 10% of
the equity portfolio.
The Board assesses on a regular basis with the Investment
Manager the applicability of these investment limits, the
use of gearing and risk diversification, whilst aiming to
meet the overall investment objectives of the Company.
In accordance with the Listing Rules, the Company will not
make any material change to its published investment
policy without the prior approval of the FCA and the
approval of its shareholders by ordinary resolution.
As set out in the Chairman’s Statement on page 9, the
Directors are seeking shareholder approval for certain
amendments at the forthcoming Annual General Meeting.
Investment Process
The investment process and risk controls employed by the
Investment Manager are described on pages 109 to 110.
Overview of Strategy Overview of Strategy
Shires Income PLC 13
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Promoting the Success of the Company
The Board’s statement on pages 20 to 23 describes how
the Directors have discharged their duties and
responsibilities over the course of the financial year under
section 172 (1) of the Companies Act 2006 and how they
have promoted the success of the Company for the
benefit of the members as a whole.
Key Performance Indicators (“KPIs”)
The Board uses a number of financial performance
measures to assess the Company’s success in achieving
its objective and determining the progress of the
Company in pursuing its investment policy. The main KPIs
identified by the Board in relation to the Company, which
are considered at each Board meeting, are shown in the
table below:
KPI
Description
Performance against benchmark index The Board measures performance over the medium to long-term, on a total return basis
against the benchmark index – the FTSE All-Share Index (total return). The figures for this
year and the past three and five years are set out on page 24 and a graph showing
performance against the benchmark index over the past five years is shown on page 25.
Share price performance
The Board monitors the performance of the Company’s share price on a total return
basis. The returns for this year and for the past three and five years are set out on page 24
and a graph showing the share price total return performance against the benchmark
index over the past five years is included on page 25.
Premium/discount to NAV
The premium/discount relative to the NAV per share represented by the share price is
closely monitored by the Board. A graph showing the history of the premium/discount for
the past five years is included on page 25. The Board also monitors trading activity in the
Company’s shares on a regular basis.
Revenue return per Ordinary share
The Board monitors the Company’s net revenue return (earnings per share). The
revenue returns per Ordinary share for each of the past ten years are set out on page 27.
Dividend per share
The Board monitors the Company’s annual dividends per Ordinary share and the extent
to which dividends are covered by current net revenue and revenue reserves. The
dividends per share for each of the past ten years are set out on page 27. The Board gives
active consideration to growth in the Company’s dividend given that this forms part of the
Company’s investment objective.
Ongoing charges The Board monitors the Company’s operating costs carefully. Ongoing charges for the
year and the previous year are disclosed on page 5.
14 Shires Income PLC
Principal and Emerging Risks
and Uncertainties
The Board carries out a regular review of the risk
environment in which the Company operates, changes to
that environment and to individual risks. The Board also
identifies emerging risks which might impact the
Company. During the year, the most significant risks were
inflation and high interest rates and the resultant volatility
that this created in global stock markets. In addition, the
conflicts in Ukraine and the Middle East and other geo-
political tensions have created geo-political uncertainty
which has further increased market risk premia and
volatility. The most significant direct issue that the
Company has faced is the increasing discounts to net
asset value that have affected the entire investment
company sector, including income funds, resulting from
selling pressure and lack of investor demand.
There are a number of other risks which, if realised, could
have a material adverse effect on the Company and its
financial condition, performance and prospects. The
Board has carried out a robust assessment of the
Company’s principal and emerging risks, which include
those that would threaten its business model, future
performance, solvency, liquidity or reputation and has
endeavoured to find means of mitigating those risks,
wherever practical.
The principal risks and uncertainties faced by the
Company are reviewed by the Audit Committee in the
form of a risk matrix. The assessment of risks and their
mitigation continues to be an area of significant focus for
the Audit Committee. The principal risks and uncertainties
facing the Company at the current time, together with a
description of the mitigating actions the Board has taken,
are set out in the table below.
The principal risks associated with an investment in the
Company’s shares are published monthly in the
Company’s factsheet and they can be found in the
pre-investment disclosure document (“PIDD”) published
by the Manager, both of which are available on the
Company’s website.
Description
Mitigating Actions
Strategic objectives and investment
policy – a lack of demand for the
Company’s shares due to its
objectives becoming unattractive
to investors, or a negative
perception of investment trusts,
could result in a fall in the value of its
shares and a widening of the
discount of the share price to its
underlying NAV.
The Board formally reviews the Company’s objectives and strategies for achieving them on
an annual basis, or more regularly if appropriate.
The Board is cognisant of the importance of regular communication with shareholders and
knowledge of what encourages investment in the Company. Directors attend meetings with
shareholders where practical, host the Annual General Meeting as a forum for shareholder
contact and regularly discuss shareholder investment behaviour with the Manager, including
trends on investment platforms and shareholder themes. The Board reviews shareholder
feedback through reports provided by the Manager’s Investor Relations team and also
receives feedback from the Company’s Stockbroker.
The Board and Manager keep the level of discount under constant review, as well as changes
to the Company’s shareholder register. There has been regular review in the last year
culminating in the use of share buy backs as appropriate.
Overview of Strategy
Continued
Shires Income PLC 15
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Description
Mitigating Actions
Investment performance –
performance of the portfolio when
measured against the benchmark.
The Board meets the Manager on a regular basis and keeps investment performance under
close review. This includes performance attribution by sector and stock, and liquidity analysis,
as well as the degree of diversification in the portfolio and income sustainability through
examination of forward income projections.
Representatives of the Investment Manager attend all Board meetings and a detailed
formal appraisal of the abrdn Group is carried out annually by the Management
Engagement Committee.
The Board sets, and monitors, the investment restrictions and guidelines, and receives regular
reports which include performance reporting on the implementation of the investment policy,
the investment process, risk management and application of the guidelines.
Investment risk within the portfolio is managed in four ways:
· Adherence by the Investment Manager to the investment process in order to minimise
investments in poor quality companies and/or overpaying for investments.
· Diversification of investment - seeking to invest in a wide variety of companies with strong
balance sheets and the earnings power to pay increasing dividends. In addition, investments
are diversified by sector in order to reduce the risk of a single large exposure. The Company
invests mainly in equities and preference shares.
· Adherence by the Investment Manager to the investment limits set by the Board
(see page 12).
· Examination of changes to the portfolio and emerging investment themes, including relative
to benchmark constituents and in order to provide income.
Investment in preference shares
The Company has longstanding holdings in a number of preference shares with no fixed
redemption dates, as detailed on page 46 (representing 19.8% of the Company’s portfolio as
at 31 March 2024). The Directors regularly review these investments, which are held primarily
to enhance the income generation of the Company. By their nature, their price movements
will be subject to a number of factors, including prevailing and changing interest rates, and, in
normal market conditions, will tend to respond less to pricing movements in equity markets.
Issue sizes of these preference shares are normally relatively small and with associated low
secondary market liquidity by comparison with the equity component of the portfolio. The
Board also considers the long-term nature of these investments and the impact of any
potential changes on the duration of the portfolio and its returns, as well as the sustainability of
the dividends paid.
16 Shires Income PLC
Overview of Strategy
Continued
Description
Mitigating Actions
Failure to maintain, and grow the
dividend over the longer term –
the level of the Company’s
dividends and future dividend
growth will depend on the
performance of the
underlying portfolio.
The Directors review detailed income forecasts at each Board meeting and discuss the
Investment Manager’s outlook for dividends. The Company has revenue reserves which it can
draw upon should there be a shortfall in revenue returns in a year, and also has the ability to
pay dividends from realised capital reserves but would only resort to this in circumstances
where there was an unexpected fall in net income.. The Board regularly reviews forward net
revenue projections and takes into account revenue reserves in setting quarterly dividend
levels.
Share price and shareholder
relations – the adoption of an
inappropriate marketing strategy,
failure to address shareholder
concerns or other factors, including
the setting of an unattractive
strategic investment proposition,
changing investor sentiment and
investment underperformance,
may lead to a decrease in demand
for the Company’s shares and a
widening of the difference
between the share price and the
NAV per share.
The Board monitors the Company’s Ordinary share price relative to the NAV per share and
keeps the level of premium or discount at which the Company’s shares trade under review.
The Board also keeps the investment objective and policy under review and holds an annual
strategy meeting where it reviews investor relations reports and updates from the Manager
and the Company’s Stockbroker.
The Directors are updated at each Board meeting on the composition of, and any movements
in, the shareholder register, which is retail investor dominated. The Board annually agrees a
marketing and communications programme and budget with the Manager, and receives
updates regularly on both marketing and investor relations.
The Board has a close focus on investor platform activity which has been the dominant
change over recent years in how retail investors choose to acquire and hold their shares. This
includes contact with the platform operators through the Manager. The transfer of the abrdn
Savings Plans to the Interactive Investor platform during the last twelve months has given rise
to some selling pressure on the Company’s shares.
Gearing – a fall in the value of the
Company’s investment portfolio
could be exacerbated by the
impact of gearing. It could also
result in a breach of loan covenants
and the forced sale
of investments.
The Board sets the gearing limits within which the Investment Manager can operate. Gearing
levels and compliance with loan covenants are monitored on an ongoing basis by the
Manager and at scheduled Board meetings, or between Board meetings if required. In the
event of a possible impending covenant breach, appropriate action would be taken to reduce
borrowing levels. The financial covenants attached to the Company’s borrowings currently
provide for significant headroom. The maximum equity gearing level is 35% of net assets at
the time of drawdown, which constrains the amount of gearing that can be invested in
equities which are more volatile than the fixed interest part of the portfolio. The use of gearing
has been an important facilitator of the income returns from the portfolio, particularly in
financing the high yield preference share proportion of the portfolio which has historically
provided significant dividend income for the Company.
The Company’s gearing includes a revolving credit facility which can be reduced without any
significant financial penalties for early repayment and at relatively short notice.
Accounting and financial reporting
-
inadequate controls over financial
record keeping and forecasting
could result in inaccurate financial
reporting, the Company being
unable to meet its financial
obligations or inability to pay a
dividend, losses to the Company
and impact its ability to continue
trading as a going concern.
At each Board meeting, the Board reviews management accounts and receives a report from
the Administrator, detailing any breaches during the period under review. The Company’s
annual financial statements are audited. The Audit Committee receives bi-annual compliance
and internal reports from the Manager and meets a representative from its Internal Audit
team on at least an annual basis and discusses any findings and recommendations relevant
to the Company.
Shires Income PLC 17
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Description
Mitigating Actions
Regulatory and governance – failure
to comply with relevant laws and
regulations could result in fines, loss
of reputation and potentially loss of
an advantageous tax regime.
The Board and Manager monitor changes in government policy and legislation which may
have an impact on the Company, and the Audit Committee monitors compliance with
regulations by reviewing internal control reports from the Manager. There is also a regular
review of adherence to governance guidelines that affect investment companies and how
the Company is meeting existing or proposed guidelines.
The Board is kept aware of proposed changes to laws and regulations, considers the changes
and applies them as appropriate, if they are not already being met.
From time to time the Board employs external advisers to advise on specific regulatory and
governance matters.
Operational
– the Company is
dependent on third parties for the
provision of all systems and
services (in particular, those of the
abrdn Group) and any control
failures and gaps in their systems
and services, including in relation to
cyber security, could result in a loss
or damage to the Company.
The Board receives reports from the Manager on its internal controls and risk management
processes and receives assurances from the Manager and all its other significant service
providers on at least an annual basis, including on matters relating to operational resilience
and cyber security. Written agreements are in place with all third party service providers. The
Manager monitors closely the control environments and quality of services provided by third
parties, including those of the Depositary, through service level agreements, regular meetings
and key performance indicators. In the last year this has included close monitoring of the
activities involved in consolidating the interests of the Company with abrdn Smaller
Companies Income Trust plc, including setting the terms of participation.
Exogenous risks such as health,
social, financial, economic, climate
and geo-political – the financial
impact of such risks, associated
with the portfolio or the Company
itself, could result in losses to
the Company.
At any given time, the Company has sufficient cash resources to meet its operating
requirements. In common with most commercial operations, exogenous risks over which
the Company has no control are always a risk. The Company does what it can to address
these risks where possible and to try and meet the Company’s investment objectives.
The Board is supportive of the Investment Manager’s approach to environmental, social and
governance (“ESG”) risks and welcomes its active engagement with company management.
Through this activity, the Investment Manager aims to identify and manage the exposure to
such risks over time. The Investment Manager’s Approach to ESG Matters is included on pages
35 to 39.
The financial and economic risks associated with the Company include market risk, liquidity
risk and credit risk, all of which the Investment Manager seeks to mitigate. Further details of the
steps taken to mitigate the financial risks associated with the portfolio are set out in note 18 to
the financial statements.
18 Shires Income PLC
External Agencies
In addition to the services provided to the Company by the
abrdn Group, the Board has contractually delegated
certain services to external service suppliers, including:
depositary services (which include the safekeeping of the
Company’s assets) (BNP Paribas Trust Corporation UK
Limited) and share registration services (Equiniti Limited).
Each of these services was entered into after full and
proper consideration by the Board of the quality and
cost of services offered. In addition, day-to-day
accounting and administration services are provided,
through delegation by the Manager, by the Administrator,
BNP Paribas Securities Services.
Promotional Activities
The Board recognises the importance of promoting the
Company to prospective investors both for improving
liquidity and enhancing the rating of the Company’s
shares. The Board believes one effective way to achieve
this is through subscription to, and participation in, the
promotional programme run by the abrdn Group on
behalf of a number of investment trusts under its
management. The Company’s financial contribution to
the programme is matched by the abrdn Group. The
Company also supports the Manager’s investor relations
programme which involves regional roadshows to existing
and potential shareholders, promotional and public
relations campaigns. The Manager’s promotional and
investor relations teams report to the Board on a quarterly
basis giving analysis of the promotional activities as well as
updates on the shareholder register and any changes in
the make up of that register.
The purpose of the promotional and investor relations
programmes is both to communicate effectively with
existing shareholders and to gain new shareholders, with
the aim of improving liquidity and enhancing the value and
rating of the Company’s shares. Communicating the long-
term attractions of the Company is key. The promotional
programme includes commissioning independent paid for
research on the Company, most recently from Kepler
Trust Intelligence. A copy of the latest research note is
available from the Company's website.
Environmental, Social and Human
Rights Issues
The Company has no employees as the Board has
delegated the day-to-day management and
administrative functions to the Manager. There are
therefore no disclosures to be made in respect of
employees or environmental matters.
Modern Slavery Act
Due to the nature of the Company’s business, being a
company that does not offer goods and services to
customers, the Board considers that it is not within the
scope of the Modern Slavery Act 2015 because it has no
turnover. The Company is therefore not required to make
a slavery and human trafficking statement. In any event,
the Board considers the Company’s supply chains, dealing
predominantly with professional advisers and service
providers in the financial services industry, to be low risk in
relation to this matter.
Environmental, Social and Governance
(“ESG”) Matters
The Board is supportive of the Investment Manager’s
approach to ESG issues, including climate change, and
welcomes its active engagement with company
management. The Investment Manager’s Approach to
ESG Matters is included on pages 35 to 39.
The UK Stewardship Code and Proxy Voting
The Company supports the UK Stewardship Code, and
seeks to play its role in supporting good stewardship of the
companies in which it invests. Responsibility for actively
monitoring the activities of portfolio companies has been
delegated by the Board to the Manager which has sub-
delegated that authority to the Investment Manager.
abrdn plc is a tier 1 signatory of the UK Stewardship Code
which aims to enhance the quality of engagement by
investors with investee companies in order to improve
their socially responsible performance and the long-term
investment return to shareholders. While delivery of
stewardship activities has been delegated to the
Manager, the Board acknowledges its role in setting the
tone for the effective delivery of stewardship on the
Company’s behalf.
The Board has also given discretionary powers to the
Manager to exercise voting rights on resolutions proposed
by the investee companies within the Company’s portfolio.
The Manager reports on a quarterly basis on stewardship
(including voting) issues.
Overview of Strategy
Continued
Shires Income PLC 19
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report
from its operations, nor does it have responsibility for any
other emissions producing sources under the Companies
Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013.
Under Listing Rule 15.4.29(R), the Company, as a
closed ended investment company, is exempt from
complying with the Task Force on Climate-related
Financial Disclosures.
Board Diversity
The Board’s disclosures in relation to its diversity are
included on pages 59 and 59.
Viability Statement
The Board considers the Company, with no fixed life, to be
a long-term investment vehicle but, for the purposes of
this viability statement, has decided that three years is an
appropriate period over which to report, irrespective of
any exogenous risks that the Company may face. The
Board considers that this period reflects a balance
between a longer-term investment horizon, the inherent
uncertainties within equity markets and the specifics of a
closed-end investment company where its central
purpose is different from other listed commercial and
industrial companies.
In assessing the viability of the Company over the
review period, the Directors have focused upon the
following factors:
· The principal risks and uncertainties detailed on pages
14 to 17 and the steps taken to mitigate these risks.
· The ongoing relevance of the Company’s investment
objective.
· The liquidity of the Company’s portfolio. The majority of
the portfolio is invested in readily realisable listed
securities.
· The level of ongoing expenses. The Company’s annual
revenue expenses, excluding the cost of the dividend,
are expected to continue to be covered by investment
income.
· The level of gearing. This is closely monitored and stress
testing is carried out by the Manager. The financial
covenants attached to the Company’s borrowings
provide for significant headroom.
· Regulatory or market changes.
· The robustness of the operations of the Company’s third
party service providers.
· The operation of share buy backs undertaken by
the Company.
In making its assessment, the Board has considered that
there are other matters that could have an impact on the
Company’s prospects or viability in the future, including
the current events in Ukraine and the Middle East,
economic shocks, significant stock market volatility, the
emerging risk of climate change, and changes in
regulation or investor sentiment, including to income
propensities.
Taking into account the Company’s current position and
the potential impact of its principal risks and uncertainties
and emerging risks, the Directors have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due for a
period of three years from the date of approval of
this Report.
Outlook
The Board’s view on the general outlook for the Company
can be found in the Chairman’s Statement on page 11
whilst the Investment Manager’s views on the outlook for
the portfolio are included on pages 31 to 32.
On behalf of the Board
Robert Talbut
Chairman
22 May 2024
20 Shires Income PLC
How the Board Meets its Obligations Under
Section 172 of the Companies Act
The Board is required to describe to the Company’s
shareholders how the Directors have discharged their
duties and responsibilities over the course of the financial
year under section 172 (1) of the Companies Act 2006
(the “Section 172 Statement”). The Board provides below
an explanation of how the Directors have promoted the
success of the Company for the benefit of its members as
a whole, taking into account, amongst other things, the
likely long-term consequences of decisions, the need to
foster business relationships with all stakeholders and the
impact of the Company’s operations on the environment.
The Purpose of the Company and Role
of the Board
The purpose of the Company is to act as an investment
vehicle to provide, over time, financial returns (both
income and capital) to its shareholders. Investment trusts,
such as the Company, are long-term investment vehicles
and are typically externally managed, have no
employees, and are overseen by an independent non-
executive board of directors.
The Board, which, at the year end, comprised five
independent non-executive Directors with a broad range
of skills and experience across all major functions that
affect the Company, retains responsibility for taking all
decisions relating to the Company’s investment objective
and policy, gearing, corporate governance and strategy,
and for monitoring the performance of the Company’s
service providers.
The Board’s philosophy is that the Company should
operate in a transparent culture where all parties are
treated with respect and provided with the opportunity to
offer practical challenge and participate in positive
debate which is focused on the aim of achieving the
expectations of shareholders and other stakeholders alike.
The Board reviews the culture and manner in which the
Manager and Investment Manager operate at its regular
meetings and receives regular reporting and feedback
from the other key service providers. The Board is very
conscious of the ways it promotes the Company’s culture
and ensures as part of its regular oversight that the
integrity of the Company’s affairs is foremost in mind in
the way that the activities are managed and promoted.
The Board works very closely with the Manager and
Investment Manager in reviewing how stakeholder issues
are handled, ensuring good governance and responsibility
in managing the Company’s affairs, as well as visibility and
openness in how the affairs are conducted.
The Company’s main stakeholders have been identified
as its shareholders, the Manager/Investment Manager,
service providers, investee companies, its debt provider
and, more broadly, the community at large and
the environment.
How the Board Engages with Stakeholders
The Board considers its stakeholders at Board meetings
and receives feedback on the Manager’s interactions
with them.
The Board and Manager also continue to consider how
best to engage with private investors who invest through
platforms, not least to increase voting participation at
general meetings of the Company and to try and increase
investor demand for diversified income from retail
investors.
Stakeholder
How We Engage
Shareholders Shareholders are key stakeholders and the Board places great importance on communication
with them. The Board welcomes all shareholders’ views and aims to act fairly between all
shareholders. The Company’s shareholder register is retail dominated. The Manager and
Company’s Stockbroker regularly meet with current and prospective shareholders from the
wealth management and IFA community to discuss performance. Shareholder feedback is
discussed by the Directors at each Board meeting. The Company subscribes to the Manager’s
investor relations programme in order to maintain communication channels with shareholders.
Regular updates are provided to shareholders through the Annual Report, Half-Yearly Report,
monthly factsheets, Company announcements, including daily NAV announcements, and through
the Company’s website, which includes up to date information on the Company. The Company’s
Annual General Meeting provides a forum, both formal and informal, for shareholders to meet and
Promoting the Success of the Company
Shires Income PLC 21
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Stakeholder
How We Engage
discuss issues with the Directors and Manager. The Board encourages as many shareholders as
possible to attend the Company’s Annual General Meeting and to provide feedback on the
Company. In addition to the Annual General Meeting, there will be an Online Shareholder
Presentation again this year following a favourable response in the past to this informal on-line
event. The Board welcomes contact with shareholders and has various ways of receiving
shareholder questions and responding to them, including through the Company Secretary. During
the year, the Investment Manager held meetings with a number of the Company’s larger
shareholders to update them on the Company and to receive any feedback or concerns,
particularly in relation to the corporate action involving abrdn Smaller Companies Income
Trust plc.
The Board is keen to have increased shareholder voting at general meetings of the Company and
reviews ways in which there can be greater communication with the largely retail investor
shareholder base.
Manager/Investment Manager
The Investment Manager’s Review on pages 28 to 32 details the key investment decisions taken
during the year. The Investment Manager has continued to manage the Company’s assets in
accordance with the mandate agreed with the Company, with the oversight of the Board.
The Board regularly reviews the Company’s performance against its investment objective and
undertakes an annual strategy review meeting to ensure that the Company is positioned well for
the future delivery of its objective for its shareholders. The Board receives presentations from the
Investment Manager at every Board meeting to help it to exercise effective oversight of the
Investment Manager and the Company’s strategy.
The Board, through the Management Engagement Committee, formally reviews the performance
of the Manager and Investment Manager at least annually. More details are provided on page 60.
Service Providers
The Board seeks to maintain constructive relationships with the Company’s suppliers either
directly or through the Manager with regular communications and meetings.
The Management Engagement Committee conducts an annual review of the performance, terms
and conditions of the Company’s main service providers to ensure they are performing in line with
Board expectations, undertaking their responsibilities and providing value for money.
Investee Companies
Responsibility for actively monitoring the activities of portfolio companies has been delegated by
the Board to the Manager which has sub-delegated that authority to the Investment Manager.
The Board has also given discretionary powers to the Manager to exercise voting rights on
resolutions proposed by the investee companies within the Company’s portfolio. The Manager
reports to the Board on a quarterly basis on stewardship (including voting) issues. Through
engagement and exercising voting rights, the Investment Manager actively works with companies
to improve corporate standards, transparency and accountability. Further details are provided on
page 39.
The Board monitors investments made and divested and questions the rationale for investment
and voting decisions.
Debt Provider
On behalf of the Board, the Manager maintains a positive working relationship with the provider of
the Company’s loan facility, and provides regular updates to the Board on business activity and
compliance with its loan covenants. Gearing is an important component of the Company’s
capital structure.
22 Shires Income PLC
Stakeholder
How We Engage
Environment and Community The Board and Manager are committed to investing in a responsible manner and the Investment
Manager embeds Environmental, Social and Governance (“ESG”) considerations into its research
and analysis as part of the investment decision-making process. Further details are provided on
pages 35 to 39.
Specific Examples of Stakeholder
Consideration During the Year
The Board is fully engaged in both oversight and the
general strategic direction of the Company. During the
year, the Board’s main strategic discussions focussed
around the aSCIT transaction.
While the importance of giving due consideration to the
Company’s stakeholders is not a new requirement, and is
considered during every Board decision, the Directors
were particularly mindful of stakeholder considerations
during the following decisions undertaken during the year
ended 31 March 2024.
aSCIT Transaction
On 26 July 2023, the Company announced that it had
agreed terms with the Board of aSCIT for a proposed
combination of the assets of the Company with those of
aSCIT (the “aSCIT transaction”). The scheme of
reconstruction completed on 1 December 2023. Further
details of the transaction and the benefits to shareholders
are contain in the Chairman’s Statement.
Management of the Portfolio
The Investment Manager’s Review on pages 28 to 32
details the key investment decisions taken during the year.
The overall shape and structure of the investment
portfolio is an important factor in delivering the
Company’s stated investment objective.
As explained in more detail on page 60, during the year,
the Board, through the Management Engagement
Committee, decided that the continuing appointment of
the Manager was in the best interests of shareholders.
Proposed Change to Investment Policy
As explained in the Chairman’s Statement, following a
review by the Board and Manager of the Company’s
investment policy, the Board proposes to seek
shareholder approval at the Annual General Meeting to
increase the limit on exposure to overseas companies
from 10% of total assets to 20% of total assets. The Board
considers that this change will provide the Investment
Manager with greater flexibility to achieve the Company’s
investment objective and is therefore in the best interests
of shareholders. The Company will remain in the AIC’s UK
Equity Income Sector following the change.
Dividend
Following the payment of the final dividend for the year, of
4.80p per Ordinary share, total dividends for the year will
amount to 14.40p per Ordinary share, representing a
dividend yield of 6.5% based on the share price of 222p at
the end of the financial year. This is in accordance with the
Company’s objective to provide shareholders with a high
level of income.
In deciding on the level of dividend for the year, the Board
took into account the revenue earnings per Ordinary
share for the year, forecast revenues for subsequent
years, the level of revenue reserves and the increase in
issued share capital following the aSCIT transaction, as
well as the impact of share buy backs.
Through meetings with shareholders and feedback from
the Manager and the Company’s Stockbroker, the Board
remains conscious of the importance that shareholders
place on the level, and sustainability, of dividends paid by
the Company.
Promoting the Success of the Company
Continued
Shires Income PLC 23
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Allocation of Costs
As explained in the Chairman’s Statement, the Board has
decided that, with effect from 1 April 2024, management
fees and finance costs will be charged 40% to Revenue
and 60% to Capital. The Board considers that this
allocation better reflects the expected long-term view of
the nature of the future investment returns of the enlarged
portfolio and is consistent with the treatment adopted by
other UK Equity Income investment trusts. The Board
therefore considers that this change is in the best interests
of shareholders.
Share Buy Backs
During the year, the Company bought back 863,532
Ordinary shares to be held in treasury, providing a small
accretion to the NAV per share and a degree of liquidity to
the market at times when the discount to the NAV per
share had widened in normal market conditions. It is the
view of the Board that this policy of periodically using buy
back powers, but not in a mechanical fashion, is in the
interest of all shareholders.
Proposed Cancellation of Share Premium Account
As explained in the Chairman’s Statement, the Board will
propose a special resolution at the Annual General
Meeting to cancel the amount standing to the credit of the
Share Premium Account. The cancellation will also require
court approval which will be sought following the Annual
General Meeting. Once this exercise is complete, the
newly created distributable reserve will be available to
fund the cost of share buy backs and dividend payments.
The Board considers that it is in shareholders’ interests for
the Company to have this flexibility, although it has no
current intention of making use of it for dividend payments
which will continue to be resourced through net revenue
and revenue reserves.
Board Succession
As explained in the Directors’ Report on page 56, Simon
White was appointed as an independent non-executive
Director on 1 January 2024 in advance of the retirement of
Robert Talbut from the Board at the forthcoming Annual
General Meeting. New Board appointments seek to
achieve a good balance of skills, experience, gender and
ethnicity. The Board believes that shareholders’ interests
are best served by ensuring a smooth and orderly
refreshment of the Board which serves to provide
continuity and maintain the Board’s open and
collegiate style.
Following the Annual General Meeting, Robin Archibald,
current Audit Committee Chairman and Senior
Independent Director (“SID”), will assume the role of
Chairman of the Board and Jane Pearce will assume the
role of Chair of the Audit Committee, with Helen Sinclair
acting as the SID.
Online Shareholder Presentation
As explained in the Chairman’s Statement, to encourage
and promote interaction and engagement with the
Company’s shareholders, the Board has again decided to
hold an interactive Online Shareholder Presentation which
will be held at 10.00am on 25 June 2024. At the
presentation, shareholders will receive updates from the
Chairman and Investment Manager and there will be an
interactive question and answer session. The online
presentation is being held ahead of the Annual General
Meeting in order to allow shareholders to submit their
proxy votes prior to the meeting.
On behalf of the Board
Robert Talbut
Chairman
22 May 2024
24 Shires Income PLC
Performance (Total Return)
1 year
3 year
5 year
% return
% return
% return
Net asset value
A
+5.1
+14.5
+25.7
Share price
A
(based on mid-market)
–5.7
+5.6
+9.2
FTSE All-Share Index
+8.4
+26.1
+30.3
A
Considered to be an Alternative Performance Measure. See page 118 for further information.
All figures are for total return and assume re-investment of net dividends excluding transaction costs.
Source: abrdn plc, Morningstar & Factset
Analysis of Total Return Performance
%
Gross assets total return
6.7
Total NAV return per share
5.1
Total return on FTSE All-Share Index
8.4
Relative performance of NAV compared to FTSE All-Share Index
-3.3
Analysis of Performance for the year relative to the FTSE All-Share Index
-3.0
-4.5
1.5
1.0
-0.2
1.0
-1.1
-1.2
-0.1
0.3
%
Lis ted equities
- Stock selection*
- Asset allocation*
Preference shares
Cash
Bid pricing ad justment
Loans
Fees & expenses
Tax charge
Technical differences
The above table shows the composition of the relative performance of the NAV total return compared to the benchmark index. In
particular, it shows the contribution from the Listed Equities Portfolio and from the Preference shares. Within the Listed Equites Portfolio,
the contributions to relative performance come from exposure to individual stocks (Stock Selection) and sectors (Asset Allocation).
* Further analysis of performance attributable to listed equities.
Performance
Shires Income PLC 25
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Total Return of NAV and Ordinary Share Price vs FTSE All-Share Index
Five years to 31 March 2024. Figures are total return and have been rebased to 100 at 31 March 2019
70
80
90
100
110
120
130
31/03/19 31/03/20 31/03/21 31/03/22 31/03/23 31/03/24
S M & b d
NAV
Shar e Price
Benchmark
Source: Morningstar & abrdn
Ordinary Share Price Premium/(Discount) to NAV (cum-income)
Five years to 31 March 2024
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
31/03/19 31/03/20
31/03/21
31/03/22 31/03/23
31/03/24
Source: Morningstar & abrdn
26 Shires Income PLC
Dividends
Rate per share
XD date
Record date
Payment date
First interim dividend
3.20p
5 October 2023
6 October 2023
27 October 2023
Second interim dividend
3.20p
4 January 2024
5 January 2024
31 January 2024
Third interim dividend
3.20p
4 April 2024
5 April 2024
30 April 2024
Proposed final dividend
4.80p
4 July 2024
5 July 2024
31 July 2024
2023/24
14.40p
First interim dividend
3.20p
6 October 2022
7 October 2022
28 October 2022
Second interim dividend
3.20p
5 January 2023
6 January 2023
27 January 2023
Third interim dividend
3.20p
6 April 2023
11 April 2023
28 April 2023
Final dividend
4.60p
6 July 2023
7 July 2023
28 July 2023
2022/23
14.20p
Dividends Per Share
Five years to 31 March 2024
13.20p 13.20p
13.80p
14.20p
14.40p
2020 2021 2022 2023 2024
Dividend Yield
Five years to 31 March 2024
0%
1%
2%
3%
4%
5%
6%
7%
8%
2020 2021 2022 2023 2024
Sh ir es I ncom e PLC
FTSE All-S hare Index
Performance
Continued
Shires Income PLC 27
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Ten Year Financial Record
Year to 31 March
2015
2016
2017
2018
2019
2020
2021*
2022*
2023*
2024*
Revenue available for ordinary dividends
(£’000)
3,877
3,617
3,925
4,106
3,920
3,961
3,796
4,379
4,584
5,068
Per share (p)
Net revenue earnings
12.9
12.1
13.1
13.7
13.1
13.0
12.3
14.2
14.8
14.8
Net dividends paid/proposed
12.25
12.25
12.75
13.00
13.20
13.20
13.20
13.80
14.20
14.40
Net total earnings
23.1
(17.8)
54.5
9.4
10.3
(45.4)
68.2
29.5
(6.6)
(4.3)
Net asset value
259.5
229.4
271.6
268.2
265.5
207.4
262.4
278.3
257.9
256.0
Share price (mid-market)
252.0
202.0
243.3
260.0
267.0
200.5
248.0
279.0
250.0
222.0
Shareholders’ funds (£m)
77.8
68.8
81.5
80.5
80.1
63.9
80.9
85.8
79.9
106.0
* Net asset value per share is calculated after the repayment of the capital paid up on Cumulative Preference shares (see note 16 on
page 98).
Cumulative Performance
Rebased to 100 at 31 March 2014
As at 31 March
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Net asset value
100.0
104.5
92.3
109.4
108.0
106.9
83.5
105.7
112.1
103.8
103.1
Net asset value total return
A
100.0
109.7
102.0
127.0
131.2
136.4
111.8
149.8
166.8
163.1
171.5
Share price performance
100.0
99.9
80.1
96.4
103.1
105.8
79.5
98.3
110.6
99.1
88.0
Share price total return
A
100.0
104.9
88.7
113.0
126.9
137.0
107.9
141.6
167.7
158.5
149.6
Benchmark performance
100.0
103.0
95.5
112.2
109.5
111.9
87.4
107.7
117.8
116.9
122.0
Benchmark total return
A
100.0
106.6
102.4
124.9
126.4
134.5
109.7
138.9
157.1
161.6
175.3
A
Total return figures are based on reinvestment of net income.
28 Shires Income PLC
Highlights
· NAV total return of 5.1% compared to the FTSE All-Share
Index total return of 8.4%.
· The equity portfolio lagged a rising market, as we would
expect given the defensive and income focused nature
of the holdings.
· The total return from the preference share portfolio was
16.1%, with yields compressing as interest rate
expectations began to move lower.
· The Company successfully completed the combination
with abrdn Smaller Companies Income Trust
(the “aSCIT transaction”), adding scale and liquidity
and improving exposure to a focused set of high
quality small-cap companies.
Portfolio Strategy
We take a long term approach to investing, believing that,
whilst there might be volatility in the short and even
medium term, share prices will ultimately reflect the
fundamental value of a company. Consequently, there
was no change to our approach to the construction of the
portfolio during the year under review. The Company’s
investment portfolio continues to be invested in equities
and preference shares. At the year end, 80% of the
portfolio was invested in equities and 20% was invested in
preference shares.
Equity Market Review
The year to the end of March 2024 was a good one for
equities, with the MSCI World Global Index delivering a
total return of around 25%, well ahead of the long term
average. This return was heavily weighted to the second
half of the year. The market move has generally tracked
inflation and therefore interest rate expectations, with
valuations improving once investors had a line of sight on
the peak of inflation and interest rates.
By geography, the US performed well, with a 30% return
from the S&P 500 Index and an even more impressive 40%
gain for the technology focused Nasdaq Index. Europe,
returning 15%, and the UK, 8% were comparative
laggards. Emerging markets were also relatively weaker,
returning 8% in aggregate, although there were distinct
winners and losers within that: the MSCI China Index
returned a negative 17%; the MSCI India Index returned a
positive 40%, highlighting the stark difference in investor
positions of these two economies over the period.
The above performance data highlights the significant
outperformance of the US in developed markets and
particularly of the group of large cap technology
companies known as the “Magnificent Seven”. These
companies have been direct beneficiaries of accelerated
revenue growth due to the early adoption of artificial
intelligence technologies alongside increased investor
optimism on the sector. They have also been natural
beneficiaries of investor expectations that interest rates
have peaked and will begin to fall in the second half of
2024 (more on this in the Outlook section below). In
contrast, European and UK markets, which have a lower
weighting to technology and growth companies, have
relatively underperformed.
“The NAV total return for the year
was 5.1%, lagging the FTSE All-Share
Index which returned 8.4%. This
performance is roughly in line
with what we would expect in
these markets.”
Within the UK market, technology also performed well,
with the sector returning 35%. The problem was that with
a weighting of only 1.4% in the FTSE 350 Index at the end of
the year, it was not enough to drive the wider market.
Other sectors that performed well were Industrials (+27%),
Financials (+14%), Consumer Discretionary (+13%) and
Energy (+11%). These were offset by weaker returns from
Telecoms (-13%), Consumer Staples (-6%), Basic
Materials (-5%) and Utilities (flat on the year). In general,
the UK’s weighting to some defensive and income
sectors meant it failed to keep up with a rapidly rising
global market.
The UK market ended the year on a material valuation
discount to global markets – roughly a 40% discount on a
price to earnings multiple. While much of this is justified by
the lower growth from the UK’s sectoral exposure, the
discount remains around 20% once we adjust for this.
Investment Manager’s Review
Shires Income PLC 29
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Investment Performance
The equity portfolio returned 5.1% over the 12 month
period, lagging the FTSE All-Share Index which returned
8.4%. This performance is roughly in line with what we
would expect in these markets. The equity portfolio is
defensive and weighted to higher income sectors, so can
lag a rising market. That being said, stock section in the
year detracted from portfolio returns and that was
disappointing. After taking into account the performance
of the preference share portfolio (see below) and
adjusting for costs, the net asset value (“NAV”) total return
of the Company was also 5.1%.
On a stock specific level, there were a number of strong
performers in the portfolio. Intermediate Capital, a private
equity fund manager, delivered robust performance and
flows, with its shares rising by 78%. The exposure to banks
performed well as returns improved, benefitting from
higher interest rates and low credit write-offs: NatWest’s
shares increased by 31% during the period and Standard
Chartered increased by 16%. Industrials generally
performed well as economic activity remained robust and
valuations recovered. Melrose Industrials (+65%) re-rated
after spinning out its lower quality autos business and
Morgan Sindall (+45%) delivered continued growth as its fit
out and construction businesses performed strongly.
Finally, the addition of a number of small cap UK
companies around the middle of the year also had a
positive impact as these responded well to robust results
and falling interest rate expectations. Hollywood Bowl
(+24%) and 4Imprint (+46%) performed particularly well.
Offsetting this, the portfolio suffered from holding a
number of companies that disappointed in the year for
fundamental reasons. XP Power, which provides power
supply to high tech manufacturing, fell by 61% after issuing
a profit warning as end clients de-stocked. This was
particularly disappointing, coming only a matter of weeks
after management had reassured on the outlook for the
business. XP Power was one company that fell victim to a
lack of visibility in client orders as many industries went
through a de-stocking cycle, having built up inventory
during the pandemic period. Dr. Martens (-36%) faced
similar issues, with high inventory levels in US wholesalers
and supply chain challenges causing downgrades to
expectations. Another cyclical disappointment was Genus,
with its shares down 40% due to weakening demand for
pork in China. Close Brothers fell by 51% after the
announcement of an FCA review into auto lending in the
UK, although we feel the impact of this is overstated. Some
commodity companies also suffered from falling prices:
Anglo American fell by 24% due to lower metals prices and
disappointing production figures, while Diversified Energy
fell 40% due to a sustained fall in the US gas prices to very
low levels. Given its weighting in the portfolio, the fall in
Diversified Energy had a meaningful impact on the
portfolio, detracting 1.4% from performance over the
year.
Gearing and Preference Share Portfolio
The total return from the preference share portfolio for
the year was 16.1%, with yields compressing as interest
rate expectations began to move lower. This
performance is very much as expected – during a period
of rapidly rising interest rates we would expect the bond
like characteristics of preference shares to mean they
decline in value, and in an environment when interest rates
are falling we would expect this to provide a boost to the
portfolio. Our view on the long term attractions of the
preference shares has not changed. From here onwards it
is more likely that interest rates eventually decline
gradually, acting as a modest tailwind for the valuation of
this part of the portfolio. Secondly, the attraction of these
instruments is their high, dependable yield. This has not
changed and the preference share portfolio offered a
forward yield of almost 7% as at the year end.
“The total return from the preference
share portfolio for the year was
16.1%, with yields compressing as
interest rate expectations began to
move lower.”
The gearing level at the year end was 16.4%. The
Company’s borrowings are notionally invested in the
preference share portfolio. At the year end these
securities had a value of £24.2 million, materially in excess
of net indebtedness which stood at £17.3 million.
Revenue Account
Revenue earnings per share were broadly flat at 14.75p.
While the income generation of the portfolio in absolute
terms has continued to increase, the aSCIT transaction in
December resulted in an increased share-count. We
expect the impact of this to be limited over time, but the
timing of the transaction meant that we received a
number of holdings from aSCIT which did not pay
dividends during the remainder of the financial year,
resulting in a short term shortfall in income. We remain
optimistic on the income growth potential of the portfolio
over the longer term.
30 Shires Income PLC
The following table details the Company’s main sources of
income over the last five years.
2024
2023
2022
2021
2020
%
%
%
%
%
Ordinary dividends
63.0
62.8
66.5
57.2
60.0
Preference dividends
25.7
29.1
26.9
33.2
31.0
abrdn Smaller
Companies Income
Trust
9.4
6.6
5.2
5.7
5.4
Fixed interest and bank
interest
1.4
0.2
-
-
0.3
Traded option
premiums
0.5
1.3
1.4
3.9
3.3
Total
100.0
100.0
100.0
100.0
100.0
Total income (£'000s)
6,429
5,673
5,239
4,529
4,807
Portfolio Activity
Over the course of the year, we remained active in the
portfolio, adding 14 new positions and exiting 18. The
number of positions in the portfolio therefore reduced and,
despite the aSCIT transaction, we have maintained a
reasonably concentrated portfolio, while diversifying
sources of income widely.
The aSCIT transaction allowed us to select, alongside the
abrdn small-cap team, those holdings from the portfolio
which best suited our requirements of income growth and
long term capital growth. The result was a more
concentrated and meaningful small-cap exposure than
through our previous indirect exposure through aSCIT. We
added five new names: Greggs is a growing UK food
retailer with a strong market position and cost competitive
offering; Hollywood Bowl is a well-run leisure company
gaining market share in the UK and expanding
internationally in Canada; 4Imprint is a digital business
providing corporate marketing products and is winning
market share in a fragmented industry; Bytes Technology
is an IT re-seller with exposure to growing software
demand; and Hunting is a high quality engineer focused on
energy services and benefiting from increased visibility on
sales as offshore activity recovers. In aggregate, these
companies give us exposure to a diversified mix of quality
and growth within the portfolio.
Other additions reflected changing outlooks for some
sectors. We added exposure to UK banks via Lloyds given
the outlook for more resilient income as interest rates
have normalised. We also added some modest real estate
exposure after a period of weakness, adding Sirius Real
Estate and Assura - two companies with strong
management teams and track records of growing value
and dividends. Our view that the aerospace sector had an
improving outlook was reflected in a purchase of Melrose
Industrials, which also re-rated after the spin out of its
lower quality auto business.
“We remain optimistic on the income
growth potential of the portfolio over
the longer term.”
We also reflected changes in our analysts’ preference by
switching holdings within sectors. For example, we
replaced Smith & Nephew with Convatec given our view
that there was more margin improvement and end
market growth to come from Convatec in the near term.
In the banking sector, we switched Nordea into ING given
the more defensive nature of the business and a
preference to move away from Nordic banks after a
strong run and higher valuations. Also overseas, we
continued to look for ways to diversify income, adding
Mercedes-Benz, where the valuation looked very
attractive and Enel which gives exposure to diversified
utilities and strong capital growth from energy transition in
its end markets.
Exits during the year primarily reflected changes to our
view on the fundamental value of the businesses. RS
Group, Howden Joinery and Coca-Cola Hellenic all
performed reasonably well and reached levels where we
saw more limited upside compared to other holdings. For
Diageo and British American Tobacco we had some
concerns around the potential for revenue growth in the
near term and decided to move onto higher conviction
ideas. Sales of Vistry, Urban Logistics, Nordea, Bawag and
Smith & Nephew reflected a preference for other
companies in the same sectors. Veterinary
pharmaceuticals producer Dechra Pharmaceuticals was
sold after the company was bid for by a private equity firm
at a healthy premium.
Investment Manager’s Review
Continued
Shires Income PLC 31
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
In most cases of disappointing performance we chose to
hold onto the positions, taking the view that the long term
quality of the businesses remained and a lower price
reflected short term changes in outlook. However, we did
sell out of XP Power after a profit warning and Direct Line
Insurance following a dividend cut, given decreased
visibility on cash generation and the ability to pay a stable
and growing source of income over time.
As usual, the preference share portfolio has seen limited
change, although we did add two new fixed income
investments issued by Standard Chartered and Lloyds. This
enabled the portfolio to retain its weighting of around 20%
to preference shares after the aSCIT transaction. Both
positions offered around a 7% yield at the time of
purchase, an attractive level relative to equities and with a
higher degree of income protection in the long term.
Stewardship
We believe that, as long term owners of the businesses in
which we are invested, it is not sufficient merely to seek out
assets that we believe to be undervalued. It is also
incumbent upon us to take a proactive approach to our
stewardship of these companies. Therefore, we engage
extensively with investee companies. We have attended a
range of meetings with chairmen, non-executive directors
and other stakeholders. Topics covered have included the
composition of boards, environmental and social issues,
and remuneration. Risk is a very broad subject that is
interpreted in varying manners by different companies.
However, by engaging on this subject we secure a deeper
understanding of how the boards of investee companies
perceive and seek to manage these issues. Such
interactions also enable us to push for improved disclosure
and better management practices and on occasion
different decisions where appropriate. We have had
conversations regarding companies’ financing choices.
We find that it is always worthwhile communicating our
preference for conservatively structured balance sheets
that place a company’s long term fortunes ahead of
possible short term share price gains. Such activity is by its
nature time consuming but we regard it as an integral
aspect of our role as long term investors.
Consideration of Environmental, Social and Governance
(“ESG”) factors forms an important part of our investment
process. Whilst the management of the Company’s
investments is not undertaken with any specific
instructions to exclude certain asset types or classes, we
embed ESG into the portfolio and sector specific research
on all positions as part of the investment process. ESG
investment is about active engagement with the goal of
improving the performance of assets held by the
Company. We aim to make the best possible investments
for the Company by understanding the whole picture -
before, during and after an investment is made. That
includes understanding the ESG risks and opportunities
they present, and how these could affect longer-term
performance and valuation. ESG considerations underpin
all investment activities.
Outlook
The last 12 months have delivered positive NAV growth,
increased scale and continued income growth for the
Company. Performance has not kept pace with a rising
market and that is, of course, disappointing, but we
continue to focus on capital and income growth. Positions
in defensive, income generating sectors, such as utilities
have lagged faster growth areas of the market such as
technology, but that does not mean they have been bad
investments or that they will fail to deliver an attractive
total return for investors over the long term.
“The portfolio has performed well in
the last few months and our
expectation would be that a focus on
capital and income growth will deliver
results over the long term.”
32 Shires Income PLC
Making forecasts for the next 12 months is always difficult,
and especially at the moment. In the last three months we
have seen interest rate expectations move back and
forward, with global markets pushed to new highs before
retreating again. At this time, it seems that interest rates
will need to stay higher for longer to counteract inflation
and continued strong growth from the US economy - but
which direction we will be heading a year from now is hard
to guess. Economic policy and market sentiment is very
data dependent, and the data can change quickly. The
added complication of a record year for democratic
elections globally, including the US and the UK, makes the
outlook even cloudier.
Stretching our time horizon perhaps makes the task
easier. Interest rates are higher than they have been for
some time and although they are not going back to the
extreme lows we have seen in the last decade, the
likelihood is that the direction of travel is back towards an
equilibrium rate of 3-3.5% within our investment
timeframe. Rates at that level should allow for a more
normal market, with equity performance broadening out,
something we have started to see in March and April 2024.
Market performance in the past year has been unusually
concentrated - history would indicate that is unlikely to
remain the case forever. Similarly, the discount on UK
equities is historically high, providing a margin of safety.
Without a re-rating of the benchmark index we will
continue to see UK companies acquired by
international peers.
The portfolio has performed well in the past few months
and our expectation would be that a focus on capital and
income growth will deliver results over the long term. We
also expect a reduction in interest rates to increase the
relative appeal of the proposition. Currently, investors can
earn an attractive return on cash deposits and that has led
many to understandably take a “risk-free” approach in
allocation. The Company’s dividend yield is already
superior to cash, while also providing the prospect of
capital growth and a hedge to inflation, but as deposit
rates reduce it is likely that a high level income will become
more appealing again.
Iain Pyle and Charles Luke
abrdn Investments Limited
22 May 2024
Investment Manager’s Review
Continued
Shires Income PLC 33
Hunting
Hunting is a precision engineer, making premium metal
tools and connections used primarily in the global energy
industry. Sales are weighted to the US, but the company is
experiencing increased demand from international
markets as offshore development activity has increased in
recent years. This has allowed for much better visibility on
order book growth than in previous cycles. With a high
degree of operating leverage, the Investment Manager
expects the company to deliver profit and dividend
growth over the next few years, with further potential to
expand sales into clean energy markets over the
long term.
Investment Case Studies
34 Shires Income PLC
Novo-Nordisk
Novo-Nordisk is a Danish pharmaceutical company with a
strong record of Research & Development and customer
service. Having had a long-term market leadership
position in diabetes care, it has recently developed highly
effective anti-obesity treatments. These have seen rapid
growth in the past few years, with widespread adoption in
developed markets. The Investment Manager expects the
company to deliver continued strong growth, supported
by increased access and duration of use. The Investment
Manager also sees the potential for expansion of the
addressable market as clinical trials prove the benefit of
these products in other indications. While Novo-Nordisk
does not have a high dividend yield, it does have a track
record of continued dividend growth.
Investment Case Studies
Continued
Shires Income PLC 35
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Introduction
The Board relies on its Investment Manager to apply
appropriate Environment, Social and Governance (“ESG”)
principles to how the portfolio is constructed and
managed within the confines of its investment objective
and policy. Having an income objective means that the
Company needs to acquire investments which typically
provide a higher than average yield which in some cases
means more exposure to older industries such as energy
and consumables but, even here, ESG principles are
applied in deciding on a specific investment within these
more mature industries as it is evident that the possibility of
engagement by the Investment Manager can lead to
changes to their business models to account for social
and environmental responsibilities, irrespective of
government interventions.
Although ESG factors are not the overriding criteria in
relation to the investment decisions taken by the
Investment Manager, significant prominence is placed on
ESG and climate-related factors throughout the
investment process. The following pages highlight the
way that ESG and climate change are considered by the
Investment Manager.
Core beliefs: Assessing Risk, Enhancing Value
Whilst the management of the Company’s investments is
not undertaken with any specific instructions to exclude
certain asset types or classes, the consideration of ESG
factors is a fundamental part of the Investment Manager’s
process and has been so for over 30 years. It is one of the
key criteria on which the Investment Manager assesses
the investment case for any company in which it invests
for three key reasons as set out in the table below.
Responsible Investing – Integration of ESG into the Investment Manager's Process
“By embedding ESG factors into our active equity investment process, we aim to reduce risk, enhance potential value for
our investors and foster companies that can contribute positively to the world.”abrdn
Financial Returns
ESG factors can be financially material – the level of consideration they are given in a company will
ultimately have an impact on corporate performance, either positively or negatively. Those
companies that take their ESG responsibilities seriously tend to outperform those that do not.
Fuller Insight Systematically assessing a company’s ESG risks and opportunities alongside other financial metrics
allows the Investment Manager to make better investment decisions.
Corporate Advancement
Informed and constructive engagement helps foster better companies, protecting and enhancing the
value of the Company’s investments.
“We believe that the market systematically undervalues the importance of ESG factors. We believe that in-depth ESG
analysis is part of both fundamental company research and portfolio construction and will lead to better client
outcomes.”abrdn
The Investment Manager’s Approach to ESG
36 Shires Income PLC
Researching Companies: Deeper Company
Insights for Better Investor Outcomes
The Investment Manager conducts extensive and high-
quality fundamental and first-hand research to fully
understand the investment case for every company in its
global universe. A key part of the Investment Manager’s
research involves focusing its extensive resources on
analysis of ESG issues. As set out in more detail in the table
below, the Investment Manager’s portfolio managers, ESG
equity analysts and central ESG Investment Team
collaborate to generate a deep understanding of the ESG
risks and opportunities associated with each company.
Stewardship and active engagement with every company
are also fundamental to the investment process, helping
to produce positive outcomes that lead to better risk-
adjusted returns.
Global ESG Infrastructure
The Investment Manager has around 150 equity
professionals globally. Each systematically analyses ESG
risks and opportunities as part of the research output for
each company. Its central team and ESG equity analysts
support the Investment Manager’s first-hand company
analysis, producing research into specific themes (e.g.
labour relations or climate change), sectors (e.g. forestry)
and ESG topics to understand and highlight best practice.
Examples of thematic and sector research can be found
on the Manager’s website.
Portfolio Managers
All of the Investment Manager’s equity portfolio managers seek to engage actively with
companies to gain insight into their specific risks and provide a positive ongoing influence on their
corporate strategy for governance, environmental and social impact.
ESG Equity Analysts The Investment Manager has dedicated and highly experienced ESG equity analysts located
across the UK, US and Asia. Working as part of individual investment teams, rather than as a
separate department, these specialists are integral to pre-investment due diligence and post-
investment ongoing company engagement. They are also responsible for reviewing thematic
research produced by the central ESG Investment Team (see below), interpreting
and translating it into actionable insights and engagement programmes for its regional
investment strategies.
ESG Investment Team
This central team of more than 20 experienced specialists based in Edinburgh and London
provides ESG consultancy and insight for all asset classes. Taking a global approach both
identifies regions, industries and sectors that are most vulnerable to ESG risks and identifies those
that can take advantage of the opportunities presented. Working with portfolio managers, the
team is key to the Investment Manager’s active stewardship approach of using shareholder voting
and corporate engagement to drive positive change.
The Investment Manager’s Approach to ESG
Continued
Shires Income PLC 37
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Climate Change
Climate change is one of the most significant challenges
of the 21st century and has big implications for investors.
The energy transition is underway in many parts of the
world, and policy changes, falling costs of renewable
energy, and a change in public perception are happening
at a rapid pace. Assessing the risks and opportunities
arising as a result of climate change is a core part of the
investment process. In particular, the Investment
Manager considers:
· Transition risks and opportunities
Governments could take robust climate change
mitigation actions to reduce emissions and transition to
a low-carbon economy. This is reflected in targets,
policies and regulation and can have a considerable
impact on high-emitting companies.
· Physical risks and opportunities
Insufficient climate change mitigation action will lead to
more severe and frequent physical damage. This results
in financial implications, including damage to crops and
infrastructure, and the need for physical adaptation
such as flood defences.
The Investment Manager has aligned its approach with
that advocated by the investor agenda of the Principles
for Responsible Investment (“PRI”) – a United Nations-
supported initiative to promote responsible investment as
a way of enhancing returns and better managing risk.
PRI provides an intellectual framework to steer the
massive transition of financial capital towards low-carbon
opportunities. It also encourages fund managers to
demonstrate climate action across four areas:
investments; corporate engagement; investor disclosure;
and policy advocacy as explained below:
38 Shires Income PLC
From Laggards to Best in Class: Rating
Company ESG Credentials
A systematic and globally-applied approach to evaluating
stocks allows the Investment Manager to compare
companies consistently on their ESG credentials – both
regionally and against their peer group.
The Investment Manager captures the findings from its
research and company engagement meetings in formal
research notes.
Some of the key questions include:
· Which ESG issues are relevant for this company, how
material are they, and how are they being addressed?
· What is the assessment of the quality of this company’s
governance, ownership structure and management?
· Are incentives and key performance indicators
aligned with the company’s strategy and the interests
of shareholders?
Having considered the regional universe and peer group in
which the company operates, the Investment Manager’s
equity team then allocates it an ESG rating between one
and five (see below). This is applied across every
company that the Investment Manager covers globally.
The Investment Manager also uses a combination of
external and proprietary in-house quantitative scoring
techniques to complement and cross-check analyst-
driven ESG assessments. ESG analysis is peer-reviewed
within the equities team, and ESG factors impacting both
sectors and stocks are discussed as part of the formal
sector reviews. To be considered ‘best in class’, the
management of ESG factors must be a material part of
the company’s core business strategy. It must provide
excellent disclosure of data on key risks. It must also have
clear policies and strong governance structures, among
other criteria.
1. Best in class
2. Leader
3. Average
4. Below average
5. Laggard
ESG considerations are
material part of the
company’s core
business strategy
Excellent disclosure
Makes opportunities
from strong ESG risk
management
ESG considerations
not market leading
Disclosure is good, but
not best in class
Governance is
generally very good
ESG risks are considered
as a part of principal
business
Disclosure in line with
regulatory requirements
Governance is generally
good but some minor
concerns
Evidence of some
financially material
controversies
Poor governance or
limited oversight of key
ESG issues
Some issues in treating
minority shareholders
poorly
Many financially
material controversies
Severe governance
concerns
Poor treatment of
minority shareholders
The Investment Manager’s Approach to ESG
Continued
Shires Income PLC 39
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Working with Companies: Staying
Engaged, Driving Change
Once the Investment Manager invests in a company, it is
committed to helping that company maintain or raise its
ESG standards further, using the Investment Manager’s
position as a shareholder to press for action as needed.
The Investment Manager actively engages with the
companies in which it invests to maintain ESG focus and
encourage improvement.
The Investment Manager views this programme of regular
engagement as a necessary fulfilment of its duty as a
responsible steward of clients’ assets. It is also an
opportunity to share examples of best practice seen in
other companies and to use its influence to effect positive
change. The Investment Manager’s engagement is not
limited to the company’s management team. It can
include many other stakeholders such as non-
government agencies, industry and regulatory bodies, as
well as activists and the company’s clients. What gets
measured gets managed, so the Investment Manager
strongly encourages companies to set clear targets or key
performance indicators on all material ESG risks.
The investment process consists of four interconnected
and equally important stages.
Monitor
Contact
Engage
Act
Ongoing due diligence
· Business performance
· Company financials
· Corporate governance
· Company’s key risks and
opportunities
Frequent dialogue
· Senior executives
· Board members
· Heads of departments and
specialists
· Site visits
Exercise rights
· Attend AGM/EGMs
· Always vote
· Explain voting decisions
· Maximise influence to drive
positive outcomes
Consider all options
· Increase or decrease
shareholding
· Collaborate with other
investors
· Take legal action if
necessary
During the year ended 31 March 2024, the Investment Manager held 140 separate meetings with portfolio companies
where ESG topics were raised. By topic, corporate governance remains the most discussed area, but there was
significant engagement on environmental and climate issues and increasing engagement on labour management and
corporate behaviour. The pie chart below shows the overlapping topics covered at the meetings held during the year.
28
35
57
38
60
66
Human Rights & Stakeholders
Environment
Corporate Behaviour
Climate
Labour Management
Corporate Governance
40 Shires Income PLC
Portfolio
Shires Income PLC 41
42 Shires Income PLC
As at 31 March 2024
AstraZeneca
Shell
AstraZeneca researches, develops,
produces and markets pharmaceutical
products. The company has a significant
focus on oncology which offers
significant growth potential over the
medium term.
Shell is an integrated energy company. It
produces and refines crude oil, produces
chemicals and runs retail operations
globally. It has particular strength in
natural gas markets and is one of the
world’s leading energy traders.
Morgan Sindall
Energean
Morgan Sindall operates as a
construction and regeneration group.
The group's five specialist and
complementary divisions provide office
design, fitting out, refurbishment,
building contracting, property
investment, and related specialist
services. It serves customers in the
United Kingdom.
Energean is a gas producer with
operations focused in the Eastern
Mediterranean region. It has developed
the Karish project offshore Israel, with
long term gas sales agreements in place
to protect cashflows and allow for the
payment of an attractive dividend. In
addition, it has assets in Egypt and Italy
and is developing a carbon capture and
storage project offshore Greece.
BP
Intermediate Capital Group
BP is a fully integrated energy company
involved in the exploration, production,
refining, transportation and marketing
of oil and natural gas.
Intermediate Capital Group operates as
a private equity firm. The firm invests in
private debt, credit and equity, bridge
financing, acquisitions, and other
financial instruments.
HSBC Holdings
Inchcape
HSBC Holdings provides a variety of
international banking and financial
services. It operates worldwide but has
particular strength in the Hong Kong and
UK markets.
Inchcape is a global automotive
distributor. The company acts as a
vehicle and parts distributor in multiple
markets. Over two thirds of the group
profit is derived from Asia Pacific and
emerging markets.
Rio Tinto
4Imprint Group
Rio Tinto operates as a diversified mining
company. The company focuses on the
production of iron ore, predominantly
from Australia.
4imprint Group supplies imprinted
promotional merchandise. The
company offers a wide range of
imprinted products ranging from
clothing and caps to pens and pencils to
customers worldwide.
Ten Largest Investments
Shires Income PLC 43
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
As at 31 March 2024
Valuation
Total
Valuation
2024
portfolio
2023
Company
FTSE All-Share Index Sector
£’000
%
£’000
AstraZeneca
Pharmaceuticals and Biotechnology
5,440
4.5
4,136
Shell
Oil, Gas and Coal
4,674
3.8
3,931
Morgan Sindall
Construction and Materials
3,642
3.0
883
Energean
Oil, Gas and Coal
3,333
2.7
1,894
BP
Oil, Gas and Coal
3,281
2.7
3,184
Intermediate Capital Group
Investment Banking and Brokerage Services
3,234
2.6
1,078
HSBC Holdings
Banks
3,232
2.6
903
Inchcape
Industrial Support Services
2,931
2.4
1,226
Rio Tinto
Industrial, Metals and Mining
2,637
2.2
1,152
4Imprint Group
Media
2,637
2.2
–
Ten largest investments
35,041
28.7
Chesnara
Life Insurance
2,399
2.0
1,222
Anglo American
Industrial, Metals and Mining
2,384
1.9
2,748
Hollywood Bowl
Travel and Leisure
2,334
1.9
–
Diversified Energy
Oil, Gas and Coal
2,292
1.9
2,499
National Grid
Gas, Water and Multiutilities
2,283
1.9
1,726
SSE
Electricity
2,265
1.9
2,661
TotalEnergies
Oil, Gas and Coal
2,218
1.8
1,839
Telecom Plus
Telecommunications Service Providers
2,161
1.7
754
Sirius Real Estate
Real Estate Investment Trusts
1,991
1.6
–
Bytes Technology
Software and Computer Services
1,914
1.6
–
Twenty largest investments
57,282
46.9
Investment Portfolio - Equities
44 Shires Income PLC
Investment Portfolio - Equities
Continued
As at 31 March 2024
Valuation
Total
Valuation
2024
portfolio
2023
Company
FTSE All-Share Index Sector
£’000
%
£’000
Balfour Beatty
Construction and Materials
1,780
1.5
967
Lloyds Banking
Banks
1,779
1.5
–
Standard Chartered
Banks
1,771
1.4
1,526
M&G
Investment Banking and Brokerage Services
1,723
1.4
1,051
NatWest
Banks
1,722
1.4
1,042
Melrose Industrials
General Industrials
1,614
1.3
–
Enel
Electricity
1,609
1.3
–
GSK
Pharmaceuticals and Biotechnology
1,576
1.3
835
Convatec
Health Care Equipment and Services
1,563
1.3
–
Softcat
Software and Computer Services
1,500
1.2
563
Thirty largest investments
73,919
60.5
Assura
Real Estate Investment Trusts
1,487
1.2
–
Hunting
Oil Equipment Services and Distribution
1,410
1.2
–
Imperial Brands
Tobacco
1,362
1.1
1,351
Games Workshop Group
Leisure Goods
1,302
1.1
654
Mercedes-Benz Group
Automobiles and Parts
1,222
1.0
–
Novo-Nordisk
Pharmaceuticals and Biotechnology
1,186
1.0
1,272
Engie
Gas, Water and Multiutilities
1,182
1.0
981
ING Group
Banks
1,080
0.9
–
Hiscox
Non-life Insurance
1,066
0.9
982
OSB
Finance and Credit Services
1,035
0.7
995
Forty largest investments
86,251
70.6
Shires Income PLC 45
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
As at 31 March 2024
Valuation
Total
Valuation
2024
portfolio
2023
Company
FTSE All-Share Index Sector
£’000
%
£’000
Greggs
Food and Drug Retailers
995
0.8
–
AXA
Non-life Insurance
977
0.8
906
IP Group
Investment Banking and Brokerage Services
975
0.8
–
Berkeley Group Holdings
Household Goods and Home Construction
953
0.8
–
Ashmore
Investment Banking and Brokerage Services
875
0.7
641
Unilever
Personal Care, Drug and Grocery Stores
873
0.7
1,378
Mondi
General Industrials
866
0.8
855
Drax
Electricity
809
0.7
578
Wood Group
Oil Equipment Services and Distribution
781
0.6
648
Prudential
Life Insurance
764
0.6
1,149
Fifty largest investments
95,119
77.9
Close Brothers
Banks
721
0.6
810
Dr. Martens
Personal Goods
668
0.5
673
Bodycote
Industrial Engineering
627
0.5
553
Genus
Pharmaceuticals and Biotechnology
480
0.4
–
Oxford Instruments
Electronic and Electrical Equipment
359
0.3
833
Total equity investments
97,974
80.2
Purchases and/or sales of portfolio holdings effected during the year and the transaction with aSCIT result in 2024 and 2023 values not
being directly comparable.
46 Shires Income PLC
As at 31 March 2024
Valuation
Total
Valuation
2024
portfolio
2023
Company
£’000
%
£’000
Preference shares
A
Ecclesiastical Insurance Office 8 5/8%
5,837
4.8
5,512
Royal & Sun Alliance 7 3/8%
4,899
4.0
4,437
Santander 10.375%
4,244
3.5
3,616
General Accident 7.875%
4,116
3.4
3,654
Standard Chartered 8.25%
3,197
2.6
2,900
Lloyds Bank 11.75%
960
0.8
–
R.E.A. Holdings 9%
686
0.5
776
Standard Chartered 7.375%
256
0.2
–
Total Preference shares
24,195
19.8
Total Investments
122,169
100.0
A
None of the preference shares listed above have a fixed redemption date.
Purchases and/or sales of portfolio holdings effected during the year and the transaction with aSCIT result in 2024 and 2023 values
not being directly comparable.
Investment Portfolio - Other Investments
Shires Income PLC 47
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Movement during the year
Valuation at
Gains/
Valuation at
31 March 2023
Purchases
Sales
(losses)
31 March 2024
£’000
%
£’000
£’000
£’000
£’000
%
Listed investments
Equities
75,760
94.8
75,634
(44,372)
(9,048)
97,974
92.5
Preference shares
20,895
26.2
-
-
3,300
24,195
22.8
Total investments
96,655
121.0
75,634
(44,372)
(5,748)
122,169
115.3
Current assets
2,559
3.2
3,242
3.1
Current liabilities
(9,350)
(11.7)
(9,491)
(9.0)
Non-current liabilities
(9,951)
(12.5)
(9,963)
(9.4)
Net assets
79,913
100.0
105,957
100.0
Net asset value per Ordinary share
257.9p
256.0p
Distribution of Assets and Liabilities
48 Shires Income PLC
Analysis of Listed Equity Portfolio
0% 5% 10% 15% 20% 25% 30%
aSC IT*
Basic Materials
Consumer Discretionary
Consumer Staples
En ergy
Financials
Health Care
Indus trials
Real Estate
Technology
Telec omm unications
Utilities
2024
2023
Shires Income PLC relative to the FTSE All-Share Index
-12% -1 0% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12%
aSC IT*
Basic Materials
Consumer Discretionary
Consumer Staples
En ergy
Financials
Health Care
Indus trials
Real Estate
Technology
Telec omm unications
Utilities
2024
2023
* While the Company’s investment in abrdn Smaller Companies Income Trust plc (“aSCIT”) is classified under “Financials” for FTSE
classification purposes, it is shown separately in the above tables given its materiality to the Company
.
Sector Analysis
AUM
m
Invest
Shires Income PLC 49
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Listed equities sector allocation 2024
5.1%
6.1%
6.5%
18.4%
27.3%
10.5%
12.1%
3.5%
2.2%
8.3%
Basic Materials - 5.1%
Consumer Discretionary - 6.1%
Consumer Staples - 6.5%
Energy - 18.4%
Financial s - 27. 3%
Health Ca re - 10.5%
Industrials - 12.1%
Technology - 3.5%
Telecommunications - 2.2%
Utilities - 8.3%
Listed equities sector allocation 2023
10.0%
5.2%
1.2%
13.5%
18.5%
20.3%
9.6%
10.2%
0.7%
3.0%
7.8%
aS CIT - 10. 0%
Basic Materials - 5.2%
Consumer Discretionary - 1.2%
Consumer Stapl es - 13. 5%
Energy - 18.5%
Financials - 20.3%
Health Care - 9.6%
Industrials - 10.2%
Technology - 0.7%
Telecommunications - 3.0%
Utilities - 7.8%
Invest
50 Shires Income PLC
Governance
Shires Income PLC 51
[Section Divider Text]
The Company is committed to high standards
of corporate governance and applies the
principles and provisions identified in the AIC
Code of Corporate Governance.
All Directors are considered by the Board to
be independent of the Company and the
Manager and free of any material relationship
with the Manager.
52 Shires Income PLC
Robert Talbut
Independent non-executive Chairman and
Chairman of the Management Engagement Committee
(will retire from the Board following the AGM)
Experience:
Robert Talbut was formerly Chief Investment Officer of
Royal London Asset Management and has over 30 years
of financial services experience. He has represented the
asset management industry through the chairmanship of
both the ABI Investment Committee and the Asset
Management Committee of the Investment Association.
He has also been a member of the Audit & Assurance
Council of the FRC and the Financial Conduct Authority’s
Listing Authority Advisory Panel. He is Chairman of
Schroder UK Mid Cap Fund plc and JPMorgan American
Investment Trust PLC and a non-executive director of
Pacific Assets Trust plc.
Length of service:
9 years, appointed a Director in April 2015 and
Chairman in July 2017
Last re-appointed to the Board:
6 July 2023
Committee member:
Audit Committee, Management Engagement Committee
(Chairman), Remuneration Committee
Contribution:
The Board has reviewed the contribution of Robert Talbut
and has concluded that he has continued to chair the
Company expertly, fostering a collaborative spirit
between the Board and Manager whilst ensuring that
meetings remain focused on the key areas of stakeholder
relevance. In addition, with his investment management
knowledge and experience of other current roles, he has
continued to provide significant investment insight to
the Board and knowledge of the investment
management sector. Robert Talbut will retire from the
Board following the conclusion of the AGM on 5 July 2024.
Robin Archibald
Senior Independent non-executive Director and
Chairman of the Audit Committee (will be appointed as
Chairman following the AGM)
Experience:
Robin Archibald has a wide range of experience in
advising and managing transactions in the UK closed-end
funds sector over his 35 year career as a corporate
financier including with Samuel Montagu, S G Warburg
and Natwest Markets. He retired from Winterflood
Investment Trusts in May 2014, where he was formerly
Head of Corporate Finance and Broking. He is currently a
non-executive director of AEW UK REIT plc, Capital
Gearing Trust PLC and Henderson European Focus Trust
plc, and currently serves as audit chair on two of these
other investment companies. He is a Chartered
Accountant.
Length of service:
7 years, appointed a Director in May 2017
Last re-appointed to the Board:
6 July 2023
Committee member:
Audit Committee (Chairman), Management Engagement
Committee, Remuneration Committee
Contribution:
The Board has reviewed the contribution of Robin
Archibald in light of his proposed re-appointment at the
AGM and has concluded that he has continued to chair
the Audit Committee expertly and continues to provide
significant corporate insight to the Board. In addition, his
advisory experience and the benefits of his roles as a non-
executive director, audit committee chairman and senior
independent director of other investment company
boards have contributed to his specific knowledge of
investment companies to the benefit of the Company.
Board of Directors
Shires Income PLC 53
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Jane Pearce
Independent non-executive Director and Chairman of the
Remuneration Committee (will be appointed as Audit
Committee Chair following the AGM)
Experience:
Jane Pearce had an executive career as an equity analyst
at leading investment banks and latterly was an equity
strategist at Lehman Brothers and Nomura International.
She is a non-executive director of three UK subsidiaries of
Morgan Stanley and is also a non-executive director and
Chair of the Audit Committee of Polar Capital Technology
Trust PLC. She is a Chartered Accountant and was a
Member of the Governing Council of the Institute of
Chartered Accountants of Scotland from 1999-2000.
Length of service:
4 years, appointed a Director in January 2020
Last re-appointed to the Board:
6 July 2023
Committee member:
Audit Committee, Management Engagement Committee,
Remuneration Committee (Chairman)
Contribution:
The Board has reviewed the contribution of Jane Pearce
in light of her proposed re-appointment at the AGM and
has concluded that she has continued to provide
significant financial and investment insight to the Board
and knowledge of the investment management sector.
Helen Sinclair
Independent non-executive Director (will be appointed as
Senior Independent Director following the AGM)
Experience:
Helen Sinclair began her career in investment banking and
spent nearly eight years at 3i plc focusing on
management buy-outs and growth capital investments.
She later co-founded Matrix Private Equity (which
became Mobeus Equity Partners) in 2000 and
subsequently became Managing Director of the company
before moving to take on a number of non-executive
director roles. She is Chairman of Octopus Future
Generations VCT plc and a non-executive director of
Sherborne Investors (Guernsey) C Limited and BlackRock
Smaller Companies Trust plc.
Length of service:
2 years, appointed a Director in February 2022
Last re-appointed to the Board:
6 July 2023
Committee member:
Audit Committee, Management Engagement Committee,
Remuneration Committee
Contribution:
The Board has reviewed the contribution of Helen Sinclair
in light of her proposed re-appointment at the AGM and
has concluded that she has continued to provide
significant corporate insight and knowledge of the
investment management sector to the Board.
54 Shires Income PLC
Simon White
Independent non-executive Director
Experience:
Simon White has a background in UK equity fund
management and significant experience in the
investment trust sector. He was, until June 2022, Co-Head
of Investment Trusts at BlackRock where he was
responsible for overseeing the company secretarial, sales
and marketing and third-party administration services. He
was also involved in successful fundraisings and significant
secondary issuance within the investment trust business.
He is currently a Senior Adviser to Cadarn Capital, an
independent distribution and investor relations company
servicing London-listed investment companies.
Length of service:
Appointed a Director on 1 January 2024
Last re-appointed to the Board:
n/a, will stand for appointment at the AGM on 5 July 2024
Committee member:
Audit Committee, Management Engagement Committee,
Remuneration Committee
Contribution:
The Board has reviewed the contribution of Simon White
in light of his proposed appointment at the AGM and has
concluded that, since his appointment to the Board, he
has provided a significant contribution through his
experience of the investment trust sector and the
investment management sector more generally.
Board of Directors
Continued
Shires Income PLC 55
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
The Directors present their report and audited financial
statements for the year ended 31 March 2024.
Results and Dividends
The financial statements for the year ended 31 March
2024 are contained on pages 82 to 106. Dividends paid
and proposed for the year amounted to 14.40p per
Ordinary share.
First, second and third interim dividends for the year, each
of 3.20p per Ordinary share, were paid on 27 October
2023, 31 January 2024 and 30 April 2024 respectively. The
Directors recommend a final dividend of 4.80p per
Ordinary share, payable on 31 July 2024 to shareholders
on the register on 5 July 2024. The ex-dividend date is 4
July 2024. Under UK-adopted international accounting
standards the third interim and final dividends will be
accounted for in the financial year ended 31 March 2025.
A resolution in respect of the final dividend will be
proposed at the forthcoming Annual General Meeting.
Investment Trust Status
The Company is registered as a public limited company
(registered in England and Wales No. 00386561) and is an
investment company within the meaning of Section 833 of
the Companies Act 2006. The Company has been
approved by HM Revenue & Customs as an investment
trust subject to it continuing to meet the relevant eligibility
conditions of Section 1158 of the Corporation Tax Act
2010 and the ongoing requirements of Part 2 Chapter 3
Statutory Instrument 2011/2999 for all financial years
commencing on or after 1 April 2012. The Directors are of
the opinion that the Company has conducted its affairs for
the year ended 31 March 2024 so as to enable it to comply
with the ongoing requirements for investment trust status.
Individual Savings Accounts
The Company satisfies the requirements as a qualifying
security for Individual Savings Accounts. The Directors
intend that the Company will continue to conduct its
affairs in this manner.
aSCIT Transaction
On 26 July 2023 the Company announced that it had
agreed terms with the board of abrdn Smaller Companies
Income Trust plc (“aSCIT”) in respect of a proposed
combination of the assets of the Company with those of
aSCIT (the “aSCIT transaction”). Shareholders were sent
documentation in October explaining that this was to be
effected by way of a scheme of reconstruction and
winding up of aSCIT under section 110 of the Insolvency
Act 1986 (the “Scheme”) and the associated transfer of
the assets of aSCIT to the Company in exchange for the
issue of new Ordinary shares in the Company to those
aSCIT shareholders who rolled their shareholdings into the
Company in accordance with the Scheme.
Shareholders approved the Scheme proposals at the
Company’s General Meeting held on 20 November 2023
and aSCIT’s shareholders approved the Scheme
proposals at their General Meeting held on the same day.
The Scheme completed on 1 December. On that date the
Company issued 11,268,494 new Ordinary shares to
aSCIT shareholders in accordance with the Scheme.
The new shares were admitted to trading on
4 December 2023.
Capital Structure
During the year the Company issued 11,268,494 Ordinary
shares of 50p each in connection with the aSCIT
transaction as referred to above. In addition, the
Company bought back 863,532 Ordinary shares at a
discount to net asset value, to hold in treasury. The issued
Ordinary share capital as at 31 March 2024 comprised
41,369,542 Ordinary shares of 50p each, 863,532 Ordinary
shares held in treasury and 50,000 3.5% Cumulative
Preference shares of £1 each.
Directors’ Report
56 Shires Income PLC
Voting Rights
Each Ordinary and Cumulative Preference share carries
one vote at general meetings of the Company. The
Cumulative Preference shares carry a right to receive a
fixed rate of dividend and, on a winding up of the
Company, to the payment of such fixed cumulative
preferential dividends to the date of such winding up and
to the repayment of the capital paid up on such shares
in priority to any payment to the holders of the
Ordinary shares.
The Ordinary shares, excluding any treasury shares, carry
a right to receive dividends and, on a winding up or other
return of capital, after meeting the liabilities of the
Company, the surplus assets will be paid to Ordinary
shareholders in proportion to their shareholdings.
There are no restrictions on the transfer of Ordinary or
Cumulative Preference shares in the Company other than
certain restrictions which may from time to time be
imposed by law.
Management Agreement
The Company has appointed abrdn Fund Managers
Limited (“aFML”), a wholly owned subsidiary of abrdn plc,
as its alternative investment fund manager. aFML has
been appointed to provide investment management, risk
management, administration, company secretarial
services and promotional activities to the Company. The
Company’s portfolio is managed by abrdn Investments
Limited by way of a group delegation agreement in place
between aFML and abrdn Investments Limited. In addition,
aFML has sub-delegated administrative and company
secretarial services to abrdn Holdings Limited and
promotional activities to abrdn Investments Limited.
Details of the management fee and fees payable for
promotional activities are shown in notes 4 and 5 to the
financial statements.
The management agreement is terminable on not less
than six months’ notice. In the event of termination by the
Company on less than the agreed notice period,
compensation is payable to the Manager in lieu of the
unexpired notice period.
Substantial Interests
Information provided to the Company by major
shareholders pursuant to the FCA’s Disclosure Guidance
and Transparency Rules is published by the Company via
a Regulatory Information Service.
The table below sets out the interests in 3% or more of the
issued share capital of the Company, of which the Board
was aware as at 31 March 2024.
Shareholder
Number of
Ordinary
shares held
% of
Ordinary
shares held
Interactive Investor
13,410,525
32.4
Hargreaves Lansdown
8,562,529
20.7
AJ Bell
2,841,009
6.9
HSDL
2,363,079
5.7
There have been no changes notified to the Company
between the year end and the date of approval of
this Report.
Directors
Simon White was appointed as an independent non-
executive Director on 1 January 2024. In respect of the
appointment of Mr White, the Board used the services of
an external search consultant, Fletcher Jones Limited.
Fletcher Jones Limited does not have any other
connections with the Company or individual Directors.
At the end of the year the Board comprised five
non-executive Directors, each of whom is considered by
the Board to be independent of the Company and
the Manager.
The Directors attended scheduled Board and Committee
meetings during the year ended 31 March 2024 as follows
(relevant meetings in brackets):
Director
Board
Audit
Committee
Management
Engagement
Committee
Remuneration
Committee
Robert Talbut
5 (5)
2 (2)
1 (1)
1 (1)
Robin Archibald
5 (5)
2 (2)
1 (1)
1 (1)
Jane Pearce
5 (5)
2 (2)
1 (1)
1 (1)
Helen Sinclair
5 (5)
2 (2)
1 (1)
1 (1)
Simon White
A
1 (1)
- (-)
1 (1)
1 (1)
A
Appointed 1 January 2024
Continued
Directors’ Report
Shires Income PLC 57
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
The Board meets more frequently when business needs
require and has regular dialogue between formal Board
meetings, including with the Manager. During the year,
there were an additional 11 Board/Board Committee
meetings held principally in relation to the aSCIT
transaction, but also in relation to share buy backs, Board
succession and the approval of the Annual and Half Yearly
Reports.
Under the terms of the Company’s Articles of Association,
Directors must retire and be subject to appointment at the
first Annual General Meeting after their appointment by
the Board, and be subject to re-appointment every three
years thereafter. However, the Board has decided that all
Directors will seek annual re-appointment after initial
appointment to the Board.
Having served for nine years, Robert Talbut will retire at the
Annual General Meeting on 5 July 2024. Simon White will
stand for appointment and each of Helen Sinclair, Robin
Archibald and Jane Pearce will seek re-appointment at
the meeting.
The Board believes that all the Directors seeking
appointment/re-appointment remain independent of the
Manager and free from any relationship which could
materially interfere with the exercise of their judgement
on issues of strategy, performance, resources and
standards of conduct. The biographies of each of the
Directors are shown on pages 52 to 54, setting out their
range of skills and experience as well as length of service
and contribution to the Board during the year. The Board
believes that each Director has the requisite high level and
range of business, investment and financial experience
which enables the Board to provide clear and effective
leadership, oversight and proper governance of
the Company.
During the year, the Board undertook an annual appraisal
of the Chairman of the Board, individual Directors and the
performance of Committees and the Board as a whole.
This process involved the completion of questionnaires by
each Director and follow-on discussions between the
Chairman and each Director. The appraisal of the
Chairman was undertaken by the Senior Independent
Director. Following this process, the Board considers that it
continues to operate in an efficient and effective manner
and that the performance of each of the Directors seeking
appointment/re-appointment continues to be effective.
Each Director has demonstrated commitment to the role
and the Board is satisfied that their individual
performances contribute to the long-term sustainable
success of the Company. All of the Directors have
demonstrated that they have sufficient time and
commitment to fulfil their directorial roles with the
Company. The Board therefore recommends the
appointment/re-appointment of each of the Directors at
the Annual General Meeting.
Board’s Policy on Tenure
In normal circumstances, it is the Board’s expectation that
Directors will not serve beyond the Annual General
Meeting following the ninth anniversary of their
appointment. However, the Board takes the view that
independence of individual Directors is not necessarily
compromised by length of tenure on the Board and that
continuity and experience can add significantly to the
Board’s strength. The Board believes that
recommendation for re-election should be on an
individual basis following a rigorous review which assesses
the contribution made by the Director concerned, but also
taking into account the need for regular refreshment
and diversity, as well as providing continuity of experience
of the Company.
It is the Board’s policy that the Chairman of the Board will
not normally serve as a Director beyond the Annual
General Meeting following the ninth anniversary of his/her
appointment to the Board. However, this may be
extended in certain circumstances including the
facilitation of effective succession planning and the
development of a diverse Board. In such a situation the
reasons for the extension will be fully explained to
shareholders and a timetable for the departure of the
Chairman clearly set out.
The Role of the Chairman and Senior
Independent Director
The Chairman is responsible for providing effective
leadership to the Board, by setting the tone of the
Company, demonstrating objective judgement and
promoting a culture of openness and debate. The
Chairman facilitates the effective contribution and
encourages active engagement by each Director. In
conjunction with the Company Secretary, the Chairman
ensures that Directors receive accurate, timely and clear
information to assist them with effective decision-making.
The Chairman acts upon the results of the Board
evaluation process by recognising strengths and
addressing any weaknesses and also ensures that the
Board engages with major shareholders and that all
Directors understand shareholder views.
58 Shires Income PLC
The Senior Independent Director acts as a sounding board
for the Chairman and acts as an intermediary for other
Directors, when necessary. Working closely with the other
Directors, the Senior Independent Director takes
responsibility for an orderly succession process for the
Chairman, and leads the annual appraisal of the
Chairman’s performance. The Senior Independent
Director is also available to shareholders to discuss any
concerns they may have.
Directors’ and Officers’ Liability Insurance
The Company maintains insurance in respect of Directors’
and Officers’ liabilities in relation to their acts on behalf of
the Company. In addition, the Company has entered into
a separate deed of indemnity with each of the Directors
reflecting the scope of the indemnity in the Articles of
Association. Under the Articles of Association, each
Director is entitled to be indemnified out of the assets of
the Company to the extent permitted by law against any
loss or liability incurred by him or her in the proper
execution of his or her duties in relation to the affairs of
the Company.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a
situation where a Director has a conflict of interest. As part
of this process, each Director prepares a list of other
positions held and all other conflict situations that may
need to be authorised either in relation to the Director
concerned or his or her connected persons. The Board
considers each Director’s situation and decides whether
to approve any conflict, taking into consideration what is in
the best interests of the Company and whether the
Director’s ability to act in accordance with his or her wider
duties is affected. Each Director is required to notify the
Company Secretary of any potential, or actual, conflict
situations that will need authorising by the Board.
Authorisations given by the Board are reviewed at each
Board meeting.
No Director has a service contract with the Company
although all Directors are issued with letters of
appointment, which may be amended from time to time
to reflect regulatory and other changes. Other than the
deeds of indemnity referred to above and the Directors’
letters of appointment, there were no contracts during,
or at the end of the year, in which any Director
was interested.
The Company has a policy of conducting its business in an
honest and ethical manner. The Company takes a zero-
tolerance approach to bribery and corruption and has
procedures in place that are proportionate to the
Company’s circumstances to prevent them. The Manager
also adopts a group-wide zero-tolerance approach and
has its own detailed policy and procedures in place to
prevent bribery and corruption. Copies of the Manager’s
anti-bribery and corruption policies are available on
its website.
In relation to the corporate offence of failing to prevent tax
evasion, it is the Company’s policy to conduct all business
in an honest and ethical manner. The Company takes a
zero-tolerance approach to facilitation of tax evasion
whether under UK law or under the law of any foreign
country and is committed to acting professionally,
fairly and with integrity in all its business dealings
and relationships.
Board Diversity
The Board recognises the importance of having a range
of skilled and experienced individuals with the right
knowledge represented on the Board in order to allow it to
fulfil its obligations. The Board also recognises the benefits
and is supportive of the principle of diversity in its
recruitment of new Board members. The Board will not
display any bias for age, gender, race, sexual orientation,
socio-economic background, religion, ethnic or national
origins or disability in considering the appointment of its
Directors. In view of its size, the Board will continue to
ensure that all appointments are made on the basis of
merit against the specification prepared for each
appointment. In doing so, the Board will take account of
the targets set out in the FCA’s Listing Rules, which are set
out in the tables below.
The Board has resolved that the Company’s year end
date is the most appropriate date for disclosure purposes.
The following information has been provided by each
Director through the completion of questionnaires. There
have been no changes since the year end.
Directors’ Report
Continued
Shires Income PLC 59
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Table for reporting on gender as at 31 March 2024
Number of Board
members
Percentage of
the Board
Number of senior
positions on the Board
(CEO, CFO, Chair and
SID)
Number in
executive
management
Percentage of
executive
management
Men
3
60%
n/a
(note 3)
n/a
(note 3)
n/a
(note 3)
Women
2
40%
(note 1)
Not specified/prefer not to say
-
-
Table for reporting on ethnic background as at 31 March 2024
Number of Board
members
Percentage of
the Board
Number of senior
positions on the Board
(CEO, CFO, Chair and
SID)
Number in
executive
management
Percentage of
executive
management
White British or other White
(including minority-white groups)
5 100%
n/a
(note 3)
n/a
(note 3)
n/a
(note 3)
Minority ethnic
-
-
(note 2)
Not specified/prefer not to say
-
-
Notes:
1. Meets target that at least 40% of Directors are women as set out in LR 9.8.6R (9)(a)(i).
2. Does not meet target that at least one Director is from a minority ethnic background as set out in LR 9.8.6R (9)(a)(iii). The Directors
will take this into account when making future Board appointments.
3. This column is not applicable as the Company is externally managed and does not have any executive staff. Specifically, it does not
have either a CEO or CFO. The Company considers that the roles of Chairman of the Board, Senior Independent Director and
Chairman of the Audit Committee are senior Board positions. During the year ended 31 March 2024 the Company did not meet the
target set out in LR 9.8.6R (9)(a)(ii) that at least one of the senior Board positions is held by a woman. However, it will meet the target
following the Annual General Meeting on 5 July 2024 when Jane Pearce will be appointed as Chair of the Audit Committee and
Helen Sinclair will be appointed as SID.
Corporate Governance
The Company is committed to high standards of
corporate governance and the Board is accountable to
the Company’s shareholders for good governance. The
Board has considered the principles and provisions of the
AIC Code of Corporate Governance as published in
February 2019 (the “AIC Code”). The AIC Code addresses
the principles and provisions set out in the UK Corporate
Governance Code as published by the FRC in July 2018
(the “UK Code”), as well as setting out additional
provisions on issues that are of specific relevance to
investment trusts.
The Board considers that reporting against the principles
and provisions of the AIC Code, which has been endorsed
by the FRC, provides more relevant information to
shareholders than if it had adopted the UK Code. The AIC
Code is available on the AIC’s website: theaic.co.uk. It
includes an explanation of how the AIC Code adapts the
principles and provisions set out in the UK Code to make
them relevant for investment trusts.
The Board confirms that, during the year, the Company
complied with the principles and provisions of the
AIC Code.
Further details of the Company’s compliance with the AIC
Code can be found on its website.
60 Shires Income PLC
The Board and its Committees
Mr Talbut is the Chairman of the Board and Mr Archibald is
the Senior Independent Director.
The Board has appointed committees with specific
responsibilities as set out below. Copies of the terms of
reference of each committee are available on the
Company’s website, or upon request from the Company.
Given the size of the Board and because all of the
Directors are non-executive, the Board does not consider
it appropriate for the Company to have a nominations
committee. The business of nominations and succession
planning, and Board evaluations, is covered by the
full Board.
Audit Committee
The Audit Committee comprises all Directors and is
chaired by Mr Archibald and will be chaired by Ms Pearce
following the Annual General Meeting on 5 July 2024.
The Audit Committee’s Report is contained on pages
68 to 71.
Management Engagement Committee
The Management Engagement Committee comprises all
Directors and is chaired by Mr Talbut. The purpose of the
Committee is to review the terms of the agreement with
the Manager including, but not limited to, the
management fee, and also to review the performance of
the Manager in relation to the achievement of the
Company’s objectives. These reviews were conducted
during the year and the outcomes are noted below. In
addition, the Committee conducts an annual review of the
performance, terms and conditions of the Company’s
other main service providers.
The key terms of the management agreement and fees
payable to the Manager are set out on page 56 and in
notes 4 and 5 to the financial statements. The Board
believes the fee arrangements are competitive with
reference to other investment trusts with a similar
investment mandate and are priced appropriately given
the level of service provided by the abrdn Group. As stated
above, the Committee reviews the performance of the
Manager annually. The Board is satisfied with the
Company’s performance since the appointment of the
abrdn Group as Manager in 2008 and believes that the
Investment Manager has positioned the portfolio well in
order to seek to achieve good medium and long-term
performance in line with the Company’s investment
objective. The Board is also satisfied with the standard of
company secretarial, administration and promotional
support provided by the Manager. It therefore considers
the continuing appointment of the Manager on the terms
agreed to be in the best interests of shareholders.
Remuneration Committee
The Remuneration Committee comprises all Directors and
is chaired by Ms Pearce who has relevant experience and
understanding of the Company. The Committee’s duties
include reviewing the Company’s remuneration policy
and determining Directors’ remuneration, including for
the Chairman.
Going Concern
The Company’s assets consist mainly of equity shares in
companies listed on the London Stock Exchange. The
Board has performed stress testing and liquidity analysis
on the portfolio and considers that, in most foreseeable
circumstances, the majority of the Company’s
investments are realisable within a relatively
short timescale.
The Board has set limits for borrowing and regularly
reviews actual exposures, cash flow projections and
compliance with banking covenants, including the
headroom available. At the year end, the Company had a
£20 million loan facility which is due to mature in May 2027.
Having taken these factors into account, the Directors
believe that the Company has adequate resources to
continue in operational existence for the foreseeable
future and has the ability to meet its financial obligations
as they fall due for the period to 30 June 2025, which is at
least twelve months from the date of approval of this
Report. For these reasons, they continue to adopt the
going concern basis of accounting in preparing the
financial statements.
Accountability and Audit
The respective responsibilities of the Directors and the
Auditor in connection with the financial statements
appear on page 72, and pages 73 to 80.
Each Director confirms that, so far as he or she is aware,
there is no relevant audit information of which the
Company’s Auditor is unaware, and they have taken all
the steps that they could reasonably be expected to have
taken as Directors in order to make themselves aware of
any relevant audit information and to establish that the
Company’s Auditor is aware of that information.
Directors’ Report
Continued
Shires Income PLC 61
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Independent Auditor
The Company’s Auditor, Ernst & Young LLP, has indicated
its willingness to remain in office. The Board will place
resolutions before the Annual General Meeting to re-
appoint Ernst & Young LLP as Auditor for the ensuing year
and to authorise the Directors to determine its
remuneration.
Relations with Shareholders
The Directors place a great deal of importance on
communications with shareholders. Shareholders and
investors may obtain up to date information on the
Company through its website and the Manager’s
information service.
The Board’s policy is to communicate directly with
shareholders and their representative bodies without the
involvement of the management group (including the
Company Secretary or the Manager) in situations where
direct communication is required, and representatives
from the Manager meet with major shareholders on at
least an annual basis in order to gauge their views. In
addition, the Company Secretary only acts on behalf of
the Board, not the Manager, and there is no filtering of
communication. At each Board meeting the Board
receives full details of any communication from
shareholders to which the Chairman responds personally
as appropriate.
Directors make themselves available to attend meetings
with the Company’s largest shareholders and meet other
shareholders at the Annual General Meeting and, as
explained in the Chairman’s Statement, the Company
will hold an Online Shareholder Presentation in advance
of the Annual General Meeting this year including
the opportunity for an interactive question and
answer session.
The notice of the Annual General Meeting is, where
practicable, sent out at least 20 working days in advance
of the meeting. All shareholders have the opportunity to
put questions to the Board and Manager at the meeting.
Further details regarding the arrangements for this year’s
Annual General Meeting and separate Online Shareholder
Presentation are set out in the Chairman’s Statement on
page 11.
Annual General Meeting
The Annual General Meeting will be held at 18 Bishops
Square, London E1 6EG on Friday 5 July 2024 at 12 noon.
The Notice of Annual General Meeting is included on
pages 121 to 127.
There are 17 resolutions to consider, including four
resolutions put as special resolutions which require the
approval of 75% of the votes cast. The 13 ordinary
resolutions include adopting the accounts and Auditor’s
report, adopting the Directors’ Remuneration Report,
approving the final dividend, the appointment/re-
appointment of Directors, the re-appointment and
determining the remuneration of the Auditor, increasing
the limit on Directors’ remuneration, a general share
allotment authority and a resolution to approve a change
to the investment policy. Further details of the ordinary
and special resolutions to be proposed at the meeting are
set out below.
Allotment of Shares
Resolution 11, which is an ordinary resolution, will, if
approved, give the Directors a general authority to allot
new securities up to 10% of the issued Ordinary share
capital of the Company as at the date of the passing of
the resolution (up to a maximum aggregate nominal
amount of £2,068,477 based on the number of Ordinary
shares in issue as at the date of this Report), such authority
to expire on 30 September 2025 or, if earlier, at the
conclusion of the next Annual General Meeting of the
Company (unless previously revoked, varied or extended
by the Company in general meeting).
Limit on Directors’ Fees
Resolution 12, which is an ordinary resolution, will, if
approved, increase the annual limit on aggregate
Directors' fees from £175,000 to £200,000. The proposal is
explained in more detail in the Directors' Remuneration
Report on page 65 and is permitted under Article 80 of the
Company's Articles of Association. If Resolution 12 is
passed, the increase in the annual limit will take effect
from the conclusion of the Annual General Meeting.
Change of Investment Policy
The Company is proposing to amend its investment policy,
principally to increase from 10% to 20% the limit of total
assets that may be invested in the equity securities of
overseas companies. The full text of the proposed
amendments may be found in the Appendix to the Notice
of Annual General Meeting on page 127 while further
information on the reasons for this amendment may be
found in the Chairman’s Statement on page 9. The
amendment requires both FCA and shareholder approval
and it is intended that Resolution 13 will be put to
shareholders at the forthcoming Annual General Meeting
for their approval.
62 Shires Income PLC
Disapplication of Pre-emption Provisions
Resolution 14, which is a special resolution, will, if approved,
give the Directors power to allot Ordinary shares
(including Ordinary shares held in treasury) for cash,
otherwise than pro-rata to existing shareholders, up to a
maximum aggregate nominal amount representing 10%
of the Company’s issued Ordinary share capital as at the
date of the passing of the resolution (up to an aggregate
nominal amount of £2,068,477 based on the number of
Ordinary shares in issue as at the date of this Report).
Ordinary shares would only be issued for cash at a
premium to the net asset value per share. This authority
will expire on 30 September 2025 or, if earlier, at the
conclusion of the next Annual General Meeting of the
Company (unless previously revoked, varied or extended
by the Company in general meeting). As noted, this
disapplication of pre-emption rights also applies in respect
of treasury shares which the Company may sell.
Purchase of the Company's own Ordinary Shares
Resolution 15, which is a special resolution, will, if approved,
renew the Company’s authority to make market
purchases of its own shares. The maximum number of
Ordinary shares which may be purchased pursuant to the
authority is 14.99% of the issued share capital of the
Company as at the date of the passing of the resolution
(approximately 6.2 million Ordinary shares as at the date
of this Report). The minimum price which may be paid for
an Ordinary share (exclusive of expenses) is 50p. The
maximum price which may be paid (exclusive of
expenses) is an amount being not more than the higher of
(i) 105% of the average of the middle market quotations
for the Company’s Ordinary shares for the five business
days immediately preceding the date of purchase and (ii)
the higher of the price of the last independent trade and
the highest current independent bid relating to an
Ordinary share on the trading venue where the purchase
is carried out.
This authority, if conferred, will only be exercised if shares
are purchased for cash at a price below the prevailing net
asset value per share and the Directors believe it is in the
best interests of shareholders generally. Shares so
repurchased may be held in treasury or cancelled. Any
purchase of shares will be made within guidelines
established from time to time by the Board. This authority
will expire on 30 September 2025 or, if earlier, at the
conclusion of the next Annual General Meeting of the
Company (unless previously revoked, varied or extended
by the Company in general meeting).
Cancellation of Share Premium Account
Resolution 16 is a special resolution to cancel the entire
amount standing to the credit of the Company’s Share
Premium Account. Subject to the passing of the resolution,
the cancellation of the Share Premium Account will be
completed by means of a Court approved capital
reduction, as described below.
The Share Premium Account represents the excess over
the nominal value for new Ordinary shares issued, less the
costs of issue. The reserve represented by the Share
Premium Account can only be used for very limited
applications and cannot, for example, be used to pay
dividends or apply against future share buybacks.
On completion of the capital reduction, the Company's
entire Share Premium Account will be cancelled and,
subject to the Court being satisfied with the Company’s
approach to creditors, as outlined below, an equivalent
amount will be added to the Company’s distributable
reserves, which can be used for the future payment of
dividends to shareholders or to carry out share buybacks
should it be desirable to do so.
Under the Companies Act 2006, the cancellation of the
Share Premium Account is conditional upon (a) the
sanction of the special resolution of shareholders, (b) the
confirmation of the Court, (c) the registration of the
Court’s order confirming the capital reduction and (d) the
capital reduction not otherwise being unlawful.
In considering the Company’s application for the Court
order, the Court will need to be satisfied that the interests
of any creditors (including contingent creditors) of the
Company, whose debts remain outstanding on the date
on which the Court order is registered, are not prejudiced
by the capital reduction. The Company intends that an
application will be made for the Court to approve the
capital reduction as soon as reasonably practicable after
the Annual General Meeting, provided that Resolution 16 is
passed as a special resolution.
The completion of the capital reduction will not affect the
rights attaching to the Ordinary shares and will not result in
any change to the number of Ordinary shares in issue.
Neither will the capital reduction involve a return of capital
to shareholders nor any reduction in the Company’s
net assets.
Continued
Directors’ Report
Shires Income PLC 63
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Notice Period for General Meetings
The Company’s Articles of Association enable it to call
general meetings (other than an Annual General Meeting)
on 14 clear days' notice. In order for this to be effective, the
shareholders must also annually approve the calling of
meetings on 14 days' notice by separate resolution.
Resolution 17, which is a special resolution, seeks such
approval. The approval will be effective until the
Company's next Annual General Meeting, when it is
intended that a similar resolution will be proposed. The
Company will also need to meet the requirements for
electronic voting under the Companies Act 2006 (as
amended by the Shareholders’ Rights Regulations) before
it can call a general meeting on 14 days' notice. It is the
Board’s intention to only use this authority where it is
merited by the purpose of the meeting.
Recommendation
The Directors believe that the resolutions to be proposed
at the Annual General Meeting are in the best interests of
the Company and its shareholders and recommend that
shareholders vote in favour of the resolutions, as they
intend to do in respect of their own beneficial
shareholdings totalling 70,981 Ordinary shares,
representing 0.17% of the issued share capital.
By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
22 May 2024
64 Shires Income PLC
This Directors’ Remuneration Report comprises
three parts:
a) a Remuneration Policy which is subject to a binding
shareholder vote every three years (or sooner if
varied during this interval) - most recently voted on at
the Annual General Meeting on 7 July 2021, and will be
put to shareholders for approval at the Annual
General Meeting on 5 July 2024;
b) an Implementation Report which is subject to an
advisory vote on the level of remuneration paid during
the year; and
c) an Annual Statement.
The law requires the Company’s Auditor to audit certain of
the disclosures provided in the Directors’ Remuneration
Report. Where disclosures have been audited, they are
indicated as such. The Auditor’s opinion is included on
pages 73 to 80.
The Directors’ Remuneration Policy and level of Directors’
remuneration are determined by the Remuneration
Committee, which is chaired by Ms Pearce, and comprises
all of the Directors. The Remuneration Policy is reviewed
by the Remuneration Committee on an annual basis.
The Directors’ Remuneration Policy takes into
consideration the principles of the UK Corporate
Governance Code and the AIC’s recommendations
regarding the application of those principles to
investment companies.
No shareholder views have been sought in setting the
Remuneration Policy (approved by shareholders at the
Annual General Meeting in 2021) although any comments
received from shareholders are considered.
Remuneration Policy
The Board’s policy is that the remuneration of non-
executive Directors should reflect the nature of the
Directors’ duties, responsibilities, the value of their time
spent and be fair and comparable to that of other
investment trusts that are similar in size, and have similar
capital structures and investment objectives.
Remuneration should also be sufficient to attract Directors
of the quality and with the skills required to oversee the
Company’s activities successfully.
Appointment Terms
· All the Directors are non-executive and are appointed
under the terms of letters of appointment which are
updated from time to time for updated regulatory
provisions.
· Under the terms of the Company’s Articles of
Association, Directors must retire and be subject to
appointment at the first Annual General Meeting after
their appointment by the Board, and be subject to re-
appointment every three years thereafter. However, the
Board has decided that all Directors will seek annual
re-appointment.
· Any Director newly appointed to the Board will receive
the fee applicable to each of the other Directors at the
time of appointment together with any other fee then
currently payable in respect of a specific role which the
new Director is to undertake for the Company.
· Additional fees may be payable to take account of
specific circumstances that might arise where a
Director is required to perform services (i) outside the
scope of the ordinary duties of a Director; or (ii) outside
the ordinary course of Company business, and in
each case where this is exceptional in terms of
time commitment.
· No incentive or introductory fees will be paid to
encourage a person to become a Director.
· Directors are not eligible for bonuses, pension benefits,
share options, long-term incentive schemes or
other benefits.
· Directors are entitled to re-imbursement of out-of-
pocket expenses incurred in connection with the
performance of their duties, including travel and
accommodation expenses as necessary.
· The Company indemnifies its Directors under deeds of
indemnity for all costs, charges, losses, expenses and
liabilities which may be incurred in the discharge of
duties as a Director of the Company.
· The Directors’ remuneration is not subject to any
performance related fee.
· No Director has a service contract.
· The terms of appointment provide that a Director may
be removed without notice in certain circumstances.
· Compensation will not be due upon leaving office.
· No Director is entitled to any other monetary payment
or any assets of the Company.
· Directors’ & Officers’ liability insurance cover is
maintained by the Company on behalf of the Directors.
Directors’ Remuneration Report
Shires Income PLC 65
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Statement of Voting at General Meeting on the
Remuneration Policy
At the Annual General Meeting held on 7 July 2021,
shareholders approved the Directors’ Remuneration
Policy. 86.8% of proxy votes were in favour of the
resolution and 13.2% were against. There were
abstentions in respect of 113,961 Ordinary shares.
Implementation Report
Limit on Directors’ Fees
Directors’ fees are set within the limits of the Company’s
Articles of Association which limit the aggregate fees per
annum payable to the Board of Directors. The current limit
specified in the Articles of Association, as approved by
shareholders at the Annual General Meeting on 6 July
2023, is £175,000 per annum (or such other amount as
may from time to time be determined by ordinary
resolution of the Company).
An ordinary resolution will be proposed at the Annual
General Meeting on 5 July 2024 to increase the annual
limit on aggregate Directors' fees from £175,000 to
£200,000. This higher amount is considered necessary to
allow for modest fee increases in the future and also for a
higher level of aggregate fees during years where new
Directors are appointed as part of the Board’s succession
planning. If the resolution is passed, the increase to the
annual limit will take effect from the conclusion of the
Annual General Meeting.
Review of Directors’ Fees
The levels of fees for the year and the preceding year are
set out in the table below.
31 March
2024
£
31 March
2023
£
Chairman
41,000
39,000
Chairman of Audit Committee
33,500
32,000
Director
29,000
27,500
An additional fee of £1,000 per annum (2023: £1,000) is
paid to the Senior Independent Director.
The Remuneration Committee carried out a review of the
level of Directors’ fees during the year by reference to
peer group and sector comparisons. Following this review,
it was decided that fees would be increased with effect
from 1 April 2024 to £43,500 per annum for the Chairman,
£35,000 per annum for the Audit Committee Chairman
and £30,500 for the other Directors. It was also decided
that a separate fee of £1,000 per annum would continue
to be paid to the Senior Independent Director.
These fee levels are considered to reflect the
responsibility, time commitment, experience, and skills
and expertise required of a director of an investment
trust company.
Company Performance
The graph below shows the share price and NAV total
return (assuming all dividends are reinvested) to Ordinary
shareholders compared to the total return from the FTSE
All-Share Index for the ten year period to 31 March 2024
(rebased to 100 at 31 March 2014). This Index was chosen
for comparison purposes, as it is the benchmark used for
investment performance measurement purposes.
80
1 00
1 20
1 40
1 60
1 80
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
NAV Sh are P rice Index
Spend on Pay
As the Company has no employees, the Directors do not
consider it appropriate to present a table comparing
remuneration paid to employees with distributions to
shareholders. The total fees paid to Directors are
shown below.
66 Shires Income PLC
Fees Payable (Audited)
The Directors who served during the year received the
following fees, which exclude employers’ National
Insurance contributions:
Director
2024
£
2023
£
Robert Talbut
41,000
39,000
Robin Archibald
A
34,500
32,553
Marian Glen
B
-
7,585
Jane Pearce
29,000
27,500
Helen Sinclair
29,000
27,500
Simon White
C
7,250
-
Total
140,750
134,138
A
Appointed Senior Independent Director 12 September 2022
B
Retired 6 July 2022
C
Appointed 1 January 2024
Fees are pro-rated where a change takes place during a
financial year. There were no payments to third parties
included in the fees referred to in the table above.
Annual Percentage Change in Directors’ Remuneration
The table below sets out the annual percentage change in
Directors’ fees for the past four years.
Year
ended
31
March
2024
Year
ended
31
March
2023
Year
ended
31
March
2022
Year
ended
31
March
2021
Director
%
%
%
%
Robert Talbut
5.1
5.4
4.2
-
Robin Archibald
A
6.0
6.7
5.2
3.7
Jane Pearce
B
5.5
3.8
6.0
n/a
Helen Sinclair
C
5.5
n/a
n/a
-
Simon White
D
n/a
n/a
n/a
n/a
A
Appointed Chairman of the Audit Committee on 4 July 2019 and Senior
Independent Director on 12 September 2022
B
Appointed 1 January 2020
C
Appointed 1 February 2022
D
Appointed 1 January 2024
Directors’ Interests in the Company (Audited)
The Directors are not required to have a shareholding in
the Company. The Directors (including their connected
persons) at 31 March 2024 and 31 March 2023 had no
interest in the share capital of the Company other than
those interests, all of which are beneficial, shown in the
table below.
31 March 2024
31 March 2023
Ordinary shares
Ordinary shares
Robert Talbut
18,496
18,496
Robin Archibald
22,471
20,294
Jane Pearce
7,014
3,000
Helen Sinclair
3,000
3,000
Simon White
20,000
-
No Director had an interest in the 3.5% Cumulative
Preference shares at any time during the year.
There have been no changes to the Directors’ interests
in the share capital of the Company since the end of
the year.
Statement of Voting at General Meeting on the
Remuneration Report
At the Company’s last Annual General Meeting, held on 6
July 2023, shareholders approved the Directors’
Remuneration Report (excluding the Directors’
Remuneration Policy) in respect of the year ended 31
March 2023. 88.0% of proxy votes were in favour of the
resolution and 12.0% were against. There were
abstentions in respect of 133,536 Ordinary shares.
A resolution will be proposed at the Annual General
Meeting to approve the Directors’ Remuneration Report
(excluding the Directors’ Remuneration Policy) in respect
of the year ended 31 March 2024.
Continued
Directors’ Remuneration Report
Shires Income PLC 67
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Annual Statement
On behalf of the Board and in accordance with Part 2 of
Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013, it is confirmed that the above
Remuneration Report summarises, as applicable, for the
year to 31 March 2024:
· the major decisions on Directors’ remuneration;
· any substantial changes relating to Directors’
remuneration made during the year; and
· the context in which the changes occurred and
decisions have been taken.
On behalf of the Board
Jane Pearce
Director
22 May 2024
68 Shires Income PLC
The Audit Committee presents its Report for the year
ended 31 March 2024.
Committee Composition
The Audit Committee comprises all of the Directors of the
Company with Mr Archibald acting as Chairman. Mr
Archibald is a Chartered Accountant and has served as
audit committee chair on other investment company
boards for more than a decade. The Board is satisfied that
he has recent and relevant financial experience and
knowledge of the investment company sector, and that
the Committee as a whole has competence relevant to
the sector. Ms Pearce, also a Chartered Accountant and
experienced audit committee chair on another
investment company, will be appointed as Chair of the
Audit Committee following the Annual General Meeting
on 5 July 2024, when Mr Archibald will take over as
Chairman of the Board following Mr Talbut’s retirement as
a Director.
The Board considers that, given its size and the nature of
the Company’s activities, it is appropriate for the
Chairman of the Board to be a member of the
Committee. Mr Talbut was independent upon his
appointment to the Board in April 2015. It is expected that
Mr Archibald will continue as a member of the Audit
Committee when he assumes the chair of the Company
as he remains independent as he was when he was
appointed to the Board in May 2017.
Functions of the Audit Committee
The principal role of the Audit Committee is to assist the
Board in relation to the reporting of financial information,
the review of financial controls and the management of
risk. The Committee has defined terms of reference which
are reviewed and re-assessed for their adequacy on at
least an annual basis. Copies of the terms of reference are
published on the Company’s website and are available
from the Company on request.
The Committee’s main functions are listed below:
· to review and monitor the internal control systems and
risk management systems (including review of non-
financial risks) on which the Company is reliant (the
Directors’ statement on the Company’s internal controls
and risk management is set out below);
· to consider whether there is a need for the Company to
have its own internal audit function;
· to monitor the integrity of the half-yearly and annual
financial statements of the Company by reviewing, and
challenging where necessary, the actions and
judgements of the Manager and how the financial
statements are presented;
· to review, and report to the Board on, the significant
financial reporting issues and judgements made in
connection with the preparation of the Company’s
annual and half-yearly financial statements,
announcements and related formal statements and to
test the validity of these judgements on a regular basis;
· to review the content of the Annual Report and advise
the Board on whether, taken as a whole, it is fair,
balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy;
· to review the proposed audit programme and planning
with the Auditor;
· to meet with the Auditor to review the audit results
report;
· to develop and implement policy on the engagement of
the Auditor to supply non-audit services. There were no
fees for non-audit services paid to the Auditor during the
year (2023: £nil). All non-audit services must be
approved in advance by the Audit Committee and will
be reviewed in the light of statutory requirements and
the need to maintain the Auditor’s independence;
· to make recommendations to the Board in relation to
the re-appointment of the Auditor or the appointment
of a new Auditor and to approve the remuneration and
terms of engagement of the Auditor;
· to monitor and review the Auditor’s independence,
objectivity, effectiveness, resources and qualification;
and
· to review a statement from the abrdn Group detailing
the arrangements in place within the group whereby
staff may, in confidence, escalate concerns about
possible improprieties in matters of financial reporting or
other matters.
Audit Committee’s Report
Shires Income PLC 69
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Activities During the Year
The Audit Committee met twice during the year when,
amongst other things, it considered the Annual Report and
the Half-Yearly Financial Report. Representatives of the
abrdn Group’s internal audit, risk and compliance
departments reported to the Committee at these
meetings on matters such as internal control systems, risk
and the conduct of the business in the context of its
regulatory environment. The Audit Committee also meets
privately with the Auditor to discuss issues arising from the
audit. Members of the Audit Committee had regular
meetings and communications with the Manager
between these formal Committee meetings.
The Audit Committee also kept close scrutiny on the
financial impact and reporting of the aSCIT transaction.
The Audit Committee reviews annually the split of
management expenses and finance costs between
income and capital, which has been applied as to 50:50 for
some time, and concluded that, in future, from the
commencement of the new financial year on 1 April 2024,
this should be applied as to 40:60 between income and
capital respectively. This change will not give rise to any
prior year adjustment.
Internal Control
The Board confirms that there is an ongoing process for
identifying, evaluating and managing the Company’s
significant business and operational risks, that it has been
in place for the year ended 31 March 2024 and up to the
date of approval of the Annual Report, that it is regularly
reviewed by the Board and accords with the FRC’s
guidance on internal controls.
The Board has overall responsibility for ensuring that there
is a system of internal controls in place and a process for
reviewing its effectiveness. Any system of internal control
is designed to manage rather than eliminate the risk of
failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material
misstatement or loss.
The design, implementation and maintenance of controls
and procedures to safeguard the assets of the Company
and to manage its affairs properly extends to operational
and compliance controls and risk management. The
Board, through the Audit Committee, has prepared its
own risk register which identifies potential risks and it
considers the potential cause and possible impact of
these risks and changes to the individual risks as well as
reviewing the controls in place to mitigate them. A risk is
rated by having a likelihood and an impact rating and is
plotted on a “heat map”. There is also regular discussion
and identification of emerging risks, including those of an
exogenous nature.
Clear lines of accountability have been established
between the Board and the Manager. The Board receives
regular reports covering key performance and risk
indicators and considers control and compliance issues
brought to its attention. In carrying out its review, the
Board has had regard to the activities of the abrdn
Group, its internal audit and compliance functions
and the Auditor.
The Audit Committee has reviewed the effectiveness of
the abrdn Group’s system of internal control including its
annual internal controls report prepared in accordance
with the International Auditing and Assurance Standards
Board’s International Standard on Assurance
Engagements (“ISAE”) 3402, “Assurance Reports on
Controls at a Service Organization”. The Committee has
also reviewed the abrdn Group’s process for identifying
and evaluating the significant risks faced by the Company
and the policies and procedures by which these risks
are managed.
The Depositary, BNP Paribas Trust Corporation UK Limited,
reports annually to the Board. Its services are monitored
on an ongoing basis on behalf of the Company by the
Manager, and the Manager meets with the Depositary on
a regular basis and reviews internal control reports
produced by the Depositary.
Risks are identified and documented through a risk
management framework by each function within the
abrdn Group’s activities. Risk is considered in the context
of the FRC’s guidance on internal controls and includes
financial, regulatory, market, operational and reputational
risk. This helps the internal audit risk assessment model
identify those functions for review. Any weaknesses
identified are reported to the Board and timetables are
agreed for implementing improvements to systems. The
implementation of any remedial action required is
monitored and feedback provided to the Board.
70 Shires Income PLC
The key components designed to provide effective
internal control are outlined below:
· the Board and Manager have agreed clearly defined
investment criteria, specified levels of authority and
exposure limits. Reports on these issues, including
performance statistics and investment valuations, are
regularly submitted to the Board;
· written agreements are in place which specifically
define the roles and responsibilities of the Manager and
other third party service providers;
· the Manager prepares forecasts and management
accounts which allow the Board to assess the
Company’s activities and review its performance; the
emphasis is on obtaining the relevant degree of
assurance and not merely reporting by exception;
· as a matter of course the abrdn Group’s compliance
department continually reviews its operations; and
· at its meeting in May 2024, the Audit Committee carried
out an annual assessment of internal controls for the
year ended 31 March 2024 by considering
documentation from the abrdn Group including the
internal audit and compliance functions and taking
account of events since 31 March 2024.
The Board has considered the need for an internal audit
function but, given that the Audit Committee receives
reports from the Company’s key service providers on their
internal controls and, because of the compliance and
internal control systems in place within the abrdn Group,
has decided to place reliance on those systems and
internal audit procedures and concluded that it is not
necessary for the Company to have its own internal
audit function.
Financial Statements and Significant Issues
During its review of the Company’s financial statements
for the year ended 31 March 2024, the Audit Committee
considered the following significant issues, in particular
those communicated by the Auditor during its planning
and reporting of the year end audit:
Valuation and Existence of Investments
How the issue was addressed - The Company’s
investments have been valued in accordance with the
accounting policies as disclosed in note 2(b) to the
financial statements. All investments are in quoted
securities in active markets, are considered to be liquid
and have been categorised as Level 1 within the IFRS 13
fair value hierarchy. The portfolio holdings and their pricing
are reviewed and verified by the Manager on a regular
basis and management accounts, including a full portfolio
listing, are prepared for each Board meeting. The
Company uses the services of an independent depositary
(BNP Paribas Trust Corporation UK Limited) to hold the
assets of the Company. The Depositary checks the
consistency of its records with those of the Manager on a
monthly basis and reports to the Board on an annual basis.
Recognition of Investment Income
How the issue was addressed - The recognition of
investment income is undertaken in accordance with the
stated accounting policies. In addition, the Directors
review the Company’s income, including income received,
revenue forecasts and dividend comparisons at each
Board meeting. The Board also examines any unusual
items of income or receipts (including special dividends)
which could be categorised as capital or income and how
they should be treated for accounting purposes. The
Committee notes that there was no significant accounting
judgement required in relation to the classification of
special dividends and option premiums received during
the period.
Maintenance of Investment Trust Status
How the issue was addressed - Approval of the Company
as an investment trust under Sections 1158 and 1159 of
the Corporation Tax Act 2010 for financial years
commencing on or after 1 April 2012 has been obtained
and ongoing compliance with the eligibility criteria is
monitored on a regular basis by the Manager and
reported at each Board meeting.
Audit Committee’s Report
Continued
Shires Income PLC 71
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
The Impact of the aSCIT transaction and the Rating of the
Company’s Shares
How the issues were addressed – Enquiry of the Manager
as to how the issue of new Ordinary shares and the costs
of the aSCIT transaction, principally to capital and covered
by the uplift in the holding of aSCIT shares, were
accounted for and how the Company’s Ordinary share
price performance, a KPI, was reported over the short,
medium and longer term. Share buy backs during the
year were also scrutinised to ensure that the costs and
impacts of the buy backs were correctly accounted for.
Review of Auditor
The Audit Committee has reviewed the effectiveness of
the Auditor, Ernst & Young LLP (“EY”), including:
· Independence - the Auditor discusses with the Audit
Committee, at least annually, the steps it takes to ensure
its independence and objectivity and makes the
Committee aware of any potential issues, explaining all
relevant safeguards.
· Quality of audit work - including the ability to resolve
issues in a timely manner, its communications and
presentation of outputs, and its working relationship
with management.
· Quality of people and service - including continuity and
succession plans.
· Fees – including current and proposed fees for
future years.
The Committee has also reviewed developments in the
audit of listed companies and in governance and how this
impacts the audit function.
In common with all UK listed companies, including
investment companies, there has been upward pressure
on audit fees. The Audit Committee continues to monitor
the fees paid and payable by the Company and has been
satisfied that the continuity, experience and service levels
have been important in approving increased fees paid to
the Auditor in the past few years.
Tenure of the Auditor
EY was appointed as Auditor at the Annual General
Meeting on 6 July 2016. In accordance with present
professional guidelines the audit partner is rotated after
no more than five years and the year ended 31 March
2024 is the third year for which the present partner, James
Beszant, has served.
The Audit Committee is satisfied that EY is independent
and therefore supports the recommendation to the Board
that the re-appointment of EY be put to shareholders for
approval at the Annual General Meeting.
Robin Archibald
Chairman of the Audit Committee
22 May 2024
72 Shires Income PLC
The Directors are responsible for preparing the Annual
Report and the financial statements, in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year, and under that law
they have chosen to prepare the financial statements
in accordance with UK-adopted international
accounting standards.
The financial statements are required by law to give a true
and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
· select suitable accounting policies in accordance with
IAS 8 ‘Accounting Policies, Changes in Accounting
Estimates and Errors’ and then apply them consistently;
· make judgments and estimates that are reasonable
and prudent;
· present information, including accounting policies, in a
manner that provides relevant, reliable, comparable
and understandable information;
· provide additional disclosures when compliance with
the specific requirements in UK-adopted international
accounting standards is insufficient to enable users to
understand the impact of particular transactions, other
events and conditions on the Company’s financial
position and financial performance;
· state whether the financial statements have been
prepared in accordance with UK-adopted international
accounting standards subject to any material
departures disclosed and explained in the notes to the
financial statements; and
· prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping proper
accounting records that disclose with reasonable
accuracy at any time the financial position of the
Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They
have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the
Company and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
Statement of Corporate Governance that comply with
that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website, but not for the
content of any information included on the website that
has been prepared or issued by third parties. Legislation in
the UK governing the preparation and dissemination of
financial statements may differ from legislation in
other jurisdictions.
The Board confirms that to the best of its knowledge:
· the financial statements have been prepared in
accordance with applicable accounting standards and
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company;
· in the opinion of the Directors, the Annual Report taken
as a whole, is fair, balanced and understandable and it
provides the information necessary to assess the
Company’s position and performance, business model
and strategy; and
· the Strategic Report and Directors’ Report include a fair
review of the development and performance of the
business and the position of the Company, together with
a description of the principal risks and uncertainties that
the Company faces.
On behalf of the Board
Robert Talbut
Chairman
22 May 2024
Statement of Directors’ Responsibilities
Shires Income PLC 73
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Opinion
We have audited the financial statements of Shires Income PLC (the “Company”) for the year ended 31 March 2024
which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow
Statement including the related notes 1 to 22, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and UK adopted international
accounting standards.
In our opinion, the financial statements:
· give a true and fair view of the Company’s affairs as at 31 March 2024 and of its loss for the year then ended;
· have been properly prepared in accordance with UK adopted international accounting standards; and
· have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain
independent of the Company in conducting the audit.
Conclusions Relating to Going Concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the
Company’s ability to continue to adopt the going concern basis of accounting included:
· Confirmation of our understanding of the Company’s going concern assessment process. We engaged with the
Directors and the Company Secretary to determine if the key factors that we have become aware of during our audit
were considered in their assessment.
· Inspection of the Directors’ assessment of going concern, including the liquidity assessment of the investment portfolio
and the revenue forecast, for the period to 30 June 2025 which is at least 12 months from the date the financial
statements were authorised for issue. In preparing the revenue forecast and liquidity assessment, the Company has
concluded that it is able to continue to meet its ongoing costs as they fall due.
· Review of the factors and assumptions, including the impact of the current economic environment, as applied to the
revenue forecast and the liquidity assessment of the investment portfolio. We considered the appropriateness of the
methods used to calculate the revenue forecast and the liquidity assessment and determined, through testing of the
methodology and calculations, that the methods, inputs and assumptions utilised were appropriate to be able to make
an assessment for the Company.
· Assessment of the risk of breaching the debt covenants as a result of a reduction in the value of the Company’s
portfolio. We calculated the Company’s compliance with debt covenants and we performed reverse stress testing in
order to identify what factors would lead to the Company breaching the financial covenants.
· Consideration of the mitigating factors included in the revenue forecasts and covenant calculations that are within the
control of the Company in relation to their stress testing. We reviewed the Company’s assessment of the liquidity of
investments held and evaluated the Company’s ability to sell those investments in order to cover the working capital
requirements should revenue decline significantly.
Independent Auditor’s Report to the Members
of Shires Income PLC
74 Shires Income PLC
Independent Auditor’s Report to the Members
of Shires Income PLC
Continued
· Review of the Company’s going concern disclosures included in the Annual Report in order to assess whether the
disclosures were appropriate and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a
period assessed by the Directors, being the period to 30 June 2025.
In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the
Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report. However, because not all future events or conditions can be predicted, this statement is not a
guarantee as to the Company’s ability to continue as a going concern.
Overview of Our Audit Approach
Key audit matters
·
Risk of incomplete or inaccurate revenue recognition, including the classification of special dividends
and option premiums as revenue or capital items in the Statement of Comprehensive Income
· Risk of incorrect valuation or ownership of the investment portfolio
· Incorrect accounting for the transaction between the Company and abrdn Smaller Companies
Income Trust plc
Materiality · Overall materiality of £1.06 million (2023: £0.80 million) which represents 1% (2023: 1%) of
shareholder’s funds
An Overview of the Scope of our Audit
Tailoring the Scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our
audit scope for the Company. This enables us to form an opinion on the financial statements. We take into account size,
risk profile, the organisation of the Company and effectiveness of controls, the potential impact of climate change and
changes in the business environment when assessing the level of work to be performed.
Climate Change
The Company has determined that the most significant future impacts from climate change on its operations will be
from how climate change could affect the Company’s investments. This is explained on page 14 in the principal and
emerging risks and uncertainties section. This disclosure forms part of the “Other information,” rather than the audited
financial statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether
they are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appear to be materially misstated, in line with our responsibilities on “Other information”.
Our audit effort in considering climate change was focused on the adequacy of the Company’s disclosures in the
financial statements as set out in note 2(a) and conclusion that there was no further impact of climate change to be
taken into account as the investments are valued based on market pricing as required by UK adopted International
Accounting Standards. We also challenged the Directors’ considerations of climate change in their assessment of
viability and associated disclosures.
Shires Income PLC 75
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon,
and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Key observations
communicated to the
Audit Committee
Incomplete or inaccurate revenue recognition,
including the classification of special dividends
and option premiums as revenue or capital items
in the Statement of Comprehensive Income
(as
described on page 70 in the Audit Committee’s
Report and as per the accounting policy set out
on page 87).
The total revenue for the year to 31 March 2024
was £6.43 million (2023: £5.67 million),
consisting of dividend income from listed
investments and option premiums.
The Company received four (2023: four)
special dividends amounting to £0.50 million
(2023: £0.12 million), all of which were classified
as revenue. The total amount of revenue from
traded option premiums was £0.03 million
(2023 £0.07 million).
There is a risk of incomplete or inaccurate
revenue recognition through the failure to
recognise proper income entitlements or to
apply an appropriate accounting treatment.
In addition to the above, the Directors are
required to exercise judgement in determining
whether income receivable in the form of
special dividends and option premiums should
be classified as ‘revenue’ or ‘capital’ in the
Statement of Comprehensive Income.
We have performed the following procedures:
We obtained an understanding of the processes and
controls surrounding revenue recognition and
classification of special dividends and option
premiums by performing walkthrough procedures.
For all dividends received, including dividends on
preference shares, we recalculated the dividend
income by multiplying the investment holdings at the
ex-dividend date, traced from the accounting records,
by the dividend per share, which was agreed to an
independent data vendor. For all of dividends received,
we agreed amounts to bank statements and agreed
the exchange rates used to an external source.
For all accrued dividends, we reviewed the investee
company announcements to assess whether the
dividend entitlements arose prior to 31 March 2024.
We agreed the dividend rate to corresponding
announcements made by the investee company,
recalculated the dividend amount receivable and
agreed the subsequent cash receipts to the post year
end bank statements where the dividend had
been received.
To test completeness of recorded income, we verified
that expected dividends for each investee company
held during the year had been recorded as income
with reference to investee company announcements
obtained from an independent data vendor.
For all investments held during the year, we reviewed
the type of dividends paid with reference to an
external data source to identify those which were
‘special’. We identified four special dividends,
amounting to £0.50 million, were received during the
year. We have tested 1 special dividend, amounting to
£0.44 million, by assessing the appropriateness of
classification as revenue by reviewing the underlying
rationale of the distribution.
The results of our
procedures identified
no material
misstatement in relation
to incomplete or
inaccurate revenue
recognition, including
incorrect classification
of special dividends and
option premiums as
revenue or capital items
in the Statement of
Comprehensive
Income.
76 Shires Income PLC
Independent Auditor’s Report to the Members
of Shires Income PLC
Continued
Risk
Our response to the risk
Key observations
communicated to the
Audit Committee
The revenue from options is not material to our audit
and the risk of material misstatement is therefore
considered to be low. We have performed a test of
one to ensure that the process of recognising option
premiums was applied correctly.
Incorrect valuation or ownership of the
investment portfolio (as described on page 70
in the Audit Committee’s Report and as per the
accounting policy set out on page 87).
The valuation of the portfolio at 31 March 2024
was £122.17 million (2023: £96.65 million)
consisting of listed investments.
The valuation of the assets held in the
investment portfolio is the key driver of the
Company’s net asset value and total return.
Incorrect investment pricing, or failure to
maintain proper legal title of the investments
held by the Company, could have a significant
impact on the net asset value and the return
generated for shareholders.
The fair value of listed investments is
determined using quoted market bid prices at
close of business on the reporting date.
We performed the following procedures:
We obtained an understanding of the processes
surrounding investment pricing and legal title of listed
investments by performing walkthrough procedures.
For all listed investments in the portfolio, we compared
the market prices and exchange rates applied to an
independent pricing vendor and recalculated the
investment valuations as at the year end.
We confirmed with the Administrator that there were
no investments with stale prices as at the year-end
and therefore no stale pricing report produced. We
challenged this assertion by reviewing the daily
valuation of each investment for five business days
before and after 31 March 2024 to identify any stale
prices. Our testing did not identify any stale prices.
We compared the Company’s investment holdings at
31 March 2024 to the independent confirmation
received directly from the Company’s Depositary.
The results of our
procedures identified
no material
misstatement in relation
to the risk of incorrect
valuation or ownership
of the investment
portfolio
Incorrect accounting of the transaction between
the Company and abrdn Smaller Companies
Income Trust plc (as described on page 71 in
the Audit Committee’s Report).
On 26 July 2023 the board of abrdn Smaller
Companies Income Trust plc (“aSCIT”) agreed
terms with the Company for a transfer of the
assets of each company by means of a section
110 scheme of transaction. Implementation of
the transaction resulted in aSCIT shareholders
(who did not take the cash exit option) owning
shares in the Company based on a formula
asset value.
We recalculated the calculation by checking that
inputs to the calculation agreed to the supporting
documentation, and checked that the methodology
applied to the calculation agrees to the scheme of
reconstruction documents.
We agreed the number of shares issued pursuant to
the transaction to the RNS announcement and
compared to the accounting records of the Company.
We obtained a breakdown of total transaction cost
incurred by the Company related to the transaction,
and on a sample basis agreed the transaction cost to
invoices and bank statements. In addition, we also
checked through our review of the Annual Report and
financial statements whether the transaction cost has
been appropriately accounted for and disclosed in
accordance with UK adopted IAS and AIC SORP.
The results of our
procedures identified
no material
misstatement in relation
to the risk of incorrect
accounting for the
transaction with abrdn
Smaller Companies
Income Trust plc.
Shires Income PLC 77
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Risk
Our response to the risk
Key observations
communicated to the
Audit Committee
As part of the transaction all of aSCIT's
investments and cash were transferred to the
Company. The transaction was completed in
December 2023.
There is a risk that the assets transferred from
aSCIT to the Company are not complete or
recorded correctly. There is also a risk that the
issuance of shares related to the transaction is
incorrectly accounted for or incorrectly
disclosed in the financial statements of
the Company.
We reviewed the disclosures in the Annual Report and
financial statements to ensure the strategic report
and S172 statement provide details of the transaction.
We also agreed all related numbers disclosed in the
Annual Report and financial statements to supporting
documentation.
In the current year we have added a key audit matter on ‘Incorrect accounting of the transaction between the
Company and abrdn Smaller Companies Income Trust plc’ as it is a significant event that occurred during the period,
and has a significant impact on the financial statements of the Company.
Our Application of Materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to
influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the
nature and extent of our audit procedures.
We determined materiality for the Company to be £1.06 million (2023: £0.80 million), which is 1% (2023: 1%) of
shareholders’ funds. We believe that shareholders’ funds provides us with materiality aligned to the key measures of the
Company’s performance.
Performance Materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our
judgement was that performance materiality was 75% (2022: 75%) of our planning materiality, namely £0.79 million
(2023: £0.60 million). We have set performance materiality at this percentage due to the fact that there have been no
misstatements in prior periods.
Given the importance of the distinction between revenue and capital for investment trusts, we have also applied a
separate testing threshold for the revenue column of the Statement of Comprehensive Income of £0.26 million
(2023: £0.23 million) being 5% (2023: 5%) of revenue profit before tax.
78 Shires Income PLC
Independent Auditor’s Report to the Members
of Shires Income PLC
Continued
Reporting Threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.05
million (2023: £0.04 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in forming our opinion.
Other Information
The other information comprises the information included in the Annual Report, other than the financial statements and
our Auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on Other Matters Prescribed by the Companies Act 2006
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
· the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on Which We Are Required to Report by Exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit,
we have not identified material misstatements in the Strategic Report or Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
· adequate accounting records have not been kept, or returns adequate for our audit have not been received from
branches not visited by us; or
· the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
· certain disclosures of Directors’ remuneration specified by law are not made; or
· we have not received all the information and explanations we require for our audit.
Shires Income PLC 79
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained
during the audit:
· Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 60;
· Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why
the period is appropriate set out on page 19;
· Directors’ statement on whether they have a reasonable expectation that the Company will be able to continue in
operation and meets its liabilities set out on page 60;
· Directors’ statement on fair, balanced and understandable set out on page 72;
· Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 14;
· The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems set out on pages 69 and 70; and;
· The section describing the work of the Audit Committee set out on pages 68 to 71.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 72, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Explanation as to What Extent the Audit Was Considered Capable of Detecting Irregularities,
Including Fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities, including fraud is detailed below.
80 Shires Income PLC
Independent Auditor’s Report to the Members
of Shires Income PLC
Continued
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with
governance of the Company and management.
· We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and
determined that the most significant are UK adopted International Accounting Standards, the Companies Act 2006,
the Listing Rules, the UK Corporate Governance Code, the Statement of Recommended Practice for the Financial
Statements of Investment Trust Companies as issued by the Association of Investment Companies, Section 1158 of the
Corporation Tax Act 2010, and The Companies (Miscellaneous Reporting) Regulations 2018.
· We understood how the Company is complying with those frameworks by discussions with the Audit
Committee and Company Secretary, review of the Board and committee minutes and review of papers provided to
the Audit Committee.
· We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud
might occur by considering the key risks impacting the financial statements. We identified a fraud risk with respect to
the incomplete or inaccurate revenue recognition through incorrect classification of special dividends and option
premiums as revenue or capital in the Statement of Comprehensive Income. Further discussion of our approach is set
out in the section on key audit matters above.
· Based on this understanding we designed our audit procedures to identify non-compliance with such laws and
regulations. Our procedures involved review of the reporting to the Directors with respect to the application of the
documented policies and procedures and review of the financial statements to ensure compliance with the reporting
requirements of the Company.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s report.
Other Matters we are Required to Address
· Following the recommendation from the Audit Committee, we were appointed by the Company on 6 July 2016 to
audit the financial statements for the year ending 31 March 2017 and subsequent financial periods.
· The period of total uninterrupted engagement including previous renewals and reappointments is eight years,
covering the years ending 31 March 2017 to 31 March 2024.
· The audit opinion is consistent with the additional report to the Audit Committee.
Use of Our Report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
James Beszant (Senior Statutory Auditor)
For and on behalf of Ernst & Young LLP, Statutory Auditor
London
22 May 2024
Shires Income PLC 81
Financial Statements
82 Shires Income PLC
Year ended
Year ended
31 March 2024
31 March 2023
Revenue
Capital
Total
Revenue
Capital
Total
Notes
£’000
£’000
£’000
£’000
£’000
£’000
Losses on investments at fair value
11
-
(5,748)
(5,748)
-
(6,084)
(6,084)
Currency (losses)/gains
-
(56)
(56)
-
39
39
Income
3
Income from investments
6,361
-
6,361
5,593
-
5,593
Income from other investing activity
68
-
68
80
-
80
6,429
(5,804)
625
5,673
(6,045)
(372)
Expenses
Management fee
4
(210)
(210)
(420)
(207)
(207)
(414)
Administrative expenses
5
(505)
(24)
(529)
(417)
-
(417)
Finance costs
7
(502)
(502)
(1,004)
(363)
(363)
(726)
(1,217)
(736)
(1,953)
(987)
(570)
(1,557)
Profit/(loss) before taxation
5,212
(6,540)
(1,328)
4,686
(6,615)
(1,929)
Taxation
8
(144)
-
(144)
(102)
-
(102)
Profit/(loss) attributable to equity holders of the
Company
5,068
(6,540)
(1,472)
4,584
(6,615)
(2,031)
Earnings per Ordinary share (pence)
10
14.75
(19.03)
(4.28)
14.83
(21.40)
(6.57)
The Company does not have any income or expense that is not included in profit for the year, and therefore the “Profit for the year” is
also the “Total comprehensive income for the year”, as defined in IAS 1 (revised).
The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance
with UK adopted International Accounting Standards. The revenue and capital columns are supplementary to this and are prepared
under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these financial statements.
Statement of Comprehensive Income
Shires Income PLC 83
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
As at
As at
31 March 2024
31 March 2023
Notes
£’000
£’000
Non-current assets
Ordinary shares
97,974
75,760
Preference shares
24,195
20,895
Securities at fair value
11
122,169
96,655
Current assets
Other receivables
12
1,567
1,383
Cash at bank
1,675
1,176
3,242
2,559
Creditors: amounts falling due within one year
Other payables
(491)
(350)
Short-term borrowings
(9,000)
(9,000)
13
(9,491)
(9,350)
Net current liabilities
(6,249)
(6,791)
Total assets less current liabilities
115,920
89,864
Non-current liabilities
Long-term borrowings
13
(9,963)
(9,951)
Net assets
105,957
79,913
Share capital and reserves
Called-up share capital
14
21,166
15,532
Share premium account
49,952
21,411
Capital reserve
15
27,451
35,930
Revenue reserve
7,388
7,040
Equity shareholders’ funds
105,957
79,913
Net asset value per Ordinary share (pence)
16
256.00
257.92
The financial statements were approved by the Board of Directors and authorised for issue on 22 May 2024 and were signed on its
behalf by:
Robert Talbut
Chairman
The accompanying notes are an integral part of these financial statements.
Balance Sheet
84 Shires Income PLC
Year ended 31 March 2024
Share
Share
premium
Capital
Revenue
capital
account
reserve
reserve
Total
Note
£’000
£’000
£’000
£’000
£’000
As at 31 March 2023
15,532
21,411
35,930
7,040
79,913
Issue of shares on the aSCIT transaction
22
5,634
29,594
–
–
35,228
Cost of shares issued in respect of the aSCIT transaction
22
–
(1,053)
–
–
(1,053)
Buyback of Ordinary shares for treasury
–
–
(1,939)
–
(1,939)
(Loss)/profit for the year
–
–
(6,540)
5,068
(1,472)
Equity dividends
9
–
–
–
(4,720)
(4,720)
As at 31 March 2024
21,166
49,952
27,451
7,388
105,957
Year ended 31 March 2023
Share
Share
premium
Capital
Revenue
capital
account
reserve
reserve
Total
£’000
£’000
£’000
£’000
£’000
As at 31 March 2022
15,460
21,109
42,545
6,705
85,819
Issue of Ordinary shares
72
302
–
–
374
(Loss)/profit for the year
–
–
(6,615)
4,584
(2,031)
Equity dividends
9
–
–
–
(4,249)
(4,249)
As at 31 March 2023
15,532
21,411
35,930
7,040
79,913
The Company has aggregate realised and distributable reserves of £34,839,000 as at 31 March 2024 (2023 – £42,970,000),
comprising a capital reserve of £27,451,000 (2023 – £35,930,000) and a revenue reserve of £7,388,000 (2023 – £7,040,000).
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Equity
Shires Income PLC 85
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Year ended
Year ended
31 March 2024
31 March 2023
£’000
£’000
Net cash inflow from operating activities
Dividend income received
6,171
5,478
Interest income received
31
7
Options premium received
35
71
Interest received from money market funds
31
7
Management fee paid
(397)
(415)
Other cash expenses
(539)
(432)
Cash generated from operations
5,332
4,716
Interest paid
(991)
(684)
Overseas tax paid
(140)
(184)
Net cash inflows from operating activities
4,201
3,848
Cash flows from investing activities
Purchases of investments
(43,873)
(16,518)
Sales of investments
44,372
16,199
Net cash outflow from investing activities
499
(319)
Cash flows from financing activities
Equity dividends paid
(4,720)
(4,249)
Issue of Ordinary shares
–
374
Buyback of Ordinary shares to Treasury
(1,838)
–
Net cash acquired and received following the aSCIT transaction
3,444
–
Cost of shares issued in respect of the aSCIT transaction
(1,031)
–
Loan repayment
–
(19,000)
Loan drawdown
–
19,000
Net cash outflow from financing activities
(4,145)
(3,875)
Increase/(decrease) in cash and cash equivalents
555
(346)
Reconciliation of net cash flow to movements in cash and cash equivalents
Increase/ (decrease) in cash and cash equivalents as above
555
(346)
Net cash and cash equivalents at start of year
1,176
1,483
Effect of foreign exchange rate changes
(56)
39
Net cash and cash equivalents at end of year
1,675
1,176
Cash Flow Statement
86 Shires Income PLC
1.
Principal activity.
The Company is a closed-end investment company, registered in England and Wales No. 00386561, with its Ordinary shares
listed on the London Stock Exchange.
2.
Accounting policies
(a)
Basis of accounting. The financial statements of the Company have been prepared in accordance with UK adopted
International Accounting Standards (“IAS”) and using the historical cost convention except for investments, which are
measured at fair value (see note 2(b) below) .
In preparing these financial statements the Directors have considered the impact of climate change risk as an
emerging risk as set out on page 17, and have concluded that it does not have a material impact on the Company’s
investments. In line with IAS, investments are valued at fair value, which for the Company are quoted bid prices for
investments in active markets at the Balance Sheet date and therefore reflect market participants view of climate
change risk.
The Company’s financial statements are presented in sterling, which is also the functional currency as it is the currency
in which shares are issued and expenses are generally paid. All values are rounded to the nearest thousand pounds
(£’000) except when otherwise indicated.
Where presentational guidance set out in the Statement of Recommended Practice (“SORP”): ‘Financial Statements of
Investment Trust Companies and Venture Capital Trusts’ issued by the Association of Investment Companies (“AIC”), is
consistent with the requirements of IAS, the Directors have sought to prepare the financial statements on a basis
compliant with the recommendations of the SORP issued in July 2022.
Going concern. The Company’s assets consist mainly of equity shares in companies listed on the London Stock
Exchange. The Board has performed stress testing and liquidity analysis on the portfolio and considers that, in most
foreseeable circumstances, the majority of the Company’s investments are realisable within a relatively short timescale.
The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance
with banking covenants, including the headroom available. At the year end, the Company had a £20 million loan facility
which is due to mature in May 2027. Having taken these factors into account, the Directors believe that the Company
has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its
financial obligations as they fall due for the period to 30 June 2025, which is at least twelve months from the date of
approval of this Report. For these reasons, they continue to adopt the going concern basis of accounting in preparing
the financial statements.
Significant accounting judgements, estimates and assumptions. The preparation of financial statements requires the use
of certain significant accounting judgements, estimates and assumptions which requires management to exercise its
judgement in the process of applying the accounting policies and are continually evaluated. The Directors do not
consider there to be any significant judgements and estimates within the financial statements for the year ended 31
March 2024. Special dividends are assessed and credited to capital or revenue according to their circumstances.
New and amended accounting standards and interpretations. At the date of authorisation of these financial statements,
the following amendments to Standards and Interpretations were assessed to be relevant and are all effective for
annual periods beginning on or after 1 January 2023 but are considered to not have a material impact on the financial
statements:
– IAS 1 Amendments (Disclosure of Accounting Policies) (effective from 1 January 2023)
Notes to the Financial Statements
For the year ended 3
1 March 2024
Shires Income PLC 87
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Information
Financial Statements
Future amendments to standards and interpretations. At the date of authorisation of these financial statements, the
following amendments to Standards and Interpretations were assessed to be relevant and are all effective for annual
periods beginning on or after 1 January 2024;
– IAS 1 Amendments (Classification of Liabilities as Current or Non-Current) (effective from 1 January 2024)
– IAS 1 Amendments (Non-current Liabilities with Covenants) (effective from 1 January 2024)
The Company intends to adopt the Standards and Interpretations in the reporting period when they become effective
and the Board does not anticipate that the adoption of these Standards and Interpretations in future periods will
materially impact the Company’s financial results in the period of initial application although there may be revised
presentations to the Financial Statements and additional disclosures.
(b) Investments. All investments are evaluated and managed on a fair value basis and are therefore classified as FVTPL
(“Fair Value Through Profit or Loss”).
Investments are recognised and de-recognised at the trade date where a purchase or sale is under a contract whose
terms require delivery within the timeframe established by the market concerned, and are measured at fair value. For
listed investments, this is deemed to be bid market prices or closing prices for SETS (London Stock Exchange’s electronic
trading service) stocks sourced from the London Stock Exchange.
Gains and losses arising from the changes in fair value are included in net profit or loss for the period as a capital item.
Transaction costs are treated as a capital cost.
(c) Income. Dividend income from equity investments, which have a discretionary dividend, is recognised when the
shareholders’ rights to receive payment have been established, normally the ex-dividend date. Special dividends are
allocated to revenue or capital based on their individual merits.
If a scrip dividend is taken in lieu of a cash dividend, the net amount of the cash dividend declared is credited to the
revenue account. Any excess in the value of the shares received over the amount of the cash dividend foregone is
recognised as capital.
Income from preference shares which do not have a discretionary dividend are accounted for on a fair value basis.
Interest from deposits and interest from debt securities which do not have a discretionary dividend are accounted for
on an accruals basis.
The premium received from traded options is recognised in the revenue column of the Statement of Comprehensive
Income.
(d)
Expenses. All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital
items presented within the Statement of Comprehensive Income, all expenses have been presented as revenue items
except those where a connection with the maintenance or enhancement of the value of the investments held can be
demonstrated. Accordingly, the management fee and finance costs have been allocated 50% to revenue and 50% to
capital, in order to reflect the Directors’ expected long-term view of the nature of the future investment returns of the
Company.
(e)
Borrowings. Both short-term and long-term borrowings, which comprise interest bearing bank loans are initially
recognised at cost, being the fair value of the consideration received, net of any issue expenses and subsequently
measured at amortised cost using the effective interest method. The finance costs, being the difference between the
net proceeds of borrowings and the total amount of payments that require to be made in respect of those borrowings,
are amortised over the life of the borrowings.
88 Shires Income PLC
(f)
Taxation. The tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in
the Statement of Comprehensive Income because it excludes items of income or expenditure that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Company has no
liability for current tax.
Deferred tax is recognised in respect of all temporary differences at the Balance Sheet date, where transactions or
events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the
Balance Sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not
that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred
tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise, using tax rates
that are expected to apply at the date the deferred tax position is unwound.
Owing to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to
obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses
arising on the revaluation or disposal of investments.
(g)
Foreign currencies. Monetary assets and liabilities, comprising current assets, current liabilities and non-current liabilities
and non-monetary assets comprising non-current assets held at fair value which are denominated in foreign
currencies are converted into sterling at the rate of exchange ruling at the reporting date. Transactions during the year
in foreign currencies are converted at the rate of exchange ruling at the transaction date. Gains or losses on monetary
assets and liabilities arising from a change in exchange rates subsequent to the date of a transaction are included as a
currency gain or loss in revenue or capital column of the Statement of Comprehensive Income, depending on whether
the gain or loss is of a revenue or capital nature. Non-monetary assets that are measured at fair value and gains or
losses arising from a change in exchange rates subsequent to the date of a transaction are included as a gain or loss on
investments in the capital column of the Statement of Comprehensive Income.
(h) Derivatives. The Company may enter into certain derivatives (e.g. traded options). Traded option contracts are
restricted to writing out-of-the-money options with a view to generating income. Premiums received on traded option
contracts are recognised as income evenly over the period from the date they are written to the date when they expire
or are exercised or assigned. Losses on any movement in the fair value of open contracts at the year end and on the
exercise of the contracts are recorded in the capital column of the Statement of Comprehensive Income as they arise.
(i) Cash and cash equivalents
. Cash and cash equivalents comprise cash in hand and at banks and short-term deposits
with an original maturity of less than 90 days.
(j)
Other receivables. Financial assets classified as loans and receivables are held to collect contractual cash flows and give
rise to cash flows representing solely payments of principal and interest. As such they are measured at amortised cost.
Other receivables do not carry any interest, they have been assessed for any expected credit losses over their lifetime
due to their short-term nature.
(k) Other payables. Payables are non-interest bearing and are stated at their undiscounted cash flows.
(l) Dividends payable. Final dividends are recognised from the date on which they are approved by shareholders. Interim
dividends are recognised when paid.
(m)
Nature and purpose of reserves
Share premium account. The balance classified as share premium includes the premium above nominal value from the
proceeds on issue of any equity share capital comprising Ordinary shares of 50p per share and includes the premium
arising following the issue of shares on the transaction with abrdn Smaller Companies Income Trust plc on 1 December
2023 less the costs associated with the transaction. This reserve is not distributable.
Notes to the Financial Statements
Continued
Shires Income PLC 89
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General Portfolio
Corporate
Information
Financial Statements
Capital reserve. This reserve reflects any realised gains or losses in the period together with any unrealised increases
and decreases that have been recognised in the Statement of Comprehensive Income. These include gains and losses
from foreign currency exchange differences. Additionally, expenses, including finance costs, are charged to this reserve
in accordance with (d) above.
The capital reserve, to the extent that the gains are deemed realised, is distributable, including by way of share
buybacks and dividends.
Revenue reserve
. This reserve reflects all income and costs which are recognised in the revenue column of the
Statement of Comprehensive Income. The revenue reserve is distributable, including by way of dividend.
(n)
Segmental reporting. The Directors are of the opinion that the Company is engaged in a single segment of business
activity, being investment business. Consequently, no business segmental analysis is provided.
3.
Income
2024
2023
£’000
£’000
Income from listed investments
UK dividend income
5,254
4,784
Overseas dividend income
1,048
802
Interest from investment in money market funds
31
7
UK interest
28
–
6,361
5,593
Other income from investment activity
Deposit interest
34
7
Traded option premiums
34
73
Total income
6,429
5,673
90 Shires Income PLC
4.
Management fees
2024
2023
Revenue
Capital
Total
Revenue
Capital
Total
£’000
£’000
£’000
£’000
£’000
£’000
Management fees
210
210
420
207
207
414
The management fee is based on 0.45% per annum up to £100 million and 0.40% over £100 million, by reference to the net
assets of the Company and including any borrowings up to a maximum of £30 million, and excluding commonly managed
funds, calculated monthly and paid quarterly. In addition, with effect from 1 December 2023, a further fee of £120,000 per
annum is charged for other services provided under the terms of the management agreement. The fee is allocated 50% to
revenue and 50% to capital. The management agreement is terminable on not less than six months’ notice. For the period 1
December 2023 to 30 May 2024, there is a management fee waiver in place as a result of the transaction with abrdn Smaller
Companies Income Trust plc (“aSCIT”). For this period the fee will be calculated at 0.29% per annum of net assets up to £100
million and 0.26% per annum of net assets over this threshold. After this waiver period has ended the fee will return to the
existing fee rates. Should the Company terminate the management agreement within three years of the date of the
transaction with aSCIT, then the Company undertakes to repay all or a proportion of the management fees waived by the
Manager based on the time elapsed since completion of the transaction. For the period to 31 March 2024 the value of the
management fee waiver was calculated to be £65,000. The total of the fees paid and payable during the year to 31 March
2024 was £420,000 (2023 – £414,000) and the balance due to abrdn Fund Managers Limited (“aFML”) at the year end was
£127,000 (2023 – £105,000).
5.
Administrative expenses
2024
2023
£’000
£’000
Directors’ remuneration
141
134
Auditor’s remuneration: fees payable to the Company’s Auditor for the audit
of the Company’s annual accounts
60
53
Promotional activities
50
40
Professional fees
25
19
Directors’ & Officers’ liability insurance
11
10
Trade subscriptions
29
27
Share plan costs
30
18
Registrar’s fees
39
39
Printing, postage and stationery
28
31
Custody fees
11
7
Other administrative expenses
81
39
505
417
Capital administrative expenses – professional fees
24
–
529
417
Notes to the Financial Statements
Continued
Shires Income PLC 91
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General Portfolio
Corporate
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Financial Statements
The management agreement with aFML also provides for the provision of promotional activities, which aFML has delegated
to abrdn Investments Limited. The total fees payable under the management agreement in relation to promotional activities
were £50,000 (2023 – £40,000) with a balance due to aFML at the year end of £19,000 (2023 – £10,000). The Company’s
management agreement with aFML also provides for the provision of company secretarial and administration services to the
Company. No separate fee is charged to the Company in respect of these services, which have been delegated to abrdn
Holdings Limited.
6.
Directors’ remuneration
The Company had no employees during the year (2023 – none). No pension contributions were paid for Directors
(2023 – £nil). Further details on Directors’ Remuneration can be found in the Directors’ Remuneration Report on page 66.
7.
Finance costs
2024
2023
Revenue
Capital
Total
Revenue
Capital
Total
£’000
£’000
£’000
£’000
£’000
£’000
On bank loans
502
502
1,004
363
363
726
8.
Taxation
2024
2023
Revenue
Capital
Total
Revenue
Capital
Total
£’000
£’000
£’000
£’000
£’000
£’000
(a)
Analysis of the charge for the year
Overseas tax
144
–
144
102
–
102
Total tax charge
144
–
144
102
–
102
92 Shires Income PLC
(b)
Factors affecting the tax charge for the year. The tax assessed for the year is lower than the effective rate of corporation
tax in the UK. The differences are explained in the reconciliation below:
2024
2023
Revenue
Capital
Total
Revenue
Capital
Total
£’000
£’000
£’000
£’000
£’000
£’000
Profit/(loss) before taxation
5,212
(6,540)
(1,328)
4,686
(6,615)
(1,929)
Corporation tax at an effective rate of 25%
(2023 – 19%)
1,303
(1,635)
(332)
890
(1,257)
(367)
Effects of:
Non-taxable UK dividend income
(1,329)
–
(1,329)
(903)
–
(903)
Excess management expenses not utilised
251
184
435
162
108
270
Expenses not deductible for tax purposes
3
–
3
–
–
–
Overseas withholding tax
144
–
144
102
–
102
Non-taxable overseas dividends
(228)
–
(228)
(149)
–
(149)
Losses on investments not taxable
–
1,437
1,437
–
1,156
1,156
Losses/(gains) on currency movements
–
14
14
–
(7)
(7)
Total tax charge
144
–
144
102
–
102
At 31 March 2024 the Company had surplus management expenses and loan relationship debits with a tax value of
£8,008,000 based on a corporation tax rate of 25% (2023 – £7,572,000 based on a corporation tax rate of 19%) in respect
of which a deferred tax asset has not been recognised. This is because the Company is not expected to generate
taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, it is unlikely
that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses.
9.
Dividends
2024
2023
£’000
£’000
Amounts recognised as distributions to equity holders in the period:
Third interim dividend for 2023 of 3.20p (2022 – 3.20p) per share
991
986
Final dividend for 2023 of 4.60p (2022 – 4.20p) per share
1,425
1,294
First two interim dividends for 2024 totalling 6.40p (2023 – 6.40p) per share
2,308
1,982
Refund of unclaimed dividends from previous periods
(6)
(15)
4,718
4,247
3.5% Cumulative Preference shares
2
2
Total
4,720
4,249
Notes to the Financial Statements
Continued
Shires Income PLC 93
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Overview
General Portfolio
Corporate
Information
Financial Statements
The third interim dividend of 3.20p for the year to 31 March 2024, which was paid on 30 April 2024, and the proposed final
dividend of 4.80p for the year to 31 March 2024, payable on 31 July 2024, have not been included as liabilities in these
financial statements.
Set out below are the total Ordinary dividends payable in respect of the financial year, which is the basis on which the
requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered:
2024
2023
£’000
£’000
Three interim dividends for 2024 totalling 9.60p (2023 – 9.60p) per share
3,632
2,973
Proposed final dividend for 2024 of 4.80p (2023 – 4.60p) per share
1,986
1,424
5,618
4,397
The amount reflected above for the cost of the proposed final dividend for 2024 is based on 41,369,542 Ordinary shares, being
the number of Ordinary shares in issue at the date of this Report.
10.
Earnings per Ordinary share
2024
2023
£’000
£’000
Earnings per Ordinary share are based on the following figures:
Revenue return
5,068
4,584
Capital return
(6,540)
(6,615)
Total return
(1,472)
(2,031)
Weighted average number of Ordinary shares
34,363,846
30,919,854
During the year and preceding years there were no potentially dilutive shares in issue.
94 Shires Income PLC
11.
Non–current assets – Securities at fair value
2024
2023
Listed
Listed
investments
investments
£’000
£’000
Opening book cost
89,610
87,106
Opening investment holdings gains
7,045
15,319
Opening valuation
96,655
102,425
Assets acquired in relation to the aSCIT transaction
31,761
–
Purchases
43,873
16,513
Sales – proceeds
(44,372)
(16,199)
Losses on investments
(5,748)
(6,084)
Total investments held at fair value through profit or loss
122,169
96,655
2024
2023
Listed
Listed
investments
investments
£’000
£’000
Closing book cost
119,549
89,610
Closing investment holdings gains
2,620
7,045
Total investments held at fair value through profit or loss
122,169
96,655
2024
2023
Losses on investments
£’000
£’000
Net realised (losses)/gains on sales of investments
A
(1,202)
2,210
Cost of call options exercised
(121)
(20)
Net realised (losses)/gains on sales
(1,323)
2,190
Movement in fair value of investments
(4,413)
(8,274)
Cost of put options assigned
(12)
–
(5,748)
(6,084)
A
Includes losses realised on the exercise of traded options of £133,000 (2023 – £20,000) which are reflected in the capital
column of the Statement of Comprehensive Income.
Notes to the Financial Statements
Continued
Shires Income PLC 95
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Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
The cost of exercising of call options and assigning put options is the difference between the market price of the underlying
shares and the strike price of the options. The premiums earned on options expired, exercised or assigned of £34,000 (2023 –
£73,000) have been dealt with in the revenue account.
The movement in the fair value of traded option contracts has been calculated in accordance with the accounting policy
stated in note 2(h) and has been charged to the capital reserve.
The Company received £44,372,000 (2023 – £16,199,000) from investments sold in the period. The book cost of these
investments when they were purchased was £45,695,000 (2023 – £14,009,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss.
These have been expensed through capital and are included within losses on investments in the Statement of
Comprehensive Income. The total costs on purchases of investments in the year was £182,000 (2023 – £78,000). The total
costs on sales of investments in the year was £15,000 (2023 – £11,000). 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.
At 31 March 2024 the Company held the following investments comprising more than 3% of the class of share capital held:
Class
Country of
Number of
Class of
held
Company
Incorporation
shares held
shares held
%
Ecclesiastical Insurance Office
England
4,490,000
8 5/8% Cum Pref
4.2
Royal & Sun Alliance
England
4,600,000
7 3/8% Cum Pref
3.7
General Accident
Scotland
3,548,000
7.875% Cum Pref
3.2
12.
Other receivables
2024
2023
£’000
£’000
Accrued income and prepayments
1,567
1,381
Option contract premium
–
2
1,567
1,383
None of the above amounts are overdue.
96 Shires Income PLC
13.
Current liabilities
2024
2023
£’000
£’000
Short-term bank loan
9,000
9,000
Amounts due to brokers relating to buyback of Ordinary shares for Treasury
101
–
Other creditors
390
350
9,491
9,350
Included above are the following amounts owed to aFML for management and savings scheme services and for the
promotion of the Company.
2024
2023
£’000
£’000
Other creditors
160
123
2024
2023
Non-current liabilities
£’000
£’000
Long-term bank loan
10,000
10,000
Loan arrangement fees
(37)
(49)
9,963
9,951
On 3 May 2022, the Company entered into a five year £20 million loan facility with The Royal Bank of Scotland International
Limited, London Branch. £10 million of the loan facility has been drawn down and fixed at an all-in interest rate of 3.903% until
30 April 2027. £9 million of the facility has been drawn down on a short-term basis at an all-in interest rate of 6.84%, maturing 5
April 2024. At the date this Report was approved £9,000,000 of the facility had been drawn down on a short-term basis at a
rate of 6.85%, maturing on 7 June 2024.
The terms of The Royal Bank of Scotland International Limited facility contain covenants that consolidated gross borrowings
do not exceed 33% of the adjusted portfolio value (“Securities at fair value” per the Balance Sheet adjusted for any ineligible
investments) at any time, the number of eligible investments shall not be less than 30 at any time and the portfolio value
shall at all times be equal to or more than £40 million. The Company met these covenants during the year and following the
year end.
The arrangement expenses incurred on the drawdown of the loan will be amortised over the term of the loan.
Notes to the Financial Statements
Continued
Shires Income PLC 97
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Corporate
Information
Financial Statements
14.
Called up share capital
2024
2023
Number
£’000
Number
£’000
Allotted, called up and fully paid Ordinary shares of 50 pence each:
Balance brought forward
30,964,580
15,482
30,819,580
15,410
Ordinary shares issued
11,268,494
5,634
145,000
72
Ordinary shares bought back to Treasury in the year
(863,532)
(432)
–
–
Balance carried forward
41,369,542
20,684
30,964,580
15,482
Allotted, called up and fully paid 3.5% Cumulative Preference shares of
£1 each:
Balance brought forward and carried forward
50,000
50
50,000
50
20,734
15,532
Treasury shares:
Balance brought forward
–
–
–
–
Ordinary shares bought back to Treasury in the year
863,532
432
–
–
Balance carried forward
863,532
432
–
–
During the year 11,268,494 Ordinary shares were issued in exchange for £35,228,000 of net assets from abrdn Smaller
Companies Income Trust plc (note 22).
During the year 863,532 Ordinary shares were bought back into Treasury representing 2.1% of the Company’s total issued
share capital (2023 – nil) at a total cost of £1,939,000 (2023 – the Company issued 145,000 Ordinary shares of 50p each for
proceeds of £374,000).
Each Ordinary and Cumulative Preference share carries one vote at general meetings of the Company. The Cumulative
Preference shares are considered to be equity. They have no fixed redemption date, carry a right to receive a fixed rate of
dividend and, on a winding up of the Company, to the payment of such fixed cumulative preferential dividends to the date of
such winding up and to the repayment of the capital paid up on such shares in priority to any payment to the holders of the
Ordinary shares.
The Ordinary shares, excluding any treasury shares, carry a right to receive dividends and, on a winding up or other return of
capital, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to
their shareholdings.
There are no restrictions on the transfer of Ordinary or Cumulative Preference shares in the Company other than certain
restrictions which may from time to time be imposed by law.
98 Shires Income PLC
15.
Capital reserve
2024
2023
£’000
£’000
At 31 March 2023
35,930
42,545
Net (losses)/gains on sales of investments during year
(1,323)
2,190
Movement in fair value decreases of investments
(4,425)
(8,274)
Buyback of Ordinary shares for treasury
(1,939)
–
Management fees
(210)
(207)
Administrative expenses (24) –
Interest on bank loans
(502)
(363)
Currency (losses)/gains
(56)
39
At 31 March 2024
27,451
35,930
The capital reserve includes gains of £2,620,000 (31 March 2023 – gains of £7,045,000), which relate to the revaluation of
investments held at the reporting date.
16.
Net asset value per Ordinary share
The net asset value per share and the net assets attributable to the Ordinary shareholders at the year end were as follows:
2024
2023
Net assets per Balance Sheet
£105,957,000
£79,913,000
3.5% Cumulative Preference shares of £1 each
£50,000
£50,000
Attributable net assets
£105,907,000
£79,863,000
Number of Ordinary shares in issue
41,369,542
30,964,580
Net asset value per share
256.00p
257.92p
Notes to the Financial Statements
Continued
Shires Income PLC 99
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Overview
General Portfolio
Corporate
Information
Financial Statements
17.
Analysis of changes in financial liabilities during the year
At
At
31 March
Cash
Other
31 March
2023
flows
movements
A
2024
Financing activities
£’000
£’000
£’000
£’000
Debt due within one year
(9,000)
–
–
(9,000)
Debt due after more than one year
(9,951)
–
(12)
(9,963)
(18,951)
–
(12)
(18,963)
At
At
31 March Cash Other 31 March
2022
flows
movements
A
2023
Financing activities
£’000
£’000
£’000
£’000
Debt due within one year
(19,000)
10,000
–
(9,000)
Debt due after more than one year
–
(10,000)
49
(9,951)
(19,000)
–
49
(18,951)
A
The other movements column represents the amortisation of the loan arrangement fees.
18.
Financial instruments
Risk management. The Company’s investment activities expose it to various types of financial risk associated with the financial
instruments and markets in which it invests. The Company’s financial instruments comprise securities and other investments,
cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and
purchases awaiting settlement, and debtors for accrued income.
The Company may also, subject to Board approval, enter into derivative transactions, in the form of traded options, for the
purpose of enhancing income returns and portfolio management. The risks associated with these option contracts are
detailed on page 12. During the year, the Company entered into certain derivative contracts. As disclosed in note 3, the
premium received and fair value changes in respect of options written in the year were £34,000 (2023 – £73,000). Positions
closed during the year realised a loss of £133,000 (2023 – £20,000). The largest position in derivative contracts held during the
year at any given time was £35,000 (2023 – £40,000). The Company had no open positions in derivative contracts at 31 March
2024 (2023 – nil).
The Board has delegated the risk management function in relation to financial instruments to abrdn Fund Managers Limited
(“aFML”) under the terms of its management agreement with aFML (further details of which are included under note 4). The
Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types
of risk and the Manager’s approach to the management of each type of risk, are summarised below. Such approach has been
applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude
short-term debtors and creditors given their relatively low value.
Risk management framework. The directors of aFML collectively assume responsibility for aFML’s obligations under the AIFMD
including reviewing investment performance and monitoring the Company’s risk profile during the year.
100 Shires Income PLC
aFML is a fully integrated member of the abrdn Group (the “Group”), which provides a variety of services and support to aFML
in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The
AIFM has delegated the day to day administration of the investment policy to abrdn Limited, which is responsible for ensuring
that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment
disclosures to investors (details of which can be found on the Company’s website). The AIFM has retained responsibility for
monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.
The Group’s Internal Audit Department is independent of the Risk Division and reports directly to the Group’s CEO and to the
Audit Committee of the Group’s Board of Directors. The Internal Audit Department is responsible for providing an independent
assessment of the Group’s control environment.
The Manager conducts its risk oversight function through the operation of the Group’s risk management processes and
systems which are embedded within the Group’s operations. The Group’s Risk Division supports management in the
identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance,
Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group’s Chief Risk Officer, who reports to
the Group’s CEO. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the
organisation using the Group’s operational risk management system (“SHIELD”).
The Group’s corporate governance structure is supported by several committees to assist the board of directors of abrdn, its
subsidiaries and the Company to fulfil their roles and responsibilities. The Group’s Risk Division is represented on all committees,
with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the
functioning of those committees are described on the committees’ terms of reference.
Risk management. The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate
risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.
(i) Market risk
. The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of
changes in market prices. This market risk comprises three elements – interest rate risk, currency risk and other price risk.
Interest rate risk. Interest rate movements may affect:
– the fair value of the investments in convertibles and preference shares;
– the level of income receivable on cash deposits; and
– interest payable on the Company’s variable rate borrowings.
Management of the risk. The possible effects on fair value and cash flows that could arise as a result of changes in interest
rates are taken into account when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a
regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. The fixed rate facilities are used to
finance opportunities at low rates and, the revolving and uncommitted facilities to provide flexibility in the short-term.
Current bank covenants state that the gross borrowings will not exceed one-third of adjusted portfolio value.
The Board reviews the value of investments in preference shares on a regular basis.
Continued
Notes to the Financial Statements
Shires Income PLC 101
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Interest rate profile. The interest rate risk profile of the portfolio of financial assets and liabilities (excluding ordinary shares)
at the Balance Sheet date was as follows:
Weighted
average
period
Weighted
for which
average
rate is
interest
Fixed
Floating
fixed
rate
rate
rate
As at 31 March 2024
Years
%
£’000
£’000
Assets
UK preference shares
–
8.62
24,195
–
Cash and cash equivalents
–
5.35
–
1,675
Total assets
24,195
1,675
Liabilities
Short-term bank loans
0.01
6.84
(9,000)
–
Long-term bank loans
3.09
3.90
(9,963)
–
Total liabilities
(18,963)
–
Weighted
average
period
Weighted
for which
average
rate is
interest
Fixed
Floating
fixed
rate
rate
rate
As at 31 March 2023
Years
%
£’000
£’000
Assets
UK preference shares
–
8.49
20,895
–
Cash and cash equivalents
–
3.97
–
1,176
Total assets
20,895
1,176
Liabilities
Short-term bank loans
0.01
5.58
(9,000)
–
Long-term bank loans
4.01
3.90
(9,951)
–
Total liabilities
(18,951)
–
102 Shires Income PLC
The weighted average interest rate is based on the current yield of each asset, weighted by its market value.
The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value
of the loans.
The cash assets consist of cash deposits on call earning interest at prevailing market rates.
The UK preference shares assets have no maturity date.
Short-term debtors and creditors (with the exception of bank loans) have been excluded from the above tables.
Interest rate sensitivity. The sensitivity analyses below have been determined based on the exposure to interest rates for
non-derivative instruments at the Balance Sheet date and the stipulated change taking place at the beginning of the
financial year and held constant throughout the reporting period in the case of instruments that have floating rates.
If interest rates had been 200 basis points higher or lower and all other variables were held constant, the Company’s:
– profit before tax for the year ended 31 March 2024 would increase/decrease by £34,000 (2023 – £24,000). This is mainly
attributable to the Company’s exposure to interest rates on its floating rate cash balances. These figures have been
calculated based on cash positions at each year end.
– the capital return would decrease/increase by £3,300,000 (2023 – increase/decrease by £3,342,000) using VaR
(“Value at Risk”) analysis based on 100 observations of monthly VaR computations of fixed interest portfolio positions at
each year end.
Currency risk. A small proportion of the Company’s investment portfolio is invested in overseas securities whose values
are subject to fluctuation due to changes in exchange rates.
Management of the risk. The revenue account is subject to currency fluctuations arising on dividends received in foreign
currencies and, indirectly, due to the impact of foreign exchange rates upon the profits of investee companies. The
Company does not hedge this currency risk. The Company does not have any exposure to foreign currency liabilities.
No currency sensitivity analysis has been prepared as the Company considers any impact to be immaterial to the
financial statements.
Price risk. Price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect
the value of the quoted investments.
Management of the risk. It is the Board’s policy to hold an appropriate spread of investments in the portfolio in order to
reduce the risk arising from factors specific to a particular sector. The allocation of assets to specific sectors and the stock
selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and
reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company
are listed on recognised stock exchanges.
Price sensitivity. If market prices at the Balance Sheet date had been 20% higher or lower while all other variables
remained constant, the profit before tax attributable to Ordinary shareholders for the year ended 31 March 2024 would
have increased/decreased by £19,595,000 (2023 – increase/decrease of £15,152,000). This is based on the Company’s
portfolio of Ordinary shares held at each year end.
(ii)
Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with
financial liabilities.
Management of the risk. Liquidity risk is not considered to be significant as the Company’s assets comprise mainly readily
realisable securities, which can be sold to meet funding commitments if necessary.
Notes to the Financial Statements
Continued
Shires Income PLC 103
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Short-term flexibility is achieved through the use of loan facilities, details of which can be found in note 13. Under the terms
of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender
with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a
lender on a regular basis.
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a
regular basis. Borrowings comprise a revolving loan facility and a fixed term loan facility. The Board has imposed a
maximum equity gearing level of 35% which constrains the amount of gearing that can be invested in equities which, in
normal market conditions, are more volatile than the preference shares within the portfolio. Details of borrowings at
31 March 2024 are shown in note 13.
Maturity profile.
The maturity profile of the Company’s financial liabilities at the Balance Sheet date, with amounts
undiscounted and order by contractual maturity, was as follows:
Within
Within
More than
1 year
1-5 years
5 years
At 31 March 2024
£’000
£’000
£’000
Trade and other payables
(491)
–
–
Short-term bank loans
(9,052)
–
–
Long-term bank loans
(389)
(10,873)
–
(9,932)
(10,873)
–
Within
Within
More than
1 year
1-5 years
5 years
At 31 March 2023
£’000
£’000
£’000
Trade and other payables
(350)
–
–
Short-term bank loans
(9,044)
–
–
Long-term bank loans
(392)
(11,262)
–
(9,786)
(11,262)
–
(iii) Credit risk. This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction
that could result in the Company suffering a loss.
Management of the risk
. The risk is managed as follows:
– where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is
taken into account so as to minimise the risk to the Company of default;
– transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into
account so as to minimise the risk to the Company of default;
– investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically
by the investment manager, and limits are set on the amount that may be due from any one broker;
104 Shires Income PLC
– the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed
trade reports on a daily basis. In addition, both stock and cash reconciliations to the Custodian’s records are performed
on a daily basis to ensure discrepancies are investigated on a timely basis. The Group’s Compliance carries out periodic
reviews of the Custodian’s operations and reports its findings to the abrdn Group’s Risk Management Committee and to
the Board of the Company. This review will also include checks on the maintenance and security of investments held;
– transactions involving derivatives and other arrangements wherein the creditworthiness of the entity acting as broker or
counterparty to the transaction is likely to be of sustained interest are subject to rigorous assessment by the Investment
Manager of the credit worthiness of that counterparty. The Company’s aggregate exposure to each such counterparty is
monitored regularly by the Board; and
– cash is held only with reputable banks with high quality external credit enhancements.
It is the Investment Manager’s policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated)
counterparties.
None of the Company’s financial assets are secured by collateral or other guarantees or assurances.
Credit risk exposure.
In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at
31 March 2024 and 31 March 2023 was as follows:
2024
2023
Balance
Maximum
Balance
Maximum
Sheet
exposure
Sheet
exposure
£’000
£’000
£’000
£’000
Non-current assets
Quoted preference shares at fair value through profit or loss
24,195
24,195
20,895
20,895
Current assets
Accrued income
1,567
1,567
1,363
1,363
Option contract premium
–
–
2
2
Cash and cash equivalents
1,675
1,675
1,176
1,176
27,437
27,437
23,436
23,436
None of the Company’s financial assets is past its due date.
Fair value of financial assets and liabilities. The fair value of the long–term loan has been calculated at £9,619,000 as at 31
March 2024 (2023 – £9,097,000) compared to an accounts value in the financial statements of £9,963,000 (2023 –
£9,951,000) (note 13). The fair value of each loan is determined by aggregating the expected future cash flows for that
loan discounted at a rate comprising the borrower’s margin plus an average of market rates applicable to loans of a
similar period of time and currency. The loan is considered to be classed as a Level 2 liability under IFRS 13. The carrying
values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted
market prices. Traded options contracts are valued at fair value which have been determined with reference to quoted
market values of the contracts. The contracts are tradeable on a recognised exchange. For all other short-term debtors
and creditors, their book values approximate to fair values because of their short-term maturity.
Notes to the Financial Statements
Continued
Shires Income PLC 105
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
19.
Fair value hierarchy
IFRS 13 ‘Financial Value Measurement’ requires an entity to classify fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at 31
March 2024 as follows:
Level 1
Level 2
Level 3
Total
As at 31 March 2024
Note
£’000
£’000
£’000
£’000
Financial assets at fair value through profit or loss
Quoted investments
a)
122,169
–
–
122,169
Net fair value
122,169
–
–
122,169
Level 1
Level 2
Level 3
Total
As at 31 March 2023
Note
£’000
£’000
£’000
£’000
Financial assets at fair value through profit or loss
Quoted investments
a)
96,655
–
–
96,655
Net fair value
96,655
–
–
96,655
a)
Quoted investments. The fair value of the Company’s quoted investments has been determined by reference to their
quoted bid prices at the reporting date. Quoted investments included in Fair Value Level 1 are actively traded on
recognised stock exchanges.
20.
Capital management policies and procedures
The Company’s capital management objectives are:
– to ensure that the Company will be able to continue as a going concern; and
– to maximise the return to its equity shareholders through an appropriate balance of equity capital and debt.
The capital of the Company consists of equity, comprising issued capital, reserves and retained earnings.
The Board monitors and reviews the broad structure of the Company’s capital. This review includes the nature and planned
level of gearing, which takes account of the Investment Manager’s views on the market and the extent to which revenue in
excess of that which is required to be distributed should be retained. The Company is not subject to any externally imposed
capital requirements.
106 Shires Income PLC
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 66.
Transactions with the Manager. The Company has an agreement with the abrdn Group for the provision of management,
secretarial, accounting and administration services and for the carrying out of promotional activities in relation to the
Company. Details of transactions during the year and balances outstanding at the year end are disclosed in notes 4 and 5.
22.
Transaction with abrdn Smaller Companies Investment Trust plc (“aSCIT”)
On 1 December 2023, the Company announced that it had acquired £35,228,000 of net assets from aSCIT in consideration for
the issue of 11,268,494 new Ordinary shares as part of a recommended s110 Scheme under the Insolvency Act. The scheme,
inter alia, involved the cancellation of the Company’s existing holding in the issued capital of aSCIT, and a formula asset value
(“FAV”) calculation to take account the costs of the transaction in computing the number and value of shares to be issued by
the Company and assets transferred under the Scheme, as well as the value of cash exit for aSCIT shareholders which was at
a discount to the FAV.
Net assets acquired
£’000
Investments
31,779
Cash
3,444
Debtors
5
Net assets
35,228
Satisfied by the value of new Ordinary shares issued
35,228
Notes to the Financial Statements
Continued
Shires Income PLC 107
Corporate Information
The Company’s Investment Manager
is a wholly-owned subsidiary of
abrdn plc. The abrdn Group’s
assets under management and
administration were £507.7 billion
as at 31 March 2024.
108 Shires Income PLC
abrdn Investments Limited
The Company’s Investment Manager is abrdn
Investments Limited which is a wholly-owned subsidiary of
abrdn plc. The abrdn Group’s assets under management
and administration were £507.7 billion as at 31 March
2024, managed for a range of clients including 15 UK-
listed closed-end investment companies.
The Investment Team Senior Managers
Iain Pyle
Senior Investment Director, UK Equities
Iain is a Senior Investment Director in the UK Equities team,
having joined abrdn in 2015. Prior to joining, he was an
analyst on the top-ranked Oil & Gas research team at
Sanford Bernstein. Iain graduated with a MEng degree
in Chemical Engineering from Imperial College and an
MSc (Hons) in Operational Research from Warwick
Business School. He is a Chartered Accountant and a
CFA Charterholder.
Charles Luke
Senior Investment Director, UK Equities
Charles is a Senior Investment Director in the UK Equities
team. He joined abrdn’s Pan European Equities team in
2000 and previously worked at Framlington Investment
Management. He has a BA in Economics and Japanese
Studies from Leeds University and an MSc in Business and
Economic History from the London School of Economics.
Information about the Investment Manager
Shires Income PLC 109
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
The Investment Process
Investment Philosophy and Style
The Investment Manager believes that company
fundamentals ultimately drive stock prices but are often
priced inefficiently. It believes that in-depth company
research delivers insights that can be used to exploit these
market inefficiencies. The Investment Manager focuses on
investing in high-quality companies, with the market often
underestimating the sustainability of their returns. Quality
companies tend to produce more resilient earnings
streams with fewer tail risks, allowing them to better
navigate challenging market conditions whilst also
capitalising on opportunities to create value. This makes
the approach well suited to identifying companies with
sustainable and growing income generation. Investment
insights are generated by the extensive equity research
platform at abrdn. Ideas are generated through frequent
direct company contact, deep fundamental analysis and
integrated ESG analysis with rigorous team debate
strengthening analytical conclusions. The Investment
Manager has a long-term approach, aiming to buy and
hold companies for a multi-year time horizon although it
has the ability to react quickly if necessary. The Investment
Manager is willing to take sizeable deviations to the
benchmark based on the companies where it finds the
highest quality and most attractive valuations.
Investment Process
The investment process has three stages:
1. Idea Generation and Research. Comprehensive
coverage of the UK equity market with a team of
analysts generating investment ideas from company
meetings, combined with corroborating evidence
from competitors, suppliers and customers. External
secondary research is also generated to gain insight
on the consensus view and supplement proprietary
research.
2. Stock Selection. Buy ideas are peer reviewed by the
whole UK Equity team, evaluating the level of
conviction and the materiality, corroboration and
correlation of those investment opportunities. For the
Company specifically, the Investment Manager aims
to select high-quality stocks. Quality is defined by
reference to management, business focus, balance
sheet and corporate governance.
3. Portfolio Construction and Risk Management. Portfolio
construction is undertaken in a disciplined way,
prioritising the taking of company specific risk with a
rigorous sell discipline. Non-proprietary and
proprietary quantitative tools are used to identify and
control risk factor exposures, including sector and
geographic weights.
The Investment Manager believes that good investment
decision-making requires clarity of responsibility for those
decisions. Every stock has a named analyst responsible for
its coverage, and every portfolio has a named fund
manager responsible for its management. They make
those decisions supported and challenged by the team,
but accountability for the final decision is clear.
The investment process also leverages a wealth of
knowledge, insight and expertise across asset classes and
regions within abrdn. This allows the fund manager to take
advantage of equity colleagues across the globe who are
meeting companies and conducting research and sharing
their insights using one common global research platform.
This is invaluable when investing in the UK equity market,
which is one of the most global markets in the world.
Corporate level insights are shared with the credit team
which enriches the equity view through an understanding
of the full capital structure of the businesses invested in.
Members of the Investment Manager’s multi-asset and
economics teams regularly attend the equity team’s daily
meeting to share macro level insights.
Approach to Income
The primary aim of the Company is to deliver a high level of
income with the capacity for growth of both income and
capital over time. Consideration of income therefore plays
an important part in the Investment Manager’s process.
Research analysts are required to consider the prospects
for dividend affordability and growth for each stock under
coverage within the research process. For stock selection,
the Investment Manager pays particular attention to
measures relevant for income such as: cash flow outlook,
balance sheet strength and intention to pay dividends. The
Investment Manager looks for investment cases that deliver
returns from income in a number of ways: high yielding
stocks with potential for yield compression; stable high yield
names to deliver resilient income; and growing companies
with the potential for capital and dividend growth over time.
Portfolio construction considers the required level of
income to fund and, over time, grow the Company’s
dividend and the overall risk profile required to achieve this.
Investment ideas and portfolio construction are reviewed
by a group of income portfolio managers with significant
experience in UK equity income.
110 Shires Income PLC
ESG Integration
ESG integration means identifying and including all of the
Investment Manager’s ESG analysis in each investment
decision and the Investment Manager is regarded as a
leader in this area. A central ESG team supports
investment teams across different asset classes with its
thematic work on areas such as remuneration and
climate change, as well as taking responsibility for voting
policies. The Investment Manager’s Approach to ESG is
included on pages 35 to 39.
Preference Shares
Given the importance of the Preference Share portfolio to
the Company, there is an additional process in place to
monitor these holdings. Regular meetings are held,
comprising analysts from the fixed income and equity
teams responsible for coverage of issuing companies,
along with the portfolio managers. The process ensures
that the holdings are monitored closely and that there is
timely visibility on any changes at issuing companies
which could potentially impact their ability or intention to
pay the dividends associated with the preference shares.
Risk Management
The Investment Manager utilises a number of quantitative
risk tools to ensure it is fully aware of, and understands, all
the risks prevalent in portfolios it manages. These risk
management systems monitor and analyse active risk, the
composition of portfolio positions, as well as contribution
to risk and marginal contribution to risk of the portfolio’s
holdings. The systems break down the risk within the
portfolio by industry and country factors, and highlight the
stocks with the highest marginal contribution to risk and
the largest diversification benefit. Sector, thematic and
geographical positions are a residual of stock selection
decisions, but are monitored to ensure excessive risk is not
taken in any one area. The Investment Manager also
makes use of pre-trade analytics to assess the impact of
any trades on the portfolio risk metrics.
The Investment Process – Accountability and Performance Evaluated at Each Stage of the Process
Continued
Information about the Investment Manager
Shires Income PLC 111
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Alternative Investment Fund Managers
Directive (“AIFMD”) and Pre-Investment
Disclosure Document (“PIDD”)
The Company has appointed abrdn Fund Managers
Limited as its alternative investment fund manager and
BNP Paribas Trust Corporation UK Limited as its depositary
under the AIFMD.
The AIFMD requires abrdn Fund Managers Limited, as the
Company’s AIFM, to make available to investors certain
information prior to such investors’ investment in the
Company. Details of the leverage and risk policies which
the Company is required to have in place under the AIFMD
are published in the Company’s PIDD which can be found
on its website: shiresincome.co.uk. The periodic disclosures
required to be made by the AIFM under the AIFMD are set
out on page 119.
Investor Warning: Be alert to share fraud and
boiler room scams
abrdn has been contacted by investors informing it that it
has received telephone calls and emails from people who
have offered to buy their investment company shares,
purporting to work for abrdn or for third party firms. abrdn
has also been notified of emails claiming that certain
investment companies under its management have
issued claims in the courts against individuals. These may
be scams which attempt to gain your personal
information with which to commit identity fraud or could
be ‘boiler room’ scams where a payment from you is
required to release the supposed payment for your
shares. These callers/senders do not work for abrdn and
any third party making such offers/claims has no link with
abrdn.
abrdn does not ‘cold-call’ investors in this way. If you have
any doubt over the veracity of a caller, do not offer any
personal information and end the call.
The Financial Conduct Authority provides advice with
respect to share fraud and boiler room scams at:
fca.org.uk/consumers/scams
Shareholder Enquiries
For queries regarding shareholdings, lost certificates,
dividend payments, registered details and related
matters, shareholders holding their shares directly in the
Company are advised to contact the Registrar
(see Contact Addresses). Changes of address
must be notified to the Registrar in writing.
Any general queries about the Company should be
directed to the Company Secretary in writing
(see Contact Addresses) or by email to:
CEF.CoSec@abrdn.com
Closure of the abrdn Investment Trust
Savings Plans (the “Plans”)
In June 2023, abrdn notified investors in the abrdn
Investment Trust ISA, Share Plan and Investment Plan for
Children that these plans would be closing in December
2023. All investors with a holding or cash balance at that
time transferred to interactive investor (“ii”). ii
communicated with investors in November to set up
account security to ensure that investors could continue
to access their holdings via ii following the closure of
the Plans.
Please contact ii for any ongoing support with your
account on 0345 646 1366, or +44 113 346 2309 if you are
calling from outside the UK. Lines are open 8.00am to
5.00pm Monday to Friday. Alternatively, you can access
the ii website at: www.ii.co.uk/abrdn-welcome
How to Invest
Investors can buy and sell shares in the Company directly
through a stockbroker or indirectly through a lawyer,
accountant or other professional adviser. Alternatively, for
private investors, there are a number of online dealing
platforms that offer share dealing, ISAs and other means
to invest in the Company. Real-time execution-only
stockbroking services allow you to trade online, manage
your portfolio and buy UK listed shares. These sites do not
give advice. Some comparison websites also look at
dealing rates and terms.
Discretionary Private Client Stockbrokers
If you have a large sum to invest, you may wish to contact
a discretionary private client stockbroker. They can
manage your entire portfolio of shares and will advise you
on your investments. To find a private client stockbroker
visit The Personal Investment Management and Financial
Advice Association at: pimfa.co.uk
Financial Advisers
To find an adviser who recommends on investment trusts,
visit: unbiased.co.uk
Investor Information
112 Shires Income PLC
Regulation of Stockbrokers
Before approaching a stockbroker, always check that
they are regulated by the Financial Conduct Authority at:
fca.org.uk/firms/financial-services-register.
How to Attend and Vote at Company
Meetings
Investors who hold their shares through a platform or
share plan provider (for example Hargreaves Lansdown,
Interactive Investor or AJ Bell) and would like to attend and
vote at Company meetings (including AGMs) should
contact their platform or share plan provider directly to
make arrangements.
Investors who hold their shares through platforms and
have their shares held through platform nominees, may
not necessarily receive notification of general meetings
and are advised to keep themselves informed of
Company business by referring to the Company’s
website. Where voting is required, and the Board
encourages shareholders to vote at all general meetings
of the Company, shareholders with their holdings in
nominees will need to instruct the nominee to vote on their
behalf and should do so in good time before the meetings.
Keeping You Informed
Information about the Company can be found on its
website: shiresincome.co.uk, including share price and
performance data as well as London Stock Exchange
announcements, current and historic Annual and Half-
Yearly Reports, and the latest monthly factsheet on the
Company issued by the Manager. Investors can receive
updates via email by registering on the home page of the
Company’s website.
Details are also available at: invtrusts.co.uk
Twitter:
@abrdnTrusts
LinkedIn:
abrdn Investment Trusts
Key Information Document (“KID”)
The KID relating to the Company and published by the
Manager can be found on the Company’s website.
Suitable for Retail/NMPI Status
The Company’s shares are intended for investors,
primarily in the UK, including retail investors, professionally-
advised private clients and institutional investors who are
seeking a high level of income, together with the potential
for growth of both income and capital from a diversified
portfolio substantially invested in UK equities but also in
preference shares, convertibles and other fixed income
securities, and who understand and are willing to accept
the risks of exposure to equities.
Investors should consider consulting a financial adviser
who specialises in advising on the acquisition of shares
and other securities before acquiring shares. Investors
should be capable of evaluating the risks and merits of
such an investment and should have sufficient resources
to bear any loss that may result.
The Company currently conducts its affairs so that its
securities can be recommended by a financial adviser to
ordinary retail investors in accordance with the Financial
Conduct Authority’s rules in relation to non-mainstream
pooled investments (“NMPIs”) and intends to continue to
do so for the foreseeable future. The Company’s securities
are excluded from the Financial Conduct Authority’s
restrictions which apply to NMPIs because they are
securities issued by an investment trust.
Note
Please remember that past performance is not a guide to
the future. Stock market and currency movements may
cause the value of shares and the income from them to
fall as well as rise and investors may not get back the
amount they originally invested.
As with all equity investments, the value of investment trust
shares purchased will immediately be reduced by the
difference between the buying and selling prices of the
shares, known as the market maker’s spread.
Investors should further bear in mind that the value of any
tax relief will depend on the individual circumstances of
the investor and that tax rates and reliefs, as well as the
tax treatment of ISAs, may be changed by future
legislation.
The information on pages 111 and 112 has been
approved for the purposes of Section 21 of the Financial
Services and Markets Act 2000 (as amended by the
Financial Services Act 2012) by abrdn Investments Limited
which is authorised and regulated by the Financial
Conduct Authority in the United Kingdom.
Investor Information
Continued
Shires Income PLC 113
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Governance
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General Portfolio
Corporate
Information
Financial Statements
abrdn Group or abrdn
The abrdn plc group of companies.
Administrator
BNP Paribas Securities Services.
aSCIT
abrdn Smaller Companies Income Trust plc.
AIC
The Association of Investment Companies.
AIFMD
The UK version of the Alternative Investment Fund
Managers Directive and all implementing and delegating
legislation thereunder, as it forms part of UK law following
the UK’s departure from the EU. The AIFMD was originally
European legislation which created a European-wide
framework for regulating managers of ‘alternative
investment funds’ (“AIFs”). It is designed to regulate any
fund which is not a UCITS fund and which is managed
and/or marketed in the EU (and, now separately, the UK).
The Company has been designated as an AIF.
Alternative Performance Measure or APM
A financial measure of historic or future financial
performance, financial position, or cash flows, other than a
financial measure defined or specified in the applicable
financial reporting framework.
Benchmark
This is a measure against which an Investment Trust’s
performance is compared. The Company’s benchmark is
the FTSE All-Share Index. The index averages the
performance of a defined selection of listed companies
over specific time periods.
Call Option
An option contract which gives the buyer the right, but not
the obligation, to purchase a specified amount of an asset
at an agreed price by a future specified date.
Closed-End Fund
A collective investment scheme which has a fixed number
of shares which are not redeemable from the fund itself.
Unlike open-ended funds, new shares/units are not
created by managers to meet demand from investors;
instead, shares are purchased (or sold) only in the market.
Closed-end funds are normally listed on a recognised
stock exchange, such as the London Stock Exchange, and
shares can be bought and sold on that exchange.
Convertibles
Fixed income securities, which can be converted into
equity shares at a future date.
Discount
The amount by which the market price per share of an
Investment Trust is lower than the Net Asset Value per
share. The discount is normally expressed as a
percentage of the Net Asset Value per share.
Dividend Cover
Earnings per share divided by the dividend per share,
expressed as a ratio.
Dividend Yield
The annual dividend expressed as a percentage of the
share price.
ESG
Environmental, Social and Governance.
FCA
Financial Conduct Authority.
Gearing and Equity Gearing
Net gearing is calculated by dividing total borrowings, less
cash or cash equivalents, by shareholders’ funds
expressed as a percentage. Equity gearing is the sum of
the investments in ordinary shares, both listed and unlisted,
and convertibles, expressed as a proportion of
shareholders’ funds.
Glossary of Terms
114 Shires Income PLC
Investment Manager
abrdn Investments Limited is a wholly owned subsidiary of
abrdn plc and acts as the Company’s investment
manager. It is authorised and regulated by
the FCA.
Investment Trust
A type of Closed-End Fund which invests in other
securities, allowing shareholders to share the risks, and
returns, of collective investment.
Key Information Document or KID
The UK version of the Packaged Retail and Insurance-
based Investment Products (“PRIIPS”) Regulation (as it
forms part of UK law following the UK’s departure from the
EU) requires the Manager, as the Company’s PRIIP
‘manufacturer’, to prepare a Key Information Document
(“KID”) in respect of the Company. This KID must be made
available by the Manager to retail investors prior to them
making any investment decision and is available via the
Company’s website. The Company is not responsible for
the information contained in the KID and investors should
note that the procedures for calculating the risks, costs
and potential returns are prescribed by law. The figures in
the KID may not reflect the expected returns for the
Company and anticipated performance returns cannot
be guaranteed.
Leverage
For the purposes of the AIFMD, leverage is any method
which increases the Company’s exposure, including the
borrowing of cash and the use of derivatives. It is
expressed as a ratio between the Company’s exposure
and its Net Asset Value and can be calculated on a gross
and a commitment method. Under the gross method,
exposure represents the sum of the Company’s positions
after the deduction of sterling cash balances, without
taking into account any hedging and netting
arrangements. Under the commitment method, exposure
is calculated without the deduction of sterling cash
balances and after certain hedging and netting positions
are offset against each other.
Manager, AIFM or aFML
abrdn Fund Managers Limited is a wholly owned
subsidiary of abrdn plc and acts as the Alternative
Investment Fund Manager for the Company. It is
authorised and regulated by the FCA.
Net Asset Value or NAV
The value of total assets less liabilities. Liabilities for this
purpose include current and long-term liabilities. The Net
Asset Value divided by the number of shares in issue
produces the Net Asset Value per share.
Ongoing Charges
Ratio of expenses of an Investment Trust expressed as a
percentage of average daily shareholders’ funds
calculated annually per the AIC’s industry standard
method. More specifically, it is the annual percentage
reduction in shareholder returns as a result of recurring
operational expenses, assuming markets remain static
and the portfolio is not traded. Although the Ongoing
Charges figure is based on historical information, it
provides shareholders with an indication of the likely level
of costs that will be incurred in managing the Company in
the future. The Board uses the Ongoing Charges Ratio as a
Key Performance Indicator for the Company.
Preference Shares
These entitle the holder to a fixed rate of dividend out of
the profits of a company, to be paid in priority to other
classes of shareholder.
Pre-Investment Disclosure Document
(“PIDD”)
The AIFM and the Company are required to make certain
disclosures available to investors in accordance with the
AIFMD. Those disclosures that are required to be made
pre-investment are included within a PIDD, which can be
found on the Company’s website.
Premium
The amount by which the market price per share of an
Investment Trust exceeds the Net Asset Value per share.
The premium is normally expressed as a percentage of
the Net Asset Value per share.
Price/Earnings Ratio
This is calculated by dividing the market price per share by
the earnings per share. The calculation assumes no
change in earnings but in practice the multiple reflects the
stock market’s view of a company’s prospects and profit
growth potential.
Glossary of Terms
Continued
Shires Income PLC 115
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Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Prior Charges
The name given to all borrowings including debentures,
loans and overdrafts that are to be used for investment
purposes, reciprocal foreign currency loans, currency
facilities to the extent that they are drawn down,
index-linked securities, and all types of preference or
preferred capital.
Put Option
An option contract which gives the buyer the right, but not
the obligation, to sell a specified amount of an asset at an
agreed price by a future specified date.
Total Assets
Total Assets as per the balance sheet less current liabilities
(before deducting Prior Charges as defined above).
Total Return
Total Return involves reinvesting the net dividend in the
month that the share price goes ex-dividend. The NAV
Total Return involves investing the same net dividend in the
NAV of the Company on the date on which that dividend
was earned.
116 Shires Income PLC
Alternative performance measures are numerical measures of the Company’s current, historical or future performance, financial
position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company’s
applicable financial framework includes IAS and the AIC SORP. The Directors assess the Company’s performance against a range of
criteria which are viewed as particularly relevant for closed-end investment companies.
Discount to net asset value per Ordinary share
The difference between the share price and the net asset value per Ordinary share expressed as a percentage of the net asset value
per Ordinary share.
2024
2023
NAV per Ordinary share (p)
a
256.00
257.92
Share price (p)
b
222.00
250.00
Discount
(a-b)/a
13.3%
3.1%
Dividend Cover
Dividend cover measures the revenue return per share divided by total dividends per share, expressed as a ratio.
2024
2023
Revenue return per share
a
14.75p
14.83p
Dividends per share
b
14.40p
14.20p
Dividend cover
a/b
1.02x
1.04x
Dividend Yield
The annual dividend divided by the share price, expressed as a percentage.
2024
2023
Annual dividend per Ordinary share (p)
a
14.40p
14.20p
Share price (p)
b
256.00p
250.00p
Dividend yield
a/b
5.6%
5.7%
Alternative Performance Measures
Shires Income PLC 117
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Corporate
Information
Financial Statements
Net Gearing
Net gearing measures total borrowings less cash and cash equivalents divided by shareholders’ funds, expressed as a percentage.
Under AIC reporting guidance, cash and cash equivalents includes net amounts due to and from brokers at the period end as well as
cash and short-term deposits.
2024
2023
Borrowings (£’000)
a
18,963
18,951
Cash (£’000)
b
1,675
1,176
Amounts due to brokers (£’000)
c
101
–
Amounts due from brokers (£’000)
d
–
–
Shareholders’ funds (£’000)
e
105,957
79,913
Net gearing
(a-b+c-d)/e
16.4%
22.2%
Ongoing Charges Ratio
The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment
management fees and administrative expenses and expressed as a percentage of the average net asset values throughout the year.
2024
2023
Investment management fees (£’000)
420
414
Administrative expenses (£’000)
529
417
Less: non-recurring charges
A
(£’000)
(24)
–
Ongoing charges (£’000)
925
831
Average net assets (£’000)
85,134
80,617
Ongoing charges ratio (excluding look-through costs)
1.09%
1.03%
Look-through costs
B
0.01%
0.14%
Ongoing charges ratio (including look-through costs)
1.10%
1.17%
A
Comprises promotional acitivities fees not expected 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
amongst other things, includes the cost of borrowings and transaction costs.
118 Shires Income PLC
Total Return
NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking
into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-
ended and closed-ended competitors, and the Reference Index, respectively.
Share
Year ended 31 March 2024
NAV
Price
Opening at 1 April 2023
a
250.00p
257.92p
Closing at 31 March 2024
b
222.00p
256.00p
Price movements
c=(b/a)-1
–11.2%
–0.7%
Dividend reinvestment
A
d
5.8%
5.5%
Total return
c+d
–5.4%
+4.8%
Share
Year ended 31 March 2023
NAV
Price
Opening at 1 April 2022
a
278.29p
279.00p
Closing at 31 March 2023
b
257.92p
250.00p
Price movements
c=(b/a)-1
–7.3%
–10.4%
Dividend reinvestment
A
d
5.1%
4.9%
Total return
c+d
–2.2%
–5.5%
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.
Alternative Performance Measures
Continued
Shires Income PLC 119
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General Portfolio
Corporate
Information
Financial Statements
abrdn Fund Managers Limited (“aFML”) and the Company are required to make certain disclosures available to investors
in accordance with the Alternative Investment Fund Managers Directive (“AIFMD”). Those disclosures that are required to
be made pre-investment are included within a pre-investment disclosure document (“PIDD”) which can be found on the
Company’s website.
There have been no material changes to the disclosures contained within the PIDD since its most recent update in
December 2023.
The periodic disclosures as required under the AIFMD to investors are made below:
· information on the investment strategy and sector investment focus and principal stock exposures is included in the
Strategic Report;
· none of the Company’s assets are subject to special arrangements arising from their illiquid nature;
· the Strategic Report, note 18 to the financial statements and the PIDD, together set out the risk profile and risk
management systems in place. There have been no changes to the risk management systems in place in the period
under review and no breaches of any of the risk limits set, with no breach expected;
· there are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity
management systems and procedures employed by aFML; and
· all authorised Alternative Investment Fund Managers are required to comply with the AIFMD Remuneration Code. In
accordance with the Remuneration Code, the AIFM’s remuneration policy is available from the Company Secretary,
abrdn Holdings Limited, on request and the remuneration disclosures in respect of the AIFM’s reporting period for the
year ended 31 December 2023 are available on the Company’s website.
Leverage
The table below sets out the current maximum permitted limit and actual level of leverage for the Company:
Gross Method
Commitment Method
Maximum level of leverage
2.50:1
2.00:1
Actual level at 31 March 2024
1.33:1
1.35:1
There have been no breaches of the maximum level during the period and no changes to the maximum level of
leverage employed by the Company. There have been no changes to the circumstances in which the Company may
be required to post assets as collateral and no guarantees granted under the leveraging arrangement. Changes to the
information contained either within this Annual Report or the PIDD in relation to any special arrangements in place, the
maximum level of leverage which aFML may employ on behalf of the Company, the right of use of collateral or any
guarantee granted under any leveraging arrangement, or any change to the position in relation to any discharge of
liability by the Depositary will be notified via a regulatory news service without undue delay in accordance with
the AIFMD.
The information on this page has been approved for the purposes of Section 21 of the Financial Services and Markets Act
2000 (as amended by the Financial Services Act 2012) by abrdn Fund Managers Limited which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom.
AIFMD Disclosures (Unaudited)
120 Shires Income PLC
General
The Annual General Meeting will be held at 18 Bishops
Square, London E1 6EG on Friday 5 July 2024 at 12 noon.
The Company will also be hosting an online shareholder
presentation, which will be held at 10.00am on Tuesday 25
June 2024. Full details on how to register for the online
event can be found at: https://bit.ly/Shires-Income
Shires Income PLC 121
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Corporate
Information
Financial Statements
NOTICE IS HEREBY GIVEN that the ninety sixth Annual General Meeting of Shires Income PLC (the “Company”) will be
held at 18 Bishops Square, London E1 6EG on Friday 5 July 2024 at 12 noon to transact the following business:
To consider and, if thought fit, pass the following as Ordinary Resolutions:
1. To receive and adopt the Directors’ Report and audited financial statements of the Company for the year ended
31 March 2024 together with the Auditor’s Report thereon.
2. To receive and adopt the Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy) for the
year ended 31 March 2024.
3. To approve the Directors’ Remuneration Policy.
4. To approve a final dividend of 4.80p per Ordinary share in respect of the year ended 31 March 2024.
5. To appoint Mr Simon White as a Director of the Company.
6. To re-appoint Ms Helen Sinclair as a Director of the Company.
7. To re-appoint Ms Jane Pearce as a Director of the Company.
8. To re-appoint Mr Robin Archibald as a Director of the Company.
9. To re-appoint Ernst & Young LLP as Auditor of the Company.
10. To authorise the Directors to determine the remuneration of the Auditor for the year to 31 March 2025.
11. That, in substitution for any pre-existing power to allot or grant rights to subscribe for or to convert any security into
shares in the Company, but without prejudice to the exercise of any such authority prior to the date of this resolution,
the Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the
Companies Act 2006 to exercise all the powers of the Company to allot shares in the Company (“relevant
securities”) up to an aggregate nominal amount of £2,068,477 or, if less, the number representing 10% of the issued
Ordinary share capital of the Company as at the date of the passing of this resolution provided that such
authorisation expires on 30 September 2025 or, if earlier, at the conclusion of the next Annual General Meeting of the
Company to be held after the passing of this resolution, unless previously revoked, varied or extended by the
Company in general meeting, save that the Company may, at any time prior to the expiry of such authority, make
an offer or enter into an agreement which would or might require relevant securities to be allotted after the expiry of
such authority, and the Directors may allot relevant securities in pursuance of such an offer or agreement as if such
authority had not expired.
12. To increase the limit on the Directors' aggregate ordinary remuneration, in accordance with Article 80 of the
Company's Articles of Association, to £200,000 per annum.
13. That the proposed investment policy set out in the appendix to this notice on page 127 of the Annual Report for the
year ended 31 March 2024, a copy of which has been produced to the meeting and signed by the Chairman for the
purposes of identification, be and is hereby adopted as the investment policy of the Company to the exclusion of the
existing investment policy of the Company.
Notice of Annual General Meeting
122 Shires Income PLC
To consider and, if thought fit, pass the following as Special Resolutions:
14. That, subject to the passing of Resolution 11 in the notice convening the meeting at which this resolution is to be
proposed (the “Notice of Meeting”) and in substitution for all existing powers, the Directors be and are hereby
generally empowered pursuant to Section 570 of the Companies Act 2006 (the “Act”) to allot equity securities (as
defined in Section 560 (1) of the Act) for cash pursuant to the authority under Section 551 of the Act conferred by
Resolution 11 in the Notice of Meeting as if Section 561 of the Act did not apply to any such allotment, provided that
this power:
i. expires on 30 September 2025 or, if earlier, at the conclusion of the next Annual General Meeting of the
Company to be held after the passing of this resolution, but the Company may make an offer or agreement
which would or might require equity securities to be allotted after expiry of this power and the Directors may
allot equity securities in pursuance of that offer or agreement as if that power had not expired; and
ii. shall be limited to the allotment of equity securities for cash up to an aggregate nominal amount of £2,068,477
or, if less, the number representing 10% of the issued Ordinary share capital of the Company as at the date of
the passing of this resolution.
This power applies in relation to the sale of shares which is an allotment of equity securities that immediately before
the allotment are held by the Company as treasury shares as if in the opening paragraph of this resolution the words
“subject to the passing of Resolution 11 in the notice convening the meeting at which this resolution is to be proposed
(the “Notice of Meeting”) and” and “pursuant to the authority under Section 551 of the Act conferred by Resolution 11
in the Notice of Meeting” were omitted.
15. That, in substitution for any existing authority but without prejudice to the exercise of any such authority prior to the
date hereof, the Company be generally and unconditionally authorised, in accordance with Section 701 of the
Companies Act 2006 (the “Act”), to make market purchases (within the meaning of Section 693(4) of the Act) of fully
paid Ordinary shares of 50p each in the capital of the Company (“shares”), and to cancel or hold in treasury such
shares, provided that:
i. the maximum aggregate nominal value of the Ordinary shares hereby authorised to be purchased shall be
limited to £3,100,647 or, if less, the number representing 14.99% of the issued Ordinary share capital of the
Company as at the date of the passing of this resolution;
ii. the minimum price which may be paid for a share shall be 50p (exclusive of expenses);
iii. the maximum price (exclusive of expenses) which may be paid for a share shall be an amount being not more
than the higher of:
a) 105% of the average of the middle market quotations (as derived from the Daily Official List of the London
Stock Exchange) for the shares for the five business days immediately preceding the date of purchase; or
b) the higher of the price of the last independent trade and the highest current independent bid relating to a
share on the trading venue where the purchase is carried out; and
iv. unless previously varied, revoked or renewed, the authority hereby conferred shall expire on 30 September 2025
or, if earlier, at the conclusion of the next Annual General Meeting of the Company to be held after the passing
of this resolution, save that the Company may, at any time prior to such expiry, enter into a contract or contracts
to purchase shares under such authority which would or might be completed or executed wholly or partly after
the expiration of such authority and may make a purchase of shares pursuant to any such contract or contracts
as if the authority conferred hereby had not expired.
Continued
Notice of Annual General Meeting
Shires Income PLC 123
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
16. That subject to approval by the High Court of Justice, the amount standing to the credit of the share premium
account of the Company, at the date an order is made confirming such cancellation by the Court, is cancelled.
17. That a general meeting of the Company other than an Annual General Meeting may be called on not less than 14
clear days’ notice provided that this authority shall expire at the conclusion of the next Annual General Meeting of
the Company to be held after the passing of this resolution.
By order of the Board Registered Office:
abrdn Holdings Limited 280 Bishopsgate
Company Secretary London EC2M 4AG
1 George Street
Edinburgh EH2 2LL
22 May 2024
124 Shires Income PLC
Notes
i. A member is entitled to appoint a proxy or proxies to exercise all or any of their rights to attend, speak and vote on
their behalf. A proxy need not be a member of the Company. A member may appoint more than one proxy
provided each proxy is appointed to exercise rights attached to different shares. A member may not appoint
more than one proxy to exercise rights attached to any one share. If a member wishes to appoint more than one
proxy, they should contact the Company’s Registrars, Equiniti Limited, on +44 (0)371 384 2508 (charges for calling
this number are determined by the caller’s service provider. Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday
excluding bank holidays in England and Wales). If calling from outside the UK, please ensure the country code
is used.
ii. A form of proxy for use by members is enclosed with the Annual Report. Completion and return of the form of
proxy will not prevent any member from attending the meeting and voting in person. To be valid, the form of proxy
should be lodged, together with any power of attorney or other authority (if any) under which it is signed or a
notarially certified copy of such power or authority, at the address stated thereon, so as to be received not less
than 48 hours (excluding non-working days) before the time of the meeting.
iii. In accordance with Regulation 41 of the Uncertificated Securities Regulations 2001, to have the right to attend and
vote at the meeting a member must first have his or her name entered in the Company’s register of members at
6.30 p.m. on 3 July 2024 (or, in the event that the meeting is adjourned, at 6.30 p.m. on the day which is two
business days before the time of the adjourned meeting). Changes to entries on that register after that time shall
be disregarded in determining the rights of any member to attend and vote at the meeting.
iv. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service
may do so by using the procedures described in the CREST Manual and by logging on to the website:
euroclear.com. CREST personal members or other CREST sponsored members, and those CREST members who
have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who
will be able to take the appropriate action on their behalf.
v. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST
message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland
Limited’s specifications, and must contain the information required for such instruction, as described in the CREST
Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the
instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by
the Company’s Registrar (ID RA19) not less than 48 hours (excluding non-working days) before the time of the
meeting or any adjournment. For this purpose, the time of receipt will be taken to be the time (as determined by
the timestamp applied to the message by the CREST Application Host) from which the Company’s Registrar is
able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change
of instructions to proxies appointed through CREST should be communicated to the appointee through
other means.
vi. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that
Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message.
Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is
the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed a voting service provider(s), to procure that his CREST sponsor
or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by
means of the CREST system by any particular time. In this connection, CREST members and, where applicable,
their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
Continued
Notice of Annual General Meeting
Shires Income PLC 125
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
vii. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a)
of the Uncertificated Securities Regulations 2001.
viii. If you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform, a
process which has been agreed by the Company and approved by the Registrar. For further information
regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 12 noon on 3 July 2024 in
order to be considered valid. Before you can appoint a proxy via this process you will need to have agreed to
Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be bound by
them and they will govern the electronic appointment of your proxy.
ix. The right to appoint a proxy does not apply to persons whose shares are held on their behalf by another person
and who have been nominated to receive communications from the Company in accordance with Section 146 of
the Companies Act 2006 (“Nominated Persons”). Nominated Persons may have a right under an agreement with
the member who holds the shares on their behalf to be appointed (or to have someone else appointed) as a
proxy. Alternatively, if nominated persons do not have such a right, or do not wish to exercise it, they may have a
right under such an agreement to give instructions to the person holding the shares as to the exercise of
voting rights.
The statement of the rights of members in relation to the appointment of proxies in notes (i) and (ii) above does
not apply to Nominated Persons. The rights described in these notes can only be exercised by members of
the Company.
x. No Director has a service contract with the Company but copies of Directors’ letters of appointment will be
available for inspection at the registered office of the Company during normal business hours on any weekday
(Saturdays, Sundays and public holidays excepted) from the date of this notice and for at least 15 minutes prior to
the meeting and during the meeting.
xi. As at close of business on 22 May 2024 (being the latest practicable date prior to publication of this document),
the Company’s issued share capital comprised 41,369,542 Ordinary shares of 50p each and 50,000 Cumulative
Preference shares of £1 each. Accordingly, the total number of voting rights in the Company as at 22 May 2024
is 41,419,542.
xii. Any person holding 3% of the total voting rights in the Company who appoints a person other than the Chairman
as his proxy will need to ensure that both he and such third party complies with their respective disclosure
obligations under the UK Disclosure Guidance and Transparency Rules.
xiii. Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise on
its behalf all of its powers as a shareholder provided that they do not do so in relation to the same shares.
xiv. The members of the Company may require the Company to publish, on its website, a statement setting out any
matter relating to the audit of the Company’s accounts, including the Auditor’s Report and the conduct of the
audit, which they intend to raise at the next meeting of the Company. The Company will be required to do so once
it has received such requests from either (i) members representing at least 5% of the total voting rights of the
Company or (ii) at least 100 members who have a relevant right to vote and hold shares in the Company on
which there has been paid up an average sum per member of at least £100. Such requests must be made in
writing and must state your full name and address, and be sent to: the Company Secretary, Shires Income PLC, 1
George Street, Edinburgh EH2 2LL.
xv. Information regarding the meeting, including information required by Section 311A of the Companies Act 2006, is
available from the Company’s website: www.shiresincome.co.uk.
126 Shires Income PLC
xvi. Under Section 319A of the Companies Act 2006, the Company must answer any question relating to the business
being dealt with at the meeting put by a member attending the meeting unless:
(a) answering the question would interfere unduly with the preparation for the meeting or involve the disclosure
of confidential information;
(b) the answer has already been given on a website in the form of an answer to a question; or
(c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
xvii. Shareholders are advised that, unless otherwise stated, any telephone number, website or e-mail address which
may be set out in this notice of Annual General Meeting or in any related documents (including the proxy form) is
not to be used for the purposes of serving information or documents on, or otherwise communicating with, the
Company for any purposes other than those expressly stated.
Notice of Annual General Meeting
Continued
Shires Income PLC 127
Strategic Report
Governance
Overview
General Portfolio
Corporate
Information
Financial Statements
Proposed Changes to Investment Policy to be put to Shareholders at the Annual General
Meeting on 5 July 2024
Investment Policy
The Company’s investment policy is to invest principally in the ordinary shares of UK quoted companies, and in
preference shares, convertibles and other fixed income securities with above average yields. The Company generates
income primarily from ordinary shares, preference shares, convertibles and other fixed income securities. It may also use
derivatives to enhance income generation generates income by writing call and put options on shares owned, or shares
the Company would like to own. By doing so, the Company generates premium income.
Gearing
The Directors are responsible for determining the gearing strategy of the Company. Gearing is used with the intention of
enhancing long-term returns. It is subject to a maximum equity gearing level of 35% of net assets at the time of
drawdown. Any borrowing except in relation to short-term liquidity requirements is used for investment purposes.
Diversification of Risk and Investment Restrictions
In order to ensure adequate diversification, limits are set within the investment policy which the AIFM and Investment
Manager must operate. All of these limits are measured at the point of acquisition of investments, unless otherwise
stated, as follows:
General Investment Limits
· a maximum of 10% 20% of total assets may be invested in the equity securities of overseas companies;
· a maximum of 7.5% of total assets may be invested in the securities of one company (historically excluding abrdn
Smaller Companies Income Trust plc);
· any investment must not represent more than 5% of a quoted investee company’s ordinary shares (historically
excluding abrdn Smaller Companies Income Trust plc); and
· a maximum of 10% of total assets may be invested directly in AIM holdings.
Limits in Relation to Preference Shares
· a maximum of 7.5% of total assets may be invested in the preference shares of any one company; and
· the Company may not hold more than 10% of any investee company’s preference shares.
Limits in Relation to Traded Option Contracts
There are principal guidelines put in place to manage the risks associated with these contracts, including:
· call options written are to be covered by stock;
· put options written are to be covered by net current assets/borrowing facilities;
· call options are not to be written on more than 10% of the equity portfolio; and
· put options are not to be written on more than 10% of the equity portfolio.
Appendix to Notice of Annual General Meeting
128 Shires Income PLC
Shires Income PLC 129
Directors
Robert Talbut (Chairman)
Robin Archibald
Jane Pearce
Helen Sinclair
Simon White
Registered Office
280 Bishopsgate
London EC2M 4AG
Company Secretary
abrdn Holdings Limited
1 George Street
Edinburgh EH2 2LL
Email: CEF.CoSec@abrdn.com
Alternative Investment Fund Manager
abrdn Fund Managers Limited
280 Bishopsgate
London EC2M 4AG
Investment Manager
abrdn Investments Limited
1 George Street
Edinburgh EH2 2LL
Company Registration Number
00386561 (England & Wales)
Legal Entity Identifier (“LEI”)
549300HVCIHNQNZAYA89
Website
shiresincome.co.uk
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Shareholder help can be found at shareview.co.uk.
Alternatively, you can contact the Shareholder Helpline:
+44 (0)371 384 2508*
(*Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday
excluding public holidays in England and Wales. Charges
for calling telephone numbers starting with ‘03’ are
determined by the caller’s service provider.)
If calling from outside the UK, please ensure the country
code is used.
Depositary
BNP Paribas Trust Corporation UK Limited
10 Harewood Avenue
London NW1 6AA
Stockbroker
JPMorgan Cazenove
25 Bank Street
London E14 5JP
Auditor
Ernst & Young LLP
Atria One
144 Morrison Street
Edinburgh EH3 8EX
Solicitors
Dentons UK and Middle East LLP
One Fleet Place
London EC4M 7WS
Contact Addresses
For more information visit shiresincome.co.uk
abrdn.com