Davina Walter

Over the six months ended 31 March 2021, Aberdeen Diversified Income and Growth Trust’s net asset value per share rose by 2.8%, on a total return basis, whilst share price total return increased by 6.8%. This meant that over the 12 month period, ended 31 March 2021, the company’s NAV total return was 15.2%, while the company’s share price total return was 11.6%.

These returns compare favourably with the company’s revised performance target of 6% per annum, although these should be measured against performance over a rolling five year period, not over one year.

A comprehensive review of the company’s investment strategy and the ability to provide income and growth, as the Trust’s name suggests, was undertaken in 2020 and was set out in the 30 September 2020 Annual Report. However, the six month period to 31 March 2021, which this report covers, includes the majority of the agreed actions.

The key building block to deliver the returns expected by its shareholders was the clarification of the investment objective, approved at the February 2021 AGM, to: “The company seeks to provide income and capital appreciation over the long term through investment in a globally diversified multi-asset portfolio.”

Alongside this objective, the board has agreed that in future it will use a Total Return (defined as dividends plus change in net asset value) of 6% per annum over a rolling five year period against which to measure the returns from the portfolio.

Although a challenging target, the Investment Manager believes that this total return is achievable based on its recent strategic asset allocation analysis and the changes to the investment portfolio, which have now largely been implemented.

The trust’s investment manager completed a review of the company’s portfolio in early 2021 to provide a more solid foundation for generating income and delivering capital appreciation over the long term.

One of the more material changes in the portfolio was the implementation of an increased private markets exposure. The ambition is to bring the overall private markets exposure to 45%-55% of the portfolio. This increase should enable the company to gain additional income by harvesting returns from holding assets which are less frequently traded and where value is created over time. The majority of this re-alignment took place during the six months ended 31 March 2021.

During the reporting period, the portfolio was also substantially deleveraged with 73% of the outstanding Bonds 2031 being repurchased in November 2020. As a result of alleviating the cost of servicing this debt, the company will benefit both from increased distributable cash, as the portfolio evolves to the new asset allocation, while volatility is reduced against the listed assets held. As markets continue to be erratic and volatile, the Company has a core portfolio that has been simplified to be more defensive in the near term and to provide growth over the longer term. This helped deliver a positive total return of 2.8% over the past six months, whilst undergoing this shift in strategic direction.

Over the period, the portfolio has been streamlined to create a better balance of income and growth across four areas of activity or risk premia: Listed Equities, Listed Fixed Income and Credit, Listed Alternatives and Private Markets. Within these four asset classes, investments are selected to provide income and/or growth within the portfolio construction of each area.

Aberdeen Diversified Income and Growth Trust looks to offer a dependable and regular dividend to its shareholders. The company’s revenue return for the six months ended 31 March 2021 was 2.79 pence per share (2020 - 2.46 pence). For the year to 30 September 2021, a first interim dividend of 1.38 pence (2020 - 1.36 pence) per share was paid to shareholders on 31 March 2021.

The board declared on 10 June 2021 a second interim dividend per share of 1.38 pence (2020 - 1.36 pence) to be paid on 15 July 2021 to shareholders on the register on 18 June 2021 with an ex-dividend date of 17 June 2021. On an annualised basis, a quarterly dividend of 1.38 pence per share is equivalent to a dividend yield of 5.8% based on the period end share price of 95.0p.

Davina Walter, chairman of Aberdeen Diversified Income and Growth Trust, said: “With still so much uncertainty surrounding the short term outlook, the Board believes the Company’s revised strategy, to provide a regular and dependable dividend as well as potential capital growth from a genuinely diversified portfolio consisting of a wide range of assets, each with clear, fundamental performance drivers, will deliver an attractive return to our shareholders over the medium term.

“For those investors seeking income, Aberdeen Diversified Income and Growth Trust’s revenue reserves of almost two years of the present dividend should provide a level of reassurance regarding regular dividend payments.”