abrdn Diversified Income and Growth plc

LEI - 2138003QINEGCHYGW702

Half Yearly Report 31 March 2025

abrdndiversified.co.uk

Investment Objective

The Company's investment objective is to conduct an orderly realisation of its assets in a manner that seeks to optimise the value of the Company's investments whilst progressively returning cash to shareholders in a timely manner.

Financial Highlights

Financial Highlights

Chairman's Statement

Performance

Over the six months ended 31 March 2025, the Company's net asset value ("NAV") per share total return (including dividends) was 4.4%.

Dividends and distributions

During the six months ended 31 March 2025, shareholders received 1.95 pence per share on 24 October 2024 (with an ex dividend date of 26 September 2024 and a record date of 27 September 2024) while the Company's share price rose to 48.10p (30 September 2024 - 44.50p).

It is important for shareholders to note that the Company's capacity for revenue generation substantially decreased following the sale of the public markets assets and will reduce further as the private markets' assets are realised and capital is returned to shareholders. It is expected that, as a minimum, the Company will declare a dividend each September, normally payable in October, to maintain investment trust status.

The Board and its advisers will continue to explore options for returning cash to shareholders in a timely and tax-efficient manner, in line with the Managed Wind-Down strategy approved by shareholders in February 2024, as investments are realised and the value of the Company's undrawn commitments to existing investments reduces.

Market update

Over the past six months, the global economic landscape has been marked by significant geopolitical and economic shifts. This has been dominated by policy change in the United States where President Trump is seeking to challenge long-established trading agreements and introduce higher tariffs for some key trading partners as was proposed in March 2025 before a full scale tariff announcement on "Liberation Day" at the start of April.

These moves have introduced significant uncertainty into the global economy and raised the prospect of slowing economic growth and increased trade friction, most notably between China and the U.S. The U.S. Federal Reserve held interest rates steady at 4.50% for a third consecutive meeting in May 2025 in line with expectations as officials adopted a wait-and-see approach amid concerns that President Trump's tariffs could drive up inflation and slow economic growth. Policymakers noted that uncertainty about the economic outlook had increased further and that the risks of higher unemployment and higher inflation had risen.

China announced an aggressive fiscal expansion in 2025, including record debt issuance and strategic investments to maintain a 5% GDP growth target. Inflationary pressures persisted globally, with headline inflation rising in many countries, posing challenges for central banks trying to balance growth and inflation.

In the UK, the new Labour government focused on resetting relations with the EU, aiming to reduce trade barriers and enhance security cooperation. The Spring Statement in March 2025 announced fiscal measures, including increased public spending and tax reforms, seeking to support economic growth. In May the outline of a new trade agreement with the US and consequential reduced tariffs was announced following quickly on from an historic free trade agreement between the UK and India. Meanwhile, the Bank of England reduced UK interest rates by a quarter point to 4.25% and the European Central Bank continued its gradual easing of monetary policy, reducing interest rates to support economic recovery and manage inflation.

The private markets space is navigating a complex landscape due to the recent U.S. tariff announcements, which have introduced significant uncertainty and affected valuations and exit strategies. The already-fragile European economy is facing a significant negative demand shock from US tariffs, specifically Germany is heavily exposed. European and German fiscal policy is set to ease significantly. EU defence spending will increase up to €800bn (5% GDP), and Germany has announced a plan to spend €500bn on infrastructure (12% of GDP). Some retaliation is possible, but the overall impact is likely to be disinflationary.

Private equity firms are extending due diligence periods and incorporating more flexible deal structures to mitigate risks from the US tariffs. Despite these challenges, there is cautious optimism within the industry with expectations that private equity activity in 2025 may sustain its recent activity level and exceed that of 2024. Private debt continues to expand globally, and infrastructure investments, particularly in AI-related data centres and power, are accelerating. Real estate valuations appear to be nearing the bottom, presenting opportunities for recovery. Overall, private markets are poised for growth, with higher investment activity and greater demand for long-term capital, underscoring the sector's resilience amid geopolitical and economic shifts.

Portfolio update

As at 31 March 2025, the Company reported a NAV of £206.1 million, comprising the investment portfolio of £171.4 million and net current assets of £34.8 million. Unfunded commitments stood at £21.4m.

During the six months ended 31 March 2025, the portfolio benefited from three full redemptions and two partial redemptions. Mount Row II, Markel CATCo Reinsurance Opportunities Fund, and HarbourVest International Private Equity V were fully redeemed and liquidated for a total of £10.3 million. Partial redemptions included £4.9 million from the Aberdeen Global Private Markets Fund and £5.2m (58% redemption) from the PIMCO Private Income Fund.

The portfolio performance over the period was characterised by notable gains in several asset classes, with Private Equity leading the way.

Private Equity - Private Equity contributed significantly to performance, adding +1.8%. Key positive drivers included:

·  Truenoord: +0.9%

·  Patria Secondary Opportunities IV: +0.6%

·  Bonaccord: +0.3%

Diversifying Opportunities - Diversifying Opportunities added +0.9%, supported by positive movements in:

·  Aberdeen Global Private Markets fund: +0.5%

·  Private Litigation Finance investment in Burford: +0.3%

·  Healthcare Royalties: +0.1%

Defensive Assets - Defensive Assets added +0.2%, reflecting returns from cash holdings invested in money market short-term instruments.

Private Credit - Private Credit added +0.4% within the Higher Yielding Fixed Income allocation, driven by:

·  Return of capital from Mount Row II and PIMCO Private Income

·  Hark III remained flat over the period.

Real Assets - Real Assets detracted -0.1%, as gains in:

·  Private Infrastructure: +1.3%

were offset by a fall in:

·  Private Real Estate: -1.4%

Foreign Exchange

Foreign Exchange was a notable contributor, adding +2.0% to overall returns, reflecting favourable currency movements over the period.

Managed Wind-Down update

Further to the Company's announcement on 16 April 2025, the Board has appointed Campbell Lutyens as an independent broker to market the Company's remaining portfolio of private market assets pursuant to a secondary sales process.

Following careful consideration of the various strategic options available to the Company in respect of its Managed Wind-Down, the Board concluded that a secondary sales process offers the best opportunity to optimise the value of the Company's investments whilst progressively returning cash to shareholders in a timely manner. In reaching this conclusion, the Board was particularly mindful of the expected timeline for the natural maturity of the Company's private markets portfolio (which is expected to occur between 2025 and 2033).

In addition to generating opportunities for timely liquidity from the Company's portfolio, the appointment of Campbell Lutyens and commencement of the secondary sales process will enable the Company to market-test demand for its assets. Given the diversified nature of the Company's remaining portfolio, it is unlikely that any one buyer will be found for the entire portfolio and therefore the process is expected to involve sales to multiple interested parties. The Company is liaising with the underlying general partners of its investments with a view to commencing the marketing in the coming weeks.

Once indicative pricing has been obtained (which, for the avoidance of doubt, the Board and its advisers still expect to be at a material discount to the underlying net asset values), the ultimate decision whether to proceed with any given secondary sale will remain with the Board, which (together with its advisers) will assess the pricing against the quantum and likelihood of near-term returns expected from the relevant assets. Returns to shareholders will also be optimised through the Company continuing to exercise near-term redemption mechanics within the underlying fund documentation where available.

As announced on 26 February 2025 (the day of the AGM), the Company was previously in exclusive and confidential discussions with a third party regarding a potential transaction in relation to all or substantially all of the remaining portfolio. The consideration was principally payable in listed shares plus a cash element. The Board initially considered the third party offer to be credible and worthwhile for the Company to explore given the relative certainty and deliverability that a sale of the entire portfolio would provide for shareholders (avoiding the risks and costs of a protracted managed wind-down process) and the indicative pricing range in the initial offer letter. However, after careful consideration of the final terms of the offer, and the alternative options available to the Company, the Board resolved not to proceed with the third party offer as it did not consider the terms to be sufficiently attractive to merit a Board recommendation. In particular, both elements of the consideration would have been at a discount which the Board believed would be lower than the price that could be achieved through a secondary market sale, whilst the share element would also leave shareholders exposed to current market volatility and potential liquidity issues.

Since shareholders approved the Managed Wind-Down in February 2024, the Board has continued to assess all options on the basis of, among other things, the quantum expected to be delivered to shareholders (on a net present value basis), timing, relative certainty of execution and the nature of the consideration. Whilst it was not able to recommend the third party offer, the Board believes that proceeding with the open-market sales process should provide shareholders with more certainty than a managed wind-down process over a longer time period.

Whilst secondary sales are still being transacted at discounts to carrying value, the Board also notes recent improvements in secondary market conditions (notwithstanding the current macroeconomic volatility), with secondary fundraising momentum supporting demand. By way of background, Campbell Lutyens has strong market knowledge and experience (including in respect of private equity, private credit and infrastructure) and has shown enthusiasm to support the Company during its Managed Wind-Down. At 31 March 2025, Campbell Lutyens had over 60 professionals dedicated to the secondaries market and had advised on more than $135 billion in transaction volume across over 350 secondary portfolio sales and advisory mandates.

While the Board and Campbell Lutyens intend to obtain indicative pricing from potential purchasers over the coming months, there can be no certainty as to the precise quantum or timing for the completion of any realisations or returns of capital arising out of the secondary sales process at this time. In particular, the process is not guaranteed to result in a complete solution in respect of the Company's entire portfolio (with there being a risk that the Company may not be able to find buyers for all of its investments at sufficiently attractive prices).

The Company remains committed to returning the net proceeds of any realisations to shareholders progressively in an efficient and fair manner (which accounts for, among other things, the UK tax consequences for shareholders and the composition of the Company's shareholder register). In particular, following Court approval confirming the cancellation of the amount standing to the credit of its capital redemption reserve on 28 March 2025, the Company is well-placed to continue returning cash to shareholders progressively, by way of its B share scheme, during the secondary sales process (subject to consideration of the Company's liabilities, any remaining undrawn fund commitments and general working capital requirements) and will look to do so in a cost-effective manner.

Davina Walter
Chairman

5 June 2025

Interim Management Report and Directors' Responsibility Statement

The Chairman's Statement provides details of the important events which have occurred during the period and their impact on the financial statements.

Principal Risks and Uncertainties

The principal risks faced by the Company can be divided into various areas as follows:

·  Performance risk;

·  Regulatory risk;

·  Operational risk;

·  Market risk; and

·  Financial risks.

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 September 2024 (the "Annual Report"); a detailed explanation can be found in the Strategic Report on pages 9 and 10 of the Annual Report which is available on the Company's website: abrdndiversified.co.uk

The Board is monitoring the heightened geopolitical risks in the form of the Russian invasion of Ukraine, conflict in the Middle East, recent and rising tension between China and Taiwan as well as more recent hostilities between Pakistan and India over Kashmir.

The Board is also conscious of the elevated threat posed by climate change and continues to monitor, through its Investment Manager, the potential risk that its portfolio investments may fail to adapt to the requirements imposed by climate change.

In the view of the Board, there have not been any other changes to the fundamental nature of the principal risks and uncertainties facing the Company since the previous Annual Report, which are considered to be equally applicable to the remaining six months of the financial year to 30 September 2025.

Going Concern

The Financial Statements of the Company have been prepared on a going concern basis. The Directors have assessed the financial position of the Company as outlined above and in the Chairman's Statement and on the basis more fully set out in the accounting policies in Note 1 to the Financial Statements.

The forecast projections and actual performance have been reviewed on a regular basis throughout the period and the Directors believe that the going concern basis remains appropriate as the Company is financially sound with adequate resources to continue in operational existence for the foreseeable future (being a period of twelve months from the date that these financial statements were approved). The Company is able to meet all of its liabilities from its assets, including its ongoing operating expenses.

Related Party Disclosures and Transactions with the Alternative Investment Fund Manager and Investment Manager

abrdn Fund Managers Limited ("AFML") has been appointed as the Company's alternative investment fund manager.

AFML has (with the Company's consent) delegated certain portfolio and risk management services, and other ancillary services, to abrdn Investments Limited and abrdn Holdings Limited, which are regarded as related parties under the UK Listing Rules issued by the Financial Conduct Authority ("FCA"). Details of the fees payable to AFML are set out in note 3 to the condensed financial statements.

Directors' Responsibility Statement

The Disclosure Guidance and Transparency Rules of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors confirm to the best of their knowledge that:

·  the condensed set of financial statements contained within the Half Yearly Financial Report has been prepared in accordance with applicable UK Accounting Standard FRS 104 'Interim Financial Reporting' and give a true and fair view of the assets, liabilities, financial position and return of the Company for the period ended 31 March 2025; and

·  the Interim Management Report, together with the Chairman's Statement and Investment Manager's Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure Guidance and Transparency Rules.

The Half-Yearly Financial Report was approved by the Board and the above Directors' Responsibility Statement was signed on its behalf by the Chairman.

For and on behalf of the Board
Davina Walter
Chairman

5 June 2025

Ten Largest Investments

As at 31 March 2025

Investment Portfolio - Private Markets

Investment Portfolio - Equities

Investment Portfolio - Net Assets Summary

Condensed Statement of Comprehensive Income (unaudited)

Condensed Statement of Financial Position (unaudited)

Condensed Statement of Changes in Equity (unaudited)

Condensed Statement of Cash Flows (unaudited)

Notes to the Financial Statements

For the year ended 31 March 2025

Alternative Performance Measures

END