The £387m Dunedin Income and Growth investment trust, managed in Edinburgh by Aberdeen Asset Management, trailed its benchmark last year as the yield-seeking fund missed out on the boom in resources stocks.
Net asset value fell by 11.2% and total share price return by 10.9%, while the FTSE All-Share index fell by 3.6%.
But the trust is able to lift its dividend by 11.1% to 10p, as revenue return per share increased by 5.4%.
Chairman John Scott said it had been a difficult year for higher-yielding shares, and 2007 was the flipside of the outperformance recorded the previous year. The trust was still well ahead of the benchmark over five and 10 years.
"Despite the shortfall in performance, the underlying holdings have generally been performing well at an operational level, and this has been reflected in robust dividend growth."
He said the UK was more constrained than the US in its ability to reduce interest rates, given the current inflationary pressures, which pointed to a more difficult economic environment.
"Against this backdrop, the UK stock market has already witnessed sharp divergences in performance amongst the various constituent companies that make up the market. Many of these companies are now trading on lower valuations than has been evident for a number of years as a matter of prudence, however, gearing (borrowing to buy) has been reduced in the trust."
The trust reduced its drawn-down borrowings from £22m to £13m during the second half of the year.
l Baillie Gifford Japan has blamed a "savage de-rating" of several of its smaller companies and "foreign investors appearing to sell quality Japanese companies indiscriminately" for its first-half decline in net asset value of 14.4%, against 7% for the benchmark in sterling terms.
The discount on the £116m trust more than doubled to 11.5% as the shares slid by almost 20%.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article