Annual Financial Report

abrdn Equity Income Trust plc

30 November 2023

 

abrdn Equity Income Trust plc Annual Financial Report

for the year ended 30 September 2023

Legal Entity Identifier (LEI): 21380015XPT7BZISSQ74

Investment Objective

To provide shareholders with an above average income from their equity investment, while also providing real growth in capital and income

Website

Up to date information can be found on the Company's website: abrdnequityincome.com

Performance Highlights

Net asset value total return per Ordinary shareA ​			Share price total return per Ordinary shareA ​
Year ended 30 September 2023			Year ended 30 September 2023
+1.8% ​			+11.4% ​
Year ended 30 September 2022	-7.6%		Year ended 30 September 2022	-7.8%
Revenue return per Ordinary share			Discount to net asset valueA
Year ended 30 September 2023			As at 30 September 2023
23.43p ​			0.2% ​
Year ended 30 September 2022	25.51p		As at 30 September 2022	8.8%
Dividend per Ordinary share ​			Ongoing charges ratioA ​
Year ended 30 September 2023			Year ended 30 September 2023
22.80p ​			0.94% ​
Year ended 30 September 2022	22.70p		Year ended 30 September 2022	0.91%
A Considered to be an Alternative Performance Measure. ​ ​ ​ ​

Highlights

					30 September 2023	30 September 2022	% change
Capital
Net asset value per Ordinary share  ​ ​ ​					314.6p	331.8p	-5.2%
Ordinary share price ​ ​ ​					314.0p	302.5p	3.8%
Reference Index capital returnC ​ ​ ​					4,127.2	3,763.5	9.7%
Discount of Ordinary share price to net asset valueA ​ ​ ​					0.2%	8.8%
Total assets ​ ​ ​					£170.8m	£182.5m	-6.4%
Shareholders' funds ​ ​ ​					£149.9m	£157.5m	-4.8%
Gearing
Net gearingA					11.3%	15.0%
Earnings and Dividends ​ ​ ​
Revenue return per Ordinary share ​ ​ ​					23.43p	25.51p	-8.2%
Total dividends for the year ​ ​ ​					22.80p	22.70p	0.4%
Dividend yieldA ​ ​ ​					7.3%	7.5%
Expenses
Ongoing charges ratioAB ​ ​ ​					0.94%	0.91%
A Considered to be an Alternative Performance Measure. ​ ​ ​ ​ ​ ​ ​
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.  ​ ​ ​ ​ ​ ​ ​
C FTSE All-Share Index ​ ​ ​ ​ ​ ​ ​

For further information, please contact:

Helen Mattia

Evan Bruce-Gardyne

abrdn Fund Managers Limited

0131 372 2200

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

Chair's Statement

It is a great pleasure to present a full year report to you for the first time as Chair, having assumed the role at the Annual General Meeting in February 2023, following the retirement of Mark White.

While the Company's Net Asset Value ("NAV") made progress in the first quarter of the financial year, calendar 2023 has proved to be more challenging. The combination of political and financial turmoil, 40 year-high inflation and rising interest rates have made for a difficult backdrop for small and mid-cap companies, especially those with a focus on the domestic UK economy. The key highlights for the financial year to 30 September 2023 are:

·      A 23^rd consecutive year of dividend growth.  The dividend for the year is, once again, covered by earnings.

·      A sharp and sustained closing of the discount from around 10% this time last year to around par today. Although the Company bought back shares at the beginning of the year, the Company has been trading at a premium during the year and has issued shares in order to meet the excess demand. 

·      A material increase in the proportion of the Company's shares held by execution-only platforms (such as interactive investor and Hargreaves Lansdown), who typically act on behalf of private shareholders. In the year under review, the  ten largest buyers of the Company's shares were all platforms and those ten large buyers now collectively own over 65% of the Company's shares on behalf of their various customers. This reaffirms the Board's view that there remains demand for income mandates from private investors.

Please see below for the Company's performance against it's Key Performance Indicators.

Earnings

Gross income generated by the Company's investments in the financial year to 30 September 2023 was £12.6 million (2022: £13.5 million). The costs of managing the portfolio, including administration costs, were down 7.3%, largely driven by management fees being down almost 10%. At the same time, interest costs attributable to the revenue account were up from £149,000 to £401,000, reflecting the increase in the cost of debt, as interest rates have risen. After tax, the income of the Company was £11.1 million, down from £12.2 million last year.

This resulted in the Company's earnings per share being 23.43 pence, which was 8.2% lower than last year. Despite this decline, the dividend for the year is covered by the earnings for the second consecutive year.

Our Portfolio Manager is focused on delivering increased earnings in order to extend the 23-year track record of dividend growth, which we intend to be covered by the revenue earnings in the financial year. Please see the Portfolio Manager's Review for more detail on the sources of the performance and income.

Dividends

As a result of the earnings performance the Board is declaring a fourth interim dividend for 2023 of 5.7 pence per share which will be paid on 8 January 2024 to shareholders on the Register on 8 December 2023 with an associated ex-dividend date of 7 December 2023. This takes the total dividend for the year to 22.80 pence per share, and the 23rd consecutive annual dividend increase declared by the Company. At the time of writing, the Company is trading on a yield of 7.6%, among the highest in the AIC UK Equity Income sector. In setting the level of the fourth interim dividend the Board balanced the desire to ensure that the dividend continues to grow and that revenue reserves were replenished.

After payment of the fourth interim dividend, and based on current shares in issue, 0.56 pence per share will be transferred to revenue reserves which will be increased to 15.61 pence per share.

The Board is committed to maintaining and extending its track record of dividend growth.  We therefore expect that, in the absence of any adverse circumstances, in the coming financial year we will extend our track record to 24 consecutive years of dividend growth by paying a dividend of at least 22.90 pence per share. We believe that we are in a position to do this because we are confident that the portfolio should deliver net earnings that will cover this cost except for unforeseen circumstances. We expect that the first three interim dividends will be 5.7 pence per share, payable in March, June and September and the fourth interim will be at least 5.8 pence per share payable in January. Once again, we have tasked the Portfolio Manager with delivering net revenue earnings to be able to cover this level of distribution.

Results

On a more disappointing note, the NAV total return of the Company for the financial year to 30 September 2023 was 1.8% (2022: -7.6%) and the share price total return was 11.4% (2022: -7.8%). The FTSE All-Share Index delivered a total return of 13.8% (2022: -4.0%) over the same period. More detailed information on capital performance can be found in the Portfolio Manager's Review and generally relate to the continued outperformance of large-cap stocks which only comprise 52.6% of our portfolio.  Whilst UK equity markets remain undervalued, there is an opportunity for re-rating that recognises the underlying value of our portfolio.  The Board remains focused on improving performance and growing the dividend.

Premium & Discount

The Company share price started the year trading on a discount of 8.8% and closed the year on a discount of 0.2%. The Board was pleased to note the market's positive reaction to the announcement of the full year results in December 2022. The day before the results were announced the Company's share price was trading on a discount of around 10%; within a week the share price was trading at around par. Crucially, the rerating of the Company's share price has been maintained.

This meant that the Company has moved from buying back shares in the first two months of the financial year , to re-issuing shares from treasury. In October 2022 and November 2022, the Company bought back 100,417 Ordinary shares or 0.21% of the opening issued share capital in the year at a weighted discount of 10.1%.

In August 2023 the Company issued 275,000 shares in the market, from treasury, for the first time since January 2016 at a weighted premium of 1.1%. The Board will only issue shares when it considers that the premium is sustained and sufficient to ensure that, net of commission and reasonable market movements, the issuance will be NAV accretive to existing shareholders. We are very pleased that we are in a position to continue to issue shares and over the year, the net number of shares in issue increased by 174,583 with a value of  just over £547,000. We hope to be able to continue to grow the Company in this way.  Since the year end, the Company has issued a further 135,000 shares from treasury. 

Through its buy back and issuance approach, the Board aims to try to reduce any volatility in the discount and indeed in the premium to ensure that shareholders have, as far as possible, confidence that the share price will broadly reflect the value of the underlying assets.

Loan refinancing

During the financial year, the Company renewed its £30 million revolving credit facility with the Royal Bank of Scotland International Limited for three years, expiring in June 2026 ("the Facility").  £21 million was drawn down at the year-end (2022: £25 million).  Under the terms of the Facility, the Company also has the option to increase the level of the commitment from £30 million to £40 million at any time, subject to the Lender's credit approval. The Board and Manager are very aware of the impact of the increase in the cost of borrowing as a result of rising interest rates. The Board considers the impact of these increased costs versus the financial benefit of gearing the portfolio. The Board continues to believe in the long-term benefits of gearing, one of the tools available to closed-end investment companies.

Management Agreement

The management fee structure that prevailed during the year was introduced in 2019 and during the year the Board undertook a review of the agreement and concluded that it was no longer competitive when compared to other similar investment trusts in the sector. Accordingly, the Board negotiated a revision to the fee structure with the Manager. The new agreement does away with the tiered fee structure of 0.65% on the first £175 million of net assts and replaces it with a flat fee of 0.55% on net assets and took effect on 1 October 2023. Based on the net assets at the year-end of £149.9 million, the change represents a reduction in the fee of 15.4%. The Board considers that this makes the fee structure more competitive when compared to the other similar investment trusts in the sector.

Change of Auditor

The Board, led by the Audit Committee, undertook an audit tender in 2023 with a view to appointing a new auditor for the financial year starting on 1 October 2023. KPMG has been the Company's auditors for six years and the Board concluded that it was appropriate to test the market. The Board had noted that the audit fee for the Company had risen significantly over the last few years. The Board is aware of a general trend of rising audit fees across the industry and discussed this with KPMG in order to gain an understanding as to the likely future fees. The audit tender attracted strong interest and resulted in the proposed appointment of Johnston Carmichael LLP for the financial year ending 30 September 2024.

Manager

During the year, the Board has continued its focus on the revenue account and maintained its direction to the Portfolio Manager that the revenue account should cover a dividend greater than 22.80 pence per share.  Despite the challenging markets, the Board was encouraged that the revenue account surpassed the planned dividend for the year but has encouraged the Portfolio Manager to concentrate on this. The Board believes that the continued appointment of the Manager remains in the best interest of the Company's shareholders as a whole.

The Board

The Board has continued to evolve in the last 12 months. Mark White retired at the AGM in February 2023 and I assumed the role of Chair, with Mark Little succeeding me as Chair of the Audit Committee. Jeremy Tigue has announced that, after nine years on the Board, he does not intend to stand for re-election at the Company's AGM in February 2024 and consequently the Board undertook a recruitment process over the summer, and after a thorough search, we were delighted to invite Nick Timberlake to join the Board. Nick joined the Board on  1 August 2023. He has extensive experience as an investment trust fund manager and is already making a significant contribution.

Following the conclusion of the AGM, Caroline Hitch will replace Jeremy as the Senior Independent Director and Nick Timberlake will replace Caroline as Chair of the Remuneration & Management Engagement Committee.

I would like to thank Jeremy for his invaluable contribution to the Board and the Company over the last nine years.

Online Shareholder Presentation

In order to encourage as much interaction as possible with our shareholders, we will be hosting an Online Shareholder Presentation, which will be held at 11:30 am on Friday, 26 January 2024. At this event there will be a presentation from the Portfolio Manager followed by an opportunity to ask live questions to the Portfolio Manager and me. The online presentation is being held ahead of the AGM to allow shareholders sufficient time to submit their proxy votes after the presentation but prior to the AGM should they so wish. Full details on how to register for the online event can be found on the Company's website at abrdnequityincome.com.

Annual General Meeting ("AGM")

This year's Annual General Meeting ("AGM") will be held at wallacespace Spitalfields, 15-25 Artillery Lane, London, E1 7HA on Tuesday, 20 February 2024 at 11:30 am. The meeting will include a presentation by the Portfolio Manager and will be followed by lunch. This is a good opportunity for shareholders to meet the Board and the Manager and the Board encourages you to attend. The Notice of the Meeting is contained in the Annual Report.

Outlook

I described last year as "challenging" at the start of this report. I suspect this situation will persist well into 2024. Economically, the Office for Budget Responsibility ("OBR") has downgraded forecast growth of the UK economy to 0.7% in the coming year which does not suggest much prospect of robust earnings growth. The fact that UK equities are already undervalued relative to other markets might provide some downside protection.  This filters through to the sector, where investment trusts are trading at discounts not widely seen for over ten years. The announced reduction in employee National Insurance contributions is welcome, but unlikely to be the catalyst to kick start the recovery the economy needs. On top of that, politically we must expect that by the time we report on the 2024 earnings we will either have had or be about to have a General Election. A change of government seems almost inevitable but, whatever its hue, how it will address the fiscal issues is far from clear.

Against that gloomy background, one can see some glimmers of hope. The latest inflation numbers for the UK, announced on 15 November show, as expected, a marked downward trend to 4.6% and there is a possibility that this will continue over the next few months as the impact of the energy prices increases last winter, cease to have a bearing on the calculations. That , in turn, could mean that the next move in interest rates, when it happens (and we are not expecting it to be soon), might be downwards. Both these changes should boost confidence, particularly if they are sustained.  From the perspective of the Company, these could be excellent conditions for our Manager's approach, where the Focus on Change process helps our Portfolio Manager identify those stocks that are, in his view, mispriced by the market. This holds out the prospect of some capital growth to accompany the focus on delivering a growing and covered dividend for the 24th consecutive year.

I would like to close this statement by thanking my fellow Board members, the Manager and all our service providers that support the Company in delivering an attractive yield to our shareholders.

Thank you to our shareholders for your continued commitment.

Sarika Patel
Chair
29 November 2023

Portfolio Manager's Review

Market Review

UK equities staged a recovery over the 12 months to 30 September 2023 as investors responded positively to signs of stabilising politics, peaking inflation and the continued avoidance of economic recession.

The period began with a resolution to the political uncertainty that followed the resignation of Liz Truss in October 2022. The arrival of Rishi Sunak as Prime Minister allowed bond markets to stabilise on the expectation of responsible fiscal policy, thereby restoring investor confidence in the UK's outlook.

With political turmoil fading from view, the market turned its attention towards inflation and its impact on monetary policy and economic growth. In the UK, consumer price inflation peaked at a 40-year high of 11.1% in October 2022, before falling back to 4.6% in October 2023. The Bank of England's decision to hold rates at 5.25% in September, following 14 successive rate hikes since December 2021, raised hopes that monetary policy had tightened sufficiently to curb inflationary pressures. Tightness in the labour market is a particular focus for policymakers in gauging underlying inflationary pressure, with average weekly earnings growing at 8.1% in the year to August. The view Economists predicted that interest rates would remain elevated monetary policy is unlikely to loosen until wage growth decelerates was reflected in the Bank of England's description of the likely profile of future interest rates as "Table Mountain".

During the period, the transmission of higher rates to the global economy became clearer, with various fragilities becoming exposed. In March, Silicon Valley Bank and Credit Suisse both collapsed, prompting intervention from financial regulators to limit the contagion across the global financial system. In May, markets became rattled by the prospect of a US government debt default, further compounding the damage to bond markets, although Congress ultimately approved an eleventh-hour increase of the debt ceiling. In August, investors reacted badly to signs of growing stress in the Chinese housing market after years of excessive borrowing and overbuilding, with some large developers on the edge of default. In the UK, the impact of higher rates on housing activity and house prices was less acute, reflecting the reduction in household sector leverage since the 2008 financial crisis. Third quarter GDP data revealed that economic activity remains subdued, although recession continues to be avoided despite higher interest rates; a scenario that many economists would have dismissed as unlikely at the start of the year.

Although the FTSE All-Share Index returned 13.8% over the period, there were significant variations in performance within the UK market. The FTSE 100 index produced a total return of 14.7%, reflecting investors' preference for larger, more liquid stocks during nervous market conditions. The more domestically-orientated FTSE 250 and Small Cap indices lagged, returning 10.0% and 7.5% respectively, as worries about higher interest rates caused investors to shun less liquid domestic cyclical stocks in favour of more defensive large caps. Over the two years to September 2023, a divergence of over 31% in total return has built up between the FTSE 100 and FTSE 250 indices, underlining the unusual magnitude of this move.

Revenue Account

Dividends distributed by our holdings in the period under review came in at £12.6 million, compared to the £13.5 million received last year, representing a reduction of 7.2%. This was largely caused by a sharp decline in the contribution from special dividends to £186,000 (from £800,000 in 2022). Excluding all special dividends from the calculation, to provide a clearer view of the underlying change in dividends, the reduction was 2.8%. The decline in special dividends reflects the tendency of management teams to favour share buybacks over special dividends, often because they deem their valuation to be unfairly cheap. We note that 29 of our holdings - over half the portfolio - performed share buybacks during the financial year, underlining the intrinsic valuation attractions of the portfolio.

Net revenue was £11.1 million. Management fees were 9.9% lower and total expenditure before interest and tax was 7.7% lower than last year.

We are forecasting that the portfolio is currently delivering a gross dividend yield, before costs, of 7.6% based on the income expected to be generated by the portfolio over the financial year divided by the portfolio value at the year end, representing a significant premium to the dividend yield of the Index of 4.0% as at 30 September 2023.

During the financial year we focused on achieving the Board's priority of delivering sufficient income to cover the dividend. We achieved this for a second year, although the market backdrop of a decelerating global economy, rising interest rates and geopolitical conflict made this a more challenging task than it was the previous financial year. The largest variation in portfolio income during the year was caused by the reduction in commodity prices, affecting some of our Energy and Mining holdings. The UK equity market has, in recent years, seen a concentration of dividends among a relatively small number of sectors due to a succession of macro shocks, specifically Covid-related dividend cuts, followed by Ukraine-related commodity price surge and economic slowdown linked to higher interest rates. Our portfolio was not immune from this increase in dividend concentration.

Having rebuilt dividend coverage since the Covid trough, we have turned our attention to taking portfolio action that will simultaneously enhance the portfolio's income prospects and diversify the portfolio's income generation across a broader range of stocks and sectors. We would expect this process to be assisted by a broadening in dividend payments across the UK market, especially once macro uncertainty eases sufficiently to encourage management teams to distribute surplus cash in the form of dividends.

Taking a step back, we are encouraged by the progress in our revenue account in the 2 years since the height of Covid. While share prices may continue to swing around on changing sentiment in relation to these macro drivers, we remain confident that the focus of our investment approach on delivery of cash flows and dividends remains the right one. For the wider UK equity market as a whole, dividend cover of 2.2x (on a 12 month forward basis) suggests some cushion should macro conditions remain tough. We continue to find many examples of stocks whose cash flow and dividend potential is not effectively priced in by the market. This provides us with the opportunity to buy well-managed businesses with sound dividend prospects at low valuations, helping to support our confidence in the continued progression of our dividend per share in the financial year to 30 September 2024.

Portfolio Performance

The Company's net asset value ("NAV") total return was 1.8% for the period.

This return was lower than that of the Company's Reference Index as the return of the index masked some sharp variations in performance within the UK equity market, reflecting an underlying nervousness that persisted throughout most of the period. 

In summary, our NAV lagged the index for two key reasons.

First, market conditions were not supportive for the Fund's positioning. The outperformance of a narrow range of large-cap stocks, linked to the strong US dollar and ongoing investor de-allocations from domestic UK stocks, was a key feature of the stock market during the period. This dragged on performance given the portfolio's heavy weighting in small- and mid-cap stocks, itself a function of the index-agnostic approach that we use in constructing the portfolio. Our portfolio's exposure to the FTSE 100 Index was 52.6% at the end of the period, whereas the FTSE 100 Index represented 84.4% of the total value of the FTSE All-Share Index.

Second, the portfolio suffered from some company-specific disappointments, mainly linked to the impact of falling commodity prices on some of our Energy holdings and the impact of higher interest rates on activity levels in some of our Financials and Consumer holdings.

Turning to specific stocks, the key drivers of our performance over the period are as follows:

-       Our Energy exposure detracted from performance at a time of falling energy prices due to a rebuilding in gas storage levels and reduced demand due to unseasonably mild winter weather. The weakest performers were Thungela Resources and Diversified Energy which reversed the gains they had made in the previous financial year. Both companies remain highly cash generative even at lower energy prices, providing significant portfolio income. Despite the benefit of our large holding in BP, this sector detracted around 4% of relative performance.

-       Within Financials, performance was hit by our holdings in CMC Markets, OSB Group and Vanquis, all of which struggled in an environment of rising interest rates, resulting in profit warnings. These negatives were only partially offset by contributions from International Personal Finance, Litigation Capital Management and Conduit, all of which delivered better than expected results. Overall, this sector detracted around 5% of relative performance.

-       Performance was varied within Consumer and Industrial sectors. Better than expected results from housebuilder Vistry and construction business Galliford Try and Tyman. The portfolio also benefited from its underweight in Consumer Staples, in particular not owning Unilever and Reckitt Benckiser, although this was offset by weak performance of Imperial Brands on concerns over the imposition of new tobacco restrictions. In aggregate, these sectors were neutral for performance.

-       The gearing position mildly detracted from performance as the interest rate on the gearing exceeded the portfolio return. We continue to believe that the gearing facility is in the best interests of shareholders given the benefit to the revenue account as the dividend yield of the portfolio still exceeds the interest rate being paid on the facility, as well as the potential benefit to the capital account over time.

Activity

Purchases

During a period of rapidly changing expectations over the path for inflation and interest rates, we have applied our investment process to position the portfolio in stocks where we see the greatest potential to deliver income and capital growth. Our experience is that stock-level opportunities can become most abundant during times of volatile macro, as investors focus on economic data, rather than corporate fundamentals. 

Our largest purchase during the period was HSBC where we see rapid improvement in profitability thanks to the benefit of higher base rates, as well as the re-opening of the China/Hong Kong border. The business appears well prepared for a tough economic backdrop, with management running a high level of deposits and taking a cautious approach to lending.  This sets the stock up to deliver attractive dividends, while also providing capital growth potential given the attractive returns being generated.

We added to our holding in National Grid which we see as well positioned to deliver the grid expansion necessary for the transition to electric vehicles. In the UK, National Grid benefits from inflation-linked contracts. The stock has fallen sharply due to its correlation with government bonds, providing us with an opportunity to add to our holding, with clear portfolio income benefits given the high yield.

We bought a new holding in Ithaca Energy, whose huge cash generation is supporting extremely attractive dividends, with around one fifth of the company's market cap being paid back to shareholders in the form of dividends in its first full year of listing. We expect Ithaca's heavy investment in the North Sea to provide it with significant up-front tax breaks, helping to mitigate the impact of the Energy Profits Levy.

Among smaller cap stocks, we bought a new holding in Vanquis where we expect the new CEO to take rapid action to improve returns by managing loan growth and costs. The stock's very low valuation  - around 0.5x book value  - appears to reflect historic execution issues, rather than its forward-looking earnings potential. We also added to our holding in Conduit which appears set to benefit from a hardening reinsurance market, supporting our confidence in management's ability to achieve the returns targets it set out at its IPO in 2020.

Please see the Annual Report for examples of our engagement with investee companies which begins prior to purchase.

Sales

We reduced some of our Resources holdings, attempting to manage the trade-off between portfolio income and risk, after strong performance linked to the surge in energy prices caused by Russia's invasion of Ukraine. We took some profits in BP and Shell, our two largest holdings, managing down their position sizes. We also trimmed our weightings in Rio Tinto and BHP where weakness in the Chinese real estate sector created a difficult backdrop for their main commodity, iron ore.

This was another busy year of M&A for the portfolio. Following bid announcements, we sold our holdings in DWF and Industrials REIT, both of which received offers from private equity at a sizeable premium.  We see this M&A activity as a sign of the intrinsic value in this portfolio.

We also took action to sell some of the lower yielding stocks in the portfolio, including Coca-Cola Hellenic, Mondi and Playtech, seeing more attractive income opportunities elsewhere in the UK market.

Outlook

The narrowness of market returns, both in the UK and globally, was the most striking feature of the period under review. In a large number of the world's stock markets, index performance has been led by a small number of very large cap stocks. Most notable is the US market, where the "Magnificent Seven", the group of headline-grabbing technology companies, including Amazon, Apple, Microsoft and Tesla  are worth more than $11 trillion (greater than the combined market capitalisation of the Japanese, UK and German stock markets). The UK has seen a similar, if less pronounced, shift towards large cap stocks, for two key reasons. First, concerns about the risk of a global recession have driven investors towards the largest, most liquid internationally-focused stocks in each sector, at the expense of small and mid-cap domestically-orientated stocks. Second, UK equity funds have suffered a prolonged period of outflows, as investors sell down UK equities in favour of other asset classes. This has created a circularity in which negative share price momentum has fuelled the perception that the UK is an unattractive market, causing a reduction in liquidity and depressed valuations. In some cases, low valuations have triggered bids for UK companies, resulting in a shrinking number of companies listed on the UK market. According to Peel Hunt, the number of companies (ex-investment trusts) listed on FTSE has fallen from 504 in 2013 to 412 in 2023. For those companies that remain listed, there is often a frustration that their long-term prospects are not reflected in their valuations, driving a sharp pick-up in buyback announcements.

Against this backdrop, we have retained our focus on income, providing shareholders with a high level of dividend yield through a portfolio of attractively valued UK-listed stocks from across the UK market. We have constructed the portfolio across 3 key baskets of stocks. Each of these baskets provides different characteristics that should perform at different points in the cycle and help the portfolio to achieve each aspect of our investment objective.

-       (1) Dividend growth - stocks that are well positioned to grow their cash flows and dividends, supported by corporate fundamentals that make them resilient in an inflationary environment. Examples include Shell and National Grid. Objective: achieve real growth in income.

-       (2) Mispriced yield - higher yield stocks whose fundamentals are more solid than the market perceives, enabling their dividends to be paid, contrary to market expectations.  Examples include BHP and Diversified Energy. Objective: achieve above average income and deliver capital growth as the yield normalises.

-       (3) Unrecognised change - stocks with operational change that is overlooked by the market. Earnings growth and valuation re-rating can work together powerfully to drive share price. Examples include Conduit and Hargreaves Lansdown. Objective: achieve real growth in capital as companies deliver earnings growth and valuations normalise.

Our focus on valuation is a key aspect of our investment process. We believe that the importance of valuation can come to life when managing an income portfolio. A simplified way of visualising the valuation attractions of an income stock is to consider the stream of dividends it is set to pay in relation to its share price. This can provide some perspective on what is being priced in, allowing a judgement to be made on whether the stock is attractively valued. For example, in its latest financial year Rio Tinto paid out 407p/share in dividends versus its year-end share price of 5174p, which equates to a dividend yield of over 7.8%. The market is clearly pricing in a rapid fade in dividend payouts, despite Rio Tinto owning high quality mines that will endure for decades. In another example, Thungela Resources, we made back our original investment in dividends within two years of purchase.

If you also include share buybacks, in addition to dividends, to calculate a stock's overall distribution yield, then it becomes even clearer how rapid the payback period can be. At the pace of share buybacks being made by some of our holdings, the entire share capital would have been retired by the mid-2030s. Of course, there are always risks to every business that could erode profitability, de-railing dividend or buyback plans. We consider these risks when making a judgement on each stock we analyse, assessing what level of cash flow is likely to be sustainable in the context of the competitive position of each business. We discuss with management teams what percentage of those cash flows they expect to pay out in the form of dividends and/or buybacks. At the time of writing, the median free cash flow yield in the portfolio is 9.9%. All of this increases our understanding of the dividend prospects of the portfolio, strengthening our confidence in our ability to maintain a growing dividend per share to our shareholders.

Historically dividends have tended to represent a very high proportion of total return (Goldman Sachs calculate 65% over a rolling 20 year period in UK equities). We expect that, in a world of higher interest rates, investors should logically be more attracted to value stocks that pay out dividends now, rather than growth stocks that promise returns in the future. Higher discount rates make future cash flows worth less, when discounted back. We believe that this will drive an adjustment in the market's perception of the attractions of value stocks versus growth stocks. The market is slowly acknowledging that interest rates are unlikely to go back to the extremely low levels seen during the 2010s. This should challenge the view that market leadership can revert to the quality growth stocks that led the stock market during that decade. As this becomes more widely recognised by investors, we would expect it to help catalyse a valuation re-rating of the cash generative stocks that we own in the portfolio. At the time of writing, the portfolio has a median Price/Earnings ratio of 9.0x and a median Price/Book ratio of 1.0x which compares favourably with 11.8x and 1.6x respectively for the FTSE All-Share ex Investment Trusts Index despite returns that are in line with the wider market (median Return on Equity of 11.7%).

In conclusion, our investment approach provides us with the flexibility to invest across the UK market to build a portfolio that is delivering a high yield and a growing dividend, while offering the potential to deliver NAV growth as earnings growth picks up and valuations re-rate. In the short term, the frustration is that subdued economic growth is causing a period of low activity levels across a range of sectors. Coupled with ongoing asset allocation shifts away from UK equities, this has so far inhibited a valuation re-rating in our holdings, thereby holding back our NAV/share. However, we are confident that this will change in time, as companies are rewarded for using this period to set their house in order, taking actions to improve profitability, while distributing capital via dividends and buybacks. We see the Company's high yield as a function of the unusual level of opportunities available at this time, and we therefore look forward to the coming year with confidence.

Thomas Moore
Portfolio Manager
29 November 2023

Overview of Strategy

Business Model

The Company is an investment trust with a premium listing on the London Stock Exchange.

Investment Objective

The Company's objective is to provide shareholders with an above average income from their equity investment, while also providing real growth in capital and income.  

Investment Policy

The Directors set the investment policy, which is to invest in a diversified portfolio consisting mainly of quoted UK equities which will normally comprise between 50 and 70 individual equity holdings.

In order to reduce risk in the Company without compromising flexibility:

·  no holding within the portfolio should exceed 10% of total assets at the time of acquisition; and

·  the top ten holdings within the portfolio will not exceed 50% of net assets.

The Company may invest in convertible preference shares, convertible loan stocks, gilts and corporate bonds.

The Directors set the gearing policy within which the portfolio is managed.  The parameters are that the portfolio should operate between holding 5% net cash and 15% net gearing.  The Directors have delegated responsibility to the Manager for the operation of the gearing level within the above parameters.

Delivering the Investment Objective

The Board delegates investment management services to abrdn. The team within abrdn managing the Company's portfolio of investments has been headed up by Thomas Moore since 2011.

The portfolio is invested on an index-agnostic basis. The process is based on a bottom-up stock-picking approach where sector allocations are a function of the sum of the stock selection decisions, constrained only by appropriate risk control parameters. The aim is to Focus on Change by evaluating changing corporate situations and identifying insights that are not fully recognised by the market.

Idea Generation and Research

The vast majority of the investment insights are generated from information and analysis from one-on-one company meetings. Collectively, more than 3,000 company meetings are conducted annually across abrdn. These meetings are used to ascertain the company's own views and expectations of its future prospects and the markets in which it operates. Through actively questioning the senior management and key decision makers of companies, the portfolio managers and analysts look to uncover the key changes affecting the business and the materiality of their impact on company fundamentals within the targeted investment time horizon.

Investment Process in Practice

The index-agnostic approach ensures that the weightings of holdings reflect the conviction levels of the investment team, based on an assessment of the management team, the strategy, the prospects and the valuation metrics. The process recognises that some of the best investment opportunities come from under-researched parts of the market, where the breadth and depth of the analyst coverage that the Portfolio Manager can access provides the scope to identify a range of investment opportunities.

The consequence of this is that the Company's portfolio often looks very different from other investment vehicles providing their investors with access to UK equity income. This is because the process focuses on conviction levels rather than index weightings. This means that the Company may provide a complementary portfolio to the existing portfolios of investors who prefer to make their own decisions and manage their ISAs, SIPPs and personal dealing accounts themselves. As at 30 September 2023, 52.6% (2022: 48.9%) of the Company's portfolio is invested in companies outside the FTSE 100 Index.

The index-agnostic approach further differentiates the portfolio because it allows the Portfolio Manager to take a view at a thematic level, concentrate the portfolio's holdings in certain areas and avoid others completely. The effect of this approach is that the weightings of the portfolio can be expected to differ significantly from that of any index, and the returns generated by the portfolio may reflect this divergence, particularly in the short term.

Our Manager's Approach to ESG

There is a broad understanding on the Board that a full and thorough assessment of environmental, social and governance ("ESG") factors will allow for better investment decisions to be made, which will lead to better outcomes for the Company's shareholders.  ESG factors are considered alongside financial and other fundamental factors in order to make the best possible investment decisions at a stock picking and at a portfolio construction level.

Although ESG factors are not the over-riding criteria in relation to the investment decisions taken by our Portfolio Manager and the Company does not specifically exclude any sectors from its investment universe, the Board encourages the Portfolio Manager to ensure that ESG considerations are inextricably embedded into the investment process in order to achieve successful and sustainable performance for the Company over the long term.

By taking account of ESG factors, the Board believes that the Portfolio Manager has a more complete view of a company, including its risks and opportunities.  The analysts supporting the Portfolio Manager seek to determine which ESG factors are financially material to form a forward-looking view of how a business will manage risks and capture opportunities. The analysts focus on what they deem to be the most material ESG factors to understand their impact on a company's future business performance, financial position, and / or market perception.

To advance this analysis on behalf of the Company's shareholders, the Portfolio Manager and his team have a very close relationship with the ESG specialists within abrdn and have an on-desk ESG analyst to assist in the research process and ESG engagements with companies. Through the utilisation of third party provided research including MSCI and abrdn's inhouse ESG rating tools the team is able to identify,  where appropriate, leaders and laggards, areas of weakness and areas of strength.

It should be noted that as part of the investment process to identify attractive investment opportunities the Portfolio Manager must consider a diverse range of companies, spanning a spectrum of maturity with respect to environmental and social sustainability practices.  An important feature of the investment process is therefore active and meaningful engagement to generate insights into underlying ESG performance, with the Company's approach to engagement set out below.

In addition, for those investee companies at the relative beginning of their journey towards improved ESG performance or in higher-impact industries, the Portfolio Manager increasingly devotes attention to the robustness of companies' strategies to improve sustainability performance. This is particularly relevant for companies that must adopt credible transition strategies - an area of growing focus for the  Portfolio Manager on behalf of the Company. For example, the portfolio holds a position in SSE, which is undergoing a major shift away from fossil-fuel powered electricity generation to renewable energy, with the company now planning to increase its renewable capacity from 4GW in 2020/21 to 13GW by 2030/31. 

Proactive company engagement

Our Manager believes that proactive company engagement ensures our holdings remain or become better companies.

Our Manager's Approach to Engagement

Engagement is an important part of our Manager's investment process: our Manager sees engagement not only as a right but as an obligation of investors, in its role as owners of companies. Our Manager engages actively and regularly with companies in which it is or may become
an investor.

Our Manager believes that informed and constructive engagement helps to foster better companies, enhancing the value of the Company's investments.

There are generally two core reasons for engagement: to understand more about a company's strategy and performance, or encourage best practice and drive change.

Active engagement involves regular, candid communication with management teams (or boards of directors) of portfolio companies to discuss a broad range of ESG issues that are material to sustainable long-term returns, either positively or negatively, including both risks and opportunities. Our Manager's focus is on the factors which it believes to have the greatest potential to enhance or undermine the Company's investment case. Sometimes the Manager seeks more information, exchanges views on specific issues, encourages better disclosure; and at other times, encourages change (including either corporate strategy, capital allocation, or climate change strategy). On our behalf, the Manager's engagements cover a range of ESG issues, including but not limited to board composition, remuneration, audit, climate change, labour issues, human rights, bribery and corruption.

Promoting the Success of the Company

The Board's statement in the Annual Report 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. That statement forms part of the Strategic Report.

Key Performance Indicators ("KPIs")

The Board assesses the performance of the Company against the range of KPIs shown below over a variety of time periods, but has particular focus on the long term, which the Board considers to be at least five years.

KPI	Description
Net Asset Value ("NAV") Total Return  relative to the FTSE All-Share Index	While the Manager does not manage the portfolio with direct reference to any particular index, the Board does review the performance against that of the FTSE All-Share Index to provide context for the performance delivered. The Company's NAV Total Return relative to the FTSE All Share Index since 2013, is set out on in the Annual Report.
Premium or discount to the NAV compared to the unweighted average of the discount of the peer group	The Board compares the discount of the Company's share price to its NAV when compared to the unweighted average discount of the other investment trusts in the UK Equity Income sector. The discount at the year end and at the end of the previous year, and the narrowest and widest discounts during the year, for the Company and the peer group, are shown in the table in the Annual Report.
Dividend growth compared to the Retail Price Index ("RPI")	The Company's objective is to provide shareholders with an above average income from their equity investment, while also providing real growth in capital and income.  Between 2012, the first full year after Thomas Moore took over the role of Portfolio Manager, and the outbreak of the Covid-19 pandemic, the dividend growth of the portfolio exceeded inflation, as measured by the RPI, indicating that shareholders had received real growth in the dividends paid by the Company. However, the income generated by the portfolio was significantly affected by dividend cuts made by investee companies during 2020, which have not yet been fully recovered. While dividend payments to shareholders did increase over the last three years they did not keep pace with RPI, despite the dividends being supplemented by drawing from revenue reserves. In setting the level of the dividend for the current financial year, the Board has balanced the need to deliver a meaningful increase to shareholders and its desire to continue rebuilding the revenue reserves. After payment of the fourth interim dividend, and based on current shares in issue, 0.56 pence per share will be transferred to revenue reserves A breakdown of the Company's dividend growth compared with RPI since 2013 is set out in the Annual Report.
Ongoing charges ratio relative to comparator investment vehicles	The Board monitors the Company's ongoing charges ratio against prior years and other similar sized companies in the peer group. The Ongoing Charges Ratio for the year increased moderately to 0.94% based on average net assets over the year (2022: 0.91%).

Principal Risks and Uncertainties

The Board and Audit Committee carry out a regular review of the risk environment in which the Company operates, changes to the environment and individual risks. The Board also identifies emerging risks which might affect the Company. 

There are a number of principal risks and uncertainties which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board, through the Audit Committee 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.

The principal risks and uncertainties faced by the Company are reviewed by the Audit Committee in the form of a risk matrix and the Committee also gives consideration to the emerging risks facing the Company.

The Board has identified the implications for the Company's investment portfolio of a changing climate, and the increased use of artificial intelligence, as emerging risks which it considers are likely to become more relevant for the Company in the future.  The Board continues to assess these emerging risks and their impact on the portfolio as they develop, including how investor sentiment is evolving towards climate risk and how artificial intelligence may impact business models in the future, and will consider how the Company may mitigate these risks and any other emerging risks.  The Board receives regular reporting from the Manager on its approach to engagement with investees on a variety of different topics. 

The principal risks currently facing the Company, together with a description of the mitigating actions the Board has taken, are set out in the table below.

The Board considers its risk appetite in relation to each principal risk and monitors this on an ongoing basis. Where a risk is approaching or is outside the tolerance level, the Board will consider taking action to manage the risk. Currently, the Board considers the risks to be managed within acceptable levels.

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.

Risk	Trend	Mitigating Action
Strategy - the Company's objectives or the investment trust sector as a whole become unattractive to investors, leading to a fall in demand for the Company's shares.	ó	Through regular updates from the Manager, the Board monitors the relevance of the Company's strategy, the performance of equity markets, the economic and political environment, risks to the delivery of the Company's strategy in light of the external environment and the discount/ premium at which the Company's shares trade relative to the net asset value.  It also holds an annual strategy meeting and receives feedback from the Company's broker and updates from the Manager's investor relations team at Board meetings to help to better understand investor sentiment towards the Company and its strategy.
Investment Performance - the Board recognises that market risk is significant in achieving performance and it reviews investment guidelines to ensure that they are appropriate.  The Board regularly reviews the impact of geopolitical instability and change on market risk.	ì	The Board meets the Manager on a regular basis and keeps investment performance under close review.  The Board sets and monitors the investment restrictions and guidelines and regular reports are received from the Manager on stock selection, asset allocation, gearing, revenue forecasts and the costs of running the Company.  The Board determines the Company's dividend policy and approves the level of dividends payable to shareholders.  Representatives of the Manager attend all Board meetings and a detailed formal appraisal of the Manager is carried out by the Management Engagement Committee on an annual basis to ensure that the continued appointment of the Manager remains in the best interests of the shareholders. The Board engages with shareholders at its AGM and Pre-AGM Online Event and with larger shareholders at least annually to listen to sentiment towards the Company and its performance directly.
Exogenous risks such as health, social, financial, economic and geopolitical - the effects of instability or change arising from these risks could have an adverse impact on stock markets and the value of the investment portfolio. Political risks include the political instability in the UK, the terms of the UK's exit from the European Union, any regulatory changes resulting from a different political environment, and wider geo-political issues.	ì	The Board discusses current issues with the Manager.  During the year under review, such issues have included increased inflation and interest rates and the resulting volatility that it created in global stock markets, the Russian invasion of Ukraine and associated sanctions, investor attitudes towards equity markets, and the steps that the Manager has taken or might take to limit their impact on the portfolio and the operations of the Company. The Portfolio Manager's Review summarises the purchases and sales activity during the Period as the Company considered the new set of opportunities arising from the meaningful change in market backdrop during the financial year.  The Manager is in regular communication with investee entities, economists, and the wider market to determine the impact of the geopolitical and economic environment on the portfolio.  The Board oversees the Manager's performance at each Board Meeting and formally considers whether the Company's strategy remains fit for purpose, in light of exogenous risk, at its annual strategy meeting which last took place in August 2023.  The Board also regularly discusses the economic environment, geopolitical risks, industry trends and the potential impact on the Company with the Company's broker.
Operational Risk - in common with most investment trusts, the Board delegates the operation of the business to third parties, the principal delegate being the Manager.  Failure of internal controls and poor performance of any service provider could lead to disruption, reputational damage or loss to the Company.	ó	The Audit Committee receives and reviews reports from the Manager on its internal controls and risk management (including an annual ISAE Report).  It also receives and reviews report from all its other significant service providers on at least an annual basis, including on matters relating to business continuity 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. A formal appraisal of the Company's main third party service providers is carried out by the Management Engagement Committee on an annual basis.
Governance Risk - the Directors recognise the impact that an ineffective board, unable to discuss, review and make decisions, could have on the Company and its shareholders.	ó	The Board is aware of the importance of effective leadership and board composition.  The Board regularly reviews its own performance and, at least annually, formally reviews the performance of the Board and Chair through its performance evaluation process.
Discount / Premium to NAV - a significant share price discount or premium to net asset value per share could lead to high levels of uncertainty for shareholders.		The Board keeps the level of the Company's discount / premium under review.  As explained in the Chair's Statement, the Company's share price has traded at close to par, and at times at a small premium, to net asset value during the financial year.  The share price discount to NAV was 8.8% at 30 September 2022 and 0.2% at 30 September 2023. The Company participates in the Manager's investment trust promotional programme where the Manager has an annual programme of meetings with institutional shareholders and reports back to the Board on these meetings.
Financial obligations - inadequate controls over financial record keeping and forecasting, the setting of an inappropriate gearing strategy or the breaching of loan covenants could result in the Company being unable to meet its financial obligations, losses to the Company and its ability to continue trading as a going concern.	ó	At each Board meeting, the Board reviews management accounts and revenue forecasts. The Directors set the gearing policy within which the portfolio is managed.  The parameters are that the portfolio should operate between holding 5% net cash and 15% net gearing.  The Directors have delegated responsibility to the Manager for the operation of the gearing level within the above parameters. The Company's annual financial statements are audited by the independent auditor.
Legal and Regulatory Risks - the Company operates in a complex legal and regulatory environment.  As a UK company with shares publicly quoted on the London Stock Exchange, as an alternative investment fund and an investment trust, there are several layers of risk of this nature.	ó	The actions the Board takes to mitigate these extensive risks are to ensure that there is breadth and depth of expertise within the Board and the organisations to which the Company has delegated.  There are also authorities whereby the Board or individual Directors can take further advice by employing experts should that ever be considered necessary.

Promotional Activities

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and 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 abrdn on behalf of a number of investment trusts under its management. The Company's financial contribution to the programme is matched by abrdn.  The Company also supports abrdn's investor relations programme which involves regional roadshows, promotional and public relations campaigns. abrdn'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. Part of the promotional programme includes commissioning independent paid for research on the Company, most recently from Kepler Trust Intelligence Research Limited. A copy of the latest research note is available from the Key Documents section of the Company's website.

On 20 January 2023, the Board hosted an online shareholder presentation where the Portfolio Manager provided an update on the portfolio.  The Portfolio Manager and Chair also answered live questions from the audience. 

On 24 August 2023, the Board hosted an in-person meeting for large shareholders at which the Portfolio Manager provided an update on the portfolio. Both of these events gave the Directors the opportunity to hear the views of shareholders first hand.

Board Diversity

The Board's statement on diversity is set out in the Statement of Corporate Governance.

At 30 September 2023, there were three male and two female Directors on the Board.

Modern Slavery Act

Due to the nature of its business, being a company that does not offer goods and services to customers, the Board considers that the Company 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 Human Rights Issues

The Company has no employees.  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.

The Company's socially responsible investment policy is set out below.

Active Engagement

Through engagement and exercising voting rights, the Manager actively works with companies to improve corporate standards, transparency and accountability. By making ESG central to its investment capabilities, the Manager looks to deliver robust outcomes as well as actively contributing to a fairer, more sustainable world.

The primary goal of the Manager is to generate the best long-term outcomes for the Company in order to fulfil fiduciary responsibilities to shareholders and this fits with one of the Manager's core principles as a business in how it evaluates investments. The Manager sees ESG factors as being financially material and impacting corporate performance. The Manager focuses on understanding the ESG risks and opportunities of investments alongside other financial metrics to make better investment decisions.

Responsible Investment

The Board is aware of its duty to act in the interests of the Company.  The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner and has noted the Manager's policy on social responsibility. The Manager considers social, environmental and ethical factors which may affect the performance or value of the Company's investments as part of its investment process.  In particular, the Manager encourages companies in which investments are made to adhere to best practice in the areas of ESG stewardship. The Manager believes that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies.

The Company's objective is to deliver above average income, while also providing real growth in capital and income, on its investments for its shareholders.  The Board and Manager believes this will be produced on a sustainable basis by investments in companies which adhere to best practice in ESG. Accordingly, the Manager will seek to favour companies which pursue best practice.

Stewardship

The Company is committed to the UK's 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 and its group, 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 to the Board on a quarterly basis on stewardship (including voting) issues. 

Global Greenhouse Gas Emissions

All of the Company's activities are outsourced to third parties. The Company therefore has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

For the same reason as set out above, the Company considers itself to be a low energy user under the SECR regulations and therefore is not required to disclose energy and carbon information.

Task Force for Climate-Related financial Disclosures ("TCFD")
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 ("TCFD").

Whilst TCFD is currently not applicable to the Company, the Manager has produced a product level report on the Company in accordance with the FCA's rules and guidance regarding the disclosure of climate-related financial information consistent with TCFD Recommendations and Recommended Disclosures. These disclosures are intended to help meet the information needs of market participants, including institutional clients and consumers of financial products, in relation to the climate-related impact and risks of the Manager's TCFD in-scope business. The product level report on the Company is available on the Manager's website at: invtrusts.co.uk.

Viability Statement

The Board considers that the Company is a long-term investment vehicle and, for the purposes of this statement, has decided that three years is an appropriate period over which to consider its viability. The Board considers this to be an appropriate period for an investment trust company with a portfolio of equity investments, and the financial position of the Company.

Taking into account the Company's current financial position and the potential impact of its principal risks and uncertainties, 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 this Report.

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 above and the steps taken to mitigate these risks.

·  All of the Company's investments are traded on major stock exchanges and there is a spread of investments held.

·  The Company is closed ended in nature and therefore it is not required to sell investments when shareholders wish to sell their shares.

·  The performance of the Company's share price relative to its net asset value during the financial year.  The share price discount narrowed from 8.8% at 30 September 2022 to 0.2% at 30 September 2023, and the share price traded at a small premium to NAV during the year.

·  The Company's main liability is its bank loan of £21 million (2022: £25 million), which represents 11.3% (2022: 15.0%) of the Company's investment portfolio.  This is a £30 million (2022: £30 million) revolving credit facility with The Royal Bank of Scotland International Limited, London Branch, which was refinanced during the financial year and is due to expire in June 2026.

·  The Company' s cash balance, and money market funds, at 30 September 2023 amounted to £4.2 million (2022: £3.6 million).

·  The levels of ongoing charges of 0.94% (2022 0.91%).

·  Shareholders' overwhelming voting in favour of the continuation of the Company at the AGM in February 2022.  The next continuation vote is due to take place at the AGM to be held in 2027.

When considering the risks, the Board reviewed the impact of stress testing on the portfolio, including the effects of any future falls in investment values.  The Board has also had regard to matters such as a reduction in the income generated in the portfolio, a material increase in interest rates, a reduction in the liquidity of the portfolio or changes in investor sentiment, all of which could have an impact on the Company's prospects and viability in the future.  The results of the stress tests have given the Board comfort over the viability of the Company.

Taking into account all of these factors, the Company's current position and the potential impact of the principal risks and uncertainties faced by the Company, the Board has concluded that it has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period of this assessment to 30 September 2026.

In assessing the Company's future viability, the Board has assumed that investors will wish to continue to have exposure to the Company's activities, in the form of a closed ended entity, the Company's long-term performance is satisfactory, and the Company will continue to have access to sufficient capital.

Future Strategy

The Board intends to maintain the Company's strategy set out in the Strategic Report for the year ending 30 September 2024 as it is believed that these are in the best interests of shareholders.

On behalf of the Board
Sarika Patel
Chair
29 November 2023

Promoting the Success of the Company

How the Board Meets its Obligations under Section 172 of the Companies Act 2006

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").  This statement provides 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 the likely long term consequences of decisions, the need to foster relationships with all stakeholders and the impact of the Company's operations on the environment.

The Board takes its role very seriously in representing the interests of the Company's shareholders.  The Board which, at the year end, comprised five independent Non-Executive Directors collectively has a broad range of skills and experience across all major functions that affect the Company.  The Board is responsible 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 ensures that the Company operates in a transparent culture where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in debate to achieve the expectations of shareholders and other stakeholders alike.  The Board works very closely with the Manager in reviewing how 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.

How the Board Engages with Stakeholders

The Board's main stakeholders have been identified as its shareholders, the Investment and Portfolio Manager, service providers, investee companies, debt providers and the community at large and the environment.

A summary of the  Board's approach to engagement with stakeholders is set out below.

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 to all shareholders. The Manager and the Company's broker regularly meet with current and prospective shareholders to discuss performance and shareholder feedback is discussed by the Directors at Board meetings. In addition, Directors have an opportunity to meet shareholders at the Annual General Meeting. The Company subscribes to abrdn's investor relations programme in order to maintain communication channels with the Company's shareholder base. Regular updates are provided to shareholders through the Annual Report, Half Yearly Report, monthly factsheets, Company announcements, including daily net asset value announcements, and the Company's website. The Company's Annual General Meeting provides a forum, both formal and informal, for shareholders to meet and 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.
Manager (and Investment Manager)	The Portfolio Manager's Review details the key investment decisions taken during the year. The Company has appointed AFML as the Company's Manager, or AIFM, which sub-delegates investment management to abrdn Investment Management Limited, which is known as the Investment Manager. The Manager has continued to manage the Company's assets in accordance with the mandate provided by shareholders, with oversight provided by the Board. The Board regularly reviews the Company's performance against its investment objective and the Board undertakes an annual strategy review meeting to ensure that the Company is positioned well for the future delivery of its objective for its stakeholders. The Board receives presentations from the Manager at every Board meeting to help it to exercise effective oversight of the Manager and the Company's strategy. The Board, through the Remuneration & Management Engagement Committee, formally reviews the performance of the Manager at least annually.
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 Remuneration & 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, carrying out their responsibilities and providing value for money.
Investee Companies	Responsibility for 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 on a quarterly basis on stewardship (including voting) issues.  Through engagement and exercising voting rights, the Manager actively works with companies to improve corporate standards, transparency and accountability. The Board monitors investments made and divested and questions the rationale for investment and voting decisions made.
Debt Providers	On behalf of the Board, the Manager maintains a positive working relationship with The Royal Bank of Scotland International Limited, London Branch, the provider of the Company's loan facility, and provides regular updates on business activity and compliance with its loan covenants.
Environment and Community	The Board and Manager are committed to investing in a responsible manner and the Manager embeds Environmental, Social and Governance ("ESG") considerations into the research and analysis as part of the investment decision-making process.  Through the Investment Manager, the Board encourages improvements in ESG practices and disclosures.

Specific Examples of Stakeholder Consideration during the Year

The importance of giving due consideration to the Company's stakeholders is not a new requirement and is considered as part of every Board decision. 

The Board considers its stakeholders at Board meetings and receives feedback on the Investment Manager's interactions with them. 

The Directors were particularly mindful of stakeholder considerations when considering the following items during the year ended 30 September 2023:

Portfolio

The Portfolio Manager's Review 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 and is reviewed at every Board Meeting.  At every Board Meeting, the Board discusses the performance in detail with the Portfolio Manager.

Dividend

The Board has determined the payment of a fourth interim dividend for the year of 5.7 pence per Ordinary share. Following payment of the fourth interim dividend, total dividends for the year will amount to 22.80 pence per Ordinary share, a small increase compared to the previous year. In setting the level of the dividend, the Board has balanced the need to deliver an increase to shareholders and continuing the process of rebuilding the revenue reserves, which was depleted during the height of Covid-19.  Following payment of the fourth interim dividend, and based on current shares in issue, 0.56 pence per share will be transferred to revenue reserves

Promoting the Company

On 23 January 2023, the Board hosted an online shareholder presentation where the Portfolio Manager provided an update on the portfolio, and the previous Chair and Portfolio Manager answered questions from the audience. Over 240 investors signed up to the event.  On 24 August 2023, the Company hosted a meeting for large shareholders at which members of the Board were present and at which the Portfolio Manager provided an update. Both these events gave the Directors the opportunity to hear the views of shareholders first hand.

Pre-AGM Online Event

We will be hosting an Online Shareholder Presentation, which will be held at 11:30am on Friday, 26 January 2024.  At this event there will be a presentation from the Portfolio Manager followed by an opportunity to ask live questions of the Portfolio Manager and the Chair. The online presentation is being held ahead of the AGM to allow shareholders time to submit their proxy votes after the presentation but prior to the AGM should they so wish. Full details on how to register for the online event can be found on the Company's website at abrdnequityincome.com.

Management Fee

As set out in the Chair's Statement, the Board has negotiated the Company's Management Fee, on behalf of the Company's shareholders.  With effect from 1 October 2023, the Company's management fee is charged at 0.55% of the net assets of the Company, a 15.4% reduction when the Company's net assets are below £175m.

Renewal of Bank Loan

On 23 June 2023 the Company renewed its loan facility with the Royal Bank of Scotland International, giving it access to a £30 million revolving credit facility ("RCF"), £21 million of which was drawn down at the year end. The Board continues to believe that gearing is beneficial to long term net asset value returns and is one of the benefits of the closed ended investment trust structure.

Buy-Back and Issuance of Shares

During the year the Company bought back 100,417 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 has widened in normal market conditions.

During the year the Company also issued 275,000 Ordinary shares from treasury to meet investor demand at a premium to the prevailing net asset value.  Since the year end, the Company has issued a further [135,000] ordinary shares from treasury.

The Board believes that the selective use of share buybacks and issuing shares from treasury, when circumstances dictate, is in the best interest of all shareholders.

Succession Planning

The Board has continued to consider its succession plans during the year, as it recognises the benefits of regular Board refreshment.  As reported in the hair's Statement, Jeremy Tigue will retire as Senior Independent Director at the AGM on 20 February 2024. 

During the financial year, the Board, therefore, commenced the search for an additional non-executive director.  Nick Timberlake was appointed on 1 August 2023.  Nick brings a wealth of investment trust and asset management experience to the Board.  During the year, it was agreed that Caroline Hitch will replace Jeremy Tigue as Senior Independent Director and Nick Timberlake will replace Caroline Hitch as Chair of the Remuneration & Management Engagement Committee with effect from the conclusion of the AGM on 20 February 2024.

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.

Consumer Duty

During the year, the FCA's Consumer Duty Regulations came into effect, introducing new rules for FCA regulated firms which manufacture or distribute products and services to retail customers. The Consumer Duty rules do not apply to the Company but do apply to the Manager.

The Board has reviewed the methodology employed by the Manager to assess the value of the Company under the Consumer Duty regulations and will review the Manager's assessment of value on an ongoing basis.

Results

Performance (total return)

	1 year	3 years	5 years	10 years
30 September 2023	%	%	%	%
Net asset valueA	1.8	31.5	-12.8	31.5
Share priceA	11.4	51.1	-9.5	33.9
Reference IndexB	13.8	39.8	19.7	71.8
A Considered to be an Alternative Performance Measure.  ​ ​ ​ ​
B FTSE All-Share Index.
Source: abrdn/Morningstar/Factset

Ten Year Financial Record

		Revenue
		available							Net	Equity
	Gross	for Ordinary	Revenue	Ordinary	Net asset	Share		Ongoing	gearing /	shareholders'	Revenue
Year ended	revenue	shareholders	return	dividends	valueA	price	DiscountAB	chargesBC	(cash)B	funds	reservesD
30 September	£'000	£'000	p	p	p	p	%	%	%	£m	(£m)
2014	5,780	5,136	15.69	14.00	397.9	394.0	1.0	0.94	13.4	166.5	5.75
2015	6,107	5,361	17.18	14.70	440.7	439.0	0.4	0.94	7.7	195.6	6.88
2016	7,084	6,214	17.92	15.40	431.5	412.4	4.4	0.96	7.5	199.7	8.15
2017	7,957	7,044	19.23	17.10	478.6E	459.6	4.8	0.87	9.9	235.3E	9.41
2018	11,893	10,846	22.06	19.20	485.0	473.0	2.5	0.87	12.1	238.4	10.82
2019	11,791	10,687	21.74	20.50	411.8	381.5	7.4	0.91	13.7	201.5	11.58
2020	8,730	7,614	15.61	20.60	288.0	252.0	12.5	0.92	13.3	139.2	8.75
2021	10,642	9,693	20.06	21.20	380.8	349.0	8.4	0.93	13.5	182.9	8.49
2022	13,517	12,244	25.51	22.70	331.8	302.5	8.8	0.91	15.0	157.5	10.27
2023	12,598	11,109	23.43	22.80	314.6	314.0	0.2	0.94	11.3	149.9	10.18
A Diluted for the effect of Subscription shares in issue for the year ended 30 September 2012 to 30 September 2016. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
B Considered to be an Alternative Performance Measure.. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
C 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 figure for 30 September 2020 has been restated in accordance with this guidance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
D Revenue reserves are reported prior to paying the final dividend or fourth interim dividend in each year. For 2017 only, reserves are reported after having deducted the third interim dividend. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
E The 2017 Net Asset Value is calculated under Financial Reporting Standards, but includes an adjustment for the third interim dividend which had been declared, but not paid, at the year end. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Investment Portfolio

As at 30 September 2023 ​ ​ ​ ​
		Valuation as at		Valuation as at
		30 September 2023	Weight	30 September 2022
Stock	Key Sector	£'000	%	£'000
BP	Oil Gas and Coal	8,862	5.4	10,244
Shell	Oil Gas and Coal	8,771	5.3	8,712
SSE	Electricity	7,294	4.4	5,735
Glencore	Industrial Metals and Mining	6,210	3.7	7,157
National Grid	Gas Water and Multi-utilities	6,160	3.7	3,180
Close Brothers	Banks	5,604	3.4	4,445
Barclays	Banks	5,420	3.3	4,921
Diversified Energy	Oil Gas and Coal	5,373	3.2	6,154
NatWest Group	Banks	5,194	3.1	3,504
Imperial Brands	Tobacco	4,945	3.0	4,217
Top ten investments		63,833	38.5
BHP	Industrial Metals and Mining	4,612	2.8	6,172
Smith (DS)	General Industrials	4,418	2.7	2,503
HSBC	Banks	4,400	2.6	-
Conduit Holdings	Non-life Insurance	4,267	2.6	1,520
Thungela Resources	Oil Gas and Coal	4,122	2.5	9,109
Chesnara	Life Insurance	3,763	2.3	3,756
Rio Tinto	Industrial Metals and Mining	3,686	2.2	5,353
OSB Group	Finance and Credit Services	3,476	2.1	3,626
Tyman	Construction and Materials	3,304	2.0	2,320
British American Tobacco	Tobacco	3,127	1.9	5,068
Top twenty investments		103,008	62.2
BAE Systems	Aerospace and Defense	3,102	1.9	2,623
Legal & General	Life Insurance	3,051	1.8	3,145
LondonMetric	Real Estate Investment Trusts	2,849	1.7	1,222
Ithaca Energy	Oil Gas and Coal	2,776	1.7	-
Vistry	Household Goods and Home Construction	2,687	1.6	2,995
Hargreaves Lansdown	Investment Banking and Brokerage Services	2,606	1.6	1,737
Standard Chartered	Banks	2,555	1.6	4,015
Galliford Try	Construction and Materials	2,532	1.5	1,517
International Personal Finance	Finance and Credit Services	2,368	1.4	1,326
Anglo American	Industrial Metals and Mining	2,355	1.4	3,488
Top thirty investments		129,889	78.4
Litigation Capital	Investment Banking and Brokerage Services	2,268	1.4	1,631
CMC Markets	Investment Banking and Brokerage Services	2,146	1.3	4,498
Real Estate Investors	Real Estate Investment Trusts	2,020	1.2	2,319
DFS Furniture	Retailers	2,014	1.2	1,667
Petershill Partners	Investment Banking and Brokerage Services	1,999	1.2	1,706
TP ICAP	Investment Banking and Brokerage Services	1,987	1.2	1,602
Quilter	Investment Banking and Brokerage Services	1,898	1.1	1,281
Vanquis Banking Group	Finance and Credit Services	1,795	1.1	-
Bellway	Household Goods and Home Construction	1,705	1.0	1,272
Speedy Hire	Industrial Transportation	1,615	1.0	1,865
Top forty investments		149,336	90.1
Hays	Industrial Support Services	1,595	1.0	1,490
Centamin	Precious Metals and Mining	1,547	0.9	1,668
Ashmore	Investment Banking and Brokerage Services	1,517	0.9	1,591
Phoenix	Life Insurance	1,471	0.9	1,606
Harbour Energy	Oil Gas and Coal	1,366	0.8	1,209
Diageo	Beverages	1,328	0.8	1,922
AstraZeneca	Pharmaceuticals and Biotechnology	1,311	0.8	1,839
Randall & Quilter	Non-life Insurance	1,247	0.7	2,337
Halfords	Retailers	1,132	0.7	753
Vodafone	Telecommunications Service Providers	1,086	0.7	1,887
Top fifty investments		162,936	98.3
CLS Holdings	Real Estate Investment and Services	1,085	0.7	1,266
Bridgepoint	Investment Banking and Brokerage Services	1,007	0.6	981
Premier Miton	Investment Banking and Brokerage Services	683	0.4	2,411
AssetCo	Investment Banking and Brokerage Services	23	-	750
Total Portfolio		165,734	100.0
All investments are equity investments. ​ ​ ​ ​

Sector Distribution

As at 30 September 2023

Portfolio Weightings	%
Financials	36.6
Energy	18.9
Basi Materials	11.0
Industrials	10.1
Utilities	8.1
Consumer Staples	5.7
Consumer Discretionary	4.5
Real Estate	3.6
Healthcare	0.8
Telecommunications	0.7

As at 30 September 2022

Portfolio Weightings	%
Financials	31.4
Energy	23.6
Industrials	10.2
Basi Materials	9.8
Consumer Staples	7.6
Consumer Discretionary	6.3
Utilities	5.1
Real Estate	3.2
Healthcare	1.7
Telecommunications	1.1

 

Directors' Report (extract)

The Directors present their report and the audited financial statements of the Company for the year ended 30 September 2023.

Results and Dividends

The financial statements for the year ended 30 September 2023 are set out below. Interim dividends of 5.7 pence per share were paid in March, June and September 2023.  The Board has declared that a fourth interim dividend for the year to 30 September 2023 of 5.7 pence per share is payable on 8 January 2024 to shareholders on the register on 8 December 2023. The ex-dividend date is 7 December 2023.

Principal Activity and Status

The Company is registered as a public limited company in England and Wales under company number 2648152.  The Company is an investment company within the meaning of Section 833 of the Companies Act 2006, carries on business as an investment trust and is a member of the Association of Investment Companies.

The Company has applied for and has been accepted as an investment trust under Sections 1158 and 1159 of the Corporation Tax Act 2010 and Part 2 Chapter 1 of Statutory Instrument 2011/2999. This approval relates to accounting periods commencing on or after 1 October 2012. The Directors are of the opinion that the Company has conducted its affairs so as to be able to retain such approval.

The Company intends to manage its affairs so that its Ordinary shares continue to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account.

Capital Structure and Voting Rights

The Company's issued share capital at 30 September 2023 consisted of 47,646,522 Ordinary shares of 25 pence each (2022: 47,471,939) and there were 1,532,245 Ordinary shares held in treasury (2022: 1,706,828), representing 3.1% (2022: 3.5%) of the issued share capital as at that date.

During the year, 100,417 Ordinary shares were bought back into treasury (2022: 561,535) and 275,000 Ordinary shares were issued from treasury (2022: nil). 

There have been no changes to the Company's capital structure or voting rights since the year end.

Each Ordinary shareholder is entitled to one vote on a show of hands and, on a poll, to one vote for every Ordinary share held.

Management Agreement

The Company has appointed abrdn Fund Managers Limited ("AFML"), a wholly-owned subsidiary of abrdn plc, as its alternative investment fund manager (the "Manager"). AFML has been appointed to provide investment management, risk management, administration and company secretarial services, and promotional activities to the Company. The Company's portfolio is managed by abrdn Investment Management Limited (the "Investment Manager") by way of a group delegation agreement in place between AFML and the Investment Manager. 

In addition, AFML has sub-delegated administrative and secretarial services to abrdn Holdings Limited (previously called Aberdeen Asset Management PLC).

Up until 30 September 2023 ,the Company's management fee is calculated as 0.65% per annum of net assets up to £175million and at a rate of 0.55% of net assets above this threshold. 

With effect from 1 October 2023, the Company's management fee is calculated as 0.55% of net assets.

The Manager also receives a separate fee for the provision of promotional activities to the Company. 

Further details of the fees payable to the Manager are shown in notes 3 and 4 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.

External Agencies

The Board has contractually delegated to external agencies, including the Manager and other service providers, certain services including: the management of the investment portfolio, the day-to-day accounting and company secretarial requirements, the depositary services (which include the custody and safeguarding of the Company's assets) and the share registration services. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered in so far as they relate to the affairs of the Company. In addition, ad hoc reports and information are supplied to the Board as requested.

Substantial Interests

Information provided to the Company by major shareholders pursuant to the FCA's Disclosure, Guidance and Transparency Rules are 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 30 September 2023.

Shareholder	Number of Ordinary shares	% held
Hargreaves Lansdown	11,166,926	23.4
Interactive Investor	10,063,837	21.1
Charles Stanley	4,586,981	9.6
AJ Bell	2,823,343	5.9
HSDL	2,285,627	4.8
abrdn Savings Plans	1,461,954	3.1

The Company has not been notified of any changes to these holdings as at the date of this Report.

Directors

Biographies of the Directors of the Company are shown in the Annual Report and on the Company's website: abrdnequityincome.com.

Sarika Patel is the Chair, Jeremy Tigue is the Senior Independent Director, Mark Little is Chair of the Audit Committee and Caroline Hitch is Chair of the Remuneration & Management Engagement Committee.  Nick Timberlake was appointed as an Independent Non-executive Director on 1 August 2023.  The Board engaged the services of Cornforth Consulting to assist in the search for Nick Timberlake.

The Chair 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 Chair facilitates effective contribution from each Director and encourages active engagement. In conjunction with the Company Secretary, the Chair ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chair 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.

The Senior Independent Director acts as a sounding board for the Chair and acts as an intermediary for other Directors, when necessary. Working closely with the Remuneration & Management Engagement Committee, the Senior Independent Director takes responsibility for an orderly succession process for the Chair, and leads the annual appraisal of the Chair's performance. The Senior Independent Director is also available to shareholders to discuss any concerns they may have.

The Directors attended scheduled Board and Committee meetings during the year ended 30 September 2023 as follows (with their eligibility to attend the relevant meetings in brackets):

	Board Meetings	Audit Committee Meetings	Remuneration & Management Engagement Committee Meetings
Sarika Patel	4 (4)	2 (2)	1 (1)
Caroline Hitch	4 (4)	2 (2)	1 (1)
Mark Little	4 (4)	2 (2)	1 (1)
Jeremy Tigue	4 (4)	2 (2)	1 (1)
Nick Timberlake A	1 (1)	0 (0)	1 (1)
Mark White B	2 (2)	1 (1)	0 (0)
A Appointed to the Board on 1 August 2023. B Retired from the Board on 2 February 2023.

The Board meets more frequently when business needs require, and met an additional four times during the financial year.

Caroline Hitch, Mark Little and Sarika Patel will retire and, being eligible, will offer themselves for re-election at the Annual General Meeting. Nick Timberlake will offer himself for election at the Annual General Meeting.  As set out in the Chair's Statement, Jeremy Tigue will retire from the Board at the Annual General Meeting on 20 February 2024, having served on the Board for nine years.

The Board believes that all the Directors seeking election or re-election 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 in the Annual Report and on the Company's website abrdnequityincome.com, setting out their range of skills and experience as well as length of service and their contribution to the Board during the year. The Board believes that, collectively, it has the requisite high level and range of business, investment and financial experience to enable it to provide clear and effective leadership and proper governance of the Company. Following formal performance evaluations, each Director's performance continues to be effective and demonstrates commitment to the role, and their individual performances contribute to the long-term sustainable success of the Company. The Board therefore recommends the election or re-election 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. 

Board Diversity Policy

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.

Board Gender as at 30 September 2023

	Number of Board members	Percentage of the Board	Number of senior positions on the Board (note 3)	Number in executive management	Percentage of executive management
Men	3	60%	2	n/a	n/a
Women	2	40% (note 1)	2

 

Board Ethnic Background as at 30 September 2023

	Number of Board members	Percentage of the Board	Number of senior positions on the Board (note 3)	Number in executive management	Percentage of executive management
White British or other White (including minority-white groups)	4	80%	3	n/a	n/a
Asian	1 (note 2)	20%	1

Notes:

1.   Meets the target of at least 40% as set out in LR 9.8.6R (9)(a)(i).

2.  Meets the target of at least one individual on the Board is from a minority ethnic background as set out in LR 9.8.6R (9)(a)(iii)

3.   Whilst the Listing Rules define senior positions as the role of the Chair, the Chief Executive, the Senior Independent Director ("SID") and the Chief Financial Officer, the positions of the Chief Executive and Chief Financial Officer are not relevant for the Company. The Company therefore considers that the role of Chair, the SID, the Chair of the Audit Committee and the Chair of the Remuneration & Management Engagement Committee are senior positions.  

Directors' and Officers' Liability Insurance

The Company's Articles of Association provide for each of the Directors to be indemnified out of the assets of the Company against any liabilities incurred by them as a Director of the Company in defending proceedings, or in connection with any application to the Court in which relief is granted. Directors' and Officers' liability insurance cover has been maintained throughout the year at the expense 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. 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.

Financial Instruments

The financial risk management objectives and policies arising from its financial instruments and the exposure of the Company to risk are disclosed in note 15 to the financial statements.

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code as published in July 2018 (the "UK Code"), which is available on the Financial Reporting Council's (the "FRC") website: frc.org.uk.

The Board has also 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 Code, as well as setting out additional provisions on issues that are of specific relevance to the Company. 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 companies.

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.

The Board confirms that, during the year, the Company complied with the principles and provisions of the AIC Code and the relevant provisions of the UK Code, except as set out below.

The UK Code includes provisions relating to:

·  interaction with the workforce (provisions 2, 5 and 6);

·  the role and responsibility of the chief executive (provisions 9 and 14);

·  requirement to establish a nomination committee and describe the work of the nomination committee (provisions 17 and 23);

·  the chair shall not be a member of the audit committee (provision 24);

·  the need for an internal audit function (provision 25);

·  previous experience of the chairman of a remuneration committee (provision 32); and

·  executive directors' remuneration (provisions 33 and 36 to 40).

The Board considers that these provisions, with the exception of the requirement to establish a nomination committee and describe the work of the nomination committee, are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Board has determined that there is no need for the Company to have a standalone Nomination Committee given the number of Directors on the Board.  The functions traditionally undertaken by a nomination committee are fulfilled by the Board. 

The Company has therefore not reported further in respect of these provisions.

The full text of the Company's Corporate Governance Statement can be found on its website.

Board Committees

The Board has appointed two committees, as set out below. Copies of their terms of reference, which clearly define the responsibilities and duties of each committee, are available on the Company's website, or upon request from the Company. The terms of reference of each of the committees are reviewed and re-assessed by the Board for their adequacy on an ongoing basis.

Audit Committee

The Audit Committee's Report is contained in the Annual Report.

Remuneration & Management Engagement Committee

The Remuneration & Management Engagement Committee comprises the full Board and is chaired by Caroline Hitch. The main responsibilities of the Committee include:

·  monitoring and evaluating the performance of the Manager;

·  reviewing at least annually the continued retention of the Manager;

·  reviewing, at least annually, the terms of appointment of the Manager including, but not limited to, the level and method of remuneration and the notice period of the Manager;

·  reviewing the performance and remuneration of the other key service providers to the Company; and

·  determining the Directors' remuneration policy and level of remuneration.

The Committee met once during the year to 30 September 2023 and undertook a review of the management of the Company and its performance.  Following conclusion of the review, the Committee recommended to the Board that the continuing appointment of the Manager and other key service providers was in the best interests of the shareholders and the Company as a whole. 

As reported in the Chair's Statement, it has been agreed that Nick Timberlake will assume the role of Chair of the Remuneration & Management Engagement Committee with effective from the conclusion of the AGM on 20 February 2024.

Going Concern

The Company's assets consist mainly of equity shares in companies listed on recognised stock exchanges and are considered by the Board to be realisable within a short timescale under normal market conditions. The Board has set overall limits for borrowing and reviews regularly the Company's level of gearing, cash flow projections and compliance with banking covenants, when applicable.  The Board has also performed stress testing and liquidity analysis.

The Company's Articles require that at every fifth AGM, the Directors shall propose an Ordinary Resolution to effect that the Company continues as an investment trust.  An Ordinary Resolution approving the continuation of the Company for five years was passed at the AGM on 4 February 2022.  The next continuation vote will take place at the AGM to be held in 2027.

As at 30 September 2023, the Company had a £30 million (2022: £30 million) revolving credit facility with The Royal Bank of Scotland International Limited, London Branch.  £21 million was drawn at the end of the financial year (2022: £25 million).  The revolving credit facility was refinanced during the financial year and matures on
23 June 2026. 

The Directors are mindful of the Principal Risks and Uncertainties disclosed in the Strategic Report and they believe that the Company has adequate financial resources to continue its operational existence for a period of not less than 12 months from the date of approval of this Report. They have arrived at this conclusion having confirmed that the Company's diversified portfolio of realisable securities is sufficiently liquid and could be used to meet short-term funding requirements were they to arise. They have also reviewed the revenue and ongoing expenses forecasts for the coming year.  Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

Accountability and Audit

The respective responsibilities of the Directors and the Auditor in connection with the financial statements appear below.

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

Independent Auditor

Shareholders approved the re-appointment of KPMG LLP as the Company's Independent Auditor at the AGM on 2 February 2023. 

As set out in the Chair's Statement, following an audit tender exercise, the Board is submitting resolutions to the AGM on 20 February 2024 to appoint Johnston Carmichael LLP as the Company's Auditor for the year to 30 September 2024 and to authorise the Directors to determine the remuneration of the Auditor.

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 Customer Services Department by emailing [e-mail].

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, and report back to the Board on these meetings. 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 Chair responds personally
as appropriate.

The Company's Annual General Meeting provides a forum for communication primarily with private shareholders and is attended by the Board. The Manager makes a presentation to the meeting and all shareholders have the opportunity to put questions to both the Board and the Manager at the meeting.  The Board will also be hosting an Online Pre-AGM Investor Session to engage directly with shareholders, regardless of their location.  Details on how to register for the Online Pre-AGM Investor Session are set out in the Chair's Statement.

The notice of the Annual General Meeting is 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.

Additional Information

Where not provided elsewhere in the Directors' Report, the following provides the additional information required to be disclosed by Part 15 of the Companies Act 2006.

There are no restrictions on the transfer of Ordinary shares in the Company issued by the Company other than certain restrictions which may from time to time be imposed by law (for example, the Market Abuse Regulation). The Company is not aware of any agreements between shareholders that may result in a transfer of securities and/or voting rights.

The rules governing the appointment of Directors are set out in the Directors' Remuneration Report in the Annual Report. The Company's Articles of Association may only be amended by a special resolution passed at a general meeting of shareholders.

The Company is not aware of any significant agreements to which it is a party that take effect, alter or terminate upon a change of control of the Company following a takeover. Other than the management agreement with the Manager, further details of which are set out below, the Company is not aware of any contractual or other agreements which are essential to its business which could reasonably be expected to be disclosed in the Directors' Report.

Annual General Meeting

The Notice of the Annual General Meeting, which will be held on 20 February 2024, and related notes, may be found in the Annual Report.

Statement of Directors' Responsibilities in Respect of the Annual Report and the Financial Statements

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. Under that law the Directors are required to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 'The Financial Reporting Standard Applicable in the UK and Republic
of Ireland'.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for
that period. 

In preparing these financial statements, the Directors are required to: 

·  select suitable accounting policies and then apply them consistently; 

·  make judgements and estimates that are reasonable and prudent;

·  state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

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

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

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and 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 Directors confirm that to the best of their 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; 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.

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

On behalf of the Board
Sarika Patel
Chair
29 November 2023

Statement of Comprehensive Income

		2023			2022
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Net losses on investments at fair value	9	-	(6,443)	(6,443)	-	(24,281)	(24,281)
Currency (losses)/gains		-	(1)	(1)	-	1	1
Income	2	12,598	-	12,598	13,517	-	13,517
Investment management fee	3	(302)	(704)	(1,006)	(335)	(782)	(1,117)
Administrative expenses	4	(508)	-	(508)	(464)	-	(464)
Net return before finance costs and taxation		11,788	(7,148)	4,640	12,718	(25,062)	(12,344)
Finance costs	5	(401)	(936)	(1,337)	(149)	(347)	(496)
Return before taxation		11,387	(8,084)	3,303	12,569	(25,409)	(12,840)
Taxation	6	(278)	-	(278)	(325)	-	(325)
Return after taxation		11,109	(8,084)	3,025	12,244	(25,409)	(13,165)
Return per Ordinary share	8	23.43p	(17.05p)	6.38p	25.51p	(52.93p)	(27.42p)
The total column of this statement represents the profit and loss account of the Company. ​ ​ ​ ​ ​ ​ ​
All revenue and capital items in the above statement derive from continuing operations. ​ ​ ​ ​ ​ ​ ​
The accompanying notes are an integral part of the financial statements. ​ ​ ​ ​ ​ ​ ​

Statement of Financial Position

		2023	2022
	Notes	£'000	£'000
Fixed assets
Investments at fair value through profit or loss	9	165,734	179,730
Current assets
Debtors	10	1,611	2,343
Investments in AAA-rated money market funds		3,027	2,503
Cash and short-term deposits		1,196	1,054
		5,834	5,900
Current liabilities
Creditors: amounts falling due within one year
Bank loan	11	(20,941)	(24,979)
Other creditors	11	(754)	(3,152)
		(21,695)	(28,131)
Net current liabilities		(15,861)	(22,231)
Net assets		149,873	157,499
Capital and reserves
Called-up share capital	12	12,295	12,295
Share premium account		52,043	52,043
Capital redemption reserve		12,616	12,616
Capital reserve	13	62,735	70,276
Revenue reserve		10,184	10,269
Equity shareholders' funds		149,873	157,499
Net asset value per Ordinary share	14	314.55p	331.77p
The financial statements were approved by the Board of Directors and authorised for issue on 29 November 2023 and were signed on its behalf by: ​ ​ ​
Sarika Patel
Chair
The accompanying notes are an integral part of the financial statements. ​ ​ ​

Statement of Changes in Equity

For the year ended 30 September 2023 ​ ​ ​ ​ ​ ​ ​
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2022		12,295	52,043	12,616	70,276	10,269	157,499
Return after taxationA		-	-	-	(8,084)	11,109	3,025
Purchase of own shares for treasury		-	-	-	(315)	-	(315)
Sale of own shares from treasury		-	-	-	858	-	858
Dividends paid during the year	7	-	-	-	-	(11,194)	(11,194)
Balance at 30 September 2023		12,295	52,043	12,616	62,735	10,184	149,873
For the year ended 30 September 2022 ​ ​ ​ ​ ​ ​ ​
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2021		12,295	52,043	12,616	97,491	8,486	182,931
Return after taxationA		-	-	-	(25,409)	12,244	(13,165)
Purchase of own shares for treasury		-	-	-	(1,806)	-	(1,806)
Dividends paid during the year	7	-	-	-	-	(10,461)	(10,461)
Balance at 30 September 2022		12,295	52,043	12,616	70,276	10,269	157,499
A per the Statement of Comprehensive Income.
The capital reserve at 30 September 2023 is split between realised gains of £80,674,000 and unrealised losses of £17,939,000 (30 September 2022: realised gains of £85,606,000 and unrealised losses of £15,330,000). ​ ​ ​ ​ ​ ​ ​
The Company's reserves available to be distributed by way of dividends or buybacks which includes the revenue reserve and the realised element of the capital reserve amount to £90,858,000 (30 September 2022 - £95,875,000). ​ ​ ​ ​ ​ ​ ​
The accompanying notes are an integral part of the financial statements. ​ ​ ​ ​ ​ ​ ​

Notes to the Financial Statements

For the year ended 30 September 2023

1.	Accounting policies ​
	(a)	Basis of accounting and going concern. The Financial Statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in July 2022. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The Financial Statements have been prepared on a going concern basis.
		The Company had net current liabilities at the year end. The Company's assets consist mainly of equity shares in companies listed on recognised stock exchanges and are considered by the Board to be realisable within a short timescale under normal market conditions. The Board has set overall limits for borrowing and reviews regularly the Company's level of gearing, cash flow projections and compliance with banking covenants, when applicable. The Board has also performed stress testing and liquidity analysis.
		The Company's Articles require that at every fifth AGM, the Directors shall propose an Ordinary Resolution to effect that the Company continues as an investment trust. An Ordinary Resolution approving the continuation of the Company for the next five years was passed at the AGM on 4 February 2022. The next continuation vote will take place at the AGM to be held in 2027.
		As at 30 September 2023, the Company had a £30 million (2022 - £30 million) revolving credit facility with The Royal Bank of Scotland International Limited, London Branch. £21 million was drawn at the end of the financial year (2022 - £25 million). The revolving credit facility matures on 23 June 2026. A replacement option will be sought in advance of the expiry of the facility, or should the Board decide not to renew this facility, any outstanding borrowing would be repaid through the proceeds of equity sales as required.
		The Directors are mindful of the Principal Risks and Uncertainties disclosed in the Strategic Report and they believe that the Company has adequate financial resources to continue its operational existence for a period of not less than 12 months from the date of approval of this Report. They have arrived at this conclusion having confirmed that the Company's diversified portfolio of realisable securities is sufficiently liquid and could be used to meet short-term funding requirements were they to arise. They have also reviewed the revenue and ongoing expenses forecasts for the coming year, and expect to secure a replacement facility upon expiry of the current facility. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
		As an investment fund the Company has the option under FRS 102, which it has taken, not to present a cash flow statement. A cash flow statement is not required when an investment fund meets all the following conditions: substantially all of the entity's investments are highly liquid, substantially all of the entity's investments are carried at market value, and the entity provides a Statement of Changes in Equity. The Directors have assessed that the Company meets all of these conditions.
		The accounting policies applied are unchanged from the prior year and have been applied consistently.
		All values are rounded to the nearest thousand pounds (£'000) except where indicated otherwise.
	(b)	Investments. Investments have been designated upon initial recognition as fair value through profit or loss in accordance with IAS 39. As permitted by FRS 102, the Company has elected to apply the recognition and measurement provisions of IAS 39 Financial Instruments. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis.
		Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery to be made within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are valued at fair value.  For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all the FTSE All-Share and the most liquid AIM constituents.
		Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserve.
	(c)	Investments in AAA-rated money market funds. Money market funds investments are used by the Company to provide additional short term liquidity. Due to their short term nature, they are recognised in the Financial Statements as a current asset and are included at fair value through profit and loss.
		The Company invests in a AAA-rated money-market fund, Aberdeen Standard Liquidity Fund, which is managed by abrdn Investments Limited. The share class of the money market fund in which the Company invests does not charge a management fee.

	(d)	Income. Income from equity investments, including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to revenue or capital according to the circumstances. Foreign income is converted at the exchange rate applicable at the time of receipt. Interest receivable on cash at bank and in hand and on the money market fund is accounted for on an accruals basis.
	(e)	Expenses and interest payable. Expenses are accounted for on an accruals basis. Expenses are charged to capital when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect, the investment management fee and relevant finance costs are allocated between revenue and capital in line with the Board's expectation of returns from the Company's investments over the long term in the form of revenue and capital respectively (see notes 3 and 5).
		Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Statement of Comprehensive Income.
	(f)	Dividends payable. Interim dividends are accounted for when they are paid.  Final dividends are accounted on the date that they are approved by shareholders.

	(g)	Capital and reserves
		Called-up share capital. Share capital represents the nominal value of Ordinary shares issued. This reserve is not distributable.
		Share premium account. The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs. This reserve is not distributable.
		Capital redemption reserve. The capital redemption reserve represents the nominal value of Ordinary shares repurchased and cancelled. This reserve is not distributable.
		Capital reserve. Gains or losses on realisation of investments and changes in fair values of investments are included within the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. The part of this reserve represented by realised capital gains is available for distribution by way of a dividend and for the purpose of funding share buybacks.
		Revenue reserve. The revenue reserve represents accumulated revenue profits retained by the Company that have not currently been distributed to shareholders as a dividend.

	(h)	Taxation. The tax expense represents the sum of the tax currently payable and deferred tax. Tax payable is based on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date.
		Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Statement of Financial Position date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the accounts.
		Owing to the Company's status as an investment trust company, 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.
	(i)	Cash and cash equivalents. Cash comprises bank balances and cash held by the Company. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
	(j)	Bank borrowings. Interest bearing bank loans and overdrafts are recorded initially at fair value, being the proceeds received, net of direct issue costs. They are subsequently measured at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
	(k)	Treasury shares. When the Company purchases its Ordinary shares to be held in treasury, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effect, and is recognised as a deduction from the capital reserve. When these shares are sold subsequently, the amount received is recognised as an increase in equity, and any resulting surplus on the transaction is transferred to the share premium account and any resulting deficit is transferred from the capital reserve.
	(l)	Judgements and key sources of estimation uncertainty. Disclosure is required of judgements and estimates made by management in applying the accounting policies that have a significant effect on the Financial Statements. There are no significant estimates or judgements which impact these Financial Statements.

2.	Income	​	​
		2023	2022
		£'000	£'000
	Income from investments
	UK investment income
	Ordinary dividends	8,191	8,460
	Special dividends	101	800
	Stock dividends	101	-
		8,393	9,260
	Overseas and Property Income Distribution investment income
	Ordinary dividends	3,998	4,243
	Special dividends	85	-
	Stock dividends	52	-
		4,135	4,243
		12,528	13,503
	Other income
	Money-market interest	67	14
	Bank interest	3	-
		70	14
	Total income	12,598	13,517

3.	Investment management fee	​	​
		2023	2022
		£'000	£'000
	Charged to revenue reserve	302	335
	Charged to capital reserve	704	782
		1,006	1,117
	The Company has an agreement with abrdn Fund Managers Limited ("aFML") for the provision of management services, under which investment management services have been delegated to abrdn Investment Management Limited. The contract is terminable by either party on not less than six months' notice. ​ ​
	The fee payable to aFML was calculated at a rate of 0.65% per annum of net assets up to £175 million and at a rate of 0.55% per annum of net assets thereafter. The fee is payable quarterly in arrears and is chargeable 30% to revenue and 70% to capital (see note 1(e) for further detail). The balance of fees due at the year end was £245,000 (2022 - £530,000). ​ ​

4.	Administrative expenses	​	​
		2023	2022
		£'000	£'000
	Directors' fees	127	105
	Employers' National Insurance	7	4
	Fees payable to the Company's Auditor (excluding VAT):
	- for the audit of the annual financial statements	65	40
	Professional fees	14	52
	Depositary fees	19	22
	Promotional activitiesA	109	103
	Other expenses	167	238
		508	564
	A The Company has an agreement with aFML for the provision of promotional activities. Fees paid under the agreement during the year were £109,000 (2022 - £103,000). At 30 September 2023, £27,000 was due to aFML (2022 - £166,000).
	With the exception of fees payable to the Company's auditor, irrecoverable VAT has been included under the relevant expense line above. Irrecoverable VAT on fees payable to the Company's auditor is included within other expenses.
	The Company has no employees.

5.	Finance costs	​	​
		2023	2022
		£'000	£'000
	On bank loans and overdrafts:
	Charged to revenue reserve	401	149
	Charged to capital reserve	936	347
		1,337	496
	Finance costs are chargeable 30% to revenue and 70% to capital (see note 1(e)). ​ ​

6.	Taxation ​ ​ ​ ​ ​ ​ ​
			2023 ​ ​			2022 ​ ​
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of charge for the year
		Overseas withholding tax	278	-	278	325	-	325
	(b)	Factors affecting total tax charge for the year. The corporation tax rate was 22% (2022 - 19%). The total tax assessed for the year is lower (2022 - higher) than that resulting from applying the standard rate of corporation tax in the UK. ​ ​ ​ ​ ​ ​
		A reconciliation of the Company's total tax charge is set out below: ​ ​ ​ ​ ​ ​
			2023 ​ ​			2022 ​ ​
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Return before taxation	11,387	(8,084)	3,303	12,569	(25,409)	(12,840)
		Corporation tax at a rate of 22% (2022 - 19%)	2,505	(1,778)	727	2,388	(4,828)	(2,440)
		Effects of:
		Non-taxable UK dividends	(1,891)	-	(1,891)	(1,770)	-	(1,770)
		Non-taxable overseas dividends	(826)	-	(826)	(744)	-	(744)
		Expenses not deductible for tax purposes	2	-	2	-	-	-
		Losses on investments not relievable	-	1,417	1,417	-	4,613	4,613
		Excess management expenses and loan relationship losses	210	361	571	126	215	341
		Irrecoverable overseas withholding tax	278	-	278	325	-	325
		Total taxation	278	-	278	325	-	325
		At 30 September 2023, the Company had unutilised management expenses and loan relationship losses of £34,587,000 (2022 - £31,990,000). No deferred tax asset has been recognised on the unutilised management expenses and loan relationship losses as it is unlikely that the Company will generate suitable taxable profits in the future that these tax losses could be deducted against. ​ ​ ​ ​ ​ ​

7.	Dividends on Ordinary shares	​	​
		2023	2022
		£'000	£'000
	Amounts recognised as distributions to equity holders in the year:
	Fourth interim dividend for 2022 of 6.50p per share (2021 - 5.60p)	3,079	2,690
	First interim dividend for 2023 of 5.70p per share (2022 - 5.40p)	2,700	2,594
	Second interim dividend for 2023 of 5.70p per share (2022 - 5.40p)	2,700	2,594
	Third interim dividend for 2023 of 5.70p per share (2022 - 5.40p)	2,715	2,583
		11,194	10,461
	The fourth interim dividend of 5.70p per Ordinary share, payable on 8 January 2024 to shareholders on the register on 8 December 2023 has not been included as a liability in the financial statements. ​ ​
	The total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered, are set out below. ​ ​
		2023	2022
		£'000	£'000
	First interim dividend for 2023 of 5.70p per share (2022 - 5.40p)	2,700	2,594
	Second interim dividend for 2023 of 5.70p per share (2022 - 5.40p)	2,700	2,594
	Third interim dividend for 2023 of 5.70p per share (2022 - 5.40p)	2,715	2,583
	Fourth interim dividend for 2023 of 5.70p per share (2022 - 6.50p)	2,724	3,079
		10,839	10,850

8.	Return per Ordinary share	​	​	​	​
		2023 ​		2022 ​
		£'000	p	£'000	p
	Basic
	Revenue return	11,109	23.43	12,244	25.51
	Capital return	(8,084)	(17.05)	(25,409)	(52.93)
	Total return	3,025	6.38	(13,165)	(27.42)
	Weighted average number of Ordinary shares in issueA		47,415,968		48,004,224
	A Calculated excluding shares held in Treasury where applicable. ​ ​ ​ ​

9.	Investments	​	​
		2023	2022
		£'000	£'000
	Fair value through profit or loss
	Opening book cost	195,060	191,866
	Opening fair value (losses)/gains on investments held	(15,330)	15,552
	Opening fair value	179,730	207,418
	Movements in the year:
	Purchases at cost	46,738	40,986
	Sales - proceeds	(54,291)	(44,393)
	Losses on investments	(6,443)	(24,281)
	Closing fair value	165,734	179,730
	Closing book cost	183,673	195,060
	Closing fair value losses on investments held	(17,939)	(15,330)
	Closing fair value	165,734	179,730
	The Company received £54,291,000 (2022 - £44,393,000) from investments sold in the year. The book cost of these investments when they were purchased was £58,125,000 (2022 - £37,797,000). These investments have been revalued over time and until they were sold any unrealised gains/(losses) were included in the fair value of the investments. ​ ​
	Transaction costs. During the year, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within losses on investments in the Statement of Comprehensive Income. The total costs were as follows: ​ ​
		2023	2022
		£'000	£'000
	Purchases	206	201
	Sales	37	30
	Total	243	231

10.	Debtors: amounts falling due within one year	​	​
		2023	2022
		£'000	£'000
	Amounts due from brokers	148	9
	Net dividends and interest receivable	1,078	2,056
	Other debtors	385	278
		1,611	2,343

11.	Creditors: amounts falling due within one year	​	​
		2023	2022
		£'000	£'000
	Bank loan	21,000	25,000
	Unamortised loan arrangement expenses	(59)	(21)
		20,941	24,979
	Other creditors
	Amounts due to brokers	305	2,247
	Investment management fee payable	245	530
	Sundry creditors	204	375
		754	3,152
	On 23 June 2023, the Company agreed a new three year £30 million revolving credit facility with the Royal Bank of Scotland International Limited, which expires on 23 June 2026.
	The facility agreement contains the following covenants:
	- The Company's gross assets will not be less than £120 million (2022 - £120 million) at any time. ​ ​
	- The Company's total net debt will not exceed 25% (2022 - 25%) of net asset value at any time. ​ ​
	- The Company should hold a minimum of 45 eligible investments.
	All covenants were complied with throughout the year.
	At 30 September 2023 and at the date of signing this Report, £21 million had been drawn down from the facility, at a SONIA rate of 6.6847%. This is due to mature on 21 December 2023. ​ ​

12.	Called-up share capital	​	​
		2023	2022
		£'000	£'000
	Issued and fully paid:
	Ordinary shares of 25p each
	Opening balance of 47,471,939 (2022 - 48,033,474) Ordinary shares	11,868	12,009
	Buyback of 100,417 (2022 - 561,535) Ordinary shares	(25)	(141)
	Issue of 275,000 (2022 - nil) Ordinary shares	69	-
	Closing balance of 47,646,522 (2022 - 47,471,939) Ordinary shares	11,912	11,868
	Treasury shares
	Opening balance of 1,706,828 (2022 - 1,145,293) Treasury shares	427	286
	Buyback of 100,417 (2022 - 561,535) Ordinary shares to Treasury	25	141
	Issue of 275,000 (2022 - nil) Ordinary shares from Treasury	(69)	-
	Closing balance of 1,532,245 (2022 - 1,706,828) treasury shares	383	427
		12,295	12,295
	During the year, 100,417 Ordinary shares (2022 -561,535) were repurchased for a consideration of £315,000 (2022 - £1,806,000), and 275,000 Ordinary shares (2022 -nil) were issued from Treasury for a consideration of £858,000 (2022 - £nil). At the year end the number of shares held in Treasury was 1,532,245 (2022 - 1,706,828). ​ ​
	Subsequent to the year end, a further 135,000 Ordinary shares were issued from Treasury for a consideration of £403,000. ​ ​

13.	Capital reserve	​	​
		2023	2022
		£'000	£'000
	Opening balance	70,276	97,491
	Unrealised losses on investment holdings	(2,612)	(30,877)
	(Losses)/ Gains on realisation of investments at fair value	(3,831)	6,596
	Currency (losses)/gains	(1)	1
	Investment management fee charged to capital	(704)	(782)
	Finance costs charged to capital	(936)	(347)
	Buyback of Ordinary shares into treasury	(315)	(1,806)
	Issue of Ordinary shares from treasury	858	-
	Closing balance	62,735	70,276
	The capital reserve includes investment holding losses amounting to £17,939,000 (2022 - losses of £15,330,000) as disclosed in note 9. ​ ​

14.	Net asset value per share	​	​
	The net asset value per share and the net assets attributable to Ordinary shares at the end of the year calculated in accordance with the Articles of Association were as follows: ​ ​
		2023	2022
	Basic
	Total shareholders' funds (£'000)	149,873	157,499
	Number of Ordinary shares in issue at year endA	47,646,522	47,471,939
	Net asset value per share	314.55p	331.77p
	A Excludes shares in issue held in treasury where applicable.

15.	Financial instruments		​
	Risk management. 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 also has the ability to enter into derivative transactions for the purpose of managing currency and market risks arising from the Company's activities. ​
	The main risks the Company faces from its financial instruments are (i) market price risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk. ​
	The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year.
	(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 level of income receivable on cash deposits;
		- interest payable on the Company's variable rate borrowings.
		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.
		It is the Company's policy to increase its exposure to equity market price risk through the judicious use of borrowings. When borrowed funds are invested in equities, the effect is to magnify the impact on Shareholders' funds of changes - both positive and negative - of revenue and capital returns.

		Interest rate profile
		The interest rate risk profile of the portfolio of financial assets and liabilities at the Statement of Financial Position date was as follows: ​ ​ ​ ​
			Weighted
			average	Weighted
			period for	average
			which	interest	Fixed	Floating
			rate is fixed	rate	rate	rate
		As at 30 September 2023	Years	%	£'000	£'000
		Assets
		Investments in AAA-rated money-market funds	-	5.38	-	3,027
		Cash deposits	-	3.69	-	1,196
		Total assets	-	-	-	4,223
		Liabilities
		Bank loans	0.22	6.68	20,941	-
		Total liabilities	-	-	20,941	-
			Weighted
			average	Weighted
			period for	average
			which	interest	Fixed	Floating
			rate is fixed	rate	rate	rate
		As at 30 September 2022	Years	%	£'000	£'000
		Assets
		Investments in AAA-rated money-market funds	-	6.67	-	2,503
		Cash deposits	-	-	-	1,054
		Total assets	-	-	-	3,557
		Liabilities
		Bank loans	-	2.79	24,979	-
		Total liabilities	-	-	24,979	-
		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 floating rate assets consist of investments in AAA-rated money-market funds and cash deposits on call earning interest at prevailing market rates. ​ ​ ​ ​
		All financial liabilities are measured at amortised cost. ​ ​ ​ ​

		Maturity profile. The Company did not hold any assets at 30 September 2023 or 30 September 2022 that had a maturity date. The £21 million (2022 - £25 million) loan drawn down had a maturity date of 21 December 2023 (2022 - 30 November 2022) at the Statement of Financial Position date.
		Interest rate sensitivity. The sensitivity analysis below have been determined based on the exposure to interest rates at the Statement of Financial Position date and with the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.
		If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's :
		- profit for the year ended 30 September 2023 would decrease/increase by £168,000 (2022 - decrease/increase by £214,000). This is mainly attributable to the Company's exposure to interest rates on its fixed rate borrowings and floating rate cash balances.
		Currency risk. All of the Company's investments are in Sterling. The Company can be exposed to currency risk when it receives dividends in currencies other than Sterling. The current policy is not to hedge this risk but this policy is kept under constant review by the Board.
		Other price risk. Other 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.
		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 Manager actively monitors market prices throughout the year and reports to the Board. The investments held by the Company are listed on the London Stock Exchange.
		Other price risk sensitivity. If market prices at the Statement of Financial Position date had been 10% higher or lower while all other variables remained constant, the return attributable to ordinary shareholders and equity for the year ended 30 September 2023 would have increased/decreased by £16,573,000 (2022 - increase/decrease of £17,973,000). This is based on the Company's equity portfolio 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.
		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. Short-term flexibility is achieved through the use of loan and overdraft facilities (note 11).

	(iii)	Credit risk. This is failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. ​ ​ ​ ​
		The risk is not significant, and 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; ​ ​ ​ ​
		- investment transactions are carried out with a large number of brokers, whose credit-standing and credit rating is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker; ​ ​ ​ ​
		- cash and money invested in AAA money market funds are held only with reputable institutions.  ​ ​ ​ ​
		None of the Company's financial assets are secured by collateral or other credit enhancements. ​ ​ ​ ​
		Credit risk exposure. In summary, compared to the amount in the Statement of Financial Position, the maximum exposure to credit risk at 30 September was as follows: ​ ​ ​ ​
			2023 ​		2022 ​
			Statement of		Statement of
			Financial Position	Maximum exposure	Financial Position	Maximum exposure
			£'000	£'000	£'000	£'000
		Current assets
		Debtors	1,611	1,611	2,343	2,343
		Investment in AAA-rated money market funds	3,027	3,027	2,503	2,503
		Cash and short term deposits	1,196	1,196	1,054	1,054
			5,834	5,834	5,900	5,900
		None of the Company's financial assets is past due or impaired. ​ ​ ​ ​
		Fair values of financial assets and financial liabilities. The fair value of borrowings is not materially different to the accounts value in the financial statements of £20,941,000 (note 11). ​ ​ ​ ​

16.	Fair value hierarchy
	FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.  The fair value hierarchy shall have the following classifications:
	Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
	Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market date) for the asset or liability, either directly or indirectly.
	Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
	All of the Company's investments are in quoted equities (2022 - same) that are actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments (2023 - £165,734,000; 2022 - £179,730,000) have therefore been deemed as Level 1 The investment in AAA rated money market funds of £3,027,000 (2022 - £2,503,000) is considered to be Level 2 under the fair value hierarchy of FRS 102 due to not trading in an active market.

17.	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 income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Board normally seeks to limit gearing to 15% of net assets. At the year end the Company had gearing of 11.3% of net assets (2022 - 15.0%).
	The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the 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's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. Any year end positions are presented in the Statement of Financial Position. ​
	The Company does not have any externally imposed capital requirements. ​

18.	Contingent liabilities
	As at 30 September 2023 there were no contingent liabilities (2022 - none).

19.	Segmental Information
	The Company is engaged in a single segment of business, which is to invest in equity securities. All of the Company's activities are interrelated and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

20.	Related party transactions and transactions with the Manager
	Related party transactions. Fees payable during the year to the Directors and their interests in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report The balance of fees due to Directors at the year end was £33,000 (2022 - £30,000).
	Transactions with the Manager. abrdn Fund Managers Limited received fees for its services as Manager. Further details are provided in notes 3 and 4.

21.

Subsequent events

Subsequent to the year end, the Company announced a change to the terms of the management fee. With effect from 1 October 2023, the Company's management fee will be charged at a flat fee of 0.55% per annum of the Company's net assets. Prior to 1 October 2023, the Company's management fee was charged at a rate of 0.65% per annum of net assets up to £175 million and at a rate of 0.55% per annum of net assets thereafter.

Alternative Performance Measures

Alternative performance measures ('APM') are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. ​ ​ ​
The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-ended investment companies. Where the calculation of an APM is not detailed within the financial statements, an explanation of the methodology employed is provided below: ​ ​ ​
Discount & premium ​ ​ ​
A discount is the percentage by which the market price of an investment trust is lower than the Net Asset Value ("NAV") per share. A premium is the percentage by which the market price per share of an investment trust exceeds the NAV per share. ​ ​ ​
		30 September 2023	30 September 2022
Share price		314.00p	302.50p
Net asset value per share		314.55p	331.77p
Discount		0.2%	8.8%
Dividend yield	​	​	​
Dividend yield measures the dividend per share as a percentage of the share price per share. ​ ​ ​
		30 September 2023	30 September 2022
Share price		314.00p	302.50p
Dividend per share		22.80p	22.70p
Dividend yield		7.3%	7.5%
Net gearing	​	​	​
Net gearing measures the total borrowings less cash and cash equivalents divided by Shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due from and to brokers at the period end as well as cash and short-term deposits. ​ ​ ​
		30 September 2023	30 September 2022
		£'000	£'000
Total borrowings	a	20,941	24,979
Cash and short-term deposits		1,196	1,054
Investments in AAA-rated money-market funds		3,027	2,503
Amounts due from brokers		148	9
Amounts payable to brokers		(305)	(2,247)
Total cash and investments in AAA-rated money-market funds	b	4,066	1,319
Gearing (borrowings less cash & investments in AAA-rated money-market funds)	c=(a-b)	16,875	23,660
Shareholders' funds	d	149,873	157,499
Net gearing	e=(c/d)	11.3%	15.0%
Ongoing charges ratio ​ ​ ​
The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC, which is defined as the total of investment management fees and recurring administrative expenses and expressed as a percentage of the average daily net asset values published throughout the period.  ​ ​ ​
		30 September 2023	30 September 2022
		£'000	£'000
Investment management fees		1,006	1,117
Administrative expenses		508	464
Less: non-recurring chargesA		(27)	(42)
Ongoing charges	a	1,487	1,539
Average net assets	b	158,676	178,283
Ongoing charges ratio (excluding look-through costs)	c=(a/b)	0.94%	0.86%
Look-through costsB	d	0.00%	0.05%
Ongoing charges ratio (including look-through costs)	e=c+d	0.94%	0.91%
A Comprises professional 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 includes financing and transaction costs. ​ ​ ​
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 30 September 2023		NAV	Price
Opening at 1 October 2022	a	331.8p	302.5p
Closing at 30 September 2023	b	314.6p	314.0p
Price movements	c=(b/a)-1	(5.2%)	3.8%
Dividend reinvestmentA	d	7.0%	7.6%
Total return	c+d	1.8%	11.4%
			Share
Year ended 30 September 2022		NAV	Price
Opening at 1 October 2021	a	380.8p	349.0p
Closing at 30 September 2022	b	331.8p	302.5p
Price movements	c=(b/a)-1	(12.9%)	(13.3%)
Dividend reinvestmentA	d	5.3%	5.5%
Total return	c+d	(7.6%)	(7.8%)
A NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.  ​ ​ ​

Additional Notes to the Annual Financial Report

The Annual General Meeting will be held at wallacespace Spitalfields, 15-25 Artillery Lane, London, E1 7HA on Tuesday, 20 February 2024 at 11:30 am.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 30 September 2023 have been agreed with the auditor and are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2022 and 2023 statutory accounts received unqualified reports from the Company's auditor and did not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498(2) or 498(3) of the Companies Act 2006.  The financial information for 2022 is derived from the statutory accounts for 2022 which have been delivered to the Registrar of Companies. The 2023 accounts will be filed with the Registrar of Companies in due course.

The Annual Report and Accounts will be posted to shareholders in December 2023. Copies will be available during normal business hours from the Secretary, abrdn Holdings Limited, 1 George Street, Edinburgh EH2 2LL or from the Company's website, abrdnequityincome.com*.

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

By order of the Board
abrdn Holdings Limited
Company Secretary
29 November 2023

* Neither the Company's website nor the content of any website accessible from hyperlinks on it (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

 

END