Annual Financial Report

Shires Income PLC

25 May 2023

 

SHIRES INCOME PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2023

Legal Entity Identifier (LEI): 549300HVCIHNQNZAYA89

The Company

Shires Income PLC (the "Company") is an investment trust. Its Ordinary shares are listed on the premium segment of the London Stock Exchange.

Investment Objective

The Company's investment objective is to provide shareholders with a high level of income, together with the potential for growth of both income and capital from a diversified portfolio substantially invested in UK equities but also in preference shares, convertibles and other fixed income securities.

Benchmark

The Company's benchmark is the FTSE All-Share Index (total return).

Website

Up to date information can be found on the Company's website: www.shiresincome.co.uk

COMPANY OVERVIEW - FINANCIAL HIGHLIGHTS

Net asset value per Ordinary share total returnA			Share price total returnA
-2.2%			-5.5%
2022	+11.4%		2022	+18.4%
Benchmark index total return			Earnings per share (revenue)
+2.9%			14.83p
2022	+13.0%		2022	14.21p
Dividends per Ordinary share			Dividend yieldA
14.20p			5.7%
2022	13.80p		2022	4.9%
A Alternative Performance Measure.

For further information, please contact:

Luke Mason (0207 463 5971)

Stephanie Hocking (0207 463 6403)

abrdn Fund Managers Limited

Financial Calendar and Highlights

Financial Calendar

Online Shareholder Presentation	22 June 2023
Annual General Meeting	6 July 2023
Expected payment dates of quarterly dividends	28 July 2023 27 October 2023 26 January 2024 26 April 2024
Half year end	30 September 2023
Expected announcement of results for the six months ending 30 September 2023	November 2023
Financial year end	31 March 2024
Expected announcement of results for year ending 31 March 2024	May 2024

Highlights

	31 March 2023	31 March 2022
Total assets	£98,864,000	£104,819,000
Shareholders' funds	£79,913,000	£85,819,000
Market capitalisationA	£77,411,000	£85,987,000
Net asset value per Ordinary share	257.92p	278.29p
Share price	250.00p	279.00p
(Discount)/premium to NAV (cum-income)C	(3.1)%	0.3%
Net gearingC	22.2%	20.4%
Dividend and earnings
Revenue return per shareD	14.83p	14.21p
Dividend per shareE	14.20p	13.80p
Dividend coverC	1.04	1.03
Revenue reservesF	£7,040,000	£6,705,000
Dividend yieldC	5.7%	4.9%
Operating costs
Ongoing charges ratio (excluding look-through costs)C	1.03%	0.98%
Ongoing charges ratio (including look-through costs)C	1.17%	1.14%
A Represents the number of Ordinary shares in issue in the Company multiplied by the Company's share price.
B Net asset value per Ordinary share is calculated after the repayment of the capital paid up on Cumulative Preference shares (see note 16).
C Considered to be an Alternative Performance Measure.
D Measures the revenue earnings for the year divided by the weighted average number of Ordinary shares in issue (see Statement of Comprehensive Income).
E The figures for dividend per share reflect the years in which they were earned (see note 9).
F The revenue reserve figure does not take account of payment of the third interim or final dividend amounting to £2,415,000 (2022 - £2,281,000) combined.

Chairman's Statement

The year to 31 March 2023 proved to be another challenging year on many levels. The conflict between Russia and Ukraine continued to impact the geo-political landscape, and the cost of living crisis deepened, with higher food and energy costs, in addition to rising inflation, higher interest rates and UK Government instability. Despite the impact of these factors on global equity markets, the UK market showed some resilience, with the FTSE All-Share Index returning 2.9% for the year.

Performance

Against this challenging economic backdrop, the Company's NAV performance for the year, on a total return basis, was -2.2%, an under performance of 5.1% compared to the FTSE All-Share Index benchmark return.

The Company's share price performance was also behind the benchmark, with a total return of -5.5% for the year.

While we did see strong performance from a number of holdings in the equity portfolio, the main detractors from performance were the preference share portfolio and the Company's holding in abrdn Smaller Companies Income Trust plc ("ASCIT"). I am pleased to report, however, that the portfolio continues to produce a high level of income, with the Company's revenue return per share exceeding returns of previous years.

Full details of performance for the year and portfolio activity are contained in the Investment Manager's Review.

Earnings and Dividends

The Company's revenue earnings per share for the year were 14.83p, compared to 14.21p last year, an increase of 4.4%, which is illustrative of the strong recovery we have continued to see since the declines experienced during the Covid-19 pandemic.  

The Company has paid three interim dividends of 3.20p per Ordinary share (2022: 3.20p). The Board is proposing a final dividend of 4.60p per Ordinary share (2022: 4.20p), which will be paid on 28 July 2023 to shareholders on the register on 7 July 2023. This final dividend brings total Ordinary share dividends for the year to 14.20p per share, an increase of 2.9% compared to last year.  Based on the year end share price of 250p, this equates to a dividend yield of 5.7%.

With the total dividends for the year covered by earnings, revenue reserves will stand at 1.05 times the current annual Ordinary share dividend cost. This allows the Company to support future dividend payments in times of economic difficulty. In addition, the Company also has the flexibility to pay dividends from its realised capital reserves, although the Board has no current intention of making use of this flexibility. Subject to unforeseen circumstances, it is proposed to continue during this financial year to pay three quarterly interim dividends of 3.20p each per Ordinary share and, as in previous years, the Board will decide on next year's final dividend having reviewed the full year results, taking into account the general outlook for the portfolio's investment income at that time.

Premium/(Discount)

At the end of the year, the Company's Ordinary shares were trading at a discount of 3.1% to the NAV per share (including income) compared to a premium of 0.3% at the end of the previous year. The average discount for the year was 1.0%. Despite ending the year on a small discount, the Company did enjoy periods where its shares traded at a premium to NAV and, as a result, in response to investor demand, we were able to issue 145,000 new Ordinary shares on a non-dilutive basis.

The Board and Manager monitor the premium/discount of the Company's shares on an ongoing basis and the Board will seek to renew the appropriate share issuance and share buyback authorities at the Annual General Meeting.  

Gearing

The Company's gearing level (net of cash) was 22.2% as at 31 March 2023, compared to 20.4% at the end of the previous year, with the difference due to a lower amount of cash being held at the year end and a slightly lower net asset value compared to last year.

In May 2022, the Board made the decision, given the uncertain interest rate outlook, to renew the £20 million loan facility held with Scotia Bank Europe PLC, ahead of its maturity date of September 2022, which we believe proved to be the correct approach to take as interest rates continued to rise.

A new £20 million loan facility was therefore entered into with The Royal Bank of Scotland International Limited, London Branch, on 3 May 2022 for a five-year tenure.

£10 million of the new loan facility was drawn down for five years and fixed at an all-in interest rate of 3.903%. £9 million of the facility was drawn down on a short-term basis and can be repaid without incurring any financial penalties. The proceeds of the new loan were used to repay and cancel in full the Company's previous loan facilities with Scotia Bank Europe PLC. The Company's total borrowings were therefore unchanged following the re-financing.

Given the economic volatility we have seen since that time, the Board is pleased to have renewed the Company's debt early and for a longer tenure, in order to provide certainty over the funding cost in such an uncertain environment.  As in previous years, the Board takes the view that the borrowings are notionally invested in the less volatile fixed income part of the portfolio which generates a high level of income, giving the Investment Manager greater ability to invest in a range of equity stocks with various yields. The Board believes that this combination should help enable the Company to achieve a high and potentially growing level of dividend, but also deliver some capital appreciation to shareholders.

Board Composition

Following the appointment of Helen Sinclair as a Director in February 2022 and the retirement of Marian Glen at the AGM in July 2022, the Board is comprised of four independent Directors, two women and two men, all with a wide range of skills and relevant experience to oversee the Company's affairs.  The Board regularly reviews its composition, with succession planning an important part of its deliberations. In accordance with the AIC Code of Corporate Governance, all Directors are standing for re-appointment at this year's AGM. 

Environmental, Social and Governance ("ESG")

Shareholders will note in this Annual Report that there is a wealth of information provided by the Investment Manager on its ESG approach, which continues to be a fundamental part of its investment process.

The Board endorses the level of focus the Investment Manager places on ESG, which entails significant levels of engagement with company management focused upon both the reduction of risk but also potentially enhanced returns.

abrdn Smaller Companies Income Trust plc ("ASCIT)

As I have mentioned above, detractors from performance over the year included the Company's holding in ASCIT. This holding represented 7.8% of the portfolio at the year end and therefore its performance compared against the FTSE All-Share Index had a meaningful impact on the Company's own performance for the year. Shires, as a 13.6% shareholder in ASCIT, has been discussing for some time whether Shires' smaller company exposure could be delivered more efficiently and with less volatility.

In October 2022, the Board and its adviser, JPMorgan Cazenove, and after consultation with abrdn, put forward in their opinion what was a constructive and compelling proposal to the board of ASCIT and its advisers. This proposal envisaged consolidating the companies whilst maintaining small cap exposure and concentrating on providing above average income from a diversified portfolio of UK quoted securities, which is in line with Shires' existing investment objective.

Following this approach, the Board of ASCIT announced on 13 February 2023 that it was conducting a strategic review and we were pleased to note that the ASCIT discount partially narrowed following this announcement. We look forward to hearing the outcome of the review shortly and to a resolution of the current uncertainty surrounding that company, with an outcome that is favourable to all shareholders.

Annual General Meeting ("AGM") and Online Shareholder Presentation

The Company's AGM will take place at 12 noon on Thursday 6 July 2023 at Wallacespace Spitalfields, 15-25 Artillery Lane, London E1 7HA, and will be followed by lunch. As well as the formal business of the meeting, the Investment Manager will provide a short presentation on the Company and there will be an opportunity for shareholders to ask questions of the Manager and the Board. We do hope you are able to join us. 

Irrespective of whether you are able to attend, we do encourage all shareholders to complete and return the Proxy Form enclosed with the Annual Report to ensure that your votes are represented at the meeting. If you hold your shares in the Company via a share plan or a platform and would like to attend and / or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform. For this purpose, investors who hold their shares in the Company via the abrdn Investment Plan for Children, Share Plan or ISA will find a Letter of Direction enclosed. Shareholders are encouraged to complete and return their Proxy Forms / Letters of Direction in accordance with the instructions.

Given the popularity of our Online Shareholder Presentation in previous years, we have decided to hold another online presentation this year, in addition to the AGM. This will be held at 10.00am on Thursday 22 June 2023. A presentation will be given by the Investment Manager, and those in attendance will be given the opportunity to ask questions of the Chairman and Investment Manager both during the presentation and in advance.

Full details on how to register for the event can be found at: bit.ly/Shires-Income-PLC

Details are also contained on the Company's website. Should you be unable to attend the online event, it will be made available on the Company's website shortly afterwards. For those wishing to submit questions in advance, you can do this at the following email address: [e-mail] 

Outlook

With the challenges I outlined in my opening remarks still very much present, and likely to continue for some time, the Board is pleased to see that the Company's equity portfolio performance on the whole remains robust and, as outlined in the Investment Manager's Review, given greater stability in fixed income markets, we expect the preference share portfolio to show some recovery in the coming months while still continuing to provide a reliable and high source of income. 

In this environment, good stock selection is key, together with a focus on maintaining the Company's income objective, both of which the Investment Manager has a strong track-record of delivering. The Board remains confident that the diverse sources of income in the portfolio and the flexibility to invest in both growth and value equities will continue to deliver the income and capital growth objectives of the Company over the longer term.

Robert Talbut
Chairman
24 May 2023

Overview of Strategy

Business Model

The business of the Company is that of an investment company which qualifies as an investment trust for tax purposes.  The Directors do not envisage any change in this activity in the foreseeable future.

Investment Objective

The Company's investment objective is to provide shareholders with a high level of income, together with the potential for growth of both income and capital, from a diversified portfolio substantially invested in UK equities but also in preference shares, convertibles and other fixed income securities.

Investment Policy

In pursuit of its objective, the Company's policy is to invest principally in the ordinary shares of UK quoted companies, and in preference shares, convertibles and other fixed income securities with above average yields.

The Company generates income primarily from ordinary shares, preference shares, convertibles and other fixed income securities. It also generates income by writing call and put options on shares owned, or shares the Company would like to own. By doing so, the Company generates premium income.

Risk Diversification

In order to ensure adequate diversification, the Board sets absolute limits on maximum holdings and exposures in the portfolio from time to time. These limits do not form part of the investment policy and can be changed or overridden with Board approval. The current limits are disclosed under the heading "Board Investment Limits" below.  

Gearing

The Directors are responsible for determining the gearing strategy of the Company.  Gearing is used with the intention of enhancing long-term returns. Gearing is subject to a maximum equity gearing level of 35% of net assets at the time of drawdown.  Any borrowing, except for short-term liquidity purposes, is used for investment purposes. 

Delivering the Investment Policy

The Directors are responsible for determining the investment objective and investment policy of the Company, although any significant changes are required to be approved by shareholders at a general meeting. Day-to-day management of the Company's assets has been delegated, via the Alternative Investment Fund Manager (the "AIFM"), to the Investment Manager.

Board Investment Limits

In order to ensure adequate diversification, the Board has set absolute limits on maximum holdings and exposures in the portfolio at the time of acquisition. These can only be overridden with Board approval. The current limits include the following:

-       Maximum 10% of total assets invested in the equity securities of overseas companies;

-       Maximum 7.5% of total assets invested in the securities of one company (excluding abrdn Smaller Companies Income Trust plc);

-       Maximum 5% of quoted investee company's ordinary shares (excluding abrdn Smaller Companies Income Trust plc); and 

-       Maximum 10% of total assets invested directly in AIM holdings.

The Board assesses on a regular basis with the Manager the applicability of these investment limits, the use of gearing and risk diversification, whilst aiming to meet the overall investment objectives of the Company.

Preference Shares

The Company also invests in preference shares, primarily to enhance the income generation of the Company. The majority of these investments are in large financial institutions. Issue sizes are normally relatively small and the underlying securities are relatively illiquid by comparison with the equity component of the portfolio. A maximum of 7.5% of total assets may be invested in the preference shares of any one company. In addition, the Company cannot hold more than 10% of any investee company's preference shares.

Traded Options Contracts

The Company enters into traded option contracts, primarily to enhance the income generation of the Company. The risks associated with these option contracts are managed through the principal guidelines below, which operated in the year under review:

-       Call options written to be covered by stock;

-       Put options written to be covered by net current   assets/borrowing facilities;

-       Call options not to be written on more than 10% of the equity portfolio; and

-       Put options not to be written on more than 10% of the equity portfolio.

Benchmark

In assessing its performance, the Company compares its returns with the returns of the FTSE All-Share Index (total return).

Promoting the Success of the Company

The Board's statement below describes how the Directors have discharged their duties and responsibilities over the course of the financial year under section 172 (1) of the Companies Act 2006 and how they have promoted the success of the Company for the benefit of the members as a whole.

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determining the progress of the Company in pursuing its investment policy.  The main KPIs identified by the Board in relation to the Company, which are considered at each Board meeting, are shown in the table below:

KPI	Description
Performance against benchmark index	The Board measures performance over the medium to long-term, on a total return basis against the benchmark index - the FTSE All-Share Index (total return).
Share price performance	The Board monitors the performance of the Company's share price on a total return basis.
Premium/discount  to NAV	The premium/discount relative to the NAV per share represented by the share price is closely monitored by the Board. The Board also monitors trading activity in the Company's shares on a regular basis.
Revenue return per Ordinary share	The Board monitors the Company's net revenue return (earnings per share).
Dividend per share	The Board monitors the Company's annual dividends per Ordinary share and the extent to which dividends are covered by current net revenue and revenue reserves.
Ongoing charges	The Board monitors the Company's operating costs carefully. Some of the operating costs are fixed whilst the most significant cost, being the investment management fee, is variable depending on the net asset value of the Company.

Principal and Emerging Risks and Uncertainties

The Board carries out a regular review of the risk environment in which the Company operates, changes to that environment and to individual risks. The Board also identifies emerging risks which might impact on the Company. During the year, the most significant risks were inflation and increasing interest rates and the resultant volatility that this created in global stock markets. In addition, the conflict in Ukraine has created geo-political uncertainty which has further increased market risk premia and volatility. 

There are a number of other risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has carried out a robust assessment of the Company's principal and emerging risks, which include those that would threaten its business model, future performance, solvency, liquidity or reputation and has endeavoured to find means of mitigating those risks, wherever practical.

The principal risks and uncertainties faced by the Company are reviewed by the Audit Committee in the form of a risk matrix. The assessment of risks and their mitigation continues to be an area of significant focus for the Audit Committee.

The Board also regularly identifies and evaluates newly emerging risks, for example the impact of climate change, and monitors these closely, as appropriate for the Company. The impact of climate change is not considered to be material to the financial statements as the entire investment portfolio consists of listed equities and preference shares and the market price is expected to reflect market participants' view of climate change risk.

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

The principal risks associated with an investment in the Company's shares are published monthly in the Company's factsheet and they can be found in the pre-investment disclosure document ("PIDD") published by the Manager, both of which are available on the Company's website.

Description	Mitigating Actions
Strategic objectives and investment policy - a lack of demand for the Company's shares due to its objectives becoming unattractive to investors, or a negative perception of investment trusts, could result in a widening of the discount of the share price to its underlying NAV and a fall in the value of its shares.	The Board formally reviews the Company's objectives and strategies for achieving them on an annual basis, or more regularly if appropriate. The Board is cognisant of the importance of regular communication with shareholders and knowledge of what encourages investment in the Company. Directors attend meetings with shareholders where practical, host the Annual General Meeting as a forum for shareholder contact and regularly discuss shareholder investment behaviour with the Manager, including trends on investment platforms and shareholder themes. The Board reviews shareholder feedback through reports provided by the Manager's Investor Relations team and also receives feedback from the Company's Stockbroker. The Board and Manager keep the level of discount under constant review, as well as changes to the Company's shareholder register.
Investment performance  - performance of the portfolio when measured against the benchmark.	The Board meets the Manager on a regular basis and keeps investment performance under close review. This includes performance attribution by sector and stock, and liquidity analysis, as well as the degree of diversification in the portfolio and income sustainability through examination of forward income projections. Representatives of the Investment Manager attend all Board meetings and a detailed formal appraisal of the abrdn Group is carried out annually by the Management Engagement Committee. The Board sets, and monitors, the investment restrictions and guidelines, and receives regular reports which include performance reporting on the implementation of the investment policy, the investment process, risk management and application of the guidelines. Investment risk within the portfolio is managed in four ways: -          Adherence by the Investment Manager to the investment process in order to minimise investments in poor quality companies and/or overpaying for investments. -          Diversification of investment - seeking to invest in a wide variety of companies with strong balance sheets and the earnings power to pay increasing dividends. In addition, investments are diversified by sector in order to reduce the risk of a single large exposure. The Company invests mainly in equities and preference shares. -          Adherence by the Investment Manager to the investment limits set by the Board. -          Examination of changes to the portfolio and emerging investment themes, including relative to benchmark constituents. Investment in UK smaller companies In order to gain exposure to a higher growth sector, rather than holding a number of smaller companies' shares, the Company invests indirectly into this part of the equity market through one holding in abrdn Smaller Companies Income Trust plc, which is also managed by the Manager. Given its size (representing 7.8% of the Company's portfolio as at 31 March 2023) the Directors regularly review this holding, including its liquidity.  All of the directors of abrdn Smaller Companies Income Trust plc are independent of Shires Income plc. The Manager does not charge any management fee in respect of the amount of the Company's assets attributable to this holding. Investment in preference shares The Company has longstanding holdings in a number of preference shares with no fixed redemption dates (representing 21.6% of the Company's portfolio as at 31 March 2023). The Directors regularly review these investments, which are held primarily to enhance the income generation of the Company. By their nature, their price movements will be subject to a number of factors, including prevailing and changing interest rates, and, in normal market conditions, will tend to respond less to pricing movements in equity markets. Issue sizes of these preference shares are normally relatively small and with associated low secondary market liquidity by comparison with the equity component of the portfolio. The Board also considers the long-term nature of these investments and the impact of any potential changes on duration on the portfolio and its returns, as well as the sustainability of the dividends paid.
Failure to maintain, and grow the dividend over the longer term  - the level of the Company's dividends and future dividend growth will depend on the performance of the underlying portfolio.	The Directors review detailed income forecasts at each Board meeting and discuss the Investment Manager's outlook for dividends. The Company has revenue reserves which it can draw upon should there be a shortfall in revenue returns in a year, and also has the ability to pay dividends from realised capital reserves. The Board regularly reviews forward net revenue projections and takes into account revenue reserves in setting quarterly dividend levels.
Share price and shareholder relations - the adoption of an inappropriate marketing strategy, failure to address shareholder concerns or other factors, including the setting of an unattractive strategic investment proposition, changing investor sentiment and investment underperformance, may lead to a decrease in demand for the Company's shares and a widening of the difference between the share price and the NAV per share.	The Board monitors the Company's Ordinary share price relative to the NAV per share and keeps the level of premium or discount at which the Company's shares trade under review. The Board also keeps the investment objective and policy under review and holds an annual strategy meeting where it reviews investor relations reports and updates from the Manager and the Company's Stockbroker. The Directors are updated at each Board meeting on the composition of, and any movements in, the shareholder register, which is retail investor dominated. The Board annually agrees a marketing and communications programme and budget with the Manager, and receives updates regularly on both marketing and investor relations. The Board has a close focus on investor platform activity which has been the dominant change over recent years in how retail investors choose to acquire and hold their shares. This includes contact with the platform operators through the Manager.
Gearing - a fall in the value of the Company's investment portfolio could be exacerbated by the impact of gearing. It could also result in a breach of loan covenants and the forced sale of investments.	The Board sets the gearing limits within which the Investment Manager can operate. Gearing levels and compliance with loan covenants are monitored on an ongoing basis by the Manager and at regular Board meetings, or between scheduled Board meetings if required. In the event of a possible impending covenant breach, appropriate action would be taken to reduce borrowing levels. The financial covenants attached to the Company's borrowings currently provide for significant headroom. The maximum equity gearing level is 35% of net assets at the time of drawdown, which constrains the amount of gearing that can be invested in equities which are more volatile than the fixed interest part of the portfolio. The use of gearing has been an important facilitator of the income returns from the portfolio, particularly in financing the high yield preference share proportion of the portfolio which has historically provided significant dividend income for the Company. The Company's gearing includes a revolving credit facility which can be reduced without any significant financial penalties for early repayment and at relatively short notice.
Accounting and financial reporting - inadequate controls over financial record keeping and forecasting could result in inaccurate financial reporting, the Company being unable to meet its financial obligations or inability to pay a dividend, losses to the Company and impact its ability to continue trading as a going concern.	At each Board meeting, the Board reviews management accounts and receives a report from the Administrator, detailing any breaches during the period under review. The Company's annual financial statements are audited. The Audit Committee receives bi-annual compliance and internal reports from the Manager and meets a representative from its Internal Audit team on at least an annual basis and discusses any findings and recommendations relevant to the Company.
Regulatory and governance - failure to comply with relevant laws and regulations could result in fines, loss of reputation and potentially loss of an advantageous tax regime.	The Board and Manager monitor changes in government policy and legislation which may have an impact on the Company, and the Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager. There is also a regular review of adherence to governance guidelines that affect investment companies and how the Company is meeting existing or proposed guidelines. The Board is kept aware of proposed changes to laws and regulations, considers the changes and applies them as appropriate, if they are not already being met. From time to time the Board employs external advisers to advise on specific regulatory and governance matters.
Operational - the Company is dependent on third parties for the provision of all systems and services (in particular, those of the abrdn Group) and any control failures and gaps in their systems and services, including in relation to cyber security, could result in a loss or damage to the Company.	The Board receives reports from the Manager on its internal controls and risk management processes and receives assurances from the Manager and all its other significant service providers on at least an annual basis, including on matters relating to operational resilience and cyber security. Written agreements are in place with all third party service providers. The Manager monitors closely the control environments and quality of services provided by third parties, including those of the Depositary and Custodian, through service level agreements, regular meetings and key performance indicators.
Exogenous risks such as health, social, financial, economic, climate and geo-political - the financial impact of such risks, associated with the portfolio or the Company itself, could result in losses to the Company.	At any given time, the Company has sufficient cash resources to meet its operating requirements. In common with most commercial operations, exogenous risks over which the Company has no control are always a risk. The Company does what it can to address these risks where possible and to try and meet the Company's investment objectives. The Board is supportive of the Investment Manager's approach to environmental, social and governance ("ESG") risks and welcomes its active engagement with company management. Through this activity, the Investment Manager aims to identify and manage the exposure to such risks over time. The financial and economic risks associated with the Company include market risk, liquidity risk and credit risk, all of which the Investment Manager seeks to mitigate. Further details of the steps taken to mitigate the financial risks associated with the portfolio are set out in note 18 to the financial statements.

External Agencies

In addition to the services provided to the Company by the abrdn Group, the Board has contractually delegated certain services to external service suppliers, including: depositary services (which include the safekeeping of the Company's assets) (BNP Paribas Trust Corporation UK Limited) and share registration services (Equiniti Limited). Each of these services was entered into after full and proper consideration by the Board of the quality and cost of services offered. In addition, day-to-day accounting and administration services are provided, through delegation by the Manager, by BNP Paribas Securities Services.

Promotional Activities

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the rating of the Company's shares. The Board believes one effective way to achieve this is through subscription to, and participation in, the promotional programme run by the abrdn Group on behalf of a number of investment trusts under its management. The Company's financial contribution to the programme is matched by the abrdn Group.  The Company also supports the Manager's  investor relations programme which involves regional roadshows to existing and potential shareholders, promotional and public relations campaigns. The Manager's promotional and investor relations teams report to the Board on a quarterly basis giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make up of that register.

The purpose of the promotional and investor relations programmes is both to communicate effectively with existing shareholders and to gain new shareholders, with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of the Company is key. The promotional programme includes commissioning independent paid for research on the Company, most recently from Kepler Trust Intelligence. A copy of the latest research note is available from the Company's website.  

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated the day-to-day management and administrative functions to the Manager. There are therefore no disclosures to be made in respect of employees or environmental matters.

Modern Slavery Act

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Environmental, Social and Governance ("ESG") Matters

The Board is supportive of the Investment Manager's approach to ESG issues, including climate change, and welcomes its active engagement with company management.

The UK Stewardship Code and Proxy Voting

The Company supports the UK Stewardship Code, and seeks to play its role in supporting good stewardship of the companies in which it invests. Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager. abrdn plc is a tier 1 signatory of the UK Stewardship Code which aims to enhance the quality of engagement by investors with investee companies in order to improve their socially responsible performance and the long-term investment return to shareholders. While delivery of stewardship activities has been delegated to the Manager, the Board acknowledges its role in setting the tone for the effective delivery of stewardship on the Company's behalf.

The Board has also given discretionary powers to the Manager to exercise voting rights on resolutions proposed by the investee companies within the Company's portfolio. The Manager reports on a quarterly basis on stewardship (including voting) issues.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Under Listing Rule 15.4.29(R), the Company, as a closed ended investment company, is exempt from complying with the Task Force on Climate-related Financial Disclosures.

Viability Statement

The Board considers the Company, with no fixed life, to be a long-term investment vehicle but, for the purposes of this viability statement, has decided that three years is an appropriate period over which to report, irrespective of any exogenous risks that the Company may face. The Board considers that this period reflects a balance between a longer-term investment horizon, the inherent uncertainties within equity markets and the specifics of a closed-end investment company where its central purpose is different from other listed commercial and industrial companies. 

In assessing the viability of the Company over the review period, the Directors have focused upon the following factors:

-       The principal risks and uncertainties detailed above and the steps taken to mitigate these risks.

-       The ongoing relevance of the Company's investment objective.

-       The liquidity of the Company's portfolio. The majority of the portfolio is invested in readily realisable listed securities.

-       The level of ongoing expenses. The Company's annual expenses, excluding the cost of the dividend, are expected to continue to be covered by annual investment income. 

-       The level of gearing. This is closely monitored and stress testing is carried out by the Manager. The financial covenants attached to the Company's borrowings provide for significant headroom.

-       Regulatory or market changes.

-       The robustness of the operations of the Company's third party service providers.

In making its assessment, the Board has considered that there are other matters that could have an impact on the Company's prospects or viability in the future, including the current events in Ukraine, economic shocks, significant stock market volatility, the emerging risk of climate change, and changes in regulation or investor sentiment, including on income propensities.

Taking into account the Company's current position and the potential impact of its principal risks and uncertainties and emerging risks, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of approval of
this Report.

Outlook

The Board's view on the general outlook for the Company can be found in the Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included in its statement below.

On behalf of the Board
Robert Talbut
Chairman
24 May 2023

Promoting the Success of the Company

How the Board Meets its Obligations Under Section 172 of the Companies Act

The Board is required to describe to the Company's shareholders how the Directors have discharged their duties and responsibilities over the course of the financial year under section 172 (1) of the Companies Act 2006 (the "Section 172 Statement").  The Board provides below an explanation of how the Directors have promoted the success of the Company for the benefit of its members as a whole, taking into account, amongst other things, the likely long-term consequences of decisions, the need to foster business relationships with all stakeholders and the impact of the Company's operations on the environment.

The Purpose of the Company and Role of the Board

The purpose of the Company is to act as an investment vehicle to provide, over time, financial returns (both income and capital) to its shareholders. Investment trusts, such as the Company, are long-term investment vehicles and are typically externally managed, have no employees, and are overseen by an independent non-executive board of directors.

The Board, which, at the year end, comprised four independent non-executive Directors with a broad range of skills and experience across all major functions that affect the Company, retains responsibility for taking all decisions relating to the Company's investment objective and policy, gearing, corporate governance and strategy, and for monitoring the performance of the Company's service providers.

The Board's philosophy is that the Company should operate in a transparent culture where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike. The Board reviews the culture and manner in which the Manager and Investment Manager operate at its regular meetings and receives regular reporting and feedback from the other key service providers. The Board is very conscious of the ways it promotes the Company's culture and ensures as part of its regular oversight that the integrity of the Company's affairs is foremost in mind in the way that the activities are managed and promoted. The Board works very closely with the Manager and Investment Manager in reviewing how stakeholder issues are handled, ensuring good governance and responsibility in managing the Company's affairs, as well as visibility and openness in how the affairs are conducted.

The Company's main stakeholders have been identified as its shareholders, the Manager/Investment Manager, service providers, investee companies, its debt provider and, more broadly, the community at large and
the environment. 

How the Board Engages with Stakeholders

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

The Board and Manager also continue to consider how best to engage with private investors who invest through platforms, not least to increase voting participation at general meetings of the Company.

Stakeholder	How We Engage
Shareholders	Shareholders are key stakeholders and the Board places great importance on communication with them. The Board welcomes all shareholders' views and aims to act fairly between all shareholders. The Company's shareholder register is retail dominated and the Manager and Company's Stockbroker regularly meet with current and prospective shareholders to discuss performance. Shareholder feedback is discussed by the Directors at each Board meeting. The Company subscribes to the Manager's  investor relations programme in order to maintain communication channels with shareholders. Regular updates are provided to shareholders through the Annual Report, Half-Yearly Report, monthly factsheets, Company announcements, including daily NAV announcements, and through the Company's website. 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. In addition to the Annual General Meeting, there will be an Online Shareholder Presentation again this year following a favourable response in the past to this informal on-line event. The Board welcomes contact with shareholders and has put in place ways of receiving shareholder questions and responding to them. During the year, the Investment Manager held meetings with a number of the Company's larger shareholders to update them on the Company and to receive any feedback or concerns. The Board is keen to have increased shareholder voting at general meetings of the Company and reviews ways in which there can be greater communication with the largely private investor shareholder base.
Manager/Investment Manager	The Investment Manager's Review details the key investment decisions taken during the year. The Investment Manager has continued to manage the Company's assets in accordance with the mandate agreed with the Company, with the oversight of the Board. The Board regularly reviews the Company's performance against its investment objective and undertakes an annual strategy review meeting to ensure that the Company is positioned well for the future delivery of its objective for its shareholders. The Board receives presentations from the Investment Manager at every Board meeting to help it to exercise effective oversight of the Investment Manager and the Company's strategy. The Board, through the Management Engagement Committee, formally reviews the performance of the Manager and Investment Manager at least annually.
Service Providers	The Board seeks to maintain constructive relationships with the Company's suppliers either directly or through the Manager with regular communications and meetings. The Management Engagement Committee conducts an annual review of the performance, terms and conditions of the Company's main service providers to ensure they are performing in line with Board expectations, undertaking their responsibilities and providing value for money.
Investee Companies	Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager. The Board has also given discretionary powers to the Manager to exercise voting rights on resolutions proposed by the investee companies within the Company's portfolio. The Manager reports on a quarterly basis on stewardship (including voting) issues.  Through engagement and exercising voting rights, the Investment Manager actively works with companies to improve corporate standards, transparency and accountability. The Board monitors investments made and divested and questions the rationale for investment and voting decisions made.
Debt Provider	On behalf of the Board, the Manager maintains a positive working relationship with the provider of the Company's loan facility, and provides regular updates to the Board on business activity and compliance with its loan covenants. Gearing is an important component of the Company's capital structure.
Environment and Community	The Board and Manager are committed to investing in a responsible manner and the Investment Manager embeds Environmental, Social and Governance ("ESG") considerations into its research and analysis as part of the investment decision-making process.

Specific Examples of Stakeholder Consideration During the Year

The Board is fully engaged in both oversight and the general strategic direction of the Company. During the year, the Board's main strategic discussions focussed around income management, with a portfolio consisting of equities, fixed interest securities, options and exposure to UK smaller companies through abrdn Smaller Companies Income Trust plc, a closed-end investment company. The impact of inflation and increasing interest rates was factored into these discussions.

While the importance of giving due consideration to the Company's stakeholders is not a new requirement, and is considered during every Board decision, the Directors were particularly mindful of stakeholder considerations during the following decisions undertaken during the year ended 31 March 2023.

Management of the Portfolio

The Investment 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. 

The Board held its annual strategy meeting during the year at which it considered a number of factors, including the overall shape and composition of the portfolio, any feedback from shareholders and the Company's Stockbroker, and medium term revenue forecasts. 

During the year, the Board, through the Management Engagement Committee, decided that the continuing appointment of the Manager was in the best interests of shareholders.

Dividend

Following the payment of the final dividend for the year, of 4.6p per Ordinary share, total dividends for the year will amount to 14.2p per Ordinary share, representing a dividend yield of 5.7% based on the share price of 250p at the end of the financial year. This is in accordance with the Company's objective to provide shareholders with a high level of income.  

In deciding on the level of dividend for the year, the Board took into account the revenue earnings per Ordinary share for the year, forecast revenues for subsequent years and the level of revenue reserves.

Through meetings with shareholders and feedback from the Manager and the Company's Stockbroker, the Board remains conscious of the importance that shareholders place on the level, and sustainability, of dividends paid by the Company. 

Online Shareholder Presentation

As explained in the Chairman's Statement, to encourage and promote interaction and engagement with the Company's shareholders, the Board has again decided to hold an interactive Online Shareholder Presentation which will be held at 10.00am on 22 June 2023. At the presentation, shareholders will receive updates from the Chairman and Investment Manager and there will be an interactive question and answer session. The online presentation is being held ahead of the AGM in order to allow shareholders to submit their proxy votes prior to the meeting.

Shareholder Engagement and Communication

During the year, through a mechanism provided by the Companies Act 2006, the Company wrote to a number of shareholders who hold their shares indirectly through retail platforms, to advise them how to register for updates relating to the Company and notifications of communications with shareholders.

The Company has a large retail shareholder base and the Board is keen to communicate with as many shareholders as possible and to encourage and increase voting participation at general meetings. 

On behalf of the Board
Robert Talbut
Chairman
24 May 2023

Performance

Performance (Total Return)

	1 year	3 year	5 year
	% return	% return	% return
Net asset valueA	-2.2	+45.9	+24.3
Share priceA (based on mid-market)	-5.5	+46.9	+24.9
FTSE All-Share Index	+2.9	+47.4	+27.9
A Considered to be an Alternative Performance Measure.
All figures are for total return and assume re-investment of net dividends excluding transaction costs.
Source: abrdn plc, Morningstar & Factset

Analysis of Total Return Performance

Gross assets total return	-0.3
Total NAV return per share	-2.2
Total return on FTSE All-Share Index	2.9
Relative performance of NAV compared to FTSE All-Share Index	-5.1

Dividends

	Rate per share	XD date	Record date	Payment date
First interim dividend	3.20p	6 October 2022	7 October 2022	28 October 2022
Second interim dividend	3.20p	5 January 2023	6 January 2023	27 January 2023
Third interim dividend	3.20p	6 April 2023	11 April 2023	28 April 2023
Proposed final dividend	4.60p	6 July 2023	7 July 2023	28 July 2023
2022/23	14.20p
First interim dividend	3.20p	7 October 2021	8 October 2021	29 October 2021
Second interim dividend	3.20p	6 January 2022	7 January 2022	28 January 2022
Third interim dividend	3.20p	7 April 2022	8 April 2022	29 April 2022
Proposed final dividend	4.20p	7 July 2022	8 July 2022	29 July 2022
2021/22	13.80p

Ten Year Financial Record

Year to 31 March	2014	2015	2016	2017	2018	2019	2020	2021*	2022*	2023*
Revenue available for ordinary dividends (£'000)	3,789	3,877	3,617	3,925	4,106	3,920	3,961	3,796	4,379	4,584
Per share (p)
Net revenue earnings	12.6	12.9	12.1	13.1	13.7	13.1	13.0	12.3	14.2	14.8
Net dividends paid/proposed	12.00	12.25	12.25	12.75	13.00	13.20	13.20	13.20	13.80	14.20
Net total earnings	26.0	23.1	(17.8)	54.5	9.4	10.3	(45.4)	68.2	29.5	(6.6)
Net asset value	248.4	259.5	229.4	271.6	268.2	265.5	207.4	262.4	278.3	257.9
Share price (mid-market)	252.3	252.0	202.0	243.3	260.0	267.0	200.5	248.0	279.0	250.0
Shareholders' funds (£m)	78.7	77.8	68.8	81.5	80.5	80.1	63.9	80.9	85.8	79.9
* Net asset value per share is calculated after the repayment of the capital paid up on Cumulative Preference shares (see note 16).

Cumulative Performance

Rebased to 100 at 31 March 2013

As at 31 March	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
Net asset value	100.0	106.0	110.7	97.9	115.9	114.4	113.3	88.5	112.0	118.7	110.0
Net asset value total returnA	100.0	111.5	122.3	113.8	141.6	146.3	152.2	124.7	167.1	186.1	181.9
Share price performance	100.0	108.3	108.2	86.7	104.4	111.6	114.6	86.1	106.4	119.7	107.3
Share price total returnA	100.0	114.0	119.6	101.1	128.9	144.7	156.2	123.1	161.5	191.2	180.7
Benchmark performance	100.0	105.2	108.4	100.4	118.0	115.2	117.7	91.9	113.3	123.9	123.0
Benchmark total returnA	100.0	108.8	116.0	111.4	135.9	137.6	146.3	119.3	151.2	170.9	175.9
A Total return figures are based on reinvestment of net income.

Investment Manager's Review

Portfolio Strategy

We take a long term approach to investing, believing that whilst there might be volatility in the short and even medium term, share prices will ultimately reflect the fundamental value of a company. Consequently, there has been no change to our approach to the construction of the portfolio during the year under review. The Company's investment portfolio is invested in equities and preference shares. At the year-end 78.4% of the portfolio was invested in equities and 21.6% was invested in preference shares.

Equity Market Review

Global equity markets fell over the 12 month period to 31 March 2023, with the MSCI World Index down by around 9% in US Dollar terms. While that marks a poor return for global equities, it could have been worse, with the index down by 22% in mid-October last year. Since then, we have seen a recovery in valuations and the financial year has ended with markets in a more optimistic mood.

Market direction over the year was dominated by macroeconomic factors, with the interplay between inflation, economic growth, and central bank policy setting the tone for equities. At the start of the Company's financial year, from April to June, the direction of travel continued very much as it was in the first quarter of 2022. Inflation expectations were increasing, driven by post-Covid tightness in many markets and exacerbated by the start of the Russia-Ukraine conflict. Indeed, some of the economic data was historic, with US inflation reaching a 40 year high and UK unemployment a 48 year low. This resulted in more hawkish central bank policy and rising interest rate expectations, with the clear impact of higher discount rates translating into lower equity valuations across the market, but especially in higher growth sectors. Investors also worried that higher interest rates would lead to a recession and, although the impact from Covid-19 had reduced significantly compared to the prior year, China's zero-Covid policy continued to weigh on global economic growth.

In July, there was some respite, with global equities increasing by almost 10% in a month - although even this did not quite offset the declines seen in the prior month. The increase came despite the ongoing and increasing fears of a recession and a warning at the start of the month from the Bank of England that the economic outlook for the UK had "deteriorated materially", matching similar comments from the International Monetary Fund ("IMF"). This view of underlying economic weakness was supported by data, with inflation continuing to rise and GDP growth slowing. UK consumer confidence in June remained at its lowest level since records began in 1974. The UK also faced increased political uncertainty as Prime Minister Boris Johnson finally announced his resignation. Despite the weak macro backdrop, corporate earnings results were generally strong at the half year stage, with many cyclical companies beating reduced expectations. Throughout the course of the year, fundamental corporate earnings remained robust, with limited signs of weakness.

July proved to be a false dawn for equity markets, however, with continued high levels of inflation pushing central banks to double down on more hawkish messaging and on interest rate rises. The Federal Reserve implemented a large 0.75% rise in interest rates, while the Bank of England raised interest rates by 0.5% at its September meeting. A few days later, UK Chancellor Kwarteng's mini-budget surprised investors with widespread unfunded tax cuts, which were partially reversed in early October. The £45 billion package prompted a wave of selling in bond and currency markets, driving gilt yields higher. The IMF warned that it did not recommend "large and untargeted" measures and that the proposals could fuel inflation and inequality. The 10-year gilt yield finished the month above 4% and the Bank of England was forced to launch emergency measures to stabilise markets, delaying a planned gilt sale and committing to buy up to £65 billion of gilts over a 13-day period. After the end of the period, the turmoil caused by the budget forced Prime Minister Liz Truss to resign, setting a record for the shortest premiership in history, at 45 days.

After a strong start to the year, the summer months also saw commodity price pull back. The combination of recession fears and resilient production from Russia meant that the oil price declined, with the West Texas Intermediate benchmark back under $80 per barrel, having peaked at over $120 per barrel as recently as June. At the same time, a period of warmer and windier weather led to a pullback in European natural gas prices, mitigating a major source of concern for the European economy since the Russian invasion of Ukraine.

The US economy outperformed expectations, reporting annualised growth of 2.6% in the third quarter, having been in a technical recession during the first half of the year. In the UK, Gilt markets settled after the volatility arising from the mini-Budget. In particular, government bond prices rose as former chancellor Rishi Sunak succeed Liz Truss as Prime Minister and quickly implemented a more pragmatic fiscal policy.

Equity markets turned more positive in October, as investors became optimistic that central banks could slow the pace of future interest rate increases. The US was one of the top-performing markets, with the Dow Jones Industrial Average posting its best monthly gain since 1987, having risen for four consecutive weeks. Markets rose again in November, as US data showed decelerating inflation, adding to investor expectations for a change in Federal Reserve policy. Markets also responded positively to the announcement from the Chinese government that it would start to ease Covid-19 restrictions.

That optimism reversed slightly in December as recession fears increased and the relaxation of Covid-19 restrictions in China led to a spike in cases, yet this concern was relatively short lived. 2022 closed with more interest rate rises: the Federal Reserve, European Central Bank, Swiss Central Bank and Bank of England all raised interest rates by 0.50% in their December meetings. The moves marked a deceleration in the pace of monetary tightening, however, and equities recovered into the calendar year end, helped by better than expected macro data.

The first quarter of 2023 saw continued volatility in equity markets, yet despite some marked swings, all major asset classes except the US Dollar and commodities delivered positive returns - a contrast to 2022 which was a rare year when both bonds and equities declined. The quarter started with a 'risk-on' mood due to better than expected economic data and falling recession worries, as gas prices fell in Europe and there were signs of a rapid reopening in China, with no persistent rise in infections, and a resilient US consumer sector. This led to short covering and a rebound in economically sensitive sectors, especially Consumer Discretionary. However, it also drove a resurgence in inflation pressures and incrementally hawkish rhetoric from central banks.

Market dynamics reversed sharply in March, with the collapse of Silicon Valley Bank in the US and the subsequent issues with Credit Suisse in Europe. This led to a 'risk-off' environment, with bonds rising and risk assets falling. Equities, especially in Europe, bore the brunt of the pain given the higher exposure of that region's banking sector to the economy and equity markets relative to the US. Still, signs that the crisis was under control as we moved through March meant that risk assets reversed direction again. Strong underlying fundamentals of the banking sector supported the view that Silicon Valley Bank and Credit Suisse were exceptions rather than the start of a broader sector issue.

Over the course of the 12 month period, UK equities performed relatively well compared to other global markets. The FTSE All-Share Index delivered a total return of 2.9% and the large cap FTSE 100 Index returned 5.2%. The performance was better than the US S&P 500 index returning -8.1% and the MSCI Europe Index at 3.9%. Generally, the weighting of the UK market towards more defensive and less growth-orientated sectors has worked in its favour during a period of rising interest rates. It is also notable, however, that in a time of flat/falling equity markets, a higher dividend yield enhances total return noticeably.

With the dominant theme for the year being one of rising interest rates, sector leadership in the UK market remained more with the value-orientated sectors, despite these being more economically sensitive. Energy was the top performing sector, with gains largely concentrated in the first part of the year. Consumer Discretionary and Industrials also performed well, despite rising recession concerns. At the other end of the spectrum, the Property sector performed particularly poorly, falling by around 30%. UK property companies have operated with higher levels of leverage than most sectors, and so rising interest rates put pressure on returns at the same time that their ability to grow rental yield is constrained by demand. Materials were also weak, with the boost from China reopening not enough to offset a pull-back in valuations earlier in the year.

Investment Performance

Over the year ended 31 March 2023,  the Net Asset Value ("NAV") of the Company declined by 2.2% on a total return basis.  This compares to the benchmark FTSE All-Share Index total return of 2.9%. The under performance was concentrated in two areas: the preference share portfolio and the holding in abrdn Smaller Companies Income Trust ("ASCIT").  The preference shares declined in value by 10.2% and detracted 3.0% from performance - we discuss the reasons for this in more detail below. The ASCIT share price declined by almost 12% (in total return terms) over twelve months, even following the re-rating of its shares after its announcement of a strategic review, and contributed around 1% of the under performance.

This under performance should largely be expected in the investment environment we saw during the year. Rising interest rates benefit less growth-orientated investments and smaller companies as an asset class under-performed larger companies during the year. Furthermore, ASCIT follows a momentum strategy, which is disadvantaged in such an environment.

Within the core equity portfolio, there were a number of very strong performers. These included a number of recent purchases. Games Workshop Group (+58%) recovered well after our investment, as did Vistry Group (+35%), NatWest (+29%), Hiscox (+25%), Oxford Instruments (+19%) and Smith & Nephew (+14%). Energy stocks continued to be strong contributors to overall performance, with BP (+42%) and TotalEnergies (+31%) standing out. TotalEnergies was also an example of a European holding in the portfolio that performed well. Novo-Nordisk (+52%) continued to deliver upgrades to revenue as new product launches beat expectations, while Kone (+20%), Nordea (+18%), AXA (+18%) and Engie (+13%) all delivered positive returns. Another trend we benefited from (and which seems to be only increasing) was the rise in bids for UK listed companies, reflecting the discount many trade at compared to international peers.  Euromoney Institutional Investor (+48%) and Wood Group (+24%) were subject to bids in the year.

Some other positions did not work out as well as we had hoped. The most concentrated under performance came in the Real Estate sector, with the impact of rising yields dragging down asset values and increasing interest costs. Sirius Real Estate (-41%), Urban Logistics (-29%), Supermarket Income REIT (-21%) and Assura (-17%) all under performed in share price terms although the underlying businessess continued to perform as expected.

The number of companies missing our expectations on underlying performance was small, although there were some notable disappointments. Marshalls (-52%) had two profit warnings after failing to offset the slow down in consumer demand for its products. Direct Line Insurance (-45%) was impacted by a high level of claims inflation in the winter months, putting its capital ratio under pressure and leading to a cut in the dividend. Close Brothers (-19%) disclosed a write down to the value of a recent acquisition. In each case we have retained the holding, and in the cases of Marshalls and Close Brothers increased the positions - we see these as strong long term businesses which will regain lost value over time. In the case of Direct Line Insurance, signs that the pricing cycle is improving cause us to hold on to the position for now.

Gearing and Preference Share Portfolio

As stated above, the preference shares declined in value in the year. This performance is very much as expected - during a period of rapidly rising interest rates we would expect the bond like characteristics of preference shares to mean they decline in value. Our view on the long term attractions of the preference shares has not changed. Firstly, it is unlikely that we will see a period of such rapid rises in interest rates repeated this cycle - indeed it is more likely that interest rates will eventually decline, acting as a tailwind for the valuations of the preference shares. Secondly, the attraction of these instruments is their high, dependable yield. This has not changed and the preference share portfolio offered a forward yield of almost 7.5% at the year end.

Gearing (net of cash) increased during the year, from 20.4% to 22.2%. The gearing is notionally invested in the preference share portfolio. At the year end these securities had a value of £20.9 million, exceeding the net indebtedness which stood at £17.8 million.

Revenue Account

Revenue earnings per share increased by 4.4% over the year to 14.83p (2022: 14.21p). This continues the strong recovery we have seen in dividends since the Covid-19 pandemic. The Company aims to invest in companies with the ability to grow dividends over time and it is encouraging to see revenue growth delivered. This is an important target for the Company.

The following table details the Company's main sources of income over the last five years.

	2023	2022	2021	2020	2019
	%	%	%	%	%
Ordinary dividends	62.8	66.5	57.2	60.0	58.5
Preference dividends	29.1	26.9	33.2	31.0	34.4
abrdn Smaller Companies Income Trust	6.6	5.2	5.7	5.4	4.9
Fixed interest and bank interest	0.2	-	-	0.3	0.2
Traded option premiums	1.3	1.4	3.9	3.3	2.0
Total	100.0	100.0	100.0	100.0	100.0
Total income (£'000s)	5,673	5,239	4,529	4,807	4,712

Portfolio Activity

Changes to the portfolio during the year were, as ever, driven by fundamental analysis and by our views on the merits of individual companies. However, it is useful to try to explain some trends behind our trading activity over the course of the year. In the prior year, there was a clear move to add value to the portfolio, reflecting our view that the growth premium in equities was too high and that interest rates were likely to rise. In this financial year, the main drivers, such as they are, were different - although we retain a slight preference for value within the portfolio, we have been looking to add income and quality. Our broad view is that market levels look high and the economic outlook is uncertain. In this scenario we see income as an increasingly important part of total return and have been taking action to enhance this.

In April 2022, we initiated a position in Supermarket Income REIT. The company invests in supermarket real estate, with long term tenancy agreements and inflation linked pricing. This provides a reliable, and defensive, source of income, with a 5% headline yield and with the inflation linkage making cashflows reliable through the cycle. We sold out of one position in the month. Last year's purchase of the Schroders-Non Voting shares was based on a view that the discount of that instrument to the voting shares was too wide and would close over time. The announcement in March 2022 that the company would combine the two lines of shares caused the discount to close, resulting in a 29% increase in the value of our holding. With the investment case having played out we chose to move on to other ideas.

During July, we started a new position in Legal & General. The share price had fallen given concerns about how rising rates impact credit quality. In our view, Legal & General has a secure outlook and actually benefits from rising interest rates through its stronger Solvency 2 position (a measure of balance sheet strength for insurance companies). This means the dividend, with an 8% dividend yield, is secure and the company can continue to grow, using an integrated approach and, for example, through its strong market position in bulk annuities. We see it as an undervalued company that should deliver resilient income through cycle.

To fund this trade, we sold out of a number of positions. Fortum had performed poorly due to its exposure to Russia and the risks to the business from higher European gas prices. While we think much of the risk is in the price, uncertainty remained very high and we could find similarly high yields which are likely to be more secure, so chose to move on. We also sold United Utilities, which held up well as a source of defensive exposure, but looked fairly priced. We also sold out of Euromoney Institutional Investor following a bid for the company at a reasonably attractive price.

During the third quarter of 2022 we introduced three new holdings. The first of these was lift manufacturer Kone, listed in Finland. The shares had de-rated on China growth concerns and looked attractively valued given the quality of the business with a very secure balance sheet. The weighting of earnings to recurring service revenue should make it resilient and 4.4% dividend yield is a premium to the market.

We also started a new position in French utility Engie. The implementation of a power price cap in Europe above market expectations and the company's business plan provides confidence in the dividend at an attractive yield of approximately 8%. The company also has an attractive long term renewable growth story.

The third new position was in reinsurer Hiscox, started after a positive meeting with the management team. After weak performance post-2019 a confident new CEO has put the balance sheet in a strong position and has sorted out legacy issues in the portfolio.  The company is well positioned for better underwriting conditions and higher investment returns, both of which should drive strong earnings growth in the next few years.  Hiscox is also less at risk from inflation concerns than its peers. The shares trade on an attractive valuation and US retail has the potential to be a much larger business if it can deliver as management expects. Its forward yield is marginally above the market level with the ability to grow.

We sold out of two positions, both of which were inherited as spin outs from other holdings and were subscale in the portfolio. Haleon was spun out of GlaxoSmithKline and has an attractive end market position, but high debt and litigation risk combined with a low dividend yield make it less appropriate for this portfolio. We also sold out of Woodside Energy, another subscale inherited position from BHP, after it went ex-dividend.

We started new positions in two companies in October. The first was medical services company Smith & Nephew. The stock has de-rated to 12x earnings, well below its long term average of 17x, but has a new CEO with a credible plan to fix the business. A 3% dividend yield is not large but has potential to grow over time and the company remains a potential take out candidate at this valuation. Income is likely to be defensive and relatively insulated from macro turbulence.

We also started a new position in Games Workshop Group. The shares have de-rated, but it has all the characteristics of a quality company with a high return on capital, a net cash balance sheet and a very strong track record of growth. Recent dividend increases provide reassurance on the commitment to distribute excess cash and the business should be resilient through any recession. Longer term, growth potential comes from expansion in foreign markets and consistent product roll out to a loyal customer base.

After a review of the property sector in October, we decided to focus our exposure. We consequently reduced the number of holdings within the sector, selling out of Sirius Real Estate, Assura and SuperMarket Income REIT. In each case, we see a risk to income from higher interest rates which may compress margins and lead to lower cash generation.

During November, we sold out of Entain. This has been a long term holding in the portfolio, with a positive return over that period. However, we see less chance of the company paying a material dividend in the near term and there is a high degree of uncertainty on growth and regulation in the US, meaning it is not a natural holding in the portfolio. We therefore choose to move on. The proceeds were used to start a new position in Dechra Pharmaceuticals, the veterinary pharmaceutical business. We sold out of this company in April 2021, but given its recent under performance it now looks good value again, with the earnings multiple 35% lower and the dividend yield 65% higher than when we sold. The quality characteristics remain very much in place, with strong barriers to entry and structural growth in end markets, and recent deals have built out the research pipeline to support future earnings growth.

During January we started two new positions. The first was in XP Power. The company designs and produces power supply products, often used in highly sensitive manufacturing processes. It has 4% yield and the potential to deliver attractive growth, with the current valuation at less than a 14x earnings multiple, reflecting some cyclical weakness and recent legal costs. Recent downgrades should now be close to an end and resolution of supply chain issues and litigation could be positive catalysts for the company within our investment time horizon.

Secondly, we started a new position in Dr. Martens. The iconic shoe brand is currently delivering steady top line growth, with more to play for in emerging markets and the potential for margins to improve as the sales mix shifts away from wholesale. The shares have de-rated on issues around a change in the company's US distribution centre which have hit profits in the short term. We believe this is an opportunity to buy a solid brand with earnings growth from market expansion and the direct to consumer mix shift, which delivers 4x higher margins than wholesale over the next five years. The current multiple of 8x earnings is an opportunity to buy for the long term in our view and a 4% dividend yield (which is very well covered) is attractive for the portfolio. It is also a diversifier, given our underweight exposure to the Fashion and Consumer Discretionary sectors.

In March, we made a number of portfolio adjustments to enhance income. In the Mining sector, we exited BHP and continued to reduce the weighting to Rio Tinto, reflecting our view that a recovery in Chinese demand is now largely priced in to the share price. We continued to reinvest some proceeds in Anglo American. We also topped up the position in Diversified Energy which has been weak on lower US gas prices, despite being well hedged - the yield of 15% is well covered and very attractive in our view. We started a new position in HSBC.  The shares have pulled back in response to the recent "banking crisis" but we see the company as a natural beneficiary of a flight to quality for deposits and of reduced competition in the attractive Asian wealth market following the UBS purchase of Credit Suisse. The dividend is now well on its way to recovering to pre-Covid levels and the 8% yield is highly attractive given exposure to growing Asian markets. We funded the purchase with a small reduction in the holding in Standard Chartered - the move helps diversify the portfolio's exposure to banks and enhances income.

Finally, we sold out of the position in Kone - a purchase form earlier in the year. The shares had risen by 15% in a flat market since we purchased them in September, providing an attractive annualised return. We now see the company as more fairly valued so have taken profits and are moving on, hopefully to better ideas.

Stewardship and ESG

We believe that, as long term owners of the businesses in which we are invested, it is not sufficient merely to seek out assets that we believe to be undervalued. It is also incumbent upon us to take a proactive approach to our stewardship of these companies. Therefore, we engage extensively with our investee companies. We have attended a range of meetings with chairmen, non-executive directors and other stakeholders. Topics covered have included the composition of boards, environmental and social issues, and remuneration. Risk is a very broad subject that is interpreted in varying manners by different companies. However, by engaging on this subject we secure a deeper understanding of how the boards of our investee companies perceive and seek to manage these issues. Such interactions also enable us to push for improved disclosure and better management practices and, on occasion, different decisions where appropriate. We have had conversations regarding companies' financing choices. We find that it is always worthwhile communicating our preference for conservatively structured balance sheets that place a company's long term fortunes ahead of possible short term share price gains. Such activity is by its nature time consuming but we regard it as an integral aspect of our role as long term investors.

Consideration of Environmental, Social and Governance ("ESG") factors forms an important part of our process. Whilst the management of the Company's investments is not undertaken with any specific instructions to exclude certain asset types or classes, we embed ESG into the portfolio and sector specific research on all positions in the portfolio as part of the investment process. ESG investment is about active engagement with the goal of improving the performance of assets held by the Company. We aim to make the best possible investments for the Company by understanding the whole picture of the companies invested in - before, during and after an investment is made. That includes understanding the ESG risks and opportunities they present, and how these could affect longer-term performance and valuation. With in excess of 1,000 investment professionals and more than 50 ESG specialists, we are able to take account of ESG factors in our company research, stock selection and portfolio construction. ESG considerations underpin all investment activities.

Outlook

After the first quarter of 2023, anyone hoping for calmer markets after a turbulent 2022 would have been disappointed, with a sharp equity rally to start the year followed by a banking "crisis" which has hopefully largely passed by already. It has been a surprising start to the year in two ways. Firstly, fundamentals have so far been better than expected, with economic data proving resilient, A recession has so far been avoided and consensus forecasts have been upgraded from outright bearish to just slightly gloomy. Company results have proved to be better than expected, particularly in more cyclical areas of the market, with retailers and industrial companies rallying in recent months.

That should all support higher equity markets, but the second surprise in our view is that equities have risen as strongly as they have done. While the fundamentals have been less bad than feared, valuations already looked generous and it is notable that the market now prices in the lowest equity risk premium for many years once we account for impact of higher interest rates and slower profit growth based on consensus forecasts.

Interest rate expectations continue to drive the market direction, and we should not expect a pivot from central banks soon - falling energy costs have helped confidence rebound, but core inflation remains stubbornly high globally. Wage growth continues to surprise to the upside and, until this adjusts, central banks are unlikely to risk the rate cuts the market seems to be expecting. A correction in market levels is therefore likely in our view, especially as Q1 earnings could be a source of downgrades given that aggregate company margins remain close to all-time highs, something that should simply not persist with higher interest charges and wage inflation.

How do we reflect this outlook in the portfolio? The focus on quality companies and the generation of resilient income remains to the fore and becomes more important than ever. In a period where equity market returns could pause after an unprecedented run since the global financial crisis, income is likely to be a more important part of total return.

It is also worth noting that not all parts of the equity market are equally valued: the UK market remains at a record discount to other developed markets. In the last month we have started to see this reflected in a notable increase in acquisitions of UK listed companies (Wood Group and Dechra Pharmaceuticals are examples within the portfolio that have been bid for in the last few months). Unless the valuation gap closes, this is likely to continue and could be an additional tailwind, especially for UK companies with genuine barriers to entry and scarcity value which is underappreciated in public markets. For overseas investors, the need to deliver growth and margin improvement as organic opportunities reduce will likely compel further deals. So overall, a focus on income and stock selection is more important than ever as we look to generate returns.

Iain Pyle and Charles Luke
abrdn Investments Limited
24 May 2023

Investment Portfolio - Equities

As at 31 March 2023
		Valuation	Total	Valuation
		2023	portfolio	2022
Company	FTSE All-Share Index Sector	£'000	%	£'000
abrdn Smaller Companies Income Trust	Closed End Investments	7,534	7.8	9,041
AstraZeneca	Pharmaceuticals and Biotechnology	4,136	4.3	4,264
Shell	Oil, Gas and Coal	3,931	4.0	2,997
BP	Oil, Gas and Coal	3,184	3.3	2,339
Anglo American	Industrial, Metals and Mining	2,748	2.8	-
SSE	Electricity	2,661	2.7	2,537
Diageo	Beverages	2,566	2.7	2,744
Diversified Energy	Oil, Gas and Coal	2,499	2.6	2,665
British American Tobacco	Tobacco	1,913	2.0	2,424
Energean	Oil, Gas and Coal	1,894	2.0	1,733
Ten largest investments		33,066	34.2
TotalEnergies	Oil, Gas and Coal	1,839	1.9	2,068
National Grid	Gas, Water and Multiutilities	1,726	1.7	1,846
Standard Chartered	Banks	1,526	1.6	2,643
Unilever	Personal Care, Drug and Grocery Stores	1,378	1.4	1,136
Imperial Brands	Tobacco	1,351	1.4	1,167
Novo-Nordisk	Pharmaceuticals and Biotechnology	1,272	1.3	894
Inchcape	Industrial Support Services	1,226	1.3	1,060
Chesnara	Life Insurance	1,222	1.3	1,674
Rio Tinto	Industrial, Metals and Mining	1,152	1.2	2,152
Prudential	Life Insurance	1,149	1.2	1,427
Twenty largest investments		46,907	48.5
Marshalls	Construction and Materials	1,123	1.2	654
Intermediate Capital Group	Investment Banking and Brokerage Services	1,078	1.1	-
M&G	Investment Banking and Brokerage Services	1,051	1.1	1,428
NatWest	Banks	1,042	1.1	625
OSB	Finance and Credit Services	995	1.0	933
Hiscox	Non-life Insurance	982	1.0	-
Engie	Gas, Water and Multiutilities	981	1.0	-
Balfour Beatty	Construction and Materials	967	1.0	668
Vodafone	Telecommunications Service Providers	939	1.0	1,658
Howden Joinery	Retailers	938	1.0	1,166
Thirty largest investments		57,003	59.0
AXA	Non-life Insurance	906	0.9	821
HSBC	Banks	903	0.9	-
Morgan Sindall	Construction and Materials	883	0.9	1,262
Coca-Cola HBC	Beverages	859	0.9	621
Mondi	General Industrials	855	0.9	919
GSK	Pharmaceuticals and Biotechnology	835	0.9	1,203
Oxford Instruments	Electronic and Electrical Equipment	833	0.9	45
Close Brothers	Banks	810	0.8	1,071
Telecom Plus	Telecommunications Service Providers	754	0.8	1,608
Legal & General	Life Insurance	734	0.7	-
Forty largest investments		65,375	67.6
Bawag	Banks	722	0.7	714
XP Power	Electronic and Electrical Equipment	713	0.7	-
Direct Line Insurance	Non-life Insurance	705	0.7	1,146
Dr. Martens	Personal Goods	673	0.7	-
Games Workshop	Leisure Goods	654	0.7	-
Wood	Oil, Gas and Coal	648	0.7	524
Ashmore	Investment Banking and Brokerage Services	641	0.7	676
Telenor	Telecommunications Service Providers	584	0.6	767
Drax	Electricity	578	0.6	747
Softcat	Software and Computer Services	563	0.6	402
Fifty largest investments		71,856	74.3
Bodycote	Industrial Engineering	553	0.6	688
RS Group	Industrial Support Services	549	0.6	848
Vistry Group	Household Goods and Home Construction	549	0.6	-
Dechra Pharmaceuticals	Pharmaceuticals and Biotechnology	533	0.6	-
Nordea	Banks	522	0.5	480
Smith & Nephew	Medical Equipment and Services	475	0.5	-
Urban Logistics	Real Estate Investment Trusts	403	0.4	598
Redrow	Household Goods and Home Construction	320	0.3	351
Total equity investments		75,760	78.4
Purchases and/or sales of portfolio holdings effected during the year result in 2023 and 2022 values not being directly comparable.

Investment Portfolio - Other Investments

As at 31 March 2023
	Valuation	Total	Valuation
	2023	portfolio	2022
Company	£'000	%	£'000
Preference sharesA
Ecclesiastical Insurance Office 8 5/8%	5,512	5.7	5,936
Royal & Sun Alliance 7 3/8%	4,437	4.6	5,220
General Accident 7.875%	3,654	3.8	4,364
Santander 10.375%	3,616	3.7	4,491
Standard Chartered 8.25%	2,900	3.0	3,737
R.E.A. Holdings 9%	776	0.8	968
Total Preference shares	20,895	21.6
Total Investments	96,655	100.0
A None of the preference shares listed above have a fixed redemption date.
Purchases and/or sales of portfolio holdings effected during the year result in 2023 and 2022 values not being directly comparable.

Distribution of Assets and Liabilities

			Movement during the year
	Valuation at				Gains/	Valuation at
	31 March 2022		Purchases	Sales	(losses)	31 March 2023
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Equities	77,709	90.5	16,513	(16,199)	(2,263)	75,760	94.8
Preference shares	24,716	28.8	-	-	(3,821)	20,895	26.2
Total investments	102,425	119.3	16,513	(16,199)	(6,084)	96,655	121.0
Current assets	2,656	3.1				2,559	3.2
Current liabilities	(19,262)	(22.4)				(9,350)	(11.7)
Non-current liabilities	-	-				(9,951)	(12.5)
Net assets	85,819	100.0				79,913	100.0
Net asset value per Ordinary share	278.3p					257.9p

Directors' Report (extract)

The Directors present their report and audited financial statements for the year ended 31 March 2023.

Results and Dividends

The financial statements for the year ended 31 March 2023 are contained below. Dividends paid and proposed for the year amounted to 14.20p per Ordinary share.

First, second and third interim dividends for the year, each of 3.20p per Ordinary share, were paid on 28 October 2022, 27 January 2023 and 28 April 2023 respectively. The Directors recommend a final dividend of 4.60p per Ordinary share, payable on 28 July 2023 to shareholders on the register on 7 July 2023. The ex-dividend date is 6 July 2023. Under UK-adopted international accounting standards the third interim and final dividends will be accounted for in the financial year ended 31 March 2024. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.

Investment Trust Status

The Company is registered as a public limited company (registered in England and Wales No. 00386561) and is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company has been approved by HM Revenue & Customs as an investment trust subject to it continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 April 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 March 2023 so as to enable it to comply with the ongoing requirements for investment trust status.

Individual Savings Accounts

The Company satisfies the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.

Capital Structure

During the year the Company issued 145,000 Ordinary shares of 50p each under its non pre-emptive allotment authority, raising £374,000 in aggregate on a non-dilutive basis. The issued Ordinary share capital at 31 March 2023 consisted of 30,964,580 Ordinary shares of 50p each and 50,000 3.5% Cumulative Preference Shares of £1 each.

Voting Rights

Each Ordinary and Cumulative Preference share carries one vote at general meetings of the Company. The Cumulative Preference shares carry a right to receive a fixed rate of dividend and, on a winding up of the Company, to the payment of such fixed cumulative preferential dividends to the date of such winding up and to the repayment of the capital paid up on such shares in priority to any payment to the holders of the Ordinary shares.

The Ordinary shares, excluding any treasury shares, carry a right to receive dividends and, on a winding up or other return of capital, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

There are no restrictions on the transfer of Ordinary or Cumulative Preference shares in the Company other than certain restrictions which may from time to time be imposed by law.

Management Agreement

The Company has appointed abrdn Fund Managers Limited ("aFML"), a wholly owned subsidiary of abrdn plc, as its alternative investment fund manager. aFML has been appointed to provide investment management, risk management, administration, company secretarial services and promotional activities to the Company. The Company's portfolio is managed by abrdn Investments Limited by way of a group delegation agreement in place between aFML and abrdn Investments Limited. In addition, aFML has sub-delegated administrative and company secretarial services to abrdn Holdings Limited and promotional activities to abrdn Investments Limited. Details of the management fee and fees payable for promotional activities are shown in notes 4 and 5 to the financial statements.

The management agreement is terminable on not less than six months' notice. In the event of termination by the Company on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period.

Substantial Interests

As at 31 March 2023, the following interests in the issued Ordinary share capital of the Company had been disclosed in accordance with the requirements of the FCA's Disclosure Guidance and Transparency Rules:

Shareholder	Number of Ordinary shares held	% of Ordinary shares held
abrdn Retail PlansA	5,986,289	19.3
A Non-beneficial interest

There have been no changes notified to the Company between the year end and the date of approval of
this Report.

Directors

Marian Glen retired as a Director on 6 July 2022. At the end of the year the Board comprised four non-executive Directors, each of whom is considered by the Board to be independent of the Company  and the Manager.

The Directors attended scheduled Board and Committee meetings during the year ended 31 March 2023 as follows (relevant meetings in brackets):

Director	Board	Audit Committee	Management Engagement Committee	Remuneration Committee
Robert Talbut	5 (5)	2 (2)	1 (1)	1 (1)
Robin Archibald	5 (5)	2 (2)	1 (1)	1 (1)
Marian GlenA	2 (2)	1 (1)	- (-)	- (-)
Jane Pearce	5 (5)	2 (2)	1 (1)	1 (1)
Helen Sinclair	5 (5)	2 (2)	1 (1)	1 (1)

^A Retired 6 July 2022

The Board meets more frequently when business needs require and has regular dialogue between formal Board meetings, including with the Manager. There were two additional Board meetings and a number of committee meetings during the year, including to approve the new loan facility.

Under the terms of the Company's Articles of Association, Directors must retire and be subject to appointment at the first Annual General Meeting after their appointment by the Board, and be subject to re-appointment every three years thereafter. Directors with more than nine years' service are subject to annual re-appointment. However, the Board has decided that all Directors will seek annual re-appointment after initial appointment to the Board.

Each of Helen Sinclair, Robin Archibald, Robert Talbut and Jane Pearce will seek re-appointment at the Annual General Meeting.

The Board believes that all the Directors seeking re-appointment remain independent of the Manager and free from any relationship which could materially interfere with the exercise of their judgement on issues of strategy, performance, resources and standards of conduct. The Board believes that each Director has the requisite high level and range of business, investment and financial experience which enables the Board to provide clear and effective leadership, oversight and proper governance of the Company. 

Following formal performance evaluations, the performance of each of the Directors seeking re-appointment continues to be effective. Each Director has demonstrated commitment to the role and the Board is satisfied that their individual performances contribute to the long-term sustainable success of the Company. All of the Directors have demonstrated that they have sufficient time and commitment to fulfil their directorial roles with the Company. The Board therefore recommends the re-appointment of each of the Directors at the Annual General Meeting.

Board's Policy on Tenure

In normal circumstances, it is the Board's expectation that Directors will not serve beyond the Annual General Meeting following the ninth anniversary of their appointment. However, the Board takes the view that independence of individual Directors is not necessarily compromised by length of tenure on the Board and that continuity and experience can add significantly to the Board's strength. The Board believes that recommendation for re-election should be on an individual basis following a rigorous review which assesses the contribution made by the Director concerned, but also taking into account the need for regular refreshment and diversity, as well as providing continuity of experience of the Company. 

It is the Board's policy that the Chairman of the Board will not normally serve as a Director beyond the Annual General Meeting following the ninth anniversary of his appointment to the Board. However, this may be extended in certain circumstances including the facilitation of effective succession planning and the development of a diverse Board. In such a situation the reasons for the extension will be fully explained to shareholders and a timetable for the departure of the Chairman clearly set out.

The Role of the Chairman and Senior Independent Director

The Chairman is responsible for providing effective leadership to the Board, by setting the tone of the Company, demonstrating objective judgement and promoting a culture of openness and debate. The Chairman facilitates the effective contribution and encourages active engagement by each Director. In conjunction with the Company Secretary, the Chairman ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chairman acts upon the results of the Board evaluation process by recognising strengths and addressing any weaknesses and also ensures that the Board engages with major shareholders and that all Directors understand shareholder views.

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

Directors' and Officers' Liability Insurance

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. In addition, the Company has entered into a separate deed of indemnity with each of the Directors reflecting the scope of the indemnity in the Articles of Association. Under the Articles of Association, each Director is entitled to be indemnified out of the assets of the Company to the extent permitted by law against any loss or liability incurred by him or her in the proper execution of his or her duties in relation to the affairs of the Company. 

Management of Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, each Director prepares a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his or her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his or her wider duties is affected. Each Director is required to notify the Company Secretary of any potential, or actual, conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

No Director has a service contract with the Company although all Directors are issued with letters of appointment, which may be amended from time to time to reflect regulatory and other changes. Other than the deeds of indemnity referred to above and the Directors' letters of appointment, there were no contracts during, or at the end of the year, in which any Director was interested.

The Company has a policy of conducting its business in an honest and ethical manner. The Company takes a zero-tolerance approach to bribery and corruption and has procedures in place that are proportionate to the Company's circumstances to prevent them. The Manager also adopts a group-wide zero-tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption. Copies of the Manager's anti-bribery and corruption policies are available on its website.

In relation to the corporate offence of failing to prevent tax evasion, it is the Company's policy to conduct all business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion whether under UK law or under the law of any foreign country and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships.

Board Diversity

The Board recognises the importance of having a range of skilled and experienced individuals with the right knowledge represented on the Board in order to allow it to fulfil its obligations. The Board also recognises the benefits and is supportive of the principle of diversity in its recruitment of new Board members. The Board will not display any bias for age, gender, race, sexual orientation, socio-economic background, religion, ethnic or national origins or disability in considering the appointment of its Directors. In view of its size, the Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment. In doing so, the Board will take account of the targets set out in the FCA's Listing Rules, which are set out in the tables below.

As an externally managed investment company, the Board employs no executive staff, and therefore does not have a chief executive officer or a chief financial officer, both of which are deemed Senior Board Positions by the FCA. However, the Directors considers the chairmen of the Board committees to be Senior Board Positions and the following disclosures are made on this basis.  Other Senior Board Positions recognised by the FCA are the Chairman of the Board and Senior Independent Director.

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 31 March 2023

	Number of Board members	Percentage of the Board	Number of senior positions on the Board	Number in executive management	Percentage of executive management
Men	2	50%	4 B	n/a	n/a
Women	2	50% A	1 CD	n/a	n/a
Not specified/prefer not to say	-	-	-	n/a	n/a

^A Meets target of at least 40% as set out in LR 9.8.6R (9)(a)(i)

^B Chairman of the Board, Senior Independent Director, Chairman of the Audit Committee & Chairman of the Management Engagement Committee

^C Chairman of the Remuneration Committee 

^D Meets target of at least 1 as set out in LR 9.8.6R (9)(a)(ii)

Board Ethnic Background as at 31 March 2023

	Number of Board members	Percentage of the Board	Number of senior positions on the Board	Number in executive management	Percentage of executive management
White British or other White (including minority-white groups)	4	100%	5	n/a	n/a
Other ethnic group	-E	-	-	n/a	n/a
Not specified/prefer not to say	-	-	-	n/a	n/a

^E Does not meet target of at least 1 as set out in LR 9.8.6R (9)(a)(iii)

In relation to the ethnic diversity of the Board, the Directors recognise that this does not meet the target set out in the Listing Rules, as shown in the table above. The Directors will take this into account when making future Board appointments.

Corporate Governance

The Company is committed to high standards of corporate governance and the Board is accountable to the Company's shareholders for good governance. The Board has considered the principles and provisions of the AIC Code of Corporate Governance as published in February 2019 (the "AIC Code"). The AIC Code addresses the principles and provisions set out in the UK Corporate Governance Code as published by the FRC in July 2018 (the "UK Code"), as well as setting out additional provisions on issues that are of specific relevance to investment trusts.

The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the FRC, provides more relevant information to shareholders than if it had adopted the UK Code. The AIC Code is available on the AIC's website: theaic.co.uk. It includes an explanation of how the AIC Code adapts the principles and provisions set out in the UK Code to make them relevant for investment trusts.

The Board confirms that, during the year, the Company complied with the principles and provisions of the AIC Code. 

Further details of the Company's compliance with the AIC Code can be found on its website.

Going Concern

The Company's assets consist mainly of equity shares in companies listed on the London Stock Exchange. The Board has performed stress testing and liquidity analysis on the portfolio and considers that, in most foreseeable circumstances, the majority of the Company's investments are realisable within a relatively
short timescale.

The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants, including the headroom available. At the year end, the Company had a £20 million loan facility which is due to mature in May 2027.

Having taken these factors into account, the Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for the period to 30 June 2024, which is at least twelve months from the date of approval of this Report. For these reasons, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Accountability and Audit

Each Director confirms that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and they have taken all the steps that they could reasonably be expected to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

Independent Auditor

The Company's Auditor, Ernst & Young LLP, has indicated its willingness to remain in office. The Board will place resolutions before the Annual General Meeting to re-appoint Ernst & Young LLP as Auditor for the ensuing year and to authorise the Directors to determine its remuneration.

Relations with Shareholders

The Directors place a great deal of importance on communications with shareholders. Shareholders and investors may obtain up to date information on the Company through its website and the Manager's information service.

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the management group (including the Company Secretary or the Manager) in situations where direct communication is required, and representatives from the Manager meet with major shareholders on at least an annual basis in order to gauge their views. In addition, the Company Secretary only acts on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds personally as appropriate.

Directors make themselves available to attend meetings with the Company's largest shareholders and meet other shareholders at the Annual General Meeting and, as explained in the Chairman's Statement, the Company will hold an Online Shareholder Presentation in advance of the Annual General Meeting this year including the opportunity for an interactive question and answer session.

The notice of the Annual General Meeting is, where practicable, sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Manager at the meeting. Further details regarding the arrangements for this year's Annual General Meeting and separate Online Shareholder Presentation are set out in the Chairman's Statement.

Annual General Meeting

The Annual General Meeting will be held at Wallacespace Spitalfields, 15-25 Artillery Lane, London E1 7HA on Thursday 6 July 2023 at 12 noon.

By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
24 May 2023

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements, in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year, and under that law they have chosen to prepare the financial statements in accordance with UK-adopted international accounting standards. 

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. 

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

-       select suitable accounting policies in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' and then apply them consistently; 

-       make judgments and estimates that are reasonable and prudent;

-       present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

-       provide additional disclosures when compliance with the specific requirements in UK-adopted international accounting standards is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance;

-       state whether the financial statements have been prepared in accordance with UK-adopted international accounting standards subject to any material departures disclosed and explained in the notes to the financial statements; and 

-       prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.  

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and
other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, but not for the content of any information included on the website that has been prepared or issued by third parties. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.

The Board confirms that to the best of its knowledge:

·  the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

·  in the opinion of the Directors, the Annual Report taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's position and performance, business model and strategy; and

·  the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

On behalf of the Board
Robert Talbut
Chairman
24 May 2023

Statement of Comprehensive Income

			Year ended			Year ended
			31 March 2023			31 March 2022
			Revenue	Capital	Total	Revenue	Capital	Total
		Notes	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments at fair value		11	-	(6,084)	(6,084)	-	5,048	5,048
Currency gains			-	39	39	-	3	3
Income		3
Dividend income			5,586	-	5,586	4,974	-	4,974
Interest income			7	-	7	-	-	-
Scrip dividends			-	-	-	194	-	194
Traded option premiums			73	-	73	71	-	71
Money market interest			7	-	7	-	-	-
			5,673	(6,045)	(372)	5,239	5,051	10,290
Expenses
Management fee		4	(207)	(207)	(414)	(212)	(212)	(424)
Administrative expenses		5	(417)	-	(417)	(440)	-	(440)
Finance costs		7	(363)	(363)	(726)	(135)	(135)	(270)
			(987)	(570)	(1,557)	(787)	(347)	(1,134)
Profit/(loss) before taxation			4,686	(6,615)	(1,929)	4,452	4,704	9,156
Taxation		8	(102)	-	(102)	(73)	-	(73)
Profit/(loss) attributable to equity holders of the Company			4,584	(6,615)	(2,031)	4,379	4,704	9,083
Earnings per Ordinary share (pence)		10	14.83	(21.39)	(6.57)	14.21	15.27	29.48
The Company does not have any income or expense that is not included in profit for the year, and therefore the "Profit for the year" is also the "Total comprehensive income for the year", as defined in IAS 1 (revised).
The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with  UK adopted International Accounting Standards. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these financial statements.

Balance Sheet

		As at	As at
		31 March 2023	31 March 2022
	Notes	£'000	£'000
Non-current assets
Ordinary shares		75,760	77,709
Preference shares		20,895	24,716
Securities at fair value	11	96,655	102,425
Current assets
Other receivables	12	1,383	1,173
Cash at bank		1,176	1,483
		2,559	2,656
Creditors: amounts falling due within one year
Other payables		(350)	(262)
Short-term borrowings		(9,000)	(19,000)
	13	(9,350)	(19,262)
Net current liabilities		(6,791)	(16,606)
Total assets less current liabilities		89,864	85,819
Non-current liabilities
Long-term borrowings	13	(9,951)	-
Net assets		79,913	85,819
Share capital and reserves
Called-up share capital	14	15,532	15,460
Share premium account		21,411	21,109
Capital reserve	15	35,930	42,545
Revenue reserve		7,040	6,705
Equity shareholders' funds		79,913	85,819
Net asset value per Ordinary share (pence)	16	257.92	278.29
The financial statements were approved by the Board of Directors and authorised for issue on 24 May 2023 and were signed on its behalf by:
Robert Talbut
Chairman
The accompanying notes are an integral part of these financial statements.

Statement of Changes in Equity

Year ended 31 March 2023
			Share
		Share	premium	Capital	Revenue
		capital	account	reserve	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000
As at 31 March 2022		15,460	21,109	42,545	6,705	85,819
Issue of Ordinary shares		72	302	-	-	374
(Loss)/profit for the year		-	-	(6,615)	4,584	(2,031)
Equity dividends	9	-	-	-	(4,249)	(4,249)
As at 31 March 2023		15,532	21,411	35,930	7,040	79,913
Year ended 31 March 2022
			Share
		Share	premium	Capital	Revenue
		capital	account	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000
As at 31 March 2021		15,447	21,052	37,841	6,517	80,857
Issue of Ordinary shares		13	57	-	-	70
Profit for the year		-	-	4,704	4,379	9,083
Equity dividends	9	-	-	-	(4,191)	(4,191)
As at 31 March 2022		15,460	21,109	42,545	6,705	85,819
The Company has aggregate realised and distributable reserves of £35,925,000 as at 31 March 2023 (2022 - £33,931,000), comprising capital reserve - realised of £28,885,000 (2022 - £27,226,000) and a revenue reserve of £7,040,000 (2022 - £6,705,000).
The accompanying notes are an integral part of these financial statements.

Cash Flow Statement

	Year ended	Year ended
	31 March 2023	31 March 2022
	£'000	£'000
Net cash inflow from operating activities
Dividend income receivedA	5,478	4,809
Interest income received	7	-
Options premium received	71	71
Interest received from money market funds	7	-
Management fee paid	(415)	(512)
Other cash expenses	(432)	(417)
Cash generated from operations	4,716	3,951
Interest paid	(684)	(280)
Overseas tax paid	(184)	(91)
Net cash inflows from operating activities	3,848	3,580
Cash flows from investing activities
Purchases of investmentsA	(16,518)	(13,372)
Sales of investments	16,199	9,739
Net cash outflow from investing activities	(319)	(3,633)
Cash flows from financing activities
Equity dividends paid	(4,249)	(4,191)
Issue of Ordinary shares	374	70
Loan repayment	(19,000)	-
Loan drawdown	19,000	-
Net cash outflow from financing activities	(3,875)	(4,121)
Decrease in cash and cash equivalents	(346)	(4,174)
Reconciliation of net cash flow to movements in cash and cash equivalents
Decrease in cash and cash equivalents as above	(346)	(4,174)
Net cash and cash equivalents at start of year	1,483	5,654
Effect of foreign exchange rate changes	39	3
Net cash and cash equivalents at end of year	1,176	1,483
A Non-cash dividends during the year comprised scrip dividends of £nil (2022 - £194,000).
B Cash flows are net of repayment of loan from Scotiabank Europe PLC and a drawdown of the short and long term loan from Royal Bank of Scotland International Limited.

Notes to the Financial Statements

For the year ended 31 March 2023

1.	Principal activity.
	The Company is a closed-end investment company, registered in England and Wales No. 00386561, with its Ordinary shares listed on the London Stock Exchange.

2.	Accounting policies
	(a)	Basis of accounting. The financial statements of the Company have been prepared in accordance with UK adopted International Accounting Standards ("IAS").
		In preparing these financial statements the Directors have considered the impact of climate change risk as an emerging risk and have concluded that it does not have a material impact on the Company's investments. In line with IFRS investments are valued at fair value, which for the Company are quoted bid prices for investments in active markets at the Balance Sheet date and therefore reflect market participants view of climate change risk.
		The Company's financial statements are presented in sterling, which is also the functional currency as it is the currency in which shares are issued and expenses are generally paid. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.
		Where presentational guidance set out in the Statement of Recommended Practice ("SORP"): 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies ("AIC"), is consistent with the requirements of IAS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP issued in July 2022.
		Going concern. The Company's assets consist mainly of equity shares in companies listed on the London Stock Exchange. The Board has performed stress testing and liquidity analysis on the portfolio and considers that, in most foreseeable circumstances, the majority of the Company's investments are realisable within a relatively short timescale. The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants, including the headroom available. At the year end, the Company had a £20 million loan facility which is due to mature in May 2027. Having taken these factors into account, the Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for the period to 30 June 2024, which is at least twelve months from the date of approval of this Report. For these reasons, they continue to adopt the going concern basis of accounting in preparing the financial statements.
		Significant accounting judgements, estimates and assumptions. The preparation of financial statements requires the use of certain significant accounting judgements, estimates and assumptions which requires management to exercise its judgement in the process of applying the accounting policies and are continually evaluated. The Directors do not consider there to be any significant judgement and estimates within the financial statements for the year ended 31 March 2023. Special dividends are assessed and credited to capital or revenue according to their circumstances.
		New and amended accounting standards and interpretations. At the date of authorisation of these financial statements, the following amendments to Standards and Interpretations were assessed to be relevant and are all effective for annual periods beginning on or after 1 January 2022 but are considered to not have a material impact on the financial statements:
		- IAS 37 (provisions, Contingent Liabilties and Contingent Assets), IFRS 9 (Financial Instruments), IFRS 16 Amendments (Annual improvements 2018-2020), and IFRS 3 Amendments (Conceptual Framework)
		Future amendments to standards and interpretations. At the date of authorisation of these financial statements, the following amendments to Standards and Interpretations were assessed to be relevant and are all effective for annual periods beginning on or after 1 January 2023;
		- IAS  1 Amendments (Non-current Liabilities with Covenants) (effective from 1 January 2024)
		The Company intends to adopt the Standards and Interpretations in the reporting period when they become effective and the Board does not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the Company's financial results in the period of initial application although there may be revised presentations to the Financial Statements and additional disclosures.

	(b)	Investments. All investments are evaluated and managed on a fair value basis and are therefore classified as FVTPL ("Fair Value Through Profit or Loss").
		Investments are recognised and de-recognised at the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured at fair value. For listed investments, this is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange.
		Gains and losses arising from the changes in fair value are included in net profit or loss for the period as a capital item. Transaction costs are treated as a capital cost.
	(c)	Income. Dividend income from equity investments, including preference shares, which have a discretionary dividend, is recognised when the shareholders' rights to receive payment have been established, normally the ex-dividend date. Special dividends are allocated to revenue or capital based on their individual merits.
		If a scrip dividend is taken in lieu of a cash dividend, the net amount of the cash dividend declared is credited to the revenue account. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised as capital.
		Interest from deposits, interest from debt securities, and income from preference shares which do not have a discretionary dividend are accounted for on an accruals basis.
		The premium received from traded options is recognised in the revenue column of the Statement of Comprehensive Income.
	(d)	Expenses. All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, all expenses have been presented as revenue items except those where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Accordingly, the management fee and finance costs have been allocated 50% to revenue and 50% to capital, in order to reflect the Directors' expected long-term view of the nature of the future investment returns of the Company.
	(e)	Borrowings. Both short-term and long-term borrowings, which comprise interest bearing bank loans are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses and subsequently measured at amortised cost using the effective interest method. The finance costs, being the difference between the net proceeds of borrowings and the total amount of payments that require to be made in respect of those borrowings, are amortised over the life of the borrowings.
	(f)	Taxation. The tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company has no liability for current tax.
		Deferred tax is recognised in respect of all temporary differences at the Balance Sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Balance Sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise, using tax rates that are expected to apply at the date the deferred tax position is unwound.
		Owing to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
	(g)	Foreign currencies. Monetary assets and liabilities, comprising current assets, current liabilities and non-current liabilities and non-monetary assets comprising non-current assets held at fair value which are denominated in foreign currencies are converted into sterling at the rate of exchange ruling at the reporting date. Transactions during the year in foreign currencies are converted at the rate of exchange ruling at the transaction date. Gains or losses on monetary assets and liabilities arising from a change in exchange rates subsequent to the date of a transaction are included as a currency gain or loss in revenue or capital column of the Statement of Comprehensive Income, depending on whether the gain or loss is of a revenue or capital nature. Non-monetary assets that are measured at fair value and gains or losses arising from a change in exchange rates subsequent to the date of a transaction are included as a gain or loss on investments in the capital column of the Statement of Comprehensive Income.
	(h)	Derivatives. The Company may enter into certain derivatives (e.g. traded options). Traded option contracts are restricted to writing out-of-the-money options with a view to generating income. Premiums received on traded option contracts are recognised as income evenly over the period from the date they are written to the date when they expire or are exercised or assigned. Losses on any movement in the fair value of open contracts at the year end and on the exercise of the contracts are recorded in the capital column of the Statement of Comprehensive Income as they arise.
	(i)	Cash and cash equivalents. Cash and cash equivalents comprise cash in hand and at banks and short-term deposits with an original maturity of less than 90 days.
	(j)	Other receivables. Financial assets classified as loans and receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. As such they are measured at amortised cost. Other receivables do not carry any interest, they have been assessed for any expected credit losses over their lifetime due to their short-term nature.

	(k)	Other payables. Payables are non-interest bearing and are stated at their undiscounted cash flows.
	(l)	Dividends payable. Final dividends are recognised from the date on which they are approved by shareholders. Interim dividends are recognised when paid.
	(m)	Nature and purpose of reserves
		Share premium account. The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising Ordinary shares of 50p per share. This reserve is not distributable.
		Capital reserve. This reserve reflects any realised gains or losses in the period together with any unrealised increases and decreases that have been recognised in the Statement of Comprehensive Income. These include gains and losses from foreign currency exchange differences. Additionally, expenses, including finance costs, are charged to this reserve in accordance with (d) above.
		The capital reserve, to the extent that the gains are deemed realised, is distributable, including by way of dividend.
		Revenue reserve. This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve is distributable, including by way of dividend.
	(n)	Segmental reporting. The Directors are of the opinion that the Company is engaged in a single segment of business activity, being investment business. Consequently, no business segmental analysis is provided.

3.	Income
		2023	2022
		£'000	£'000
	Income from listed investments
	UK dividend income	4,784	4,198
	Overseas dividend income	802	776
	Interest from investment in money market funds	7	-
	Scrip dividends	-	194
		5,593	5,168
	Other income from investment activity
	Deposit interest	7	-
	Traded option premiums	73	71
	Total income	5,673	5,239

4.	Management fees
		2023			2022
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Management fees	207	207	414	212	212	424
	The management fee is based on 0.45% per annum up to £100 million and 0.40% over £100 million, by reference to the net assets of the Company and including any borrowings up to a maximum of £30 million, and excluding commonly managed funds, calculated monthly and paid quarterly. The fee is allocated 50% to revenue and 50% to capital. The management agreement is terminable on not less than six months' notice. The total of the fees paid and payable during the year to 31 March 2023 was £414,000 (2022 - £424,000) and the balance due to abrdn Fund Managers Limited ("aFML") at the year end was £105,000 (2022 - £107,000). The Company held an interest in a commonly managed investment trust, abrdn Smaller Companies Income Trust plc, in the portfolio during the year to 31 March 2023 (2022 - same). The value attributable to this holding is excluded from the calculation of the management fee payable by the Company.

5.	Administrative expenses
		2023	2022
		£'000	£'000
	Directors' remuneration	134	126
	Auditor's remuneration: fees payable to the Company's Auditor for the audit of the Company's annual accounts	53	45
	Promotional activities	40	65
	Professional fees	19	40
	Directors' & Officers' liability insurance	10	7
	Trade subscriptions	27	26
	Share plan costs	18	22
	Registrar's fees	39	43
	Printing, postage and stationery	31	26
	Custody fees	7	6
	Other administrative expenses	39	34
		417	440
	The management agreement with aFML also provides for the provision of promotional activities, which aFML has delegated to abrdn Investments Limited. The total fees payable under the management agreement in relation to promotional activities were £40,000 (2022 - £65,000) with a balance due to aFML at the the year end of £10,000 (2022 - £10,000). The Company's management agreement with aFML also provides for the provision of company secretarial and administration services to the Company. No separate fee is charged to the Company in respect of these services, which have been delegated to abrdn Holdings Limited.

6.	Directors' remuneration
	The Company had no employees during the year (2022 - none). No pension contributions were paid for Directors (2022 - £nil).

7.	Finance costs
		2023			2022
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	On bank loans	363	363	726	135	135	270

8.	Taxation
				2023			2022
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of the charge for the year
		Overseas tax	102	-	102	73	-	73
		Total tax charge	102	-	102	73	-	73
	(b)	Factors affecting the tax charge for the year. The tax assessed for the year is lower than the effective rate of corporation tax in the UK. The differences are explained in the reconciliation below:
				2023			2022
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Profit before taxation	4,686	(6,615)	(1,929)	4,452	4,704	9,156
		Corporation tax at an effective rate of 19% (2022 - 19%)	890	(1,257)	(367)	846	894	1,740
		Effects of:
		Non-taxable UK dividend income	(903)	-	(903)	(830)	-	(830)
		Excess management expenses not utilised	162	108	270	131	66	197
		Overseas withholding tax	102	-	102	73	-	73
		Non-taxable overseas dividends	(149)	-	(149)	(147)	-	(147)
		Losses/(gains) on investments not taxable	-	1,156	1,156	-	(959)	(959)
		Gains on currency movements	-	(7)	(7)	-	(1)	(1)
		Total tax charge	102	-	102	73	-	73
		At 31 March 2023 the Company had surplus management expenses and loan relationship debits with a tax value of £7,572,000 based on a corporation tax rate of 25% (2022 - £7,217,000 based on a corporation tax rate of 25%) in respect of which a deferred tax asset has not been recognised. This is because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses.

9.	Dividends
		2023	2022
		£'000	£'000
	Amounts recognised as distributions to equity holders in the period:
	Third interim dividend for 2022 of 3.20p (2021 - 3.00p) per share	986	924
	Final dividend for 2022 of 4.20p (2021 - 4.20p) per share	1,294	1,293
	First two interim dividends for 2023 totalling 6.40p (2022 - 6.40p) per share	1,982	1,972
	Refund of unclaimed dividends from previous periods	(15)	-
		4,247	4,189
	3.5% Cumulative Preference shares	2	2
	Total	4,249	4,191
	The third interim dividend of 3.20p for the year to 31 March 2023, which was paid on 28 April 2023, and the proposed final dividend of 4.60p for the year to 31 March 2023, payable on 28 July 2023, have not been included as liabilities in these financial statements.
	Set out below are the total Ordinary dividends payable in respect of the financial year, which is the basis on which the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered:
		2023	2022
		£'000	£'000
	Three interim dividends for 2023 totalling 9.60p (2022 - 9.60p) per share	2,973	2,959
	Proposed final dividend for 2023 of 4.60p (2022 - 4.20p) per share	1,424	1,294
		4,397	4,253
	The amount reflected above for the cost of the proposed final dividend for 2023 is based on 30,964,580 Ordinary shares, being the number of Ordinary shares in issue at the date of this Report.

10.	Earnings per Ordinary share
		2023	2022
		£'000	£'000
	Earnings per Ordinary share are based on the following figures:
	Revenue return	4,584	4,379
	Capital return	(6,615)	4,704
	Total return	(2,031)	9,083
	Weighted average number of Ordinary shares	30,919,854	30,812,251
	During the year there were no (2022 - same) potentially dilutive shares in issue.

11.	Non-current assets - Securities at fair value
								2023		2022
								Listed		Listed
								investments		investments
								£'000		£'000
	Opening book cost							87,106		80,380
	Opening investment holdings gains							15,319		13,165
	Opening valuation							102,425		93,545
	Purchases							16,513		13,554
	Sales - proceeds							(16,199)		(9,722)
	(Losses)/gains on investments							(6,084)		5,048
	Total investments held at fair value through profit or loss							96,655		102,425
								2023		2022
								Listed		Listed
								investments		investments
								£'000		£'000
	Closing book cost							89,610		87,106
	Closing investment holdings gains							7,045		15,319
	Total investments held at fair value through profit or loss							96,655		102,425
								2023		2022
	(Losses)/gains on investments							£'000		£'000
	Net realised gains on sales of investmentsA							2,210		2,984
	Cost of call options exercised							(20)		(90)
	Net realised gains on sales							2,190		2,894
	Movement in fair value of investments							(8,274)		2,171
	Cost of put options assigned							-		(17)
								(6,084)		5,048
	A Includes losses realised on the exercise of traded options of £20,000 (2022 - £107,000) which are reflected in the capital column of the Statement of Comprehensive Income.
	The cost of exercising of call options and assigning put options is the difference between the market price of the underlying shares and the strike price of the options. The premiums earned on options expired, exercised or assigned of £73,000 (2022 - £71,000) have been dealt with in the revenue account.
	The movement in the fair value of traded option contracts has been calculated in accordance with the accounting policy stated in note 2(h) and has been charged to the capital reserve.
	The Company received £16,199,000 (2022 - £9,722,000) from investments sold in the period. The book cost of these investments when they were purchased was £14,009,000 (2022 - £6,828,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
	During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within losses on investments in the Statement of Comprehensive Income. The total costs on purchases of investments in the year was £78,000 (2022 - £59,000).  The total costs on sales of investments in the year was £11,000 (2022 - £6,000). The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.
	At 31 March 2023 the Company held the following investments comprising more than 3% of the class of share capital held:
											Class
			Country of			Number of			Class of		held
	Company		Incorporation			shares held			shares held		%
	abrdn Smaller Companies Income Trust plc		Scotland			3,013,726			Ordinary		13.6
	Ecclesiastical Insurance Office		England			4,240,000			8 5/8% Cum Pref		4.0
	Royal & Sun Alliance		England			4,350,000			7 3/8% Cum Pref		3.5
	General Accident		Scotland			3,548,000			7.875% Cum Pref		3.2

12.	Other receivables
		2023	2022
		£'000	£'000
	Accrued income and prepayments	1,381	1,173
	Option contract premium	2	-
		1,383	1,173
	None of the above amounts are overdue.

13.	Current liabilities
		2023	2022
		£'000	£'000
	Short-term bank loan	9,000	19,000
	Amount due to brokers	-	5
	Other creditors	350	257
		9,350	19,262
	Included above are the following amounts owed to aFML for management and savings scheme services and for the promotion of the Company.
		2023	2022
		£'000	£'000
	Other creditors	123	159
		2023	2022
	Non-current liabilities	£'000	£'000
	Long-term bank loan	10,000	-
	Loan arrangement fees	(49)	-
		9,951	-
	On 3 May 2022, the Company entered into a new five year £20 million loan facility with The Royal Bank of Scotland International Limited, London Branch. £10 million of the new loan facility has been drawn down and fixed at an all-in interest rate of 3.903% until 30 April 2027. £9 million of the facility has been drawn down on a short-term basis at an all-in interest rate of 5.577%, maturing 3 April 2023. The proceeds of the new loan were used to repay and cancel in full the Company's previous loan facility with Scotiabank Europe PLC.
	The terms of The Royal Bank of Scotland International Limited facility contain covenants that consolidated gross borrowings do not exceed 33% of the adjusted portfolio value ("Securities at fair value" per the Balance Sheet adjusted for any ineligible investments) at any time, the number of eligible investments shall not be less than 30 at any time and the portfolio value shall at all times be equal to or more than £40 million. The Company met these covenants during the year and following the year end.
	The arrangement expenses incurred on the drawdown of the loan will be amortised over the term of the loan.

14.	Called up share capital
		2023		2022
		Number	£'000	Number	£'000
	Authorised
	Ordinary shares of 50 pence each	39,800,000	19,900	39,800,000	19,900
	3.5% Cumulative Preference shares of £1 each	100,000	100	100,000	100
			20,000		20,000
	Allotted, called up and fully paid Ordinary shares of 50 pence each:
	Balance brought forward	30,819,580	15,410	30,794,580	15,397
	Ordinary shares issued	145,000	72	25,000	13
	Balance carried forward	30,964,580	15,482	30,819,580	15,410
	Allotted, called up and fully paid 3.5% Cumulative Preference shares of £1 each:
	Balance brought forward and carried forward	50,000	50	50,000	50
			15,532		15,460
	During the year the Company issued 145,000 (2022 - 25,000) Ordinary shares of 50p each for proceeds of £374,000 (2022 - £70,000).
	Each Ordinary and Cumulative Preference share carries one vote at general meetings of the Company. The Cumulative Preference shares are considered to be equity. They have no fixed redemption date, carry a right to receive a fixed rate of dividend and, on a winding up of the Company, to the payment of such fixed cumulative preferential dividends to the date of such winding up and to the repayment of the capital paid up on such shares in priority to any payment to the holders of the Ordinary shares.
	The Ordinary shares, excluding any treasury shares, carry a right to receive dividends and, on a winding up or other return of capital, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.
	There are no restrictions on the transfer of Ordinary or Cumulative Preference shares in the Company other than certain restrictions which may from time to time be imposed by law.

15.	Capital reserve
		2023	2022
		£'000	£'000
	At 31 March 2022	42,545	37,841
	Net gains on sales of investments during year	2,190	2,894
	Movement in fair value (decreases)/increases of investments	(8,274)	2,154
	Management fees	(207)	(212)
	Interest on bank loans	(363)	(135)
	Currency gains	39	3
	At 31 March 2023	35,930	42,545
	The capital reserve includes gains of £7,045,000 (31 March 2022 - gains of £15,319,000), which relate to the revaluation of investments held at the reporting date.

16.	Net asset value per Ordinary share
	The net asset value per share and the net assets attributable to the Ordinary shareholders at the year end were as follows:
		2023	2022
	Net assets per Balance Sheet	£79,913,000	£85,819,000
	3.5% Cumulative Preference shares of £1 each	£50,000	£50,000
	Attributable net assets	£79,863,000	£85,769,000
	Number of Ordinary shares in issue	30,964,580	30,819,580
	Net asset value per share	257.92p	278.29p

17.	Analysis of changes in financial liabilities during the year
		At			At
		31 March	Cash	Other	31 March
		2022	flows	movementsA	2023
	Financing activities	£'000	£'000	£'000	£'000
	Debt due within one year	(19,000)	10,000	-	(9,000)
	Debt due after more than one year	-	(10,000)	49	(9,951)
		(19,000)	-	49	(18,951)
		At			At
		31 March	Cash	Other	31 March
		2021	flows	movementsA	2022
	Financing activities	£'000	£'000	£'000	£'000
	Debt due within one year	(9,000)	-	(10,000)	(19,000)
	Debt due after more than one year	(9,999)	-	9,999	-
		(18,999)	-	(1)	(19,000)
	A The other movements column represents the amortisation of the loan arrangement fees (2022 - movement in maturity profile and amortisation of loan arrangement fees).

18.	Financial instruments
	Risk management. The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income.
	The Company may also, subject to Board approval, enter into derivative transactions, in the form of traded options, for the purpose of enhancing income returns and portfolio management. During the year, the Company entered into certain derivative contracts. As disclosed in note 3, the premium received and fair value changes in respect of options written in the year were £73,000 (2022 - £71,000). Positions closed during the year realised a loss of £20,000 (2022 - £107,000). The largest position in derivative contracts held during the year at any given time was £40,000 (2022 - £26,000). The Company had no open positions in derivative contracts at 31 March 2023 (2022 - nil).
	The Board has delegated the risk management function in relation to financial instruments to abrdn Fund Managers Limited ("aFML") under the terms of its management agreement with aFML (further details of which are included under note 4). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors given their relatively low value.
	Risk management framework. The directors of aFML collectively assume responsibility for aFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.
	aFML is a fully integrated member of the abrdn Group (the "Group"), which provides a variety of services and support to aFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to abrdn Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.
	The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group's CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.
	The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Chief Risk Officer, who reports to the Group's CEO. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SHIELD").
	The Group's corporate governance structure is supported by several committees to assist the board of directors of abrdn, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.
	Risk management. The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.
	(i)	Market risk. The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.
		Interest rate risk. Interest rate movements may affect:
		- the fair value of the investments in convertibles and preference shares;
		- the level of income receivable on cash deposits; and
		- interest payable on the Company's variable rate borrowings.
		Management of the risk. The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
		The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. The fixed rate facilities are used to finance opportunities at low rates and, the revolving and uncommitted facilities to provide flexibility in the short-term. Current bank covenants state that the gross borrowings will not exceed one-third of adjusted portfolio value.
		The Board reviews the value of investments in preference shares on a regular basis.
		Interest rate profile. The interest rate risk profile of the portfolio of financial assets and liabilities (excluding ordinary shares) at the Balance Sheet date was as follows:
			Weighted
			average
			period	Weighted
			for which	average
			rate is	interest	Fixed	Floating
			fixed	rate	rate	rate
		As at 31 March 2023	Years	%	£'000	£'000
		Assets
		UK preference shares	-	8.49	20,895	-
		Cash and cash equivalents	-	3.97	-	1,176
		Total assets			20,895	1,176
		Liabilities
		Short-term bank loans	0.01	5.58	(9,000)	-
		Long-term bank loans	4.01	3.90	(9,951)	-
		Total liabilities			(18,951)	-
			Weighted
			average
			period	Weighted
			for which	average
			rate is	interest	Fixed	Floating
			fixed	rate	rate	rate
		As at 31 March 2022	Years	%	£'000	£'000
		Assets
		UK preference shares	-	8.50	24,716	-
		Cash and cash equivalents	-	0.01	-	1,483
		Total assets			24,716	1,483
		Liabilities
		Short-term bank loans	0.27	1.55	(19,000)	-
		Total liabilities			(19,000)	-
		The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans.
		The cash assets consist of cash deposits on call earning interest at prevailing market rates.
		The UK preference shares assets have no maturity date.
		Short-term debtors and creditors (with the exception of bank loans) have been excluded from the above tables.

		Interest rate sensitivity. The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the Balance Sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.
		If interest rates had been 200 basis points higher or lower and all other variables were held constant, the Company's:
		- profit before tax for the year ended 31 March 2023 would increase/decrease by £24,000 (2022 - £30,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances. These figures have been calculated based on cash positions at each year end.
		- the capital return would decrease/increase by £3,342,000 (2022 - increase/decrease by £6,810,000) using VaR ("Value at Risk") analysis based on 100 observations of monthly VaR computations of fixed interest portfolio positions at each year end.
		Currency risk. A small proportion of the Company's investment portfolio is invested in overseas securities whose values are subject to fluctuation due to changes in exchange rates.
		Management of the risk. The revenue account is subject to currency fluctuations arising on dividends received in foreign currencies and, indirectly, due to the impact of foreign exchange rates upon the profits of investee companies. The Company does not hedge this currency risk. The Company does not have any exposure to foreign currency liabilities. No currency sensitivity analysis has been prepared as the Company considers any impact to be immaterial to the financial statements.
		Price risk. Price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
		Management of the risk. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. The allocation of assets to specific sectors and the stock selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on recognised stock exchanges.
		Price sensitivity. If market prices at the Balance Sheet date had been 20% higher or lower while all other variables remained constant, the profit before tax attributable to Ordinary shareholders for the year ended 31 March 2023 would have increased/decreased by £15,152,000 (2022 - increase/decrease of £15,542,000). This is based on the Company's portfolio of Ordinary shares held at each year end.

	(ii)	Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
		Management of the risk. Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary.
		Short-term flexibility is achieved through the use of loan facilities, details of which can be found in note 13. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis.
		The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise a revolving loan facility and a fixed term loan facility. The Board has imposed a maximum equity gearing level of 35% which constrains the amount of gearing that can be invested in equities which, in normal market conditions, are more volatile than the preference shares within the portfolio. Details of borrowings at 31 March 2023 are shown in note 13.
		Maturity profile. The maturity profile of the Company's financial liabilities at the Balance Sheet date, with amounts undiscounted and order by contractual maturity, was as follows:
					Within	Within	More than
					1 year	1-5 years	5 years
		At 31 March 2023			£'000	£'000	£'000
		Trade and other payables			(350)	-	-
		Short-term bank loans			(9,044)	-	-
		Long-term bank loans			(392)	(11,262)	-
					(9,786)	(11,262)	-
					Within	Within	More than
					1 year	1-5 years	5 years
		At 31 March 2022			£'000	£'000	£'000
		Trade and other payables			(262)	-	-
		Short-term bank loans			(19,086)	-	-
					(19,348)	-	-

	(iii)	Credit risk. This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.
		Management of the risk. The risk is managed as follows:
		- where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default;
		- transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Company of default;
		- investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker;
		- the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the Custodian's records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. The Group's Compliance carries out periodic reviews of the Custodian's operations and reports its findings to the abrdn Group's Risk Management Committee and to the Board of the Company. This review will also include checks on the maintenance and security of investments held;
		- transactions involving derivatives and other arrangements wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest are subject to rigorous assessment by the Investment Manager of the credit worthiness of that counterparty. The Company's aggregate exposure to each such counterparty is monitored regularly by the Board; and
		- cash is held only with reputable banks with high quality external credit enhancements.
		It is the Investment Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties.
		None of the Company's financial assets is secured by collateral or other credit enhancements.
		Credit risk exposure. In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 March 2023 and 31 March 2022 was as follows:
				2023			2022
				Balance	Maximum		Balance		Maximum
				Sheet	exposure		Sheet		exposure
				£'000	£'000		£'000		£'000
		Non-current assets
		Quoted preference shares at fair value through profit or loss		20,895	20,895		24,716		24,716
		Current assets
		Accrued income		1,363	1,363		1,158		1,158
		Option contract premium		2	2		-		-
		Cash and cash equivalents		1,176	1,176		1,483		1,483
				23,436	23,436		27,357		27,357
		None of the Company's financial assets is past its due date.
		Fair value of financial assets and liabilities. The fair value of the long-term loan has been calculated at £9,097,000 as at 31 March 2023 (2022 - none) compared to an accounts value in the financial statements of £9,951,000 (2022 - none) (note 13). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. The loan is considered to be classed as a Level 2 liability under IFRS 13. The carrying values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. Traded options contracts are valued at fair value which have been determined with reference to quoted market values of the contracts. The contracts are tradeable on a recognised exchange. For all other short-term debtors and creditors, their book values approximate to fair values because of their short-term maturity.

19.	Fair value hierarchy
	IFRS 13 'Financial Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at 31 March 2023 as follows:
					Level 1	Level 2	Level 3	Total
				Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments			a)	96,655	-	-	96,655
	Net fair value				96,655	-	-	96,655
					Level 1	Level 2	Level 3	Total
	As at 31 March 2022			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments			a)	102,425	-	-	102,425
	Net fair value				102,425	-	-	102,425
	a)	Quoted investments. The fair value of the Company's quoted investments has been determined by reference to their quoted bid prices at the reporting date. Quoted investments included in Fair Value Level 1 are actively traded on recognised stock exchanges.

20.	Capital management policies and procedures
	The Company's capital management objectives are:
	- to ensure that the Company will be able to continue as a going concern; and
	- to maximise the return to its equity shareholders through an appropriate balance of equity capital and debt.
	The capital of the Company consists of equity, comprising issued capital, reserves and retained earnings.
	The Board monitors and reviews the broad structure of the Company's capital. This review includes the nature and planned level of gearing, which takes account of the Investment Manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained. The Company is not subject to any externally imposed capital requirements.

21.	Related party transactions
	Directors' fees and interests. Fees payable during the year to the Directors and their interests in shares of the Company are disclosed within the Directors' Remuneration Report.
	Transactions with the Manager. The Company has an agreement with the abrdn Group for the provision of management, secretarial, accounting and administration services and for the carrying out of promotional activities in relation to the Company. Details of transactions during the year and balances outstanding at the year end are disclosed in notes 4 and 5.

Alternative Performance Measures

Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes IAS and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
(Discount)/premium to net asset value per Ordinary share
The difference between the share price and the net asset value per Ordinary share expressed as a percentage of the net asset value per Ordinary share.
		2023	2022
Share price (p)	a	250.00	279.00
NAV per Ordinary share (p)	b	257.92	278.29
(Discount)/premium	(a-b)/a	(3.1%)	0.3%
Dividend Cover
Dividend cover measures the revenue return per share divided by total dividends per share, expressed as a ratio.
		2023	2022
Revenue return per share	a	14.83p	14.21p
Dividends per share	b	14.20p	13.80p
Dividend cover	a/b	1.04x	1.03x
Dividend Yield
The annual dividend divided by the share price, expressed as a percentage.
		2023	2022
Annual dividend per Ordinary share (p)	a	14.20p	13.80p
Share price (p)	b	250.00p	279.00p
Dividend yield	a/b	5.7%	4.9%
Net Gearing
Net gearing measures total borrowings less cash and cash equivalents divided by shareholders' funds, expressed as a percentage. Under AIC reporting guidance, cash and cash equivalents includes net amounts due to and from brokers at the period end as well as cash and short-term deposits.
		2023	2022
Borrowings (£'000)	a	18,951	19,000
Cash (£'000)	b	1,176	1,483
Amounts due to brokers (£'000)	c	-	5
Amounts due from brokers (£'000)	d	-	-
Shareholders' funds (£'000)	e	79,913	85,819
Net gearing	(a-b+c-d)/e	22.2%	20.4%
Ongoing Charges Ratio
The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values throughout the year.
		2023	2022
Investment management fees (£'000)		414	424
Administrative expenses (£'000)		417	440
Less: non-recurring chargesA (£'000)		-	(17)
Ongoing charges (£'000)		831	847
Average net assets (£'000)		80,617	86,114
Ongoing charges ratio (excluding look-through costs)		1.03%	0.98%
Look-through costsB		0.14%	0.16%
Ongoing charges ratio (including look-through costs)		1.17%	1.14%
A Comprises promotional acitivity fees not expected to recur.
B Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which amongst other things, includes the cost of borrowings and transaction costs.
Total Return
NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-ended and closed-ended competitors, and the Reference Index, respectively.
			Share
Year ended 31 March 2023		NAV	Price
Opening at 1 April 2022	a	278.29p	279.00p
Closing at 31 March 2023	b	257.92p	250.00p
Price movements	c=(b/a)-1	-7.3%	-10.4%
Dividend reinvestmentA	d	5.1%	4.9%
Total return	c+d	-2.2%	-5.5%
			Share
Year ended 31 March 2022		NAV	Price
Opening at 1 April 2021	a	262.41p	248.00p
Closing at 31 March 2022	b	278.29p	279.00p
Price movements	c=(b/a)-1	6.1%	12.5%
Dividend reinvestmentA	d	5.3%	5.9%
Total return	c+d	+11.4%	+18.4%
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 Annual Financial Report

The Annual General Meeting will be held at Wallacespace Spitalfields, 15-25 Artillery Lane, London E1 7HA on Thursday 6 July 2023 at 12 noon.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 March 2023 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 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 and copies will be available from the registered office of the Manager and on the Company's website, www.shiresincome.co.uk. *

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.

By order of the Board

abrdn Holdings Limited

Company Secretary

24 May2023

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

 

END