abrdnequityincome.com
abrdn Equity
Income Trust plc
Annual Report 30 September 2024
Equity income using an index-agnostic approach focusing
on our best ideas from the full UK market cap spectrum
abrdn Equity Income Trust plc is an “AIC Dividend Hero” –
it has increased its dividend for 24 years in a row.
abrdn Equity Income Trust plc 1
“The portfolio has generated earnings to cover
a 24
th
consecutive year of dividend growth
and the Company continues to yield over 7%,
well ahead of the market.”
Sarika Patel, Chair
“Our focus on income is consistent with our
investment process, as we believe cash generative
companies that use their cash flow to pay attractive
dividends and buy back their own shares can also
deliver excellent share price performance.”
Thomas Moore,
Senior Investment Director, UK Equities
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2 abrdn Equity Income Trust plc
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION. If you are in any doubt about the action you should
take, you are recommended to seek your own independent
financial advice from your stockbroker, bank manager, solicitor,
accountant or other financial adviser authorised under the
Financial Services and Markets Act 2000 if you are in the United
Kingdom or, if not, from another appropriately authorised
financial adviser.
If you have sold or otherwise transferred all your Ordinary shares
in abrdn Equity Income Trust plc, please forward this document,
together with the accompanying documents immediately to the
purchaser or transferee, or to the stockbroker, bank or agent
through whom the sale or transfer was effected for transmission
to the purchaser or transferee.
Overview
Performance Highlights 3
Financial Calendar 4
Strategic Report
Chair’s Statement 6
Portfolio Manager’s Review 9
Overview of Strategy 15
Promoting the Success of the Company 25
Results 28
Portfolio
Ten Largest Investments 32
Investment Portfolio 33
Sector Distribution 35
Investment Case Studies 36
Governance
Board of Directors 40
Directors’ Report 42
Directors’ Remuneration Report 51
Audit Committee’s Report 55
Financial Statements
Statement of Directors' Responsibilities 60
Independent Auditor’s Report 61
Statement of Comprehensive Income 68
Statement of Financial Position 69
Statement of Changes in Equity 70
Notes to the Financial Statements 71
Alternative Performance Measures 87
Corporate Information
Information about the Investment Manager 91
Investor Information 92
Glossary of Terms 94
AIFMD Disclosures (Unaudited) 97
General
Notice of Annual General Meeting 99
Contact Addresses 105
Contents
abrdn Equity Income Trust plc 3
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Net asset value total return per
Ordinary share
A
Share price total return per
Ordinary share
A
Year ended 30 September 2024 Year ended 30 September 2024
+13.3%
+10.4%
Year ended 30 September 2023 +1.8% Year ended 30 September 2023 +11.4%
Revenue return per Ordinary share Discount to net asset value
A
Year ended 30 September 2024 As at 30 September 2024
23.05
p
3.0%
Year ended 30 September 2023 23.43p As at 30 September 2023 0.2%
Dividend per Ordinary share Ongoing charges ratio
A
Year ended 30 September 2024 Year ended 30 September 2024
22.90
p
0.86%
Year ended 30 September 2023 22.80p Year ended 30 September 2023 0.94%
A
Considered to be an Alternative Performance Measure. Further details can be found on pages 87 to 89.
Net asset value per
Ordinary share
Dividends per share Share price
At 30 September– pence For the year to 30 September - pence At 30 September– pence
288.0
380.8
331.8
314.6
331.5
20 21 22 23 24
20.60
21.20
22.70
22.80
22.90
20 21 22 23 24
252.0
349.0
302.5
314.0
321.5
20 21 22 23 24
Performance Hi
g
hli
g
hts
4 abrdn Equity Income Trust plc
Pre-Annual General Meeting (“AGM “) Online Investor Event
28 January 2025
Annual General Meeting (London)
18 February 2025
Expected payment dates of interim dividends for year
ending 30 September 2025
March 2025
June 2025
September 2025
January 2026
Half year end
31 March 2025
Expected announcement of results for the
six months ending 31 March 2025
May 2025
Financial year end
30 September 2025
Expected announcement of results for
year ending 30 September 2025
December 2025
Financial Calendar
abrdn Equity Income Trust plc 5
Strategic
Report
The Company’s objective is to provide
shareholders with an above average income
from their equity investment, while also
providing real growth in capital and income.
The Company offers an actively managed
portfolio of UK listed companies. The
investment approach is index-agnostic, and
the aim is to Focus on Change by evaluating
changing corporate situations and
identifying insights that are not fully
recognised by the market.
6 abrdn Equity Income Trust plc
It has been another eventful year for the financial markets,
with a positive response to signs of a soft economic
landing offsetting ongoing geopolitical volatility. The UK
Retail Price Index (“RPI”) fell from 8.9% in September 2023
to 2.7% in September 2024 allowing the Bank of England to
cut the base rate for the first time since 2020.
Globally, a key theme for 2024 was that over half the
world’s population went to the polls, including the UK
general election and the selection of the next US president.
This inevitably increased the degree of reticence in equity
markets as investors opted to wait for any resulting policy
changes which could affect the outlook for the economy
and equities, before committing capital. Geopolitical fears
have been accentuated by ongoing conflicts, their impact
on supply chains and the cost of goods.
A prolonged period of investor caution towards UK
equities has resulted in a wide gap between the valuation
of UK equities and their global peers. Within the UK equity
market small and mid-cap companies have been
particularly unloved, reflecting fears over the prolonged
stagnation in the UK economy. As the year unfolded,
investors began to respond to these low valuations,
spurred on by hopes of interest rate cuts and the rise in
corporate activity. This is reflected in the performance of
the various UK Indices, the FTSE 250 and the FTSE Small
Cap indices both outperformed the FTSE 100 Index over
the 12 months to 30 September 2024, the first time that
they have done so for three years. Despite this, globally,
the allocation of funds to UK equities remains low.
Against this backdrop the overall performance of your
Company has been positive, and the Board is pleased to
see the Portfolio Manager’s investment thesis play out
positively across a range of holdings, including an increase
in mergers and acquisitions (“M&A”), reflecting the
compelling valuations on offer. The Portfolio Manager is
focused on delivering income, while also looking to identify
companies with positive change that can, over time,
deliver capital growth for shareholders. The Portfolio
Manager has maintained the investment approach by
continuing to invest across the market, providing access to
small and mid-cap shares trading on attractive valuations.
For some time, this approach has been out of favour,
constraining returns, but as market conditions gradually
improve, it is encouraging to see that the Shareholders are
now starting to be rewarded. Please see the Portfolio
Manager’s Review on pages 9 to 14 for more detail on the
sources of the performance and income.
Earnings
Gross income generated by the Company’s investments
in the year ended 30 September 2024 was £12.6 million
(2023: £12.5 million). The costs of managing the portfolio,
including administration costs, were down over 12%, as a
result of the change to the management fees which came
into effect at the start of the financial year as well as a
significant reduction in the auditor fee as a result of the
move to Johnston Carmichael LLP. Interest costs on the
borrowings attributable to the revenue account were up
from £401,000 to £454,000, largely driven by the increase
in average cost of borrowing during the year. After tax, the
income of the Company was £11.0 million, marginally
down from £11.1 million last year.
This resulted in the Company’s earnings per share being
23.05 pence which was 1.6% lower than last year. Despite
this decline in challenging markets, the Board was
encouraged that the dividend for the year is covered by
the earnings once again and without losing focus on
overall performance.
Dividends
As a result of the earnings performance, the Board is
declaring a fourth interim dividend for 2024 of 5.8 pence
per share which will be paid on 10 January 2025 to
shareholders on the Register on 6 December 2024 with an
associated ex-dividend date of 5 December 2024. This
takes the total dividend for the year to 22.9 pence per
share (2023: 22.8 pence), representing the 24th
consecutive annual dividend increase declared by the
Company. At the time of writing, the Company’s shares
are trading on a yield of 7%, which is among the highest in
the AIC UK Equity Income sector.
After payment of the fourth interim dividend and based on
the current number of shares in issue, 0.14 pence per
share will be transferred to revenue reserves which will be
increased to 15.76 pence per share.
Chair’s Statement
abrdn Equity Income Trust plc 7
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
The Board is committed to maintaining and extending the
Company’s track record of dividend growth. We
therefore expect that, in the absence of any adverse
circumstances, in the coming financial year we will extend
our track record to 25 consecutive years of dividend
growth by paying a dividend of at least 23.0 pence per
share. We believe that we are in a position to do this
because the most recent analysis from the Portfolio
Manager indicates that the portfolio will be able to cover
this cost out of the current year earnings. We are also
carrying revenue reserves of £10.3 million in the balance
sheet which we could also utilise if needed. We expect
that the first three interim dividends will be 5.7 pence per
share, payable in March, June and September and the
fourth interim will be at least 5.9 pence per share payable
in January 2026.
Performance
The overall performance of your Company has been
encouraging. The Net Asset Value (“NAV”) total return,
with dividends reinvested at the ex-dividend date, was
13.3% (2023: 1.8%), a fraction shy of the Company’s
reference index total return (the FTSE All-Share Index) of
13.4%. The slight widening of the share price discount
resulted in a share price total return of 10.4% (2023:
11.4%). More detailed information on capital
performance can be found in the Portfolio Manager’s
Review and outlines stock-specific drivers that have
contributed to this performance. Please see page 18
for the Company’s performance against its Key
Performance Indicators.
Whilst the UK equity market remains undervalued, we
believe that the Portfolio Manager’s portfolio construction
provides an opportunity for re-rating that recognises
the underlying value of our investments. The Board
remains focused on improving performance and
growing the dividend.
Premium & Discount
Over the last couple of years, the investment trust sector
has been plagued by wider discounts. The Company’s
share price ranged from trading at a premium to NAV in
the first couple of months of the financial year, to briefly
trading at a discount to NAV of over 11% in March 2024,
and then closing the financial year at a discount of 3%. This
experience was not unique to the Company. Many trusts
traded on a wider than usual discount, partially
attributable to the run up to the end of the tax year as
investors realised capital gains ahead of the reduction in
Capital Gains Tax thresholds coming in on 6 April 2024.
Once that deadline passed, we saw demand pick up and
the Company’s discount reverted to trading at around 5%.
For all but about three weeks, in the year ended 30
September 2024, the Company’s discount was trading at
a narrower level than the average for the UK Equity
Income investment trust sector.
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
Sep
23
Oct
23
Nov
23
Dec
23
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Jun
24
Jul
24
Aug
24
Sep
24
abrdn Equity Income Trust and unweighted sector average discounts
from 30 September 2023 to 30 September 2024
abrdn Equity Income discount
Unweighted sector average discount
Source: Refinitiv
While the Company was trading at a premium in the early
months of the financial year, the Company issued 135,000
shares at a premium to NAV, raising just over £400,000.
There were no shares bought back during the year. The
Board monitors the level of the premium / discount and
will step in should it believe that the impact of doing so
would be in the best interests of shareholders.
Borrowing facility
At the year end, the Company had drawn down £22.5
million (2023: £21 million) of its £30 million Revolving Credit
Facility which will expire in June 2026. The Board and
Manager weigh up the cost of borrowing, which has
increased significantly over the last couple of years, versus
the financial benefit of gearing the portfolio. The Board
continues to believe in the long-term benefits of gearing
and sees it as one of the potential benefits of closed-end
investment companies.
8 abrdn Equity Income Trust plc
Online Investor Presentation
In order to encourage as much interaction as possible with
our shareholders, we will be hosting an online investor
presentation, which will be held at 11: 30 am on Tuesday,
28 January 2025. At this event there will be a presentation
from the Portfolio Manager followed by an opportunity to
ask live questions to the Portfolio Manager and me. The
online presentation is being held ahead of the AGM to
allow shareholders sufficient time to submit their proxy
votes after the presentation but prior to the AGM should
they so wish. Full details on how to register for the online
event can be found on the Company’s website at
abrdnequityincome.com.
Annual General Meeting
This year’s Annual General Meeting (“AGM”) will be held at
abrdn’s office, 18 Bishops Square, London, E1 6EG on
Tuesday, 18 February 2025 at 11:30 am. The meeting will
include a presentation by the Portfolio Manager and will
be followed by lunch. This is a good opportunity for
shareholders to meet the Board and the Manager and the
Board encourages you to attend. The Notice of the
Meeting is contained on pages 99 to 103.
Outlook
The start of the current financial year can definitely be
described as “interesting times” for an equity investor in
the UK. In the first few weeks of the new financial year, we
have seen Rachel Reeves deliver Labour’s first budget
statement for 14 years and the re-election of Donald
Trump as the next President of the United States after a
four-year interlude. With those events behind us, there is
less uncertainty as to the medium-term outlook. Conflicts
in Ukraine and the Middle East have been ongoing for
some time, but it remains to be seen whether any
escalation in these conflicts further adversely affects the
global stock markets.
The fiscal impact of the UK Government’s intention to
increase borrowing and raise taxes, in particular
Employer’s National Insurance, will undoubtedly have an
impact on many UK companies. Whilst how this will
manifest is not clear, it is evident that the Government will
need the economy to grow to support much needed
investment in infrastructure. Meanwhile Donald Trump’s
economic agenda – a push for growth accompanied by
tariffs – is likely to be inflationary, both in the US and
elsewhere. Consequently, the scale of interest rate cuts
that are expected, on either side of the Atlantic, appears
to be receding.
It is worth remembering that while we invest in companies
listed in the UK, many operate internationally, so for these
companies the National Insurance increase will only affect
their UK payroll. The strengthening of the US Dollar that we
have witnessed since the start of our new financial year
has reversed some of the weakness seen in the year
ended 30 September 2024. A strengthening dollar is
beneficial to investors in companies with operations
outside the UK generating sales in US Dollars and remitting
the proceeds back to the UK. The Portfolio Manager is
aware of the sensitivities of the portfolio to such macro
variables. The resilient performance of the portfolio since
the start of the new financial year, despite these macro
changes, would support his view that the portfolio has
been structured on the basis of stock-specific insights
which makes it more resilient and less likely to be affected
by sharp changes in macro variables.
Against this backdrop the Portfolio Manager will continue
to position the portfolio in companies where we see the
potential for a combination of dividend yield, dividend
growth and valuation re-rating with the aim of delivering a
further increase in the dividend in the coming year to
extend the track record to 25 years and to deliver this
from the revenue earnings in the year.
Sarika Patel
Chair
27 November 2024
Chair’s Statement
Continued
abrdn Equity Income Trust plc 9
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Market Review
UK equities advanced over the 12 months to 30
September 2024 as investors responded positively to signs
of a soft landing for the UK economy as the rate of inflation
moderated, allowing the first-interest rate cut in four
years. Investor sentiment improved as the financial year
progressed, as the prospect of interest rate cuts helped
reassure on the outlook for the global economy. As a
result, market leadership gradually broadened out, as
reflected in the outperformance of small and mid-cap
companies over large caps, despite heightened
geopolitical instability caused by ongoing wars in Ukraine
and the Middle East.
After entering a mild recession in late 2023, the UK
economy stabilised in the early months of 2024, helping to
ease fears that a prolonged period of high interest rates
would result in a major contraction in business activity and
consumer spending. A steady decline in the rate of
inflation, eventually falling into line with the official 2%
target level in May 2024, prompted the Bank of England to
cut the base rate by 0.25% in August 2024, its first cut since
March 2020. Labour’s landslide victory in the UK’s general
election in July initially helped to reassure markets on
political stability, although the mood soured after the
Government warned that tax rises would be necessary to
address the budget deficit. This hit business and consumer
confidence in the run-up to the Autumn Budget,
constraining business investment and consumer spending.
At the same time, nervousness among bond market
investors about the new Government’s fiscal discipline
caused Gilt yields to increase, although not on the same
scale as at the Truss mini-budget two years earlier.
In the US, the Federal Reserve cut interest rates by 0.5% in
September 2024, marking the first cut in four years. This
decision was taken against the backdrop of slowing
inflation and weakening labour markets. Chinese
economic growth continued to be held back by a slump in
the real estate sector, although hopes of more assertive
stimulus measures helped to improve sentiment towards
the end of the period. Geopolitics remained febrile, with
heightened tensions in the Middle East and the ongoing
conflict in Ukraine continuing to weigh on sentiment.
The FTSE 100 Index rose 12.3% in total-return terms over
the period, but lagged indices in Europe and the US, as
larger cap sectors were hit by a strengthening in the value
of Sterling against other major currencies, while a
sustained fall in the oil price weighed on oil companies.
Conversely, the more domestically focused FTSE 250
Index delivered a total return of 19.1% over the 12 months,
buoyed by hopes that the Bank of England would make a
number of interest rate cuts. The performance of mid and
small-cap companies was also supported by a rise in
merger and acquisition (“M&A”) activity, underlining the
low valuations on offer in this part of the UK equity market.
0%
20%
40%
60%
80%
100%
FTSE 100 FTSE 250 FTSE Small
Cap
FTSE AIM Non-index
listed
Portfolio and Index weights by market cap at
30 September 2024
Reference Index abrdn Equity Income portfolio
Revenue Account
Dividends distributed by the portfolio’s holdings came in at
£12.6 million, compared to £12.5 million received last year,
representing a marginal increase of 0.8%. While the
income was largely unchanged, over 80% came from UK-
registered companies as compared to just over 19%
coming from those UK-listed, but overseas registered,
companies. It should be noted that the geographical
source of the portfolio income is a function of the ideas
identified by our investment process, rather than being a
target per se.
Special dividends accounted for over 5% of total income,
coming from five companies, as compared to less than 2%
last year. While special dividends within the portfolio have
increased in the past year, we have observed the
continued preference for buybacks over special dividends
among management teams, reflecting their view that
valuations are too cheap. We note that 25 of the holdings,
representing half the portfolio, conducted share buybacks
during the financial year. As share prices recover, it is likely
that special dividends will become more widespread.
Portfolio Mana
g
er’s Review
10 abrdn Equity Income Trust plc
The management and administration costs of running the
Company were down over 12% in 2024 as compared to
2023. The management fee was renegotiated last year,
and this has led to a reduction of over 16% year on year,
while administration costs were down almost 10%,
primarily driven by the reduction in the audit fee which
was a result of the review of the provision of audit services
in 2023. The cost savings of over £200,000 were offset by
an increase in overseas withholding tax which rose from
£278,000 to £560,000, meaning that the revenue return
after taxation was £11.0 million, around £99,000 lower
than in 2023.
We are forecasting that the portfolio is currently delivering
a gross dividend yield, before costs, of 7%, based on the
income expected to be generated over the Company’s
financial year divided by the portfolio value at the year
end, representing a significant premium to the dividend
yield of the FTSE All-Share Index (“Reference Index”) of
3.6% as of 30 September 2024. Interest rates have started
to decline with a further 0.25% rate cut in early November,
setting the scene for an increase in the gap between the
rate we pay on the Company’s bank facility and the
dividend yield we earn on the portfolio. The pace of rate
cuts is uncertain, but at the time of writing, money markets
are factoring in two rate cuts by September 2025.
Our focus on income, consistent with our investment
process, allowed us to cover the dividend again for the
third consecutive year. Management teams generally
remained cautious on dividend payouts. This can be
explained by the sluggish global economy, elevated
interest rates and geopolitical uncertainty, as well as the
continued preference for buybacks. The appreciation of
Sterling against other major currencies has also been a
headwind given the high percentage of sales investee
companies generate overseas. The composition of
dividend payouts within the UK equity market has
continued to evolve, with weakness in mining payouts
caused by lower commodity prices, offset by higher bank
payouts supported by higher interest rates.
Our investment process allows us to generate the portfolio
income required to cover the dividend while also seeking
to achieve capital growth over time. This reflects the
emphasis we place on seeking out companies whose
cash flow and dividend potential is not effectively priced in
by the market. Our experience is that the stock market
tends to reward such companies with a higher valuation,
providing shareholders with both income and capital
growth. One of the best examples of this approach
playing out during the financial year was Hargreaves
Lansdown. Short term concerns over a prolonged period
of subdued inflows, linked to high interest rates and
geopolitical tensions, caused the shares to trade at an
exceptionally low Price/Earnings multiple of 11x and a
dividend yield of over 6%. We felt this was far too cheap
for a market leader with a very sticky customer base, so
we progressively added to the holding in 2022, 2023 and
early 2024, building a sizeable holding. This turned out to
be the right decision, as a private equity bidder spotted
this valuation anomaly and took the company out at a
steep premium.
We see this approach as highly repeatable, especially at a
time when sentiment towards UK equities is at such a low
ebb, as this creates a large number of “unrecognised
change” situations with the potential to deliver both
income and capital growth. While we are not dependent
on falling interest rates or accelerating economic growth,
we acknowledge that any improvement in the macro
backdrop would help to broaden the number of
companies paying attractive dividends, providing us with a
greater range of income shares from which to build a
diversified portfolio. Overall, we remain confident that we
are well positioned to extend the Company’s 24-year
dividend growth track record in the year ahead.
Portfolio Performance
The Company’s net asset value (“NAV”) total return was
13.3% for the period. This was just behind of the
total return of 13.4% for the Company’s Reference
Index. Performance during the period was largely the
result of stock-specific drivers.
The portfolio saw a spike in M&A activity during the period,
including bids for Hargreaves Lansdown, DS Smith, Tyman
and Centamin. This underlines the benefits of our focus on
valuation, as international bidders recognise the gap
between share prices and intrinsic value. We observed
that many UK-listed companies have struggled to close
the gap with their global peers, and we had positioned the
portfolio accordingly. This was the largest contributor to
the performance of the Company.
Portfolio Mana
g
er’s Review
Continued
abrdn Equity Income Trust plc 11
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Careful stock selection within defensive mega-cap
companies helped performance during the period. The
holding in Imperial Brands surged by over 40% as investors
recognised consistent cash flow delivery by a new
management team whose strategy is to focus on their key
brands in their most profitable markets. Avoiding Reckitt
Benckiser was helpful, as the company warned on profits.
Similarly, caution on Diageo and AstraZeneca paid off,
although the portfolio would have benefited if it had
held Unilever.
Financial holdings were a positive driver of performance
during the period. The largest contributor to performance
was CMC Markets which leapt by over 200% during the
period on the publication of a string of positive
trading updates revealing higher than expected revenues,
including an increasing contribution from institutional
clients, suggesting that recent heavy investment in this
area is beginning to pay off. We added to the holding near
the recent trough in the share price, amplifying the impact
on performance as the share price took off. Elsewhere in
Financials, performance benefited from holdings in
Quilter, TP ICAP and Barclays, all of which responded
positively to better-than-expected results. These offset
the performance drag from the holding in Close Brothers
which fell on concerns over the risk of a potential sizeable
customer redress following the announcement of an FCA
review into historic motor finance industry lending
practices before 2021.
Among the detractors to performance, Energy holdings
struggled against the backdrop of falling commodity
prices, as energy demand softened as a result of a
weakening global economy, while commodity markets
became inured to geopolitical tensions. Diversified Energy
declined as a collapse in the US natural gas price
impacted cash flows. The need for balance sheet
flexibility, allowing it to continue to focus on accretive
acquisitions, ultimately led to its decision to cut the
dividend. Thungela Resources declined in response to
falling thermal coal prices, while Ithaca Energy fell on
the announcement of a rise in the North Sea Energy
Profit Levy.
Finally, performance relative to the Reference Index
was impacted by the strong performance of lower
yielding large cap growth shares Rolls-Royce, RELX, 3i
and Experian.
Activity
During the period we continued to identify investment
opportunities that can help to deliver on each aspect of
the investment objective, looking for companies that can
exhibit a combination of dividend yield, dividend growth or
valuation re-rating.
The largest purchases during the period can be
categorised into the following groupings:
1. Domestic UK shares whose valuations are low relative to
their history:
· Assura: The Company last owned the primary
healthcare property group in 2021, selling the stock at a
large premium to its NAV. The share price has since
slipped below its NAV as a result of higher interest
rates. Operationally the business remains strong,
with good tenant demand and a pipeline of new
developments.
· Barratt Redrow: The business is trading strongly, with an
improving reservation rate. Barratt’s acquisition of
Redrow enabled significant cost savings and revenue
synergies, providing a trigger for the valuation to re-rate
from a very low multiple (below 1x NAV).
· Berkeley Group: This is one of the best operators in the
housebuilding sector, deploying its surplus cash into a
new growth initiative, Build to Rent, alongside a special
dividend. Strong forward sales enabled management to
upgrade its guidance, with potential for further support
from falling mortgage rates. The valuation is well below
its historical average.
12 abrdn Equity Income Trust plc
2. Financials shares whose improving momentum is
not yet priced in:
· M&G: M&G is using strong cash generation from its life
business to invest in new sources of growth including an
expansion into new international markets. The high
dividend yield implies scepticism on the sustainability of
the dividend, which we believe is misplaced in the
context of the operational progress being made across
all its divisions.
· Petershill Partners: We added to this holding, observing
that the company’s success in private markets
fundraising is driving consistent growth in assets under
management and earnings. The share price is trading
around 35% below the NAV per share, which we see as
a valuation opportunity given the consistency its growth.
· Legal & General: We added to this holding, encouraged
by ambitious targets set at its Capital Markets Day in
May, harnessing the synergies between its divisions by
growing its institutional retirement business and
generating the permanent capital to grow its asset
management business.
3. Defensive shares whose low valuations reflect low
expectations:
· National Grid: We took part in the rights issue to fund a
five-year £60 billion energy transition investment plan,
accelerating the connections of renewable generation
to the grid.
· Drax: We started a new holding in Drax which generates
a rising proportion of earnings from non-biomass areas,
including hydro, pumped storage and natural gas
generation. This reduces its vulnerability to policy
decisions on biomass. The UK needs to maintain a high
level of baseload electricity given the intermittency of
renewables, so we see Drax as part of the solution for
the UK government at a time of growing electricity
demand.
· Imperial Brands: We added to the existing position. Since
the arrival of a new management team, the business
has consistently delivered on the profits guidance it
provides to the market, focusing on getting the
operational basics right. Earnings growth is underpinned
by a share buyback programme equating to nearly 8%
of the shares in issue on an annualised basis, in addition
to the 7% dividend yield.
· British American Tobacco: We saw the potential for a
turnaround in performance following a recent change in
the management team. It is unusual for one of the
leading companies globally to be trading at such a low
valuation, with the dividend yield exceeding 10% at one
point. Improving operating trends became more
apparent with the interim results in August, sparking a
positive share price response.
The largest sales during the period can be categorised
into the following groupings:
1. Selling out of M&A bid targets at a significant premium
· DS Smith: We sold out following a bidding war for the
company between International Paper and Mondi,
eventually won by International Paper.
· Hargreaves Lansdown: We sold out following a bid for
the company from a consortium of CVC Capital
Partners, Nordic Capital and the Abu Dhabi
Investment Authority.
· Tyman: We sold out following a bid for the company
from US building materials business Quanex.
· Centamin: We sold out following a bid for the company
from Anglogold.
2. Moderating large positions sizes, notably in Financials
and Resources:
· CMC Markets: Having added to the holding in January,
the stock’s subsequent surge took the weighting to
around 5% of the portfolio, at which point we took some
profits.
· NatWest/Barclays: We took some profits following a
very sharp rally in the share prices, as higher interest
rates helped drive upgrades to net interest income and
return on equity forecasts.
· Glencore/Shell: Conscious of the heavy weighting in the
Resources sector, we scaled back the position sizes,
attempting to diversify the portfolio’s sources of income.
· SSE: SSE’s strong performance had taken the weighting
to around 5%, prompting us to take some profits.
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3. Cutting back the number of shares by eliminating
holdings that lack the catalysts necessary for a re-rating:
· Anglo American: We sold out in the wake of the decision
by BHP to walk away from its bid for the company, as
the break-up plan appeared challenging.
· Vodafone: We sold out after Vodafone had completed
the disposals of their Italian and Spanish units. We
expect industry pricing to remain difficult until industry
consolidation is allowed to take place.
· Hays: We sold out as the macro-economic backdrop
was unhelpful, with a mismatch between candidate
and employer confidence causing a slowdown in
hiring activity.
Outlook
After bottoming out in mid-February, the NAV rose sharply
in the following six months. The portfolio’s improving NAV
performance reflects a combination of a more benign
macro backdrop and solid company results, providing the
catalyst for the holdings to deliver the valuation re-rating
that we have long been expecting. This has continued into
the new financial year, strengthening our confidence that
the portfolio is well diversified across a board range of
macro drivers, allowing it to remain resilient through
major events such as the UK Budget and the US
Presidential election.
Looking ahead, the performance of UK equities will be
driven by a number of factors, notably the prospects for
interest rates and economic growth in the UK and globally.
After a brief period of more positive sentiment towards the
UK following Labour’s landslide general election victory,
the tone is once again more sceptical as investors
scrutinise the new Government’s policies, in particular the
decision to increase taxes and borrowing in the budget.
Investors recognise that there is little room for manoeuvre
on fiscal policy given the state of government finances, but
they would welcome any signs of policy that would help to
reverse the UK’s long history of under-investment and low
productivity growth.
Trading at a Price/Earnings ratio of around 11.5x, UK
equities are cheap relative to other equity markets and
their own history, creating a low bar for share prices on the
announcement of any positive news. Among developed
markets, Europe trades at a Price/Earnings ratio of 13.5x,
Asia and Japan trade at 14x and the US trades at over 20x.
We see the valuation opportunity within the UK equity
market as two-fold:
1. The FTSE 100 Index generates 78% of its revenues
outside the UK, meaning that these are internationally
focused businesses that should, but often don’t, trade
at similar valuations to their global peers. We will
continue to seek out these valuation anomalies
among large caps, which represent 48.9% of
the portfolio.
2. The FTSE 250 and Small Cap indices are far more
domestically focused, generating over 50% of their
revenues in the UK, making them more dependent on
the UK economy. Recent Goldman Sachs research
observes a tight inverse correlation between the
performance of the FTSE 250 Index (relative to the
FTSE 100 Index) and UK 10-year Gilt yields, as well as a
strong positive correlation between the FTSE 250’s
Price/Earnings ratio and current economic activity
levels. It is therefore understandable that investors will
be scrutinising government policies in the months
ahead, seeking to establish whether they will help to
deliver higher levels of investment and productivity
growth, which could create the conditions for more
sustainable economic growth.
Regardless of the macro situation, we will continue to
search across the UK equity market for under-valued
companies with the potential to deliver growth that
surprises the market. We are encouraged that during this
financial year we have uncovered a large number of
companies that have delivered a significant valuation re-
rating, either due to better-than-expected results or M&A.
The identification of these companies can be extremely
powerful for the portfolio’s performance as share prices
go up due to higher earnings or a higher Price/Earnings
multiple. The higher NAV also provides an increased
capital base from which to generate portfolio income.
14 abrdn Equity Income Trust plc
This year has demonstrated our ability to deliver a rising
NAV at the same time as delivering sufficient portfolio
income to cover the dividend and maintain the
Company’s 24-year track record of dividend growth. Our
focus on income is consistent with our investment process,
as we believe that cash generative companies that use
their cash flow to pay attractive dividends and buy back
their own shares can also deliver excellent share price
performance. We continue to structure the portfolio in
companies where we see the potential for a combination
of dividend yield, dividend growth and valuation re-rating.
The scale of the valuation re-rating opportunity can be
seen from the gap between the valuations of the holdings
in the portfolio and those of the wider market. At the time
of writing, the portfolio has a median Price/Earnings ratio
of 9.4x and a median Price/Book ratio of 1.2x which
compares favourably with 12.5x and 1.7x respectively for
the FTSE All-Share (ex-Investment Trusts) Index. In a
portfolio of 50 companies, 25 have been buying back
shares during this financial year. On pages 36 and 37 we
have included individual case studies of two companies
seeing their valuations re-rate as their successful cash
flow delivery is reflected in their valuations.
Having engaged with shareholders, I have a clear
understanding of what matters most. I have listened to
shareholders who tell me how important the high level of
income is for them at a time of an elevated cost of living. I
have also listened to shareholders who tell me that they
want to see a growing NAV. This year we delivered both,
helped by careful portfolio construction and improving
market conditions. This shows that income and capital
growth can be delivered hand in hand. I am encouraged
by the improving momentum of the portfolio, and I am
determined to deliver for shareholders in the year ahead.
Thomas Moore
Portfolio Manager
27 November 2024
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Business Model
The Company is an investment trust, and its Ordinary
shares are listed on the London Stock Exchange.
Investment Objective
The Company’s objective is to provide shareholders with
an above average income from their equity investment,
while also providing real growth in capital and income.
Investment Policy
The Directors set the investment policy, which is to invest in
a diversified portfolio consisting mainly of quoted UK
equities which will normally comprise between 50 and 70
individual equity holdings.
In order to reduce risk in the Company without
compromising flexibility:
· no holding within the portfolio should exceed 10% of
total assets at the time of acquisition; and
· the top ten holdings within the portfolio will not exceed
50% of net assets.
The Company may invest in convertible preference
shares, convertible loan stocks, gilts and corporate bonds.
The Directors set the gearing policy within which the
portfolio is managed. The parameters are that the
portfolio should operate between holding 5% net cash and
15% net gearing. The Directors have delegated
responsibility to the Manager for the operation of the
gearing level within the above parameters.
Delivering the Investment Objective
The Board delegates investment management services to
abrdn. The team within abrdn managing the Company’s
portfolio of investments has been headed up by Thomas
Moore since 2011.
The portfolio is invested on an index-agnostic basis. The
process is based on a bottom-up stock-picking approach
where sector allocations are a function of the sum of the
stock selection decisions, constrained only by appropriate
risk control parameters. The aim is to Focus on Change by
evaluating changing corporate situations and identifying
insights that are not fully recognised by the market.
Idea Generation and Research
The vast majority of the investment insights are generated
from information and analysis from one-on-one company
meetings. Collectively, more than 3,000 company
meetings are conducted annually across abrdn. These
meetings are used to ascertain the company’s own views
and expectations of its future prospects and the markets
in which it operates. Through actively questioning the
senior management and key decision makers of
companies, the portfolio managers and analysts look to
uncover the key changes affecting the business and the
materiality of their impact on company fundamentals
within the targeted investment time horizon.
Investment Process in Practice
The index-agnostic approach ensures that the weightings
of holdings reflect the conviction levels of the investment
team, based on an assessment of the management team,
the strategy, the prospects and the valuation metrics. The
process recognises that some of the best investment
opportunities come from under-researched parts of the
market, where the breadth and depth of the analyst
coverage that the Portfolio Manager can access provides
the scope to identify a range of investment opportunities.
The consequence of this is that the Company’s portfolio
often looks very different from other investment vehicles
providing their investors with access to UK equity income.
This is because the process focuses on conviction levels
rather than index weightings. This means that the
Company may provide a complementary portfolio to the
existing portfolios of investors who prefer to make their
own decisions and manage their ISAs, SIPPs and personal
dealing accounts themselves. As at 30 September 2024,
51.1% (2023: 52.6%) of the Company’s portfolio is invested
in companies outside the FTSE 100 Index.
The index-agnostic approach further differentiates the
portfolio because it allows the Portfolio Manager to take a
view at a thematic level, concentrate the portfolio’s
holdings in certain areas and avoid others completely. The
effect of this approach is that the weightings of the
portfolio can be expected to differ significantly from that
of any index, and the returns generated by the portfolio
may reflect this divergence, particularly in the short term.
Overview of Strate
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16 abrdn Equity Income Trust plc
The Manager’s Approach to ESG
There is a broad understanding on the Board that a full and
thorough assessment of environmental, social and
governance (“ESG”) factors will allow for better investment
decisions to be made. ESG factors are considered alongside
financial and other fundamental factors in order to make the
best possible investment decisions at a stock picking and at a
portfolio construction level. It should be noted that the
Company does not have a sustainability objective and does
not promote any sustainability characteristics, nor does it
specifically exclude any sectors from its investment universe.
By considering ESG factors, the Board believes that the
Portfolio Manager has a more complete view of a
company, including its risks and opportunities. The
analysts supporting the Portfolio Manager seek to
determine which ESG factors are financially material to
form a forward-looking view of how a business will
manage risks and capture opportunities. The analysts
focus on what they deem to be the most material ESG
factors to understand their impact on a company’s
future business performance, financial position, and/or
market perception.
To advance this analysis on behalf of the Company’s
shareholders, the Portfolio Manager has a very close
relationship with the ESG specialists within abrdn and
there is an on-desk ESG analyst to assist in the research
process and ESG engagements with companies. Through
the utilisation of third party provided research, including
MSCI and abrdn’s inhouse ESG rating tools, the team is
able to identify, where appropriate, leaders and laggards,
areas of weakness and areas of strength.
It should be noted that as part of the investment process
to identify attractive investment opportunities, the
Portfolio Manager must consider a diverse range of
companies, spanning a broad-spectrum of practices. An
important feature of the investment process is therefore
active and meaningful engagement to generate insights
into underlying performance, with the Company’s
approach to engagement set out below.
Proactive Company Engagement
The Manager believes that proactive company
engagement ensures the holdings in the portfolio remain
or become better companies.
See the Case Studies on pages 36 and 37 for specific
examples of the Company’s engagement with
investee companies.
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The Manager’s Approach to Engagement
Engagement is an important part of the Manager’s
investment process, the Manager sees engagement not
only as a right but as an obligation of investors, in its role as
owners of companies. The Manager engages actively and
regularly with companies in which it is or may become
an investor.
The Manager believes that informed and constructive
engagement helps to foster better companies, enhancing
the value of the Company’s investments.
There are generally two core reasons for engagement:
to understand more about a company’s strategy and
performance or encourage best practice and
drive change.
Active engagement involves regular, candid
communication with management teams (or boards of
directors) of portfolio companies to discuss a broad range
of issues that are material to sustain long-term returns,
either positively or negatively, including both risks and
opportunities. The Manager’s focus is on the factors which
it believes to have the greatest potential to enhance or
undermine the Company’s investment case. Sometimes
the Manager seeks more information, exchanges views on
specific issues, encourages better disclosure: and at other
times, encourages change (including either corporate
strategy, capital allocation, or climate change strategy).
On the Company’s behalf, the Manager’s engagements
cover a range of issues, including but not limited to board
composition, remuneration, audit, climate change, labour
issues, human rights, bribery and corruption.
Promoting the Success of the Company
The Board’s statement on pages 25 to 27 describes how
the Directors have discharged their duties and
responsibilities over the course of the financial year under
section 172 (1) of the Companies Act 2006 and how they
have promoted the success of the Company. That
statement forms part of the Strategic Report.
18 abrdn Equity Income Trust plc
Key Performance Indicators (“KPIs”)
The Board assesses the performance of the Company against the range of KPIs shown below over a variety of time
periods, but has particular focus on the long term, which the Board considers to be at least five years.
KPI Description
Net Asset Value (“NAV”) Total Return
relative to the FTSE All-Share Index
While the Manager does not manage the portfolio with direct reference to any
particular index, the Board does review the performance against that of the FTSE All-
Share Index to provide context for the performance delivered.
The Company’s NAV Total Return relative to the FTSE All Share Index since 2014, is set
out on page 29.
Premium or discount to the NAV compared to
the unweighted average of the discount of
the peer group
The Board compares the discount of the Company’s share price to its NAV when
compared to the unweighted average discount of the other investment trusts in the
UK Equity Income sector.
A five-year chart showing the discount of the Company and for the UK Equity Income
sector is shown on page 29.
Dividend growth compared to the
Retail Price Index (“RPI”)
The Company’s objective is to provide shareholders with an above average income
from their equity investment, while also providing real growth in capital and income.
Between 2012, the first full year after Thomas Moore took over the role of Portfolio
Manager, and the outbreak of the Covid-19 pandemic, the annual dividend growth of
the portfolio exceeded inflation, as measured by the RPI, indicating that shareholders
had received real growth in the dividends paid by the Company.
However, the income generated by the portfolio was significantly affected by
dividend cuts made by investee companies during 2020. While dividend payments
to shareholders have increased over the last three years, they have not kept pace
with RPI.
In setting the level of the dividend for the current financial year, the Board has
balanced the need to deliver a meaningful increase to shareholders and its desire to
continue rebuilding the revenue reserves. After payment of the fourth interim
dividend, and based on current shares in issue, 0.14 pence per share will be
transferred to revenue reserves
A breakdown of the Company’s dividend growth compared with RPI since 2014 is set
out on page 30.
Ongoing charges ratio relative to
comparator investment vehicles
The Board monitors the Company’s ongoing charges ratio against prior years and
other similar sized companies in the peer group.
The Ongoing Charges Ratio for the year decreased moderately to 0.86% based on
average net assets over the year (2023: 0.94%).
Continued
Overview of Strate
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Principal Risks and Uncertainties
The Board and Audit Committee carry out a regular
review of the risk environment in which the Company
operates, changes to the environment and individual risks.
The Board also identifies emerging risks which might
affect the Company.
There are a number of principal risks and uncertainties
which, if realised, could have a material adverse effect on
the Company and its financial condition, performance
and prospects. The Board, through the Audit Committee,
has carried out a robust assessment of the Company’s
principal and emerging risks, which include those that
would threaten its business model, future performance,
solvency, liquidity or reputation.
The principal risks and uncertainties faced by the
Company are reviewed by the Audit Committee in the
form of a risk matrix and the Committee also gives
consideration to the emerging risks facing the Company.
The Board has identified the implications for the
Company’s investment portfolio of a changing climate,
and the increased use of artificial intelligence, as
emerging risks which it considers are likely to become
more relevant for the Company in the future.
The Board continues to assess these emerging risks and
their impact on the portfolio as they develop, including
how investor sentiment is evolving towards climate risk
and how artificial intelligence may impact business
models in the future, and will consider how the Company
may mitigate these risks and any other emerging risks.
The Board receives regular reporting from the Manager
on its approach to engagement with investees on a
variety of different topics.
The principal risks currently facing the Company, together
with a description of the mitigating actions the Board has
taken, are set out in the table below.
The Board considers its risk appetite in relation to each
principal risk and monitors this on an ongoing basis. Where
a risk is approaching or is outside the tolerance level, the
Board will consider taking action to manage the risk.
Currently, the Board considers the risks to be managed
within acceptable levels.
The principal risks associated with an investment in the
Company’s shares are published monthly in the
Company’s factsheet and they can be found in the pre-
investment disclosure document (“PIDD”) published by
the Manager, both of which are available on the
Company’s website.
Risk Trend Mitigating Action
Strategy –
the Company’s objectives or
the investment trust sector as
a whole become unattractive
to investors, leading to a fall in
demand for the Company’s
shares.
Through regular updates from the Manager, the Board monitors the relevance of the
Company’s strategy, the performance of equity markets, the economic and political
environment, risks to the delivery of the Company’s strategy in light of the external
environment and the discount/ premium at which the Company’s shares trade relative
to the net asset value and its peers.
The Board holds an annual strategy meeting and receives feedback from the
Company’s broker on the Investment Trust sector in general, and more specifically on
the UK Equity Income sector, and the Company’s relative performance against peers.
The Board also receive regular updates from the Manager’s investor relations team to
help to better understand investor sentiment towards the Company and its strategy.
Investment Performance -
Market risk arises from
volatility in prices of the
Company’s investments and
the potential loss the
Company could suffer
through realising investments
following negative market
movements.
The Board recognises that market risk is significant in achieving performance and it
reviews and monitors the investment restrictions and guidelines it has set to ensure
that they are appropriate. The Company’s investment policy and approach to risk
diversification may be found on page 15.
The Board meets with the Manager on a regular basis and regularly receives reports to
discuss and consider the diversification of the portfolio, asset allocation, stock selection
and levels of gearing on a regular basis. The Board also monitors the revenue
forecasts, the costs of running the Company and the Company’s relative performance
as compared to peers and the Reference Index.
20 abrdn Equity Income Trust plc
Overview of Strate
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Continued
Risk Trend Mitigating Action
Changes in general economic
or market conditions (such as
interest rates, exchange rates
and rates of inflation) as well
as global political events and
trends, could substantially and
adversely affect the prices of
securities and, as a
consequence, the value of the
Company’s investment
portfolio, its prospects and
share price.
The Board regularly reviews the impact of geopolitical instability and change on
market risk.
The Board determines the Company’s dividend policy and approves the level of
dividends payable to shareholders. Shareholders are invited to vote on the Company’s
dividend policy to pay four interim dividends at each Annual General Meeting.
Representatives of the Manager attend all Board meetings, and a detailed formal
appraisal of the Manager is carried out by the Remuneration & Management
Engagement Committee on an annual basis.
The Board engages with shareholders at its Annual General Meeting and Pre-AGM
Online Investor Event and with larger shareholders at least annually to listen to
sentiment towards the Company and its performance directly.
Exogenous risks such as health,
social, financial, economic and
geopolitical –
the effects of instability or
change arising from these
risks could have an adverse
impact on stock markets and
the performance of the
investment portfolio and/or
negatively impact the
operations of the Company,
Manager or key service
providers.
The Board discusses current geopolitical and macroeconomic issues with the
Manager. During the year under review, such issues have included the UK’s relationship
within the European Union, investment risks arising from the impact of events such as
the invasion of Ukraine and increased military tensions in the Middle East, investor
attitudes towards equity markets, UK inflation, and the slowing of Chinese growth. More
recently the Board has been engaging with the Manager on the impact of the UK
Budget and the US Election results. The Board discusses with the Manager the steps
that the Manager has taken or might take to limit their impact on the portfolio and the
operations of the Company.
The Portfolio Manager’s Review on pages 9 to 14 summarises the purchases and sales
activity during the period as the Company considered the new set of opportunities
arising from the meaningful change in market backdrop during the financial year. The
Manager is in regular communication with investee entities, economists, and the wider
market to determine the impact of the geopolitical and economic environment on the
portfolio.
The Board oversees the Manager’s performance at each Board Meeting and at its
annual strategy meeting in August, formally considers whether the Company’s
strategy remains fit for purpose, in the light of exogenous risks. The Board also regularly
discusses the economic environment, geopolitical risks, industry trends and the
potential impact on the Company with the Company’s broker.
Operational Risk –
the Board delegates the
operation of the business to
third parties, the principal
delegate being the Manager.
Failure of internal controls and
poor performance of any
service provider could lead
to disruption, reputational
damage or loss to
the Company.
The Audit Committee receives, and reviews reports from the Manager on its internal
controls and risk management (including an annual ISAE Report). It also receives and
reviews reports from all its other significant service providers on at least an annual
basis, including on matters relating to business continuity and cyber security. Written
agreements are in place with all third-party service providers.
The Manager monitors closely the control environments (Including cyber security) and
quality of services provided by third parties, including those of the Depositary, through
service level agreements, regular meetings, and key performance indicators.
A formal appraisal of the Company’s main third-party service providers is conducted
by the Remuneration & Management Engagement Committee on an annual basis.
abrdn Equity Income Trust plc 21
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Risk Trend Mitigating Action
Governance Risk –
the Directors recognise the
impact that an ineffective
board, unable to discuss,
review and make decisions,
could have on the Company
and its shareholders.
The Board is aware of the importance of effective leadership and board composition.
The Board regularly reviews its composition and formally reviews the performance of
the Board, Chair, and individual Directors through its performance
evaluation process on an annual basis. At each Board Meeting, Directors are invited to
disclose any interests or potential interests in business due to be discussed.
All Directors are subject to annual shareholder re-election.
Discount/Premium to NAV –
a significant share price
discount or premium to net
asset value per share could
lead to high levels of
uncertainty for shareholders.
The Board keeps the level of the Company’s discount/premium under review. As
explained in the Chair’s Statement, the share price ranged from trading at a premium
to NAV in the first couple of months of the financial year to briefly trading at over 11%
discount to NAV in March 2024 and then closing the year end at discount of 3.0%. For all
but about three weeks, the Company’s discount was trading at a narrower level than
the average for the UK Equity Income investment trust sector.
The share price discount to NAV was 0.2% at 30 September 2023 and 3.0% at
30 September 2024.
The Company participates in the Manager’s investment trust promotional programme
where the Manager has an annual programme of meetings with institutional
shareholders and reports back to the Board on these meetings.
Financial obligations -
inadequate controls over
financial record keeping and
forecasting, the setting of an
inappropriate gearing
strategy or the breaching of
loan covenants could result in
the Company being unable to
meet its financial obligations,
losses to the Company and its
ability to continue trading as a
going concern.
At each Board meeting, the Board reviews management accounts and
revenue forecasts.
The Directors set the gearing policy within which the portfolio is managed. The
parameters are that the portfolio should operate between holding 5% net cash and
15% net gearing. The Directors have delegated responsibility to the Manager for the
operation of the gearing level within the above parameters.
The independent Auditor audits the Company’s annual financial statements.
Legal and Regulatory Risks –
the Company operates in a
complex legal and regulatory
environment. As a UK
company with shares publicly
quoted on the London Stock
Exchange, as an alternative
investment fund and an
investment trust, there are
extensive legal and regulatory
requirements.
The actions the Board takes to mitigate these extensive risks are to ensure that there is
breadth and depth of expertise within the Board, and through the appointment of
reputable service providers to support the Company and its operations. The Board can
instruct additional external professional support on behalf of the Company, or the
Directors individually should that be considered necessary.
22 abrdn Equity Income Trust plc
Promotional Activities
The Board recognises the importance of promoting the
Company to current and prospective investors both for
improving liquidity and enhancing the value and rating of
the Company’s shares. The Board believes one effective
way to achieve this is through subscription to, and
participation in, the promotional programme run by abrdn
on behalf of a number of investment trusts under its
management. The Company’s financial contribution to
the programme is matched by abrdn. The Company also
supports abrdn’s investor relations programme which
involves regional roadshows, promotional and public
relations campaigns. abrdn’s promotional and investor
relations teams report to the Board on a quarterly basis
giving analysis of the promotional activities as well as
updates on the shareholder register and any changes in
the make-up of that register.
The purpose of the promotional and investor relations
programmes is both to communicate effectively with
existing shareholders and to gain new shareholders, with
the aim of improving liquidity and enhancing the value and
rating of the Company’s shares. Communicating the long-
term attractions of the Company is key. Part of the
promotional programme includes commissioning
independent paid for research on the Company, most
recently from Kepler Trust Intelligence Research Limited. A
copy of the latest research note is available from the Key
Documents section of the Company's website.
On 26 January 2024, the Board hosted an online investor
presentation where the Portfolio Manager provided an
update on the portfolio. The Portfolio Manager and Chair
also answered live questions
from the audience.
On 29 August 2024, the Board hosted an in-person
meeting for large shareholders at which the Portfolio
Manager provided an update on the portfolio. Both of
these events gave the Directors the opportunity to hear
the views of shareholders first hand.
Board Diversity
The Board’s statement on diversity is set out in the
Directors’ Report on page 44
At 30 September 2024, there were two male and two
female Directors on the Board. The Chair and the Senior
Independent Director positions are both held by women.
Modern Slavery Act
Due to the nature of its business, being a company that
does not offer goods and services to customers, the Board
considers that the Company is not within the scope of the
Modern Slavery Act 2015 because it has no turnover. The
Company is therefore not required to make a slavery and
human trafficking statement. In any event, the Board
considers the Company’s supply chains, dealing
predominantly with professional advisers and service
providers in the financial services industry, to be low risk in
relation to this matter.
Environmental, Social and Human
Rights Issues
The Company has no employees. The Board has
delegated the day-to-day management and
administrative functions to the Manager. There are
therefore no disclosures to be made in respect
of employees.
The Company’s socially responsible investment policy is
set out below.
Active Engagement
Through engagement and exercising voting rights, the
Manager actively works with companies to improve
corporate standards, transparency and accountability.
The primary goal of the Manager is to generate the best
long-term outcomes for the Company in order to fulfil
fiduciary responsibilities to shareholders and this fits with
one of the Manager’s core principles as a business in how
it evaluates investments.
Overview of Strate
g
y
Continued
abrdn Equity Income Trust plc 23
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Responsible Investment
The Board is aware of its duty to act in the interests of the
Company. The Board acknowledges that there are risks
associated with investment in companies which fail to
conduct business in a socially responsible manner and has
noted the Manager’s policy on social responsibility. The
Manager considers social, environmental and ethical
factors which may affect the performance or value of the
Company’s investments as part of its investment process.
In particular, the Manager encourages companies in
which investments are made to adhere to best practice in
the areas of ESG stewardship. The Manager believes that
this can best be achieved by entering into a dialogue with
company management to encourage them, where
necessary, to improve their policies.
The Company’s objective is to provide shareholders with
an above average income from their equity investment
while also providing real growth in capital and income. The
Board and Manager believes this will be produced on a
sustainable basis by investments in companies which
adhere to best practice. Accordingly, the Manager will
seek to favour companies which pursue best practice.
Stewardship
The Company is committed to the UK’s Stewardship Code
and seeks to play its role in supporting good stewardship
of the companies in which it invests. Responsibility for
actively monitoring the activities of portfolio companies
has been delegated by the Board to the Manager which
has sub-delegated that authority to the Investment
Manager. abrdn plc is a tier 1 signatory of the UK
Stewardship Code which aims to enhance the quality of
engagement by investors with investee companies in
order to improve their socially responsible performance
and the long-term investment return to shareholders.
While delivery of stewardship activities has been
delegated to the Manager and its group, the Board
acknowledges its role in setting the tone for the effective
delivery of stewardship on the Company’s behalf.
The Board has also given discretionary powers to the
Manager to exercise voting rights on resolutions proposed
by the investee companies within the Company’s portfolio.
The Manager reports to the Board on a quarterly basis on
stewardship (including voting) issues.
Global Greenhouse Gas Emissions
All of the Company’s activities are outsourced to third
parties. The Company therefore has no greenhouse gas
emissions to report from the operations of its business,
nor does it have responsibility for any other emissions
producing sources under the Companies Act 2006
(Strategic Report and Directors’ Reports)
Regulations 2013.
For the same reason as set out above, the Company
considers itself to be a low energy user under the SECR
regulations and therefore is not required to disclose
energy and carbon information.
Task Force for Climate-related Financial
Disclosures (“TCFD”)
Under UK Listing Rules, the Company, as a closed ended
investment company, is exempt from complying with the
Task Force on Climate-related Financial Disclosures
(“TCFD”).
Whilst TCFD is currently not applicable to the Company,
the Manager, as the delegated Alternative Investment
Fund Manager (“AIFM”) is required to produce a product
level report on the Company in accordance with the FCA’s
rules and guidance regarding the disclosure of climate-
related financial information consistent with TCFD
Recommendations and Recommended Disclosures.
These disclosures are intended to help meet the
information needs of market participants, including
institutional clients and consumers of financial products, in
relation to the climate-related impact and risks of the
Manager’s TCFD in-scope business. The product level
report on the Company is available on the Manager’s
website at: invtrusts.co.uk.
24 abrdn Equity Income Trust plc
Viability Statement
The Board considers that the Company is a long-term
investment vehicle and, for the purposes of this statement,
has decided that three years is an appropriate period over
which to consider its viability. The Board considers this to
be an appropriate period for an investment trust
company with a portfolio of equity investments, and the
financial position of the Company.
Taking into account the Company’s current financial
position and the potential impact of its principal risks and
uncertainties, the Directors have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due for a
period of three years from the date of this Report.
In assessing the viability of the Company over the
review period, the Directors have focused upon the
following factors:
· The principal risks and uncertainties detailed on pages
19 to 21 and the steps taken to mitigate these risks.
· All of the Company’s investments are traded on
major stock exchanges and there is a spread of
investments held.
· The Company is closed ended in nature and therefore it
is not required to sell investments when shareholders
wish to sell their shares.
· The performance of the Company’s share price relative
to its net asset value during the financial year. The share
price discount increased from 0.2% at 30 September
2023 to 3.0% at 30 September 2024, and the share price
traded at a small premium to NAV during the year.
· The Company’s main liability is its bank loan of £22.5
million (2023: £21 million), which represents net gearing
of 13.0% (2023: 11.3%). This is drawn from a £30 million
(2023: £30 million) revolving credit facility with The Royal
Bank of Scotland International Limited, London Branch,
which was refinanced in June 2023 and is due to expire
in June 2026.
· The Company’ s cash balance, and money market
funds, at 30 September 2024 amounted to £1.9 million
(2023: £4.2 million).
· The levels of ongoing charges of 0.86% (2023: 0.94%).
· Shareholders’ overwhelming voting in favour of the
continuation of the Company at the Annual General
Meeting in February 2022. The next continuation vote is
due to take place at the Annual General Meeting to be
held in 2027.
When considering the risks, the Board reviewed the
impact of stress testing on the portfolio, including the
effects of any future falls in investment values. The Board
has also had regard to matters such as a reduction in the
income generated in the portfolio, a material increase in
interest rates, a reduction in the liquidity of the portfolio or
changes in investor sentiment, all of which could have an
impact on the Company’s prospects and viability in the
future. The results of the stress tests have given the Board
comfort over the viability of the Company.
Taking into account all of these factors, the Company’s
current position and the potential impact of the principal
risks and uncertainties faced by the Company, the Board
has concluded that it has a reasonable expectation that
the Company will be able to continue in operation and
meet its liabilities as they fall due over the three-year
period of this assessment to 30 September 2027.
In assessing the Company’s future viability, the Board has
assumed that investors will wish to continue to have
exposure to the Company’s activities, in the form of a
closed ended entity, the Company’s long-term
performance is satisfactory, and the Company will
continue to have access to sufficient capital.
Future Strategy
The Board intends to maintain the Company’s strategy set
out in the Strategic Report for the year ending 30
September 2025 as it is believed that these are in the best
interests of shareholders.
On behalf of the Board
Sarika Patel
Chair
27 November 2024
Overview of Strate
g
y
Continued
abrdn Equity Income Trust plc 25
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
How the Board Meets its Obligations under
Section 172 of the Companies Act 2006
The Board is required to describe to the Company’s
shareholders how the Directors have discharged their
duties and responsibilities over the course of the financial
year under Section 172 (1) of the Companies Act 2006
(the “Section 172 Statement”). This statement provides an
explanation of how the Directors have promoted the
success of the Company for the benefit of its members as
a whole, taking into account the likely long-term
consequences of decisions, the need to foster
relationships with all stakeholders and the impact of the
Company’s operations on the environment.
The Board takes its role very seriously in representing the
interests of the Company’s shareholders. The Board
which, at the year end, comprised four independent Non-
Executive Directors collectively has a broad range of skills
and experience across all major functions that affect the
Company. The Board is responsible for taking all decisions
relating to the Company’s investment objective and
policy, gearing, corporate governance, and strategy,
and for monitoring the performance of the Company’s
service providers.
The Board ensures that the Company operates in a
transparent culture where all parties are treated with
respect and provided with the opportunity to offer
practical challenge and participate in debate to achieve
the expectations of shareholders and other stakeholders
alike. The Board works very closely with the Manager in
reviewing how issues are handled, ensuring good
governance and responsibility in managing the
Company’s affairs, as well as visibility and openness in how
the affairs are conducted.
How the Board Engages with Stakeholders
The Board’s main stakeholders have been identified as its
shareholders, the Manager and the Investment Manager,
service providers, investee companies, debt providers and
the community at large and the environment.
A summary of the Board’s approach to engagement with
stakeholders is set out below.
Stakeholder How We Engage
Shareholders Shareholders are key stakeholders and the Board places great importance on communication with
them. The Board welcomes all shareholders’ views and aims to act fairly to all shareholders. The Manager
and the Company’s broker regularly meet with current and prospective shareholders to discuss
performance and shareholder feedback is discussed by the Directors at Board meetings. In addition,
Directors have an opportunity to meet shareholders at the Annual General Meeting.
The Company subscribes to abrdn’s investor relations programme in order to maintain communication
channels with the Company’s shareholder base.
Regular updates are provided to shareholders through the Annual Report, Half Yearly Report, monthly
factsheets, Company announcements, including daily net asset value announcements, and the
Company’s website.
The Company’s Annual General Meeting provides a forum, both formal and informal, for shareholders to
meet and discuss issues with the Directors and Manager. The Board encourages as many shareholders
as possible to attend the Company’s Annual General Meeting and to provide feedback on the Company.
Promotin
g
the Success of the Company
26 abrdn Equity Income Trust plc
Stakeholder How We Engage
Manager (and
Investment Manager)
The Portfolio Manager’s Review on pages 9 to 14 details the key investment decisions taken during
the year. The Company has appointed abrdn Fund Managers Limited (“AFML”) as the Company’s
Manager, or AIFM, which sub-delegates investment management to abrdn Investment Management
Limited, which is known as the Investment Manager.
The Manager has continued to manage the Company’s assets in accordance with the mandate
provided by shareholders, with oversight provided by the Board.
The Board regularly reviews the Company’s performance against its investment objective and the Board
undertakes an annual strategy review meeting to ensure that the Company is positioned well for the
future delivery of its objective for its stakeholders.
The Board receives presentations from the Manager at every Board meeting to help it to exercise
effective oversight of the Manager and the Company’s strategy.
The Board, through the Remuneration & Management Engagement Committee, formally reviews the
performance of the Manager at least annually. More details are provided on page 47.
Service Providers The Board seeks to maintain constructive relationships with the Company’s suppliers either directly or
through the Manager with regular communications and meetings.
The Remuneration & Management Engagement Committee conducts an annual review of the
performance, terms, and conditions of the Company’s main service providers to ensure they are
performing in line with Board expectations, carrying out their responsibilities and providing value
for money.
Investee Companies The Board has delegated responsibility for monitoring the activities of portfolio companies to the
Manager which has sub-delegated that authority to the Investment Manager.
The Board has also given discretionary powers to the Manager to exercise voting rights on resolutions
proposed by the investee companies within the Company’s portfolio. The Manager reports on a quarterly
basis on stewardship (including voting) issues.
Through engagement and exercising voting rights, the Manager actively works with companies to
improve corporate standards, transparency, and accountability. Further details are provided on pages
16 and 17.
The Board monitors investments made and divested and questions the rationale for investment and
voting decisions made.
Debt Providers On behalf of the Board, the Manager maintains a positive working relationship with The Royal Bank of
Scotland International Limited, London Branch, the provider of the Company’s loan facility, and provides
regular updates on business activity and compliance with its loan covenants.
Environment and
Community
The Board and Manager are committed to investing in a responsible manner and the Manager includes
Environmental, Social and Governance (“ESG”) considerations into the research and analysis as part of
the investment decision-making process. Through the Investment Manager, the Board encourages
improvements in ESG practices and disclosures. Further details are provided on page 16.
Promotin
g
the Success of the Company
Continued
abrdn Equity Income Trust plc 27
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Specific Examples of Stakeholder
Consideration during the Year
The importance of giving due consideration to the
Company’s stakeholders is not a new requirement and is
considered as part of every Board decision.
The Board considers its stakeholders at Board meetings
and receives feedback on the Investment Manager’s
interactions with them.
The Directors were particularly mindful of stakeholder
considerations when considering the following items
during the year ended 30 September 2024:
Portfolio
The Portfolio Manager’s Review on pages 9 to 14 details
the key investment decisions taken during the year. The
overall shape and structure of the investment portfolio is
an important factor in delivering the Company’s stated
investment objective and is reviewed at every Board
Meeting. The Board also discusses the performance in
detail with the Portfolio Manager on a regular basis.
Dividend
The Board has determined the payment of a fourth
interim dividend for the year of 5.8 pence per Ordinary
share. Following payment of the fourth interim dividend,
total dividends for the year will amount to 22.9 pence per
Ordinary share, a small increase compared to the
previous year. In setting the level of the dividend, the Board
has balanced the need to deliver an increase to
shareholders and continuing the process of rebuilding the
revenue reserve, which was depleted during the height of
Covid-19. Following payment of the fourth interim
dividend, and based on current shares in issue, 0.14 pence
per share will be transferred to revenue reserves.
Promoting the Company
On 26 January 2024, the Board hosted an online investor
presentation where the Portfolio Manager provided an
update on the portfolio, and the Chair and Portfolio
Manager answered questions from the audience. Over
250 investors signed up to the event. On 29 August 2024,
the Company hosted a meeting for large shareholders at
which members of the Board were present and at which
the Portfolio Manager provided an update. Both these
events gave the Directors the opportunity to hear the
views of shareholders first hand.
Pre-AGM Online Investor Event
The Board will be hosting an Online Investor Presentation,
which will be held at 11:30am on Tuesday, 28 January
2025. At this event there will be a presentation from the
Portfolio Manager followed by an opportunity to ask live
questions of the Portfolio Manager and the Chair. The
online presentation is being held ahead of the Annual
General Meeting to allow shareholders time to submit
their proxy votes after the presentation but prior to the
Annual General Meeting should they so wish. Full details on
how to register for the online event can be found on the
Company’s website at abrdnequityincome.com.
Issuance and Buy-Back of Shares
During the year, the Company issued 135,000 Ordinary
shares from treasury to meet investor demand, at a
premium to the prevailing net asset value. The Company
did not buy-back any shares in the year.
The Board believes that the selective use of issuing share
and share buybacks from treasury, when circumstances
dictate, is in the best interest of all shareholders.
On behalf of the Board
Sarika Patel
Chair
27 November 2024
28 abrdn Equity Income Trust plc
Highlights
30 September 2024 30 September 2023 % change
Capital
Net asset value per Ordinary share 331.5p 314.6p 5.4%
Ordinary share price 321.5p 314.0p 2.4%
Reference Index capital return
C
4,511.0 4,127.2 9.3%
Discount of Ordinary share price to net asset value
A
3.0% 0.2%
Total assets (as defined on page 96) £180.9m £170.8m 5.9%
Shareholders’ funds £158.4m £149.9m 5.7%
Gearing
Net gearing
A
13.0% 11.3%
Earnings and Dividends
Revenue return per Ordinary share 23.05p 23.43p –1.6%
Total dividends for the year 22.90p 22.80p 0.4%
Dividend yield
A
7.1% 7.3%
Expenses
Ongoing charges ratio
AB
0.86% 0.94%
A
Considered to be an Alternative Performance Measure. Further details can be found on pages 87 to 89.
B
Calculated in accordance with AIC guidance issued in October 2020 to include the Company’s share of costs of holdings in investment companies on a look-through basis.
C
FTSE All-Share Index
Performance (total return)
1 year 3 years 5 years 10 years
30 September 2024 % % % %
Net asset value
A
13.3 6.5 10.7 38.9
Share price
A
10.4 13.3 17.7 39.0
Reference Index
B
13.4 23.9 32.2 83.6
A
Considered to be an Alternative Performance Measure. Further details can be found on page 89.
B
FTSE All-Share Index.
Source: abrdn/Morningstar/Factset
Results
abrdn Equity Income Trust plc 29
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Annual total returns of abrdn Equity Income Trust NAV and
FTSE All-Share Index September 2014– 2024
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Sep 14 Sep 15 Sep 16 Sep 17 Sep 18 Sep 19 Sep 20 Sep 21 Sep 22 Sep 23 Sep 24
abrdn Equity Income Trust NAV Total Return FTSE All-Share Index Total Return
abrdn Equity Income Trust Premium/(Discount) relative to the UK Equity Income unweighted
sector average since 30 September 2019
-20%
-15%
-10%
-5%
0%
5%
30/09/ 19 30/09/ 20 30/0 9/21 30 /0 9/22 30/09/ 23 30/09/ 24
abrdn Equity Income Trust discount Un weighted S ec tor A verage
30 abrdn Equity Income Trust plc
Annual Dividend Growth versus Retail Price Index since 2014
0%
2%
4%
6%
8%
10%
12%
14%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Dividend growth RPI
Ten Year Financial Record
Revenue
available Net Equity
Gross for Ordinary Revenue Ordinary Net asset Share Ongoing gearing / shareholders’ Revenue
Year ended revenue shareholders return dividends value
A
price Discount
AB
charges
BC
(cash)
B
funds reserves
D
30 September £’000 £’000 p p p p % % % £m (£m)
2015 6,107 5,361 17.18 14.70 440.7 439.0 0.4 0.94 7.7 195.6 6.88
2016 7,084 6,214 17.92 15.40 431.5 412.4 4.4 0.96 7.5 199.7 8.15
2017 7,957 7,044 19.23 17.10 478.6
E
459.6 4.8 0.87 9.9 235.3
E
9.41
2018 11,893 10,846 22.06 19.20 485.0 473.0 2.5 0.87 12.1 238.4 10.82
2019 11,791 10,687 21.74 20.50 411.8 381.5 7.4 0.91 13.7 201.5 11.58
2020 8,730 7,614 15.61 20.60 288.0 252.0 12.5 0.92 13.3 139.2 8.75
2021 10,642 9,693 20.06 21.20 380.8 349.0 8.4 0.93 13.5 182.9 8.49
2022 13,517 12,244 25.51 22.70 331.8 302.5 8.8 0.91 15.0 157.5 10.27
2023 12,598 11,109 23.43 22.80 314.6 314.0 0.2 0.94 11.3 149.9 10.18
2024 12,735 11,010 23.05 22.90 331.5 321.5 3.0 0.86 13.0 158.4 10.30
A
Diluted for the effect of Subscription shares in issue for the year ended 30 September 2012 to 30 September 2016.
B
Considered to be an Alternative Performance Measure. Further details can be found on pages 87 to 89.
C
Calculated in accordance with AIC guidance issued in October 2020 to include the Company’s share of costs of holdings in investment companies on a look-through basis. The
figure for 30 September 2020 has been restated in accordance with this guidance.
D
Revenue reserves are reported prior to paying the final dividend or fourth interim dividend in each year. For 2017 only, reserves are reported after having deducted the third
interim dividend.
E
The 2017 Net Asset Value is calculated under Financial Reporting Standards, but includes an adjustment for the third interim dividend which had been declared, but not paid, at
the year end.
Results
Continued
abrdn Equity Income Trust plc 31
Portfolio
The portfolio is invested on an index-
agnostic basis. The process is based on
bottom-up stock picking approach where
sector allocations are a function of the
sum of the stock selection decisions,
constrained only by appropriate risk
control parameters.
32 abrdn Equity Income Trust plc
As at 30 September 2024
Imperial Brands
National Grid
Imperial Brands is a global consumer
goods company that manufactures,
markets and distributes tobacco
products across approximately
120 markets.
National Grid is a utility company which
is focused on the transmission and
distribution of electricity and gas in
Great Britain and the United States.
BHP
British American Tobacco
BHP is a diversified resources group
with a global portfolio of high-quality
assets, focusing on iron ore, petroleum
and copper.
British American Tobacco sells
combustible tobacco products in more
than 50 countries around the world, as
well as a growing portfolio of non-
combustible products such as vapour
and tobacco heating products.
Berkeley Group
BP
Berkeley Group is a UK homebuilder
specialising in large-scale residential-
led brownfield redevelopment projects
with a particular focus on the London,
Birmingham, and south of England
housing markets.
BP is an oil and petrochemicals
company. The company explores for
and produces oil and natural gas,
refines, markets, and supplies
petroleum products, generates
renewable energy, and manufactures
and markets chemicals.
Rio Tinto
Conduit Holdings
Rio Tinto is a leading global mining group
that focuses on finding, mining and
processing mineral resources, with a
focus on iron ore and aluminium.
Conduit is a Bermuda-based reinsurer
with a diversified portfolio across
Property, Casualty and Specialty.
SSE
Legal & General
SSE engages in the generation,
transmission, distribution and supply of
electricity and the production, storage,
distribution and supply of gas.
Legal & General is a leading UK
financial services provider, offering life
insurance, pensions, retirement and
investment services.
© owned by each of the corporate entities in the respective logos
Ten Lar
g
est Investments
abrdn Equity Income Trust plc 33
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
As at 30 September 2024
Valuation as at Valuation as at
30 September 2024 Weight 30 September 2023
Stock Key Sector £’000 % £’000
Imperial Brands Tobacco 8,462 4.8 4,945
National Grid Gas, Water and Multi-utilities 7,376 4.1 6,160
BHP Industrial Metals and Mining 7,239 4.1 4,612
British American Tobacco Tobacco 6,900 3.9 3,127
Berkeley Group Household Goods and Home Construction 6,812 3.8 -
BP Oil, Gas and Coal 6,515 3.7 8,862
Rio Tinto Industrial Metals and Mining 6,136 3.5 3,686
Conduit Holdings Non-life Insurance 5,778 3.2 4,267
SSE Electricity 5,575 3.1 7,294
Legal & General Life Insurance 5,551 3.1 3,051
Top ten investments 66,344 37.3
Petershill Partners Investment Banking and Brokerage Services 5,125 2.9 1,999
M&G Investment Banking and Brokerage Services 5,022 2.8 -
CMC Markets Investment Banking and Brokerage Services 4,852 2.7 2,146
Barclays Banks 4,430 2.5 5,420
HSBC Banks 4,347 2.4 4,400
OSB Group Finance and Credit Services 4,128 2.3 3,476
Shell Oil, Gas and Coal 4,056 2.3 8,771
TP ICAP Investment Banking and Brokerage Services 3,975 2.2 1,987
Assura Real Estate Investment Trusts 3,910 2.2 -
Galliford Try Construction and Materials 3,823 2.2 2,532
Top twenty investments 110,012 61.8
Chesnara Life Insurance 3,490 2.0 3,763
Drax Electricity 2,986 1.7 -
Ithaca Energy Oil, Gas and Coal 2,947 1.6 2,776
Quilter Investment Banking and Brokerage Services 2,940 1.6 1,898
Glencore Industrial Metals and Mining 2,924 1.6 6,210
Diversified Energy Oil, Gas and Coal 2,811 1.6 5,373
International Personal
Finance
Finance and Credit Services 2,801 1.6 2,368
BAE Systems Aerospace and Defence 2,702 1.5 3,102
Investment Portfolio
34 abrdn Equity Income Trust plc
As at 30 September 2024
Valuation as at Valuation as at
30 September 2024 Weight 30 September 2023
Stock Key Sector £’000 % £’000
Thungela Resources Oil, Gas and Coal 2,601 1.5 4,122
Harbour Energy Oil, Gas and Coal 2,459 1.4 1,366
Top thirty investments 138,673 77.9
NatWest Group Banks 2,450 1.4 5,194
Close Brothers Banks 2,448 1.4 5,604
Real Estate Investors Real Estate Investment Trusts 2,394 1.4 2,020
Speedy Hire Industrial Transportation 2,388 1.4 1,615
Barratt Redrow Household Goods and Home Construction 2,380 1.3 -
Energean Oil, Gas and Coal 2,375 1.3 -
DFS Furniture Retailers 2,248 1.3 2,014
Johnson Matthey Chemicals 2,210 1.2 -
Sabre Insurance Non-life Insurance 2,194 1.2 -
Inchcape Industrial Support Services 2,021 1.1 -
Top forty investments 161,781 90.9
Crest Nicholson Household Goods and Home Construction 1,992 1.1 -
Standard Chartered Banks 1,922 1.1 2,555
LondonMetric Real Estate Investment Trusts 1,889 1.1 2,849
Litigation Capital Investment Banking and Brokerage Services 1,844 1.0 2,268
Phoenix Life Insurance 1,705 1.0 1,471
Sirius Real Estate Real Estate Investment Trusts 1,638 0.9 -
CLS Holdings Real Estate Investment and Services 1,391 0.8 1,085
Ashmore Investment Banking and Brokerage Services 1,338 0.8 1,517
Man Group Investment Banking and Brokerage Services 1,334 0.7 -
Smurfit Kappa General Industrials 1,144 0.6 -
Top fifty investments 177,978 100.0
Total Portfolio 177,978 100.0
All investments are equity investments.
Investment Portfolio
Continued
abrdn Equity Income Trust plc 35
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
As at 30 September 2024
37.9
13.4
10.4
8.9
8.7
7.5
6.8
6.4
Portfolio Weightings %
Financials
Energy
Basic Materials
Utilities
Consumer Staples
Consumer Discretionary
Industrials
Real Estate
As at 30 September 2023
36.6
18.9
11.0
10.1
8.1
5.7
4.5
3.6
0.8
0.7
Portfolio Weightings %
Financials
Energy
Basic Materials
Industrials
Utilities
Consumer Staples
Consumer Discretionary
Real Estate
Health Care
Telecommunications
Sector Distribution
36 abrdn Equity Income Trust plc
Berkeley Group (3.8% of the portfolio)
Berkeley Group is a UK housebuilder that was founded in
1976. The management team is regarded as one of the
best in the entire UK stock market. The current CEO, Rob
Perrins, joined Berkeley in 1994 and took over from the
founder, Tony Pidgley, in 2009. Berkeley is focused on
London and the South-East of England, having sold its
regional business in 2003. It is currently developing 36 sites
in London and 34 sites outside London. The superior
returns generated by Berkeley in the past two decades
can be attributed to its long-term approach to its housing
developments, having a very large land-bank and
excellent order book visibility. Berkeley is unusual in having
expertise in developing large brownfield regeneration
sites. As one of the only housebuilders prepared to take on
these projects, this puts it in a strong position to acquire the
land at low cost, with an average plot cost of just £49,000
compared with typical selling prices well over £500,000,
supporting Return on Equity of around 15% through
the cycle.
Berkeley has particularly good visibility on its order book
thanks to the global appeal of its high-end London homes.
Berkeley has developed strong distribution in Asia where
buyers are often willing to place orders for its homes off-
plan. The company’s focus on London and the South-East
reflects the management team’s view that this part of the
UK will continue to see the greatest upward pressure on
house prices due to the mismatch between rising demand
for new homes and constrained supply. At the time of the
2024 results, the CEO commented on the collapse in
recent years caused by a combination of factors including
geopolitical disruption, political uncertainty and planning
policy complexities. His view is that, without focused policy
intervention, the UK could be heading towards just 100,000
new homes by 2026, compared with the stated ambition
of the UK Government to achieve 300,000 new homes.
Berkeley's strong balance sheet and high returns allows
the company to announce significant capital returns,
including regular special dividends. This has continued in
recent years despite the tougher economic backdrop.
The CEO takes the view that Berkeley should retain the
flexibility to pursue growth or increase shareholder
returns, depending on the stage of the cycle. In its most
recent results, management announced a large special
dividend of £283 million, as well as investing in medium
term projects such as a new Build to Rent initiative that will
deliver the first new homes in 2027. Analysts are
forecasting that Berkeley will return over a quarter of its
market capitalisation in the three years to April 2027,
underlining the reliable, cash generative nature of the
business. The share price valuation appears attractive,
trading at 1.4x NAV, towards the bottom of its 15-year
range of 1.2x to 2.7x NAV. The catalyst for a re-rating is
likely to be a pick-up in demand, as the economy
improves, or an improvement in the planning system. The
Portfolio Manager bought a new holding in Berkeley
Group in the second half of the financial year, attracted by
the visibility of its cash flows and the potential to deliver
positive surprises in the years to come as activity levels
pick up.
Investment Case Studies
abrdn Equity Income Trust plc 37
Galliford Try (2.2% of the portfolio)
Galliford Try is a leading UK construction business focused
on three areas – Building, Infrastructure and Specialist
Services. The business became a stand-alone
construction group in 2020 when it de-merged its
housebuilding business, Linden Homes to Bovis Homes, to
create Vistry. At the time of the de-merger, Galliford Try
received a £300 million cash payment from Vistry and also
transferred its debt to Vistry. This was important as it left
Galliford Try as a well-capitalised business, regarded by its
customers as a reliable counterparty and therefore
putting it in a strong position to win positions on long-term
frameworks within the public sector and regulated
industries. These frameworks provide excellent revenue
visibility, with 92% of FY25 revenues and 70% of FY26
revenues already secured at the time of its FY24 results in
mid-2024. The strong balance sheet also allowed the
company to become an industry leader on the treatment
of its suppliers, making a commitment to prompt payment
of invoices, thereby underlining its commitment to ESG.
Galliford Try originally set ambitious targets in 2021,
seeking to grow revenues from £1.1 billion to £1.6 billion
and operating margin from 2.0% to 3.0% by 2026. Having
achieved these targets two years early, the company
announced new targets at its Capital Markets Day in May
2024. The CEO set out upgraded revenue and operating
margin targets - £2.2 billion revenues and 4.0% operating
margin. The Portfolio Manager’s confidence that Galliford
Try can achieve these targets is based on a number of
factors. The market backdrop has improved in recent
years, with the entire industry shifting towards greater
pricing discipline, after a series of high-profile company
failures in the previous decade caused by over-indebted
balance sheets and over-aggressive assumptions when
bidding on contracts. Galliford Try has taken a
conservative approach to risk management, ensuring
appropriate terms and conditions when bidding on
contracts, sticking carefully to minimum margin
thresholds and requiring board approval for larger bids.
The growing need to upgrade the UK’s deteriorating
infrastructure has created a large number of bidding
opportunities, meaning that Galliford Try can be
extremely selective when choosing which contracts it will
accept. This has driven its focus on low-risk contracts in
the public sector, with a focus on sectors such as Water
where there is a huge runway for growth. Galliford Try is
also moving up the value chain, using its incumbent
position in Building and Infrastructure to grow in Specialist
Services such as fire protection. It has also re-established
itself in Affordable Homes, which is a division where it has
historic expertise, having operated in this area before
selling the division to Bovis at the time of the de-merger.
The Portfolio Manager considers Galliford Try to be a
good example of how it can deliver for our shareholders
on both income and capital growth. The dividend outlook
is supported by the strong balance sheet and high
revenue visibility. This has allowed the management team
to announce special dividends and buybacks, alongside
an attractive ordinary dividend (dividend yield around 5%).
The share price is supported by the strong earnings
growth outlook, while the Portfolio Manager also sees
potential for valuation re-rating, as the low-teens
Price/Earnings ratio does not reflect the growth potential.
The new 2030 targets would imply mid-high teens
earnings and dividend growth by 2030. The share price is
also supported by cash and infrastructure investments of
208p/share. The Portfolio Manager added to the holding in
February 2020, shortly after the de-merger of Linden
Homes, and purchased more shares in
October/November 2023 as it gained conviction in the
delivery of the strategic plan.
38 abrdn Equity Income Trust plc
Governance
The Board of Directors of the Company is a
highly experienced group of individuals with
deep insights into investment trusts and the
financial services industry. The Board works
closely with the Manager to deliver
shareholder value.
The Board is responsible for stewardship,
including overall strategy, investment policy,
borrowings, dividends, corporate governance
procedures and risk management.
abrdn Equity Income Trust plc 39
40 abrdn Equity Income Trust plc
Sarika Patel
Independent Non-Executive Chair
Appointment
Appointed a Director on 1 November 2019 and as Chair
on 2 February 2023.
Experience:
Sarika Patel is a business leader with nearly 30 years'
experience. She is a Chartered Accountant and a
Chartered Marketer. Sarika is a non-executive director of
SDCL Energy Efficiency Income Trust plc.
Previously a partner at Zeus Caps, Sarika has been on a
host of public and private sector boards. She is currently
Chair of Action for Children, one of the UK's leading
charities for children, and a Board Member of the Office
for Nuclear Regulation where she chairs the Audit, Risk and
Assurance Committee.
Committee membership:
Audit Committee and Remuneration & Management
Engagement Committee.
Contribution:
The Board has reviewed the contribution of Sarika Patel in
light of her proposed re-election at the Annual General
Meeting and has concluded that she is an excellent Chair.
She is in full command of the governance and technical
issues and adept in bringing the Directors together to
develop a Board view.
Caroline Hitch
Senior Independent Non-Executive Director
Appointment
Appointed a Director on 1 January 2017 and Senior
Independent Director on 20 February 2024.
Experience:
Caroline Hitch is also Chair of CQS New City High Yield
Fund Ltd. Her career in financial services was mainly with
the HSBC Group and most recently she was Head of
Wealth Portfolio Management at HSBC’s asset
management arm with investment responsibility for its
flagship retail multi asset funds. She has worked in London,
Jersey, Monaco and Hong Kong.
Committee membership:
Audit Committee and Remuneration & Management
Engagement Committee.
Contribution:
The Board has reviewed the contribution of Caroline Hitch
in light of her proposed re-election at the Annual General
Meeting. The Board has concluded that she continues to
bring significant investment insight to the Board and
knowledge of the investment management sector.
Board of Directors
abrdn Equity Income Trust plc 41
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Mark Little
Independent Non-Executive Director and Chair of the
Audit Committee
Appointment
Appointed a Director on 1 August 2022 and as Chair of the
Audit Committee on 2 February 2023.
Experience:
Mark Little is a non-executive director and also chairs the
audit committees of BlackRock Smaller Companies Trust
plc, Majedie Investments Plc and Fidelity Emerging
Markets Limited.
Mark was previously Investment Director at Seven
Investment Management, and a non-executive director
(and audit committee chairman) of Sanditon Investment
Trust plc and Securities Trust of Scotland plc. He began his
career in the investment industry as a fund manager with
Scottish Widows Investment Management after qualifying
in 1991 as a Chartered Accountant with Price
Waterhouse. He subsequently worked as Global Head of
Automotive Research for Deutsche Bank and Managing
Director of Barclays Wealth (Scotland and Northern
Ireland), a position that he held for eight years until 2013.
Committee membership:
Audit Committee (Chair) and Remuneration &
Management Engagement Committee.
Contribution:
The Board has reviewed the contribution of Mark Little in
light of his proposed re-election at the Annual General
Meeting. The Board has concluded that he is an effective
Chair of the Audit Committee Chair and brings investment
trust experience and investment insights into all Board
discussions.
Nick Timberlake
Independent Non-Executive Director and Chair of the
Remuneration & Management Engagement Committee
Appointment
Appointed a Director on 1 August 2023 and as Chair of the
Remuneration & Management Engagement Committee
on 20 February 2024.
Experience:
Nick Timberlake is a non-executive director of India
Capital Growth Fund and CT Automotive plc.
Nick has over 30 years’ experience in the asset
management industry as a portfolio manager. He was
with HSBC Global Asset Management between 2005 and
2020, initially as Global Head of Emerging Markets Equities
and then Head of Equities. Previously he was a Director of
F&C Investment Management and has spent the last 30
years investing in equities. He is a partner in Panorama
Property Investments LLP and is a member of the CFA
Institute and CFA Society of the UK.
Committee membership:
Audit Committee and Remuneration & Management
Engagement Committee (Chair).
Contribution:
The Board has reviewed the contribution of Nick
Timberlake in light of his proposed re-election at the
Annual General Meeting. The Board has concluded that
he is an effective Chair of the Remuneration &
Management Engagement Committee and contributes
effectively to Board discussions.
42 abrdn Equity Income Trust plc
The Directors present their report and the audited
financial statements of the Company for the year ended
30 September 2024.
Results and Dividends
The financial statements for the year ended 30
September 2024 are contained on pages 68 to 86. Interim
dividends of 5.7 pence per share were paid in March, June
and September 2024. The Board has declared that a
fourth interim dividend for the year to 30 September 2024
of 5.8 pence per share is payable on 10 January 2025 to
shareholders on the register on 6 December 2024. The ex-
dividend date is 5 December 2024.
Principal Activity and Status
The Company is registered as a public limited company in
England and Wales under company number 2648152.
The Company is an investment company within the
meaning of Section 833 of the Companies Act 2006,
carries on business as an investment trust and is a
member of the Association of Investment Companies.
The Company has applied for and has been accepted as
an investment trust under Sections 1158 and 1159 of the
Corporation Tax Act 2010 and Part 2 Chapter 1 of
Statutory Instrument 2011/2999. This approval relates to
accounting periods commencing on or after 1 October
2012. The Directors are of the opinion that the Company
has conducted its affairs so as to be able to retain
such approval.
The Company intends to manage its affairs so that its
Ordinary shares continue to be a qualifying investment for
inclusion in the stocks and shares component of an
Individual Savings Account.
Capital Structure and Voting Rights
The Company’s issued share capital at 30 September
2024 consisted of 47,781,522 Ordinary shares of 25 pence
each (2023: 47,646,522) and there were 1,397,245
Ordinary shares held in treasury (2023: 1,532,245),
representing 2.8% (2023: 3.1%) of the issued share capital
as at that date.
During the year, no Ordinary shares were bought back
into treasury (2023: 100,417) and 135,000 Ordinary shares
were issued from treasury (2023: 275,000).
There have been no changes to the Company’s capital
structure or voting rights since the year end.
At a general meeting of the Company, each Ordinary
shareholder is entitled to one vote on a show of hands and,
on a poll, to one vote for every Ordinary share held.
Management Agreement
The Company has appointed abrdn Fund Managers
Limited (“AFML”), a wholly owned subsidiary of abrdn plc,
as its alternative investment fund manager (the
“Manager”). AFML has been appointed to provide
investment management, risk management,
administration and company secretarial services, and
promotional activities to the Company. The Company's
portfolio is managed by abrdn Investment Management
Limited (the “Investment Manager”) by way of a group
delegation agreement in place between AFML and the
Investment Manager.
In addition, AFML has sub-delegated administrative and
secretarial services to abrdn Holdings Limited.
With effect from 1 October 2023, the Company’s
management fee is calculated as 0.55% of net assets
(previously the Company’s management fee was
calculated as 0.65% per annum of net assets up to £175
million and at a rate of 0.55% of net assets above this
threshold).
The Manager also receives a separate fee for the
provision of promotional activities to the Company.
Further details of the fees payable to the Manager are
shown in notes 3 and 4 to the financial statements.
The management agreement is terminable on not less
than six months’ notice. In the event of termination by the
Company on less than the agreed notice period,
compensation is payable to the Manager in lieu of the
unexpired notice period.
Directors’ Report
abrdn Equity Income Trust plc 43
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
External Agencies
The Board has contractually delegated to external
agencies, including the Manager and other service
providers, certain services including: the management of
the investment portfolio, the day-to-day accounting and
company secretarial requirements, the depositary
services (which include the custody and safeguarding of
the Company’s assets) and the share registration services.
Each of these contracts was entered into after full and
proper consideration by the Board of the quality and cost
of services offered in so far as they relate to the affairs of
the Company. In addition, ad hoc reports and information
are supplied to the Board as requested.
Substantial Interests
Information provided to the Company by major
shareholders pursuant to the FCA’s Disclosure, Guidance
and Transparency Rules are published by the Company
via a Regulatory Information Service.
The table below sets out the interests in 3% or more of the
issued share capital of the Company, of which the Board
was aware as at 30 September 2024.
Shareholder
Number of Ordinary
shares % held
Hargreaves Lansdown 11,995,187 25.1
Interactive Investor 11,962,449 25.0
A J Bell 3,091,579 6.5
Charles Stanley 2,916,174 6.1
HSDL 2,712,616 5.7
The Company has not been notified of any changes to
these holdings as at the date of this Report.
Directors
Biographies of the Directors of the Company are shown
on pages 40 and 41.
Sarika Patel is the Chair, Caroline Hitch is the Senior
Independent Director, Mark Little is Chair of the Audit
Committee and Nick Timberlake is Chair of the
Remuneration & Management Engagement Committee.
The Chair is responsible for providing effective leadership
to the Board, by setting the tone of the Company,
demonstrating objective judgement and promoting a
culture of openness and debate. The Chair facilitates
effective contribution from each Director and encourages
active engagement. In conjunction with the Company
Secretary, the Chair ensures that Directors receive
accurate, timely and clear information to assist them with
effective decision-making. The Chair acts upon the results
of the Board evaluation process by recognising strengths
and addressing any weaknesses and also ensures that the
Board engages with major shareholders and that all
Directors understand shareholder views.
The Senior Independent Director acts as a sounding board
for the Chair and acts as an intermediary for other
Directors, when necessary. Working closely with the
Remuneration & Management Engagement Committee,
the Senior Independent Director takes responsibility for an
orderly succession process for the Chair and leads the
annual appraisal of the Chair’s performance. The Senior
Independent Director is also available to shareholders to
discuss any concerns they may have.
The Directors attended scheduled Board and Committee
meetings during the year ended 30 September 2024 as
follows (with their eligibility to attend the relevant
meetings in brackets):
Board
Meetings
Audit
Committee
Meetings
Remuneration
& Management
Engagement
Committee
Meetings
Sarika Patel 4 (4) 2 (2) 1 (1)
Caroline Hitch 4 (4) 2 (2) 1 (1)
Mark Little
4 (4) 2 (2) 1 (1)
Nick Timberlake
4 (4) 2 (2) 1 (1)
Jeremy Tigue
A
2 (2) 1 (1) 0 (0)
A
Retired from the Board on 20 February 2024.
The Board meets more frequently when business needs
require and met an additional four times during the
financial year.
44 abrdn Equity Income Trust plc
All Directors will retire and being eligible, will offer
themselves for re-election at the Annual General Meeting.
The Board believes that all the Directors remain
independent of the Manager and free from any
relationship which could materially interfere with the
exercise of their judgement on issues of strategy,
performance, resources and standards of conduct. The
biographies of each of the Directors are shown on pages
40 and 41, setting out their range of skills and experience
as well as length of service and their contribution to the
Board during the year. The Board believes that,
collectively, it has the requisite high level and range of
business, investment and financial experience to enable it
to provide clear and effective leadership and proper
governance of the Company. Following formal
performance evaluations, each Director’s performance
continues to be effective and demonstrates commitment
to the role, and their individual performances contribute to
the long-term sustainable success of the Company. The
Board therefore recommends the re-election of each of
the Directors at the Annual General Meeting.
Board’s Policy on Tenure
In normal circumstances, it is the Board’s expectation that
Directors will not serve beyond the Annual General
Meeting following the ninth anniversary of their
appointment. However, the Board takes the view that
independence of individual Directors is not necessarily
compromised by length of tenure on the Board and that
continuity and experience can add significantly to the
Board’s strength. The Board believes that
recommendation for re-election should be on an
individual basis following a rigorous review which assesses
the contribution made by the Director concerned, but also
taking into account the need for regular refreshment
and diversity.
Board Diversity Policy
The Board recognises the importance of having a range
of skilled and experienced individuals with the right
knowledge represented on the Board in order to allow it to
fulfil its obligations. The Board also recognises the benefits
and is supportive of the principle of diversity in its
recruitment of new Board members. The Board will not
display any bias for age, gender, race, sexual orientation,
socio-economic background, religion, ethnic or national
origins or disability in considering the appointment of its
Directors. In view of its size, the Board will continue to
ensure that all appointments are made on the basis of
merit against the specification prepared for each
appointment. In doing so, the Board will take account of
the targets set out in the FCA’s Listing Rules, which are set
out in the tables below.
The Board has resolved that the Company’s year-end
date is the most appropriate date for disclosure purposes.
The following information has been provided by each
Director through the completion of questionnaires. There
have been no changes since the year end.
Directors’ Report
Continued
abrdn Equity Income Trust plc 45
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Board Gender as at 30 September 2024
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%
n/a
(note 3)
n/a
(note 3)
n/a
(note 3)
Women 2 50%
(note 1)
Board Ethnic Background as at 30 September 2024
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)
3
75%
n/a
(note 3)
n/a
(note 3)
n/a
(note 3)
Asian 1
(note 2)
25%
Notes:
1. Meets the target that at least 40% of Directors are women as set out in UKLR6.6.6(9)(a)(i)
2. Meets the target that at least one individual on the Board is from a minority ethnic background as set out in
UKLR6.6.6(9)(a)(iii)
3. This column is not applicable as the Company is externally managed and does not have any Executive staff.
Specifically, it does not have a CEO or CFO. The Company considers that the roles of Chairman of the Board, Senior
Independent Director and Chairs of the Audit Committee and Remuneration & Management Engagement
Committee are senior Board positions and, accordingly, that the Company meets the requirements that at least one
of the senior Board positions is held by a woman as set out in LR.6.6.6(9)(a)(ii)
46 abrdn Equity Income Trust plc
Directors’ and Officers’ Liability Insurance
The Company’s Articles of Association provide for each of
the Directors to be indemnified out of the assets of the
Company against any liabilities incurred by them as a
Director of the Company in defending proceedings, or in
connection with any application to the Court in which
relief is granted. Directors’ and Officers’ liability insurance
cover has been maintained throughout the year at the
expense of the Company.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a
situation where a Director has a conflict of interest. As part
of this process, each Director prepares a list of other
positions held and all other conflict situations that may
need to be authorised either in relation to the Director
concerned or his or her connected persons. The Board
considers each Director’s situation and decides whether
to approve any conflict, taking into consideration what is in
the best interests of the Company and whether the
Director’s ability to act in accordance with his or her wider
duties is affected. Each Director is required to notify the
Company Secretary of any potential, or actual, conflict
situations that will need authorising by the Board.
Authorisations given by the Board are reviewed at each
Board meeting.
No Director has a service contract with the Company
although all Directors are issued with letters of
appointment. There were no contracts during, or at the
end of the year, in which any Director was interested.
The Company has a policy of conducting its business in an
honest and ethical manner. The Company takes a zero-
tolerance approach to bribery and corruption and has
procedures in place that are proportionate to the
Company’s circumstances to prevent them. The Manager
also adopts a group-wide zero-tolerance approach and
has its own detailed policy and procedures in place to
prevent bribery and corruption. Copies of the Manager’s
anti-bribery and corruption policies are available on
its website.
In relation to the corporate offence of failing to prevent tax
evasion, it is the Company’s policy to conduct all business
in an honest and ethical manner. The Company takes a
zero-tolerance approach to facilitation of tax evasion
whether under UK law or under the law of any foreign
country and is committed to acting professionally, fairly
and with integrity in all its business dealings and
relationships.
Financial Instruments
The financial risk management objectives and policies
arising from its financial instruments and the exposure of
the Company to risk are disclosed in note 15 to the
financial statements.
Corporate Governance
The Company is committed to high standards of
corporate governance. The Board is accountable to the
Company’s shareholders for good governance and this
statement describes how the Company has applied the
principles identified in the UK Corporate Governance
Code as published in July 2018 (the “UK Code”), which is
available on the Financial Reporting Council’s (the “FRC”)
website: frc.org.uk.
The Board has also considered the principles and
provisions of the AIC Code of Corporate Governance as
published in February 2019 (the “AIC Code”). The AIC
Code addresses the principles and provisions set out in the
UK Code, as well as setting out additional provisions on
issues that are of specific relevance to the Company. The
AIC Code is available on the AIC’s website: theaic.co.uk. It
includes an explanation of how the AIC Code adapts the
principles and provisions set out in the UK Code to make
them relevant for investment companies.
The Board considers that reporting against the
principles and provisions of the AIC Code, which has
been endorsed by the FRC, provides more relevant
information to shareholders.
The Board confirms that, during the year, the Company
complied with the principles and provisions of the AIC
Code and the relevant provisions of the UK Code, except
as set out below.
The UK Code includes provisions relating to:
· interaction with the workforce (provisions 2, 5 and 6).
· the role and responsibility of the chief executive
(provisions 9 and 14).
· requirement to establish a nomination committee and
describe the work of the nomination committee
(provisions 17 and 23).
· the chair shall not be a member of the audit committee
(provision 24).
· the need for an internal audit function (provision 25).
· previous experience of the chairman of a remuneration
committee (provision 32); and
· executive directors’ remuneration (provisions 33 and
36 to 40).
Directors’ Report
Continued
abrdn Equity Income Trust plc 47
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
The Board considers that these provisions, with the
exception of the requirement to establish a nomination
committee and describe the work of the nomination
committee, are not relevant to the position of the
Company, being an externally managed investment
company. In particular, all of the Company’s day-to-day
management and administrative functions are
outsourced to third parties. As a result, the Company has
no executive directors, employees or internal operations.
The Board has determined that there is no need for the
Company to have a standalone Nomination Committee
given the number of Directors on the Board. The functions
traditionally undertaken by a nomination committee are
fulfilled by the Board.
The Company has therefore not reported further in
respect of these provisions.
Full details of the Company’s compliance with the
AIC Code of Corporate Governance can be found on
its website.
Board Committees
The Board has appointed two committees, as set out
below. Copies of their terms of reference, which clearly
define the responsibilities and duties of each committee,
are available on the Company’s website, or upon request
from the Company. The terms of reference of each of the
committees are reviewed and re-assessed by the Board
for their adequacy on an ongoing basis.
Audit Committee
The Audit Committee’s Report is contained on pages
55 to 58.
Remuneration & Management Engagement Committee
The Remuneration & Management Engagement
Committee comprises the full Board and is chaired by
Nick Timberlake. The main responsibilities of the
Committee include:
· monitoring and evaluating the performance of the
Manager.
· reviewing at least annually the continued retention of
the Manager.
· reviewing at least annually the terms of appointment of
the Manager including, but not limited to, the level and
method of remuneration and the notice period of
the Manager.
· reviewing the performance and remuneration of the
other key service providers to the Company; and
· determining the Directors’ remuneration policy and level
of remuneration.
The Committee met once during the year to 30
September 2024 and undertook a review of the
management of the Company and its performance.
Following conclusion of the review, the Committee
recommended to the Board that the continuing
appointment of the Manager and other key service
providers was in the best interests of the shareholders and
the Company as a whole.
Going Concern
The Company’s assets consist mainly of equity shares in
companies listed on recognised stock exchanges and are
considered by the Board to be realisable within a short
timescale under normal market conditions. The Board has
set overall limits for borrowing and reviews regularly the
Company’s level of gearing, cash flow projections and
compliance with banking covenants, when applicable.
The Board has also performed stress testing and
liquidity analysis.
The Company’s Articles of Association require that at
every fifth Annual General Meeting, the Directors shall
propose an ordinary resolution to effect that the
Company continues as an investment trust. An ordinary
resolution approving the continuation of the Company for
five years was passed at the Annual General Meeting on 4
February 2022. The next continuation vote will take place
at the Annual General Meeting to be held in 2027.
As at 30 September 2024, the Company had a £30 million
(2023: £30 million) revolving credit facility with The Royal
Bank of Scotland International Limited, London Branch.
£22.5 million was drawn at the end of the financial year
(2023: £21 million). The revolving credit facility matures on
23 June 2026.
48 abrdn Equity Income Trust plc
The Directors are mindful of the Principal Risks and
Uncertainties disclosed in the Strategic Report on pages
15 to 24 and they believe that the Company has adequate
financial resources to continue its operational existence
for a period of not less than 12 months from the date of
approval of this Report. They have arrived at this
conclusion having confirmed that the Company’s
diversified portfolio of realisable securities is sufficiently
liquid and could be used to meet short-term funding
requirements were they to arise. They have also reviewed
the revenue and ongoing expenses forecasts for the
coming year. Accordingly, the Directors believe that it is
appropriate to continue to adopt the going concern basis
in preparing the financial statements.
Accountability and Audit
The respective responsibilities of the Directors and the
Auditor in connection with the financial statements
appear on page 66.
The Directors who held office at the date of approval of
this Directors’ Report confirm that, so far as they are each
aware, there is no relevant audit information of which the
Company’s Auditor is unaware; and each Director has
taken all the steps that he/she ought to have taken as a
Director to make himself/herself aware of any relevant
audit information and to establish that the Company’s
Auditor is aware of that information.
Independent Auditor
As explained in the Audit Committee’s Report on page 58,
Johnston Carmichael LLP was appointed as the
Company’s Auditor by shareholders at the Annual
General Meeting on 20 February 2024.
The Board will propose resolutions at the Annual General
Meeting to re-appoint Johnston Carmichael LLP as the
Company’s 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 from the Manager by
emailing equity.income@abrdn.com.
The Board’s policy is to communicate directly with
shareholders and their representative bodies without the
involvement of the management group (including the
Company Secretary or the Manager) in situations where
direct communication is required, and representatives
from the Manager meet with major shareholders on at
least an annual basis in order to gauge their views, and
report back to the Board on these meetings. In addition,
the Company Secretary only acts on behalf of the Board,
not the Manager, and there is no filtering of
communication. At each Board meeting the Board
receives full details of any communication from
shareholders to which the Chair responds personally
as appropriate.
The Company’s Annual General Meeting provides a forum
for communication primarily with private shareholders
and is attended by the Board. The Manager makes a
presentation to the meeting and all shareholders have the
opportunity to put questions to both the Board and the
Manager at the meeting. The Board will also be hosting an
Online Pre-AGM Investor Session to engage directly with
shareholders, regardless of their location. Details on how
to register for the event are set out in the Chair’s
Statement on page 8.
The notice of the Annual General Meeting is sent out at
least 20 working days in advance of the meeting. All
shareholders have the opportunity to put questions to the
Board and Manager at the meeting.
Additional Information
Where not provided elsewhere in the Directors’ Report, the
following provides the additional information required to
be disclosed by Part 15 of the Companies Act 2006.
There are no restrictions on the transfer of Ordinary
shares in the Company issued by the Company other than
certain restrictions which may from time to time be
imposed by law (for example, the Market Abuse
Regulation). The Company is not aware of any
agreements between shareholders that may result in a
transfer of securities and/or voting rights.
The rules governing the appointment of Directors are set
out in the Directors’ Remuneration Report on pages 51 to
54. The Company’s Articles of Association may only be
amended by a special resolution passed at a general
meeting of shareholders.
Directors’ Report
Continued
abrdn Equity Income Trust plc 49
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
The Company is not aware of any significant agreements
to which it is a party that take effect, alter or terminate
upon a change of control of the Company following a
takeover. Other than the management agreement with
the Manager, further details of which are set out on page
42, the Company is not aware of any contractual or other
agreements which are essential to its business which
could reasonably be expected to be disclosed in the
Directors’ Report.
Annual General Meeting
The Notice of the Annual General Meeting, which will be
held on 18 February 2025, and related notes, may be
found on pages 99 to 103.
Resolutions including the following business will be
proposed.
Dividend Policy
As a result of the timing of the payment of the Company’s
quarterly dividends, the Company’s shareholders are
unable to approve a final dividend each year. In line with
good corporate governance, the Board therefore
proposes to put the Company’s dividend policy to
shareholders for approval at the Annual General Meeting
each year.
The Company’s dividend policy is that interim dividends on
the Ordinary shares are payable quarterly in March, June,
September and January each year. Resolution 3 will seek
shareholder approval for the dividend policy.
Issue of Ordinary Shares
Resolution 10, which is an ordinary resolution, will, if passed,
renew the Directors’ authority to allot new Ordinary shares
up to an aggregate nominal amount of £1,194,538, being
10% of the issued share capital of the Company
(excluding treasury shares) as at 27 November 2024.
Resolution 11, which is a special resolution, will, if passed,
renew the Directors’ existing authority to allot new
Ordinary shares or sell treasury shares for cash without
the new Ordinary shares first being offered to existing
shareholders in proportion to their existing holdings. This
will give the Directors authority to allot Ordinary shares or
sell shares from treasury on a non-pre-emptive basis for
cash up to an aggregate nominal amount of £1,194,538
(representing 10% of the issued ordinary share capital of
the Company (excluding treasury shares) as at
27 November 2024).
New Ordinary shares, issued under this authority, will only
be issued at prices representing a premium to the last
published net asset value per share.
The authorities being sought under Resolutions 10 and 11
shall expire at the conclusion of the Company’s next
Annual General Meeting or, if earlier, on the expiry of 15
months from the date of the passing of the resolutions,
unless such authorities are renewed, varied or extended
prior to such time. The Board will only rely upon these
authorities if it believes that to do so would be in the best
interests of shareholders as a whole
Purchase of the Company’s Ordinary Shares
Resolution 12, which is a special resolution, seeks to renew
the Board’s authority to make market purchases of the
Company’s Ordinary shares in accordance with the
provisions contained in the Companies Act 2006 and the
FCA’s Listing Rules. Accordingly, the Company will seek
authority to purchase up to a maximum of 14.99% of the
issued share capital (excluding treasury shares) at the
date of passing of the resolution at a minimum price of 25
pence per share (being the nominal value). Under the
Listing Rules, the maximum price that may be paid on the
exercise of this authority must not exceed the higher of: (i)
105% of the average of the middle market quotations (as
derived from the Daily Official List of the London Stock
Exchange) for the shares over the five business days
immediately preceding the date of purchase; and (ii) the
higher of the last independent trade and the highest
current independent bid on the trading venue on which
the purchase is carried out.
The Board does not intend to use this authority to
purchase the Company’s Ordinary shares, unless to do so
would result in an increase in the net asset value per
Ordinary share and would be in the best interests of
shareholders as a whole. Any Ordinary shares purchased
shall either be cancelled or held in treasury. The authority
being sought shall expire at the conclusion of the
Company’s next Annual General Meeting or, if earlier, on
the expiry of 15 months from the date of the passing of the
resolution unless such authority is renewed, varied or
extended prior to such time.
50 abrdn Equity Income Trust plc
Notice of General Meetings
Under the Companies Act 2006, the notice period for the
holding of general meetings of the Company is 21 clear
days unless shareholders agree to a shorter notice period
and certain other conditions are met. Resolution 13, which
is a special resolution, will seek to authorise the Directors to
call general meetings of the Company (other than Annual
General Meetings) on not less than 14 clear days’ notice,
as permitted by the Companies Act 2006 amended by the
Companies (Shareholders’ Rights) Regulations 2009.
It is currently intended that this flexibility to call general
meetings on shorter notice will only be used for non-
routine business and where it is considered to be in the
interests of all shareholders. If Resolution 13 is passed, the
authority to convene general meetings on not less than 14
clear days’ notice will remain effective until the conclusion
of the Company’s next Annual General Meeting or, if
earlier, on the expiry of 15 months from the date of the
passing of the resolution, unless renewed prior to such
time.
Recommendation
The Board considers that the resolutions to be proposed
at the Annual General Meeting are in the best interests of
the Company’s shareholders as a whole, and most likely to
promote the success of the Company for the benefit of its
members as a whole. Accordingly, the Board
recommends that shareholders vote in favour of the
resolutions as they intend to do in respect of their own
beneficial shareholdings, amounting to 63,598 Ordinary
shares, representing 0.13% of the issued share capital.
By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh
EH2 2LL
27 November 2024
Directors’ Report
Continued
abrdn Equity Income Trust plc 51
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
This Directors’ Remuneration Report comprises
three parts:
1. a Remuneration Policy which is subject to a binding
shareholder vote every three years (or sooner if
varied during this interval) – most recently approved
at the Annual General Meeting on 2 February 2023.
2. an Implementation Report which is subject to an
advisory vote on the level of remuneration paid during
the year; and
3. an Annual Statement.
Company law requires the Company’s Auditor to audit
certain of the disclosures provided in the Directors’
Remuneration Report. Where disclosures have been
audited, they are indicated as such. The Auditor’s report is
included on pages 61 to 67.
The Director’s Remuneration Policy and level of Directors’
remuneration are determined by the Remuneration &
Management Engagement Committee, which is chaired
by Nick Timberlake and comprises all of the Directors.
Remuneration Policy
The Directors’ Remuneration Policy takes into
consideration the principles of UK corporate governance
and the AIC’s recommendations regarding the application
of those principles to investment companies.
No shareholder views have been sought in setting the
remuneration policy and no communication was received
from shareholders during the year regarding Directors’
remuneration.
The Company’s policy is that the remuneration of the
Directors, all of whom are non-executive, should reflect
the experience of the Board as a whole and be fair and
comparable to that of other investment trusts with a
similar capital structure and similar investment objectives.
Directors are remunerated exclusively in the form of fees,
payable quarterly in arrears to the Director personally. The
fees for the Directors are determined within the limits set
out in this Remuneration Policy which limits the aggregate
of the fees payable to the Directors to £250,000 per
annum. It is intended that the fees payable to the
Directors should reflect their duties, responsibilities, and
the value and amount of time committed to the
Company’s affairs and should also be sufficient to enable
candidates of a high quality to be recruited and retained.
There is no performance-related remuneration scheme
and therefore the Directors do not receive bonuses,
pension benefits, share options, long-term incentive
schemes or other benefits, and the fees are not
specifically related to the Directors’ performance, either
individually or collectively.
The levels of fees at the year-end are set out in the table
below. Fees are reviewed annually and, if considered
appropriate, adjusted accordingly.
30
September
2024
£
30
September
2023
A
£
Chair 37,500 34,500
Senior Independent Director 28,000 24,500
Chair of Audit Committee 32,000 30,000
Chair of the Remuneration &
Management Engagement
Committee
28,000 26,000
Director 26,500 24,500
A
Directors fees were increased with effect from 1 October.
Appointment
· The Company only intends to appoint Non-Executive
Directors.
· All the Directors are non-executive and are appointed
under the terms of letters of appointment.
· The terms of appointment provide that Directors should
retire and be subject to election at the first Annual
General Meeting after their appointment. The
Company’s Articles of Association require all Directors to
retire by rotation at least every three years. However,
notwithstanding the Articles of Association, the Board
has agreed that all Directors should retire annually and
seek re-election at the Annual General Meeting.
· Any Director newly appointed to the Board will receive
the fee applicable to each of the other Directors at the
time of appointment together with any other fee then
currently payable in respect of a specific role which the
new Director is to undertake for the Company.
· No incentive or introductory fees will be paid to
encourage a person to become a Director.
· Directors are not eligible for bonuses, pension benefits,
share options, long term incentive schemes or other
benefits.
· Directors are entitled to re-imbursement of out-of-
pocket expenses incurred in connection with the
performance of their duties.
Directors’ Remuneration Report
52 abrdn Equity Income Trust plc
· The Company indemnifies its Directors for all costs,
charges, losses, expenses and liabilities which may be
incurred in the discharge of duties as a Director of
the Company.
Performance, Service Contracts, Compensation and
Loss of Office
· Directors’ remuneration is not subject to any
performance related fee.
· No Director has a service contract.
· No Director was interested in contracts with the
Company during the period or subsequently.
· The terms of appointment provide that a Director may
be removed without notice.
· There is no notice period and no provision for
compensation upon early termination of appointment,
save for any arrears of fees which may be due.
· No Director is entitled to any other monetary payment
or any assets of the Company.
Directors’ & Officers’ liability insurance cover is maintained
by the Company on behalf of the Directors.
There were no changes to the Directors’ Remuneration
Policy during the year and there are no proposals for
changes in the foreseeable future.
The Remuneration Policy is reviewed by the Remuneration
& Management Engagement Committee on an annual
basis and at last year’s meeting the Committee’s stated its
intention that this Remuneration Policy will apply for the
three-year period ending 30 September 2025. This
intention stands.
Statement of Voting on the Directors’ Remuneration Policy
at General Meeting
At the Annual General Meeting held on 2 February 2023,
shareholders approved the Directors’ Remuneration
Policy. 96.84% of proxy votes were in favour of the
resolution and 3.16% of proxy votes were cast against
the resolution.
Implementation Report
Review of Directors’ Fees
The Remuneration & Management Engagement
Committee carried out a review of the level of Directors’
fees during the year, which included consideration of fees
paid by comparable investment trusts and the sector as a
whole. During the year, it was agreed that, with effect from
1 October 2024, Directors’ fees would be increased by
£1,500 for the Chair and for the Chair of the Audit
Committee, and by £1,000 per annum for the Chair of the
Remuneration & Management Engagement Committee,
for the Senior Independent Director and each other
Director.
Company Performance
The graph below shows the share price and NAV total
return (assuming all dividends are reinvested) to Ordinary
shareholders compared to the total return from the FTSE
All-Share Index for the ten-year period to 30 September
2024 (rebased to 100 at 30 September 2014). This index
was chosen for comparison purposes only, as it is a widely
used indicator for the equity market in which the
Company invests.
80
90
100
110
120
130
140
150
160
170
180
190
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Share price total return NAV total return
Reference index total return
Statement of Voting on the Directors’ Remuneration
Report at General Meeting
At the Company’s last Annual General Meeting, held on 20
February 2024, shareholders approved the Directors’
Remuneration Report in respect of the year ended 30
September 2023. 95.73% of proxy votes were in favour of
the resolution, and 4.27% of proxy votes were cast against
the resolution.
A resolution to approve the Directors’ Remuneration
Report in respect of the year ended 30 September 2024
will be proposed at the Annual General Meeting on
18 February 2025.
Spend on Pay
As the Company has no employees, the Directors do not
consider it appropriate to present a table comparing
remuneration paid to employees with distributions to
shareholders. However, for ease of reference, the total
fees paid to Directors are shown in the table below while
dividends paid to shareholders are set out in note 7 and
share buybacks and issuances are detailed in note 12.
Directors’ Remuneration Report
Continued
abrdn Equity Income Trust plc 53
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Audited Information
Directors’ Remuneration
The Directors who served during the year received the
following emoluments in the form of fees:
Director
Year ended 30
September 2024
Year ended 30
September 2023
G
Sarika Patel
A
37,500 32,973
Caroline Hitch
B
28,000 26,000
Mark Little
C
32,000 28,134
Nick Timberlake
D
27,418 4,083
Jeremy Tigue
E
10,943 24,500
Mark White
F
- 11,455
Total 135,861 127,145
A
Appointed as Chair on 2 February 2023
B
Appointed as Senior Independent Non-Executive Director on 20 February 2024
C
Appointed as Director on 1 August 2022 and as Chair of the Audit Committee on 2
February 2023
D
Appointed as Director on 1 August 2023 and as Chair of the Remuneration &
Management Engagement Committee on 20 February 2024
E
Retired from the Board on 20 February 2024
F
Retired from the Board on 2 February 2023
G
Directors fees were increased with effect from 1 October 2023.
The above amounts exclude any employers’ national
insurance contributions, if applicable. All fees are at a fixed
rate and there is no variable remuneration. Fees are pro-
rated where a change takes place during a financial year.
There were no payments to third parties included in the
fees referred to in the table above. No other forms of
remuneration were received by the Directors and none of
the Directors has any taxable expenses, compensation for
loss of office or non-cash benefit for the year ended
30 September 2024 (2023: nil).
Annual Percentage Change in Directors’ Remuneration
The following table sets out the annual percentage change in Directors’ fees for the past five years from 1 October 2019
to 30 September 2024.
Year ended 30
September 2024
Year ended 30
September 2023
Year ended 30
September 2022
Year ended 30
September 2021
Year ended 30
September 2020
Fees
%
Fees
%
Fees
%
Fees
%
Fees
%
Sarika Patel
A
13.7 25.6 5.0 14.2 n/a
Caroline Hitch
B
7.7 13.0 7.1 4.8 0.0
Mark Little
C
13.7 30.9 n/a n/a n/a
Nick Timberlake
D
14.3 n/a n/a n/a n/a
A
Appointed as a Director on 1 November 2019, as Chair of the Audit Committee on 23 February 2020 and as Board Chair on 2 February 2023.
B
Appointed as Chair of the Remuneration & Management Engagement Committee on 5 February 2021 and as Senior Independent Non-Executive Director on 20 February
2024.
C
Appointed as a Director on 1 August 2022 and as Chair of Audit Committee on 2 February 2023. Percentage increase reflects position if Mark Little had been appointed as a
Director for the full year to 30 September 2022. The actual amount paid to Mark during the financial year to 30 September 2022 was £3,750.
D
Appointed as a Director on 1 August 2023 and as Chair of the Remuneration & Management Committee on 20 February 2024. Percentage increase reflects position if Nick had
held each individual role for 12 months. The actual amount paid was £27,418.
54 abrdn Equity Income Trust plc
Directors’ Interests in the Company
The Directors (including their connected persons) at 30
September 2024 and 30 September 2023 had no interest
in the share capital of the Company other than those
interests shown in the following table.
30 September 2024 30 September 2023
Ordinary shares Ordinary shares
Sarika Patel 10,000 10,000
Caroline Hitch 27,900 27,900
Mark Little 5,698 5,698
Nick Timberlake 20,000 20,000
Jeremy Tigue
A
25,886 25,886
Mark White
B
- 75,000
A
As at 20 February 2024, the date Jeremy Tigue retired from the Board
B
As at 2 February 2023 the date that Mark White retired from the Board
There have been no changes to the Directors’ interests in
the share capital of the Company since the year end up to
the date of approval of this Report.
Annual Statement
On behalf of the Board and in accordance with Part 2 of
Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013, it is confirmed that the above
Remuneration Report summarises, as applicable, for the
year to 30 September 2024:
· the major decisions on Directors’ remuneration.
· any substantial changes relating to Directors’
remuneration made during the year; and
· the context in which the changes occurred, and
decisions have been taken.
Nick Timberlake
Chair of the Remuneration &
Management Engagement Committee
27 November 2024
Directors’ Remuneration Report
Continued
abrdn Equity Income Trust plc 55
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
The Audit Committee presents its Report for the year
ended 30 September 2024.
Committee Composition
During the financial year the Committee was chaired by
Mark Little. Mark Little is a Chartered Accountant and has
recent and relevant financial experience.
The Committee comprises all Non-Executive Directors.
Given the size of the Board, and the skillset and continued
independence of Sarika Patel, the Board believes that it is
appropriate for all the independent Directors, including the
Chair of the Board, to constitute the Audit Committee. The
Board is satisfied that the Committee as a whole has
competence relevant to the investment trust sector.
Functions of the Audit Committee
The principal role of the Audit Committee is to assist the
Board in relation to the reporting of financial information,
the review of financial controls and the management
of risk.
The Committee has defined terms of reference which are
reviewed and re-assessed for their adequacy on at least
an annual basis. Copies of the terms of reference are
published on the Company’s website and are available
from the Company on request.
The Committee’s main functions are listed below:
· to review and monitor the internal control systems and
risk management systems (including review of non-
financial risks) on which the Company is reliant (the
Directors’ statement on the Company’s internal controls
and risk management is set out below).
· to consider whether there is a need for the Company to
have its own internal audit function.
· to monitor the integrity of the half-yearly and annual
financial statements of the Company and any formal
announcements relating to the Company’s financial
performance, by reviewing, and challenging where
necessary, the actions and judgements of the Manager.
· to review, and report to the Board on, the significant
financial reporting issues and judgements made in
connection with the preparation of the Company’s
financial statements, half-yearly financial reports, any
formal announcements relating to the Company’s
financial performance.
· to review the content of the Annual Report and advise
the Board on whether, taken as a whole, it is fair,
balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy.
· to meet with the Auditor to review the proposed audit
programme of work and the findings of the Auditor. The
Committee shall also use this as an opportunity to
assess the effectiveness of the audit process.
· to develop and implement policy on the engagement of
the Auditor to supply non-audit services. Non-audit fees
paid to the Auditor during the year under review
amounted to £nil (2023 £nil). All non-audit services must
be approved in advance by the Audit Committee and
will be reviewed in the light of relevant guidance and
statutory requirements regarding the provision of non-
audit services by the external audit firm, and the need to
maintain the Auditor’s independence.
· to review a statement from the Manager detailing the
arrangements in place within the Manager whereby
staff may, in confidence, escalate concerns about
possible improprieties in matters of financial reporting or
other matters.
· to make recommendations to the Board in relation to
the appointment of the Auditor and to approve the
remuneration and terms of engagement of the Auditor;
and
· to monitor and review the Auditor’s independence,
objectivity, effectiveness, resources and qualification,
taking into consideration relevant UK professional and
regulatory requirements.
Audit Committee’s Report
56 abrdn Equity Income Trust plc
Activities During the Year
The Audit Committee met twice during the year when,
amongst other things, it considered the Annual Report and
the Half-Yearly Financial Report in detail.
Representatives of the Manager’s internal audit, risk and
compliance departments reported to the Committee at
these meetings on matters such as internal control
systems, risk management and the conduct of the
business in the context of its regulatory environment. No
significant weaknesses in the control environment were
identified. The Committee, therefore, concluded that
there were no significant issues which required to be
reported to the Board.
The Financial Reporting Council (the “FRC”) Audit Quality
Review (“AQR”) team completed an inspection of the audit
of the financial statements for the year ended 30
September 2023. It is the FRC’s usual practice to carry out
such reviews on annual reports of a selection of
companies each year. This was a limited inspection
covering only certain aspects of the audit. We have
considered the report, and the result of the review raised
no issues which cause doubt on the quality of abrdn Equity
Trust Income plc’s external audit.
Internal Controls and Risk Management
The Board confirms that there is an ongoing process for
identifying, evaluating and managing the Company’s
significant business and operational risks, that has been in
place for the year ended 30 September 2024 and up to
the date of approval of the Annual Report, is regularly
reviewed by the Board and accords with the FRC’s
guidance on internal controls.
The Board has overall responsibility for ensuring that there
is a system of internal controls and risk management in
place and a process for reviewing its effectiveness. Day-
to-day measures have been delegated to the Manager
with an effective process of reporting to the Board for
supervision and control. The system of internal controls
and risk management is designed to meet the Company’s
particular needs and the risks to which it is exposed.
Accordingly, the system of internal control and risk
management is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives
and, by its nature, can only provide reasonable and not
absolute assurance against material misstatement or loss.
The design, implementation and maintenance of controls
and procedures to safeguard the assets of the Company
and to manage its affairs properly extends to operational
and compliance controls and risk management. The
Board, through the Audit Committee, has prepared its
own risk register which lists potential risks including those
set out in the Strategic Report on pages 19 to 21. The
Board considers the potential cause and possible effect of
these risks as well as reviewing the controls in place to
mitigate them.
Clear lines of accountability have been established
between the Board and the Manager. The Board receives
regular reports covering key performance and risk
indicators and considers control and compliance issues
brought to its attention. In carrying out its review, the
Board has had regard to the activities of the Manager,
including its internal audit and compliance functions.
The Board has reviewed the Manager’s process for
identifying and evaluating the significant risks faced by the
Company and the policies and procedures by which these
risks are managed. The Board has also reviewed the
effectiveness of the Manager’s system of internal control
including its annual internal controls report prepared in
accordance with the International Auditing and Assurance
Standards Board’s International Standard on Assurances
Engagements (“ISAE”) 3402, “Assurance Reports on
Controls at a Service Organisation”. Any weaknesses
identified are reported to the Audit Committee and
timetables are agreed for implementing improvements to
systems. The implementation of any remedial action
required is monitored and feedback provided to the
Audit Committee.
The key components designed to provide effective
internal control are outlined below:
· written agreements are in place which specifically
define the roles and responsibilities of the Manager and
other third-party service providers. These agreements
are reviewed periodically by the Board.
· the Board and Manager have agreed clearly defined
investment criteria, specified levels of authority and
exposure limits. Reports on these issues, including
performance statistics and investment valuations, are
regularly submitted to the Board.
· the Manager prepares forecasts and management
accounts which allow the Board to assess the
Company’s activities and review its performance.
· as a matter of course the Manager’s internal audit
and compliance departments continually review
its operations.
Audit Committee’s Report
Continued
abrdn Equity Income Trust plc 57
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
· bi-annually, the Audit Committee carries out an
assessment of internal controls by considering
documentation from the Manager, including the internal
audit and compliance functions and reports to the
Board on its conclusions; and
· the Audit Committee reviews internal control reports
from its third-party service providers including the
Depositary, BNP Paribas S.A., London Branch and the
Registrar, Computershare Investor Services PLC.
The Board has considered the need for an internal audit
function. The Company has no employees, and the day-
to-day management of the Company’s assets has been
delegated to abrdn which has its own compliance and
internal control systems. The Board has therefore decided
to place reliance on those systems and internal audit
procedures and has concluded that it is not necessary for
the Company to have its own internal audit function.
Financial Statements and Significant Issues
During its review of the Company’s financial statements
for the year ended 30 September 2024, the Audit
Committee considered the following significant issues, in
particular those communicated by the Auditor during its
planning and reporting of the year-end audit:
Valuation, Existence and Ownership of
Investments
How the issue was addressed - The Company uses the
services of an independent depositary (BNP Paribas S.A.,
London Branch) (the “Depositary”) to hold the assets of
the Company. An annual internal control report is
received from the Depositary and reviewed by the Audit
Committee. This provides details of the Depositary’s
control environment. The investment portfolio is
reconciled regularly by the Manager. The portfolio is
reviewed and verified by the Manager on a regular basis
and management accounts, including a full portfolio
listing, are prepared quarterly and are considered at the
quarterly meetings of the Board. The valuation of
investments is undertaken in accordance with the
accounting policies disclosed in notes 1(b) and 1(c) to the
financial statements.
The Committee satisfied itself that there were no issues
associated with the valuation, existence and ownership of
the investments which required to be addressed.
Recognition of Dividend Income
How the issue was addressed - The recognition of
dividend income is undertaken in accordance with
accounting policy note 1(d) to the financial statements.
Special dividends are allocated to the capital or revenue
accounts according to the nature of the payment and the
specific circumstances. Management accounts are
reviewed by the Board on a quarterly basis and
discussions take place with the Manager regarding
the allocation of any special dividends that have
been received.
The Committee concluded that there were no issues
associated with the recognition of dividend income which
required to be addressed.
Review of Financial Reporting
The Committee, when considering the draft Annual
Report and financial statements for the year ended 30
September 2024, concluded that taken as a whole, it is fair,
balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy. In reaching this conclusion, the Committee
has assumed that the reader of the Annual Report and
financial statements would have a reasonable knowledge
of the investment industry in general and of investments
trusts in particular.
58 abrdn Equity Income Trust plc
Review of Independent Auditor
The Audit Committee has reviewed the effectiveness of
the independent Auditor, Johnston Carmichael LLP
(“Johnston Carmichael”), including:
· Independence - the Auditor discusses with the Audit
Committee, at least annually, the steps it takes to ensure
its independence and objectivity and makes the
Committee aware of any potential issues, explaining all
relevant safeguards.
· Quality of audit work - including the ability to resolve
issues in a timely manner (identified issues are
satisfactorily and promptly resolved), its
communications/presentation of outputs (the
explanation of the audit plan, any deviations from it and
the subsequent audit findings are comprehensive and
comprehensible) and working relationship with
management (the Auditor has a constructive working
relationship with the Manager).
· Quality of people and service - including continuity and
succession plans (the audit team is made up of
sufficient, suitably experienced staff with provision
made for knowledge of the investment trust sector and
retention on rotation of the senior statutory auditor).
· Fees - including current and proposed fees for
future years.
The independent Auditor’s report is included on pages 61
to 67. Details of the amounts paid to Johnston Carmichael
LLP during the year for audit services are set out in note 4
to the financial statements.
Tenure of the Independent Auditor
Johnston Carmichael LLP was appointed as the
Company’s independent Auditor and approved by
shareholders at the Annual General Meeting on 20
February 2024. In accordance with present professional
guidelines the senior statutory auditor is rotated after no
more than five years. The year ended 30 September 2024
is the first year during which the present senior statutory
auditor has served.
The next compulsory audit tender of the Company is due
to take place by 2034 in compliance with the FRC
Guidance on audit tenders.
The Committee is satisfied with the quality of the work and
service carried out by Johnston Carmichael LLP and with
the level of fees. The Committee is also satisfied that
Johnston Carmichael LLP is independent and therefore
supports the recommendation to the Board that the re-
appointment of Johnston Carmichael LLP be put to
shareholders for approval at the Annual General Meeting.
On behalf of the Audit Committee
Mark Little
Chair of the Audit Committee
27 November 2024
Audit Committee’s Report
Continued
abrdn Equity Income Trust plc 59
Financial
Statements
60 abrdn Equity Income Trust plc
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. Under that law the Directors are required to
prepare the financial statements in accordance with UK
Accounting Standards, including FRS 102 ‘The Financial
Reporting Standard Applicable in the UK and Republic
of Ireland’.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for
that period.
In preparing these financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them
consistently.
· make judgements and estimates that are reasonable
and prudent.
· state whether applicable UK Accounting Standards
have been followed, subject to any material departures
disclosed and explained in the financial statements.
· assess the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to
going concern; and
· prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the
Company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
Statement of Corporate Governance that comply with
that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website, but not for the
content of any information included on the website that
has been prepared or issued by third parties. Legislation in
the UK governing the preparation and dissemination of
financial statements may differ from legislation in
other jurisdictions.
The Directors confirm that to the best of their knowledge:
· the financial statements have been prepared in
accordance with applicable accounting standards and
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
· the Strategic Report and Directors’ Report include a fair
review of the development and performance of the
business and the position of the Company, together with
a description of the principal risks and uncertainties that
the Company faces.
The Board considers the Annual Report and accounts,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy.
On behalf of the Board
Sarika Patel
Chair
27 November 2024
abrdn Equity Income Trust plc 61
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Opinion
We have audited the financial statements of abrdn Equity Income Trust plc (the “Company”) for the year ended 30
September 2024 which comprise the Statement of Comprehensive Income, the Statement of Financial Position,
Statement of Changes in Equity, and notes to the financial statements, including significant accounting policies. The
financial reporting framework that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 102
The Financial Reporting Standard applicable in the UK
and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
· Give a true and fair view of the state of the Company’s affairs as at 30 September 2024 and of its return for the year
then ended.
· Have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
· Have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor responsibilities for the audit of the financial
statements section of our report. We are independent of the Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, as applied to
listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Our approach to the audit
We planned our audit by first obtaining an understanding of the Company and its environment, including its key
activities delegated by the Board to relevant approved third-party service providers and the controls over provision of
those services.
We conducted our audit using information maintained and provided by abrdn Fund Managers Limited (the Alternative
Investment Fund Manager), abrdn Holdings Limited (the “Administrator” and “Company Secretary”), BNP Paribas S.A.,
London Branch (as the “Depository) to whom the Company has delegated the provision of services.
We tailored the scope of our audit to reflect our risk assessment, taking into account such factors as the types of
investments within the Company, the involvement of the Administrator, the accounting processes and controls, and the
industry in which the Company operates.
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These together with qualitative considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual financial statement line items and disclosures and in the
evaluation of the effect of misstatements both individually and in aggregate on the financial statements as a whole.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on the
overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, we do not provide a separate opinion on these matters.
We summarise below the key audit matters in arriving at our audit opinion above, together with how our audit addressed
these matters and the results of our audit work in relation to these matters.
Independent Auditor’s Report to the Members of
abrdn Equity Income Trust plc
62 abrdn Equity Income Trust plc
Independent Auditor’s Report to the Members of
abrdn Equity Income Trust plc
Continued
Key audit matter How our audit addressed the key audit matter and our conclusions
Valuation of investments
(as described on page 57 in the Audit Committee’s Report
and as per the accounting policy and Note 9.)
At 30 September 2024 the valuation of the investment
portfolio was £177.9m (2023: £165.7m), equating to
112.3% (2023: 110.6%) of net assets.
As this is the largest component of the Company’s
Statement of Financial Position and a key driver of the
Company’s net assets and total return, this has been
designated as a key audit matter, being one of the most
significant assessed risks of material misstatement due
to error.
There is a further risk that the investments held at fair
value may not be actively traded and the quoted prices
may not be reflective of their fair value.
We obtained and assessed controls reports provided by BNP Paribas S.A.,
London Branch (as Depositary) and BNP Paribas S.A. (as custodian and
fund administration service provider) to evaluate the design of the
process and implementation of key controls.
We compared market prices and exchange rates applied to all
investments held at 30 September 2024 to an independent third-party
source and recalculated the investment valuations.
We have obtained average trading volumes from an independent third-
party source for all listed equity investments held at year end and
challenged management’s active market assessment for investment
where trading volumes indicated lower levels of liquidity.
From our completion of these procedures, we identified no
material misstatements in relation to the valuation and ownership
of the investments.
Revenue recognition including allocation of special
dividends as revenue or capital returns
(as described on page 57 in the Audit Committee’s Report
and as per the accounting policy and Note 2).
Investment income recognised in the year to 30
September 2024 was £12.6m (2023: £12.5m) consisting of
dividend income from investments.
Revenue-based performance metrics are often one of
the key performance indicators for stakeholders. The
investment income received by the Company during the
year directly impacts these metrics and the minimum
dividend required to be paid by the Company.
There is a risk that revenue is incomplete, did not occur or
is inaccurate through failure to recognise income
entitlements or failure to appropriately account for their
treatment. It has therefore been designated as a key audit
matter being one of the most significant assessed risks of
material misstatement due to fraud or error.
Additionally, there is a further risk of incorrect allocation of
special dividends as revenue or capital returns as
judgement is required in determining their allocation
within the Statement of Comprehensive Income.
We obtained and assessed controls provided by BNP Paribas S.A., London
Branch (as Depositary) and BNP Paribas S.A. (as Custodian and fund
administration service provider) to evaluate the design of the process and
implementation of key controls.
We confirmed that income was recognised and disclosed in accordance
with the AIC SORP by assessing the accounting policies.
We recalculated 100% of dividends due to the Company based on
investment holdings throughout the year and announcements made by
investee companies.
We agreed a sample of dividends received to bank statements.
We assessed the completeness of the special dividend population with
reference to third party market data and determined whether all special
dividends recognised were revenue or capital in nature with reference
to the underlying circumstances of the investee companies’
dividend payment.
We assessed the completeness of investment purchases made during
the year on a special cum-dividend basis, which had a material effect on
dividend income, as disclosed in Note 2. We tested these purchases and
the subsequent dividend receipts on a sample basis and confirmed that
they were accounted for in accordance with the accounting policy in
Note 1.
From our completion of these procedures, we identified no material
misstatements in relation to revenue recognition, including allocation of
special dividends as revenue or capital returns.
abrdn Equity Income Trust plc 63
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in
determining the nature and extent of our work and in evaluating the results of that work.
Materiality measure Value
Materiality for the financial statements as a whole
We have set materiality as 1% of net assets as we believe that net assets is the primary performance
measure used by investors and is the key driver of shareholder value. We determined the measurement
percentage to be commensurate with the risk and complexity of the audit and the Company’s listed status.
£1.58 million
Performance materiality
Performance materiality represents amounts set by the Auditor at less than materiality for the financial
statements as a whole, to reduce an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.
In setting this we consider the Company’s overall control environment, and any experience of the audit that
indicates a lower risk of material misstatements. Based on our judgement of these factors, we have set
performance materiality at 50% of our overall financial statement materiality as this is our first year
as Auditor.
£0.79 million
Specific materiality
Recognising that there are transactions and balances of a lesser amount which could influence the
understanding of users of the financial statements we calculate a lower level of materiality for testing
such areas.
Specifically, given the importance of the distinction between revenue and capital for the Company, we also
applied a separate testing threshold for the revenue column of the Statement of Comprehensive Income set
at the higher of 5% of the net revenue return on ordinary activities before tax and our Audit Committee
Reporting Threshold.
We have set a specific materiality in respect of related party transactions and Directors’ remuneration.
We used our judgement in setting these thresholds and considered our past experience of the audit, the
history of misstatements and industry benchmarks for specific materiality.
£0.58 million
Audit Committee reporting threshold
We agreed with the Audit Committee that we would report to them all differences in excess of 5% of overall
materiality in addition to other identified misstatements that warranted reporting on qualitative grounds, in
our view. For example, an immaterial misstatement as a result of fraud.
£0.08m
During the course of the audit, we reassessed initial materiality and found no reason to alter the basis of calculation used
at year-end.
64 abrdn Equity Income Trust plc
Independent Auditor’s Report to the Members of
abrdn Equity Income Trust plc
Continued
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the
Company’s ability to continue to adopt the going concern basis of accounting included:
· Evaluating management’s method of assessing going concern, including consideration of market conditions and
macro-economic uncertainties.
· Assessing and challenging the forecast cashflows and associated sensitivity modelling including assessment of the
loan covenants used by the Directors in support of their going concern assessment.
· Obtaining and recalculating management’s assessment of the Company’s ongoing maintenance of investment trust
status; and
· Assessing the adequacy of the Company’s going concern disclosures included in the Annual Report.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the
Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Other information
The other information comprises the information included in the Annual Report other than the financial statements and
our Auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read
the other information and, in doing so, consider whether the other information is materially inconsistent with the financial
statements, or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
abrdn Equity Income Trust plc 65
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
· The information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
· The Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit,
we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
· Adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
· The financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
· Certain disclosures of Directors’ remuneration specified by law are not made; or
· We have not received all the information and explanations we require for our audit; or
· A corporate governance statement has not been prepared by the Company.
Corporate governance statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the entity’s compliance with the provisions of the UK Corporate
Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements, or our knowledge obtained
during the audit:
· The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 47.
· The Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and
why the period is appropriate set out on page 24.
· The Directors’ statement on fair, balanced and understandable set out on page 60.
· The Directors’ statement on whether it has a reasonable expectation that the Company will be able to continue in
operation and meets its liabilities set out on page 24.
· The Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on
page 19.
· The section of the Annual Report that describes the review of the effectiveness of risk management and internal
control systems set out on pages 56 to 57; and
· The section describing the work of the Audit Committee set out on page 55.
66 abrdn Equity Income Trust plc
Independent Auditor’s Report to the Members of
abrdn Equity Income Trust plc
Continued
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 60, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are
responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
Auditor responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an Auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/Auditorsresponsibilities. This description forms part of our Auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable to detecting irregularities, including fraud is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify
or recognise non-compliance with laws and regulations by considering their experience, past performance and
support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the
planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and the
sector in which it operates, focusing on those provisions that had a direct effect on the determination of material
amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
· Companies Act 2006
· Financial Conduct Authority (FCA) listing and Disclosure Guidance and Transparency Rules (DTR).
· The principles of the UK Corporate Governance Code applied by the AIC Code of Corporate Governance
(the “AIC Code”).
· Industry practice represented by the Statement of Recommended Practice: Financial Statements of Investment Trust
Companies and Venture Capital Trusts (“the SORP”) issued in July 2022.
· The Company’s qualification as an investment trust under section 1158 of the Corporation Tax Act 2010; and
· UK Generally Accepted Accounting Practice.
We gained an understanding of how the Company is complying with these laws and regulations by making enquiries of
management and those charged with governance. We corroborated these enquiries through our review of relevant
correspondence with regulatory bodies and board meeting minutes.
abrdn Equity Income Trust plc 67
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by
meeting with management and those charged with governance to understand where it was considered there was
susceptibility to fraud. This evaluation also considered how management and those charged with governance were
remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control
environment and how management and those charged with governance oversee the implementation and operation of
controls. We identified a heightened fraud risk in relation to the completeness and allocation of special dividends (audit
procedures performed in response to these risks are set out in the section on key audit matters above) and
management override of controls (procedures in response to this risk are included below).
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial
statements were free of material fraud or error:
· Reviewing minutes of meetings of those charged with governance for reference to breaches of laws and regulation or
for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or
pressure to commit fraud or provide an opportunity to commit fraud.
· Reviewing the level of and reasoning behind the Company’s procurement of legal and professional services.
· Performing audit procedures over the risk of management override of controls, including testing of journal entries and
other adjustments for appropriateness, recalculating the investment management fee, evaluating the business
rationale of significant transactions outside the normal course of business and assessing judgements made by
management in their calculation of accounting estimates for potential management bias.
· Completion of appropriate checklists and use of our experience to assess the Company’s compliance with the
Companies Act 2006 and the Listing Rules; and
· Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements,
recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation.
There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws
and regulations is from the events and transactions reflected in the financial statements, the less likely we would
become aware of it.
Other matters which we are required to address
Following the recommendation of the Audit Committee, we were appointed by the Board on 20 February 2024 to audit
the financial statements for the year ended 30 September 2024 and subsequent financial periods. The period of our total
uninterrupted engagement is one year, covering the year ended 30 September 2024.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain
independent of the Company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an Auditor’s report and for other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Richard Sutherland (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
Statutory Auditor
Edinburgh, United Kingdom
27 November 2024
68 abrdn Equity Income Trust plc
2024 2023
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Net gains/(losses) on investments at fair value 9 – 9,452 9,452 – (6,443) (6,443)
Currency losses – – – – (1) (1)
Income 2 12,735 219 12,954 12,598 – 12,598
Investment management fee 3 (252) (588) (840) (302) (704) (1,006)
Administrative expenses 4 (459) – (459) (508) – (508)
Net return before finance costs and taxation 12,024 9,083 21,107 11,788 (7,148) 4,640
Finance costs 5 (454) (1,060) (1,514) (401) (936) (1,337)
Return before taxation 11,570 8,023 19,593 11,387 (8,084) 3,303
Taxation 6 (560) – (560) (278) – (278)
Return after taxation 11,010 8,023 19,033 11,109 (8,084) 3,025
Return per Ordinary share 8 23.05p 16.80p 39.85p 23.43p (17.05p) 6.38p
The total column of this statement represents the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.
Statement of Comprehensive Income
abrdn Equity Income Trust plc 69
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
2024 2023
Notes £’000 £’000
Fixed assets
Investments at fair value through profit or loss 9 177,978 165,734
Current assets
Debtors 10 1,411 1,611
Investments in AAA-rated money market funds 1,311 3,027
Cash and short-term deposits 591 1,196
3,313 5,834
Current liabilities
Creditors: amounts falling due within one year
Bank loan 11 (22,462) (20,941)
Other creditors 11 (414) (754)
(22,876) (21,695)
Net current liabilities (19,563) (15,861)
Net assets 158,415 149,873
Capital and reserves
Called-up share capital 12 12,295 12,295
Share premium account 52,043 52,043
Capital redemption reserve 12,616 12,616
Capital reserve 13 71,161 62,735
Revenue reserve 10,300 10,184
Equity shareholders’ funds 158,415 149,873
Net asset value per Ordinary share 14 331.54p 314.55p
The financial statements on pages 68 to 86 were approved by the Board of Directors and authorised for issue on 27 November 2024
and were signed on its behalf by:
Sarika Patel
Chair
The accompanying notes are an integral part of the financial statements.
Statement of Financial Position
70 abrdn Equity Income Trust plc
For the year ended 30 September 2024
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Balance at 30 September 2023 12,295 52,043 12,616 62,735 10,184 149,873
Return after taxation
A
– – – 8,023 11,010 19,033
Sale of own shares from treasury – – – 403 – 403
Dividends paid during the year 7 – – – – (10,894) (10,894)
Balance at 30 September 2024 12,295 52,043 12,616 71,161 10,300 158,415
For the year ended 30 September 2023
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Balance at 30 September 2022 12,295 52,043 12,616 70,276 10,269 157,499
Return after taxation
A
– – – (8,084) 11,109 3,025
Purchase of own shares for treasury – – – (315) – (315)
Sale of own shares from treasury – – – 858 – 858
Dividends paid during the year 7 – – – – (11,194) (11,194)
Balance at 30 September 2023 12,295 52,043 12,616 62,735 10,184 149,873
A
per the Statement of Comprehensive Income on page 68.
The capital reserve at 30 September 2024 is split between realised gains of £78,223,000 and unrealised losses of £7,062,000 (30
September 2023: realised gains of £80,674,000 and unrealised losses of £17,939,000).
The Company’s reserves available to be distributed by way of dividends or buybacks which includes the revenue reserve and the
realised element of the capital reserve amount to £88,523,000 (30 September 2023: £90,858,000).
The accompanying notes are an integral part of the financial statements.
Statement of Chan
g
es in Equity
abrdn Equity Income Trust plc 71
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
1. Accounting policies
(a) Basis of accounting and going concern. The Financial Statements have been prepared in accordance with Financial
Reporting Standard 102 and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust
Companies and Venture Capital Trusts’ issued in July 2022. They have also been prepared on the assumption that
approval as an investment trust will continue to be granted. The Financial Statements have been prepared on a going
concern basis.
The Company had net current liabilities at the year end. The Company’s assets consist mainly of equity shares in
companies listed on recognised stock exchanges and are considered by the Board to be realisable within a short
timescale under normal market conditions. The Board has set overall limits for borrowing and reviews regularly the
Company’s level of gearing, cash flow projections and compliance with banking covenants, when applicable. The Board
has also performed stress testing and liquidity analysis.
The Company’s Articles require that at every fifth AGM, the Directors shall propose an Ordinary Resolution to effect that
the Company continues as an investment trust. An Ordinary Resolution approving the continuation of the Company for
the next five years was passed at the AGM on 4 February 2022. The next continuation vote will take place at the AGM to
be held in 2027.
As at 30 September 2024, the Company had a £30 million (2023: £30 million) revolving credit facility with The Royal Bank of
Scotland International Limited, London Branch. £22.5 million was drawn at the end of the financial year (2023: £21 million).
The revolving credit facility matures on 23 June 2026. A replacement option will be sought in advance of the expiry of the
facility, or should the Board decide not to renew this facility, any outstanding borrowing would be repaid through the
proceeds of equity sales as required.
The Directors are mindful of the Principal Risks and Uncertainties disclosed in the Strategic Report on pages 19 to 21 and
they believe that the Company has adequate financial resources to continue its operational existence for a period of not
less than 12 months from the date of approval of this Report. They have arrived at this conclusion having confirmed that
the Company’s diversified portfolio of realisable securities is sufficiently liquid and could be used to meet short-term
funding requirements were they to arise. They have also reviewed the revenue and ongoing expenses forecasts for the
coming year, and expect to secure a replacement facility upon expiry of the current facility. Accordingly, the Directors
believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
As an investment fund the Company has the option under FRS 102, which it has taken, not to present a cash flow
statement. A cash flow statement is not required when an investment fund meets all the following conditions: substantially
all of the entity’s investments are highly liquid, substantially all of the entity’s investments are carried at market value, and
the entity provides a Statement of Changes in Equity. The Directors have assessed that the Company meets all of these
conditions.
The accounting policies applied are unchanged from the prior year and have been applied consistently.
All values are rounded to the nearest thousand pounds (£’000) except where indicated otherwise.
(b) Investments. Investments have been designated upon initial recognition as fair value through profit or loss in accordance
with IAS 39. As permitted by FRS 102, the Company has elected to apply the recognition and measurement provisions of
IAS 39 Financial Instruments. This is done because all investments are considered to form part of a group of financial
assets which is evaluated on a fair value basis, in accordance with the Company’s documented investment strategy, and
information about the grouping is provided internally on that basis.
Notes to the Financial Statements
For the year ended 30 September 2024
72 abrdn Equity Income Trust plc
Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms
require delivery to be made within the timeframe established by the market concerned and are measured initially at fair
value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid
market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock
Exchange electronic trading service covering most of the market including all the FTSE All-Share and the most liquid
AIM constituents.
Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the
Statement of Comprehensive Income and are ultimately recognised in the capital reserve.
(c) Investments in AAA-rated money market funds. Money market funds investments are used by the Company to provide
additional short term liquidity. Due to their short term nature, they are recognised in the Financial Statements as a current
asset and are included at fair value through profit and loss.
The Company invests in a AAA-rated money-market fund, Aberdeen Standard Liquidity Fund, which is managed by
abrdn Investments Limited. The share class of the money market fund in which the Company invests does not charge a
management fee.
(d) Income. Income from equity investments, including taxes deducted at source, is included in revenue by reference to the
date on which the investment is quoted ex-dividend. Special dividends are credited to revenue or capital according to the
circumstances. The Company carries out special cum-dividend and special ex-dividend trades as a portfolio
management tool to both enhance income and manage long-term positions. The income generated from such trades is
allocated to the revenue column of the Statement of Comprehensive Income and recognised on the date of the
transaction. This has the effect of increasing income and is offset by a decrease in unrealised gains/(losses) on
investments. Foreign income is converted at the exchange rate applicable at the time of receipt. Interest receivable on
cash at bank and in hand and on the money market fund is accounted for on an accruals basis.
(e) Expenses and interest payable. Expenses are accounted for on an accruals basis. Expenses are charged to capital when
they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect, the
investment management fee and relevant finance costs are allocated between revenue and capital in line with the
Board’s expectation of returns from the Company’s investments over the long term in the form of revenue and capital
respectively (see notes 3 and 5).
Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Statement
of Comprehensive Income.
(f) Dividends payable. Interim dividends are accounted for when they are paid. Final dividends are accounted on the date
that they are approved by shareholders.
(g) Capital and reserves
Called-up share capital. Share capital represents the nominal value of Ordinary shares issued. This reserve is not
distributable.
Share premium account. The share premium account represents the premium above nominal value received by the
Company on issuing shares net of issue costs. This reserve is not distributable.
Capital redemption reserve. The capital redemption reserve represents the nominal value of Ordinary shares
repurchased and cancelled. This reserve is not distributable.
Capital reserve. Gains or losses on realisation of investments and changes in fair values of investments are included within
the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve.
Notes to the Financial Statements
Continued
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Any associated tax relief is also credited to this reserve. The part of this reserve represented by realised capital gains is
available for distribution by way of a dividend and for the purpose of funding share buybacks.
Revenue reserve. The revenue reserve represents accumulated revenue profits retained by the Company that have not
currently been distributed to shareholders as a dividend.
(h) Taxation. The tax expense represents the sum of the tax currently payable and deferred tax. Tax payable is based on the
taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive
Income because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the Statement of Financial Position date.
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Statement
of Financial Position date where transactions or events that result in an obligation to pay more or a right to pay less tax in
future have occurred at the Statement of Financial Position date measured on an undiscounted basis and based on
enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing
differences are differences arising between the Company’s taxable profits and its results as stated in the accounts that
arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are
recognised in the accounts.
Owing to the Company’s status as an investment trust company, and the intention to continue meeting the conditions
required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains
and losses arising on the revaluation or disposal of investments.
(i) Cash and cash equivalents. Cash comprises bank balances and cash held by the Company. Cash equivalents are short-
term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
(j) Bank borrowings. Interest bearing bank loans and overdrafts are recorded initially at fair value, being the proceeds
received, net of direct issue costs. They are subsequently measured at amortised cost. Finance charges, including
premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the
Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of
the instrument to the extent that they are not settled in the period in which they arise.
(k) Treasury shares. When the Company purchases its Ordinary shares to be held in treasury, the amount of the
consideration paid, which includes directly attributable costs, is net of any tax effect, and is recognised as a deduction
from the capital reserve. When these shares are sold subsequently, the amount received is recognised as an increase in
equity, and any resulting surplus on the transaction is transferred to the share premium account and any resulting deficit
is transferred from the capital reserve.
(l) Judgements and key sources of estimation uncertainty. Disclosure is required of judgements and estimates made by
management in applying the accounting policies that have a significant effect on the Financial Statements. Special
dividends are assessed and credited to capital or revenue according to their circumstances and are considered to
require significant judgement. The Directors do not consider there to be any significant estimates within the
financial statements.
74 abrdn Equity Income Trust plc
2. Income
2024 2023
£’000 £’000
Income from investments
UK investment incom
e
Ordinary dividends 9,283 8,191
Special dividends 644 101
Special dividends – capital 219 –
Stock dividends 255 101
10,401 8,393
Overseas and Property Income Distribution investment incom
e
Ordinary dividends 2,321 3,998
Special dividends – 85
Stock dividends 131 52
2,452 4,135
12,853 12,528
Other income
Money-market interest 96 67
Bank interest 5 3
101 70
Total income 12,954 12,598
Included in income from investments is £1,161,000 (2023: £195,000) relating to income from special cum-dividend and special
ex-dividend trades. This has an equal and opposite effect on unrealised gains/(losses) on investments.
Notes to the Financial Statements
Continued
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3. Investment management fee
2024 2023
£’000 £’000
Charged to revenue reserve 252 302
Charged to capital reserve 588 704
840 1,006
The Company has an agreement with abrdn Fund Managers Limited (“aFML”) for the provision of management services, under
which investment management services have been delegated to abrdn Investment Management Limited. The contract is
terminable by either party on not less than six months’ notice.
With effect from 01 October 2023, the management fee is charged at 0.55% of the Company’s net assets (previously 0.65% on
the first £175 million of the Company’s net assets, reduced to 0.55% above £175 million). The fee is payable quarterly in arrears
and is chargeable 30% to revenue and 70% to capital (see note 1(e) for further detail). The balance of fees due at the year end
was £219,000 (2023: £245,000).
4. Administrative expenses
2024 2023
£’000 £’000
Directors’ fees 136 127
Employers’ National Insurance 8 7
Fees payable to the Company’s Auditor (excluding VAT):
– for the audit of the annual financial statements
A
37 65
Professional fees 3 14
Depositary fees 19 19
Promotional activities
A
B 109 109
Other expenses 147 167
459 508
A Johnston Carmichael LLP was appointed as the Company’s independent Auditor by shareholders at the Annual General Meeting on 20 February 2024. In 2023, KPMG
LLP was the Company’s independent Auditor.
A
The Company has an agreement with AFML for the provision of promotional activities. Fees paid under the agreement during the year were £109,000 (2023: £109,000).
At 30 September 2024, £55,000 was due to AFML (2023: £27,000).
With the exception of fees payable to the Company’s auditor, irrecoverable VAT has been included under the relevant expense
line above. Irrecoverable VAT on fees payable to the Company’s auditor is included within other expenses.
The Company has no employees.
76 abrdn Equity Income Trust plc
5. Finance costs
2024 2023
£’000 £’000
On bank loans and overdrafts:
Charged to revenue reserve 454 401
Charged to capital reserve 1,060 936
1,514 1,337
Finance costs are chargeable 30% to revenue and 70% to capital (see note 1(e)).
6. Taxation
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
(a) Analysis of charge for the year
Overseas withholding tax 560 – 560 278 – 278
(b) Factors affecting total tax charge for the year. The corporation tax rate was 25% (2023: 22%). The total tax assessed for
the year is lower (2023: lower) than that resulting from applying the standard rate of corporation tax in the UK.
A reconciliation of the Company’s total tax charge is set out below:
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Return before taxation 11,570 8,023 19,593 11,387 (8,084) 3,303
Corporation tax at a rate of 25% (2023: 22%) 2,892 2,006 4,898 2,505 (1,778) 727
Effects of:
Non-taxable UK dividends (2,563) – (2,563) (1,891) – (1,891)
Non-taxable overseas dividends (475) – (475) (826) – (826)
Expenses not deductible for tax purposes 2 – 2 2 – 2
(Gains)/losses on investments not relievable – (2,418) (2,418) – 1,417 1,417
Excess management expenses and loan
relationship losses
144 412 556 210 361 571
Irrecoverable overseas withholding tax 560 – 560 278 – 278
Total taxation 560 – 560 278 – 278
Notes to the Financial Statements
Continued
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At 30 September 2024, the Company had unutilised management expenses and loan relationship losses of £36,810,000
(2023: £34,587,000). No deferred tax asset has been recognised on the unutilised management expenses and loan
relationship losses as it is unlikely that the Company will generate suitable taxable profits in the future that these tax losses
could be deducted against.
7. Dividends on Ordinary shares
2024 2023
£’000 £’000
Amounts recognised as distributions to equity holders in the year:
Fourth interim dividend for 2023 of 5.70p per share (2022: 6.50p) 2,724 3,079
First interim dividend for 2024 of 5.70p per share (2023: 5.70p) 2,723 2,700
Second interim dividend for 2024 of 5.70p per share (2023: 5.70p) 2,724 2,700
Third interim dividend for 2024 of 5.70p per share (2023: 5.70p) 2,723 2,715
10,894 11,194
The fourth interim dividend of 5.80p per Ordinary share, payable on 10 January 2025 to shareholders on the register on 6
December 2024 has not been included as a liability in the financial statements.
The total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections
1158-1159 of the Corporation Tax Act 2010 are considered, are set out below.
2024 2023
£’000 £’000
First interim dividend for 2024 of 5.70p per share (2023: 5.70p) 2,723 2,700
Second interim dividend for 2024 of 5.70p per share (2023: 5.70p) 2,724 2,700
Third interim dividend for 2024 of 5.70p per share (2023: 5.70p) 2,723 2,715
Fourth interim dividend for 2024 of 5.80p per share (2023: 5.70p) 2,771 2,724
10,941 10,839
78 abrdn Equity Income Trust plc
8. Return per Ordinary share
2024 2023
£’000 p £’000 p
Basic
Revenue return 11,010 23.05 11,109 23.43
Capital return 8,023 16.80 (8,084) (17.05)
Total return 19,033 39.85 3,025 6.38
Weighted average number of Ordinary shares in issue
A
47,766,631 47,415,968
A
Calculated excluding shares held in Treasury where applicable.
9. Investments
2024 2023
£’000 £’000
Fair value through profit or loss
Opening book cost 183,673 195,060
Opening fair value losses on investments held (17,939) (15,330)
Opening fair value 165,734 179,730
Movements in the year:
Purchases at cost 80,819 46,738
Sales – proceeds (78,027) (54,291)
Gains/(losses) on investments 9,452 (6,443)
Closing fair value 177,978 165,734
Closing book cost 185,259 183,673
Closing fair value losses on investments held (7,281) (17,939)
Closing fair value 177,978 165,734
The Company received £78,027,000 (2023: £54,291,000) from investments sold in the year. The book cost of these investments
when they were purchased was £79,452,000 (2023: £58,125,000). 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.
Notes to the Financial Statements
Continued
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Transaction costs. During the year, expenses were incurred in acquiring or disposing of investments classified as fair value
through profit or loss. These have been expensed through capital and are included within losses on investments in the
Statement of Comprehensive Income. The total costs were as follows:
2024 2023
£’000 £’000
Purchases 408 206
Sales 48 37
Total 456 243
10. Debtors: amounts falling due within one year
2024 2023
£’000 £’000
Amounts due from brokers - 148
Net dividends and interest receivable 1,377 1,078
Other debtors 34 385
1,411 1,611
11. Creditors: amounts falling due within one year
2024 2023
£’000 £’000
Bank loan 22,500 21,000
Unamortised loan arrangement expenses (38) (59)
22,462 20,941
Other creditors
Amounts due to brokers – 305
Investment management fee payable 219 245
Sundry creditors 195 204
414 754
On 23 June 2023, the Company agreed a new three year £30 million revolving credit facility with the Royal Bank of Scotland
International Limited, which expires on 23 June 2026.
80 abrdn Equity Income Trust plc
The facility agreement contains the following covenants:
– The Company’s gross assets will not be less than £120 million at any time.
– The Company’s total net debt will not exceed 25% of net asset value at any time.
– The Company should hold a minimum of 45 eligible investments.
All covenants were complied with throughout the year.
At 30 September 2024 and at the date of signing this Report, £22.5 million had been drawn down from the facility, at a SONIA
rate of 6.45%. This is due to mature on 23 December 2024.
12. Called-up share capital
2024 2023
£’000 £’000
Issued and fully paid:
Ordinary shares of 25p each
Opening balance of 47,646,522 (2023: 47,471,939) Ordinary shares 11,912 11,868
Buyback of nil (2023: 100,417) Ordinary shares – (25)
Issue of 135,000 (2023: 275,000) Ordinary shares 34 69
Closing balance of 47,781,522 (2023: 47,646,522) Ordinary shares 11,946 11,912
Treasury shares
Opening balance of 1,532,245 (2023: 1,706,828) Treasury shares 383 427
Buyback of nil (2023: 100,417) Ordinary shares to Treasury – 25
Issue of 135,000 (2023: 275,000) Ordinary shares from Treasury (34) (69)
Closing balance of 1,397,245 (2023: 1,532,245) treasury shares 349 383
12,295 12,295
During the year, nil Ordinary shares (2023: 100,417) were repurchased for a consideration of £nil (2023: £315,000), and 135,000
Ordinary shares (2023: 275,000) were issued from Treasury for a consideration of £403,000 (2023: £858,000). At the year end
the number of shares held in Treasury was 1,397,245 (2023: 1,532,245).
Notes to the Financial Statements
Continued
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13. Capital reserve
2024 2023
£’000 £’000
Opening balance 62,735 70,276
Unrealised gains/(losses) on investment holdings 10,877 (2,612)
Losses on realisation of investments at fair value (1,206) (3,831)
Currency losses – (1)
Investment management fee charged to capital (588) (704)
Finance costs charged to capital (1,060) (936)
Buyback of Ordinary shares into treasury – (315)
Issue of Ordinary shares from treasury 403 858
Closing balance 71,161 62,735
The capital reserve includes investment holding losses amounting to £7,281,000 (2023: losses of £17,939,000) as disclosed in
note 9.
14. Net asset value per share
The net asset value per share and the net assets attributable to Ordinary shares at the end of the year calculated in
accordance with the Articles of Association were as follows:
2024 2023
Basic
Total shareholders’ funds (£’000) 158,415 149,873
Number of Ordinary shares in issue at year end
A
47,781,522 47,646,522
Net asset value per share 331.54p 314.55p
A
Excludes shares in issue held in treasury where applicable.
82 abrdn Equity Income Trust plc
15. Financial instruments
Risk management. The Company’s financial instruments comprise securities and other investments, cash balances, loans and
debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement,
and debtors for accrued income. The Company also has the ability to enter into derivative transactions for the purpose of
managing currency and market risks arising from the Company’s activities.
The main risks the Company faces from its financial instruments are (i) market price risk (comprising interest rate risk, currency
risk and other price risk), (ii) liquidity risk and (iii) credit risk.
The Board regularly reviews and agrees policies for managing each of these risks. The Manager’s policies for managing these
risks are summarised below and have been applied throughout the year.
(i) Market risk. The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of
changes in market prices.
This market risk comprises three elements - interest rate risk, currency risk and other price risk.
Interest rate risk
Interest rate movements may affect:
- the level of income receivable on cash deposits;
- interest payable on the Company’s variable rate borrowings.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into
account when making investment and borrowing decisions.
It is the Company’s policy to increase its exposure to equity market price risk through the judicious use of borrowings.
When borrowed funds are invested in equities, the effect is to magnify the impact on Shareholders’ funds of changes -
both positive and negative - of revenue and capital returns.
Notes to the Financial Statements
Continued
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Interest rate profile
The interest rate risk profile of the portfolio of financial assets and liabilities at the Statement of Financial Position date was
as follows:
Weighted
average Weighted
period for average
which interest Fixed Floating
rate is fixed rate rate rate
As at 30 September 2024 Years % £’000 £’000
Assets
Investments in AAA-rated money-market funds – 5.11 – 1,311
Cash deposits – 3.45 – 591
Total assets – – – 1,902
Liabilities
Bank loans 0.25 6.45 22,462 –
Total liabilities – – 22,462 –
Weighted
average Weighted
period for average
which interest Fixed Floating
rate is fixed rate rate rate
As at 30 September 2023 Years % £’000 £’000
Assets
Investments in AAA-rated money-market funds – 5.38 – 3,027
Cash deposits – 3.69 – 1,196
Total assets – – – 4,223
Liabilities
Bank loans 0.22 6.68 20,941 –
Total liabilities – – 20,941 –
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The
weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of
the loans.
The floating rate assets consist of investments in AAA-rated money-market funds and cash deposits on call earning
interest at prevailing market rates.
All financial liabilities are measured at amortised cost.
84 abrdn Equity Income Trust plc
Maturity profile. The Company did not hold any assets at 30 September 2024 or 30 September 2023 that had a maturity
date. The £22.5 million (2023: £21 million) loan drawn down had a maturity date of 23 December 2024 (2023: 21
December 2023) at the Statement of Financial Position date.
Interest rate sensitivity. The sensitivity analysis below has been determined based on the exposure to interest rates at the
Statement of Financial Position date and with the stipulated change taking place at the beginning of the financial year and
held constant throughout the reporting period in the case of instruments that have floating rates.
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company’s:
– profit for the year ended 30 September 2024 would decrease/increase by £206,000 (2023: decrease/increase by
£168,000). This is mainly attributable to the Company’s exposure to interest rates on its fixed rate borrowings and floating
rate cash balances.
Currency risk. All of the Company’s investments are in Sterling. The Company can be exposed to currency risk when it
receives dividends in currencies other than Sterling. The current policy is not to hedge this risk, but this policy is kept under
constant review by the Board.
Other price risk. Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk)
may affect the value of the quoted investments.
It is the Board’s policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from
factors specific to a particular sector. The Manager actively monitors market prices throughout the year and reports to
the Board. The investments held by the Company are listed on the London Stock Exchange.
Other price risk sensitivity. If market prices at the Statement of Financial Position date had been 10% higher or lower while
all other variables remained constant, the return attributable to ordinary shareholders and equity for the year ended 30
September 2024 would have increased/decreased by £17,798,000 (2023: increase/decrease of £16,573,000). This is
based on the Company’s equity portfolio held at each year end.
(ii) Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with
financial liabilities.
Liquidity risk is not considered to be significant as the Company’s assets comprise mainly readily realisable securities,
which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of loan
and overdraft facilities (note 11).
Notes to the Financial Statements
Continued
(iii) Credit risk. This is failure of the counterparty to a transaction to discharge its obligations under that transaction that could
result in the Company suffering a loss.
The risk is not significant, and is managed as follows:
- where the investment manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is
taken into account so as to minimise the risk to the Company of default;
- investment transactions are carried out with a large number of brokers, whose credit-standing and credit rating is
reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker;
- cash and money invested in AAA money market funds are held only with reputable institutions.
None of the Company’s financial assets are secured by collateral or other credit enhancements.
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16. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy shall have the following classifications:
Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the
measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the
asset or liability, either directly or indirectly.
Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
All of the Company’s investments are in quoted equities (2023: same) that are actively traded on recognised stock exchanges,
with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the
investments (2024: £177,978,000; 2023: £165,734,000) have therefore been deemed as Level 1. The investment in AAA rated
money market funds of £1,311,000 (2023: £3,027,000) is considered to be Level 2 under the fair value hierarchy of FRS 102 due
to not trading in an active market.
Credit risk exposure. In summary, compared to the amount in the Statement of Financial Position, the maximum exposure
to credit risk at 30 September was as follows:
2024 2023
Statement of Statement of
Financial
Position
Maximum
exposure
Financial
Position
Maximum
exposure
£’000 £’000 £’000 £’000
Current assets
Debtors 1,411 1,411 1,611 1,611
Investments in AAA-rated money market funds 1,311 1,311 3,027 3,027
Cash and short term deposits 591 591 1,196 1,196
3,313 3,313 5,834 5,834
None of the Company’s financial assets is past due or impaired.
Fair values of financial assets and financial liabilities. The fair value of borrowings is not materially different to the accounts
value in the financial statements of £22,462,000 (note 11).
86 abrdn Equity Income Trust plc
17. Capital management policies and procedures
The Company’s capital management objectives are:
– to ensure that the Company will be able to continue as a going concern; and
– to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and
debt. The Board normally seeks to limit gearing to 15% of net assets. At the year end the Company had gearing of 13.0% of
net assets (2023: 11.3%) (see page 88 for more details).
The Board monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This review includes the
nature and planned level of gearing, which takes account of the Manager’s views on the market and the extent to which
revenue in excess of that which is required to be distributed should be retained.
The Company’s objectives, policies and processes for managing capital are unchanged from the preceding accounting
period. Any year end positions are presented in the Statement of Financial Position.
The Company does not have any externally imposed capital requirements.
18. Contingent liabilities
As at 30 September 2024 there were no contingent liabilities (2023: none).
19. Segmental Information
The Company is engaged in a single segment of business, which is to invest in equity securities. All of the Company’s activities
are interrelated and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the
Company as one segment.
20. Related party transactions and transactions with the Manager
Related party transactions. Fees payable during the year to the Directors and their interests in shares of the Company are
considered to be related party transactions and are disclosed within the Directors’ Remuneration Report on pages 51 to 54. The
balance of fees due to Directors at the year end was £31,000 (2023: £33,000).
Transactions with the Manager. abrdn Fund Managers Limited received fees for its services as Manager. Further details are
provided in notes 3 and 4.
Notes to the Financial Statements
Continued
abrdn Equity Income Trust plc 87
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Alternative performance measures (‘APM’) are numerical measures of the Company’s current, historical or future performance,
financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The
Company’s applicable financial framework includes FRS 102 and the AIC SORP.
The Directors assess the Company’s performance against a range of criteria which are viewed as particularly relevant for closed-
ended investment companies. Where the calculation of an APM is not detailed within the financial statements, an explanation of the
methodology employed is provided below:
Discount & premium
A discount is the percentage by which the market price of an investment trust is lower than the Net Asset Value (“NAV”) per share. A
premium is the percentage by which the market price per share of an investment trust exceeds the NAV per share.
30 September 2024 30 September 2023
Share price 321.50p 314.00p
Net asset value per share 331.54p 314.55p
Discount 3.0% 0.2%
Dividend yield
Dividend yield measures the dividend per share as a percentage of the share price per share.
30 September 2024 30 September 2023
Share price 321.50p 314.00p
Dividend per share 22.90p 22.80p
Dividend yield 7.1% 7.3%
Alternative Performance Measures
88 abrdn Equity Income Trust PLC
Alternative Performance Measures
Continued
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents divided by Shareholders’ funds, expressed as a
percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due from and to brokers at the period end as
well as cash and short-term deposits.
30 September 2024 30 September 2023
£’000 £’000
Total borrowings a 22,462 20,941
Cash and short-term deposits 591 1,196
Investments in AAA-rated money-market funds 1,311 3,027
Amounts due from brokers – 148
Amounts payable to brokers – (305)
Total cash and investments in AAA-rated money-market funds b 1,902 4,066
Gearing (borrowings less cash & investments in AAA-rated money-
market funds)
c=(a-b) 20,560 16,875
Shareholders’ funds d 158,415 149,873
Net gearing e=(c/d) 13.0% 11.3%
Ongoing charges ratio
The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC, which is defined as the total of
investment management fees and recurring administrative expenses and expressed as a percentage of the average daily net asset
values published throughout the period.
30 September 2024 30 September 2023
£’000 £’000
Investment management fees 840 1,006
Administrative expenses 459 508
Less: non-recurring charges
A
(1) (27)
Ongoing charges a 1,298 1,487
Average net assets b 150,930 158,676
Ongoing charges ratio c=(a/b) 0.86% 0.94%
A
Comprises professional fees not expected to recur.
B
Calculated in accordance with AIC guidance issued in October 2020 to include the Company’s share of costs of holdings in
investment companies on a look-through basis.
The ongoing charges ratio provided in the Company’s Key Information Document is calculated in line with the PRIIPs regulations, which
includes financing and transaction costs.
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Total return
NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking
into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-
ended and closed-ended competitors, and the Reference Index, respectively.
Share
Year ended 30 September 2024 NAV Price
Opening at 1 October 2023 a 314.6p 314.0p
Closing at 30 September 2024 b 331.5p 321.5p
Price movements c=(b/a)-1 5.4% 2.4%
Dividend reinvestment
A
d 7.9% 8.0%
Total return c+d 13.3% 10.4%
Share
Year ended 30 September 2023 NAV Price
Opening at 1 October 2022 a 331.8p 302.5p
Closing at 30 September 2023 b 314.6p 314.0p
Price movements c=(b/a)-1 (5.2%) 3.8%
Dividend reinvestment
A
d 7.0% 7.6%
Total return c+d 1.8% 11.4%
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.
90 abrdn Equity Income Trust plc
Corporate
Information
The Company’s Manager is a
subsidiary of abrdn plc. The abrdn
Group’s assets under management
and administration were £506.7
billion as at 30 September 2024.
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Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
abrdn Investment Management Limited
The Company’s Manager is abrdn Fund Managers Limited
which has delegated portfolio management to abrdn
Investment Management Limited, a subsidiary of abrdn
whose assets under management and administration
were £506.7 billion as at 30 September 2024.
The team within abrdn managing the Company’s portfolio
of investments has been headed up by Thomas Moore
since 2011.
The Investment Team Senior Managers
Thomas Moore
Senior Investment Director, UK Equities
Thomas is a Senior Investment Director within the UK
equities team at abrdn. He began his career in 1998,
joining Schroder Investment Management as Assistant
Fund Manager, UK Equities. He joined abrdn in 2002 as an
Investment Analyst. He then managed EMEA portfolios
before moving to the UK equities team in 2006.
Wes McCoy
Senior Investment Director, UK Equities
Wes is a Senior Investment Director within the UK Equities
team at abrdn and is portfolio manger for the UK Value
Equity fund. Wes joined abrdn in 1999 as an Investment
Director covering UK equities where he was responsible
for the management of a wide range of institutional
mandates, including the creation and launch of the UK
Value Equity strategy. He left the industry in 2008 to work
with a charity in Africa. He re-joined abrdn in October
2012 as Investment Director in global equities before
moving to manage UK equities in April 2015.
While Wes is not involved in the day-to-day management
of the portfolio, he maintains a watching brief over the
portfolio and regularly discusses decisions and investment
opportunities with Thomas.
Information about the Investment Mana
g
er
92 abrdn Equity Income Trust plc
Alternative Investment Fund Managers
Directive (“AIFMD”) and Pre-Investment
Disclosure Document (“PIDD”)
The Company has appointed abrdn Fund Managers
Limited as its alternative investment fund manager and
BNP Paribas Securities S.A., London Branch as its
Depositary under the AIFMD.
The AIFMD requires abrdn Fund Managers Limited, as the
Company’s AIFM, to make available to investors certain
information prior to such investors’ investment in the
Company. Details of the leverage and risk policies which
the Company is required to have in place under the AIFMD
are published in the Company’s PIDD which can be found
on its website: abrdnequityincome.com. The periodic
disclosures required to be made by the AIFM under the
AIFMD are set out on page 97.
Investor Warning: Be alert to share fraud and
boiler room scams
abrdn has been contacted by investors informing us that
they have received telephone calls and emails from
people who have offered to buy their investment
company shares, purporting to work for abrdn or for third
party firms. abrdn has also been notified of emails
claiming that certain investment companies under our
management have issued claims in the courts against
individuals. These may be scams which attempt to gain
your personal information with which to commit identity
fraud or could be ‘boiler room’ scams where a payment
from you is required to release the supposed payment for
your shares. These callers/senders do not work for abrdn
and any third party making such offers/claims has no link
with abrdn.
abrdn does not ‘cold-call’ investors in this way. If you have
any doubt over the veracity of a caller, do not offer any
personal information and end the call.
The Financial Conduct Authority provides advice with
respect to share fraud and boiler room scams at:
fca.org.uk/consumers/scams.
Shareholder Enquiries
For queries regarding shareholdings, lost certificates,
dividend payments, registered details and related
matters, shareholders holding their shares directly in the
Company are advised to contact the Registrars (see
Contact Addresses). Changes of address must be notified
to the Registrars in writing.
Any general queries, comments or complaints, including
for the specific attention of the Chair or Senior
Independent Director, should be directed to the Company
Secretary in writing (see Contact Addresses) or by email
to: CEF.CoSec@abrdn.com
How to Invest
Investors can buy and sell shares in the Company directly
through a stockbroker or indirectly through a lawyer,
accountant or other professional adviser.
Alternatively, for private investors, there are a number of
online dealing platforms that offer share dealing, ISAs and
other means to invest in the Company. Real-time
execution-only stockbroking services allow you to trade
online, manage your portfolio and buy UK listed shares.
These sites do not give advice. Some comparison websites
also look at dealing rates and terms.
Discretionary Private Client Stockbrokers
If you have a large sum to invest, you may wish to contact
a discretionary private client stockbroker. They can
manage your entire portfolio of shares and will advise you
on your investments. To find a private client stockbroker
visit The Personal Investment Management and Financial
Advice Association at: pimfa.co.uk
Financial Advisers
To find an adviser who recommends on investment trusts
visit: unbiased.co.uk
Regulation of Stockbrokers
Before approaching a stockbroker, always check that
they are regulated by the Financial Conduct Authority:
fca.org.uk/firms/financial-services-register
How to Attend and Vote at Company
Meetings
Investors who hold their shares through a platform or
share plan provider (for example Hargreaves Lansdown,
Interactive Investor or AJ Bell) and would like to attend and
vote at Company meetings (including Annual General
Meetings) should contact their platform or share plan
provider directly to make arrangements.
Investor Information
abrdn Equity Income Trust plc 93
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Investors who hold their shares through platforms and
have their shares held through platform nominees, may
not necessarily receive notification of general meetings
and are advised to keep themselves informed of
Company business by referring to the Company’s
website. Where voting is required, and the Board
encourages shareholders to vote at all general meetings
of the Company, shareholders with their holdings in
nominees, need to instruct the nominee to vote on their
behalf and should do so in good time before the meetings.
Keeping You Informed
Further information about the Company may be found on
its dedicated website: abrdnequityincome.com
This provides access to information on the Company’s
share price performance, capital structure, London Stock
Exchange announcements, current and historic Annual
and Half-Yearly Reports, and the latest monthly factsheet
on the Company issued by the Manager.
Details are also available at: invtrusts.co.uk
Twitter: @abrdnTrusts
LinkedIn: abrdn Investment Trusts
Key Information Document (“KID”)
The KID relating to the Company and published by the
Manager can be found on the Company’s website
although it should be noted that following the forbearance
granted by the FCA to the investment trust industry in
September 2024, there is no obligation upon the Company
or the Manager to produce a KID. The Manager continues
to provide a modified KID for the Company as it is aware
that a number of platforms/market participants still
require prospective investors to confirm that they have
read the KID prior to a buy order being placed. In addition
to the KID, the Manager has developed a Statement of
Operating Expenses which is incorporated into the
Company’s factsheet, and which can be found on the
Company’s website.
Consumer Duty
The FCA’s Consumer Duty rules, published in July 2022, are
a fundamental component of the FCA’s consumer
protection strategy and aim to improve outcomes for
retail consumers across the entire financial services
industry, through the assessment of various outcomes,
one of which is an assessment of whether a product
provides value. Under Consumer Duty, the Manager is the
product ‘manufacturer’ of the Company and therefore
the Manager is required to publish an annual assessment
of value. The Manger uses its proprietary assessment
methodology to assess the Company as ‘expected to
provide fair value for the reasonably foreseeable future’.
The Board has reviewed the Manager’s basis of
assessment, and no concerns have been identified with
either the assessment method or the outcome of the
assessment.
Suitable for Retail/NMPI Status
The Company’s shares are intended for investors,
primarily in the UK, including retail investors, professionally
advised private clients and institutional investors. Investors
should consider consulting a financial adviser who
specialises in advising on the acquisition of shares and
other securities before acquiring shares. Investors should
be capable of evaluating the risks and merits of such an
investment and should have sufficient resources to bear
any loss that may result.
The Company currently conducts its affairs so that the
securities issued by the Company can be recommended
by a financial adviser to ordinary retail investors in
accordance with the Financial Conduct Authority’s rules in
relation to non-mainstream pooled investments (“NMPIs”)
and intends to continue to do so for the foreseeable future.
The Company’s securities are excluded from the Financial
Conduct Authority’s restrictions which apply to NMPIs
because they are securities issued by an investment trust.
Note
Please remember that past performance is not a guide to
the future. Stock market and currency movements may
cause the value of shares and the income from them to
fall as well as rise and investors may not get back the
amount they originally invested.
As with all equity investments, the value of investment
trusts purchased will immediately be reduced by the
difference between the buying and selling prices of the
shares, known as the market maker’s spread.
Investors should further bear in mind that the value of any
tax relief will depend on the individual circumstances of
the investor and that tax rates and reliefs, as well as the
tax treatment of ISAs, may be changed by future
legislation.
The information on pages 92 and 93 has been approved
for the purposes of Section 21 of the Financial Services
and Markets Act 2000 (as amended by the Financial
Services Act 2012) by abrdn Fund Managers Limited
which is authorised and regulated by the Financial
Conduct Authority in the United Kingdom
.
94 abrdn Equity Income Trust plc
abrdn Group or abrdn plc
The abrdn plc group of companies.
AFML or AIFM or Manager
abrdn Fund Managers Limited (“AFML”), is a wholly owned
subsidiary of abrdn Holdings Limited, which is part of
abrdn, and acts as the alternative investment fund
manager (“AIFM”) for the Company. AFML is authorised
and regulated by the Financial Conduct Authority. The
Manager has delegated portfolio management to abrdn
Investment Management Limited.
AIC
The Association of Investment Companies.
AIFMD
The UK version of the Alternative Investment Fund
Managers Directive and all implanting and delegating
legislation thereunder, as it forms part of UK law following
the UK’s departure from the EU. The AIFMD was originally
European legislation which created a European-wide
framework for regulating managers of ‘alternative
investment funds’ (“AIFs”). It is designed to regulate any
fund which is not a UCITS fund, and which is managed
and/or marketed in the EU (and now, separately, the UK).
The Company has been designated as an AIF.
Alternative Performance Measures or APMs
Numerical measures of the Company’s current, historical
or future performance, financial position, other than the
financial measures defined or specified in the applicable
financial framework. The Company’s applicable financial
framework includes FRS102 and the AIC SORP.
Capital Return Per Share
The realised and unrealised gains and losses of the
investment portfolio net of costs, interest and tax of the
Company that have been allocated to capital, divided by
the weighted average number of shares in issue during
the year.
Closed-End Fund
A collective investment scheme which has a fixed number
of shares which are not redeemable from the fund itself.
Unlike open-ended funds, new shares/units are not
created by managers to meet demand from investors;
instead, shares are purchased (or sold) only in the market.
Closed-end funds are normally listed on a recognised
stock exchange, such as the London Stock Exchange, and
shares can be bought and sold on that exchange.
Depositary
A depositary is responsible for cash monitoring, the
custody and safeguarding of the Company’s financial
instruments and monitoring the Company’s compliance
with investment limits and leverage requirements. The
Company’s Depositary is BNP Paribas Securities S.A.,
London Branch.
Discount
The amount by which the market price per share of an
Investment Trust is lower than the Net Asset Value per
share. The discount is normally expressed as a
percentage of the Net Asset Value per share.
Dividend Cover
Revenue Return Per Share divided by dividends per share
expressed as a ratio.
Dividend per Share or DPS
The total of all dividends paid by the Company for the
financial year on a per share basis.
Dividend Yield
The annual dividend expressed as a percentage of the
share price.
Earnings per Share or EPS
The net income after tax of the Company divided by the
weighted average number of shares in issue during the
year. In an Investment Trust this is made up of Revenue
Return Per Share and Capital Return Per Share.
ESG
Environmental, social and governance (“ESG”) factors,
which are considered in all investment decisions.
Ex-dividend date (“XD date”)
The day before the Record Date. The XD date is normally
about a month before the dividend is paid.
FCA
Financial Conduct Authority.
Gearing or Net Gearing
Gearing is calculated by dividing total borrowings less
cash and cash equivalents by Shareholders’ Funds,
expressed as a percentage.
Glossary of Terms
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Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Index
A market index calculates the average performance of its
constituents, normally on a weighted basis. It provides a
means against which the performance of individual
instruments can be assessed.
Investment Manager
abrdn Investment Management Limited
Investment Trust
A type of Closed-End Fund which invests in other
securities, allowing shareholders to share the risks, and
returns, of collective investment.
Key Information Document or KID
The UK Packaged Retail and Insurance-based Investment
Products (“PRIIPS”) Regulation requires the PRIIP
‘manufacturer’, to prepare a Key Information Document
(“KID”) and make available to retail investors prior to them
making any investment decision.
In September 2024, the FCA granted forbearance to the
investment trust industry which means that the Manger is
no longer required to produce a KID. However, the
Manager continues to publish a modified KID for the
Company largely because a number of platforms/market
participants still require prospective investors to confirm
that they have read the KID prior to a buy order being
placed. The modified KID is available via the Company’s
website and included in its factsheet. In addition to the
KID, the Manager has developed a Statement of
Operating Expenses which is incorporated into the
Company’s factsheet, and which can be found on the
Company’s website.
Leverage
For the purposes of the AIFMD, leverage is any method
which increases the Company’s exposure, including the
borrowing of cash and the use of derivatives. It is
expressed as a ratio between the Company’s exposure
and its Net Asset Value and can be calculated on a gross
and a commitment method. Under the gross method,
exposure represents the sum of the Company’s positions
after the deduction of sterling cash balances, without
taking into account any hedging and netting
arrangements. Under the commitment method, exposure
is calculated without the deduction of sterling cash
balances and after certain hedging and netting positions
are offset against each other.
Market Capitalisation
The latest price of an Ordinary share multiplied by the
number of shares in issue.
Net Asset Value, NAV or Shareholders’ Funds
The value of total assets less liabilities. Liabilities for this
purpose include current and long-term liabilities. The Net
Asset Value divided by the number of shares in issue
produces the Net Asset Value per Ordinary share.
Ongoing Charges Ratio
Ratio of total expenses as a percentage of average daily
Shareholders’ Funds calculated as per the AIC’s industry
standard method.
Portfolio Manager
The Company’s Portfolio Manager is Thomas Moore, a
Senior Investment Director within the UK Equities team at
abrdn. Thomas has managed the Company’s portfolio, on
behalf of the Manager, since 2011.
Pre-Investment Disclosure Document
(“PIDD”)
The AIFM and the Company are required to make certain
disclosures available to investors in accordance with the
AIFMD. Those disclosures that are required to be made
pre-investment are included within a PIDD, which can be
found on the Company’s website.
Premium
The amount by which the market price per share of an
Investment Trust exceeds the Net Asset Value per share.
The premium is normally expressed as a percentage of
the Net Asset Value per share.
Price/Earnings Ratio
This is calculated by dividing the market price per share by
the earnings per share. The calculation assumes no
change in earnings but in practice the multiple reflects the
stock market’s view of a company’s prospects and profit
growth potential.
96 abrdn Equity Income Trust plc
Prior Charges
The name given to all borrowings including debentures,
loans and overdrafts that are to be used for investment
purposes, reciprocal foreign currency loans, currency
facilities to the extent that they are drawn down, index-
linked securities, and all types of preference or preferred
capital irrespective of the time until repayment.
Realised Gains/Losses
The profit/loss on the sale of investments during the year.
Record Date
The date when an investor needs to be holding a share in
order to qualify for a forthcoming dividend.
Reference Index
The Company’s Reference Index is the FTSE All-Share
Index. The Company does not have a benchmark but uses
the Reference Index as a comparator.
Relative Performance
Performance of the Company relative to the FTSE All-
Share Index.
Retail Prices Index (“RPI”)
One of the main measures of consumer inflation in the UK,
produced by the Office for National Statistics.
Revenue Return Per Share
The net income from dividends and interest received,
after costs, interest and tax allocated to revenue, divided
by the weighted average number of shares in issue during
the year.
Revenue Reserves
The total of undistributed revenue earnings from prior
years. This is available for distribution to shareholders by
way of dividend.
Statement of Operating Expenses or SOE
Working with a number of market participants, abrdn has
developed a SOE in order to provide prospective investors
with a succinct and comparable summary of the
expenses incurred by the Company in administering its
portfolio. These expenses are deducted from the NAV, not
the share price, which is the inference from the KID. abrdn
hopes that this might form part of the disclosure regime
that will replace the PRIIPs regulations.
Total Assets
Total assets less current liabilities (before deducting Prior
Charge as defined above), as per the Statement of
Financial Position.
Total Return
The theoretical return including reinvesting each dividend
in additional shares in the Company on the day that the
shares go ex-dividend. The NAV Total Return involves
investing the same net dividend in the NAV of the
Company on the ex-dividend date.
Unrealised Gains/Losses
The profit/loss on the revaluation of the investment
portfolio at the end of the year.
Glossary of Terms
Continued
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abrdn Fund Managers Limited (“AFML”) and the Company are required to make certain disclosures available to
investors in accordance with the Alternative Investment Fund Managers Directive (“AIFMD”). Those disclosures that are
required to be made pre-investment are included within a pre-investment disclosure document (“PIDD”) which can be
found on the Company’s website.
There have been no material changes to the disclosures contained within the PIDD since its most recent update in
November 2023.
The periodic disclosures as required under the AIFMD to investors are made below:
· information on the investment strategy, geographic and sector investment focus and principal stock exposures is
included in the Strategic Report.
· none of the Company’s assets are subject to special arrangements arising from their illiquid nature.
· the Strategic Report, note 15 to the financial statements and the PIDD together set out the risk profile and risk
management systems in place. There have been no changes to the risk management systems in place in the period
under review and no breaches of any of the risk limits set, with no breach expected.
· there are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity
management systems and procedures employed by AFML; and
· all authorised Alternative Investment Fund Managers are required to comply with the AIFMD Remuneration Code. In
accordance with the Remuneration Code, the AIFM’s remuneration policy is available from the Company Secretary,
abrdn Holdings Limited, on request, and the remuneration disclosures in respect of the AIFM’s reporting period for the
year ended 31 December 2023 are available on the Company’s website.
Leverage
The table below sets out the current maximum permitted limit and actual level of leverage for the Company:
Gross Method Commitment Method
Maximum level of leverage 3.00:1 2.00:1
Actual level at 30 September 2024 1.27:1 1.29:1
There have been no breaches of the maximum level during the period and no changes to the maximum level of
leverage employed by the Company. There have been no changes to the circumstances in which the Company may
be required to post assets as collateral and no guarantees granted under the leveraging arrangement. Changes to the
information contained either within this Annual Report or the PIDD in relation to any special arrangements in place, the
maximum level of leverage which AFML may employ on behalf of the Company, the right of use of collateral or any
guarantee granted under any leveraging arrangement, or any change to the position in relation to any discharge of
liability by the Depositary will be notified via a regulatory news service without undue delay in accordance with
the AIFMD. The information on this page has been approved for the purposes of Section 21 of the Financial Services and
Markets Act 2000 (as amended by the Financial Services Act 2012) by abrdn Fund Managers Limited which is authorised
and regulated by the Financial Conduct Authority in the United Kingdom
Reduction in Yield misstatement
AFML identified incorrect data in Reduction in Yield (RiY) table in their PRIIPS KID documents on 4 July 2024 and rectified
the error on 19 July 2024. The issue was in the RiY illustration which shows the impact of charges on a hypothetical £10k
investment over 1,3 and 5 years. The average understatement was 0.43% and the maximum was 0.63%. The
composition of costs numbers was all correct throughout. Following the FCA's September forbearance notice regarding
the PRIIPS KID disclosures of costs for UK listed investment trusts, AFML has ceased to publish these figures and instead
has collaborated with other participants in the industry to develop the Statement of Operating Expenses to aid
understanding of the costs and expenses involved in managing an investment trust. AFML believe that this is more
compatible with our Consumer Duty obligations, by providing a consistent basis to allow end-consumers to meaningfully
compare the actual costs incurred when investing in these investment trusts.
AIFMD Disclosures
(
Unaudited
)
98 abrdn Equity Income Trust plc
General
The Annual General Meeting
of abrdn Equity Income Trust plc
will be held at abrdn plc, 18 Bishops
Square, London, E1 6EG on Tuesday, 18
February 2025 at 11:30 am.
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Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
NOTICE IS HEREBY GIVEN that the thirty third Annual General Meeting of abrdn Equity Income Trust plc (the “Company”)
will be held at abrdn plc, 18 Bishops Square, London, E1 6EG on Tuesday, 18 February 2025 at 11:30 am for the following
purposes:
Ordinary Resolutions
To consider and, if thought fit, pass resolutions 1 to 10 (inclusive) as ordinary resolutions:
1. To receive and adopt the audited financial statements of the Company for the year ended 30 September 2024,
together with the reports of the Directors and the independent Auditor on those financial statements.
2. To receive, adopt and approve the Directors’ Remuneration Report for the year ended 30 September 2024.
3. To approve the Company’s dividend policy to pay four interim dividends per annum as set out on page 49 of the
Annual Report and Accounts for the financial year ended 30 September 2024.
4. To re-elect Caroline Hitch as a Director of the Company.
5. To re-elect Mark Little as a Director of the Company.
6. To re-elect Sarika Patel as a Director of the Company.
7. To re-elect Nick Timberlake as a Director of the Company.
8. To re-appoint Johnston Carmichael LLP as independent Auditor of the Company to hold office from the conclusion
of the annual general meeting until the conclusion of the next annual general meeting at which accounts are laid
before the Company.
9. To authorise the Directors to fix the remuneration of the independent Auditor for the year to 30 September 2025.
10. That, in substitution for any existing authority, but without prejudice to the exercise of any such authority prior to the
date of the passing of this resolution, the directors of the Company (the “Directors”) be and they are hereby
generally and unconditionally authorised in accordance with Section 551 of the Companies Act 2006 (the “Act”) to
exercise all the powers of the Company to allot ordinary shares of 25 pence each in the capital of the Company
(“Shares”) and to grant rights to subscribe for or to convert any security into Shares (“Rights”) provided that such
authority shall be limited to the allotment of Shares and the grant of Rights with an aggregate nominal value of up to
£1,194,538 (representing 10% of the Company’s total issued share capital (excluding shares held in treasury) as at
the date of this notice) on such terms as the Directors may determine. Such authority shall expire at the conclusion
of the next annual general meeting of the Company after the passing of this resolution or on the expiry of 15 months
from the passing of this resolution, whichever is the earlier, unless previously revoked, varied, extended or renewed
by the Company in a general meeting, save that the Company may at any time prior to the expiry of this authority
make an offer or enter into an agreement which would or might require Shares to be allotted or Rights to be granted
after the expiry of such authority and the Directors shall be entitled to allot Shares or grant Rights in pursuance of
any such an offer or agreement as if such authority had not expired.
Special Resolutions
To consider and, if thought fit, to pass resolutions 11 to 13 (inclusive) as special resolutions:
11. That, subject to the passing of resolution 10 set out in the notice of the annual general meeting to be held on 18
February 2025, and in substitution for any existing power but without prejudice to the exercise of any such power
prior to the passing of this resolution, the directors of the Company (the “Directors”) be and they are hereby
generally and unconditionally empowered, pursuant to sections 570 and 573 of the Companies Act 2006 (the “Act”),
to allot, or make offers or agreements to allot, equity securities (within the meaning of section 560(1) of the Act), for
cash pursuant to the authority given by resolution 10 above, and/or to sell treasury shares for cash, as if Section
561(1) of the Act did not apply to any such allotment or sale provided that this power:
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100 abrdn Equity Income Trust plc
a) expires at the conclusion of the next annual general meeting of the Company after the passing of this resolution
or on the expiry of 15 months from the passing of this resolution, whichever is the earlier, unless previously
revoked, varied, extended or renewed by the Company in a general meeting, save that the Company may, at
any time prior to the expiry of this authority, make offers or enter into agreements which would or might require
equity securities to be allotted or sold out of treasury after such expiry and the Directors may allot or sell out of
treasury equity securities in pursuance of any such offer or agreement as if the power conferred hereby had
not expired; and
b) shall be limited to the allotment and sale out of treasury, of equity securities up to an aggregate nominal value of
£1,194,538, being 10% of the nominal value of the issued share capital of the Company (excluding treasury
shares), as at the date of this notice.
12. That, in substitution for any existing authority, but without prejudice to the exercise of any such authority prior to the
passing of this resolution, the Company be and is hereby generally and, subject as hereinafter appears,
unconditionally authorised in accordance with Section 701 of the Companies Act 2006 (the “Act”) to make market
purchases (within the meaning of Section 693(4) of the Act) of ordinary shares of 25 pence each in the capital of the
Company (the “Shares”) on such terms and in such manner as the Directors may from time to time determine either
for cancellation or for retention as treasury shares for future reissue, resale, transfer, or cancellation provided
always that:
a) the maximum aggregate number of Shares hereby authorised to be purchased shall be 7,162,450 or, if less, the
number representing 14.99% of the Company’s issued share capital (excluding shares held in treasury) at the
date of the passing of this resolution.
b) the minimum price (exclusive of expenses) which may be paid for each Share shall be 25 pence.
c) the maximum price (exclusive of expenses) which may be paid for a Share is the higher of (i) 105% of the
average of the middle market quotations (as derived from the Daily Official List of the London Stock Exchange)
for a Share over the five business days immediately preceding the date of purchase and (ii) the higher of the
price of the last independent trade of a Share and the highest current independent bid for such Share on the
London Stock Exchange at the time the purchase is carried out; and
d) the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the
Company after the passing of this resolution or on the expiry of 15 months from the passing of this resolution,
whichever is earlier, unless previously revoked, varied, extended or renewed by the Company in a general
meeting, save that the Company may, at any time prior to the expiry of this authority, enter into a contract to
purchase Shares under such authority which will or might be completed or executed wholly or partly after the
expiration of such authority and may make a purchase of Shares pursuant to any such contract.
13. That a general meeting other than an annual general meeting may be called on not less than 14 clear days’ notice,
provided that this authority shall expire at the conclusion of the next annual general meeting of the Company.
By order of the Board
abrdn Holdings Limited
Company Secretary
27 November 2024
Registered Office
280 Bishopsgate
London
EC2M 4AG
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Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Notes
i. A shareholder entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend, speak
and vote instead of him/her or on his/her behalf at the meeting. A proxy need not be a shareholder. A shareholder
may appoint more than one proxy, provided that each proxy is appointed to attend, speak and vote in respect of a
different share or shares. If you wish your proxy to speak on your behalf at the meeting, you will need to appoint your
own choice of proxy (not the Chair of the meeting) and give instructions directly to them. Appointing a proxy will not
prevent a shareholder from attending in person and voting at the meeting. A proxy form which may be used to
make such appointment and give proxy instructions accompanies this notice. If you do not have a proxy form and
believe that you should, or if you would like to appoint more than one proxy, please contact the Company’s
Registrar, Computershare Investor Services PLC on 0370 707 1150. In the case of joint holders, the vote of the first
named in the register of members of the Company who tenders a vote, whether in person or by proxy, shall be
accepted to the exclusion of the votes of other joint holders.
ii. To be valid, the appointment of a proxy, and the original or duly certified copy of the power of attorney or other
authority, if any, under which it is signed or authenticated, should be sent to the Company’s Registrar,
Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ so as to arrive not less than
48 hours (excluding non-working days) before the time fixed for the meeting or any adjourned meeting.
iii. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those
shareholders registered in the register of members of the Company at close of business on 14 February 2025 (or, if
the meeting is adjourned, 48 hours by close of business on the day which is two working days prior to the date of the
adjourned meeting) shall be entitled to attend or vote at the meeting in respect of the number of ordinary shares
registered in their name at that time. In each case, changes to entries on the register of members of the Company
after that time shall be disregarded in determining the rights of any person to attend or vote at the meeting.
iv. Any shareholder holding 3% or more of the total voting rights of the Company who appoints a person other than the
Chair of the meeting as his/her proxy(ies) will need to ensure that both he/she and his/her proxy(ies) comply with
their respective disclosure obligations under the FCA Disclosure Guidance and Transparency Rules.
v. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service
may do so for the meeting and any adjournment(s) thereof by utilising the procedures described in the CREST
Manual and/or by logging in to the website www.euroclear. com/CREST. CREST personal members or other CREST
sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to
their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
vi. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST
Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & International Limited’s (“EUI”)
specifications and must contain the information required for such instructions, as described in the CREST Manual.
The message must be transmitted so as to be received by the issuer’s agent (ID number 3RA50) by 11:30 am on 14
February 2025 (or, if the meeting is adjourned, 48 hours (excluding non-working days) before the time fixed for the
adjourned meeting). For this purpose, the time of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve
the message by enquiry to CREST in the manner prescribed by CREST.
vii. CREST memb
ers and, where applicable, their CREST sponsors or voting service providers should note that EUI does
not make available special procedures in CREST for any particular messages. Normal system timings and limitations
will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed
a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as
shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In
this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are
referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system
and timings.
102 abrdn Equity Income Trust plc
viii. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of
the Uncertificated Securities Regulations 2001.
ix. A person to whom this notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to
enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the shareholder
by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for
the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may,
under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
The statements of the rights of members in relation to the appointment of proxies in Notes (i) and (ii) above do not
apply to a Nominated Person. The rights described in those Notes can only be exercised by registered members of
the Company.
x. The terms of appointment of the Directors of the Company are available for inspection on any day (except
Saturdays, Sundays and bank holidays) from the date of this notice until the date of the meeting during usual
business hours at the registered office of the Company and will, on the date of the meeting, be available for
inspection at the venue of the meeting from 15 minutes before the meeting until the conclusion of the meeting.
xi. Shareholders are advised that, unless otherwise stated, any telephone number, website or email address which
may be set out in this notice of Annual General Meeting or in any related documents (including the proxy form) is
not to be used for the purposes of serving information or documents on, or otherwise communicating with, the
Company for any purposes other than those expressly stated.
xii. Following the meeting, the results of the voting at the meeting and the numbers of proxy votes cast for and against
and the number of votes actively withheld in respect of each of the resolutions will be announced via a Regulatory
Information Service and placed on the Company’s website: abrdnequityincome.com.
xiii. It is possible that, pursuant to requests made by members of the Company under Section 527 of the Companies Act
2006, the Company may be required to publish on a website a statement setting out any matter relating to: (i) the
audit of the Company’s accounts (including the Auditor’s report and the conduct of the audit) that are to be laid
before the meeting: or (ii) any circumstances connected with an Auditor of the Company ceasing to hold office
since the previous meeting at which annual accounts and reports were laid in accordance with Section 437 of the
Companies Act 2006. The Company will be required to do so once it has received such requests either from a
member or members having a right to vote and holding at least 5% of the total voting rights of the Company or from
at least 100 members who have a relevant right to vote and hold shares in the Company on which there has been
paid up an average sum per member of at least £100. Such requests must be made in writing and must state the
member’s full name and address and be sent to the Company’s registered office to be received by the Company at
least one week prior to the meeting. The Company may not require the members requesting any such website
publication to pay its expenses in complying with Sections 527 or 528 of the Companies Act 2006.
xiv. As at 6pm on 27 November 2024 (being the latest practicable date prior to publication of this notice) the
Company’s issued share capital comprised 49,178,767 ordinary shares of 25 pence each [including 1,397,245
ordinary shares held in treasury]. Each Ordinary share (other than any Ordinary shares held in treasury) carries the
right to one vote at a general meeting of the Company. Accordingly, the total number of voting rights in the
Company as at 27 November 2024 was 47,781,522.
xv. If you wish to attend the meeting in person, there will be a members’ register for you to sign on arrival. Under section
319A of the Companies Act 2006, the Company must answer any question relating to the business being dealt with
at the meeting put by a member attending the meeting unless:
a) answering the question would interf
ere unduly with the preparation for the meeting or involve the disclosure of
confidential information.
b) the answer has already been given on a website in the form of an answer to a question; or
c) it is undesirable in the interests of the Company or the good order of the meeting that the question be
answered.
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abrdn Equity Income Trust plc 103
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
xvi. Information regarding the Annual General Meeting, including information required by Section 311A of the
Companies Act 2006, is available from the Company’s website: abrdnequityincome.com.
xvii. Under section 338 of the Companies Act 2006, a member or members meeting the qualification criteria set out at
note xix below, may, subject to certain conditions, require the Company to circulate to members notice of a
resolution which may properly be moved and is intended to be moved at that meeting. The conditions are that: (i)
the resolution must not, if passed, be ineffective (whether by reason of inconsistency with any enactment or the
Company's constitution or otherwise); (ii) the resolution must not be defamatory of any person, frivolous or
vexatious; and (iii) the request: (a) may be in hard copy form or in electronic form; (b) must identify the resolution of
which notice is to be given by either setting out the resolution in full or, if supporting a resolution sent by another
member, clearly identifying the resolution which is being supported; (c) must be authenticated by the person or
persons making it; and (d) must be received by the Company not later than six weeks before the meeting to which
the requests relate.
xviii. Under section 338A of the Act, a member or members meeting the qualification criteria set out at note xix below,
may, subject to certain conditions, require the Company to include in the business to be dealt with at the meeting a
matter (other than a proposed resolution) which may properly be included in the business (a matter of business).
The conditions are that: (i) the matter of business must not be defamatory of any person, frivolous or vexatious; and
(ii) the request: (a) may be in hard copy form or in electronic form; (b) must identify the matter of business by either
setting it out in full or, if supporting a statement sent by another member, clearly identify the matter of business
which is being supported; (c) must be accompanied by a statement setting out the grounds for the request; (d)
must be authenticated by the person or persons making it; and (e) must be received by the Company not later
than six weeks before the meeting to which the requests relate.
xix. In order to be able to exercise the members' right to require: (i) circulation of a resolution to be proposed at the
meeting (see note xvii); or (ii) a matter of business to be dealt with at the meeting (see note xviii), the relevant
request must be made by: (a) a member or members having a right to vote and holding at least 5% of the total
voting rights of the Company; or (b) at least 100 members who have a relevant right to vote and hold shares in the
Company on which there has been paid up an average sum per member of at least £100.
104 abrdn Equity Income Trust plc
abrdn Equity Income Trust plc 105
Directors
Sarika Patel (Chair)
Caroline Hitch
Mark Little
Nick Timberlake
Registered Office
280 Bishopsgate
London
EC2M 4AG
Registered Number
Registered in England & Wales No. 2648152
Alternative Investment Fund Manager
abrdn Fund Managers Limited
1 George Street
Edinburgh
EH2 2LL
Website Address:
abrdnequityincome.com
Company Secretary
abrdn Holdings Limited
1 George Street
Edinburgh
EH2 2LL
E-mail: CEF.CoSec@abrdn.com
Independent Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
EH3 7PE
Solicitor
Dickson Minto W.S.
16 Charlotte Square
Edinburgh
EH2 4DF
Depositary and Custodian
BNP Paribas S.A., London Branch
10 Harewood Avenue
London
NW1 6AA
Lender
The Royal Bank of Scotland International, London Branch
3
rd
Floor
440 Strand
London
WC2R 0QS
Stockbroker
J.P.Morgan Cazenove
29th Floor
25 Bank Street
London
E14 5JP
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Telephone: 0370 707 1150
Contact Addresses
For more information visit abrdnequityincome.com
abrdn.com