ASEI.L Regulatory News (ASEI)

ABERDEEN STANDARD EQUITY INCOME TRUST PLC

Legal Entity Identifier (LEI): 21380015XPT7BZISSQ74

HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 31 MARCH 2021

PERFORMANCE HIGHLIGHTS

FINANCIAL HIGHLIGHTS

CHAIRMAN'S STATEMENT

Performance

In absolute terms, the Company's first half to 31 March 2021 has been one of the most successful for the portfolio for over 10 years with a NAV total return of 29.0%, outperforming the FTSE All-Share Index by 10.5%. These returns represent some of the best results, both in absolute and relative terms for a number of years. At the same time, the share price total return was 34.8%. These headlines obviously make much more positive reading than they did six months ago when Richard Burns, my predecessor, summarised activity in the Annual Report for the year to 30 September 2020, with the Company's portfolio so heavily affected by the impact of Covid-19. The dramatic improvement in the performance relative to the FTSE All-Share Index is due in good part to our Manager's investment process which seeks to identify companies which the Manager believes to be mispriced by the market. A consequence of this approach is that the portfolio is often more heavily weighted towards mid- and small-cap companies than the Index, where such mispricing can be more frequently found. When the market focuses more on fundamentals, rather than momentum, the portfolio will typically be well placed, as we have seen over the 6 months to 31 March 2021. One of the tangible effects of this is that we have seen the discount narrow as the market picked up on the improved performance of the portfolio.

It is worth noting that the NAV total return has outperformed the FTSE All-Share Index in each month in the period under review, something that has not been achieved by the portfolio since 2002. Indeed, only two other investment trusts in the UK Equity Income sector have produced such consistent outperformance in the period. The returns are obviously very welcome, particularly in light of the underperformance of the portfolio in recent years.

The Investment Manager's Review provides a more detailed explanation of the drivers of this performance.

Revenue

Dividend income in the 6 months was £4.199m compared to £4.724m for the same period last year, a reduction of 11.1%, as Covid-19 impacted the ability of some investments to maintain dividend payments. Total income for the period was £4.201m compared to £4.739m, a fall of 11.4%. Management fees and administrative expenses charged to revenue were down 13.3%, at £358k compared to £413k in 2020. After interest costs and tax, net earnings were down 8.4% to £3.742m and the revenue per Ordinary share was 7.74p compared to 8.35p for the first six months of the previous financial year.

Dividends

The Board is declaring a second interim dividend of 5.2p which will be paid on 25 June 2021 to shareholders on the Register on 4 June 2021, with an associated ex-dividend date of 3 June 2021. The Board paid a first interim dividend of 5.2p in March, bringing total dividends for the 6 months to 31 March 2021 to 10.4p per share, in line with the payments in 2020. The Board's intention is that the third interim dividend, which will be paid in September, will also be 5.2p per share and that the fourth interim dividend will be at least 5.1p, making a total dividend for the year of 20.7p, an increase of 0.1p on the dividend paid in 2020.

The Board will, however, monitor the progress of the revenue account and will not confirm the actual level of the fourth interim dividend until the accounts to 30 September 2021 are finalised in December.

Gearing

At 31 March 2021 net gearing amounted to 10.3% of assets, compared to 11.3% this time last year. The borrowing is in the form of a revolving credit facility with interest changed at 1.34% at the end of the period.

Discount and Buy Backs

There have been no changes to the Company's share capital structure during the 6 months under review. During the period the share price discount to NAV narrowed from 12.5% to 8.8%. At times, the discount was wider than the Board would like, particularly during the early part of the period, but since 1 January 2021 the discount has been in single digits. The Board monitors the discount of the share price to the cum-income NAV in both absolute terms and relative to the discount of other UK equity income investment trusts. We concluded that the discount in late 2020 was in a large part a reflection of the market's lack of interest in UK equities given the uncertainties due to Brexit and that buying back in such circumstances would be unlikely to be to the benefit of all shareholders. At the time of writing, the discount to NAV is 3.4%.

Board

Richard Burns retired from the Board at the AGM in February 2021 and, on behalf of my fellow Board members, I would like to thank him for the leadership and wise counsel that he has provided to the Board and the investment manager over the last 14 years, six of them as Chairman. The Directors have reviewed the composition of the Board and decided to go forward as a Board of four directors. This decision will be kept under review as part of the annual board evaluation process.

Outlook

A year ago, my predecessor had the unenviable task of discerning the outlook from a position of almost total ignorance about the future course of the pandemic and its impact on your Company. 12 months on, my task is much easier as the outlook is not only much clearer but also considerably brighter. As you will see, the tone of this report is much more positive accordingly. The track record of monthly outperformance which began in September 2020 has continued into April, making eight consecutive months of outperformance. This return to the form that we were used to seeing prior to 2016 is most welcome. The investment approach adopted by the Manager through its Focus on Change process does mean that the weightings in the portfolio may differ significantly from the weightings in the FTSE All-Share Index. As a consequence, there will be times when the portfolio's returns will deviate materially from that of the Index, sometimes to the downside, as was the case last year. However, the performance of the last eight months demonstrates the benefits of sticking to the process.

Despite, the substantial improvements in our capital returns, the Board continues to encourage our Portfolio Manager, Thomas Moore, to focus on narrowing the gap between projected earnings and our planned dividend for 2021. As you will see from his report, good progress has been made in this regard but there is still some way to go. Under normal market conditions, the Board would expect to fund dividend payments from current year earnings. However, it is clear that the long-term effect of events in 2020 is that dividends from a number of investee companies are now at lower levels. Therefore, while the Board is targeting a return to covered earnings, it fully recognises that one of the defining features of the investment trust structure is the ability to build up revenue reserves in good years to enhance distributions to shareholders in more challenging times. While we have seen a gradual improvement in dividend income received, the Board does not expect that earnings will cover the projected dividend for the financial year and expects to use reserves to support the dividend in the short term. While we remain convinced that it is entirely appropriate to draw on revenue reserves in current circumstances, we recognise that this cannot continue indefinitely. As conditions improve we wish to return to larger increases in dividend payments as we have done in the past. This may be of increasing importance to our shareholders in the event that we experience significantly higher rates of inflation than in prior years. This seems to be entirely possible given the unprecedented scale of both monetary and fiscal stimuli adopted by the Government and the Bank of England to support the post Covid recovery.

We are living through extraordinary and challenging times which have made navigating financial markets unusually difficult. Our operations have continued without issue which is remarkable in the circumstances. It does though now seem that there is light at the end of the tunnel and it is to be hoped that the road-map out of lock-down will continue to be followed successfully allowing a degree of normality to return to the economy and to the stock market. In such circumstances, it seems likely that the market will maintain its recent focus on fundamentals, rather than momentum, in determining valuations. The portfolio looks to be well positioned for this more encouraging scenario.

Mark White,

Chairman17 May 2021

INTERIM BOARD REPORT

Directors' Responsibility Statement

The Directors are responsible for preparing the Half Yearly Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

· The condensed set of financial statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

· The Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

· The financial statements include a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

Principal Risks and Uncertainties

The Board has an ongoing process for identifying, evaluating and managing the principal risks and uncertainties of the Company and has carried out a robust review. The process is regularly reviewed by the Board. Most of the Company's principal uncertainties and risks are market related and are no different from those of other investment trusts that invest primarily in the UK listed market. These are set out within the Strategic Report contained within the Annual Report for the year ended 30 September 2020 and comprise the following risk categories:

· Strategy

· Investment Performance;

· Exogenous risks such as health, social, financial, economic and geopolitical

· Operational Risk;

· Governance Risk;

· Discount / Premium to NAV;

· Financial obligations; and

· Legal and Regulatory Risks.

The Board notes that there are a number of contingent risks which continue to stem from the Covid-19 pandemic that may impact the operation of the Company. These include investment risks surrounding the companies in the portfolio such as employee absence, reduced demand, reduced turnover, supply chain breakdowns and suspension of dividends. The Board has been proactive in engaging with the Manager to ensure that the Company continues to be managed in accordance with the investment objective and policy, and in the best interest of stakeholders. The Manager continues to review carefully the composition of the Company's portfolio and to be pro-active in taking investment decisions where necessary. Operationally, Covid-19 continues to affect the suppliers of services to the Company. To date, these services have continued to be supplied without problems and the Board will continue to monitor arrangements in the form of regular updates from the Manager.

In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the 2020 Annual Report.

Going Concern

In accordance with the FRC's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern.

The Company's assets consist substantially of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short timescale. The Company has adequate resources to continue in operational existence for the foreseeable future and the ability to meet all its liabilities and ongoing expenses from its assets.

The Directors are mindful of the principal risks and uncertainties disclosed above, including Covid-19, and review on a regular basis forecasts detailing revenue and liabilities and the Company's operational expenses. Having reviewed these matters, the Directors believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of this Half Yearly Report. Accordingly, we continue to adopt the going concern basis in preparing the Half Yearly Report.

For and on behalf of the Board

Mark White,

Chairman 17 May 2021

OUR STRATEGY

Business Model

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

Investment Objective

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

Investment Policy

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

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

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

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

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

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

Delivering the Investment Objective

The Board delegates investment management to Aberdeen Standard Investments ("ASI"), the investment division of Standard Life Aberdeen PLC. The team within ASI 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 apply the Focus on Change process 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 by ASI. 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.

Environmental, social and governance ("ESG") considerations are at the heart of this engagement. Understanding a company's attitudes towards ESG issues helps to mitigate risks and actively enhance returns. As part of the company research, analysts evaluate the ownership structures, governance and management quality of the companies. Potential environmental and social risks that these companies may face are also assessed. The Manager employs dedicated ESG specialists who sit within each regional investment team, providing industry-leading expertise and insight at the company level. These specialists also mediate the insights of the central team to the stock analysts, as well as interpret and contextualise sector and company insights. The central ESG team provides thought leadership, thematic and global sector insights, as well as event-driven research.

Investment Process in Practice

The index-agnostic approach allows 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 Focus on Change 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 which aim to provide 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. Currently 60% (30 September 2020: 58%) of the Company's portfolio is invested in companies outside the FTSE 100 Index.

The index-agnostic approach, and Focus on Change process, 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.

INVESTMENT MANAGER'S REPORT

Market Review

This was a stellar period for the UK stock market, with the FTSE All-Share Index increasing by 18.5% on a total return basis. Having taken some time to stabilise in the initial post-pandemic period, investor confidence recovered sharply from October onwards as macro risks began to fade. This resulted in a rotation out of quality growth stocks, which had performed well in the initial lockdown phase, into more cyclical stocks that would benefit from the economic recovery. This resulted in domestic companies outperforming, with the FTSE Small Cap and FTSE Mid Cap indices outperforming the FTSE 100 during the period.

The beginning of the period was marked by a sharp market sell-off in the face of a second Covid-19 wave and ongoing Brexit-related uncertainty. The turning point came in early November when the election of Joe Biden as US President and the announcement of three new vaccines triggered a sharp rally in equity markets. December saw the rollout of vaccination programmes, the signing of a $900bn US stimulus bill and the UK-EU Brexit trade agreement. These provided a further boost for the UK equity market, even amid the spread of a more virulent Covid-19 strain and a tightening of lockdown measures.

The good news continued in the New Year as the rapid pace of the UK's vaccination roll-out began to bear fruit, bringing down the number of new daily Covid-19 cases. By the end of the period, over 30 million people had received their first vaccine dose and daily case numbers had returned to levels seen at the beginning of the period, despite substantially higher numbers of tests being performed. Government support measures helped to prevent a collapse in the economy. In the US a new $1.9trn Covid-19 relief bill was signed. In the UK the furlough scheme was extended until September 2021, nearly a year after it was originally intended to end. Chancellor Rishi Sunak also pledged an additional £65 billion in emergency support measures for workers and businesses, and announced a corporate tax hike scheduled for 2023. The Bank of England kept interest rates unchanged at 0.1%, but boosted its bond-buying programme. Economic growth stabilised despite new rounds of lockdowns. The unemployment rate increased more moderately than feared.

The household savings ratio spiked to levels unseen since 1993, paving the way for a recovery in consumer spending as the economy re-opens. As a result, economic sentiment improved significantly over the period, with the Office for Budget Responsibility revising its UK growth forecasts for 2022 upwards to 7.3%, which would be the fastest pace since 1948.

Portfolio Performance

The portfolio outperformed significantly in the six month period, staging a very sharp recovery. We also achieved outperformance against the FTSE All-Share Index in every calendar month of the period, highlighting how consistently our holdings are performing, admittedly from what were deeply over-sold levels in many cases. This is extremely gratifying, underlining the potential of our Focus on Change investment process to deliver for shareholders in more normal market conditions, following the intensity of the market reaction to Covid-19. In the Outlook section, I explain why I believe this more benign period for our investment process should last for some time.

Looking back at this six month period, the key drivers of our performance relative to the FTSE All-Share Index can be summarised as follows:

1. Heavy exposure to economically-sensitive sectors contributed strongly to performance. Consumer Discretionary was the largest contributor to performance by sector, adding around 2.8% of relative performance. Our holdings in house-builder Vistry and sofa retailer DFS were particularly helpful as consumer demand rebounded sharply. Financials was the second largest contributor, adding around 2.6% of relative performance. CMC Markets, Close Brothers and Premier Miton all rose sharply, as investors observed improving market conditions.

2. Limited exposure to defensive sectors helped our performance as the economic recovery caused these to fall out of favour. Our underweight positions in Healthcare and Consumer Staples added around 3% of relative performance, in particular not owning Reckitt Benckiser and the underweight position in AstraZeneca.

3. The gearing position, averaging 12.0% over the period, contributed just over 2% of relative performance.

Revenue Account

Dividends distributed by our portfolio holdings in the period were £4.2m, which was 11.1% less than the £4.7m received in the same period last year. During the period, over 95% of the dividend income came from recurring rather than special dividends.

Portfolio income declined year on year because of the base effect of comparing this latest six month period (which incorporates the full impact of the dividend cuts that were made in 2020) with the prior year period (which was largely unaffected by the pandemic). This decline compares favourably to the FTSE All-Share Index whose dividends declined by 27.0% over the same period. This demonstrates our ability to use the index-agnosticapproach to build a differentiated portfolio that will deliver on our objectives.

It has now been a year since the onset of Covid-19, giving us a fuller picture of the impact of the pandemic on UK dividends. Two thirds of companies made a dividend cut during the year, with pay-outs falling by 41.6% on an underlying basis, according to LINK Group. Mid-cap and small-cap stocks were more prone to cuts and suspensions of dividends than larger cap stocks, reflecting their respective sectoral and more domestically orientated business models. However, we continue to believe that maintaining the flexibility to be able to invest in mid and small-cap stocks will prove beneficial to the revenue account over the course of the cycle given their superior growth prospects.

While this reduction in income inevitably feeds through to the net profit for the period, we are reporting a smaller reduction of 8.4% in net revenue to £3.7m as management fees, other expenses and tax are lower this year than they were 12 months ago.

The portfolio achieved an underlying dividend yield of 4.9% based on the income generated by the portfolio over the year divided by the average portfolio value, representing a significant premium to the effective dividend yield of the FTSE All-Share Index of 2.9% for the same period.

We continue to consider carefully the income prospects of our holdings, based on their trading and balance sheet outlook, alongside their capital growth prospects. We have classified stocks into three key categories - "resilient income", "resumed income" and "interrupted income". By these classifications, as at 31st March 2021, just over 60% of the portfolio is classified as "resilient income" stocks, which have paid dividends continuously throughout the crisis. Around 25% is classified as "resumed income" stocks which have announced that they have returned to the dividend list. Around 10% are classified as "interrupted income" stocks which cancelled their dividends due to the pandemic and are yet to reinstate them.

Looking ahead, we expect the revenue account to continue recovering in the coming months for two key reasons:

1. We expect the vast majority of our remaining "interrupted income" holdings to resume their dividends as earnings visibility improves.

2. We see scope for acceleration in dividend growth among our dividend-paying holdings. This is a function of improved external conditions and management actions, such as cost-cutting, increasing operational gearing as revenues recover.

Activity

Purchases

Our transactions during the period reflect our focus on growing our portfolio income, to enable the dividend to return to full coverage, while simultaneously increasing exposure to stocks whose strong earnings outlook will augment the portfolio's capital growth potential. As I explain in the outlook section, we believe that we are capable of achieving both of these objectives while staying true to the Focus on Change investment process, given the abundance of inexpensive stocks seeing positive change.

Our largest purchases can be grouped into the following categories:

1. We bought stocks that are leading players in growing markets, generating significant cash and therefore offering attractive dividends yields and dividend growth- these include wealth platform Hargreaves Lansdown and online gaming business 888.

2. We bought stocks that are set to benefit from the improving economy as lockdowns are eased - these include banking group Barclays, fuel distributor Vivo Energy and house-builders Bellway and Persimmon.

3. We looked to identify stocks that are set to benefit from rising returns after competitors have pulled out - on this basis we purchased reinsurance business Conduit which raised capital in an IPO to take advantage of a market opportunity as insurance rates harden.

Sales

Our largest sales can be grouped into the following categories:

1. We reduced some lower-yielding stocks - these include transport operator National Express and house-builder MJ Gleeson.

2. We sold some mega-cap stocks whose earnings outlook appear muted - these include GlaxoSmithKline and National Grid.

3. We received the proceeds of two bids - Hastings and AFH Financial.

Outlook

The sharp recovery of our NAV during this period, while also making progress on rebuilding portfolio income, helps to support our view that the Focus on Change investment process can be a powerful enabler in achieving our objectives, by focusing the portfolio on inexpensive stocks seeing positive change.

The global Covid-19 outbreak caused market leadership to become entrenched in highly-valued quality growth stocks. This did not suit our investment process as we seek to identify companies whose change potential is yet to be priced in by the wider market. In the last Annual Report to 30 September 2020 I outlined the catalysts that I believed would help drive an improvement in the Company's performance. These included political events (e.g. Biden victory and EU-UK trade deal), vaccine roll-outs and economic recovery. These duly occurred, greatly benefiting our portfolio. Valuation dispersion within the UK equity market had become extreme by historical standards, further supporting the case for a significant rotation towards the holdings favoured by our investment process.

It is worth providing some context explaining how the portfolio has tended to perform at different points during my tenure as manager. Having outperformed our peer group in five years out of seven under my tenure between FY12 and FY18, the FY19-20 period was highly disappointing. I hope and expect that this period will in time be seen as an aberration. FY21 has started extremely well and I believe that this reflects a combination of strong investment execution and more normal market conditions, enabling our investment process to shine once again. The pattern that I would observe is that the Focus on Change investment process tends to perform best in the long sweeps of stable market conditions when bottom-up analysis is rewarded. These periods of outperformance can be prolonged as it can take a long time for share prices to fully reflect their underlying fundamentals following periods of macro stress. As the "wall of worry" is climbed, share prices start to reflect the improving outlook of the underlying companies (e.g. earnings, cash flows, dividends). Conversely, the valuation premium that investors have applied to quality growth stocks can start to erode. Periods of macro stress can therefore be seen as generating a store of future performance, by causing share prices to become severely disconnected from their underlying fundamentals. These inefficiencies can then be exploited for some years in the aftermath of a crisis. Despite the rally since November 2020, our team of analysts are finding numerous stocks that we see as very attractively valued.

There are several reasons why the recovery this time could be far more prolonged and intense than previous recoveries. First, we are emerging from a particularly long period of macro stress (having started at the time of Brexit/Trump in 2016). Second, investor positioning and valuations had become extreme during this period, looking at the divergence between cheap cyclical stocks and expensive quality growth stocks. Third, surging economic data could cause a major shift in market leadership as Cyclicals and Financials start to outstrip other sectors in terms of earnings growth. Policy-makers have made it clear that they are quite prepared to run the economy "too hot" by keeping the foot on the stimulus pedal, rather than returning to the austerity policies of the post-financial crisis era. The justification for prioritising growth over inflation is partly socio-economic - it is believed that those that have suffered most in the past decade, including the pandemic, are the workers in the lowest socio-economic groups who are struggling to make ends meet. However, maintaining loose monetary policy, even as inflation rises, also has implications for asset prices especially commodities, property and equities. I firmly believe that our portfolio is well positioned for such an environment.

In the months ahead, we expect the portfolio to benefit from its heavy weightings in sectors that are set to benefit from improved activity levels as vaccines are rolled out and lockdowns are eased, in particular Consumer Discretionary and Financials. The prolonged build-up of UK Household Savings during Covid-19 could be an important driver. UK consumers have had little opportunity to spend their cash in recent months. The ONS reports that the Household Savings ratio hit a peak of 25.9% in Q3 2020, staying elevated at 16.1% in Q4 2020. Putting those numbers in context, the previous peak was 14.3% in Q2 1993. This sets the scene for a spike in activity once the lockdown is eased and these savings are gradually deployed. We also expect our Resources holdings to benefit from the impact of elevated commodity prices on cash flow and dividends.

Ensuring that the portfolio is positioned correctly for this improved market backdrop requires a careful assessment of the dividend outlook, alongside the outlook for capital growth. Happily, the two go hand in hand, as dividends are paid out of cash generated from a company's operations. We continue to look for attractive yield, with no shortage of stocks offering yields in excess of 5% despite robust fundamentals. These stocks can play an important role within the portfolio but need to be carefully evaluated as they can remain cheap without a catalyst for a valuation re-rating. We will only hold higher yielding stocks where we believe in the underlying investment case, rather than holding the stock exclusively for the dividend yield. The universe of dividend-paying companies is broadening again as more and more companies announce dividend reinstatement. This will provide us with greater choice, making it incrementally easier for us to return the dividend to full coverage.

In the Annual Report to 30 September 2020, I wrote that I was absolutely determined to deliver a significant improvement in performance and explained the grounds for my confidence that this would happen. The six months to March 2021 did indeed see a very intense recovery. With a robust investment process, combined with signs that current benign market conditions are set to persist, I will strive to ensure that this stronger performance continues to build into the longer term.

Thomas Moore,

Portfolio Manager

17 May 2021

INVESTMENT PORTFOLIO

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)

For further information please contact:

Evan Bruce-Gardyne

Client Director, Investment Trusts, Aberdeen Standard Investments

Tel: 07741 608 048