Abrdn Euro Log Regulatory News (ASLI)

25 April 2024

LEI: 213800I9IYIKKNRT3G50

abrdn European Logistics Income plc

FULL YEAR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023

Improving macroeconomic backdrop and portfolio indexation provides platform for earnings growth

abrdn European Logistics Income plc ("ASLI" or the "Company"), the Continental European investor in modern warehouses, which is managed by abrdn, announces its full year results for the year to 31 December 2023.

NAV impacted by continued sector-wide asset re-pricing due to higher interest rate environment; low all-in cost of fixed debt underpinning balance sheet resilience

· Net asset value per ordinary share decreased by 21.4% to 93.4 cents (31 December 2022: 118.9 cents), primarily driven by market-wide outward yield movements as a result of the higher interest rate environment

· IFRS NAV total return of -17.1% (31 December 2022: -3.8%)

· EPRA net tangible assets 95.7 cents (31 December 2022: 123.7 cents)

· IFRS earnings per share of -19.8 cents (31 December 2022: -4.5 cents)

· Loan to Value of 38.7% (31 December 2022: 34.0%)

· Low all-in cost of fixed term debt of 2.00% (31 December 2022: 2.01%), with no major refinancings due until mid-2025

Indexation-driven, active management initiatives to drive improved portfolio occupancy and earnings growth; disposals of more mature assets proving asset class liquidity and strengthening cash position:

· Portfolio value of €634 million (31 December 2022: €759 million), including a like-for-like valuation decrease of 14.4%, largely driven by continued outward yield movement

· Completed the disposal of a warehouse in Leon, Northern Spain, for €18.5 million, reflecting a small premium to the 31 December 2022 valuation

· Post year-end, completed the disposal of a vacant French warehouse, previously occupied by Office Depot in Meung sur Loire, for €17.5 million, reflecting a small discount to the 30 September 2023 valuation and in line with the 31 December 2023 valuation

· Attractive WAULT of 8.4 years (31 December 2022: 8.9 years) and inflation linked lease profile, with 65% of the portfolio income subject to full indexation

· Annualised passing rent of €32.2 million (31 December 2022: €30.6 million), with like-for-like growth of 5% on held assets*

· Completed six lease events across 81,175 sqm, totalling €4.8 million of annualised rent, including:

o  9.5 year lease with Dachser France at its La Creche, Niort, property, 3% ahead of previous annual rent payable

o  12-year lease extension agreed with Biocoop on 28,500 sqm at its highly sustainable warehouse near Avignon, France, generating an annual contracted rent of €2.5 million

o  Five-year lease extension with AS Watson (Kruidvat) at its 39,840 sqm single-tenant warehouse in Ede, the Netherlands, reflecting a 4% increase on the previous passing rent

o  Post-period end, a new 3 plus 2 year lease with METHOD Advanced Logistics for 5,130 sqm of highly sustainable logistics space in Madrid, Spain, 8.7% above the previous passing rent

· 95% of expected annual rent due during the year collected

· Reflecting the modern, purpose built nature of the portfolio, the Company continued year-on-year improvement with a sector leading five stars out of five awarded in the Global Real Estate Sustainability Benchmark ('GRESB') survey

· In November, the Board announced the launch of a Strategic Review, enabling it to consider more fully the basis on which the Company might best deliver value to shareholders as a whole.

Tony Roper, Chairman, abrdn European Logistics Income, commented:

"While the market looks set to improve in the second half of 2024 and into 2025, and the post period transactions and letting activity achieved by the Investment Manager supports this, challenges will remain for the real estate sector, primarily as a result of higher for longer interest rates.

"The Board is continuing with its Strategic Review, as it considers all options available that offer maximum value for shareholders, and expects to issue a further update in May.

"The logistics market remains well-positioned in terms of its fundamentals. While vacancy rose across the sector in Europe in the last year, we believe that the worst of these increases has passed, with speculative development pipelines contracting. In addition, the portfolio remains well diversified by property, tenant and geography and our tenants' businesses are generally well positioned in areas which remain essential to the everyday operation of the modern economy."

Troels Andersen, Lead Fund Manager, abrdn European Logistics Income, added:

"Continental European logistics real estate is well placed to recover from a difficult market position due to the longer-term structural drivers underpinning the sector including ongoing e-commerce penetration, onshoring and supply chain modernisation. Whilst we have been encouraged by the resilience of the occupational market, rental growth is still expected to outperform historic averages and beat inflation in most European logistics hotspots. This will support our near-term focus to deliver earnings growth, principally through letting up the vacant space in Spain and capturing the portfolio's attractive indexation characteristics." 

*excluding rent free incentives and vacant assets

-Ends-

For further information please contact:

abrdn +44 (0) 20 7463 6000

Ben Heatley

Gary Jones

Investec Bank plc +44 (0) 20 7597 4000

David Yovichic

Denis Flanagan

FTI Consulting +44 (0) 20 3727 1000

Dido Laurimore

Richard Gotla

James McEwan

Highlights as at 31 December 2023

Overview

Chairman's Statement

Dear Shareholder,

I am pleased to present the Company's sixth Annual Report in respect of the year ended 31 December 2023.

2023 continued as 2022 ended, with global macro events driving market sentiment, a continued economic slowdown and high inflation. Rapidly rising interest rates saw the cost of debt increase which led to a decline in the flow of capital into the real estate sector and a significant softening of yields.

This contrasted with the strong market fundamentals at the Company's inception in 2017, a period which saw the sector attracting considerable amounts of capital, encouraged by supportive debt markets. This underpinned falling property yields and an increase in capital values. The recent sharp rise in interest rates to combat high levels of inflation has resulted in property yields moving out to reflect the higher cost of capital, with asset values subsequently falling. Such fluctuations are a reminder that real estate markets are inherently cyclical in nature. With investors fearing continued valuation falls and seeking to lower their risk profiles, share price discounts to NAV have been persistently wide, not only in the REIT sector but also the wider investment trust sector.

Whilst the logistics sector fundamentals remain compelling, a combination of this challenging backdrop and the lack of a clear pathway to reaching full dividend cover in the near future resulted in the Board launching a strategic review in November 2023. This is allowing us to look at all sensible options to deliver shareholders' value. At the time of writing, this review is still underway. It is too early to tell whether this will lead to any corporate activity for the Company, but the Board will communicate with shareholders as soon as it feels in a position to say further. In the meantime, the Company is required under its articles to hold a continuation vote at its forthcoming AGM in June, and at this stage the Board recommends that shareholders vote in favour of this resolution to enable the Board to continue to a sensible conclusion in seeking best value for all shareholders.

Market overview

December 2023 saw the end of seven consecutive months of falling Eurozone inflation figures, resulting in the money markets adjusting their expectations. However with the deposit rate held at 4%, valuations continue to come under pressure. Looking forward, our Investment Manager believes that the most significant value correction is behind us and the negative pressure on yields, which has lagged the UK, will plateau later this year.

Future occupational demand looks set to be determined by two key trends: stabilising growth amongst eCommerce operators and a continued trend towards onshoring amongst manufacturers. The logistics market is characterised by rising occupier demand, limited supply in core markets and high barriers to developing new assets in prime locations.

The onshoring of operations should be a long-term trend over the next decade. While it could lead to a tangible boost in take-up in the near term, we do not believe it will result in the same explosive growth that the increase in online shopping led to over the last decade. Data from a European Central Bank survey points to an increasing number of firms expecting to increase their sourcing of production inputs from within the EU, compared to a declining number of firms sourcing their inputs externally.

The prime logistics markets in Germany, Netherlands, France, and Spain, where the majority of the portfolio is focused, continue to witness near-historically low vacancy rates. With speculative development expected to remain low due to increased costs and regulation, we expect vacancy rates to remain tight, which will keep upward pressure on indexed rents.

Company overview

As at 31 December 2023, the Company's property portfolio was independently valued at €633.8 million (31 December 2022: €758.7 million), and consisted of 26 assets (2022: 27 assets) located across five European countries. The like-for-like portfolio valuation (excluding the sold Leon warehouse) fell over the year by 14.4% as a result of the impact of the higher interest rate backdrop on investor sentiment and debt costs.

In May 2023, the Company announced the completion of the first sale from its portfolio, the 32,645 sqm Decathlon- leased warehouse, in Leon, Northern Spain, to SCPI Iroko Zen, for €18.5 million. The disposal price reflected a small premium to the December 2022 valuation and crystalised a 20% gross profit. It generated an attractive IRR, improved the cash position, reduced gearing and the all-in-interest rate, whilst reducing our retail related exposure to a Spanish location which the Investment Manager felt could be more challenging in the future.

Pleasingly during the year the Investment Manager agreed a number of lease regears, more detail of which can be found in the Investment Manager's Report that follows. These included

· A new 9.5 year lease with Dachser France in La Creche, Niort, with the rent 3% ahead of the previous annual rent payable and significantly ahead of ERV. Importantly for revenue generation, uncapped annual ILAT indexation was agreed.

· A new 12 year lease with Biocoop over the Avignon, France, property generating annual contracted rent of €2.5 million, equating to €86 per sqm with full annual French ILAT indexation with no cap. Both of these facilities serve as strategically important locations for our tenants.

In March 2024 we sold the vacant Meung-sur-Loire warehouse for €17.5 million, reflecting a small discount to the September 2023 valuation and in line with the December 2023 valuation. As one of the portfolio's older assets and with an eye on location and the potential capital expenditure required to improve its sustainability credentials, the Board agreed with the Investment Manager that this was a sensible sale, with the proceeds strengthening the Company's balance sheet, which was one of the key 2023 priorities.

Shareholders should be aware of the situation the Company faced over the electric vehicle company Arrival's units located in Gavilanes, Madrid. Despite lengthy negotiations and continued legal proceedings, with the limited possibility of obtaining any surrender premium or rent due to Arrival's deteriorating financial situation, following the advice of the Investment Manager, the Company deemed it sensible to negotiate a surrender of the lease and to obtain possession of the units for re-leasing as quickly as possible. It is pleasing to note that the 5,130 sqm unit was quickly leased in March to Spanish company Method Logistics, at a rent 8.7% ahead of the Arrival passing rent. The Getafe area remains attractive to many companies and there is good interest being shown for the remaining units.

The Company's investment case is enhanced by the competitive advantage provided through the Investment Manager's relationships and market knowledge, with its local teams based in key markets in Europe, enabling it to originate and then execute on attractive acquisitions. It has built a portfolio of assets diversified by both geography and tenant, in established distribution hubs and within close proximity of cities that have substantial labour pools and excellent transport links, all important factors and underpinning the appeal of the assets for tenants and longer term valuations and revenue earning abilities.

Further details on the composition of the portfolio and lease renewals are provided in the Investment Manager's Report that follows.

Results

As at 31 December 2023 the audited Net Asset Value ("NAV") per Share was 93.4 euro cents (GBp - 81.2p), a decrease of 21.5% compared with the NAV per Share of 118.9 euro cents (GBp - 105.4p) at 31 December 2022. With the interim dividends declared, this reflected a NAV total return of -17.1% for the year in euro terms (-19.0% in sterling).

The closing Ordinary Share price at 31 December 2023 was 61.6p (31 December 2022 - 68.5p), representing a discount to NAV per Share of 24.1% (31 December 2022 - 35.0%).

Dividends

First, second and third interim dividends in respect of the year ended 31 December 2023 of 1.41 euro cents per Ordinary Share were paid to Shareholders on 23 June 2023, 22 September 2023 and 29 December 2023. These equated to 1.23 pence, 1.22 pence and 1.23 pence respectively.

In light of the initial response to the previously announced Strategic Review, the Board and its advisers were keen to ensure that the Company was optimally positioned, and that it maintains maximum flexibility to allow it to advance any particular proposal. As a result, the Board took the decision, announced on 19 February 2024, to forego declaring a fourth interim distribution in respect of the quarter ended 31 December 2023. With the Strategic Review ongoing and to maintain flexibility, it is likely that the Company will also forego paying a dividend in relation to the quarter ended March 2024.

Normally distributions may be made up of both dividend income and income which is designated as an interest distribution for UK tax purposes and therefore subject to the interest streaming regime applicable to investment trusts. Further details on this breakdown can be found on page 23 of the published Annual Report and financial statements for the year ended 31 December 2023 and are reflected within the Company's dividend announcements.

Financing

The Company's debt provided by our European partner banks remains fixed in nature and secured on certain assets or groups of assets within the portfolio. These non-recourse loans range in maturities between 1.4 (mid-2025) and 5.1 years with all-in interest rates ranging between 1.10% and 3.11% per annum. Full details can be found in note 14 on page 125 of the published Annual Report and financial statements for the year ended 31 December 2023.

The Company maintains an uncommitted master loan facility ("Facility") with Investec Bank plc for €70 million, which is currently undrawn. Under this Facility, the Company may make requests for drawdowns at selected short- duration tenors, as and when required, to fund acquisitions or for other liquidity requirements and this was used to good effect during the purchase of the Gavilanes, Madrid, assets. Within the Facility, Investec also makes available a £3.3 million committed revolving credit facility which is carved out of the total €70 million limit of the Facility. This facility sits at the parent company level and provides added flexibility. There were no drawdowns against this facility during 2023.

The year-end gearing level was 38.7% (2022 - 34.0%) with an average all-in interest rate of 2.0% (2022: 2.01%) on the total fixed term debt arrangements of €259.5 million (2022: 270.3 million).

GRESB and Asset Management

The Investment Manager continues to seek to improve the sustainability credentials of the portfolio and the results of the 2023 GRESB ('Global Real Estate Sustainability Benchmark') survey saw the Company's portfolio achieve another year-on-year increase, with a score of 89/100 representing continued improvement and an uplift on its 2022 GRESB survey score of 86/100. It also compares favourably versus the 81/100 average peer score and 75/100 overall average 2023 GRESB score.

The Company was awarded a maximum five stars in the 2023 GRESB awards, achieving a welcome first place in its peer group of diversified funds investing across Europe (European industrial: distribution warehouse).

In addition, the Company attained the top-rated gold level awarded by EPRA for compliance with its 'Best Practice Recommendations' in financial reporting.

The latest GRESB scoring continues to recognise the fundamental importance that the Investment Manager places on sustainability when acquiring and subsequently enhancing the Company's portfolio. The improved performance score rewards the progress made with regards to environmental, social and governance ("ESG") factors.

The Company has executed several sustainability-led initiatives during the period, building on the significant progress made improving the credentials of our portfolio of Grade-A, modern properties. These included:

· High tenant data coverage which has helped to inform carbon performance and feed into our net zero plans

· Ongoing assessment of the operational performance of the portfolio, through BREEAM In-Use assessments and sustainability audits identifying actions to improve performance

· A portfolio-wide occupier engagement programme

· 100% of landlord energy procured from renewable sources

· 34% of the portfolio by floor area with solar PV with ongoing reviews across the estate for further additions

· 96% of assets by floor area with EPC's A-B

The Company has set a net zero carbon target of 2050 across all emissions (Scopes 1, 2 and 3), and the Company's strategy for achieving net zero carbon is fully detailed on page 65 of the published Annual Report and financial statements for the year ended 31 December 2023. ESG is embedded within the Investment Manager's investment and asset management processes and although many of our assets were new when purchased, a programme of works continues to enhance areas where improvements can be made.  The ESG section of the published Annual Report and Financial statements for the year ended 31 December 2023 gives further clarity on these processes.

Governance and Board Change

The Company is a member of the Association of Investment Companies and seeks to follow best practice regarding appropriate disclosure.

In accordance with good governance, the Directors offer to meet with our substantial shareholders during the year to hear their views on the Company and its performance. Following the announcement of the Strategic Review, Directors together with the Company's advisers have met with many of our larger shareholders to understand their views on the Company and how they would like to see it positioned. The Directors may be contacted through the Company Secretary.

The Board looks to undertake short annual site visits to view the properties owned, meet with tenants where possible and members of local staff and advisers of the Investment Manager. During the year the Board was pleased to visit the German assets helping to better understand their locations, site layouts and meeting with abrdn's local well-resourced Frankfurt-based real estate team which has a focus on managing these assets for us.

With the Company having been launched in December 2017, the Directors have been considering succession planning. With this in mind, Diane Wilde has confirmed that she will retire and not stand for re-election at the AGM in June. I would like to thank Diane for all her efforts since joining the Board. Following best practice, the remaining three Directors will stand for re-election at the forthcoming AGM and further details on each Director may be found on pages 80 and 81 of the published Annual Report and financial statements for the year ended 31 December 2023. No decision on a replacement Board member will be taken until the Strategic Review has been concluded and the direction of the Company is known.

Strategic Review

As at the date of this report, the Board is continuing to undertake a Strategic Review of the options available to the Company, and is being advised on this by the Company's broker, Investec, and by Savills, who have been retained to give strategic property advice. The Board is considering all options available that offer maximum value for shareholders including, but not limited to, continuing with the current investment objective, selling the entire issued share capital of the Company or a managed wind- down of the Company's portfolio and returning monies to shareholders.

The Company has received a number of indicative non-binding proposals. However, there can be no certainty at this stage that the final terms of any proposal will prove to be sufficiently attractive to merit a Board recommendation to the Company's shareholders.

All proposals received will be analysed and considered in the light of feedback received from shareholders and the value that could be best achieved when looking at current and forecast market conditions. The Board welcomes the support shown by shareholders, both before and during this process, and will update shareholders on the progress or the outcome of the Strategic Review as soon as the process allows.

Annual General Meeting and Continuation Vote

The Company's Annual General Meeting will be held in London on Monday, 24 June 2024 at 09:00 am at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC1A 4HD.

The formal Notice of AGM may be found on page 182 of the Annual Report and financial statements for the year ended 31 December 2023.

This year the Company is required by its Articles to hold a continuation vote. With the Strategic Review still ongoing, the Board recommends that shareholders vote in favour of the Company's continuation to ensure that the review can be completed properly and the optimal outcome for shareholders delivered. It is the Board's current expectation that the result of the Strategic Review will be announced ahead of the AGM, so shareholders should have the benefit of a clear picture of the proposed way forward by the time that they are asked to vote. Should the Board not be in a position to communicate the outcome (or likely outcome) of the Strategic Review ahead of the AGM, the Board would ensure that shareholders were provided with the opportunity to vote on the future direction of the Company as and when the Review was completed (unless the proposed course of action arising from the Strategic Review in and of itself required a shareholder vote).

Outlook

While the market looks set to improve in H2 2024 and into 2025, and the post period transactions and letting activity achieved by the Investment Manager supports this, challenges will remain for the real estate sector, primarily as a result of higher-for-longer interest rates. Crucially for us, the logistics market remains well-positioned in terms of its fundamentals. While vacancy rose across the sector in Europe in the last year, we believe that vacancy levels have settled with speculative development pipelines contracting.

Several factors are driving an increased focus among occupiers on the type of prime, modern and sustainable warehouses that our portfolio contains. Many occupiers have put a greater focus on more energy-efficient space following the energy price shock and modern warehouses are more suitable for implementing automation processes, whereas older warehouses often have specifications which are unsuitable for the machinery needed. In addition, they are more flexible and thoughtfully designed, built around integrating new supply chain management technologies like RFID (radio frequency identification technology).

The portfolio remains well diversified by property, tenant and geography and our tenants' businesses are generally well positioned in areas which remain essential to the everyday operation of the modern economy. A strong commitment to sustainability, demonstrated by the Company's increased GRESB rating with five Green stars awarded for 2023, together with the inflation-linked nature of the portfolio's leases, has provided a counterbalance to the yield expansion witnessed.

Positive tailwinds from structural demand drivers should continue to benefit the portfolio. The impact of increasing online shopping penetration, the need to build greater resilience into supply chains, and the aim of reducing the environmental impact of distribution operations will continue to generate strong demand for high-quality, sustainable warehouse space and the portfolio remains well positioned to benefit from these trends.

In parallel to the abovementioned Strategic Review process, the near-term focus for the Investment Manager is to continue improving the earnings position, principally through letting up the vacant space in Spain and capturing the portfolio's attractive indexation characteristics.

Whilst this has been a hugely frustrating period, the Board reiterates its thanks for the support shown by shareholders, both before and during this process. It hopes to update shareholders on the outcome as soon as a conclusion has been reached, which should be in advance of the Company's AGM.

Tony Roper

Chairman

25 April 2024

Strategic Report

Overview of Strategy

The Company is a UK investment trust with a premium listing on the Main Market of the London Stock Exchange. The Company invests in European logistics real estate to achieve its investment objective noted below.

The Company was incorporated in England and Wales on 25 October 2017 with registered number 11032222 and launched on 15 December 2017.

As indicated in the Chairman's Statement, on 27 November 2023, the Board announced that it was undertaking a strategic review of the options available to the Company (the "Strategic Review"). The Board is considering all options available to the Company that offer maximum value for the shareholders including, but not limited to, undertaking some form of consolidation, combination, merger or comparable corporate action, selling the entire issued share capital of the Company (which would be conducted under the framework of a "formal sale process" in accordance with the City Code on Takeovers and Mergers (the "Code")), and selling the Company's portfolio and returning monies to shareholders. There is no certainty that any changes will result from the Strategic Review and, for the avoidance of doubt, a continuation of the Company's current investment strategy with a rebased target dividend level is a potential outcome of the Strategic Review.

Investment Objective

The Company aims to provide a regular and attractive level of income return together with the potential for long-term income and capital growth from investing in high quality European logistics real estate.

Investment Policy

The Company aims to deliver the investment objective through investment in, and active asset management of, a diversified portfolio of logistics real estate assets in Europe.

The Company will invest in a portfolio of single and multi-let assets diversified by both geography and tenant throughout Europe, predominantly targeting well-located assets at established distribution hubs and within population centres. In particular, the Investment

Manager will seek to identify assets benefiting from long- term, index-linked, leases as well as those which may benefit from structural change, and will take into account several factors, including but not limited to:

· the property characteristics and whether they are appropriate for the location (such as technical quality, ESG credentials, scale, configuration, layout, transportation links, power supply, data connectivity, manoeuvrability, layout flexibility, and overall operational efficiencies);

· the location and its role within European logistics (city, regional, national or international distribution), key fundamentals supporting logistics activity within the micro location such as proximity to airport, port, transport nodes, multimodal transport infrastructure, established warehousing hubs, transport corridors, population centres, labour availability and market dynamics such as supply (of both land and existing stock), vacancy rate and planned infrastructure upgrades;

· the terms of the lease(s) focusing on duration, inflation- linked terms, ESG criteria, level of passing rent relative to market rent, the basis for rent reviews, and the potential for capturing growth in market rental income;

· the strength of the tenant's financial covenant;

· the business model of the tenant and their commitment to the asset both in terms of capital expenditure and the role it plays in their operations; and

· the potential to implement active asset management initiatives to add value over the holding period.

The Company will invest either directly or through holdings in special purpose vehicles, partnerships, or other structures. The Company may invest in forward commitments when the Investment Manager believes that to do so would enhance risk adjusted returns for Shareholders and/or secure an asset at an attractive yield.

The Company's active asset management activities are expected to focus on adding value through:

· negotiating or renegotiating leases to increase/secure rental income, managing vacancies;

· undertaking refurbishments to maintain liquidity;

· managing redevelopments as assets approach obsolescence;

· adding solar panels to reduce carbon emissions and generate additional income streams;

· where appropriate, extending existing on-site buildings or developing adjacent plots;

· refurbishment and redevelopment activity will, amongst other things, focus on: enhancing occupier wellbeing; operational efficiencies; energy efficiency;

· reducing carbon emissions; and elevating technological provision as well as increasing lettable area.

The Company's active management of debt will effectively manage costs and risk seeking to enhance investment returns.

Diversification of Risk

The Company will at all times invest and manage its assets in a manner which is consistent with the spreading of investment risk. The following investment limits and restrictions will apply to the Company and its business which, where appropriate, will be measured at the time of investment:

· the Company will only invest in assets located in Europe;

· no more than 50 per cent. of Gross Assets will be concentrated in a single country;

· no single asset may represent more than 20 per cent. of Gross Assets;

· forward commitments will be wholly or predominantly pre-let and/or have the benefit of a rental guarantee and the Company's overall exposure to forward commitments and development activity will be limited to 20 per cent. of Gross Assets;

· the Company's maximum exposure to any single developer will be limited to 20 per cent. of Gross Assets;

· the Company will not invest in other closed-ended investment companies;

· the Company will predominantly invest in assets with tenants which have been classified by the Investment Manager's investment process, as having strong financial covenants. However, the Company may, on an exceptional basis, invest in an asset with a tenant with a lower financial covenant strength (and/or with a short lease term) where the Investment Manager believes that the asset can be leased on a longer term tenancy to a tenant with strong financial covenants within a reasonable time period; and

· no single tenant will represent more than 20 per cent. of the Company's annual gross income measured annually.

The Company will not be required to dispose of any asset or to rebalance the Portfolio as a result of a change in the respective valuations of its assets.

The Company intends to conduct its affairs so as to continue to qualify as an investment trust for the purposes of section 1158 and 1159 (and regulations made thereunder) of the Corporation Tax Act 2010.

Borrowing and Gearing

The Company uses gearing with the objective of improving shareholder returns. Debt is typically non- recourse and secured against individual assets or groups of assets with or without a charge over these assets, depending on the optimal structure for the Company and having consideration to key metrics including lender

diversity, cost of debt, debt type and maturity profiles.

The aggregate borrowings are always subject to an absolute maximum, calculated at the time of drawdown for a property purchase, of 50 per cent. of Gross Assets. Where borrowings are secured against a group of assets, such group of assets will not exceed 25 per cent. of Gross Assets in order to ensure that investment risk remains suitably spread.

The Board has established gearing guidelines for the Alternative Investment Fund Manager ("AIFM") in order to maintain an appropriate level and structure of gearing within the parameters set out above. Under these guidelines, aggregate asset level gearing will sit, as determined by the Board, at or around 35 per cent of Gross Assets. This level may fluctuate as and when new assets are acquired until longer term funding has been established or whilst short-term asset management initiatives are being undertaken.

The Board will keep the level of borrowings under review. In the event of a breach of the investment guidelines and restrictions set out above, the AIFM will inform the Board upon becoming aware of the same, and if the Board considers the breach to be material, notification will be made to a Regulatory Information Service and the AIFM will look to resolve the breach with the agreement of the Board. The Directors may require that the Company's assets are managed with the objective of bringing borrowings within the appropriate limit while taking due account of the interests of shareholders. Accordingly, corrective measures may not have to be taken immediately if this would be detrimental to shareholders' interests.

Any material change to the Company's investment policy set out above will require the approval of shareholders by way of an ordinary resolution at a general meeting and the approval of the Financial Conduct Authority. Non-material reasonable changes to the investment policy may be approved by the Board.

Comparative Index

The Company does not have a benchmark.

Duration

Although the Company does not have a fixed life, under the Company's articles of association the Directors are required to propose an ordinary resolution for the continuation of the Company at the Annual General Meeting to be held in 2024 and then every third year thereafter. While the Board continues to evaluate the options resulting from the ongoing strategic review, a resolution proposing that the Company continue as an investment trust is included in the Notice for the Annual General Meeting scheduled to be held on 24 June 2024. Please also refer to the Going Concern section within the Directors' Report on page 85 of the published Annual Report and financial statements for the year ended 31 December 2023.

Key Performance Indicators (KPIs)

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and to determine the progress of the Company in pursuing its Investment Policy. The main KPIs identified by the Board in relation to the Company, which are considered at each Board meeting, are as follows:

1 Alternative Performance Measure - see glossary on pages 161 to 165 of the published Annual Report and financial statements for the year ended 31 December 2023.

Manager

Under the terms of the Management Agreement, the Company has appointed abrdn Fund Managers Limited as the Company's alternative investment fund manager ("AIFM") for the purposes of the AIFM Rules. The AIFM has delegated portfolio management to the Danish Branch of abrdn Investments Ireland Limited which acts as Investment Manager.

Pursuant to the terms of the Management Agreement, the AIFM is responsible for portfolio and risk management on behalf of the Company and will carry out the on- going oversight functions and supervision and ensure compliance with the applicable requirements of the AIFM Rules. The AIFM and the Investment Manager are both legally and operationally independent of the Company.

Dividend Policy

Subject to compliance with all legal requirements the Company normally pays interim dividends on a quarterly basis. The Company declares dividends in Euros, but shareholders will receive dividend payments in Sterling unless electing to receive payments in Euros through the Equiniti Shareview Portfolio website or via CRESTPay.

If applicable, the date on which the Euro/Sterling exchange rate is set will be announced at the time the dividend is declared. Distributions made by the Company may take the form of either dividend income or ''qualifying interest income'' which may be designated as interest distributions for UK tax purposes. With the strategic review still underway, the Company announced the suspension of the fourth interim dividend for 2023 to maintain the maximum flexibility to allow it to advance any particular proposal.

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has carried out a robust assessment of the principal risks as set out below, ordered by category of risk, together with a description of the mitigating actions taken by the Board.

The Board confirms that it has a process in place for regularly reviewing emerging risks that may affect the Company in the future. The Board collectively discusses with the Manager areas where there may be emerging risk themes and maintains a register of these. Such risks may include, but are not limited to, future pandemics,

the use of AI, cybercrime, and longer term climate change. In the event that an emerging risk has gained significant weight or importance, that risk is categorised and added to the Company's risk register and is monitored accordingly. The principal risks associated with an investment in the Company's shares can be found in the Company's latest Prospectus dated 8 September 2021, published on the Company's website.

The Board continues to be very mindful of ongoing geopolitical events which have caused significant market volatility across Europe and the World. There has been no discernible impact to date on our tenants across the wider region. The indicators below show how the Board's views on the stated risks have evolved over the last year.

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an 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. abrdn's marketing team reports quarterly to the Board 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 programme 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 and therefore the Company also supports abrdn's investor relations programme which involves regional roadshows, promotional and public relations campaigns.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow the Board 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, religion, ethnic or national origins, or disability in considering the appointment of its Directors. The Board will continue to ensure that any future appointments are made on the basis of merit against the specification prepared for each appointment and, therefore, the Company does not consider it appropriate to set diversity targets. At 31 December 2023, there were two male Directors and two female Directors on the Board.

The Board commenced detailed discussions on succession planning in October 2023 before the announcement of the strategic review. The Board expects to consider succession planning fully once again when the result of the strategic review is known.

Sustainable and Responsible Investment Policy and Approach

Further details on abrdn's Sustainable and Responsible Investment Policy and Approach for Direct Real Estate are available at abrdn.com.

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated day to day management and administrative functions to abrdn Fund Managers Limited. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined in the Investment Manager's Review.

Due to the nature of the Company's business, being a Company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 ("MSA").

The Company is not required to make a slavery and human trafficking statement. 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.

A copy of the Manager's statement in compliance with the Modern Slavery Act is available for download at abrdn.com

The bulk of emissions relating to properties owned by the Company are the responsibility of the tenants and any emissions relating to the Company's registered office are the responsibility of abrdn plc. The Company has no direct greenhouse gas emissions to report from the operations of its business, although it is responsible for low emissions generated at certain properties within its portfolio reportable under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, see page 75 of the published Annual Report and financial statements for the year ended 31 December 2023.

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board formally considers risks and strategy at least annually. The Board considers the Company, with no fixed life, to be a long-term investment vehicle, but for the purposes of this viability statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long-term horizon and the inherent uncertainties of looking out further than three years.

In assessing the viability of the Company over the review period the Directors have conducted a robust review of the principal risks focusing upon the following factors:

· The status of the ongoing Strategic Review;

· The principal risks detailed in the Strategic Report;

· The ongoing relevance of the Company's investment objective in the current environment;

· The demand for the Company's shares evidenced by the historical level of premium or discount;

· The level of income generated by the Company and the stability of tenants;

· The level of gearing including the requirement to meet lending covenants, negotiate new facilities and repay or refinance future facilities;

· The continuation vote required to be put to shareholders at the AGM to be held in 2024; and

· The flexibility of the Company's bank facilities and putting these facilities in place in time to meet commitments.

The Directors have reviewed summaries from the portfolio models prepared by the Investment Manager which have been stress tested to highlight the performance of the portfolio in a number of varying economic conditions coupled with potential opportunities for mitigation. The Directors have also stress tested the financial position of the Company with attention on the proceeds from the disposal of the asset in France and refinancing of loans in 2025.

The Company has prepared cash flow forecasts which reflect the potential impact of reductions in rental income including reasonably possible downside scenarios.

The impact of reductions in rental income could be mitigated through a reduction in dividends to shareholders if considered necessary by the Board.

The Company has modelled severe but plausible downside scenarios, taking into account specific tenant risks. These scenarios modelled reduced rental income through to 2026 with the worst case scenario modelling to an overall 40% reduction of rental income per annum over that period.

The Board and Manager regularly monitor the permitted and 'hard breach' loan-to-value covenants on the Company's eight loan facilities. Further details on loan covenants are provided in Note 1(a) to the financial statements on page 110 of the published Annual Report and financial statements for the year ended 31 December 2023. There were no breaches of the loan-to-value covenants based upon the valuations adopted at year end. The Directors believe that the liquidity in the Group and £70m revolving credit facility could be used for partial repayment of a loan in the event of any future breaches.

Accordingly, taking into account the Company's current 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 subject to the material uncertainty and outcome of Strategic Review as outlined in note 1(a) and shareholders' approval of the continuation vote required under the articles to be put to the AGM to be held in 2024, noting that the Directors are unaware at this early stage of any shareholder intentions to vote against such a resolution. In making this assessment, the Board has considered that matters such as significant economic uncertainty, stock market volatility and changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future.

s172 Statement

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 "s172 Statement"). This s172 Statement requires the Directors to explain how they 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's philosophy is that the Company should operate in a transparent culture where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike. The Board reviews the culture and manner in which the Investment Manager operates at its regular meetings and receives regular reporting and feedback from the other key service providers.

Investment trusts are long-term investment vehicles, with no employees. The Company's Board of Directors sets the investment mandate as published in the most recent prospectus, monitors the performance of all service providers and is responsible for reviewing strategy on a regular basis.

Key Stakeholders

A key stakeholder and service provider for the Company is the Alternative Investment Fund Manager (the "Manager") and this relationship is reviewed at each Board meeting and relationships with other service providers are reviewed at least annually.

Shareholders are seen as key stakeholders in the Company. The Board seeks to meet at least annually with shareholders at the Annual General Meeting. This is seen as a very useful opportunity to understand the needs and views of the shareholders. In between AGMs the Directors and Investment Manager also conduct programmes of investor meetings with larger institutional, private wealth and other shareholders to ensure that the Company is meeting their needs. Such regular meetings may take the form of joint meetings or solely with a Director where any matters of concern may be raised directly.

Our European partner lending banks are also key stakeholders. We leverage off the Investment Manager's key relationships with a wide range of lending banks and the Investment Manager has regular contact with these banks updating them on the portfolio and valuations and also on plans for new acquisitions or disposals.

The other key stakeholder group is that of the underlying tenants that occupy space in the properties that the Company owns. The Board aims to conduct a site visit at least annually with the aim of meeting tenants locally and discussing their businesses and needs and assessing where improvements may be made or expectations managed. The Investment Manager's asset managers are tasked with conducting meetings with building managers and tenant representatives in order to ensure the smooth running of the day to day management of the properties. The Board receives reports on the tenants' activities at its regular Board meetings.

The Board via the Management Engagement Committee also ensures that the views of its service providers are heard and at least annually reviews these relationships in detail. The aim is to ensure that contractual arrangements remain in line with best practice, services being offered meet the requirements and needs of the Company and performance is in line with the expectations of the Board, Manager, Investment Manager and other relevant stakeholders. Reviews will include those of the Company depositary, custodian, share registrar, broker, legal adviser, lenders and auditor.

The Investment Manager's Report details the key investment decisions taken during the year and subsequently. The Investment Manager has continued to invest the Company's assets in accordance with the mandate provided by shareholders at launch, under the oversight of the Board. The Company aims to maintain gearing at asset level at or around 35% over the longer term. abrdn's dedicated treasury team has negotiated the debt facilities at competitive market rates, resulting in the Company's blended all-in interest rate across all its debt being 2.00% which is to the benefit of all shareholders. The Company has an uncommitted four year €70 million master facilities loan agreement with Investec Bank plc to provide additional flexibility which expires in October 2024. This facility increases the Company's ability to acquire new assets prior to any fresh equity raise and will reduce the impact of cash drag on investment returns.

Details of how the Board and Investment Manager have sought to address environmental, social and governance matters across the portfolio are disclosed from page 57 onwards of the published Annual Report and financial statements for the year ended 31 December 2023.

The Company is just over six years old having been launched at the end of 2017. However, it is a long-term investor and the Board has established the necessary procedures and processes to promote the long-term success of the Company. The Board will continue to monitor, evaluate and seek to improve these processes as the Company grows, to ensure that the investment proposition is delivered to shareholders and other stakeholders in line with their expectations.

Future

With exception of the Strategic Review, many of the non-performance related matters likely to affect the Company in the future are common across all closed ended investment companies, such as the attractiveness of investment companies as investment vehicles, geopolitical tensions and the impact of regulatory changes. These factors need to be viewed alongside the outlook for the Company, both generally and specifically, in relation to the portfolio. The Board's view on the general outlook for the Company can be found in my Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included on page 37 of the published Annual Report and financial statements for the year ended 31 December 2023.

Tony Roper

Chairman

25 April 2024

Results

Financial Highlights

Dividends declared in respect of the Financial Year to 31 December 2023

1 Considered to be an Alternative Performance Measure (see Glossary on pages 161 to 165 of the published Annual Report and financial statements for the year ended 31 December 2023 for more information).

2 The interim distributions are paid in GBP to shareholders on the register. However, shareholders are able to make an election to receive distributions in euros.

3 On 19 February 2024, the Board announced that the Company would forego the fourth interim distribution for the quarter ended 31 December 2023, which historically has been declared in February and paid in March each year. This was to give maximum flexibility during the strategic review process.

Strategic Report

Investment Manager's Review

Having joined the investment management team responsible for managing the Company's portfolio in October 2022, it is my pleasure on behalf of the entire fund management team to present my second Investment Manager's Review, covering the financial year ending in December 2023.

2023 Market Overview

Short-term fundamentals

The European logistics sector experienced a tougher year in terms of occupier fundamentals and leasing activity, while capital markets also remained quiet. Although inflation cooled to 2.6% in the Eurozone in February 2024, the higher interest rate environment and fiscal drag in the economy have weighed on economic growth and investor sentiment.

Borrowing costs remain high for investors and tenants are taking a more cautious approach to leasing. This has meant the market has been slower than anticipated in rebuilding momentum.

Logistics leasing demand, which has been strong in recent years, cooled in 2023, with total take up of 29 million square metres representing a 24% year on year decrease. Although this indicates a deceleration in the market in-line with slower economic growth, take up was still 9% above the long-term average. 2023 quarter-on-quarter take up did gather some momentum, however, with over 8 million square metres of take up recorded in Q4, which was just a 7% reduction on the same quarter in 2022. With 2022 delivering the second highest take up volume on record, the Q4 2023 outcome can be considered a positive sign for the leasing market. With H2 coming in 17% above the first half of 2023, the occupier market is carrying improving momentum into 2024.

Regionally, there was a clear trend with more mature and larger logistics markets seeing the sharpest slowdowns in 2023, while smaller, less mature markets such as Belgium, Ireland and Italy saw the most resilient leasing activity. However, this hides the fact that the largest markets typically had very strong years in 2021 and 2022, so some of the slowdown can be considered a natural transition back to more typical levels of long-term demand. The UK, Germany, Netherlands and Spain all saw take up drop year-on-year by more than 20%.

The type of demand is also shifting. In most markets, newer entrants such as Amazon have established their bulk inbound distribution hubs and regional fulfilment centres and are now switching to focus on efficiencies in their Local or "last mile" delivery stations in city fringe locations. This has also contributed to a lower level of overall take up, as demand has switched to smaller 10,000 to 40,000 square metre mid-box units, from the larger units in high demand in previous years. The largest deal ever recorded in Poland was signed in 2023, with a Chinese e-commerce operator taking 265,000 square metres of space.

A lack of modern, fit for purpose stock also remains a limiting factor for take up in good locations. With rents continuing to rise, leasing tensions in Europe's logistics hotspots are still evident. While vacancy rates increased over the course of 2023, rising by 205 basis points to an average of 5.4%, there is clear evidence that a slowdown in construction activity is having a stabilising influence, evidenced by an 11 basis points decline in Q4 2023, significantly below the average for the year.

The highest vacancy rates are in Poland, Spain and the UK, where rates are all in excess of 6%, while the tightest supply situations are found in Ireland, Denmark, Czech Republic and Netherlands. However, at the city level and in the most desirable fringe city locations, supply of good quality and modern logistics properties remains very low and competition between tenants is pushing up rents.

We can see this relationship when comparing rental growth with vacancy rates. As vacancy declined through the pandemic, rents gradually increased at a faster pace with a strong correlation between the two. However, during 2023, prime rental growth has continued to exceed inflation and at the same time vacancy rates have increased. This is because competition for modern best- in-class logistics facilities remains strong, while secondary buildings in weaker locations typically represent the bulk of the increasing supply in the market. It is important to differentiate between the vacancy of increasingly obsolete older warehousing stock and modern logistics facilities in high demand.

According to data from Savills, prime rents increased by 11% in 2023 on average, sustaining the same rate seen in 2022. However, there was a slowdown in Q4 2023 when rents increased by 1.5% during the quarter.

Looking ahead, the undersupply of modern logistics space in good locations across the supply chain means that cashflows should be increasingly resilient and strong income growth should persist. For European logistics, the milder recession expectation is supportive given the link between economic growth and logistics activity.

Long-term fundamentals

Supply chains continue to move through a period of exceptional structural change, backed by four key demand drivers.

· The Covid pandemic accelerated many aspects of de- globalisation, stress-tested existing distribution networks, and increased the need for companies to diversify their supply chains.

· e-commerce remains an incremental demand driver for the long-term, despite a slowdown in the growth rate; some pull back in growth was naturally due after the e-commerce boom during the pandemic where online sales penetration rates were artificially boosted by lockdowns.

· On-shoring has been an incrementally more important driver of demand over the last decade, but this has recently accelerated as a result of supply chain disruption through the Gulf of Aden and the Suez Canal. Rising tensions in the Middle East doubled international shipping costs in late 2023, resulting in supply chains re-routing goods. Volatility in variable costs, rising fixed costs and increased supply chain risks as well as broader de- globalisation pressures, are increasing supply chain diversification and the need to be closer to end users.

· Lastly, ESG and "net zero" considerations are beginning to play a clearer role in logistics performance, where tighter regulations from the European Union's Energy Efficiency Directive combined with valuation guidance from the RICS, will push tenants and investors to upgrade buildings to deliver more efficient performance. This will further widen the gap between future-fit assets and those facing obsolescence. When markets are undergoing a transformation, such as in logistics, the choice of asset quality in the right location and the future relevance of the building are increasingly critical factors.

A large proportion of European stock is no longer appropriate for today's logistics requirements and requires modernisation, especially as regulatory deadlines around energy efficiency approach. Current total supply growth of c.8% for 2023 is expected to slow to c.4% p.a. in 2024 and likely level off in the longer term, according to Green Street. Two of the key drivers of the expected limitations of new supply are increased financing and development costs. 2023 saw development economics deteriorate, with estimated profit margins halving to c.15%, driven by higher construction input costs (up 25% in 2022).

The ESG factor cannot be underestimated as a further constraining factor on future-fit logistics supply. In preparation for the net zero transition, the Research and Energy Committee of the European Parliament is finalising its position on the Energy Performance of Buildings Directive which seeks to make the EU building sector carbon neutral by 2050. However, we are seeing more significant retrofitting and energy improvement costs factored into cash flows and this is being accounted for in purchase prices or valuations. Polarisation between prime and secondary assets will amplify as limited new supply in most sectors becomes evident, while secondary and tertiary properties begin to be penalised.

Values and capital flows

Industrial rents have experienced strong growth over the last two years, an aspect of Europe that has lagged the UK and US markets. While yields have come under pressure from higher debt costs, some of this has been partially offset by rental growth or rent indexation built into many European lease contracts. 2023 gradually saw a stabilisation in logistics yields in Continental Europe, with the sector experiencing more resilience than other sectors such as offices and the lagging residential sector.

Investment values have declined as interest rates increased. Prime logistics yields had tightened to 3% or below in the most sought-after locations. This was no longer supportable as debt costs spiked and relative pricing against bonds weakened. However, given the fundamentals and strength of investor sentiment towards long-term structural demand drivers, when interest rates stabilise and commercial real estate begins to attract increased investment again, we believe that the logistics sector is well placed to recover lost performance over the short to medium term.

Capital flows into European logistics real estate have increased to now regularly reach roughly 20% of total investment, up from 10% in 2013. The volume of transactions closed in 2023 was unsurprisingly down from the record set in 2021, and 50% below the level reached in 2022. The largest markets continue to be Germany, France, The Netherlands and Spain. Where markets have seen the sharpest repricing (the UK, Netherlands, Germany and Nordics) we are starting to see investor demand return and values stabilise. In the UK, yields have shown some signs of tightening under increased investor competition, although it is too early to tell if this is the start of a new phase in the cycle.

Well diversified, liquid portfolio with strong urban profile

Fully aligned with the Manager's research and strategy teams, the Company continues to pursue its high conviction strategy focusing on the most 'liquid' and in-demand part of the European logistics market where both capital and rental growth expectations are highest. Urban logistics and mid-sized ('mid-box') warehouses are the areas of the market where supply / demand dynamics are the strongest and the potential tenant base the largest. A typical mid-box warehouse sits between 10,000 - 50,000 square metres in size and for urban logistics, often called the 'final touch in the supply chain', building sizes are generally smaller and located in close proximity to dense population centres for speedier deliveries.

With our focus on long-term, sustainable income, the future-proofing or 'second life' of our warehouses is an important consideration when acquiring any new assets. Building specifications we consider important, amongst others, are the eaves' height, floor-load capacity, number of loading doors, manoeuvrability around the building, power supply and increasingly important, a building's sustainability credentials.

Buildings positioned alongside main transport corridors, close to seaports, infrastructural nodes, or in the case of urban logistics, close to large population concentrations, are important criteria in analysing new acquisition opportunities.

The Company's focus is solely on Continental Europe, which provides a deep pool of potential acquisition targets and strong diversification options, limiting single market risk. A standard lease agreement on the Continent often includes full annual CPI indexation of rents, thereby providing a strong hedge against inflation which has become particularly relevant in today's inflationary environment. Despite recent upward pressure, our investment strategy continues to benefit from lower financing costs fixed with European banks. Finally, e-commerce penetration is still at an earlier stage on the Continent with strong growth forecast, creating an attractive investment backdrop. Statista also forecasts strong growth in online sales in the food sector as more tech conscious generations become earners and consumers.

Growth is expected to be strongest in the urban logistics sub sector, especially those assets located in dominant cities that have warehousing supply constraints and where demand is coming from different land uses, resulting in higher land costs and ultimately underpinning higher rents. Parcel delivery specialists are continuing to improve their services by reducing delivery times and thereby transportation costs. Operating a logistics warehouse in close proximity to their ultimate customer base is the best way to reduce their cost base with rental and building costs materially less impactful than transportation costs.

Approximately 50% of the Company's portfolio by value comprises urban logistics warehouses in locations such as Madrid, Frankfurt, Warsaw, Barcelona and Den Hoorn located in the Netherlands between the cities of The Hague and Rotterdam.

As at the Company's year-end, 16 out of the 26 warehouses held in the portfolio were newly developed at the point of purchase and have been constructed since 2018. The portfolio specifications are therefore very modern and in line with tenant requirements. The portfolio is well diversified and spread across five different countries. As at 31 December 2023, the Netherlands represented the largest geographic exposure in the portfolio by value (30.2%), followed by Spain (29.8%), France (15.7%), Poland (14.3%) and Germany (10.0%).

Asset Management Initiatives

2023 was a hugely challenging year with valuation declines witnessed across all geographies and sub-sectors. Despite sector re-pricing and a weakening of investor sentiment, the markets remained active for the right stock.

In all for the Company, we completed eight transactions covering 144,000 square metres of space, involving €8.2 million in annualised rent. This comprised six lease extensions, one sale, and agreeing terms committing to another which was completed post year end.

During the first quarter the Company agreed a 9.5 year lease renewal with Dachser France in La Creche, Niort. The new rent achieved a 3% uplift on the previous annual rent payable and significantly ahead of ERV, reflecting the tenant-critical nature of the asset. The strategic significance of the location and the continued upward pressure on real rents also supported the tenant agreeing to uncapped annual ILAT indexation, with the next uplift effective January 2025.

Also in Q1, the Company secured a new 12 year lease re-gear with Biocoop at its Avignon property, generating annual contracted rent of €2.5 million, again with full annual French ILAT indexation with no cap. The 'HQE Excellent' climate-controlled facility serves as a strategically important location for Biocoop, which operates a unique multi-professional cooperative model, supporting a network of over 570 organic stores promoting local production in order to limit transportation and support local economies.  The asset also generates €165,000 per annum of additional income from rooftop solar panels.

In May, the Company completed a 5-year lease extension at its single-tenant warehouse in Ede, the Netherlands. The new extended lease with pharmaceutical retailer AS Watson (trading as Kruidvat) moved the expiry out from 2028 to July 2033 and provides for future upward- only indexation capped at 4% per annum.

There was steady leasing activity in Poland, with two lease extensions agreed in Krakow. A lease extension for 3 years was agreed with MaxFliz home interiors at their 8,842 sq m facility, moves the expiry out to July 2027, reflecting their ongoing commitment to the strong location supporting their future operations. Also in Krakow, Chef's Culinar agreed to a 3-year extension moving the expiry at their 1,339 sq m unit out to November 2026.

In Lodz, Poland, a lease extension was agreed, with EGT Logistics, moving the lease expiry at their 1,634 sq m facility out to March 2027.

In May, the Company announced the sale of its 32,645 sqm warehouse, in Leon, northern Spain for €18.5 million. The price reflected a premium to the Q4 2022 valuation and crystalised a 20% gross profit. The Company had acquired the asset, let previously to Decathlon, in 2018 for €15.3 million.

Post year-end 2023 the Company sold its vacant French asset at Meung sur Loire, which completed on 25 March 2024. The price represented a modest discount to the Q3 2023 valuation, with the proceeds being used to further strengthen the Company's balance sheet.

This was a good result in exiting an asset that would require substantial capex, especially with an eye to our net zero emissions target.

In Madrid, the Company is now carrying 7% of the portfolio void at Phase 1B Gavilanes (which was vacated in August 2023) as well as accounting for the void following the surrender of the units occupied by Arrival.

Despite continued efforts to secure both a surrender premium, which had previously been agreed with Arrival, and the outstanding rental payments for 2023, we were unable to reach a satisfactory conclusion. The Company previously noted Arrival's announcement and SEC filing regarding bridge financing and in the continued absence of a satisfactory conclusion, legal proceedings to recoup monies owed continued. Off the back of good occupier interest in the properties, the Company has secured the surrender of the lease agreement with Arrival to take full possession of the units. Whilst it is extremely disappointing, the Company took the decision to take full control of the assets in order to maximise revenue going forward. Reflecting the ongoing demand for Grade-A, highly sustainable logistics space in Spain, a new lease has been agreed for 5,131 sqm of the space, at a rent 8.7% above the previous passing rent, with Spanish transportation company METHOD Advanced Logistics.

In October 2023 the Company announced that it had been awarded a maximum five stars in the 2023 Global Real Estate Sustainability Benchmark ('GRESB') awards, achieving first place in its peer group of diversified funds investing across Europe (European industrial: distribution warehouse). This was a welcome achievement and progressively increased scoring over 2021 and 2022.

Property portfolio as at 31 December 2023

A strong tenant base with inflation linked income

Our key objective remains the generation of long-term sustainable income streams in order to pay an attractive quarterly dividend.

2023 saw the Company collect 95% of total expected rent, with the shortfall attributable to Arrival. With more than 50 lease agreements, the portfolio has a diversified tenant base across different sectors. In addition to the regular interaction of our asset and property managers with our tenants, their covenant strength is monitored on a regular basis using a variety of data sources including Dun & Bradstreet.

In terms of exposure by segment, third party logistics providers ("3PLs") represent the largest at 37% of total portfolio rent. The 3PL market continues to be buoyant, particularly those businesses specialising in parcel deliveries; our exposure comprises DHL, which occupies our assets in Madrid and Warsaw and Dachser occupying three assets in Niort, Dijon and Bordeaux, France.

The combination of both DHL and Dachser France accounts for 9.4% of rental income in aggregate, across 5 units and 3 countries. Manufacturers (20%) and companies related to the food industry (19%) complete the top three. Food related companies such as supermarkets like Biocoop or Carrefour and traders in food such as Combilo and Limax all performed well during the pandemic. The retail exposure (8.3% of total rent) is accounted for by Netherlands based drugstore Kruidvat (part of the A.S Watson group) operating its e-commerce platform. The direct exposure to e-commerce (9.1% of total rent) is accounted for by the holding of the state-of-the-art, last mile Amazon facility at Gavilanes, Madrid. This is the largest asset in the portfolio by value.

Standard lease agreements on the Continent typically have annual CPI indexation of rent. This is not the standard in the UK. Having this annual inflation protection has proved beneficial with rising energy prices and supply chain issues driving inflation well into double digits in the Eurozone towards the end of 2022 and throughout 2023. 65% of the portfolio's current income has full CPI or ILAT indexation, which undoubtedly helped to grow 2023 income.

The Company's existing leases have an average length of 7.0 years including break options and 8.4 years excluding breaks to lease expiry.

Top 10 tenants based on current rents

Excludes income from Arrival in Madrid 3 where lease was surrendered in February 2024.

Loan portfolio 31 December 2023

Well diversified debt portfolio

During 2023 interest rates have remained high across the continent. The Company's debt from its European partner banks remains fixed in nature and secured on certain assets or groups of assets within the portfolio. These non-recourse loans, which include no parent company guarantees, range in maturities between 1.4 and 5.1 years with all-in interest rates ranging between 1.10% and 3.11% per annum. During the year €10.8 million was repaid following the sale of Leon in April 2023.

At the end of 2023, the Company´s fixed debt facilities totalled €259.5 million at an average all-in rate of 2.0% and with a loan-to-value of 38.7%, slightly above the long- term target of 35%. The Company´s secured fixed rate debt supports its investment objective with the earliest re-financing of debt required in mid-2025.

The Company arranged asset level fixed rate bank debt financings in those local markets where all-in loan costs were the lowest, such as Germany, the Netherlands, France and Spain with dedicated real estate banks that are active in this lending space. Stress testing on the existing financial covenants such as Interest Cover Ratios and Loan-To-Value (LTV) is conducted on a regular basis. In order to diversify risk, the loan facilities have also been cross-collateralised with groups of single-tenanted buildings or have diversified risk thanks to multi-tenanted leasing structures.

The Company also benefits from its revolving credit facility agreement with Investec Bank for the amount of €70 million which provides further flexibility for the acquisition of new properties and / or for the implementation of asset management initiatives. At the end of 2023 the revolving credit facility agreement with Investec Bank was undrawn. Within the facility, Investec also makes available a £3.3 million committed revolving credit facility which is carved out of the total €70 million limit of the facility. This facility sits at the parent company level and provides added flexibility.

Outlook

We believe Continental European logistics real estate is well placed to recover from a difficult market position due to the robust market fundamentals. Backed by the tailwinds of low vacancies and structural demand drivers, rental growth is expected to outperform historic averages and beat inflation in most European logistics hotspots. While lingering economic, political, and financial markets uncertainties may disrupt investment trends in the short- term, the favourable underlying trends including ongoing e-commerce penetration, onshoring and supply chain reconfiguration/modernisation should remain important drivers for the sector.

We continue to prefer fringe city locations where land supply is more constrained, and where tenant and investor demand is active. Good quality assets in these locations are hard to source for tenants due to low levels of new builds over the last ten years and low construction activity going forwards. The development pipeline is also constrained by rapidly rising financing costs, together with high construction and labour costs, planning difficulties and more stringent controls over sustainability and efficiency ratings of new schemes.

The immediate focus for us is to continue improving the earnings position, principally through letting up the vacant space in Spain and capturing the portfolio's attractive indexation characteristics.

abrdn's large and established local network and reputation provides a competitive advantage when sourcing deals and implementing initiatives. abrdn is one of Europe's largest real estate investors, managing approximately £43 billion of real estate, with over £15 billion of logistics assets across 12 countries. Its eight offices across Europe - London, Edinburgh, Frankfurt, Amsterdam, Madrid, Paris, Brussels and Copenhagen - employ over 300 abrdn real estate colleagues including portfolio managers, local transaction and asset managers and researchers.

We are starting to see signs of interest returning to the sector with increased investment activity in those markets that have already seen strong pricing correction, such as in the UK and the Netherlands. Various successful capital raises targeting the sector exclusively, or as part of multi-sector strategies, have recently been announced providing evidence in the longer-term conviction for the sector.

Troels Andersen

Fund Manager, abrdn

25 April 2024

Property portfolio as at 31 December 2023

Governance

Directors' Report

The Directors present their Report and the audited financial statements for the year ended 31 December 2023.

Results and Dividends

Details of the Company's results and dividends are shown on page 23 of the published Annual Report and financial statements for the year ended 31 December 2023. The dividend policy is disclosed in the Strategic Report on page 14 of the published Annual Report and financial statements for the year ended 31 December 2023.

Investment Trust Status

The Company was incorporated on 25 October 2017 (registered in England & Wales No. 11032222) and has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial periods commencing on or after 15 December 2017. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 December 2023 so as to enable it to comply with the ongoing requirements for investment trust status.

Individual Savings Accounts

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

Share Capital

The Company's capital structure is summarised in note 16 to the financial statements. At 31 December 2023, there were 412,174,356 fully paid Ordinary shares of 1p each in issue. During the year no Ordinary shares were purchased in the market for treasury or cancellation and no Ordinary shares were issued or sold from Treasury.

Voting Rights, Share Restrictions and Amendments to Articles of Association

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares carry a right to receive dividends. On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

There are no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a takeover bid. In accordance with the Companies Act, amendments to the Company's Articles of Association may only be made by shareholders passing a special resolution in general meeting.

Borrowings

A full breakdown of the Company's loan facilities is provided in note 14 to the financial statements.

Management Agreement

Under the terms of a Management Agreement dated 17 November 2017 between the Company and the AIFM, abrdn Fund Managers Limited (and amended by way of side letters dated 25 May 2018, 22 February 2019 and 24 January 2023), the AIFM was appointed to act as alternative investment fund manager of the Company with responsibility for portfolio management and risk management of the Company's investments. Under the terms of the Management Agreement, the AIFM may delegate portfolio management functions to the Investment Manager and is entitled to an annual management fee together with reimbursement of all reasonable costs and expenses incurred by it and the Investment Manager in the performance of its duties.

Pursuant to the terms of the Management Agreement, the AIFM is entitled to receive a tiered annual management fee (the ''Annual Management Fee'') calculated by reference to the Net Asset Value (as calculated under IFRS) on the following basis:

· On such part of the Net asset value that is less than or equal to €1.25 billion, 0.75 per cent. per annum.

· On such part of the Net asset value that is more than €1.25 billion, 0.60 per cent. per annum.

The annual management fee is payable in Euros quarterly in arrears, save for any period which is less than a full calendar quarter.

The Company or the AIFM may terminate the Management Agreement by giving not less than 12 months' prior written notice.

The AIFM has also been appointed by the Company under the terms of the Management Agreement to provide day-to-day administration services to the Company and provide the general company secretarial functions required by the Companies Act. In this role, the AIFM will provide certain administrative services to the Company which includes reporting the Net Asset Value, bookkeeping and accounts preparation. Effective from March 2020 accounting and administration services undertaken on behalf of the Company have been delegated to Brown Brothers Harriman.

The AIFM has also delegated the provision of the general company secretarial services to abrdn Holdings Limited.

Risk Management

Details of the financial risk management policies and objectives relative to the use of financial instruments by the Company are set out in note 22 to the financial statements.

The Board

The current Directors, Ms Gulliver, Mr Heawood, Mr Roper and Ms Wilde were the only Directors who served during the year. With the exception of Ms Wilde who will be retiring from the Board at the conclusion of the Annual General Meeting, in accordance with the Articles of Association, each Director will retire from the Board at the Annual General Meeting convened for 24 June 2024 and, being eligible, will offer himself or herself for re-election to the Board. In accordance with Principle 23 of the AIC's 2019 Code of Corporate Governance, each Director will retire annually and submit themselves for re-election at the AGM.

The Board considers that there is a balance of skills and experience within the Board relevant to the leadership and direction of the Company and that all the Directors contribute effectively.

In common with most investment trusts, the Company has no employees. Directors' & Officers' liability insurance cover has been maintained throughout the year at the expense of the Company.

Board Diversity

As indicated in the Strategic Report, the Board recognises the importance of having a range of skilled, 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, and will give due regard to, 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 Directors. The Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment. The Board takes account of the targets set out in the FCA's Listing Rules, which are set out below.

As an externally managed investment company, the Board employs no executive staff, and therefore does not have a chief executive officer (CEO) or a chief financial officer (CFO) - both of which are deemed senior board positions by the FCA. However, the Board considers the Chair of the Audit Committee to be a senior board position and the following disclosure is made on this basis. Other senior board positions recognised by the FCA are chair of the board and senior independent director (SID). In addition, the Board has resolved that the Company's year end date be the most appropriate date for disclosure purposes.

The following information has been voluntarily disclosed by each Director and is correct as at 31 December 2023. The Company has initiated a search for a new non executive Director although the process is currently on hold. Following completion of, and subject to the conclusions of, the Strategic Review which is currently ongoing, the Board expects that, the Company will aim to be in compliance with the recommendations of the Parker Review on diversity in the UK boardroom by June 2025.

Board as at 31 December 2023

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

2 Does not currently meet target that at least one Director is from a minority ethnic background as set out in LR 9.8.6R (9)(a)(iii).

3 Senior positions defined as Chair, Audit Chair and Senior Independent Director.

The Role of the Chairman and Senior Independent Director

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

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

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.

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 full text of the Company's Corporate Governance Statement can be found on the Company's website: eurologisticsincome.co.uk.

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 need for an internal audit function (provision 26);

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

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

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

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

During the year ended 31 December 2023, the Board had four scheduled meetings and over 14 other ad hoc Board meetings as well as numerous update calls. In addition, the Audit Committee met three times and there was one meeting of the Management Engagement Committee and one meeting of the Nomination Committee. Between meetings the Board maintains regular contact with the Investment Manager. The Directors have attended the following scheduled Board meetings and Committee meetings during the year ended 31 December 2023 (with their eligibility to attend the relevant meeting in brackets):

1 Mr Roper is not a member of the Audit Committee but attended all meetings by invitation.

Policy on Tenure

The Board's policy on tenure is that Directors need not serve on the Board for a limited period of time only. The Board does not consider that the length of service of a Director is as important as the contribution he or she has to make, and therefore the length of service will be determined on a case-by-case basis. However, in accordance with corporate governance best practice and the future need to refresh the Board over time, it is currently expected that Directors will not typically serve on the Board beyond the Annual General Meeting following the ninth anniversary of their appointment.

Board Committees

Audit Committee

The Audit Committee Report is on pages 95 to 97 of the published Annual Report and financial statements for the year ended 31 December 2023.

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which, due to the relatively small size of the Board, comprises all of the Directors and is chaired by the Chairman of the Company. The Nomination Committee advises the Board on succession planning, bearing in mind the balance of skills, knowledge and experience existing on the Board, and will make recommendations to the Board in this regard. The Nomination Committee also advises the Board on its balance of relevant skills, experience and length of service of the Directors serving on the Board. The Board's overriding priority when appointing new Directors in the future will be to identify the candidate with the best range of skills and experience to complement existing Directors. The Board recognises the benefits of diversity and its policy on diversity is disclosed in the Strategic Report and also on page 83 of the published Annual Report and financial statements for the year ended 31 December 2023.

The Committee has put in place the necessary procedures to conduct, on an annual basis, an appraisal of the Chairman of the Board, Directors' individual self evaluation and a performance evaluation of the Board as a whole and its Committees. In 2023 the Board conducted an evaluation based upon completed questionnaires covering the Board, individual Directors, the Chairman and the Audit Committee Chairman. The Chairman then met each Director individually to review their responses whilst the Senior Independent Director met with the Chairman to review his performance.

In accordance with Principle 23 of the AIC's Code of Corporate Governance which recommends that all directors of investment companies should be subject to annual re-election by shareholders, all the members of the Board with the exception of Ms Wilde, will retire at the forthcoming Annual General Meeting and will offer themselves for re-election. As part of the Board's succession planning, Ms Wilde will be retiring from the Board at the conclusion of the Annual General Meeting. In conjunction with the evaluation feedback, the Committee has reviewed each of the proposed reappointments and concluded that each of the Directors has the requisite high level and range of business and financial experience and recommends their re-election at the forthcoming AGM. Details of the contributions provided by each Director during the year are disclosed on pages 80 and 81 of the published Annual Report and financial statements for the year ended 31 December 2023.

The Board has initiated the search for a new independent non executive Director but the process is on hold whilst the strategic review is concluded. Succession planning will be considered again once the result of the review is known.

Management Engagement Committee

The Management Engagement Committee comprises all of the Directors and is chaired by Mr Heawood.

The Committee reviews the performance of the Manager and Investment Manager and its compliance with the terms of the management and secretarial agreement. The terms and conditions of the Manager's appointment, including an evaluation of fees, are reviewed by the Committee on an annual basis. Based upon the competitive management fee and expertise of the Manager, the Committee believes that the continuing appointment of the Manager on the terms agreed is in the interests of shareholders as a whole. The Committee also at least annually reviews the Company's relationships with its other service providers. These reviews aim to ensure that services being offered meet the requirements and needs of the Company, provide value for money and performance is in line with the expectations of stakeholders.

Remuneration Committee

Under the FCA Listing Rules, where an investment trust has only non-executive directors, the Code principles relating to directors' remuneration do not apply. Accordingly, matters relating to remuneration are dealt with by the full Board, which acts as the Remuneration Committee.

The Company's remuneration policy is to set remuneration at a level to attract individuals of a calibre appropriate to the Company's future development. Further information on remuneration is disclosed in the Directors' Remuneration Report on pages 91 to 93 of the published Annual Report and financial statements for the year ended 31 December 2023.

Terms of Reference

The terms of reference of all the Board Committees may be found on the Company's website eurologisticsincome.co.uk and copies are available from the Company Secretary upon request. The terms of reference are reviewed and re-assessed by the relevant Board Committee for their adequacy on an annual basis.

Going Concern

In accordance with the Financial Reporting Council's guidance the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants.

The Directors are mindful of the principal risks and uncertainties disclosed above and the Viability Statement on page 20 of the published Annual Report and financial statements for the year ended 31 December 2023 and have reviewed forecasts detailing revenue and liabilities and they 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 Annual Report.

In coming to this conclusion, the Board has also considered the impact of geopolitical and economic turbulence on the Company's and its investments. The Investment Manager is in contact with tenants and third party suppliers and continues to have a constructive dialogue with all parties.  A range of scenarios have been modelled looking at possible impact to cash flows in the short to medium term and this is kept under regular review.

While the Company is obliged under its articles to hold a continuation vote at the 2024 AGM, the Directors do not believe this should automatically trigger the adoption of a basis other than going concern in line with the Association of Investment Companies ("AIC") Statement of Recommended Practice ("SORP") which states that it is usually more appropriate to prepare financial statements on a going concern basis unless a continuation vote has already been triggered and shareholders have voted against continuation.

On 27 November 2023, the Board announced that it was undertaking a Strategic Review. The Board is considering all options available to the Company. There is no certainty that any changes will result from the Strategic Review and, for the avoidance of doubt, a continuation of the Company's current investment strategy with a rebased target dividend level is a potential outcome of the Strategic Review. The matters referred to above indicate existence of material uncertainty. Nevertheless, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. Additional details about going concern are disclosed in note 1(a).

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, the Directors prepare 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/her connected persons. The Board considers each Director's situation and decides on any course of action required to be taken if there is a 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 Directors are issued with letters of appointment upon appointment. No Director had any interest in contracts with the Company during the year or subsequently.

The Board has adopted appropriate procedures designed to prevent bribery. The Company receives periodic reports from its service providers on the anti-bribery policies of these third parties. It also receives regular compliance reports from the Manager.

The Criminal Finances Act 2017 introduced the corporate criminal offence of "failing to take reasonable steps to prevent the facilitation of tax evasion". The Board has confirmed that it is the Company's policy to conduct all of its business in an honest and ethical manner. The Board takes a zero-tolerance approach to the facilitation of tax evasion, whether under UK law or under the law of any foreign country.

Accountability and Audit

The respective responsibilities of the Directors and the auditor in connection with the financial statements are set out on pages 94 and 105 of the published Annual Report and financial statements for the year ended 31 December 2023 respectively.

Each Director confirms that:

· so far as he or she is aware, there is no relevant audit information of which the Company's auditor is unaware; and,

· each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Additionally there have been no important events since the year end that impact this Annual Report.

The Directors have reviewed the level of non-audit services provided by the independent auditor during the year amounting to £nil (2022: £20,000 in respect of the production of a Supplementary Prospectus) and remain satisfied that the auditor's objectivity and independence is being safeguarded.

Independent Auditor

The auditor, KPMG LLP, has indicated its willingness to remain in office. The Directors will place a resolution before the Annual General Meeting to re-appoint KPMG LLP as auditor for the ensuing year, and to authorise the Directors to determine its remuneration.

Internal Control

The Board is ultimately responsible for the Company's system of internal control and for reviewing its effectiveness and confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and financial statements. It is regularly reviewed by the Board and accords with the FRC Guidance.

The Board has reviewed the effectiveness of the system of internal control. In particular, it has reviewed the process for identifying and evaluating the significant risks affecting the Company and policies by which these risks are managed.

The Directors have delegated the investment management of the Company's assets to members of the abrdn Group within overall guidelines, and this embraces implementation of the system of internal control, including financial, operational and compliance controls and risk management. Internal control systems are monitored and supported by the abrdn Group's internal audit function which undertakes periodic examination of business processes, including compliance with the terms of the management agreement, and ensures that recommendations to improve controls are implemented.

Risks are identified and documented through a risk management framework by each function within the abrdn Group's activities. Risk includes financial, regulatory, market, operational and reputational risk. This helps the abrdn group internal audit risk assessment model identify those functions for review. Any weaknesses identified are reported to the Board, and timetables are agreed for implementing improvements to systems.

The implementation of any remedial action required is monitored and feedback provided to the Board.

The significant risks faced by the Company have been identified as being strategic; investment and asset management; financial; regulatory; and operational.

The key components of the process designed by the Directors to provide effective internal control are outlined below:

· the AIFM prepares forecasts and management accounts which allows the Board to assess the Company's activities and review its performance;

· the Board and AIFM 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 and there are meetings with the AIFM and Investment Manager as appropriate;

· as a matter of course the AIFM's compliance department continually reviews abrdn's operations and reports to the Board on a six monthly basis;

· written agreements are in place which specifically define the roles and responsibilities of the AIFM and other third party service providers and, where relevant, ISAE3402 Reports, a global assurance standard for reporting on internal controls for service organisations, or their equivalents are reviewed;

· the Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place within abrdn, has decided to place reliance on the Manager's systems and internal audit procedures. At its April 2024 meeting, the Audit Committee carried out an annual assessment of internal controls for the year ended 31 December 2023 by considering documentation from the AIFM and the Depositary, including the internal audit and compliance functions and taking account of events since 31 December 2023. The results of the assessment, that internal controls are satisfactory, were then reported to the Board at the subsequent Board meeting.

Internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against mis-statement and loss.

Substantial Interests

The Board has been advised that the following shareholders owned 3% or more of the issued Ordinary share capital of the Company at 31 December 2023 (based upon 412,174,356 shares in issue):

On 2 April 2024, Asset Value Investors Limited notified the Company that its total holding of Ordinary shares was 24,732,890 representing 6.0% of the issued class of capital. Save as disclosed, there have been no significant

changes notified in respect of the above holdings between 31 December 2023 and 25 April 2024.

Relations with Shareholders

The Directors place a great deal of importance on communication with shareholders. The Annual Report will be widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up to date information on the Company through the freephone information service shown under Investor Information and on the Company's website eurologisticsincome.co.uk.

abrdn Holdings Limited (aHL) has been appointed Company Secretary to the Company. Whilst aHL is a wholly owned subsidiary of the abrdn Group, there is a clear separation of roles between the Manager and Company Secretary with different board compositions and different reporting lines in place. The Board notes that, in accordance with Market Abuse Regulations, procedures are in place to control the dissemination of information within the abrdn plc group of companies when necessary. Where correspondence addressed to the Board is received there is full disclosure to the Board. This is kept confidential if the subject matter of the correspondence requires confidentiality.

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of representatives of the Manager (including the Company Secretary and Investment Manager) in situations where direct communication is required and usually a representative from the Board is available to meet with major shareholders on an annual basis in order to gauge their views.

The Notice of the Annual General Meeting, included within the Annual Report and financial statements, is sent out at least 20 working days in advance of the meeting. In normal circumstances, all Shareholders have the opportunity to put questions to the Board or the Investment Manager, either formally at the Company's Annual General Meeting or at the subsequent buffet luncheon for Shareholders. Shareholders are, however, invited to send any questions for the Board and/or the Investment Manager on the Annual Report by email to European.Logistics@abrdn.com. The Company Secretary is available to answer general shareholder queries at any time throughout the year.

Annual General Meeting

The Annual General Meeting will be held on 24 June 2024 at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street London, EC1A 4HD at 9:00 a.m. In addition to the usual resolutions the following matters will be proposed at the AGM:

Special Business Directors' Authority to Allot Relevant Securities

Approval is sought in Resolution 9, an ordinary resolution, to renew the Directors' existing general power to allot shares but will also provide a further authority (subject to certain limits) to grant rights to subscribe for or to convert any security into shares under a fully pre-emptive rights issue. The effect of Resolution 9 is to authorise the Directors to allot up to a maximum of 272,035,075 shares in total (representing approximately 66% (as at the latest practicable date before publication of this Annual Report) of the existing issued share capital of the Company), of which a maximum of 136,017,537 shares (approximately 33% (as at the latest practicable date before publication of this Annual Report) of the existing issued share capital of the Company) may only be applied other than to fully pre-emptive rights issues. This authority is renewable annually and will expire at the conclusion of the next Annual General Meeting in 2025, or 30 June 2025, whichever is earlier. The Directors do not have any immediate intention to utilise this authority.

Special Business Disapplication of Pre-emption Rights

Resolution 10 is a special resolution that seeks to renew the Directors' existing authority until the conclusion of the next Annual General Meeting to make limited allotments of shares for cash of up to a maximum of 41,217,435 shares representing 10% of the issued share capital (as at the latest practicable date before publication of this Annual Report) other than according to the statutory pre-emption rights which require all shares issued for cash to be offered first to all existing shareholders.

This authority includes the ability to sell shares that have been held in treasury (if any), having previously been bought back by the Company. The Board has established guidelines for treasury shares and will only consider buying in shares for treasury at a discount to their prevailing NAV and selling them from treasury at or above the then prevailing NAV.

New shares issued in accordance with the authority sought in Resolution 10 will always be issued at a premium to the NAV per Ordinary share at the time of issue. The Board will issue new Ordinary shares or sell Ordinary shares from treasury for cash when it is appropriate to do so, in accordance with its current policy. It is therefore possible that the issued share capital of the Company may change between the date of this document and the Annual General Meeting and therefore the authority sought will be in respect of 10% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document. This authority is renewable annually and will expire at the conclusion of the Annual General Meeting in 2025 or 30 June 2025, whichever is earlier.

Special Business Purchase of the Company's Shares

Resolution 11 is a special resolution proposing to renew the Directors' authority to make market purchases of the Company's shares in accordance with the provisions contained in the Companies Act 2006 and the Listing Rules of the Financial Conduct Authority. The minimum price to be paid per Ordinary share by the Company will not be less than £0.01 per share (being the nominal value) and the maximum price should not be more than the higher of (i) an amount equal to 5% above the average of the middle market quotations for an Ordinary share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the date on which the Ordinary share is contracted to be purchased; and (ii) the higher of the price of the last independent trade and the current highest independent bid on the trading venue where the purchase is carried out.

The Directors do not intend to use this authority to purchase the Company's Ordinary shares unless to do so would result in an increase in NAV per share and would be in the interests of Shareholders generally. The authority sought will be in respect of 14.99% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document.

The Company's shares have traded at a premium to NAV per share for the majority of the life of the Company since its launch, and therefore the Company has not bought back any shares for treasury or cancellation. However, the Board is very aware of the current wide share price discount to NAV and regularly monitors this. The Directors view buybacks as a very useful tool for seeking to assist in the management of the liquidity of the Company shares which could be used in the future as one of a number of methods to address imbalances of supply and demand which, arithmetically, can cause discounts to NAV per share. Shares bought back would be purchased at a discount to the prevailing NAV per share and the result would be accretive to the NAV for all on-going shareholders.

The authority being sought will expire at the conclusion of the Annual General Meeting in 2025 or 30 June 2025, whichever is earlier unless it is renewed before that date. Any Ordinary shares purchased in this way will either be cancelled and the number of Ordinary shares will be reduced accordingly or under the authority granted in Resolution 10 above, may be held in treasury.

If Resolutions 9 to 11 are passed then an announcement will be made on the date of the Annual General Meeting which will detail the exact number of Ordinary shares to which each of these authorities relates.

These powers will give the Directors additional flexibility going forward and the Board considers that it will be in the interests of the Company that such powers be available. Such powers will only be implemented when, in the view of the Directors, to do so will be to the benefit of Shareholders as a whole.

Special Business Notice of Meetings

Resolution 12 is a special resolution seeking to authorise the Directors to call general meetings of the Company (other than Annual General Meetings) on 14 days' clear notice. This approval will be effective until the Company's Annual General Meeting in 2025 or 30 June 2025 whichever is earlier. In order to utilise this shorter notice period, the Company is required to ensure that Shareholders are able to vote electronically at the general meeting called on such short notice. The Directors confirm that, in the event that a general meeting is called, they will give as much notice as practicable and will only utilise the authority granted by Resolution 12 in limited and time sensitive circumstances.

Special Business Continuation of Company

In accordance with Article 163.2 the Directors are required to propose an ordinary resolution that the Company continue its business as presently constituted (the "Continuation Resolution") at the sixth annual general meeting of the Company and every third annual general meeting thereafter. Accordingly, Resolution 13 is an ordinary resolution proposing that the Company continue its business as presently constituted. With the Strategic Review still ongoing, the Board recommends that shareholders vote in favour of the Company's continuation to ensure that the review can be completed properly and the best outcome for shareholders delivered. It is the Board's current expectation that the result of the Strategic Review will be announced ahead of the AGM, so shareholders should have the benefit of a clear picture of the proposed way forward by the time that they are asked to vote. Should the Board not be in a position to communicate the outcome (or likely outcome) of the Strategic Review ahead of the AGM, the Board would ensure that shareholders were provided with the opportunity to vote on the future direction of the Company as and when the Review was completed (unless the proposed course of action arising from the Strategic Review in and of itself required a shareholder vote).

If the Continuation Resolution is not passed, the Articles require the Directors to cease further investment, the properties in the Company's portfolio to be sold in an orderly fashion as market demand appears and the net funds, determined by the Directors as available for distribution, to be distributed to Shareholders.

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 and on an annual basis.

Resolution 13 is an ordinary resolution to approve the Company's dividend policy. The Company's dividend policy shall be that dividends on the Ordinary shares are payable quarterly in relation to periods ending March, June, September and December and the last dividend referable to a financial year end will not be categorised as a final dividend that is subject to Shareholder approval. It is intended that the Company will pay quarterly dividends consistent with the expected annual underlying portfolio yield. The Company has the flexibility in accordance with its Articles to make distributions from capital.

Shareholders should note that references to ''dividends'' are intended to cover both dividend income and income which is designated as an interest distribution for UK tax purposes and therefore subject to the interest streaming regime applicable to investment trusts.

Recommendation

Your Board considers Resolutions 9 to 13 to be in the best interests of the Company and its members as a whole and most likely to promote the success of the Company for the benefit of its members as a whole. Accordingly, your Board unanimously recommends that Shareholders should vote in favour of all Resolutions to be proposed at the AGM, as they intend to do in respect of their own beneficial shareholdings amounting to 347,187 Ordinary shares.

By order of the Board

abrdn Holdings Limited - Company Secretaries and Registered Office

280 Bishopsgate London EC2M 4AG

25 April 2024

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

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

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law and have elected to prepare the parent Company financial statements in accordance with UK accounting standards and applicable law, including FRS 101 Reduced Disclosure Framework.

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 Group and parent Company and of the Group's profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable, relevant, reliable and prudent;

· for the Group financial statements, state whether they have been prepared in accordance with UK-adopted international accounting standards;

· for the parent Company financial statements, state whether applicable UK accounting standards

· have been followed, subject to any material departures disclosed and explained in the parent Company financial statements;

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

· use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent 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 Group 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 Corporate Governance Statement that complies 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. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the financial statements will form part of the annual financial report prepared using the single electronic reporting format under the TD ESEF Regulation. The auditor's report on these financial statements provides no assurance over the ESEF format.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

· the Strategic Report/Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

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

By order of the Board

Tony Roper

25 April 2024

Financial Statements

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2023

The accompanying notes are an integral part of the financial statements.

The total column of the Consolidated Statement of Comprehensive Income is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.

Consolidated Balance Sheet

As at 31 December 2023

The financial statements on pages 106 to 148 of the published Annual Report and financial statements for the year ended 31 December 2023 were approved and authorised for issue by the Board of Directors on 25 April 2024 and signed on its behalf by:

Caroline Gulliver

Independent Non-Executive Director

Company number: 11032222.

The accompanying notes are an integral part of the financial statements.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2023