UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
| Investment Company Act file number: |
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811-06565 |
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| Exact name of registrant as specified in charter: |
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abrdn Life Sciences Investors |
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| Address of principal executive offices: |
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1900 Market Street, Suite 200 |
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Philadelphia, PA 19103 |
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| Name and address of agent for service: |
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Sharon Ferrari |
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abrdn Inc. |
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1900 Market Street Suite 200 |
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Philadelphia, PA 19103 |
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| Registrant’s telephone number, including area code: |
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1-800-522-5465 |
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| Date of fiscal year end: |
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September 30 |
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| Date of reporting period: |
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September 30, 2024 |
Item 1. Reports to Stockholders.
(a)
abrdn Life Sciences Investors (HQL)
Annual Report
September 30, 2024
Managed Distribution Policy
(unaudited)
In February 2024, the Board of Trustees (the
"Board") of the abrdn Life Sciences Investors (the "Fund") approved the continuation of the managed distribution policy ("MDP") and determined to increase the rolling distribution rate from 8% to 10% based on the
average daily net asset value of the previous three months as of the month-end prior to declaration for the 12-month period commencing with the distribution paid on March 28, 2024. In May 2024, the Board determined to
increase the rolling distribution rate from 10% to 12% based on the average daily net asset value of the previous three months as of the month-end prior to declaration commencing with the distribution payable on June
28, 2024. The Fund intends to maintain the increased MDP for at least 12 months from the distribution payable date unless there is significant and unforeseen change in market conditions.
With each distribution, the Fund will issue
a notice to shareholders and an accompanying press release which will provide detailed information regarding the estimated amount and composition of the distribution and other information required by the Fund’s
MDP exemptive order. The Board may amend or terminate the MDP at any time without prior notice to shareholders; however, at this time,there are no reasonably foreseeable circumstances that might cause the termination
of the MDP. You should not draw any conclusions about the Fund’s investment performance from the amount of distributions or from the terms of the Fund’s MDP.
Distribution Disclosure
Classification (unaudited)
The Fund’s policy is to provide
investors with a stable distribution rate. Each quarterly distribution will be paid out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital.
The Fund is subject to U.S.
corporate, tax and securities laws. Under U.S. tax rules, the amount applicable to the Fund and character of distributable income for each fiscal period depends on the actual exchange rates during the entire year
between the U.S. Dollar and the currencies in which Fund assets are denominated and on the aggregate gains and losses realized by the Fund during the entire year.
Therefore, the exact amount
of distributable income for each fiscal year can only be determined as of the end of the Fund’s fiscal year, September 30. Under Section 19 of the Investment Company Act of
1940, as amended (the “1940
Act”), the Fund is required to indicate the sources of certain distributions to shareholders. The estimated distribution composition may vary from quarter to quarter because it may be materially impacted by
future income, expenses and realized gains and losses on securities and fluctuations in the value of the currencies in which the Fund's assets are denominated.
The distributions for the
fiscal year ended September 30, 2024 consisted of 42% net investment income, 46% net realized gains and 12% tax return of capital.
In January 2025, a Form
1099-DIV will be sent to shareholders, which will state the final amount and composition of distributions and provide information with respect to their appropriate tax treatment for the 2024 calendar year.
abrdn Life Sciences Investors
Letter to Shareholders (unaudited)
Dear Shareholder,
We present the Annual Report,
which covers the activities of abrdn Life Sciences Investors (the “Fund”), for the fiscal year ended September 30, 2024. The Fund’s investment objective is to seek long-term capital appreciation
by investing primarily in securities of Life Sciences companies.
Effective close of regular
business on October 27, 2023, abrdn Inc. assumed responsibility for the management of four former Tekla Capital Management, LLC closed-end funds: abrdn Healthcare Investors (Ticker: HQH), formerly Tekla
Healthcare Investors, abrdn Life Sciences Investors (Ticker: HQL), formerly Tekla Life Sciences Investors, abrdn Healthcare Opportunities Fund (Ticker: THQ), formerly Tekla Healthcare Opportunities Fund and abrdn
World Healthcare Fund (Ticker: THW), formerly Tekla World Healthcare Fund.
Total Investment Return1
For the fiscal year ended
September 30, 2024, the total return to shareholders of the Fund based on the net asset value (“NAV”) and market price of the Fund, respectively, compared to the Fund’s benchmark, is as follows:
| NAV2,3
| 22.75%
|
| Market Price2
| 35.94%
|
| Nasdaq Biotechnology Index4
| 21.59%
|
For more information about Fund performance,
please visit the Fund on the web at www.abrdnhql.com. Here, you can view quarterly commentary on the Fund's performance, monthly fact sheets, distribution and performance information, and other Fund literature.
NAV, Market Price and
Premium(+)/Discount(-)
The below table represents a
comparison between the current fiscal year end and prior fiscal year end of the Fund's market price to NAV and associated Premium(+) and Discount(-).
|
|
|
|
|
|
| NAV
| Closing
Market
Price
| Premium(+)/
Discount(-)
|
| 9/30/2024
| $16.38
| $15.08
| -7.94%
|
| 9/30/2023
| $15.00
| $12.47
| -16.87%
|
During the fiscal year ended
September 30, 2024, the Fund’s NAV was within a range of $14.11 to $17.36 and the Fund’s market price traded within a range of $11.35 to $15.78. During the fiscal year ended September 30, 2024, the
Fund’s shares traded within a range of a premium(+)/discount(-) of -19.62% to -5.30%.
Managed Distribution Policy
The Fund has a managed
distribution policy that provides for quarterly distributions at a rate set by the Board of Trustees (the "Board"). On February 9, 2024, the Board determined to increase the
{foots1}
| 1
| Past performance is no guarantee of future results. Investment returns and principal value will fluctuate and shares, when sold, may be worth more or less than original cost. Current performance may be
lower or higher than the performance quoted. NAV return data include investment management fees, custodial charges and administrative fees (such as Trustee and legal fees) and assumes the reinvestment of all
distributions.
|
{foots1}
| 2
| Assuming the reinvestment of dividends and distributions.
|
{foots1}
| 3
| The Fund’s total return is based on the reported NAV for each financial reporting period end and may differ from what is reported on the Financial Highlights due to financial statement rounding or adjustments.
|
{foots1}
| 4
| The Nasdaq Biotechnology Index contains securities of Nasdaq-listed companies classified according to the Industry Classification Benchmark as either Biotechnology or Pharmaceuticals industry. The Index
is unmanaged and has been provided for comparison purpose only. No fees or expenses are reflected. You cannot invest directly in an index.
|
| abrdn Life Sciences Investors
| 1
|
Letter to Shareholders (unaudited) (continued)
rolling distribution rate from 8% to
10% for the 12-month period commencing with the distribution payable in March 2024. On May 9, 2024, the Board determined to increase the rolling distribution rate from 10% to 12% for the 12-month period commencing
with the distribution payable in June 2024. This policy will be subject to regular review by the Board. The distributions will be made from current income, supplemented by realized capital gains and, to the extent
necessary, paid-in capital, which is a nontaxable return of capital.
On November 11, 2024, the
Fund announced that it will pay on January 10, 2025, a stock distribution of US $0.50 per share to all shareholders of record as of November 21, 2024. This stock distribution will automatically be paid in newly issued
shares of the Fund unless otherwise instructed by the shareholder. Shares of common stock will be issued at the lower of the NAV per share or the market price per share with a floor for the NAV of not less than 95% of
the market price. Fractional shares will generally be settled in cash, except for registered shareholders with book entry accounts at Computershare Investor Services who will have whole and fractional shares added to
their account.
Shareholders may request to
be paid their quarterly distributions in cash instead of shares of common stock by providing advance notice to the bank, brokerage or nominee who holds their shares if the shares are in “street name” or by
filling out in advance an election card received from Computershare Investor Services if the shares are in registered form.
The Fund is covered under
exemptive relief received by the Fund’s investment manager from the U.S. Securities and Exchange Commission (“SEC”) that allows the Fund to distribute long-term capital gains as frequently as
quarterly in any one taxable year.
Unclaimed Share Accounts
Please be advised that
abandoned or unclaimed property laws for certain states require financial organizations to transfer (escheat) unclaimed property (including Fund shares) to the state. Each state has its own definition of unclaimed
property, and Fund shares could be considered “unclaimed property” due to account inactivity (e.g., no owner-generated activity for a certain period), returned mail (e.g., when mail sent to
a shareholder is returned to the Fund's transfer agent as undeliverable), or a combination of both. If your Fund shares are categorized as unclaimed, your financial advisor or the Fund's transfer agent will
follow the applicable state’s statutory requirements to contact you, but if unsuccessful, laws may require that the shares be escheated to the appropriate state. If this happens, you will have to contact the
state to recover your property, which
may involve time and expense. For more
information on unclaimed property and how to maintain an active account, please contact your financial adviser or the Fund's transfer agent.
Options Writing
In order to further support
the increase in distribution rate for the Fund, the Fund employs a strategy of writing (selling) covered call options on a portion of the common stocks in its portfolio, writing (selling) put options on a portion of
the common stocks in its portfolio and, to a lesser extent, writing (selling) covered call and writing (selling) put options on indices of securities and sectors of securities generally within the healthcare industry.
This option strategy is intended to generate current income from option premiums as a means to enhance distributions payable to the Fund's shareholders. The Fund's investment team does not anticipate any adverse
implications to the Fund's existing total return potential or risk profile as a result of the strategy; however, the investment adviser may choose to decrease or modify its use of the option writing strategy to the
extent that it may negatively impact the Fund's ability to benefit from capital appreciation. The Fund currently expects that it will not write options on more than 10% of its assets.
Open Market Repurchase Program
The Board has approved
an open market repurchase and discount management policy (the “Program”). The Program allows the Fund to purchase, in the open market, its outstanding common shares, with the amount and timing of any
repurchase determined at the discretion of the Fund's investment adviser. Such purchases may be made opportunistically at certain discounts to NAV per share in the reasonable judgment of management based on historical
discount levels and current market conditions. If shares are repurchased, the Fund reports repurchase activity on its website on a monthly basis. For the fiscal year ended September 30, 2024, the Fund did not
repurchase any shares through the Program.
On a quarterly basis, the
Board will receive information on any transactions made pursuant to this policy during the prior quarter and management will post the number of shares repurchased on the Fund's website on a monthly basis. Under
the terms of the Program, the Fund is permitted to repurchase up to 12% of its outstanding shares of common stock in the open market during any 12-month period.
Portfolio Holdings Disclosure
The Fund's complete schedule
of portfolio holdings for the second and fourth quarters of each fiscal year are included in the Fund's semi-annual and annual reports to shareholders. The Fund files its complete schedule of portfolio holdings with
the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form
| 2
| abrdn Life Sciences Investors
|
Letter to Shareholders (unaudited) (concluded)
N-PORT. These reports are available on the
SEC’s website at http://www.sec.gov. The Fund makes the information available to shareholders upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465.
Proxy Voting
A description of the policies
and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month
period ended June 30 is available by August 31 of the relevant year: (1) upon request without charge by calling Investor Relations toll-free at 1-800-522-5465; and (2) on the SEC’s website at
http://www.sec.gov.
Investor Relations Information
As part of abrdn’s
commitment to shareholders, we invite you to visit the Fund on the web at www.abrdnhql.com. Here, you can view monthly fact sheets, quarterly commentary, distribution and performance information, and other Fund
literature.
Enroll in abrdn’s email
services and be among the first to receive the latest closed-end fund news, announcements, videos, and other information. In addition, you can receive electronic versions of important Fund documents, including annual
reports, semi-annual reports, prospectuses and proxy statements. Sign up today at https://www.abrdn.com/en-us/cefinvestorcenter/contact-us/preferences
Contact Us:
| •
| Visit: https://www.abrdn.com/en-us/cefinvestorcenter
|
| •
| Email: Investor.Relations@abrdn.com; or
|
| •
| Call: 1-800-522-5465 (toll free in the U.S.).
|
Yours sincerely,
/s/ Alan Goodson
Alan Goodson
President
{foots1}
All amounts are U.S. Dollars
unless otherwise stated.
| abrdn Life Sciences Investors
| 3
|
Report of the Investment Adviser (unaudited)
Performance review
For the review period, the
Fund returned 22.75%1 net of expenses2, on a net asset value basis versus a return of 21.59% of the Fund’s benchmark, NASDAQ Biotechnology Index3.
Market review
Equity markets posted strong
gains over the 12-month review period. After a prolonged period of monetary tightening and receding inflationary pressures, the U.S. Federal Reserve, European Central Bank, and other central banks started cutting
interest rates in 2024. Moreover, investors were factoring in further interest rate reductions in most regions before the end of 2024. However, with some inflationary pressures still lingering, the world’s major
central banks have maintained a cautious stance on further interest rate declines.
Economic data has generally
been more robust than was feared. The U.S. economy, in particular, has remained resilient and robust, but the labor market has recently shown signs of slowing. Investors continued to be concerned about the outlook for
the Chinese economy, especially the country’s real estate sector and the resulting implications for global economic growth. The ongoing wars in Ukraine and the Middle East continue to be other key risks.
Despite having a robust
positive performance over the last year of approximately 20%, the performance of the healthcare sector lagged that of the broader equity markets (S&P 500 Index total return was approximately 36% for the same
period). Biotechnology, a healthcare subsector this Fund is overweight, performed in-line with the broader healthcare universe. The underperformance of healthcare equities relative to the S&P 500 can be attributed
to several factors. By far the most relevant factor driving this differential in performance is the ongoing surge in interest towards technology stocks, especially those involved in artificial intelligence (AI) and
other innovative technologies. These high -growth sectors have diverted investor attention and capital away from more traditional sectors like healthcare. Companies like NVIDIA and Microsoft experienced
substantial gains due to their advancements in AI, which eclipsed the steady, albeit slower, growth of companies in the healthcare sector.
Despite the relative
underperformance of healthcare as a whole compared to broader equity benchmarks, there were many pockets of strength within the sector. The strong growth of the GLP-1 class of drugs continued to drive the market for
obesity and diabetes treatments. Advancements in gene therapy and cell-based therapies have shown significant potential. Companies focusing on these
innovative treatments have made notable
strides, offering new hope for treating genetic disorders and certain types of cancer.
Historically
strong-performing subsectors such as the life science tools and contract research organizations subsectors also have experienced a mixed year. While demand for their services remained strong, particularly in the areas
of clinical trials and drug development, the life sciences tools and contract research organizations sector faced continued headwinds in contrast to the previous tailwinds during the pandemic.
Overall, the healthcare
sector’s performance was shaped by a combination of innovation, regulatory changes, and shifting investor preferences. While some subsectors faced challenges, others benefited from the ongoing advancements in
medical technology and the growing emphasis on personalized and value-based care.
Portfolio review
The Fund has a
strong focus on biotechnology, biopharmaceutical, and life sciences companies. The Fund invests in opportunities ranging from pre-clinical stages to commercially available products. The Fund also emphasizes
venture capital investments in pre-public companies. By targeting innovative biotech and life sciences firms at various stages of development, the Fund aims to capture significant growth potential.
Among the Fund's equity
investments, at a stock level, Amgen was a positive contributor to performance as it traded positively after its CEO provided an upbeat statement on the early results of the company’s experimental obesity drug,
MariTide, an antibody-based approach to obesity that has the potential for once-a-month dosing. Regeneron Pharmaceuticals, a commercial-stage biotechnology company, also contributed to performance.
Better-than-expected quarterly financial results, continued research and development execution, and investor excitement about its drug pipeline underpinned the stock’s strong performance. Vertex Pharmaceuticals
continued to trade positively on the back of clinical data presented in late 2023, demonstrating the potential for a first-in-class non-opioid pain therapeutic.
Conversely, among the
detractors to performance was Biogen, a biotechnology company focused on neurodegenerative diseases. Its share price underperformed for various reasons, though the main challenge facing the company was the lackluster
uptake of its Alzheimer’s drug, Leqembi. Additionally, the ramp-up of Skyclarys, a drug used to treat Friedrich’s ataxia (a neurodegenerative disorder),
{foots1}
| 1
| Past performance is no guarantee of future results. Investment returns and principal value will fluctuate and shares, when sold, may be worth more or less than original cost. Current performance may be
lower or higher than the performance quoted. Net asset value return data includes investment management fees, custodial charges and administrative fees (such as Trustee and legal fees) and assumes the reinvestment of
all distributions.
|
{foots1}
| 2
| Net of expenses after expenses are deducted.
|
{foots1}
| 3
| NASDAQ Biotechnology Index includes securities of biotechnology or pharmaceutical companies listed in the NASDAQ Composite Index.
|
| 4
| abrdn Life Sciences Investors
|
Report of the Investment Adviser (unaudited) (concluded)
appears to have moderated over the last
several months. Apellis Pharmaceuticals, a company selling a drug for Geographic Atrophy, a form of age-related macular degeneration, also underperformed on continued concerns over the relative safety of its drug
versus those of competitors. Meanwhile, Rallybio also detracted from the Fund's performance over the review period. Rallybio is a clinical-stage biotechnology company focused on preventing fetal and neonatal
alloimmune thrombocytopenia through its lead candidate drug, RLYB212. The company’s share price declined over the period due to concerns about the lack of near-term clinical catalysts and its cash burn, which
have been addressed through a reduced workforce.
The Fund also engaged in a
modest degree of call-option4 writing5 and overwriting6, which were additive to performance.
During the review period, the
venture capital investment portion of the portfolio added to the Fund’s performance. AstraZeneca purchased Amolyt Pharmaceuticals for a total consideration of $1.05 billion on a cash basis. The Fund also
benefited when its venture holding Invetx, a pioneer in protein-based therapeutics for animal health, was sold to Dechra Pharmaceuticals Limited for up to $520 million in total consideration on a cash basis.
The Fund’s quarterly
distribution7 reflects the current policy of providing shareholders with a relatively stable cash flow per share. During the 12-month period ended September 30,
2024, the distributions were comprised of ordinary income, long-term capital gains, and a return of capital.
Outlook and Strategy
Macroeconomic factors remain
as unpredictable as ever, with intense scrutiny of data and predictions about when a pivot in interest rate direction will occur. Geopolitical pressures remain elevated throughout the world. Recessionary concerns are
all too present, as we expect global growth to stagnate while inflationary pressures remain.
The outlook after the
November elections, with Republicans potentially gaining control of the federal government next year, including the House of Representatives, adds to some additional uncertainties. Despite these political shifts, the
fundamental, long-term drivers for healthcare investments remain robust globally.
Our primary focus for the
portfolio is at the stock level, ensuring the portfolio is well diversified on both a regional and sector basis and robust enough to preserve capital in periods of market weakness. We aim to have exposure to
higher-quality businesses within the
healthcare sector with the financial strength
to withstand volatility and with exposure to strong structural drivers for long-term growth.
In general, healthcare
companies' near- and long-term outlooks remain favorable. Long-term demographic trends of an aging population should continue to support the growing demand for new healthcare products and therapies. Innovation
within the sector should also help contribute to the long-term growth of the sector. Due to the healthcare sector’s generally defensive characteristics, we believe its relative underperformance in the short
term should position it favorably, especially if the U.S. and global economies slowdown.
abrdn Inc.
Risk Considerations
Past performance is not an
indication of future results.
Life sciences companies are
likely to be more sensitive to, and possibly more adversely affected by, regulatory, economic or political factors or trends relating to the life sciences industries. Life sciences companies have, in the past, been
characterized by limited product focus, rapidly changing technology and extensive government regulation. In particular, technological advances can render an existing product, which may account for a disproportionate
share of a company’s revenue, obsolete. Obtaining governmental approval from U.S. governmental agencies and from non-U.S. governmental agencies for new products can be lengthy, expensive and uncertain as to
the outcome. Such delays in product development may result in the need to seek additional capital, potentially diluting the interests of existing investors such as the Fund.
Intense competition exists
within and among certain life sciences industries, including competition to obtain and sustain proprietary technology protection upon which life sciences companies can be highly dependent for maintenance of profit
margins and market exclusivity. The complex nature of the technologies involved can lead to patent disputes, including litigation, that may be costly and that could result in a company losing an exclusive right to a
patent. Additionally, certain life sciences companies may be exposed to potential product liability risks that are inherent to the life sciences industry. A product liability claim may have a material adverse effect
on a company in which the Fund has invested.
All of these factors, as well as
others may cause the value of the Fund’s shares to fluctuate significantly over relatively short periods of time.
{foots1}
| 4
| Call option – A contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a set period.
|
{foots1}
| 5
| Call-option writing – Selling a call option, which obligates the seller to sell the asset at the strike price if the option is exercised.
|
{foots1}
| 6
| Overwriting – Selling a call option on an asset the seller does not expect to reach the strike price before expiration, aiming to collect the premium without exercise.
|
{foots1}
| 7
| Distribution – A payment made to its shareholders.
|
| abrdn Life Sciences Investors
| 5
|
Total Investment Return (unaudited)
The following table summarizes
the average annual Fund performance compared to the Fund’s primary benchmark for the 1-year, 3-year, 5-year and 10-year periods ended September 30, 2024.
|
| 1 Year
| 3 Years
| 5 Years
| 10 Years
|
| Net Asset Value (NAV)
| 22.75%
| 1.47%
| 9.74%
| 6.05%
|
| Market Price
| 35.94%
| -0.62%
| 9.93%
| 5.77%
|
| Nasdaq Biotechnology Index
| 21.59%
| -1.30%
| 9.61%
| 5.87%
|
Performance of a $10,000
Investment (as of September 30, 2024)
This graph shows the change in
value of a hypothetical investment of $10,000 in the Fund for the periods indicated. For comparison, the same investment is shown in the indicated index.
Returns represent past
performance. Total investment return at NAV is based on changes in the NAV of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program
sponsored by the Fund’s transfer agent. All return data at NAV includes fees charged to the Fund, which are listed in the Fund’s Statement of Operations under “Expenses.” Total investment
return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE during the period and assumes reinvestment of dividends and distributions, if any, at market prices
pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. The Fund’s total investment return is based on the reported NAV as of the financial reporting period end date of
September 30, 2024. Because the Fund’s shares trade in the stock market based on investor demand, the Fund may trade at a price higher or lower than its NAV. Therefore, returns are calculated based on both
market price and NAV. Past performance is no guarantee of future results. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received
from the Fund. The current performance of the Fund may be lower or higher than the figures shown. The Fund’s yield, return, market price and NAV will fluctuate. Performance information current to the most recent
month-end is available at www.abrdnhql.com or by calling 800-522-5465.
The gross operating expense
ratio based on the fiscal year ended September 30, 2024 was 1.36%.
| 6
| abrdn Life Sciences Investors
|
Portfolio Summary (as a percentage of net assets) (unaudited)
As of September 30, 2024
The following table summarizes
the composition of the Fund’s portfolio by asset allocation.
| Asset Allocation
|
|
| Common Stocks
| 87.1%
|
| Convertible Preferred Stocks
| 6.0%
|
| Milestone Interests
| 3.0%
|
| Convertible Notes
| 0.3%
|
| Warrants
| 0.0%
|
| Short-Term Investment
| 3.7%
|
| Call Options Written
| 0.0%
|
| Liabilities in Excess of Other Assets
| (0.1%)
|
|
| 100.0%
|
The following table summarizes
the industry composition of the Fund’s portfolio, in S&P Global Inc.’s Global Industry Classification Standard (“GICS”) Industries.
| Industries
|
|
| Biotechnology
| 75.8%
|
| Pharmaceuticals
| 15.4%
|
| Life Sciences Tools & Services
| 4.7%
|
| Health Care Providers & Services
| 0.5%
|
| Health Care Equipment & Supplies
| 0.0%
|
| Short-Term Investments
| 3.7%
|
| Liabilities in Excess of Other Assets
| (0.1%)
|
|
| 100.0%
|
The following were the
Fund’s top ten holdings as of September 30, 2024:
| Top Ten Holdings
|
|
| Regeneron Pharmaceuticals, Inc.
| 7.9%
|
| Amgen, Inc.
| 7.9%
|
| Vertex Pharmaceuticals, Inc.
| 6.6%
|
| Gilead Sciences, Inc.
| 6.3%
|
| AstraZeneca PLC, ADR
| 4.2%
|
| Biogen, Inc.
| 3.8%
|
| Alnylam Pharmaceuticals, Inc.
| 3.4%
|
| Sarepta Therapeutics, Inc.
| 2.7%
|
| BioMarin Pharmaceutical, Inc.
| 2.3%
|
| Illumina, Inc.
| 2.2%
|
| abrdn Life Sciences Investors
| 7
|
Portfolio of Investments
As of September 30, 2024
|
| Shares or
Principal
Amount
| Value
|
| Convertible Preferred Stocks(a),(b),(c)—6.0%
|
| Biotechnology—3.4%
|
| Abcuro, Inc. Series B
|
| 232,252
| $ 1,274,994
|
| Arbor Biotechnologies, Inc. Series B, 8.00%
|
| 38,624
| 640,000
|
| Arbor Biotechnologies, Inc. Series C
|
| 389,294
| 1,599,998
|
| Arkuda Therapeutics, Inc. Series A, 6.00%
|
| 1,008,829
| 101
|
| Arkuda Therapeutics, Inc. Series B, 6.00%
|
| 447,566
| 512,821
|
| Flamingo Therapeutics, Inc. Series A3
|
| 107,120
| 728,560
|
| Glycomine, Inc. Series C
|
| 1,133,333
| 680,000
|
| Hotspot Therapeutics, Inc. Series B, 6.00%
|
| 1,291,668
| 2,672,074
|
| Hotspot Therapeutics, Inc. Series C, 6.00%
|
| 284,119
| 827,894
|
| Incendia Therapeutics, Inc. Series A
|
| 832,650
| 1,599,995
|
| Priothera Co. Ltd. Series A, 6.00%
|
| 152,534
| 17
|
| Quell Therapeutics Ltd. Series B
|
| 731,121
| 1,520,000
|
| Recode Therapeutics, Inc. Series B, 5.00%
|
| 155,959
| 1,440,001
|
| Seismic Therapeutics, Inc. Series B
|
| 282,340
| 1,274,991
|
| Third Arc Bio, Inc. Series A, 8.00%
|
| 403,954
| 850,000
|
|
|
|
| 15,621,446
|
| Health Care Equipment & Supplies—0.0%
|
| IO Light Holdings, Inc. Series A2
|
| 421,634
| 42
|
| Pharmaceuticals—2.6%
|
| Biotheryx, Inc. Series E, 8.00%
|
| 609,524
| 346,453
|
| Curasen Therapeutics, Inc. Series A Prime(d)
|
| 9,049,182
| 4,339,083
|
| Curasen Therapeutics, Inc. Series B(d)
|
| 713,482
| 342,115
|
| Endeavor Biomedicines, Inc. Series B, 8.00%
|
| 296,855
| 1,936,860
|
| Endeavor Biomedicines, Inc. Series C
|
| 54,815
| 357,646
|
| Engrail Therapeutics, Inc. Series B
|
| 2,124,646
| 2,250,000
|
| HiberCell, Inc. Series B
|
| 1,305,163
| 574,272
|
| HiberCell, Inc. Series C
|
| 719,652
| 333,631
|
| Qlaris Bio, Inc. Series B
|
| 1,974,522
| 1,550,000
|
|
|
|
| 12,030,060
|
| Total Convertible Preferred Stocks
| 27,651,548
|
| Convertible Notes(a),(b),(c)—0.3%
|
|
|
|
| Biotechnology—0.2%
|
|
|
|
| Hotspot Therapeutics, Inc., 6.00%, 04/10/26
| $
| 323,870
| 323,870
|
| Incendia Therapeutics, Inc., 8.00%, 04/18/25
|
| 738,460
| 738,460
|
|
|
|
| 1,062,330
|
| Pharmaceuticals—0.1%
|
|
|
|
| HiberCell, Inc., 10.00%, 12/31/25
|
| 206,589
| 206,589
|
| Total Convertible Notes
|
|
| 1,268,919
|
| Common Stocks—87.1%
|
|
|
|
| Biotechnology—71.9%
|
| 89bio, Inc.(b)
|
| 206,494
| 1,528,056
|
| Abeona Therapeutics, Inc.(b)
|
| 326,995
| 2,066,608
|
| Affimed NV(b)
|
| 20,862
| 70,096
|
| Akero Therapeutics, Inc.(b)
|
| 66,178
| 1,898,647
|
| Alkermes PLC(b),(e)
|
| 146,949
| 4,113,102
|
| Alnylam Pharmaceuticals, Inc.(b),(e)
|
| 56,670
| 15,585,950
|
| ALX Oncology Holdings, Inc.(b)
|
| 66,211
| 120,504
|
| Amgen, Inc.(e)
|
| 112,985
| 36,404,897
|
| Apellis Pharmaceuticals, Inc.(b)
|
| 80,687
| 2,327,013
|
| Arcellx, Inc.(b)
|
| 18,873
| 1,576,084
|
| Arcutis Biotherapeutics, Inc.(b)
|
| 160,684
| 1,494,361
|
| Ardelyx, Inc.(b)
|
| 441,923
| 3,044,849
|
| Argenx SE, ADR(b)
|
| 17,285
| 9,369,853
|
| Arrowhead Pharmaceuticals, Inc.(b)
|
| 185,554
| 3,594,181
|
| Ascendis Pharma AS, ADR(b),(e)
|
| 51,915
| 7,751,429
|
| Avidity Biosciences, Inc.(b)
|
| 24,836
| 1,140,717
|
|
| Shares or
Principal
Amount
| Value
|
|
|
|
|
|
|
|
| BeiGene Ltd., ADR(b)
|
| 16,838
| $ 3,780,299
|
| Biogen, Inc.(b)
|
| 90,669
| 17,575,279
|
| BioMarin Pharmaceutical, Inc.(b)
|
| 148,391
| 10,430,403
|
| BioNTech SE, ADR(b)
|
| 66,750
| 7,927,897
|
| Caribou Biosciences, Inc.(b)
|
| 181,487
| 355,715
|
| Chinook Therapeutics, Inc. CVR(a),(b),(c)
|
| 59,063
| 133,482
|
| Corbus Pharmaceuticals Holdings, Inc.(b)
|
| 26,894
| 554,823
|
| Crinetics Pharmaceuticals, Inc.(b)
|
| 35,467
| 1,812,364
|
| Cytokinetics, Inc.(b),(e)
|
| 92,756
| 4,897,517
|
| Denali Therapeutics, Inc.(b)
|
| 147,796
| 4,305,297
|
| Exelixis, Inc.(b)
|
| 113,075
| 2,934,296
|
| Galera Therapeutics, Inc.(b)
|
| 125,773
| 9,056
|
| Geron Corp.(b)
|
| 705,799
| 3,204,327
|
| Gilead Sciences, Inc.
|
| 343,263
| 28,779,170
|
| GRAIL, Inc.(b)
|
| 61,810
| 850,506
|
| Ideaya Biosciences, Inc.(b)
|
| 76,201
| 2,414,048
|
| I-Mab, ADR(b)
|
| 26,109
| 32,375
|
| Immatics NV(b)
|
| 101,700
| 1,160,397
|
| Immunovant, Inc.(b)
|
| 160,803
| 4,584,494
|
| Insmed, Inc.(b)
|
| 57,005
| 4,161,365
|
| Ionis Pharmaceuticals, Inc.(b)
|
| 84,585
| 3,388,475
|
| Iovance Biotherapeutics, Inc.(b)
|
| 131,800
| 1,237,602
|
| Krystal Biotech, Inc.(b)
|
| 14,321
| 2,606,852
|
| Merus NV(b)
|
| 31,049
| 1,551,208
|
| Moderna, Inc.(b)
|
| 66,416
| 4,438,581
|
| Mural Oncology PLC(b)
|
| 14,952
| 46,800
|
| Natera, Inc.(b)
|
| 24,908
| 3,162,071
|
| Neurocrine Biosciences, Inc.(b)
|
| 46,766
| 5,388,379
|
| Nkarta, Inc.(b)
|
| 28,988
| 131,026
|
| Novavax, Inc.(b)
|
| 26,612
| 336,110
|
| Nuvalent, Inc., Class A(b)
|
| 18,256
| 1,867,589
|
| Oruka Therapeutics, Inc.
|
| 2,705
| 66,300
|
| Praxis Precision Medicines, Inc.(b)
|
| 1,572
| 90,453
|
| Pyxis Oncology, Inc.(b)
|
| 286,408
| 1,051,117
|
| Rallybio Corp.(b)
|
| 377,375
| 441,529
|
| Regeneron Pharmaceuticals, Inc.(b),(e)
|
| 34,679
| 36,454,901
|
| Rhythm Pharmaceuticals, Inc.(b)
|
| 38,129
| 1,997,578
|
| Sarepta Therapeutics, Inc.(b)
|
| 98,149
| 12,257,829
|
| Scholar Rock Holding Corp.(b)
|
| 334,985
| 2,683,230
|
| Summit Therapeutics, Inc.(b)
|
| 390,932
| 8,561,411
|
| Tenaya Therapeutics, Inc.(b)
|
| 550,700
| 1,062,851
|
| TScan Therapeutics, Inc.(b)
|
| 233,598
| 1,163,318
|
| Ultragenyx Pharmaceutical, Inc.(b),(e)
|
| 82,200
| 4,566,210
|
| uniQure NV(b)
|
| 513,577
| 2,531,935
|
| Vaxcyte, Inc.(b)
|
| 32,628
| 3,728,402
|
| Vertex Pharmaceuticals, Inc.(b),(e)
|
| 65,186
| 30,316,705
|
| Vigil Neuroscience, Inc.(b)
|
| 235,011
| 799,037
|
| Xencor, Inc.(b)
|
| 97,385
| 1,958,412
|
| Xenon Pharmaceuticals, Inc.(b)
|
| 110,608
| 4,354,637
|
| Zenas Biopharma, Inc.(b)
|
| 23,511
| 397,806
|
|
|
|
| 330,627,811
|
| Health Care Equipment & Supplies—0.0%
|
| Willow Laboratories, Inc.(a),(b),(c)
|
| 130,000
| 13
|
| Health Care Providers & Services—0.5%
|
| Guardant Health, Inc.(b)
|
| 90,930
| 2,085,934
|
| Life Sciences Tools & Services—4.7%
|
| Adaptive Biotechnologies Corp.(b)
|
| 381,660
| 1,954,099
|
| Avantor, Inc.(b)
|
| 42,923
| 1,110,418
|
| Codexis, Inc.(b)
|
| 800,410
| 2,465,263
|
| 8
| abrdn Life Sciences Investors
|
Portfolio of Investments (continued)
As of September 30, 2024
|
| Shares or
Principal
Amount
| Value
|
| Common Stocks (continued)
|
|
|
|
| Life Sciences Tools & Services (continued)
|
| Illumina, Inc.(b)
|
| 76,739
| $ 10,007,533
|
| Medpace Holdings, Inc.(b)
|
| 10,289
| 3,434,468
|
| Quanterix Corp.(b)
|
| 166,398
| 2,156,518
|
| Thermo Fisher Scientific, Inc.
|
| 908
| 561,662
|
|
|
|
| 21,689,961
|
| Pharmaceuticals—10.0%
|
| Amylyx Pharmaceuticals, Inc.(b)
|
| 603,751
| 1,956,153
|
| Arvinas, Inc.(b)
|
| 78,585
| 1,935,549
|
| AstraZeneca PLC, ADR
|
| 247,570
| 19,288,179
|
| Axsome Therapeutics, Inc.(b)
|
| 10,818
| 972,214
|
| Edgewise Therapeutics, Inc.(b)
|
| 116,698
| 3,114,670
|
| Eli Lilly & Co.(e)
|
| 1,980
| 1,754,161
|
| Fusion Pharmaceuticals, Inc. CVR(a),(b),(c),(f)
|
| 3,256
| 4,493
|
| Intra-Cellular Therapies, Inc.(b),(e)
|
| 91,659
| 6,706,689
|
| Marinus Pharmaceuticals, Inc.(b)
|
| 1,126,127
| 1,981,983
|
| Oculis Holding AG(b),(f)
|
| 148,668
| 1,823,413
|
| Spectrum Pharmaceuticals, Inc. CVR(a),(b),(c)
|
| 34,880
| 0
|
| Structure Therapeutics, Inc., ADR(b)
|
| 69,997
| 3,072,168
|
| Tarsus Pharmaceuticals, Inc.(b)
|
| 102,555
| 3,373,034
|
| Tetraphase Pharmaceuticals, Inc. CVR(a),(b),(c)
|
| 14,218
| 853
|
|
|
|
| 45,983,559
|
| Total Common Stocks
| 400,387,278
|
| Warrants(a),(b),(c)—0.0%
|
|
|
|
| Pharmaceuticals—0.0%
|
|
|
|
| HiberCell, Inc.(expiration date 09/15/28, exercise price $0.46)
|
| 719,652
| 1
|
| HiberCell, Inc.(expiration date 09/13/34, exercise price $0.08)
|
| 2,582,362
| 2
|
|
|
|
| 3
|
| Short-Term Investment—3.7%
|
| State Street Institutional U.S. Government Money Market Fund, Premier Class, 4.94%(g)
|
| 17,231,328
| 17,231,328
|
| Total Short-Term Investment
| 17,231,328
|
Total Investments Before Milestone Interests—97.1%
(Cost $394,617,355)
| 446,539,076
|
|
|
| Interests
| Value
|
| Milestone Interests(a),(b),(c)—3.0%
|
| Biotechnology—0.3%
|
| Amphivena Milestone Interest
|
| 1
| $ 0
|
| Invetx, Inc. Milestone Interest
|
| 1
| 1,399,863
|
|
|
|
| 1,399,863
|
| Pharmaceuticals—2.7%
|
| Afferent Milestone Interest
|
| 1
| 0
|
| Amolyt Milestone Interest
|
| 1
| 723,166
|
| Ethismos Research Milestone Interest
|
| 1
| 0
|
| Neurovance Milestone Interest
|
| 1
| 11,639,314
|
|
|
|
| 12,362,480
|
| Total Milestone Interests
| 13,762,343
|
| Total Investments (Cost $398,232,404)(h)—100.1%
| 460,301,419
|
| Liabilities in Excess of Other Assets (0.1%)
| (606,813)
|
| Net Assets—100.0%
| $459,694,606
|
| (a)
| Level 3 security. See Note 2(a) of the accompanying Notes to Financial Statements.
|
| (b)
| Non-income producing security.
|
| (c)
| Restricted security.
|
| (d)
| Affiliated issuers in which the Fund holds 5% or more of the voting securities (total market value of $4,681,198).
|
| (e)
| A portion of security is pledged as collateral for call options written.
|
| (f)
| Foreign security.
|
| (g)
| Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of September 30, 2024.
|
| (h)
| See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities.
|
| ADR
| American Depositary Receipt
|
| CVR
| Contingent Value Right
|
| PLC
| Public Limited Company
|
| abrdn Life Sciences Investors
| 9
|
Portfolio of Investments (concluded)
As of September 30, 2024
|
| Number of Contracts
(100 shares each)
| Notional Amount ($)
| Value ($)
|
| Option Contracts Written—0.0%
|
| Call Options Written—0.0%
|
| Alkermes PLC Oct24 30 Call
| 155
| (465,000)
| (4,263)
|
| Alnylam Pharmaceuticals, Inc. Oct24 290 Call
| 16
| (464,000)
| (6,160)
|
| Amgen, Inc. Oct24 350 Call
| 13
| (455,000)
| (702)
|
| Ascendis Pharma AS Oct24 150 Call
| 47
| (705,000)
| (21,150)
|
| Cytokinetics, Inc. Oct24 65 Call
| 72
| (468,000)
| (2,700)
|
| Eli Lilly & Co. Oct24 940 Call
| 7
| (658,000)
| (4,060)
|
| Intra-Cellular Therapies, Inc. Oct24 80 Call
| 58
| (464,000)
| (2,320)
|
| Regeneron Pharmaceuticals, Inc. Oct24 1200 Call
| 4
| (480,000)
| (500)
|
| Ultragenyx Pharmaceutical, Inc. Oct24 65 Call
| 72
| (468,000)
| (8,280)
|
| Vertex Pharmaceuticals, Inc. Oct24 500 Call
| 9
| (450,000)
| (675)
|
Total Call Options Written
(Premiums received $(93,769))
| (50,810)
|
See Accompanying Notes to Financial
Statements.
| 10
| abrdn Life Sciences Investors
|
Statement of Assets and Liabilities
As of September 30, 2024
| Assets
|
|
| Investments in unaffiliated issuers, at value(cost $372,690,568)
| $ 424,626,550
|
| Investments in affiliated issuers, at value (cost $4,695,459)
| 4,681,198
|
| Short-term investment, at value (cost $17,231,328)
| 17,231,328
|
| Milestone interests, at value(cost $3,615,049)
| 13,762,343
|
| Foreign currency, at value (cost $1)
| 1
|
| Receivable for investments sold
| 70,167
|
| Interest and dividends receivable
| 160,939
|
| Tax reclaim receivable
| 8,970
|
| Prepaid expenses
| 41,531
|
| Other assets (Note 2j)
| 189
|
| Total assets
| 460,583,216
|
| Liabilities
|
|
| Investment advisory fees payable (Note 3)
| 405,112
|
| Written options, at value (premiums received$93,769)
| 50,810
|
| Trustee fees payable
| 34,250
|
| Investor relations fees payable (Note 3)
| 24,368
|
| Administration fees payable
| 4,705
|
| Payable for investments purchased
| 1,791
|
| Other accrued expenses
| 367,574
|
| Total liabilities
| 888,610
|
| Commitments and Contingencies (Notes 8 & 10)
|
|
|
|
| Net Assets
| $459,694,606
|
| Composition of Net Assets
|
|
| Common stock (par value $0.010 per share) (Note 5)
| $ 280,614
|
| Paid-in capital in excess of par
| 415,285,501
|
| Distributable earnings
| 44,128,491
|
| Net Assets
| $459,694,606
|
| Net asset value per share based on 28,061,399 shares issued and outstanding
| $16.38
|
See Accompanying Notes to
Financial Statements.
| abrdn Life Sciences Investors
| 11
|
Statement of Operations
For the Year Ended September 30, 2024
| Net Investment Income
|
|
| Investment Income:
|
|
| Dividends
| $ 2,936,843
|
| Interest and other income
| 1,043,143
|
| Total investment income
| 3,979,986
|
| Expenses:
|
|
| Investment advisory fee (Note 3)
| 4,511,562
|
| Reports to shareholders and proxy solicitation
| 405,202
|
| Legal fees and expenses
| 312,089
|
| Trustees' fees and expenses
| 171,595
|
| Investor relations fees and expenses (Note 3)
| 142,326
|
| Independent auditors’ fees and tax expenses
| 134,136
|
| Transfer agent’s fees and expenses
| 56,656
|
| Custodian’s fees and expenses
| 41,938
|
| Administration fee
| 27,973
|
| Insurance expense
| 24,606
|
| Miscellaneous
| 72,250
|
| Total expenses
| 5,900,333
|
|
|
| Net Investment Loss
| (1,920,347)
|
| Net Realized/Unrealized Gain/(Loss):
|
|
| Net realized gain/(loss) from:
|
|
| Investments in unaffiliated issuers
| 31,312,751
|
| Written options
| 644,422
|
|
| 31,957,173
|
| Net change in unrealized appreciation/depreciation on:
|
|
| Investments in unaffiliated issuers
| 50,029,359
|
| Investments in affiliated issuers
| (14,261)
|
| Milestone interests
| 5,201,576
|
| Written options
| 42,959
|
|
| 55,259,633
|
| Net realized and unrealized gain from investments, milestone interests and written options
| 87,216,806
|
| Change in Net Assets Resulting from Operations
| $85,296,459
|
See Accompanying Notes to
Financial Statements.
| 12
| abrdn Life Sciences Investors
|
Statements of Changes in Net Assets
|
| For the
Year Ended
September 30, 2024
| For the
Year Ended
September 30, 2023
|
| Increase/(Decrease) in Net Assets:
|
|
|
| Operations:
|
|
|
| Net investment loss
| $(1,920,347)
| $(2,175,439)
|
| Net realized gain from investments and written options
| 31,957,173
| 35,884,579
|
| Net change in unrealized appreciation/depreciation investments, milestone interests
and written options
| 55,259,633
| (11,356,892)
|
| Net increase in net assets resulting from operations
| 85,296,459
| 22,352,248
|
| Distributions to Shareholders From:
|
|
|
| Distributable earnings
| (39,686,734)
| (33,382,300)
|
| Return of capital
| (5,606,991)
| –
|
| Net decrease in net assets from distributions
| (45,293,725)
| (32,382,300)
|
| Reinvestment of dividends resulting in the issuance of 1,270,202 and 1,111,561 shares
of common stock, respectively
| 17,758,355
| 15,061,212
|
| Change in net assets
| 57,761,089
| 4,031,160
|
| Net Assets:
|
|
|
| Beginning of year
| 401,933,517
| 397,902,357
|
| End of year
| $459,694,606
| $401,933,517
|
Amounts listed as
“–” are $0 or round to $0.
See Accompanying Notes to
Financial Statements.
| abrdn Life Sciences Investors
| 13
|
|
| For the Fiscal Years Ended September 30,
|
|
| 2024
(a)
| 2023
| 2022
(b)
| 2021
(b)
| 2020
(b)
|
| PER SHARE OPERATING PERFORMANCE:
|
|
|
|
|
|
| Net asset value per common share, beginning of year
| $15.00
| $15.49
| $21.22
| $20.25
| $16.55
|
| Net investment loss(c)
| (0.07)
| (0.08)
| (0.12)
| (0.17)
| (0.09)
|
| Net realized and unrealized gains/(losses) on investments, written
options and foreign currency transactions
| 3.11
| 0.87
| (4.14)
| 2.83
| 5.25
|
| Total from investment operations applicable to common shareholders
| 3.04
| 0.79
| (4.26)
| 2.66
| 5.16
|
| Distributions to common shareholders from:
|
|
|
|
|
|
| Net investment income
| (0.69)
| (0.02)
| (0.03)
| (0.42)
| –
|
| Net realized gains
| (0.76)
| (1.26)
| (1.44)
| (1.27)
| (1.47)
|
| Return of capital
| (0.21)
| –
| –
| –
| –
|
| Total distributions
| (1.66)
| (1.28)
| (1.47)
| (1.69)
| (1.47)
|
| Effect of Fund shares repurchased
| –
| –
| –
| –
| 0.01
|
| Net asset value per common share, end of year
| $16.38
| $15.00
| $15.49
| $21.22
| $20.25
|
| Market price, end of year
| $15.08
| $12.47
| $13.66
| $20.80
| $17.58
|
| Total Investment Return Based on(d):
|
|
|
|
|
|
| Market price
| 35.94%
| 0.23%
| (27.97%)
| 28.32%
| 27.50%
|
| Net asset value
| 22.75%
| 6.32%
| (19.88%)
| 13.65%
| 34.00%
|
| Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data:
|
|
|
|
|
|
| Net assets applicable to common shareholders, end of year (000 omitted)
| $459,695
| $401,934
| $397,902
| $523,440
| $483,570
|
| Average net assets applicable to common shareholders (000 omitted)
| $433,142
| $421,289
| $436,937
| $519,380
| $449,677
|
| Gross operating expenses
| 1.36%
| 1.35%
| 1.38%
| 1.24%
| 1.22%
|
| Net Investment loss
| (0.44%)
| (0.52%)
| (0.68%)
| (0.80%)
| (0.47%)
|
| Portfolio turnover
| 46%
| 35%
| 42%
| 62%
| 51%
|
| (a)
| Effective October 27, 2023, abrdn Inc. became the investment adviser of the Fund. Prior to October 27, 2023, the Fund was managed by Tekla Capital Management, LLC.
|
| (b)
| Beginning with the year ended September 30, 2023, the Fund’s financial statements were audited by KPMG LLP. Previous years were audited by a different independent registered public accounting
firm.
|
| (c)
| Based on average shares outstanding.
|
| (d)
| Total investment return based on market value is calculated assuming that shares of the Fund’s common stock were purchased at the closing market price as of the beginning of the
period, dividends, capital gains and other distributions were reinvested as provided for in the Fund’s dividend reinvestment plan and then sold at the closing market price per share on the last day of the
period. The computation does not reflect any sales commission investors may incur in purchasing or selling shares of the Fund. The total investment return based on the net asset value is similarly computed except that
the Fund’s net asset value is substituted for the closing market value.
|
Amounts listed as
“–” are $0 or round to $0.
See Accompanying Notes to
Financial Statements.
| 14
| abrdn Life Sciences Investors
|
Notes to Financial Statements
September 30, 2024
1. Organization
abrdn Life Sciences
Investors (the "Fund") is a Massachusetts business trust formed on February 20, 1992, and registered under the Investment Company Act of 1940 as a non-diversified closed-end management investment company. The Fund
commenced operations on May 8, 1992. The Fund’s investment objective is to seek long-term capital appreciation by investing primarily in securities of life sciences companies. The Fund invests primarily in
securities of public and private companies that are believed by the Fund’s Investment Adviser, abrdn Inc. (as of October 27, 2023), (the "Investment Adviser," the "Adviser" or "abrdn") (prior to October 27,
2023 Tekla Capital Management, LLC), to have significant potential for above-average growth. The Fund may invest up to 20% of its net assets in securities of foreign issuers, expected to be located primarily in
Western Europe, Canada and Japan, and securities of U.S. issuers that are traded primarily in foreign markets.
2. Summary of Significant
Accounting Policies
The Fund is an investment
company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946 Financial Services-Investment
Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to generally accepted accounting principles in the
United States of America ("U.S. GAAP"). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of
the Fund are maintained in U.S. Dollars and the U.S. Dollar is used as both the functional and reporting currency.
a. Security Valuation:
The Fund values its
securities at fair value, consistent with regulatory requirements. "Fair value" is defined in the Fund's Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a
liability in an orderly transaction between willing market participants without a compulsion to transact at the measurement date, also referred to as market value. Pursuant to Rule 2a-5 under the 1940 Act, the
Board designated abrdn as the valuation designee ("Valuation Designee") for the Fund to perform the fair value determinations relating to Fund investments for which market quotations are not readily available or
deemed unreliable. Prior to June 12, 2024, with respect to the Fund's investments in securities of early and /or later stage financing of a privately held companies ("Venture Capital Securities"), the Private Venture
Valuation Committee which was a Committee of the Board, performed fair value
determinations for the Fund. Effective
June 12, 2024, the Board designated abrdn as the Valuation Designee.
In accordance with the
authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques
used to measure the fair value. The hierarchy assigns Level 1, the highest level, measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to
valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for similar assets, and Level 3, the lowest level, measurements to valuations based upon unobservable
inputs that are significant to the valuation. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk
inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable
inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable
inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in
the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.
Open-end mutual funds are
valued at the respective NAV as reported by such company. The prospectuses for the registered open-end management investment companies in which the Fund invests explain the circumstances under which those companies
will use fair value pricing and the effects of using fair value pricing. Closed-end funds and exchange-traded funds (“ETFs”) are valued at the market price of the security at the Valuation Time (defined
below). A security using any of these pricing methodologies is generally determined to be a Level 1 investment.
Long-term debt and other
fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider. If there are no current day bids, the security is valued at the
previously applied bid. Pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size and the strategies employed by the Valuation Designee generally
trade in round lot sizes. In certain circumstances, some trades may occur in smaller “odd lot” sizes which may be effected at lower, or higher, prices than institutional round lot trades. Short-term debt
securities (such as commercial paper and U.S. treasury bills) having a remaining maturity of 60 days or less are valued at the last quoted or evaluated bid price on the valuation date
| abrdn Life Sciences Investors
| 15
|
Notes to Financial Statements (continued)
September 30, 2024
provided by an independent pricing service,
or on the basis of amortized cost, if it represents the best approximation of fair value. Debt and other fixed-income securities are generally determined to be Level 2 investments.
Equity securities that are
traded on an exchange are valued at the last quoted sale price or the official close price on the principal exchange on which the security is traded at the “Valuation Time” subject to application, when
appropriate, of the valuation factors described in the paragraph below. Under normal circumstances, the Valuation Time is as of the close of regular trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m.
Eastern Time). In the absence of a sale price, the security is valued at the mean of the bid/ask price quoted at the close on the principal exchange on which the security is traded. Securities traded on NASDAQ are
valued at the NASDAQ official closing price.
Convertible preferred shares,
warrants or convertible note interests in Venture Capital Securities, milestone interests, and other restricted securities are typically valued in good faith, based upon the recommendations made by the Valuation
Designee pursuant to fair valuation policies and procedures approved by the Board.
Derivative instruments are
valued at fair value. Exchange-traded futures are generally Level 1 investments and centrally cleared swaps and forwards are generally Level 2 investments. Forward foreign currency contracts are generally valued based
on the bid price of the forward rates and the current spot rate. Forward exchange rate quotations are available for scheduled settlement dates, such as 1-, 3-, 6-, 9- and 12-month periods. An interpolated valuation is
derived based on the actual settlement dates of the forward contracts held. Futures contracts are valued at the settlement price or at the last bid price if no settlement price is available. Swap agreements are
generally valued by an approved pricing agent based on the terms of the swap agreement (including future cash flows). Exchange-traded options are valued at the last quoted sales price. In the absence of a sales price,
options are valued at the mean of the bid/ask price quoted at the close on the exchange on which the options trade. When market quotations or exchange rates are not readily available, or if the Adviser concludes
that such market quotations do not accurately reflect fair value, the fair value of the Fund’s assets are determined in good faith in accordance with the Valuation Procedures.
Foreign equity securities
that are traded on foreign exchanges that close prior to the Valuation Time are valued by applying valuation factors to the last sale price or the mean price as noted above. Valuation factors are provided by an
independent pricing service provider. These valuation factors are used when pricing the Fund's portfolio holdings to estimate market movements between the time foreign markets close and the time the Fund values such
foreign securities. These valuation factors are based on inputs such as depositary receipts, indices, futures, sector indices/ETFs, exchange
rates, and local exchange opening and
closing prices of each security. When prices with the application of valuation factors are utilized, the value assigned to the foreign securities may not be the same as quoted or published prices of the securities on
their primary markets. A security that applies a valuation factor is generally determined to be a Level 2 investment because the exchange-traded price has been adjusted. Valuation factors are not utilized if the
independent pricing service provider is unable to provide a valuation factor or if the valuation factor falls below a predetermined threshold; in such case, the security is determined to be a Level 1 investment.
Short-term investments are
comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. The Fund sweeps available cash into the State Street Institutional U.S. Government Money Market Fund,
which has elected to qualify as a “government money market fund” pursuant to Rule 2a-7 under the 1940 Act, and has an objective, which is not guaranteed, to maintain a $1.00 per share NAV. Generally,
these investment types are categorized as Level 1 investments.
In the event that a
security’s, other than a Venture Capital Security, market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closes before the
Valuation Time), the security is valued at fair value as determined by the Valuation Designee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved by
the Board. A security that has been fair valued by the Adviser may be classified as Level 2 or Level 3 depending on the nature of the inputs.
Venture Capital Securities
are valued based on a consideration of relevant factors, including both observable and unobservable inputs. Observable and unobservable inputs considered may include (i) the existence of any contractual
restrictions on the disposition of securities; (ii) information obtained from the company, which may include an analysis of the company's financial statements, products, intended markets or technologies; (iii) the
price of the same or similar security negotiated at arm's length in an issuer's completed subsequent round of financing; (iv) the price and extent of public trading in similar securities of the issuer or of comparable
companies; or (v) a probability and time value adjusted analysis of contractual terms. Where available and appropriate, multiple valuation methodologies are applied to confirm fair value. Significant unobservable
inputs are often used in the fair value determination. A significant change in any of these inputs may result in a significant change in the fair value measurement. Additionally, changes in the market environment and
other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different from the valuations used at the date of these
financial statements.
| 16
| abrdn Life Sciences Investors
|
Notes to Financial Statements (continued)
September 30, 2024
The three-level hierarchy of inputs is
summarized below:
Level 1 - quoted prices
(unadjusted) in active markets for identical investments;
Level 2 - other significant observable
inputs (including valuation factors, quoted prices for similar securities, interest rates, prepayment speeds, and credit risk, etc.); or
Level 3 - significant unobservable inputs
(including the Fund’s own assumptions in determining the fair value of investments).
Level 3 investments are valued using
significant unobservable inputs. The Fund may also use a discounted cash flow based valuation approach in which the anticipated future cash flows of the investment are used to estimate the current fair value. The
derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
A summary of standard
inputs is listed below:
| Security Type
| Standard Inputs
|
| Foreign equities utilizing a fair value factor
| Depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local
exchange opening and closing prices of each security.
|
The following is a
summary of the inputs used as of September 30, 2024 in valuing the Fund's investments and other financial instruments at fair value. The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:
| Investments, at Value
| Level 1 – Quoted
Prices
| Level 2 – Other Significant
Observable Inputs
| Level 3 – Significant
Unobservable Inputs
| Total
|
| Assets
|
|
|
| Investments in Securities
|
|
|
|
| Common Stocks
| $400,248,437
| $–
| $138,841
| $400,387,278
|
| Convertible Preferred Stocks
| –
| –
| 27,651,548
| 27,651,548
|
| Milestone Interests
| –
| –
| 13,762,343
| 13,762,343
|
| Convertible Notes
| –
| –
| 1,268,919
| 1,268,919
|
| Warrants
| –
| –
| 3
| 3
|
| Short-Term Investment
| 17,231,328
| –
| –
| 17,231,328
|
| Total Investments
| $417,479,765
| $–
| $42,821,654
| $460,301,419
|
| Other Assets
| $–
| $–
| $189
| $189
|
| Total Investment Assets
| $417,479,765
| $–
| $42,821,843
| $460,301,608
|
| Liabilities
|
|
|
| Other Financial Instruments
|
|
|
|
| Written Options
| $(50,810)
| $–
| $–
| $(50,810)
|
| Total Investment Liabilities
| $(50,810)
| $–
| $–
| $(50,810)
|
| abrdn Life Sciences Investors
| 17
|
Notes to Financial Statements (continued)
September 30, 2024
Rollforward of Level 3 Fair Value Measurements
For the Year Ended September 30, 2024
|
Investments
in Securities
| Balance
as of
September 30,
2023
| Net Realized
Gain (Loss)
and Change
in Unrealized
Appreciation/
Depreciation
| Net
Purchases
and
conversions
| Net
Sales
and
conversions
| Net
Transfers
in to
(out of)
Level 3
| Balance
as of
September 30,
2024
| Net Change in
Unrealized
Appreciation/
Depreciation
from
Investments
Held at
September 30,
2024
|
| Common Stocks
|
|
|
|
|
|
|
|
| Biotechnology
| $0
| $36,619
| $0
| $0
| $96,863
| $133,482
| $36,619
|
| Health Care Equipment & Supplies
| 103,252
| (103,239)
| 0
| 0
| 0
| 13
| (103,239)
|
| Health Care Providers & Services
| 18,948
| (18,948)
| 0
| 0
| 0
| 0
| 0
|
| Pharmaceuticals
| 0
| (3,126)
| 0
| 0
| 8,472
| 5,346
| (3,126)
|
| Convertible Notes
|
|
|
|
|
|
|
|
| Biotechnology
| 0
| 0
| 1,062,330
| 0
| 0
| 1,062,330
| 0
|
| Pharmaceuticals
| 362,738
| 0
| 206,589
| (362,738)
| 0
| 206,589
| 0
|
| Convertible Preferred Stocks
|
|
|
|
|
|
|
|
| Biotechnology
| 15,393,085
| 6,863,573
| 5,111,866
| (11,747,078)
| 0
| 15,621,446
| (1,559,960)
|
| Health Care Equipment & Supplies
| 640,378
| (640,672)
| 336
| 0
| 0
| 42
| (640,672)
|
| Pharmaceuticals
| 8,593,631
| 3,914,292
| 8,865,966
| (9,343,829)
| 0
| 12,030,060
| (128,834)
|
| Milestone Interests
|
|
|
|
|
|
|
|
| Biotechnology
| 0
| 2,165
| 1,399,863
| (2,165)
| 0
| 1,399,863
| 0
|
| Pharmaceuticals
| 9,669,038
| 5,123,904
| 684,946
| (3,115,408)
| 0
| 12,362,480
| 4,809,513
|
| Warrants
|
|
|
|
|
|
|
|
| Pharmaceuticals
| 0
| (1,291)
| 1,294
| 0
| 0
| 3
| (1,291)
|
| Other Assets
| 189
| 0
| 2,647
| (2,647)
| 0
| 189
| 0
|
| Total
| $34,781,259
| $15,173,277
| $17,335,837
| $(24,573,865)
| $105,335
| $42,821,843
| $2,409,010
|
| Description
| Fair Value at
09/30/24
| Valuation Technique (s)
| Unobservable Inputs
| Range
| Weighted
Average
| Relationship
Between
Fair Value
and Input;
if input value
increases then
Fair Value:
|
| Common Stocks
| $13
| Market approach
| Transaction Price(a)
| N/A
| N/A
| Increase
|
|
| $138,828
| Income approach
| Probability of events
Timing of events
| 0.00%-90.00%
0.08-5.00 years
| 74.98%
1.91 years
| Increase
Decrease
|
| Convertible Notes
| $1,268,919
| Market approach
| Transaction Price(a)
| N/A
| N/A
| Increase
|
| Convertible Preferred Stocks
| $22,730,755
| Market approach
| Transaction Price(a)
| N/A
| N/A
| Increase
|
| 18
| abrdn Life Sciences Investors
|
Notes to Financial Statements (continued)
September 30, 2024
| Description
| Fair Value at
09/30/24
| Valuation Technique (s)
| Unobservable Inputs
| Range
| Weighted
Average
| Relationship
Between
Fair Value
and Input;
if input value
increases then
Fair Value:
|
|
| $4,407,871
| Market approach
| Timing of events
Implied market volatility
Risk free rate
Transaction Price(a)
| 3 years
61.68%
3.47%
N/A
| 3 years
61.68%
3.47%
N/A
| Decrease
Decrease
Decrease
Increase
|
|
| $512,922
| Income approach
| Discount rate
Probability of events
Timing of events
| 4.49%
1.00%-33.00%
0.50-12.00 years
| 4.49%
21.29%
3.17 years
| Decrease
Increase
Decrease
|
| Milestone Interests
| $13,762,343
| Income approach
| Discount rate
Probability of events
Timing of events
| 4.49%-10.00%
0.00%-90.00%
0.00-9.25 years
| 5.02%
58.28%
4.13 years
| Decrease
Increase
Decrease
|
| Warrants
| $3
| Market approach
| Transaction Price(a)
| N/A
| N/A
| Increase
|
| Other Assets
| $189
| Income approach
| Discount rate
Probability of events
Timing of events
| 4.49%
5.00%
7 years
| 4.49%
5.00%
7 years
| Decrease
Increase
Decrease
|
|
| $42,821,843
|
|
|
|
|
|
Amounts listed as
“–” are $0 or round to $0.
| (a)
| The valuation technique used as a basis to approximate fair value of these investments is based on a transaction price or subsequent financing rounds.
|
b. Restricted
Securities:
Restricted securities are privately-placed
securities whose resale is restricted under U.S. securities laws. The Fund may invest in restricted securities, including unregistered securities eligible for resale without registration pursuant to Rule 144A and
privately-placed securities of U.S. and non-U.S. issuers offered outside the U.S. without registration pursuant to Regulation S under the Securities Act of 1933, as amended (the "1933 Act"). Rule 144A securities may
be freely traded among certain qualified institutional investors, such as the Fund, but resale of such securities in the U.S. is permitted only in limited circumstances.
c. Foreign Currency
Translation:
Foreign securities,
currencies, and other assets and liabilities denominated in foreign currencies are translated into U.S. Dollars at the exchange rate of said currencies against the U.S. Dollar, as of the Valuation Time, as provided by
an independent pricing service approved by the Board.
Foreign currency amounts are
translated into U.S. Dollars on the following basis:
(i) market value of
investment securities, other assets and liabilities – at the current daily rates of exchange at the Valuation Time; and
(ii) purchases and sales of investment
securities, income and expenses – at the relevant rates of exchange prevailing on the respective dates of such transactions.
The Fund does not isolate
that portion of gains and losses on investments in equity securities due to changes in the foreign exchange rates from the portion due to changes in market prices of equity securities. Accordingly, realized and
unrealized foreign currency gains and losses with respect to such securities are included in the reported net realized and unrealized gains and losses on investment transactions balances.
Net unrealized currency gains
or losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation/depreciation in value of investments, and translation
of other assets and liabilities denominated in foreign currencies.
Net realized foreign exchange
gains or losses represent foreign exchange gains and losses from transactions in foreign currencies and forward foreign currency contracts, exchange gains or losses realized between the trade date and settlement date
on security transactions, and the difference between the amounts of interest and dividends
| abrdn Life Sciences Investors
| 19
|
Notes to Financial Statements (continued)
September 30, 2024
recorded on the Fund’s books and the U.S.
Dollar equivalent of the amounts actually received.
Foreign security and currency
transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. Dollar.
Generally, when the U.S. Dollar rises in value against foreign currency, the Fund's investments denominated in that foreign currency will lose value because the foreign currency is worth fewer U.S. Dollars; the
opposite effect occurs if the U.S. Dollar falls in relative value.
d. Rights Issues and
Warrants:
Rights issues give the
right, normally to existing shareholders, to buy a proportional number of additional securities at a given price (generally at a discount) within a fixed period (generally a short-term period) and are offered at the
company’s discretion. Warrants are securities that give the holder the right to buy common stock at a specified price for a specified period of time. Rights issues and warrants are speculative and have no value
if they are not exercised before the expiration date. Rights issues and warrants are valued at the last sale price on the exchange on which they are traded.
e. Options:
An option contract is a
contract in which the writer (seller) of the option grants the buyer of the option, upon payment of a premium, the right to purchase from (call option) or sell to (put option) the writer a designated instrument at a
specified price within a specified period of time. Certain options, including options on indices, will require cash settlement by the Fund if the option is exercised.
The Fund’s obligation
under an exchange traded written option or investment in an exchange traded purchased option is valued at the
last sale price or in the absence of a sale,
the mean between the closing bid and asked prices. Gain or loss is recognized when the option contract expires, is exercised or is closed.
If the Fund writes a covered
call option, the Fund foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the Fund
writes a put option it accepts the risk of a decline in the market value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet
the terms of their contracts. The Fund’s maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the
risk that an illiquid secondary market will limit the Fund’s ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly
with changes in the value of the securities or currencies hedged.
All options on securities and
securities indices written by the Fund are required to be covered. When the Fund writes a call option, this means that during the life of the option the Fund may own or have the contractual right to acquire the
securities subject to the option or may maintain with the Fund’s custodian in a segregated account appropriate liquid securities in an amount at least equal to the market value of the securities underlying the
option. When the Fund writes a put option, this means that the Fund will maintain with the Fund’s custodian in a segregated account appropriate liquid securities in an amount at least equal to the exercise price
of the option.
Summary of Derivative
Instruments:
The Fund may
use derivatives for various purposes as noted above. The following is a summary of the fair value of derivative instruments, not accounted for as hedging instruments, as of September 30, 2024:
|
| Risk Exposure Category
|
|
| Interest
Rate
Contracts
| Foreign
Currency
Contracts
| Credit
Contracts
| Equity
Contracts
| Commodity
Contracts
| Other
| Total
|
|
|
| Liabilities:
|
| Unrealized depreciation on:
|
| Written Options, market value
| $–
| $–
| $–
| $50,810
| $–
| $–
| $50,810
|
| Total
| $–
| $–
| $–
| $50,810
| $–
| $–
| $50,810
|
Amounts listed as
“–” are $0 or round to $0.
| 20
| abrdn Life Sciences Investors
|
Notes to Financial Statements (continued)
September 30, 2024
The effect of derivative
instruments on the Statement of Operations for the fiscal year ended September 30, 2024:
|
| Risk Exposure Category
|
|
| Interest
Rate
Contracts
| Foreign
Currency
Contracts
| Credit
Contracts
| Equity
Contracts
| Commodity
Contracts
| Total
|
|
|
Realized Gain/(Loss) on Derivatives Recognized
as a Result of Operations:
|
| Net realized gain/(loss) on:
|
| Written Options
| $–
| $–
| $–
| $644,422
| $–
| $644,422
|
| Total
| $–
| $–
| $–
| $644,422
| $–
| $644,422
|
Net Change in Unrealized Appreciation/Depreciation on
Derivatives Recognized as a Result of Operations:
|
| Net change in unrealized appreciation/depreciation of:
|
| Written Options
| $–
| $–
| $–
| $42,959
| $–
| $42,959
|
| Total
| $–
| $–
| $–
| $42,959
| $–
| $42,959
|
Amounts listed as
“–” are $0 or round to $0.
Information about derivatives reflected as
of the date of this report is generally indicative of the type of activity for the fiscal year ended September 30, 2024. The table below summarizes the weighted average values of derivatives holdings for the Fund
during the fiscal year ended September 30, 2024.
| Derivative
| Average
Notional Value
|
| Written Options Contracts
| $164,912
|
f. Security Transactions,
Investment Income and Expenses:
Security transactions are
recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Dividend income and corporate actions are recorded generally on
the ex-date, except for certain dividends and corporate actions which may be recorded after the ex-date, as soon as the Fund acquires information regarding such dividends or corporate actions. Interest income and
expenses are recorded on an accrual basis.
g. Distributions:
The Fund has a managed
distribution policy to pay distributions from net investment income supplemented by net realized capital gains and return of capital distributions, if necessary, on a quarterly basis. The managed distribution policy
is subject to regular review by the Board. The Fund will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any.
Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from
U.S. GAAP.
h. Federal Income Taxes:
The Fund intends to
continue to qualify as a “regulated investment company” ("RIC") by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"), and to make distributions of net investment income and net realized capital gains sufficient to relieve the Fund from all federal income taxes. Therefore, no federal income tax provision is
required.
The Fund recognizes the tax
benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management of the Fund has concluded that there are no
significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine previously filed tax returns, the Fund's U.S. federal and state tax returns for each of
the most recent four fiscal years up to the most recent fiscal year ended September 30, 2024 are subject to such review.
i. Milestone Interests
The Fund holds financial
instruments which reflect the current value of future milestone payments the Fund may receive as a result of contractual obligations from other parties. The value of such payments are adjusted to reflect the estimated
risk based on the relative uncertainty of both the timing and the achievement of individual milestones. A risk to the Fund is that the milestones will not be achieved and no payment will be received by the Fund. The
milestone interests were received as part of the proceeds from the sale of six private companies. Any payments received are treated as a reduction of the cost basis of the milestone interests with payments
received in
| abrdn Life Sciences Investors
| 21
|
Notes to Financial Statements (continued)
September 30, 2024
excess of the cost basis treated as a
realized gain. The contractual obligations with respect to the milestone interests provide for payments at various stages of the development of Afferent, Amolyt, Amphivena, Ethismos Research, Invetx and Neurovance
principal product candidate as of the date of the sale.
The following is a summary of
the impact of the milestone interests on the financial statements as of and for the fiscal year ended September 30, 2024:
| Statement of Assets and Liabilities, Milestone interests, at value
| $13,762,343
|
| Statement of Assets and Liabilities, Total distributable earnings
| $10,147,294
|
| Statement of Operations, Change in unrealized appreciation/depreciation
| $5,201,576
|
j. Other Assets
Other assets in the
Statement of Assets and Liabilities consists of amounts due to the Fund at various times in the future in connection with the sale of investments in one private company.
3. Agreements and Transactions
with Affiliates
a. Investment Advisory and
Other Affiliated Fees
Effective as of the close
of business October 27, 2023, abrdn serves as the Fund’s Investment Adviser pursuant to an investment management agreement (the “Advisory Agreement”) with the Fund. The Adviser is a wholly-owned
indirect subsidiary of abrdn plc. In rendering management services, the Adviser may use the resources of investment advisor subsidiaries of abrdn plc. These affiliates have entered into procedures pursuant to which
investment professionals from affiliates may render portfolio management and research services as associated persons of the Adviser. As compensation for its services to the Fund, the Adviser receives an annual
investment advisory fee at an annual rate of (i) 2.50% of the average net assets for the month of its venture capital and other restricted securities up to 25% of net assets and (ii) for all other net assets, 0.98% of
the average net assets up to $250 million, 0.88% of the average net assets for the next $250 million, 0.80% of the average net assets for the next $500 million and 0.70% of the average net assets thereafter. The
aggregate fee would not exceed a rate when annualized of 1.36%. For the fiscal year ended September 30, 2024, the Fund paid the Adviser $4,208,694.
Prior to close of business on
October 27, 2023, the Fund paid Tekla Capital Management, LLC ("Prior Adviser") an annual fee calculated at the same rate as discussed above. For the period from October 1, 2023 to October 27, 2023, the Prior Adviser
earned an advisory fee of $302,868.
The Fund entered into a
Services Agreement (the "Agreement") with the Prior Adviser. Pursuant to the terms of the Agreement, the Fund
reimbursed the Prior Adviser for
certain services related to a portion of the payment of salary and provision of benefits to the Fund’s Chief Compliance Officer. For the period from October 1, 2023 to October 27, 2023, these payments amounted
to $3,553 and are included in the Miscellaneous category of expenses in the Statement of Operations, together with insurance and other expenses incurred to unaffiliated entities. Expenses incurred pursuant to the
Agreement as well as certain expenses paid for by the Prior Adviser are allocated to the Fund in an equitable fashion as approved by the Trustees or officers of the Fund who were also officers of the
Prior Adviser. The Agreement terminated on October 27, 2023.
Effective upon the close of
business on October 27, 2023, the Adviser as Adviser of the Fund, entered into a written contract with the Fund to limit the total ordinary operating expenses of the Fund (excluding leverage costs, interest, taxes,
brokerage commissions, acquired fund fees and expenses and any non-routine expenses) from exceeding 1.36% of the average daily net assets of the Fund on an annualized basis for twelve months (the “Expense
Limitation Agreement”). The Expense Limitation Agreement may not be terminated before October 27, 2025, without the approval of the Fund’s trustees who are not “interested persons” of the Fund
(as defined in the 1940 Act). For the fiscal year ended September 30, 2024 the Adviser did not waive any Fund's expenses pursuant to the Expense Limitation Agreement.
b. Investor Relations:
Prior to March 1, 2024,
Destra Capital Advisors LLC ("Destra") provided the Fund investor support services in connection with the ongoing operation of the Fund. The fund paid Destra a fee in an annual amount equal to 0.05% of the average
aggregate daily value of the Fund's managed assets pursuant to the investor support services agreement. Effective March 1, 2024, under the terms of the Investor Relations Services Agreement, abrdn is compensated to
provide and may pay third parties to provide investor relations services to the Fund and certain other funds advised by abrdn Asia or its affiliates as part of an Investor Relations Program. Under the Investor
Relations Services Agreement, the Fund owes a portion of the fees related to the Investor Relations Program (the "Fund's Portion"). However, investor relations services fees are limited by abrdn so that the Fund
will only pay up to an annual rate of 0.05% of the Fund's average weekly net assets. Any difference between the capped rate of 0.05% of the Fund's average weekly net assets and the Fund's Portion is paid for by
abrdn.
Pursuant to the terms of the
Investor Relations Services Agreement, abrdn (or third parties engaged by abrdn), among other things, provides objective and timely information to shareholders based on publicly-available information; provides
information efficiently through the use of technology while offering shareholders immediate access to knowledgeable investor relations representatives; develops and maintains effective communications with
investment
| 22
| abrdn Life Sciences Investors
|
Notes to Financial Statements (continued)
September 30, 2024
professionals from a wide variety of firms;
creates and maintains investor relations communication materials such as fund manager interviews, films and webcasts, publishes white papers, magazine articles and other relevant materials discussing the Fund's
investment results, portfolio positioning and outlook; develops and maintains effective communications with large institutional shareholders; responds to specific shareholder questions; and reports activities and
results to the Board and management detailing insight into general shareholder sentiment.
During the fiscal year ended
September 30, 2024, the Fund incurred investor relations fees of approximately $56,682. For the fiscal year ended September 30, 2024, abrdn did not contribute to the investor relations fees for the Fund because the
Fund’s contribution was below 0.05% of the Fund’s average weekly net assets on an annual basis.
4. Investment Transactions
Purchases and sales of
investment securities (excluding short-term securities) for the fiscal year ended September 30, 2024, were $191,630,298 and $216,262,941, respectively.
5. Capital
The Fund is authorized to
issue an unlimited number of common shares of beneficial interest at par value $0.01 per common share. As of September 30, 2024, there were 28,061,399 shares of common stock issued and outstanding.
The following table shows the
shares issued by the Fund as a part of a quarterly distribution to shareholders during the fiscal year ended September 30, 2024.
| Payment Date
| Shares Issued
|
| January 10, 2024
| 247,882
|
| March 28, 2024
| 311,437
|
| June 28, 2024
| 369,639
|
| September 30, 2024
| 341,244
|
6. Other
Transactions with Affiliates
An affiliate
company is a company in which the Fund holds 5% or more of the voting securities. Transactions involving such companies during the fiscal year ended September 30, 2024 were as follows:
|
| Value at
September 30,
2023
| Cost of
Purchases
| Proceeds
from
Shares Sold
| Realized
Gain (Loss)
| Change in
Unrealized
Appreciation/
Depreciation
| Value at
September 30,
2024
| Shares held at
September 30,
2024
| Principal
Amount at
September 30,
2024
| Dividend
Income
| Capital
Gains
Distributions
|
| Curasen Therapeutics, Inc.
| $0
| $4,695,459
| $0
| $0
| $(14,261)
| $4,681,198
| 9,762,664
| $0
| $0
| $0
|
|
| $0
| $4,695,459
| $0
| $0
| $(14,261)
| $4,681,198
| 9,762,664
| $0
| $0
| $0
|
7. Open Market
Repurchase Program
In March 2024, the Board approved the
renewal of the repurchase program to allow the Fund to repurchase up to 12% of its outstanding shares in the open market for a one-year period ending July 14, 2025. Prior to this renewal, in March 2023, the Trustees
approved the renewal of the share repurchase program to allow the Fund to
repurchase up to 12% of its outstanding shares
for a one-year period ending July 14, 2024.
For the fiscal year ended
September 30, 2024, the Fund did not repurchase any shares through this program.
8. Private
Companies and Other Restricted Securities
The Fund may invest
in private companies and other restricted securities if these securities currently comprise 40% or less of net assets. The value of these securities represented 9.32% of the Fund’s net assets at September 30,
2024.
At September 30,
2024, the Fund had a commitment of $2,008,666 relating to additional investments in three private companies.
| abrdn Life Sciences Investors
| 23
|
Notes to Financial Statements (continued)
September 30, 2024
The following table details the
acquisition date, cost, carrying value per unit, and value of the Fund’s private companies and other restricted securities at September 30, 2024. The Fund on its own does not have the right to demand that such
securities be registered.
| Security
| Acquisition
Date
| Cost
| Carrying Value
per Unit
| Value
|
| Abcuro, Inc., Series B — Convertible Preferred Stock
| 12/19/23, 08/10/23
| $1,276,911
| $5.49
| $1,274,994
|
| Afferent Milestone Interest
| 07/27/16
| 24,556
| 0.00
| 0
|
| Amolyt Milestone Interest
| 7/12/24
| 684,946
| 723,166.00
| 723,166
|
| Amphivena Milestone Interest
| 10/18/22
| 0
| 0.00
| 0
|
| Arbor Biotechnologies, Inc., Series B — Convertible Preferred Stock
| 10/29/21
| 643,318
| 16.57
| 640,000
|
| Arbor Biotechnologies, Inc., Series C — Convertible Preferred Stock
| 09/27/24
| 1,599,998
| 4.11
| 1,599,998
|
| Arkuda Therapeutics, Inc., Series B — Convertible Preferred Stock
| 01/24/22, 01/23/23
| 792,453
| 1.15
| 512,821
|
| Arkuda Therapeutics, Inc., Series A — Convertible Preferred Stock
| 05/16/19, 04/02/20,
07/15/21
| 2,404,820
| 0.00*
| 101
|
| Biotheryx, Inc., Series E — Convertible Preferred Stock
| 05/19/21
| 3,206,642
| 0.57
| 346,454
|
| Chinook Therapeutics, Inc. CVR — Common Stock
| 08/14/23
| 23,035
| 2.26
| 133,482
|
| Curasen Therapeutics, Inc., Series B — Convertible Preferred Stock
| 08/20/24
| 342,400
| 0.48
| 342,115
|
| Curasen Therapeutics, Inc., Series A Prime — Convertible Preferred Stock
| 08/20/24
| 4,353,059
| 0.48
| 4,339,083
|
| Endeavor Biomedicines, Inc., Series B — Convertible Preferred Stock
| 01/21/22
| 1,402,998
| 6.53
| 1,936,860
|
| Endeavor Biomedicines, Inc., Series C — Convertible Preferred Stock
| 04/19/24
| 357,879
| 6.52
| 357,646
|
| Engrail Therapeutics, Inc., Series B
| 3/14/24
| 2,250,000
| 1.06
| 2,250,000
|
| Ethismos Research Milestone Interest
| 10/31/17
| 0
| 0.00
| 0
|
| Flamingo Therapeutics, Inc., Series A3 — Convertible Preferred Stock
| 04/21/20, 10/28/20
| 2,469,343
| 6.80
| 728,560
|
| Fusion Pharmaceuticals, Inc. CVR
|
| 1,791
| 1.38
| 4,493
|
| Glycomine, Inc., Series C — Convertible Preferred Stock
| 07/22/24
| 680,000
| 0.60
| 680,000
|
| HiberCell, Inc., Series C — Convertible Preferred Stock
| 09/15/23
| 334,334
| 0.46
| 333,631
|
| HiberCell, Inc., Series B — Convertible Preferred Stock
| 05/05/21
| 1,606,431
| 0.44
| 574,272
|
| HiberCell, Inc. — Warrant
| 09/15/23
| 1,294
| 0.00*
| 1
|
| HiberCell, Inc. — Convertible Note
| 09/13/24
| 206,589
| 100.00
| 206,589
|
| HiberCell, Inc. — Warrant
| 09/13/24
| 0
| 0.00*
| 2
|
| Hotspot Therapeutics, Inc., Series C — Convertible Preferred Stock
| 11/15/21
| 923,148
| 2.91
| 827,894
|
| Hotspot Therapeutics, Inc., Series B — Convertible Preferred Stock
| 04/22/20, 06/17/21
| 3,110,672
| 2.07
| 2,672,074
|
| Hotspot Therapeutics, Inc. — Convertible Note
| 04/12/24
| 323,870
| 100.00
| 323,870
|
| Incendia Therapeutics, Inc., Series A — Convertible Preferred Stock
| 08/12/21, 05/24/23
| 1,606,097
| 1.92
| 1,599,995
|
| Incendia Therapeutics, Inc. — Convertible Note
| 04/18/24
| 738,460
| 100.00
| 738,460
|
| Invetx, Inc. Milestone Interest
| 9/4/24
| 1,399,863
| 1,399,863.00
| 1,399,863
|
| IO Light Holdings, Inc., Series A2 — Convertible Preferred Stock
| 04/30/20, 05/17/21,
09/15/21
| 1,395,847
| 0.00*
| 42
|
| Neurovance Milestone Interest
| 03/20/17
| 1,505,684
| 11,639,314.00
| 11,639,314
|
| Priothera Co. Ltd., Series A — Convertible Preferred Stock
| 10/07/20, 10/19/21
| 1,781,593
| 0.00*
| 17
|
| Qlaris Bio, Inc., Series B — Convertible Preferred Stock
| 04/11/24
| 1,551,724
| 0.79
| 1,550,000
|
| Quell Therapeutics Ltd., Series B — Convertible Preferred Stock
| 11/29/21, 03/23/22
| 1,391,622
| 2.08
| 1,520,000
|
| Recode Therapeutics, Inc., Series B — Convertible Preferred Stock
| 01/26/24, 10/21/21,
02/16/22, 09/15/23
| 1,446,891
| 9.23
| 1,440,001
|
| Seismic Therapeutics, Inc., Series B — Convertible Preferred Stock
| 08/30/24
| 1,276,397
| 4.52
| 1,274,991
|
| Spectrum Pharmaceuticals, Inc. CVR — Common Stock
| 08/02/23
| 2,790
| 0.00
| 0
|
| Tetraphase Pharmaceuticals, Inc. CVR — Common Stock
| 06/08/23
| 2,844
| 0.06
| 853
|
| Third Arc Bio, Inc., Series A — Convertible Preferred Stock
| 07/15/24
| 852,547
| 2.10
| 850,000
|
| Willow Laboratories, Inc. — Common Stock
| 03/31/98
| 0
| 0.00*
| 13
|
|
|
| $43,972,846
|
| $42,821,655
|
| 24
| abrdn Life Sciences Investors
|
Notes to Financial Statements (continued)
September 30, 2024
| *
| Carrying value is less than $0.01.
|
9. Portfolio Investment
Risks
a. Concentration Risk:
The Fund’s portfolio may be more
sensitive to, and possibly more adversely affected by, regulatory, economic or political factors or trends relating to the healthcare industries than a portfolio of companies representing a larger number of
industries. This risk is in addition to the risks normally associated with any strategy seeking capital appreciation by investing in a portfolio of equity securities. As a result of its concentration policy, the
Fund’s investments may be subject to greater risk than a fund that has securities representing a broader range of investments and may cause the value of the Fund’s shares to fluctuate significantly over
relatively short periods of time.
b. Derivatives Risk
(including Options):
Derivatives are speculative
and may hurt the Fund’s performance. The potential benefits to be derived from the Fund’s options strategy are dependent upon the portfolio managers’ ability to discern pricing inefficiencies and
predict trends in these markets, which decisions could prove to be inaccurate.
c. Equity Securities
Risk:
The stock or other security
of a company may not perform as well as expected, and may decrease in value, because of factors related to the company (such as poorer than expected earnings or certain management decisions), to the industry in which
the company is engaged (such as a reduction in the demand for products or services in a particular industry) or to the market as a whole (such as periods of market volatility or instability, or general and prolonged
periods of economic decline). Holders of common stock generally are subject to more risks than holders of preferred stock or debt securities because the right to repayment of common shareholders' claims is
subordinated to that of preferred stock and debt securities upon the bankruptcy of the issuer.
d. Key Personnel Risk:
There may be only a limited
number of securities professionals who have comparable experience to that of the Fund’s existing portfolio management team in the area of healthcare companies. If one or more of the team members dies, resigns,
retires or is otherwise unable to act on behalf of the Investment Adviser, there can be no assurance that a suitable replacement could be found immediately.
e. Restricted Securities
and Valuation Risk:
Some of the Fund’s
investments are subject to restrictions on resale and generally have no established trading market or are otherwise illiquid with little or no trading activity. The valuation process requires an analysis of various
factors. The Fund’s fair value methodology
includes the examination of, among other
things, (i) the existence of any contractual restrictions on the disposition of the securities; (ii) information obtained from the issuer which may include an analysis of the company’s financial statements, the
company’s products or intended markets, or the company’s technologies; and (iii) the price of a security sold at arm’s length in an issuer’s subsequent completed round of financing. As there is
typically no readily available market value for some of the Restricted Securities in the Fund’s portfolio, such Restricted Securities in the Fund’s portfolio are valued at fair value as determined in
good faith by or under the direction of the Board pursuant to the Fund’s valuation policy and a consistently applied valuation process. Because of the inherent uncertainty of determining the fair value of
investments that do not have a readily available market value, the fair value of the Fund’s investments determined in good faith by the Board may differ significantly from the values that would have been used
had a ready market existed for the investments, and the differences could be material.
f. Risks Associated with
the Fund’s Option Strategy:
The ability of the Fund to
achieve its investment objective is partially dependent on the successful implementation of its option strategy. There are several risks associated with transactions in options on securities used in connection with
the Fund's option strategy. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction
not to achieve its objectives. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of
market behavior or unexpected events.
As the writer of a call
option covered with a security held by the Fund, the Fund forgoes, during the option's life, the opportunities to profit from increases in the market value of the security covering the call option above the sum of the
premium and the strike price of the call but retains the risk of loss should the price of the underlying security decline. As the Fund writes such covered calls over more of its portfolio, its ability to benefit from
capital appreciation becomes more limited. To the extent the Fund writes call options that are not fully covered by securities in its portfolio (such as calls on an index or sector), it will lose money if the portion
of the security or securities underlying the option that is not covered by securities in the Fund's portfolio appreciate in value above the exercise price of the option by an amount that exceeds the premium received
on the option plus the exercise price of the option. The amount of this loss theoretically could
| abrdn Life Sciences Investors
| 25
|
Notes to Financial Statements (continued)
September 30, 2024
be unlimited. The writer of an option has no
control over the time when it may be required to fulfill its obligations as a writer of the option.
When the Fund writes put
options, it bears the risk of loss if the value of the underlying stock declines below the exercise price minus the put premium. If the option is exercised, the Fund could incur a loss if it is required to purchase
the stock underlying the put option at a price greater than the market price of the stock at the time of exercise plus the put premium the Fund received when it wrote the option. While the Fund's potential gain as the
writer of a covered put option is limited to the premium received from the purchaser of the put option, the Fund risks a loss equal to the entire exercise price of the option minus the put premium.
g. Sector Risk:
To the extent that the Fund
has a significant portion of its assets invested in securities conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in
that economic sector than funds that invest more broadly.
Pharmaceutical Sector
Risk. The success of companies in the pharmaceutical sector is highly dependent on the development, procurement and marketing of drugs. The values of pharmaceutical companies are also dependent
on the development, protection and exploitation of intellectual property rights and other proprietary information, and the profitability of pharmaceutical companies may be significantly affected by such things as the
expiration of patents or the loss of, or the inability to enforce, intellectual property rights. The research and other costs associated with developing or procuring new drugs and the related intellectual property
rights can be significant, and the results of such research and expenditures are unpredictable. There can be no assurance that those efforts or costs will result in the development of a profitable drug.
The pharmaceutical sector is
also subject to rapid and significant technological change and competitive forces that may make drugs obsolete or make it difficult to raise prices and, in fact, may result in price discounting. Companies in the
pharmaceutical sector may also be subject to expenses and losses from extensive litigation based on intellectual property, product liability and similar claims. Companies in the pharmaceutical sector may be adversely
affected by government regulation and changes in reimbursement rates. The ability of many pharmaceutical companies to commercialize and monetize current and any future products depends in part on the extent to which
reimbursement for the cost of such products and related treatments are available from third-party payors, such as Medicare, Medicaid, private health insurance plans and health maintenance organizations.
Biotechnology Industry Risk. The success of biotechnology companies is highly dependent on the development, procurement and/or marketing of drugs. The values of biotechnology companies are also dependent on the
development, protection and exploitation of intellectual property rights and other proprietary information, and the profitability of biotechnology companies may be significantly affected by such things as the
expiration of patents or the loss of, or the inability to enforce, intellectual property rights. The research and other costs associated with developing or procuring new drugs, products or technologies and the related
intellectual property rights can be significant, and the results of such research and expenditures are unpredictable. There can be no assurance that those efforts or costs will result in the development of a
profitable drug, product or technology.
The biotechnology sector is
also subject to rapid and significant technological change and competitive forces that may make drugs, products or technologies obsolete or make it difficult to raise prices and, in fact, may result in price
discounting. Companies in the biotechnology sector may also be subject to expenses and losses from extensive litigation based on intellectual property, product liability and similar claims. Companies in the
biotechnology sector may be adversely affected by government regulation and changes in reimbursement rates. Healthcare providers, principally hospitals, that transact with companies in the biotechnology industry,
often rely on third party payors, such as Medicare, Medicaid, private health insurance plans and health maintenance organizations to reimburse all or a portion of the cost of healthcare related products or services.
Biotechnology companies will continue to be affected by the efforts of governments and third-party payors to contain or reduce health care costs.
Managed Care Sector
Risk. Companies in the managed care sector often assume the risk of both medical and administrative costs for their customers in return for monthly premiums. The profitability of these products
depends in large part on the ability of such companies to predict, price for, and effectively manage medical costs. Managed care companies base the premiums they charge and their Medicare bids on estimates of future
medical costs over the fixed contract period; however, many factors may cause actual costs to exceed what was estimated and reflected in premiums or bids.
Managed care companies are
regulated at the federal, state, local and international levels. The evolution of the ACA and other regulatory reforms could materially and adversely affect the manner in which U.S. managed care companies conduct
business and their results of operations, financial position and cash flows. New laws or regulations could drive substantial change to the way healthcare products and services are currently delivered and paid for in
the United States. A transformative overhaul of the U.S. healthcare system could impact
| 26
| abrdn Life Sciences Investors
|
Notes to Financial Statements (continued)
September 30, 2024
the financial viability of managed care
companies in which the Fund may invest.
Life Science and Tools
Industry Risk. Life science industries are characterized by limited product focus, rapidly changing technology, extensive government regulation, and intense competition. In particular, technological
advances can render an existing product, which may account for a disproportionate share of a company’s revenue, obsolete. Extensive regulation can delay cause delays in product development, which may
disadvantage a company in an intensely competitive environment. These various factors may result in abrupt advances and declines in the securities prices of particular companies, and, in some cases, may have a broad
effect on the prices of securities of companies in particular life science industries.
Healthcare Technology Sector
Risk. Companies in the healthcare technology sector may incur substantial cost related to product-related liabilities, interruptions at their data centers or client support facilities, claims for
infringement or misappropriation of intellectual property rights of others, or infringement or misappropriation of their intellectual property. Each of these may adversely impact the prices of securities of
companies in the healthcare technology sector.
Additionally, the success of
healthcare technology companies depends upon the recruitment and retention of key personnel. The failure to attract and retain qualified personnel could have a material adverse effect on healthcare technology
companies’ prospects for long-term growth.
Healthcare Services Sector
Risk. The operations of healthcare services companies are subject to extensive federal, state and local government regulations. A violation or departure from any of these legal requirements may
result in government audits, lower reimbursements, significant fines and penalties, the potential loss of certification, recoupment efforts or voluntary repayments. If healthcare services companies fail to adhere to
all of the complex government regulations that apply to their businesses, such companies could suffer severe consequences that would substantially reduce revenues, earnings, cash flows and stock prices.
A substantial percentage of a
healthcare services company’s service revenues may be generated from patients who have state Medicaid or other non-Medicare government-based programs, such as coverage through the Department of Veterans Affairs
(“VA”), as their primary coverage. As state governments and other governmental organizations face increasing budgetary pressure, healthcare services companies may in turn face reductions in payment rates,
delays in the receipt of payments, limitations on enrollee eligibility or other changes to the applicable programs.
Healthcare Supplies Sector
Risk. If healthcare supplies companies are unable to successfully expand their product lines through internal
research and development and acquisitions or
are unable to successfully grow their business through marketing partnerships, their business may be materially and adversely affected.
Quality is extremely
important to healthcare supplies companies and their customers due to the serious and costly consequences of product failure. Quality certifications are critical to the marketing success of their products and
services. If a healthcare supplies company fails to meet these standards or fails to adapt to evolving standards, its reputation could be damaged, it could lose customers, and its revenue and results of operations
could decline.
Healthcare Facilities Sector
Risk. A healthcare facility’s ability to negotiate favorable contracts significantly affects the revenues and operating results of such healthcare facilities. If a healthcare facility is
unable to enter into and maintain managed care contractual arrangements on acceptable terms, if it experiences material reductions in the contracted rates received from managed care payers, or if it has difficulty
collecting from managed care payers, its results of operations could be adversely affected.
Further changes in the
Medicare and Medicaid programs or other government health care programs could have an adverse effect on a healthcare facility’s business. In addition to the changes affected by the ACA, the Medicare and Medicaid
programs are subject to other regulatory changes which could materially increase or decrease payments from government programs in the future, as well as affect the cost of providing services to patients and the timing
of payments to facilities, which could in turn adversely affect a healthcare facility’s overall business, financial condition, results of operations or cashflows.
Healthcare Equipment Sector
Risk. The medical device markets are highly competitive and characterized by rapid change, which may affect a company’s ability to be competitive. They are also rigorously regulated and it
is anticipated that governmental authorities will continue to scrutinize this industry closely, and that additional regulation may increase compliance and legal costs, exposure to litigation, and
other adverse effects to operations.
Healthcare equipment
companies are substantially dependent on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may negatively impact the ability of healthcare
equipment companies to sell current or future products. Quality problems with the processes, goods and services of a healthcare equipment company could harm the company’s reputation for producing
high-quality products and erode its competitive advantage, sales and market share. Quality certifications are critical to the marketing success of goods and services. If a healthcare equipment company fails to meet
these standards, its reputation could be damaged, it could lose customers, and its revenue and results of operations could decline.
| abrdn Life Sciences Investors
| 27
|
Notes to Financial Statements (continued)
September 30, 2024
Healthcare Distributors Sector Risk. Companies in the healthcare distribution sector operate in markets that are highly competitive and in an industry that is highly regulated and often subject to legal proceedings. Due to the
nature of the business of healthcare distribution companies, each of the above may have an adverse impact on the securities prices of companies in the healthcare distribution sector.
Healthcare distribution
companies depend on the availability of various components, compounds, raw materials and energy supplied by others for their operations. Any of these supplier relationships could be interrupted due to events beyond
the control of such companies, including pandemics, epidemics or natural disasters, or could be terminated. A sustained supply interruption could have an adverse effect on business.
h. Valuation Risk:
The price that the Fund
could receive upon the sale of any particular portfolio investment may differ from the Fund's valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a
fair valuation methodology or a price provided by an independent pricing service. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could
realize a greater than expected loss or lower than expected gain upon the sale of the investment. The Fund's ability to value its investments may also be impacted by technological issues and/or errors by pricing
services or other third-party service providers.
i. Venture Capital
Investments Risk:
The Fund may occasionally
invest in venture capital opportunities. While these securities offer the opportunity for significant capital gains, such investments also involve a degree of risk that can result in substantial losses. Some of the
venture capital opportunities in which the Fund may invest are expected to be companies that are in a
“start-up” stage of development,
have little or no operating history, operate at a loss or with substantial variations in operating results from period to period, have limited products, markets, financial resources or management depth, or have the
need for substantial additional “follow-on” capital to support expansion or to achieve or maintain a competitive position. Such additional investments may dilute the interests of prior investors, such as
the Fund. Some of these companies may be emerging companies at the research and development stage with no marketable or approved products or technology. There can be no assurance that securities of start-up or
emerging growth companies will, in the future, yield returns commensurate with their associated risks.
These investments, which are
considered Restricted Securities, will be made primarily in convertible preferred stock. The Fund may also purchase non-convertible debt securities in connection with its venture capital investments, and otherwise
when the Investment Adviser believes that such investments would be consistent with the Fund’s investment objective. While these debt investments typically will not be rated, the Investment Adviser believes
that, in light of the risk characteristics associated with investments in emerging growth companies, if such investments were to be compared with investments rated by S&P or Moody’s, they may be rated as low
as “C” in the rating categories established by S&P and Moody’s. Such securities are commonly referred to as “junk bonds” and are considered, on balance, as predominantly
speculative.
10. Contingencies
In the normal course of
business, the Fund may provide general indemnifications pursuant to certain contracts and organizational documents. The Fund's maximum exposure under these arrangements is dependent on future claims that may be made
against the Fund, and therefore, cannot be estimated; however, the Fund expects the risk of loss from such claims to be remote.
11. Tax
Information
The U.S. federal
income tax basis of the Fund's investments (including derivatives, if applicable) and the net unrealized appreciation as of September 30, 2024, were as follows:
Tax Cost of
Securities
| Unrealized
Appreciation
| Unrealized
Depreciation
| Net
Unrealized
Appreciation/
(Depreciation)
|
| $414,776,111
| $131,626,102
| $(86,151,604)
| $45,474,498
|
| 28
| abrdn Life Sciences Investors
|
Notes to Financial Statements (concluded)
September 30, 2024
The tax character of
distributions paid during the fiscal years ended September 30, 2024 and September 30, 2023 was as follows:
|
| September 30, 2024
| September 30, 2023
|
| Distributions paid from:
|
|
|
| Ordinary Income
| $18,919,190
| $651,693
|
| Net Long-Term Capital Gains
| 20,767,544
| 32,730,607
|
| Return of Capital
| 5,606,991
| -
|
| Total tax character of distributions
| $45,293,725
| $33,382,300
|
Amounts listed as
“–” are $0 or round to $0.
As of September 30, 2024, the
components of accumulated earnings on a tax basis were as follows:
| Undistributed Ordinary Income
| $-
|
| Undistributed Long-Term Capital Gains
| -
|
| Total undistributed earnings
| $-
|
| Accumulated Capital and Other Losses
| $(1,439,775)
|
| Capital loss carryforward
| $-*
|
| Other currency gains
| -
|
| Other Temporary Differences
| -
|
| Unrealized Appreciation/(Depreciation)
| 45,568,266**
|
| Total accumulated earnings/(losses) – net
| $44,128,491
|
Amounts listed as
“–” are $0 or round to $0.
| *
| During the fiscal year ended September 30, 2024, the Fund did not utilize a capital loss carryforward.
|
| **
| The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable to the difference between the tax deferral of wash
sales and Milestone installment sale adjustments.
|
12. Subsequent Events
Based on this evaluation,
no disclosures and/or adjustments were required to the financial statements as of September 30, 2024, other than as noted below.
On November 11, 2024, the Fund announced
that it will pay on January 10, 2025, a stock distribution of US $0.50 per share to all shareholders of record as of November 21, 2024.
| abrdn Life Sciences Investors
| 29
|
Report of Independent Registered Public Accounting
Firm
To the
Shareholders and Board of Trustees
abrdn Life Sciences Investors:
Opinion on the Financial
Statements
We have audited the
accompanying statement of assets and liabilities of abrdn Life Sciences Investors (the Fund), including the portfolio of investments, as of September 30, 2024, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years
in the two-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of September 30, 2024, the results
of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the two-year period then ended,
in conformity with U.S. generally accepted accounting principles. The financial highlights for the three-year period ended September 30, 2022 were audited by other independent registered public accountants whose
report, dated November 21, 2022, expressed an unqualified opinion on those financial highlights.
Basis for Opinion
These financial statements
and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial
highlights. Such procedures also included confirmation of securities owned as of September 30, 2024, by correspondence with the custodian, respective portfolio company, or brokers, or by other appropriate auditing
procedures where replies were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor
of one or more abrdn investment companies since 2009.
Columbus, Ohio
November 29, 2024
| 30
| abrdn Life Sciences Investors
|
Federal Tax Information: Dividends and
Distributions (Unaudited)
Designation Requirements
Of the distributions paid by the
Fund from ordinary income for the year ended September 30, 2024, the following percentages met the requirements to be treated as qualifying for the corporate dividends received deduction and qualified dividend income,
respectively.
Dividends Received Deduction
12.75%
Qualified Dividend Income
14.79%
$20,767,544 from long-term
capital gains, subject to a long-term capital gains tax rate of not greater than 20%.
The above amounts are based on
the best available information at this time. In early 2025, the Fund will notify applicable shareholders of final amounts for use in preparing 2024 U.S. federal income tax forms.
| abrdn Life Sciences Investors
| 31
|
Supplemental Information (Unaudited)
Results of Annual Meeting of
Shareholders
The Annual Meeting of
Shareholders was held on June 25, 2024. The description of each proposal and number of shares voted at the meeting are as follows:
Shareholders approved the
election of two Class B Trustees to the Board to serve until 2027 Annual Meeting by the following votes:
|
| Number
of Votes
Cast For
| Percentage
of Votes
Cast For
| Number of
Votes Cast
Against/
Withheld
| Percentage of
Votes Cast
Against/
Withheld
|
| Stephen Bird*
| 20,269,963
| 84.4%
| 3,753,701
| 15.6%
|
| Jeffrey Bailey
| 19,670,734
| 81.9%
| 4,352,930
| 18.1%
|
*Resigned effective June 30,
2024.
Shareholders opposed a
shareholder proposal regarding annual terms of trustees by the following votes:
Number
of Votes
Cast For
| Percentage
of Votes
Cast For
| Number of
Votes Cast
Against/
Withheld
| Percentage of
Votes Cast
Against/
Withheld
| Votes Against/
Withheld
| Percentage
of Votes
Abstained
|
| 6,891,241
| 41.6%
| 9,133,348
| 55.1%
| 533,327
| 3.3%
|
| 32
| abrdn Life Sciences Investors
|
Additional Information Regarding the
Fund (Unaudited)
RECENT CHANGES
The following information is
a summary of certain changes during the fiscal year ended September 30, 2024. This information may not reflect all of the changes that have occurred since you purchased the Fund.
During the applicable period,
there have been: (i) no material changes to the Fund’s investment objectives and policies that constitute its principal portfolio emphasis that have not been approved by the Fund’s shareholders (the
“Shareholders”), (ii) no material changes to the Fund’s principal risks, (iii) no changes to the persons primarily responsible for day-to-day management of the Fund; and (iv) no changes to the
Fund’s charter or by-laws that would delay or prevent a change of control that have not been approved by Shareholders; except as follows:
Changes to Persons Primarily
Responsible for Day-to-Day Management of the Fund
Jason Akus, M.D./M.B.A.,
Ashton L. Wilson, Christopher Abbott, Robert Benson, Kelly Girskis, Ph.D., Richard Goss, and Loretta Tse, Ph.D. are members of a team that analyzes investments on behalf of the Fund. Dr. Akus exercises ultimate decision-making authority with
respect to investments.
On March 21, 2024, the Fund
announced the appointment of Dr. Akus as co-lead portfolio manager as part of the orderly transition of Dr. Daniel Omstead’s responsibilities as the lead portfolio manager to the Fund. Dr. Omstead
continued to serve as the co-lead portfolio manager alongside Dr. Akus through May 31, 2024. Subsequently, Dr. Akus took over as lead portfolio manager and Dr. Omstead remained at abrdn to serve in an advisory role to
Dr. Akus and the investment team until his departure on September 30, 2024.
Christopher Seitz and
Timothy Gasperoni ceased serving as members of the Fund’s portfolio management team effective as of December 22, 2023 and May 31, 2024, respectively.
INVESTMENT OBJECTIVE, STRATEGIES AND
POLICIES (unaudited)
The Fund’s investment
objective is to seek long-term capital appreciation by investing primarily in securities of life sciences companies. The Fund’s investment objective is a fundamental policy and may not be changed without the
affirmative vote of the holders of a majority of the outstanding shares (as that term is defined in Section 2(a)(42) of the Investment Company Act of 1940, as amended (the “Investment Company Act”)).
In an effort to achieve its
investment objective, the Fund will invest primarily in securities of U.S. and foreign companies that are generally believed by the Investment Adviser to have significant potential for above-average, long-term growth
in revenues and earnings. The Investment Adviser expects that such companies generally will
possess some or all of the following
characteristics, in the Investment Adviser’s judgment: current or anticipated strong market position for their services or products, experienced business management, recognized technological expertise and the
ability either to generate funds internally to finance growth or to secure outside sources of capital. For companies with earnings, the Investment Adviser generally will attempt to invest in securities that sell at
price-earnings ratios or at multiples of underlying asset or potential values which, have upside potential.
The Fund may invest in
securities of emerging growth life sciences companies which may offer limited products or services or which are at the research and development stage with no marketable or approved products or technologies. The Fund
also may invest in securities of large, well-known companies with existing products in the life sciences industries that are believed by the Investment Adviser to be undervalued in relation to their long-term growth
potential or asset value. The Fund also may invest up to 40% of its net assets in venture capital and other securities that are subject to legal or contractual restrictions on resale (“Restricted
Securities”). The Fund also may invest up to 20% of its net assets in securities of foreign issuers, expected to be located primarily in Western Europe, Canada and Japan, and securities of U.S. issuers traded in
foreign markets (“Foreign Securities”). The Fund may buy and sell currencies for the purpose of settlement of transactions in Foreign Securities. Under normal market conditions, the Fund expects to invest
at least 80% of its net assets in securities of life sciences companies. This policy may not be changed without 60 days’ prior notice to Shareholders. The Fund is required, except for temporary defensive
purposes, to invest at least 25% of its net assets in such companies. For purposes of satisfying the foregoing requirements, a company will be deemed to be a life sciences company if, at the time the Fund makes an
investment therein, 50% or more of such company’s sales, earnings efforts or assets arise from or are dedicated to, or are expected to arise from or be dedicated to, the application of scientific advances
related to healthcare, agriculture or environmental management, as the case may be. Determinations as to whether a company is a life sciences company will be made by the Investment Adviser in its discretion.
The equity and related
securities in which the Fund may invest consist of common stock of life sciences companies and, to a lesser extent, of preferred stock, convertible debt, limited partnership interests and warrants or other rights to
acquire common or preferred stocks of such companies. The Fund’s investments in venture capital opportunities, which are considered Restricted Securities, will be made primarily in convertible preferred stock.
The Fund may also purchase non-convertible debt securities in connection with its venture capital investments, and otherwise when the Investment Adviser believes that such investments would be consistent with the
| abrdn Life Sciences Investors
| 33
|
Additional Information Regarding the
Fund (Unaudited) (continued)
Fund’s investment objective. While
these debt investments typically will not be rated, the Investment Adviser believes that, in light of the risk characteristics associated with investments in emerging growth companies (see “Risk Factors”),
if such investments were to be compared with investments rated by S&P Global Ratings ("S&P") or Moody’s, they may be rated as low as “C” in the rating categories established by S&P and
Moody’s. Such securities are commonly referred to as “junk bonds” and are considered, on balance, as predominantly speculative.
Put or Call Options
The Fund may purchase and
sell (or write) put or call options on any security in which it is permitted to invest or on any index of securities or other index, the change in value of which has a high degree of correlation with the changes in
value of the Fund’s portfolio securities,and may purchase and sell (or write) on a covered basis financial futures contracts and options on such futures.
RISK FACTORS
Investing in any investment
company security involves risk, including the risk that you may receive little or no return on your investment or even that you may lose part or all of your investment. Investors should consider the following Risk
Factors and special considerations associated with investing in the Fund’s shares.
Portfolio Market Risk. The Fund is subject to market risk—the possibility that the prices of equity securities will decline over short or extended periods of time. The price of an equity security of an
issuer may be particularly sensitive to general movements in the stock market, or a drop in the stock market may depress the price of most or all of the equity securities held by the Fund. In addition, equity
securities held by the Fund may decline in price if the issuer fails to make anticipated distributions or dividend payments because, among other reasons, the issuer experiences a decline in its financial condition. As
a result, the value of an investment in the Fund’s shares will fluctuate with the market. You could lose some or all of your investment over short or long periods of time.
Political and economic news
can influence market-wide trends and can cause disruptions int he U.S. or world financial markets. Other factors may be ignored by the market as a whole but may cause movements in the price of one company’s
stock or the stock of companies in one or more industries. All of these factors may have a greater impact on initial public offerings and emerging company shares.
Market Disruption and
Geopolitical Risk. The value of your investment in the Fund is based on the market prices of the securities the Fund holds. These prices change daily due to economic and other events that affect markets
generally, as well as those that affect particular regions, countries, industries, companies or governments.
These price movements, sometimes called
volatility, may be greater or less depending on the types of securities the Fund owns and the markets in which the securities trade. The increasing interconnectivity between global economies and financial markets
increases the likelihood that events or conditions in one region or financial market may adversely impact issuers in a different country, region or financial market. Securities in the Fund’s portfolio may
underperform due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural/ environmental disasters, pandemics, epidemics, cyber-attacks, terrorism,
armed conflicts, regulatory events and governmental or quasi-governmental actions. The occurrence of global events, such as terrorist attacks around the world, natural/environmental disasters-, social and political
discord or debt crises and downgrades, among others, may result in market volatility and may have long term effects on both the U.S. and global financial markets. A disruption of financial markets or other terrorist
attacks could adversely affect Fund service providers and/or the Fund’s operations as well as interest rates, secondary trading, credit risk, inflation and other factors relating to the shares. The Fund cannot
predict the effects or likelihood of similar events in the future on the U.S. and world economies, the value of the shares or the NAV of the Fund.
Social, political, economic
and other conditions and events, such as natural disasters, health emergencies (e.g., epidemics and pandemics such as COVID-19, avian influenza or HINI/09), terrorism, actual or threatened wars or other armed
conflicts (such as the Russia/Ukraine war and Middle East conflicts), may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets. These impacts could
negatively affect the Fund’s investments in securities and instruments that are economically tied to the applicable region, and include (but are not limited to) declines in value and reductions in liquidity. In
addition, to the extent new sanctions are imposed or previously relaxed sanctions are reimposed, complying with such restrictions may prevent the Fund from pursuing certain investments, cause delays or other
impediments with respect to consummating such investments or divestments, require divestment or freezing of investments on unfavorable terms, render divestment of underperforming investments impracticable, negatively
impact the Fund’s ability to achieve its investment objective, prevent the Fund from receiving payments otherwise due it, increase diligence and other similar costs to the Fund, render valuation of affected
investments challenging, or require the Fund to consummate an investment on terms that are less advantageous than would be the case absent such restrictions. As global systems, economies and financial markets are
increasingly interconnected, events that once had only local impact are now more likely to have regional or even global effects. Events that occur in one country, region or financial market will, more frequently,
adversely impact issuers in other countries, regions or markets. These impacts
| 34
| abrdn Life Sciences Investors
|
Additional Information Regarding the
Fund (Unaudited) (continued)
can be exacerbated by failures of
governments and societies to adequately respond to an emerging event or threat. These types of events quickly and significantly impact markets in the U.S. and across the globe leading to extreme market volatility and
disruption. The extent and nature of the impact on supply chains or economies and markets from these events is unknown, particularly if these types of events persist for an extended period of time. These types of
events, could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a significant impact on the economies and financial markets and the Investment
Adviser’s investments advisory activities and services of other service providers, which in turn could adversely affect the Fund’s investments and other operations. The value of the Fund’s
investments impact the operations and effectiveness of the Investment Adviser or key service providers or if these events disrupt systems and processes necessary or beneficial to the investment advisory or other
activities on behalf the Fund.
Systemic risk events and/or
resulting government actions in the financial markets can negatively impact the Fund, for example, through less credit being available to issuers or uncertainty regarding safety of deposits at other institutions.
These risks also may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms, and exchanges, with which the Fund interacts.
Market Events Risk. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events,
governmental actions or intervention, actions taken by the US Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political events within the U.S. and abroad, such
as changes in the U.S. presidential administration and Congress, investor sentiment and other factors that may or may not be related to the issuer of the security or other asset. Economies and financial markets
throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, terrorism, natural disasters and other circumstances in one country or region could have
profound impacts on global economies or markets. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and
liquidity of the Fund's investments may be negatively affected. In addition, any spread of an infectious illness, public health threat or similar issue could reduce consumer demand or economic output, result in market
closures, travel restrictions or quarantines, and generally have a significant impact on the world economy, which in turn could adversely affect the Fund's investments. The impact of the recent U.S. elections on such
policies remains uncertain and policies supported by the new administration (or the reversal of policies supported by the previous
administration) could impact U.S. interest
rates or inflation or otherwise impact the Fund.
Security Market Risk - Discount
to NAV. Shares of closed-end investment companies frequently trade at a discount from NAV. The risk that the Fund’s common shares may trade at a discount is separate from the risk of a
decline in the Fund’s NAV as a result of investment activities.
Whether shareholders will
realize a gain or loss for federal income tax purposes upon the sale of their common shares depends upon whether the market value of the common shares at the time of sale is above or below the shareholder’s
basis in such common shares, taking into account transaction costs, and it is not directly dependent upon the Fund’s NAV. Because the market price of the Fund’s common shares will be determined by factors
such as the relative demand for and supply of the shares in the market, general market conditions and other factors beyond the Fund’s control, the Fund cannot predict whether its common shares will trade at,
below or above the NAV, or at, below or above the public offering price for the Fund’s common shares.
Non-Diversification Risk. The Fund is non-diversified, meaning that the Fund is permitted to invest more of its assets in fewer issuers than “diversified” funds. Thus, the Fund may be more susceptible
to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.
Selection Risk. Different types of equity securities tend to shift into and out of favor with investors, depending on market and economic conditions. The performance of funds that invest in equity
securities of life sciences companies may at times be better or worse than the performance of funds that focus on other types of securities or that have a broader investment style.
Concentration in the Life
Sciences Industries. Under normal market conditions, the Fund expects to invest at least 80% of its net assets in securities of Life Sciences Companies. This policy may not be changed without 60 days’
prior written notice to Shareholders. The Fund will not have less than 25% of its net assets invested in Life Sciences Companies. As a result, the Fund’s portfolio may be more sensitive to, and possibly more
adversely affected by,regulatory, economic or political factors or trends relating to the life sciences industries than a portfolio of companies representing a larger number of industries. As a result of its
concentration policy, the Fund’s investments may be subject to greater risk and market fluctuation than a fund that has securities representing a broader range of investments.
Life sciences companies have
in the past been characterized by limited product focus, rapidly changing technology and extensive government regulation. In particular, technological advances can
| abrdn Life Sciences Investors
| 35
|
Additional Information Regarding the
Fund (Unaudited) (continued)
render an existing product, which may
account for a disproportionate share of a company’s revenue, obsolete. Obtaining governmental approval from agencies such as the Food and Drug Administration (the “FDA”), U.S. Department of
Agriculture and other U.S. and non-U.S. governmental agencies for new products can be lengthy, expensive and uncertain as to outcome. Such delays in product development may result in the need to seek additional
capital, potentially diluting the interests of existing investors such as the Fund. In addition, governmental agencies may, for a variety of reasons, restrict the release of certain innovative technologies of
commercial significance, such as genetically altered material. These various factors may result in abrupt advances and declines in the securities prices of particular companies and, in some cases, may have a broad
effect on the prices of securities of companies in particular life sciences industries.
Intense competition exists
within and among certain life sciences industries, including competition to obtain and sustain proprietary technology protection. Life sciences companies can be highly dependent on the strength of patents, trademarks
and other intellectual property rights for maintenance of profit margins and market share. Accordingly, such companies may be significantly affected by such things as the expiration of patents or the loss of , or the
inability to enforce, intellectual property rights. The complex nature of the technologies involved can lead to patent disputes, including litigation that could result in a company losing an exclusive right to a
patent. Competitors of life sciences companies may have substantially greater financial resources, more extensive development, manufacturing, marketing and service capabilities, and a larger number of qualified
managerial and technical personnel. Such competitors may succeed in developing technologies and products that are more effective or less costly than any that may be developed by life sciences companies in which the
Fund invests and may also prove to be more successful in production and marketing. Competition may increase further as a result of potential advances in health services and medical technology and greater availability
of capital for investment in these fields.
With respect to healthcare
industries, cost containment measures already implemented by national governments, state or provincial governments, international organizations and the private sector have adversely affected certain sectors of these
industries. Increased emphasis on managed care in the United States may put pressure on the price and usage of products sold by life sciences companies in which the Fund may invest and may adversely affect the sales
and revenues of life sciences companies.
Product development efforts
by life sciences companies may not result in commercial products for many reasons, including, but not limited to, failure to achieve acceptable clinical trial results, limited effectiveness in treating the specified
condition or illness, harmful
side effects, failure to obtain regulatory
approval, and high manufacturing costs. Even after a product is commercially released, governmental agencies may require additional clinical trials or change the labeling requirements for products if additional
product side effects are identified, which could have a material adverse effect on the market price of the securities of those life sciences companies.
Certain life sciences
companies in which the Fund may invest may be exposed to potential product liability risks that are inherent in the testing, manufacturing, marketing and sale of pharmaceuticals, medical devices or other products.
There can be no assurance that a product liability claim would not have a material adverse effect on the business, financial condition or securities prices of a company in which the Fund has invested.
All of these factors as well as
others may cause the value of the Fund’s shares to fluctuate significantly over relatively short periods of time.
Pharmaceutical Sector
Risk. The success of companies in the pharmaceutical sector is highly dependent on the development, procurement and marketing of drugs. The values of pharmaceutical companies are also dependent
on the development, protection and exploitation of intellectual property rights and other proprietary information, and the profitability of pharmaceutical companies may be significantly affected by such things as the
expiration of patents or the loss of, or the inability to enforce, intellectual property rights.
The research and other costs
associated with developing or procuring new drugs and the related intellectual property rights can be significant, and the results of such research and expenditures are unpredictable. There can be no assurance that
those efforts or costs will result in the development of a profitable drug. Pharmaceutical companies may be susceptible to product obsolescence. Many pharmaceutical companies face intense competition from new products
and less costly generic products. Moreover, the process for obtaining regulatory approval by the FDA or other governmental regulatory authorities is long and costly and there can be no assurance that the necessary
approvals will be obtained or maintained.
The pharmaceutical sector is
also subject to rapid and significant technological change and competitive forces that may make drugs obsolete or make it difficult to raise prices and, in fact, may result in price discounting. Companies in the
pharmaceutical sector may also be subject to expenses and losses from extensive litigation based on intellectual property,product liability and similar claims. Failure of pharmaceutical companies to comply with
applicable laws and regulations can result in the imposition of civil and criminal fines,penalties and, in some instances, exclusion of participation in government sponsored programs such as Medicare and Medicaid.
| 36
| abrdn Life Sciences Investors
|
Additional Information Regarding the
Fund (Unaudited) (continued)
Companies in the pharmaceutical sector may
be adversely affected by government regulation and changes in reimbursement rates. The ability of many pharmaceutical companies to commercialize and monetize current and any future products depends in part on the
extent to which reimbursement for the cost of such products and related treatments are available from third party payors, such as Medicare, Medicaid, private health insurance plans and health maintenance
organizations. Third-party payors are increasingly challenging the price and cost-effectiveness of many medical products.
Significant uncertainty
exists as to the reimbursement status of health care products, and there can be no assurance that adequate third-party coverage will be available for pharmaceutical companies to obtain satisfactory price levels for
their products.
The international operations
of many pharmaceutical companies expose them to risks associated with instability and changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations and other risks
inherent to international business. Additionally, a pharmaceutical company’s valuation can often be based largely on the potential or actual performance of a limited number of products. A pharmaceutical
company’s valuation can also be greatly affected if one of its products proves unsafe, ineffective or unprofitable. Such companies also may be characterized by thin capitalization and limited markets, financial
resources or personnel, as well as dependence on wholesale distributors. The stock prices of companies in the pharmaceutical industry have been and will likely continue to be extremely volatile.
Biotechnology Industry
Risk. The success of biotechnology companies is highly dependent on the development, procurement and/or marketing of drugs. The values of biotechnology companies are also dependent on the
development, protection and exploitation of intellectual property rights and other proprietary information, and the profitability of biotechnology companies may be significantly affected by such things as the
expiration of patents or the loss of, or the inability to enforce, intellectual property rights.
The research and other costs
associated with developing or procuring new drugs, products or technologies and the related intellectual property rights can be significant, and the results of such research and expenditures are unpredictable. There
can be no assurance that those efforts or costs will result in the development of a profitable drug, product or technology.
Moreover, the process for
obtaining regulatory approval by the FDA or other governmental regulatory authorities is long and costly and there can be no assurance that the necessary approvals will be obtained or maintained.
The biotechnology sector is also subject to
rapid and significant technological change and competitive forces that may make drugs, products or technologies obsolete or make it difficult to raise prices and, in fact, may result in price discounting. Companies in
the biotechnology sector may also be subject to expenses and losses from extensive litigation based on intellectual property, product liability and similar claims. Failure of biotechnology companies to comply with
applicable laws and regulations can result in the imposition of civil and/or criminal fines, penalties and, in some instances, exclusion of participation in government sponsored programs such as Medicare and
Medicaid.
Companies in the
biotechnology sector may be adversely affected by government regulation and changes in reimbursement rates. Healthcare providers, principally hospitals, that transact with companies in the biotechnology industry,
often rely on third party payors, such as Medicare, Medicaid, private health insurance plans and health maintenance organizations to reimburse all or a portion of the cost of healthcare related products or services.
Biotechnology companies will continue to be affected by the efforts of governments and third party payors to contain or reduce health care costs. For example, certain foreign markets control pricing or profitability
of biotechnology products and technologies. In the United States, there has been,and there will likely continue to be, a number of federal and state proposals to implement similar controls.
A biotechnology
company’s valuation could be based on the potential or actual performance of a limited number of products and could be adversely affected if one of its products proves unsafe, ineffective or unprofitable. Such
companies may also be characterized by thin capitalization and limited markets, financial resources or personnel. The stock prices of companies involved in the biotechnology sector have been and will likely continue
to be extremely volatile.
Managed Care Sector Risk. Companies in the managed care sector often assume the risk of both medical and administrative costs for their customers in return for monthly premiums. The profitability of these products
depends in large part on the ability of such companies to predict, price for, and effectively manage medical costs. Managed care companies base the premiums they charge and their Medicare bids on estimates of future
medical costs over the fixed contract period; however, many factors may cause actual costs to exceed what was estimated and reflected in premiums or bids. These factors may include medical cost inflation,increased use
of services, increased cost of individual services, natural catastrophes or other large-scale medical emergencies, epidemics, the introduction of new or costly treatments and technology, new mandated benefits (such as
the expansion of essential benefits coverage) or other regulatory changes and insured population characteristics. Relatively small differences
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between predicted and actual medical costs
or utilization rates as a percentage of revenues can result in significant changes in financial results.
Managed care companies are
regulated at the federal, state, local and international levels. Insurance and Health Maintenance Organizations (“HMOs”) subsidiaries must be licensed by and are subject to the regulations of the
jurisdictions in which they conduct business. U.S. health plans and insurance companies are also regulated under state insurance holding company regulations, and some of their activities may be subject to other health
care-related regulations. The health care industry is also regularly subject to negative publicity, including as a result of governmental investigations, adverse media coverage and political debate surrounding
industry regulation. Negative publicity may adversely affect stock price, damage the reputation of managed care companies in various markets or foster an increasingly active regulatory environment, which, in turn,
could further increase the regulatory burdens under which such companies operate and their costs of doing business.
The evolution of the ACA and
other regulatory reforms could materially and adversely affect the manner in which U.S. managed care companies conduct business and their results of operations, financial position and cash flows. The ACA includes
guaranteed coverage and expanded benefit requirements, eliminates pre-existing condition exclusions and annual and lifetime maximum limits, restricts the extent to which policies can be rescinded, establishes minimum
medical loss ratios, creates a federal premium review process, imposes new requirements on the format and content of communications (such as explanations of benefits) between health insurers and their members, grants
to members new and additional appeal rights, and imposes new and significant taxes on health insurers and health care benefits.
New laws or regulations could
drive substantial change to the way healthcare products and services are currently delivered and paid for in the United States. Health plans and insurance companies could face meaningful disruption or
disintermediation if the U.S. migrates to a single payer healthcare system where the government acts as the sole payer of healthcare services for the entire population. A transformative overhaul of the U.S. healthcare
system could impact the financial viability of managed care companies in which the Fund may invest.
Managed care companies
contract with physicians, hospitals, pharmaceutical benefit service providers, pharmaceutical manufacturers, and other health care providers for services. Suchcompanies’ results of operations and prospects are
substantially dependent on their continued ability to contract for these services at competitive prices. Failure to develop and maintain satisfactory
relationships with health care providers,
whether in-network or out-of network,could materially and adversely affect business, results of operations, financial position and cash flows.
Life Science and Tools Industry
Risk. Life sciences industries are characterized by limited product focus, rapidly changing technology and extensive government regulation. In particular, technological advances can render an
existing product, which may account for a disproportionate share of a company’s revenue, obsolete. Obtaining governmental approval from agencies such as the FDA, the U.S. Department of Agriculture and other U.S.
and non-U.S. governmental agencies for new products can be lengthy, expensive and uncertain as to outcome. Such delays in product development may result in the need to seek additional capital, potentially diluting the
interests of existing investors such as the Fund. In addition,governmental agencies may, for a variety of reasons, restrict the release of certain innovative technologies of commercial significance, such as
genetically altered material. These various factors may result in abrupt advances and declines in the securities prices of particular companies and, in some cases, may have a broad effect on the prices of securities
of companies in particular life sciences industries.
Intense competition exists
within and among certain life sciences industries, including competition to obtain and sustain proprietary technology protection. Life sciences companies can be highly dependent on the strength of patents, trademarks
and other intellectual property rights for maintenance of profit margins and market share. Accordingly, such companies may be significantly affected by such things as the expiration of patents or the loss of , or the
inability to enforce, intellectual property rights. The complex nature of the technologies involved can lead to patent disputes, including litigation that could result in a company losing an exclusive right to a
patent. Competitors of life sciences companies may have substantially greater financial resources, more extensive development, manufacturing, marketing and service capabilities, and a larger number of qualified
managerial and technical personnel. Such competitors may succeed in developing technologies and products that are more effective or less costly than any that may be developed by life sciences companies in which the
Fund invests and may also prove to be more successful in production and marketing. Competition may increase further as a result of potential advances in health services and medical technology and greater availability
of capital for investment in these fields.
With respect to healthcare
industries, cost containment measures already implemented by the federal government, state governments and the private sector have adversely affected certain sectors of these industries. Increased emphasis on managed
care in the United States may put pressure on the price and usage of products sold by life sciences companies in which the Fund may invest and may adversely affect the sales and revenues of life sciences companies.
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Product development efforts by life sciences
companies may not result in commercial products for many reasons, including, but not limited to, failure to achieve acceptable clinical trial results, limited effectiveness in treating the specified condition or
illness, harmful side effects, failure to obtain regulatory approval, and high manufacturing costs. Even after a product is commercially released, governmental agencies may require additional clinical trials or change
the labeling requirements for products if additional product side effects are identified, which could have a material adverse effect on the market price of the securities of those life sciences companies
Certain life sciences
companies in which the Fund may invest may be exposed to potential product liability risks that are inherent in the testing, manufacturing, marketing and sale of pharmaceuticals, medical devices or other products.
There can be no assurance that a product liability claim would not have a material adverse effect on the business, financial condition or securities prices of a company in which the Fund has invested.
Healthcare Technology Sector
Risk. Companies in the healthcare technology sector may incur substantial costs related to product-related liabilities. Many of the software solutions,health care devices or services developed
by such companies are intended for use in collecting, storing and displaying clinical and health care-related information used in the diagnosis and treatment of patients and in related health care settings such as
admissions,billing, etc. The limitations of liability set forth in the companies’ contracts may not be enforceable or may not otherwise protect these companies from liability for damages. Healthcare technology
companies may also be subject to claims that are not covered by contract, such as a claim directly by a patient. Although such companies may maintain liability insurance coverage, there can be no assurance that such
coverage will cover any particular claim that has been brought or that may be brought in the future, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable
terms, if at all.
Healthcare technology
companies may experience interruption at their data centers or client support facilities. The business of such companies often relies on the secure electronic transmission, data center storage and hosting of sensitive
information, including protected health information, financial information and other sensitive information relating to clients,company and workforce. In addition, such companies may perform data center and/or hosting
services for certain clients, including the storage of critical patient and administrative data and support services through various client support facilities. If any of these systems are interrupted, damaged or
breached by an unforeseen event or actions of a third party,including a cyber-attack, or fail for any extended period of time, it could have a material adverse impact on the results of operations for such
companies.
The proprietary technology developed by
healthcare technology companies may be subject to claims for infringement or misappropriation of intellectual property rights of others, or maybe infringed or misappropriated by others. Despite protective measures and
intellectual property rights, such companies may not be able to adequately protect against theft, copying,reverse-engineering, misappropriation, infringement or unauthorized use or disclosure of their intellectual
property, which could have an adverse effect on their competitive position. In addition, these companies are routinely involved in intellectual property infringement or misappropriation claims and it is expected that
this activity will continue or even increase as the number of competitors, patents and patent enforcement organizations in the healthcare technology market increases, the functionality of software solutions and
services expands, the use of open-source software increases and new markets such as health care device innovation, health care transactions, revenue cycle, population health management and life sciences are entered
into. These claims, even if not meritorious, are expensive to defend and are often incapable of prompt resolution.
The success of healthcare
technology companies depends upon the recruitment and retention of key personnel. To remain competitive, such companies must attract, motivate and retain highly skilled managerial, sales, marketing, consulting and
technical personnel, including executives, consultants, programmers and systems architects skilled in healthcare technology,health care devices, health care transactions, population health management, revenue cycle
and life sciences industries and the technical environments in which solutions, devices and services are needed. Competition for such personnel in the healthcare technology sector is intense in both the United States
and abroad. The failure to attract additional qualified personnel could have a material adverse effect on healthcare technology companies’ prospects for long-term growth.
Healthcare Services Sector
Risk. The operations of healthcare services companies are subject to extensive federal, state and local government regulations, including Medicare and Medicaid payment rules and regulations,
federal and state anti-kickback laws, the physician self-referral law (“Stark Law”) and analogous state self-referral prohibition statutes, Federal Acquisition Regulations, the False Claims Act and federal
and state laws regarding the collection, use and disclosure of patient health information and the storage, handling and administration of pharmaceuticals. The Medicare and Medicaid reimbursement rules related to
claims submission, enrollment and licensing requirements, cost reporting, and payment processes impose complex and extensive requirements upon dialysis providers as well. A violation or departure from any of these
legal requirements may result in government audits,lower reimbursements, significant fines and penalties, the potential loss of certification,recoupment efforts or voluntary repayments. If
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healthcare services companies fail to adhere
to all of the complex government regulations that apply to their businesses, such companies could suffer severe consequences that would substantially reduce revenues, earnings, cash flows and stock prices.
A substantial percentage of a
healthcare services company’s service revenues may be generated from patients who have state Medicaid or other non-Medicare government-based programs, such as coverage through the Department of Veterans Affairs
(“VA”), as their primary coverage. As state governments and other governmental organizations face increasing budgetary pressure, healthcare services companies may in turn face reductions in payment rates,
delays in the receipt of payments, limitations on enrollee eligibility or other changes to the applicable programs.
Adverse economic conditions
could adversely affect the business and profitability of healthcare services companies. Among other things, the potential decline in federal, non-U.S. government and state revenues that may result from such conditions
may create additional pressures to contain or reduce reimbursements for services from Medicare, Medicaid and other government sponsored programs. Increasing job losses or slow improvement in the unemployment rate in
the United States and elsewhere as a result of adverse or recent economic conditions may result in a smaller percentage of patients being covered by an employer group health plan and a larger percentage being covered
by lower paying Medicare and Medicaid programs. Employers may also select more restrictive commercial plans with lower reimbursement rates. To the extent that payors are negatively impacted by a decline in the
economy, healthcare services companies may experience further pressure on commercial rates, a further slowdown in collections and a reduction in the amounts they expect to collect. In addition, uncertainty in the
financial markets could adversely affect the variable interest rates payable under credit facilities or could make it more difficult to obtain or renew such facilities or to obtain other forms of financing in the
future, if at all. Any or all of these factors, as well as other consequences of the adverse economic conditions which cannot currently be anticipated, could have a material adverse effect on a healthcare services
company’s revenues, earnings and cash flows and otherwise adversely affect its financial condition.
Healthcare Supplies Sector
Risk. If healthcare supplies companies are unable to successfully expand their product lines through internal research and development and acquisitions, their business may be materially and
adversely affected. In addition, if these companies are unable to successfully grow their businesses through marketing partnerships and acquisitions, their business may be materially and adversely affected.
Consolidation of healthcare
providers has increased demand for price concessions and caused the exclusion of suppliers from significant
market segments. It is expected that market
demand, government regulation, third-party reimbursement policies, government contracting requirements and societal pressures will continue to change the worldwide healthcare industry, resulting in further business
consolidations and alliances among customers and competitors. This may exert further downward pressure on the prices of healthcare suppliescompanies’ products and adversely impact their businesses, financial
conditions or results of operations.
Quality is extremely
important to healthcare supplies companies and their customers due to the serious and costly consequences of product failure. Quality certifications are critical to the marketing success of their products and
services. If a healthcare supplies company fails to meet these standards or fails to adapt to evolving standards, its reputation could be damaged, it could lose customers, and its revenue and results of operations
could decline.
Healthcare Facilities Sector
Risk. A healthcare facility’s ability to negotiate favorable contracts with HMOs, insurers offering preferred provider arrangements and other managed care plans significantly affects the
revenues and operating results of such healthcare facilities.
In addition, private payers
are increasingly attempting to control health care costs through direct contracting with hospitals to provide services on a discounted basis, increased utilization reviews and greater enrollment in managed care
programs, such as HMOs and Preferred Provider Organizations (“PPOs”). The trend toward consolidation among private managed care payers tends to increase their bargaining power over prices and fee
structures. As various provisions of the ACA evolve, it is not clear what impact, if any, the increased obligations on private payers imposed by the health care reform law will have on a healthcare facility’s
ability to negotiate reimbursement increases. Non-government payers may increasingly demand reduced fees. If a healthcare facility is unable to enter into and maintain managed care contractual arrangements on
acceptable terms, if it experiences material reductions in the contracted rates received from managed care payers, or if it has difficulty collecting from managed care payers, its results of operations could be
adversely affected.
Further changes in the
Medicare and Medicaid programs or other government health care programs could have an adverse effect on a healthcare facility’s business. In addition to the changes affected by the ACA, the Medicare and Medicaid
programs are subject to other statutory and regulatory changes, administrative rulings, interpretations and determinations concerning patient eligibility requirements, funding levels and the method of calculating
payments or reimbursements, among other things, requirements for utilization review, and federal and state funding restrictions. All of these could materially increase or decrease payments from government programs
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in the future, as well as affect the cost of
providing services to patients and the timing of payments to facilities, which could in turn adversely affect a healthcare facility’s overall business, financial condition, results of operations or cash
flows.
Healthcare facilities are
adversely affected by uninsured and underinsured patients, as well as a growing mix of Medicare and Medicaid patients that typically have lower reimbursement rates than commercial managed care patients As a result,
healthcare facilities continue to experience a shift in payer mix and a high level of uncollectible accounts, which could worsen if there is an increase in unemployment. Healthcare facilities may continue to
experience significant levels of bad debt expense and may have to provide uninsured discounts and charity care for undocumented immigrants who are not permitted to enroll in a health insurance exchange or government
health care program. The trend of higher co-pays and deductibles and a focus on migrating healthcare utilization to lower cost sites of care, may also pressure volumes and revenue at certain healthcare facilities
which could adversely impact the financial condition of hospitals and facilities with high fixed cost structures.
Healthcare Equipment
Sector Risk. The medical device markets are highly competitive and a healthcare equipment company many be unable to compete effectively. These markets are characterized by rapid change resulting from
technological advances and scientific discoveries.
Development by other
companies of new or improved products, processes, or technologies may make a healthcare equipment company’s products or proposed products less competitive. In addition, these companies face competition from
providers of alternative medical therapies such as pharmaceutical companies.
Medical devices and related
business activities are subject to rigorous regulation, including by the FDA, U.S. Department of Justice (“DOJ”), and numerous other federal, state, and foreign governmental authorities. These authorities
and members of Congress have been increasing their scrutiny of the healthcare equipment industry. In addition, certain states have passed or are considering legislation restricting healthcare equipment
companies’ interactions with health care providers and requiring disclosure of certain payments to them. It is anticipated that governmental authorities will continue to scrutinize this industry closely,and that
additional regulation may increase compliance and legal costs, exposure to litigation, and other adverse effects to operations.
Healthcare equipment
companies are substantially dependent on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may result in the payment of significant
monetary damages and/or royalty payments, may negatively impact the ability of healthcare equipment companies to sell current or future products, or may prohibit such
companies from enforcing their patent and other
proprietary rights against others.
Quality problems with the
processes, goods and services of a healthcare equipment company could harm the company’s reputation for producing high-quality products and erode its competitive advantage, sales and market share. Quality is
extremely important to healthcare equipment companies and their customers due to the serious and costly consequences of product failure. Quality certifications are critical to the marketing success of goods and
services. If a healthcare equipment company fails to meet these standards, its reputation could be damaged, it could lose customers, and its revenue and results of operations could decline.
Healthcare Distributors Sector
Risk. Companies in the healthcare distribution sector operate in markets that are highly competitive. Because of competition, many of these companies face pricing pressures from customers and
suppliers. If these companies are unable to offset margin reductions caused by pricing pressures through steps such as effective sourcing and enhanced cost control measures, the financial condition of such companies
could be adversely affected. In addition, the healthcare industry has continued to consolidate. Further consolidation among customers and suppliers (including branded pharmaceutical manufacturers) could give the
resulting enterprises greater bargaining power,which may adversely impact the financial condition of companies in the healthcare distribution sector.
Fewer generic pharmaceutical
launches or launches that are less profitable than those previously experienced may have an adverse effect on the profits of companies in the healthcare distribution sector. Additionally, prices for existing generic
pharmaceuticals generally decline over time, although this may vary. Price deflation on existing generic pharmaceuticals may have an adverse effect on company profits. With respect to branded pharmaceutical price
appreciation, if branded manufacturers increase prices less frequently or by amounts that are smaller than have been experienced historically, healthcare distribution companies may profit less from branded
pharmaceutical agreements.
The healthcare industry is
highly regulated, and healthcare distribution companies are subject to regulation in the United States at both the federal and state level and in foreign countries. If healthcare distribution companies fail to comply
with these regulatory requirements, the financial condition of such companies could be adversely affected.
Due to the nature of the
business of healthcare distribution companies, such companies may from time to time become involved in disputes or legal proceedings. For example, some of the products that these companies distribute may be alleged to
cause personal injury or violate the intellectual property rights of another party,
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subjecting such companies to product
liability or infringement claims. Litigation is inherently unpredictable, and the unfavorable resolution of one or more of these legal proceedings could adversely affect the cash flows and balance sheets of healthcare
distribution companies. Pharmaceutical distributors currently face lawsuits related to the abuse of opioid medications in the United States. The allegations include that pharmaceutical distributors failed to provide
effective controls around the quantities of opioid medications distributed to certain pharmacies, failed to properly prevent the diversion of medications and failed to report suspicious orders. Pharmaceutical
distributors are in discussions with federal, state and local jurisdictions related to their role in the distribution of opioid pharmaceuticals and it is possible that they will be required to pay multi-billion dollar
settlements related to the ongoing litigation.
Healthcare distribution
companies depend on the availability of various components,compounds, raw materials and energy supplied by others for their operations. Any of these supplier relationships could be interrupted due to events beyond the
control of such companies, including pandemics, epidemics or natural disasters, or could be terminated. A sustained supply interruption could have an adverse effect on business.
Risks Associated with
Regulatory and Policy Changes. At any time after the date hereof, U.S. and non-U.S. governmental agencies and other regulators may implement additional regulations and legislators may pass new laws that affect the
investments held by the Fund, the strategies used by the Fund or the level of regulation or taxation applying to the Fund. These regulations and laws impact the investment strategies, performance, costs and operations
of the Fund, as well as the way investments in, and Shareholders of, the Fund are taxed. In particular, changes to U.S. healthcare policy could affect the Fund and its investments.
Investment in Emerging Growth
Companies. The Fund may invest in equity securities of emerging growth life sciences companies. While these securities offer the opportunity for significant capital gains, such investments also
involve a degree of risk that can result insubstantial losses. There can be no assurance that securities of start-up or emerging growth companies will, in the future, yield returns commensurate with their associated
risks.
Liquidity of Portfolio
Investments. The Fund may invest in securities that are traded in the over-the-counter markets or on regional stock exchanges where the low trading volume of a particular security may result in abrupt
and erratic price movements or that are not traded in any market. An investment in such securities may have limited liquidity, and the Fund may find it necessary to sell at a discount from recent prices or to sell
over extended periods of time when disposing of such securities. In addition, the Fund may invest up to40% of its net assets in Restricted Securities, which by their terms are illiquid. In
many cases,Restricted Securities in which
the Fund may invest cannot be sold except in a public offering registered under the Securities Act of 1933, as amended, pursuant to an exemption from the Securities Act or in compliance with applicable Securities and
Exchange Commission regulations.
Venture Capital
Investments Risk. The Fund may occasionally invest in venture capital opportunities. While these securities offer the opportunity for significant capital gains, such investments also involve a degree of
risk that can result in substantial losses. Some of the venture capital opportunities in which the Fund may invest are expected to be companies that are in a “start-up” stage of development, have little or
no operating history, operate at a loss or with substantial variations in operating results from period to period, have limited products, markets, financial resources or management depth, or have the need for
substantial additional “follow-on” capital to support expansion or to achieve or maintain a competitive position. Such additional investments may dilute the interests of prior investors, such as the Fund.
Some of these companies may be emerging companies at the research and development stage with no marketable or approved products or technology. There can be no assurance that securities of start-up or emerging growth
companies will, in the future, yield returns commensurate with their associated risks.
These investments, which are
considered Restricted Securities, will be made primarily in convertible preferred stock. The Fund may also purchase non-convertible debt securities in connection with its venture capital investments, and otherwise
when the Investment Adviser believes that such investments would be consistent with the Fund’s investment objective. While these debt investments typically will not be rated, the Investment Adviser believes
that,in light of the risk characteristics associated with investments in emerging growth companies,if such investments were to be compared with investments rated by S&P or Moody’s, they may be rated as low
as “C” in the rating categories established by S&P and Moody’s. Such securities are commonly referred to as “junk bonds” and are considered, on balance, as predominantly
speculative.
Restricted Securities and
Valuation Risk. Some of the Fund’s investments are subject to restrictions on resale and generally have no established trading market or are otherwise illiquid with little or no trading activity.
The valuation process requires an analysis of various factors. The Fund’s fair value methodology includes the examination of, among other things,(i) the existence of any contractual restrictions on the
disposition of the securities;(ii) information obtained from the issuer which may include an analysis of the company’s financial statements, the company’s products or intended markets, or the
company’s technologies; and (iii) the price of a security sold at arm’s length in an issuer’s subsequent completed round of financing. As there is typically no readily available market value for some
of the
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Restricted Securities in the Fund’s
portfolio, such Restricted Securities in the Fund’s portfolio are valued at fair value as determined in good faith by or under the direction of the Board pursuant to the Fund’s valuation policy and a
consistently applied valuation process. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Fund’s
investments determined in good faith by the Board may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material. There is no
single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment, while employing a
consistently applied valuation process for the types of investments the Fund makes.
Foreign Securities Risk. The Fund may invest up to 20% of its net assets in Foreign Securities. Foreign Securities involve special risks that are not typically associated with U.S.dollar denominated or quoted
securities of U.S. issuers. Foreign Securities may be affected by changes in currency rates, changes in foreign or U.S. laws or restrictions applicable to such investments and changes in exchange control regulations
(e.g., currency blockage). A decline in the exchange rate of the currency (i.e., weakening of the currency against the U.S. dollar) in which a portfolio security is quoted or denominated relative to the U.S. dollar
would reduce the value of the portfolio security. In addition, if the currency in which the Fund receives dividends, interest or other payments declines in value against the U.S. dollar before such income is
distributed as dividends to Shareholders or converted to U.S. dollars, the Fund may have to sell portfolio securities to obtain sufficient cash to pay such dividends.
Brokerage commissions,
custodial services and other costs relating to investment in international securities markets generally are more expensive than in the United States. In addition, clearance and settlement procedures may be different
in foreign countries and, in certain markets, such procedures have been unable to keep pace with the volume of securities transactions, thus making it difficult to conduct such transactions.
Foreign issuers are not
generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to U.S. issuers. There may be less publicly available information about a foreign issuer than about a
U.S. issuer. In addition, there is generally less government regulation of foreign markets, companies and securities dealers than in the United States, and the legal remedies for investors may be more limited than the
remedies available in the United States. Foreign securities markets may have substantially less volume than U.S. securities markets and securities of many foreign issuers are less liquid and more volatile than
securities of comparable domestic issuers. Furthermore, with
respect to certain foreign countries, there
is a possibility of nationalization, expropriation or confiscatory taxation, imposition of withholding or other taxes on dividend or interest payments (or, in some cases, capital gains distributions), limitations on
the removal of funds or other assets from such countries, and risks of political or social instability or diplomatic developments which could adversely affect investments in those countries. Adverse diplomatic
developments may include the imposition of economic or trade sanctions or other measures by the U.S. or other governments and supranational organizations or changes in trade policies. These developments may, among
other things, limit the ability of the Fund to invest in certain securities or require the disposition of an investment.
Management Risk. The Fund’s ability to achieve its investment objective is directly related to the Investment Adviser’s investment strategies for the Fund. The value of your investment in the
Fund’s common shares may vary with the effectiveness of the research and analysis conducted by the Investment Adviser and its ability to identify and take advantage of attractive investment opportunities. If the
investment strategies of the Investment Adviser do not produce the expected results, the value of your investment could be diminished or even lost entirely, and the Fund could underperform the market or other funds
with similar investment objective.
Key Personnel Risk. There may be only a limited number of securities professionals who have comparable experience to that of the Fund’s existing portfolio management team in the area of healthcare
companies. If one or more of the team members dies, resigns, retires or is otherwise unable to act on behalf of the Investment Adviser, there can be no assurance that a suitable replacement could be found
immediately.
Concentration of
Investments. The Fund may from time to time concentrate its investments in a few issuers and take large positions in those issuers. As a result, the Fund may be subject to a greater risk of loss than
an investment company that diversifies its investments more broadly. Taking larger positions is also likely to increase the volatility of the Fund’s NAV reflecting fluctuation in the value of its large holdings.
The Fund may make investments in any company with the objective of controlling or influencing the management and policies of that company. Investing for the purpose of controlling or influencing the management and
policies of a company could potentially make the Fund less diversified and more susceptible to declines in the value of the company’s stock. The Investment Adviser may seek a control position in private venture
capital investments where the Investment Adviser believes its knowledge and experience will be of significant benefit to the invested company and, therefore, to the Fund’s investment. The Investment Adviser
expects to seek control in public companies only occasionally and most often in companies with a small capitalization.
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Anti-Takeover Provisions Risk. The Fund’s Declaration of Trust (“Declaration of Trust”),dated February 20, 1992, as amended, has provisions that could have the effect of limiting the ability of other
entities or persons to (1) acquire control of the Fund, (2) cause it to engage in certain transactions, or (3) modify its structure. The By-Laws also contain provisions regarding qualifications for nominees for
Trustee positions, advance notice of Shareholder proposals, and requirements for the call of special Shareholder meetings. These provisions may be considered “anti-takeover” provisions.
Related Party Transactions
Risk. The Fund may be subject to certain potential conflicts of interest. Although the Fund has no obligation to do so, it may place brokerage orders with brokers who provide supplemental
investment research and market and statistical information about life sciences companies and the life sciences industries. In addition, other investment companies advised by the Investment Adviser may concurrently
invest with the Fund in Restricted Securities under certain conditions. The Fund also may invest, subject to applicable law, in companies in which the principals of the Investment Adviser or Trustees of the Fund have
invested, or for which they serve as directors or executive officers. The Investment Company Act prohibits the Fund from engaging in certain transactions involving its “affiliates,” including, among
others, the Fund’s Trustees, officers and employees, the Investment Adviser and any “affiliates” of such affiliates except pursuant to an exemptive order or the provisions of certain rules under the
Investment Company Act. In the view of the staff of the Commission, other investment companies advised by the Investment Adviser may,in some instances, be viewed to be affiliates of the Fund. Such legal restrictions
and delays and costs involved in obtaining necessary regulatory approvals may preclude or discourage the Fund from making certain investments and no assurance can be given that any exemptive order sought by the Fund
will be granted.
The Investment
Adviser’s investment team is responsible for managing the Fund as well as three other closed-end investment companies. In the future, the investment team may manage other funds and accounts, including
proprietary accounts, separate accounts and other pooled investment vehicles, such as unregistered hedge funds. In the future, a portfolio manager may manage a separate account or other pooled investment vehicle which
may have materially higher fee arrangements than the Fund and may also have a performance based fee. The side-by-side management of these funds or accounts may raise potential conflicts of interest relating to cross
trading, the allocation of investment opportunities and the aggregation and allocation of trades.
Regulation as a
“Commodity Pool”. The Investment Adviser has claimed an exclusion from the definition of the term “commodity pool operator” with respect to the Fund pursuant to Regulation 4.5 promulgated by the
U.S. Commodity Futures Trading Commission
(the “CFTC”). For the Investment
Adviser to continue to qualify for the exclusion under CFTC Regulation 4.5 with respect to the Fund, the aggregate initial margin and premiums required to establish our positions in derivative instruments subject to
the jurisdiction of the Commodity Exchange Act of 1936, as amended (“CEA”) (other than positions entered into for hedging purposes) may not exceed five percent of the Fund’s liquidation value or,
alternatively, the net notional value of the Fund’s aggregate investments in CEA-regulated derivative instruments (other than positions entered into for hedging purposes) may not exceed 100% of the Fund’s
liquidation value. In the event the Investment Adviser fails to qualify for the exclusion with respect to the Fund and is required to register as a “commodity pool operator”, it will become subject to
additional disclosure, record keeping and reporting requirements with respect to the Fund, which may increase the Fund’s expenses.
Special Purpose Acquisition
Company Risk. The Fund may invest in SPACs. SPACs are collective investment structures that pool funds in order to seek potential acquisition opportunities. Unless and until an acquisition is completed,
a SPAC generally invests its assets (less an amount to cover expenses) in U.S. government securities, money market fund securities and cash. SPACs and similar entities may be blank check companies with no operating
history or ongoing business other than to seek a potential acquisition. Certain SPACs may seek acquisitions only in limited industries or regions. If an acquisition that meets the requirements for the SPAC is not
completed within a predetermined period of time, the invested funds are returned to the entity’s shareholders, unless such shareholders approve alternative arrangements. Investments in SPACs may be illiquid
and/or be subject to restrictions on resale.
Fundamental Investment
Restrictions
The Fund has adopted the
following fundamental restrictions, which, like its investment objective, may not be changed without the approval of the holders of a majority of the Fund's outstanding voting securities (which for this purpose and
under the Investment Company Act of 1940, means the lesser of (1) 67% of the voting shares present in person or by proxy at a meeting at which more than 50% of the outstanding voting shares are present in person or by
proxy, or (2) more than 50% of the outstanding voting shares).
| 1.
| The Fund may not purchase or sell physical commodities or physical commodities contracts.
|
| 2.
| The Fund may not purchase or sell real estate; provided that the Fund may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests
therein.
|
| 44
| abrdn Life Sciences Investors
|
Additional Information Regarding the
Fund (Unaudited) (concluded)
| 3.
| The Fund may not underwrite securities of other issuers, except to the extent that, in connection with the disposition of its portfolio securities, the Fund may be deemed an underwriter under federal or
state securities laws.
|
| 4.
| The Fund may issue senior securities to the extent permitted under the 1940 Act and the rules and regulations thereunder.
|
| 5.
| The Fund may not make loans of money, which for the purposes of this restriction does not include the purchase of debt obligations in which the Fund may invest consistent with its investment objective
and policies. The Fund reserves the authority to enter into repurchase agreements and to make loans of its portfolio securities to qualified institutional investors, brokers, dealers, banks or other financial
institutions, so long as the terms of the loans are not inconsistent with the
|
|
| requirements of the Investment Company Act. Such loans of portfolio securities may not exceed an aggregate amount of 33 1/3% of the Fund’s net assets.
|
| 6.
| The Fund may not invest less than 25% of its net assets in securities of life sciences companies in the healthcare industry, except that, during periods in which the Investment Adviser believes the
healthcare industry is affected by adverse economic conditions, the Fund may temporarily have less than 25% of the value of its net assets so invested.
|
Except as otherwise noted,
all percentage limitations set forth above apply immediately after a purchase and a subsequent change in the applicable percentage resulting from market fluctuations does not require elimination of any security from
the portfolio.
| abrdn Life Sciences Investors
| 45
|
Dividend Reinvestment and Optional Cash Purchase
Plan (Unaudited)
The Fund intends to distribute to
shareholders substantially all of its net investment income and to distribute any net realized capital gains at least annually. Net investment income for this purpose is income other than net realized long-term and
short-term capital gains net of expenses. Pursuant to the Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”), shareholders whose shares of common stock are registered in their own names
will be deemed to have elected to have all distributions automatically reinvested by Computershare Trust Company N.A. (the “Plan Agent”) in the Fund shares pursuant to the Plan, unless such shareholders
elect to receive distributions in cash. Shareholders who elect to receive distributions in cash will receive such distributions paid by check in U.S. Dollars mailed directly to the shareholder by the Plan Agent, as
dividend paying agent. In the case of shareholders such as banks, brokers or nominees that hold shares for others who are beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares
certified from time to time by the shareholders as representing the total amount registered in such shareholders’ names and held for the account of beneficial owners that have not elected to receive
distributions in cash. Investors that own shares registered in the name of a bank, broker or other nominee should consult with such nominee as to participation in the Plan through such nominee and may be required to
have their shares registered in their own names in order to participate in the Plan. Please note that the Fund does not issue certificates so all shares will be registered in book entry form. The Plan Agent serves as
agent for the shareholders in administering the Plan. If the Trustees of the Fund declare an income dividend or a capital gains distribution payable either in the Fund’s common stock or in cash, nonparticipants
in the Plan will receive cash and participants in the Plan will receive common stock, to be issued by the Fund or purchased by the Plan Agent in the open market, as provided below. If the market price per share (plus
expected per share fees) on the valuation date equals or exceeds NAV per share on that date, the Fund will issue new shares to participants at NAV; provided, however, that if the NAV is less than 95% of the market
price on the valuation date, then such shares will be issued at 95% of the market price. The valuation date will be the payable date for such distribution or dividend or, if that date is not a trading day on the NYSE,
the immediately preceding trading date. If NAV exceeds the market price of Fund shares at such time, or if the Fund should declare an income dividend or capital gains distribution payable only in cash, the Plan Agent
will, as agent for the participants, buy Fund shares in the open market, on the NYSE or elsewhere, for the participants’ accounts on, or shortly after, the payment date. If, before the Plan Agent has completed
its purchases, the market price exceeds the NAV of the Fund's share, the average per share purchase price paid by the Plan Agent may exceed the NAV of the Fund’s shares, resulting in the acquisition of fewer
shares than if the distribution had been paid in shares issued by the Fund on the dividend payment date. Because of
the foregoing difficulty with respect to
open-market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium
during the purchase period, the Plan Agent will cease making open-market purchases and will receive the uninvested portion of the dividend amount in newly issued shares at the close of business on the last purchase
date.
Participants have the option
of making additional cash payments of a minimum of $50 per investment (by check, one-time online bank debit or recurring automatic monthly ACH debit) to the Plan Agent for investment in the Fund’s common stock,
with an annual maximum contribution of $250,000. The Plan Agent will wait up to three business days after receipt of a check or electronic funds transfer to ensure it receives good funds. Following confirmation of
receipt of good funds, the Plan Agent will use all such funds received from participants to purchase Fund shares in the open market on the 25th day of each month or the next trading day if the 25th is not a trading
day.
If the participant sets up
recurring automatic monthly ACH debits, funds will be withdrawn from his or her U.S. bank account on the 20th of each month or the next business day if the 20th is not a banking business day and invested on the next
investment date. The Plan Agent maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in an account, including information needed by shareholders for personal and tax
records. Shares in the account of each Plan participant will be held by the Plan Agent in the name of the participant, and each shareholder’s proxy will include those shares purchased pursuant to the Plan. There
will be no brokerage charges with respect to common shares issued directly by the Fund. However, each participant will pay a per share fee of $0.02 incurred with respect to the Plan Agent’s open market purchases
in connection with the reinvestment of dividends, capital gains distributions and voluntary cash payments made by the participant. Per share fees include any applicable brokerage commissions the Plan Agent is required
to pay.
Participants also have the
option of selling their shares through the Plan. The Plan supports two types of sales orders. Batch order sales are submitted on each market day and will be grouped with other sale requests to be sold. The price will
be the average sale price obtained by Computershare’s broker, net of fees, for each batch order and will be sold generally within 2 business days of the request during regular open market hours. Please note that
all written sales requests are always processed by Batch Order. ($10 and $0.12 per share). Market Order sales will sell at the next available trade. The shares are sold real time when they hit the market, however an
available trade must be presented to complete this transaction. Market Order sales may only
| 46
| abrdn Life Sciences Investors
|
Dividend Reinvestment and Optional Cash Purchase
Plan (Unaudited) (concluded)
be requested by phone at 1-800-647-0584 or
using Investor Center through www.computershare.com/buyaberdeen. ($25 and $0.12 per share).
The receipt of dividends and
distributions under the Plan will not relieve participants of any income tax that may be payable on such dividends or distributions. The Fund or the Plan Agent may terminate the Plan as applied to any voluntary cash
payments made and any dividend or distribution paid subsequent to notice of the termination sent to members of the Plan at least 30 days prior to the record date for such dividend or distribution. The Plan also may be
amended by
the Fund or the Plan Agent, but (except when
necessary or appropriate to comply with applicable law or the rules or policies of the SEC or any other regulatory authority) only by mailing a written notice at least 30 days prior to the effective date to the
participants in the Plan. All correspondence concerning the Plan should be directed to the Plan Agent by phone at 1-800-647-0584, using Investor Center through www.computershare.com/buyaberdeen or in writing to Computershare Trust Company N.A., P.O. Box 43006, Providence, RI 02940-3078.
| abrdn Life Sciences Investors
| 47
|
Management of the Fund (Unaudited)
As of September 30, 2024
The names, years of birth and
business addresses of the Board Members and officers of the Fund as of the most recent fiscal year end, their principal occupations during at least the past five years, the number of portfolios each Board Member
oversees and other directorships they hold are provided in the tables below. Board Members that are deemed “interested persons” (as that term is defined in Section 2(a)(19) of the Investment Company Act of
1940, as amended) of the Fund or the Fund's Advisers are included in the table below under the heading “Interested Board Members.” Board Members who are not interested persons, as described above, are
referred to in the table below under the heading “Independent Board Members.” abrdn Inc., its parent company abrdn plc, and its advisory affiliates are collectively referred to as “abrdn” in
the tables below.
Name, Address and
Year of Birth
| Position(s) Held
with the Fund
| Term of Office
and Length of
Time Served
| Principal Occupation(s)
During at Least the Past Five Years
| Number of Registered
Investment Companies
("Registrants") consisting
of Investment Portfolios
("Portfolios") in
Fund Complex*
Overseen by
Board Members
| Other
Directorships
Held by
Board Member**
|
| Interested Board Member
|
|
|
|
|
|
Christian Pittard***
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1973
| Class B Trustee and President
| Term expires 2027; Trustee since 2024
| Mr. Pittard is Head of Closed End Funds for abrdn responsible for the US and UK businesses. He is also Managing Director of Corporate Finance having done a
significant number of closed end fund transactions in the US and UK since joining abrdn in 1999. Previously, he was Head of the Americas and the North American Funds business based in the US.
| 12 Registrants
consisting of
12 Portfolios
| None.
|
| Independent Board Members
|
|
|
|
|
|
Jeffrey A. Bailey
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1962
| Class B Trustee
| Term expires 2027; Trustee since 2020
| Mr. Bailey was the CEO of IllummOss Inc from 2018-2020. He also served as the Board Chairman of Aileron Therapeutics Inc. 2017-2024 and Independent Board Chair of
Tekla Funds 2020 - 2023. Most recently he served as the Director and CEO of BioDelivery Systems, Inc. from 2020-2022. He currently also serves on the board of Aurinia Pharmaceuticals.
| 4 Registrants
consisting of
4 Portfolios
| None.
|
Rose DiMartino
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1952
| Class C Trustee
| Term expires 2025; Trustee since 2023
| Ms. DiMartino has been retired since 2019. Previously, she was Partner (1991-2017) and Senior Counsel (2017-2019) at the law firm of Willkie Farr &
Gallagher LLP.
| 6 Registrants
consisting of
8 Portfolios
| None
|
Kathleen Goetz
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1966
| Class A Trustee
| Term expires 2026; Trustee since 2021
| Independent Consultant (since 2020); Novartis Pharmaceuticals: Vice President and Head of Sales (2017-2019), Executive Director of Strategic
Account Management (2015-2016).
| 4 Registrants
consisting of
4 Portfolios
| None.
|
| 48
| abrdn Life Sciences Investors
|
Management of the Fund (Unaudited) (continued)
As of September 30, 2024
Name, Address and
Year of Birth
| Position(s) Held
with the Fund
| Term of Office
and Length of
Time Served
| Principal Occupation(s)
During at Least the Past Five Years
| Number of Registered
Investment Companies
("Registrants") consisting
of Investment Portfolios
("Portfolios") in
Fund Complex*
Overseen by
Board Members
| Other
Directorships
Held by
Board Member**
|
C. William Maher
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1961
| Class A Trustee
| Term expires 2026; Trustee since 2023
| Mr. Maher is a Co-founder of Asymmetric Capital Management LLC from May 2018 to September 2020. Formerly Chief Executive Officer of Santa Barbara Tax Products Group
from October 2014 to April 2016.
| 7 Registrants
consisting of
7 Portfolios
| None.
|
Todd Reit
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1968
| Chair of the Board, Class C Trustee
| Term expires 2025; Trustee since 2023
| Mr. Reit is a a Managing Member of Cross Brook Partners LLC, a real estate investment and management company since 2017. Mr. Reit is also
Director and Financial Officer of Shelter Our Soldiers, a charity to support military veterans, since 2016. Mr. Reit was formerly a Managing Director and Global Head of Asset Management Investment Banking for UBS AG,
where he was responsible for overseeing all the bank’s asset management client relationships globally, including all corporate security transactions, mergers and acquisitions. Mr. Reit retired from UBS in 2017
after an over 25-year career at the company and its predecessor company, PaineWebber Incorporated (merged with UBS AG in 2000).
| 9 Registrants
consisting of
9 Portfolios
| None.
|
| *
| As of the most recent fiscal year end, the Fund Complex has a total of 18 Registrants with each Board member serving on the Boards of the number of Registrants listed. Each Registrant in the Fund
Complex has one Portfolio except for two Registrants that are open-end funds, abrdn Funds and abrdn ETFs, which each have multiple Portfolios. The Registrants in the Fund Complex are as follows: abrdn Asia-Pacific
Income Fund, Inc., abrdn Global Income Fund, Inc., abrdn Australia Equity Fund, Inc., abrdn Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., abrdn Japan Equity Fund, Inc., abrdn Income Credit
Strategies Fund, abrdn Global Dynamic Dividend Fund, abrdn Global Premier Properties Fund, abrdn Total Dynamic Dividend Fund, abrdn Global Infrastructure Income Fund, abrdn National Municipal Income Fund, abrdn
Healthcare Investors, abrdn Life Sciences Investors, abrdn Healthcare Opportunities Fund, abrdn World Healthcare Fund, abrdn Funds (20 Portfolios), and abrdn ETFs (3 Portfolios).
|
| **
| Current directorships (excluding Fund Complex) as of September 30, 2024 held in (1) any other investment companies registered under the 1940 Act, (2) any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) or (3) any company subject to the requirements of Section 15(d) of the Exchange Act.
|
| ***
| Mr. Pittard is deemed to be an interested person because of his affiliation with the Fund’s investment adviser.
|
| abrdn Life Sciences Investors
| 49
|
Management of the Fund (Unaudited) (continued)
As of September 30, 2024
Officers of the Fund
Name, Address and
Year of Birth
| Position(s) Held
with the Fund
| Term of Office*
and Length of
Time Served
| Principal Occupation(s) During at Least the Past Five Years
|
Jason Akus**
abrdn Inc.
28 State Street
17th floor
Boston, MA 02109
Year of Birth: 1974
| Vice President
| Since 2023
| Currently Senior Investment Director. Dr. Akus joined abrdn Inc in October 2023 from Tekla Capital Management where he was employed as a Senior Vice President of
Research.
|
Joseph Andolina**
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1978
| Chief Compliance Officer and Vice President - Compliance
| Since 2023
| Currently, Chief Risk Officer – Americas for abrdn Inc. and serves as the Chief Compliance Officer for abrdn Inc. Prior to joining the Risk and Compliance
Department, he was a member of abrdn Inc.'s Legal Department, where he served as US Counsel since 2012.
|
Joshua Duitz**
abrdn Inc.
875 Third Ave
4th Floor, Suite 403
New York, NY 10022
Year of Birth: 1970
| Vice President
| Since 2023
| Currently, Head of Global Income at abrdn Inc. Mr. Duitz joined abrdn Inc. in 2018 from Alpine Woods Capital Investors LLC where he was a Portfolio Manager.
|
Sharon Ferrari**
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1977
| Treasurer and Chief Financial Officer
| Since 2023
| Currently, Director, Product Management for abrdn Inc. Ms. Ferrari joined abrdn Inc. as a Senior Fund Administrator in 2008.
|
Alan Goodson**
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1974
| President
| Since 2023
| Currently, Executive Director and Head of Product & Client Solutions – Americas for abrdn Inc., overseeing Product Management & Governance, Product
Development and Client Solutions for registered and unregistered investment companies in the U.S., Brazil and Canada. Mr. Goodson is Director and Vice President of abrdn Inc. and joined abrdn Inc. in 2000.
|
Megan Kennedy**
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1974
| Vice President and Secretary
| Since 2023
| Currently, Senior Director, Product Governance for abrdn Inc. Ms. Kennedy joined abrdn Inc. in 2005.
|
Ben Ritchie**
abrdn Investments Limited
280 Bishopsgate
London, E2M 4AG
Year of Birth: 1980
| Vice President
| Since 2023
| Currently Head of the Developed Markets Equity team at abrdn.
|
Kolotioloma Silue**
abrdn Inc.
28 State Street
17th floor
Boston, MA 02109
Year of Birth: 1977
| Vice President
| Since 2024
| Currently, Senior Product Manager for abrdn Inc. Mr. Silue joined abrdn Inc in October 2023 from Tekla Capital Management where he was employed as a Senior Manager
of Fund Administration.
|
Lucia Sitar**
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1971
| Vice President
| Since 2023
| Currently, Vice President and Head of Product Management and Governance for abrdn Inc. since 2020. Previously, Ms. Sitar was Managing U.S.
Counsel for abrdn Inc. She joined abrdn Inc. as U.S. Counsel in 2007.
|
| 50
| abrdn Life Sciences Investors
|
Management of the Fund (Unaudited) (concluded)
As of September 30, 2024
Name, Address and
Year of Birth
| Position(s) Held
with the Fund
| Term of Office*
and Length of
Time Served
| Principal Occupation(s) During at Least the Past Five Years
|
Michael Taggart**
co abrdn Inc.
1900 Market Street
Suite 200
Philadelphia, PA 19103
Year of Birth: 1970
| Vice President
| Since 2023
| Currently, Closed End Fund Specialist at abrdn Inc since 2023. Prior to that, he was Vice President of Investment Research and Operations at Relative Value Partners,
LLC from June 2022. Prior to that, he was self-employed after having left Nuveen in November 2020, where he had served as Vice President of Closed-End Fund Product Strategy since November 2013.
|
Loretta Tse**
abrdn Inc.
28 State Street
17th floor
Boston, MA 02109
Year of Birth: 1967
| Vice President
| Since 2023
| Currently Investment Director at abrdn. Ms. Tse joined abrdn in October 2023 from Tekla Capital Management LLC where she was a Vice President
investing in venture. Previously, she worked for the Fred Hutchinson Cancer Research Center and Oxford Biosciences Partners.
|
| *
| Officers hold their positions with the Fund until a successor has been duly elected and qualifies. Officers are elected annually at a meeting of the Fund Board.
|
| **
| Each officer may hold officer position(s) in one or more other funds which are part of the Fund Complex.
|
Further information about the
Fund's Board Members and Officers is available in the Fund's Statement of Additional Information, which can be obtained without charge by calling (800) 522-5465.
| abrdn Life Sciences Investors
| 51
|
[THIS PAGE INTENTIONALLY LEFT BLANK]
Trustees
Todd Reit, Chair
Jeffrey Bailey
Rose DiMartino
Kathleen Goetz
C. William Maher
Christian Pittard
Investment Adviser
abrdn Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
Administrator and Custodian
State Street Bank and Trust Company
One Congress Street, Suite 1
Boston, MA 02114-2016
Transfer Agent
Computershare Trust Company, N.A.
P.O. Box 43006
Providence, RI 02940-3078
Independent Registered Public Accounting Firm
KPMG LLP
191 West Nationwide Blvd., Suite 500
Columbus, OH 43215
Legal Counsel
Dechert LLP
1900 K Street N.W.
Washington, D.C. 20006
Investor Relations
abrdn Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
1-800-522-5465
Investor.Relations@abrdn.com
Notice is hereby given in
accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may purchase, from time to time, shares of its common stock in the open market.
Shares of abrdn Life
Sciences Investors are traded on the NYSE under the symbol “HQL.” Information about the Fund’s net asset value and market price is available at www.abrdnhql.com.
This report, including
the financial information herein, is transmitted to the shareholders of abrdn Life Sciences Investors for their general information only. It does not have regard to the specific investment objectives, financial
situation and the particular needs of any specific person. Past performance is no guarantee of future results.
Item 2. Code of Ethics.
| (a) |
As of September 30, 2024, abrdn Life Sciences Investors (the “Fund” or the
“Registrant”) had adopted a Code of Ethics that applies to the Registrant’s principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals
are employed by the Registrant or a third party (the “Code of Ethics”). |
| (c) |
There have been no amendments, during the period covered by this report, to a provision of
the Code of Ethics. |
| (d) |
During the period covered by this report, there were no waivers to the provisions of the
Code of Ethics. |
| (f) |
A copy of the Code of Ethics has been filed as an exhibit to this Form N-CSR. |
Item 3. Audit Committee Financial Expert.
The Registrant's Board of Trustees has determined
that C. William Maher, a member of the Board of Trustees’ Audit Committee, possesses the attributes, and has acquired such attributes
through means, identified in instruction 2 of Item 3 to Form N-CSR to qualify as an “audit committee financial expert,”
and has designated Mr. Maher as the Audit Committee’s financial expert. Mr. Maher is considered to be an “independent”
trustee, as such term is defined in paragraph (a)(2) of Item 3 to Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) –
(d) Below is a table reflecting the fee information requested in Items 4(a) through (d):
Fiscal Year
Ended | |
(a)
Audit Fees1 | | |
(b)
Audit-Related Fees2 | | |
(c)
Tax Fees3 | | |
(d)
All Other Fees4 | |
| September 30, 2024 | |
$ | 123,200 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Percentage approved pursuant to pre-approval exception5 | |
| 0 | % | |
| 0 | % | |
| 0 | % | |
| 0 | % |
| September 30, 2023 | |
$ | 118,500 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Percentage approved pursuant to pre-approval exception5 | |
| 0 | % | |
| 0 | % | |
| 0 | % | |
| 0 | % |
1
“Audit Fees” are the aggregate fees billed for professional services for the audit of the Fund’s annual financial statements
and services provided in connection with statutory and regulatory filings or engagements.
2
“Audit Related Fees” are the aggregate fees billed for assurance and related services reasonably related to the performance
of the audit or review of financial statements that are not reported under “Audit Fees”. These fees include offerings related
to the Fund’s common shares.
3
“Tax Fees” are the aggregate fees billed for professional services for tax advice, tax compliance, and tax planning. These
fees include: federal and state income tax returns, review of excise tax distribution calculations and federal excise tax return.
4
“All Other Fees” are the aggregate fees billed for products and services other than “Audit Fees”, “Audit-Related
Fees” and “Tax Fees”.
5
Pre-approval exception under Rule 2-01 of Regulation S-X. The pre-approval exception for services provided directly to the Fund waives
the pre-approval requirement for services other than audit, review or attest services if: (A) the aggregate amount of all such services
provided constitutes no more than 5% of the total amount of revenues paid by the Fund to its accountant during the fiscal year in which
the services are provided; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the
services are promptly brought to the Audit Committee’s attention, and the Committee (or its delegate) approves the services before
the audit is completed.
| (e)(1) |
The Registrant’s Audit Committee (the “Committee”) has adopted a Charter that provides that the Committee shall annually select, retain or terminate, and recommend to the Independent Directors for their ratification, the selection, retention or termination, the Registrant’s independent auditor and, in connection therewith, to evaluate the terms of the engagement (including compensation of the independent auditor) and the qualifications and independence of the independent auditor, including whether the independent auditor provides any consulting, auditing or tax services to the Registrant’s investment adviser (the “Adviser”) or any sub-adviser, and to receive the independent auditor’s specific representations as to their independence, delineating all relationships that may affect the independent auditor’s independence, including the disclosures required by PCAOB Rule 3526 or any other applicable auditing standard. PCAOB Rule 3526 requires that, at least annually, the auditor: (1) disclose to the Committee in writing all relationships between the auditor and its related entities and the Registrant and its related entities that in the auditor’s professional judgment may reasonably be thought to bear on independence; (2) confirm in the letter that, in its professional judgment, it is independent of the Registrant within the meaning of the Securities Acts administered by the SEC; and (3) discuss the auditor’s independence with the audit committee. The Committee is responsible for actively engaging in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditor and for taking, or recommending that the full Board take, appropriate action to oversee the independence of the independent auditor. The Committee Charter also provides that the Committee shall review in advance, and consider approval of, any and all proposals by Management or the Adviser that the Registrant, the Adviser or their affiliated persons, employ the independent auditor to render “permissible non-audit services” to the Registrant and to consider whether such services are consistent with the independent auditor’s independence. “Permissible non-audit services” include any professional services, including tax services, provided to the Registrant by the independent auditor, other than those provided to the Registrant in connection with an audit or a review of the financial statements of the Registrant. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Registrant; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the PCAOB determines, by regulation, is impermissible. Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Registrant constitutes not more than 5% of the total amount of revenues paid by the Registrant to its auditor during the fiscal year in which the permissible non-audit services are provided; (ii) the permissible non-audit services were not recognized by the Registrant at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee or its Delegate(s) prior to the completion of the audit.
The Committee may delegate to one or more of its members (“Delegates”) authority to pre-approve permissible non-audit services to be provided to the Registrant. Any pre-approval determination of a Delegate shall be presented to the full Committee at its next meeting. Any pre-approval determination of a Delegate shall be presented to the full Committee at its next meeting. Pursuant to this authority, the Registrant’s Committee delegates to the Committee Chair, subject to subsequent ratification by the full Committee, up to a maximum amount of $25,000, which includes any professional services, including tax services, provided to the Registrant by its independent registered public accounting firm other than those provided to the Registrant in connection with an audit or a review of the financial statements of the Registrant. The Committee shall communicate any pre-approval made by it or a Delegate to the Adviser, who will ensure that the appropriate disclosure is made in the Registrant’s periodic reports required by Section 30 of the Investment Company Act of 1940, as amended, and other documents as required under the federal securities laws. |
| (e)(2) |
None of the services described in each of paragraphs (b) through (d) of this Item involved a waiver of the pre-approval requirement by the Audit Committee pursuant to Rule 2-01 (c)(7)(i)(C) of Regulation S-X. |
| (g) |
Non-Audit Fees |
| |
|
| |
The following table shows the amount of fees that KPMG LLP
billed during the Fund’s last two fiscal years for non-audit services to the Registrant, and to the Adviser, and any entity controlling,
controlled by or under common control with the Adviser that provides ongoing services to the Fund (“Affiliated Fund Service Provider”): |
| Fiscal Year Ended | |
Total Non-Audit Fees
Billed to Fund | | |
Total Non-Audit Fees
billed to Adviser and
Affiliated Fund Service
Providers (engagements
related directly to the
operations and financial
reporting of the Fund) | | |
Total
Non-Audit Fees
billed to Adviser and
Affiliated Fund Service
Providers (all other
engagements) | | |
Total | |
| September 30, 2024 | |
$ | | | |
$ | | | |
$ | 629,124 | | |
$ | 629,124 | |
| September 30, 2023 | |
$ | 0 | | |
$ | 0 | | |
$ | 1,171,994 | | |
$ | 1,171,994 | |
“Non-Audit Fees billed to Fund” for both fiscal years represent
“Tax Fees” and “All Other Fees” billed to Fund in their respective amounts from the previous table.
Item 5. Audit Committee of Listed Registrants.
| (a) |
The Registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). |
| |
|
| |
As of the fiscal year ended September 30,
2024, the Audit Committee members were: |
Jeffrey Bailey
Rose DiMartino
Kathleen Goetz
C. William Maher
Todd Reit
Item 6. Schedule of Investments.
| (a) | Included as part of the Report to Shareholders filed under Item
1 of this Form N-CSR. |
Item 7. Financial Statements and Financial Highlights for Open-End
Management Investment Companies.
Not applicable.
Item 8. Changes in and Disagreements with Accountants for Open-End
Management Investment Companies.
Not applicable.
Item 9. Proxy Disclosures for Open-End Management Investment Companies.
Not applicable.
Item 10. Remuneration Paid to Directors, Officers, and Others of
Open-End Management Investment Companies.
Not applicable.
Item 11. Statement Regarding Basis for Approval of Investment Advisory
Contract.
Not applicable.
Item 12. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies.
Pursuant to the Registrant's Proxy Voting Policy
and Procedures, the Registrant has delegated responsibility for its proxy voting to its Adviser, provided that the Registrant's Board
of Trustees has the opportunity to periodically review the Adviser's proxy voting policies and material amendments thereto.
The proxy voting policies of the Registrant are
included herewith as Exhibit (d) and policies of the Adviser are included as Exhibit (e).
Item 13. Portfolio Managers of Closed-End Management Investment
Companies.
(a)(1) PORTFOLIO MANAGER BIOGRAPHIES
As of the date of filing this report, Jason Akus, M.D./M.B.A.,
Ashton L. Wilson, Christopher Abbott, Robert Benson, Kelly Girskis, Ph.D., Richard Goss, and Loretta Tse, Ph.D. are members of a team
that analyzes investments on behalf of the Fund. Dr. Akus exercises ultimate decision-making authority with respect to investments.
| Individual & Position |
Past Business Experience |
Served on the
Fund Since |
|
Jason Akus, M.D./M.B.A
Head of Healthcare Investments |
Head of Healthcare Investments of the investment adviser and is responsible for investment research and due diligence in the biotechnology, medical device, and diagnostic areas. He joined the predecessor investment adviser in 2001, where he was Senior Vice President, Research. Dr. Akus joined abrdn Inc. in October 2023. |
2001 |
|
Ashton Wilson
Senior Investments Director |
Senior Investments Director of the investment adviser. He joined the predecessor investment adviser in 2018, where he was Senior Vice President. He was previously a Vice President in equity derivative trading at Goldman Sachs and Co. and was an equity derivative trader at Bank of America Merrill Lynch. He joined abrdn Inc. in October 2023 |
2018 |
|
Christopher Abbott
Investment Director |
Investment Director of the investment adviser. He joined the predecessor investment adviser in 2016, where he was Vice President, Research. Previously, Mr. Abbott was at Leerink Partners where he was a Vice President on the Equity Research Team. He joined abrdn Inc. in October 2023. |
2016 |
|
Robert Benson
Investment Director |
Investment Director of the investment adviser. He joined the predecessor investment adviser in 2016, where he was Vice President. Previously, Mr. Benson was at State Street Global Advisors (SSgA) where he performed quantitative research for asset allocation, equities, and alternatives teams. He joined abrdn Inc. in October 2023. |
2016 |
|
Kelly Girskis, Ph.D.
Investment Director |
Investment Director of the investment adviser. She joined the predecessor investment adviser in 2021, where she was Vice President, Research. Previously, Dr. Girskis was an Equity Research Associate at SVB Leerink. She joined abrdn Inc. in October 2023. |
2021 |
|
Richard Goss
Investment Director |
Investment Director of the investment adviser. He joined the predecessor investment adviser in 2018, where he was Vice President, Research. Previously, Mr. Goss was at Leerink Partners where he was a Vice President on the Large Pharma and Biotech Equity Research Teams and a Healthcare Analyst at Datamonitor. He joined abrdn Inc. in October 2023. |
2018 |
|
Loretta Tse, Ph.D.
Investment Director |
Investment Director of the investment adviser. She joined the predecessor investment adviser in 2015, where she was Vice President. She previously ran a biotech consulting business and worked at various venture funds and start-up companies and was Managing Director at Fred Hutchinson Cancer Research Center. She joined abrdn Inc. in October 2023. |
2015 |
(a)(2) OTHER ACCOUNTS
MANAGED BY PORTFOLIO MANAGERS.
The following chart summarizes information regarding
other accounts for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into the following three
categories: (1) registered investment companies; (2) other pooled investment vehicles; and (3) other accounts. To the extent
that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information
on those accounts is provided separately. The figures in the chart below for the category of “registered investment companies”
include the Fund. The “Other Accounts Managed” represents the accounts managed by the teams of which the portfolio manager
is a member. The information in the table below is as of September 30, 2024.
Name of
Portfolio Manager | |
Type of Accounts | |
Other
Accounts
Managed | | |
Total Assets ($M) | | |
Number of
Accounts
Managed for
Which
Advisory
Fee is Based
on
Performance | | |
Total Assets for
Which
Advisory Fee is
Based on
Performance ($M) | |
| Jason Akus | |
Registered Investment Companies | |
4 | | |
$ | 3,303.31 | | |
| 0 | | |
| 0 | |
| | |
Pooled Investment Vehicles | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
Other Accounts | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| |
| | |
| | | |
| | | |
| | |
| Ashton Wilson | |
Registered Investment Companies | |
4 | | |
$ | 3,303.31 | | |
| 0 | | |
| 0 | |
| | |
Pooled Investment Vehicles | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
Other Accounts | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| |
| | |
| | | |
| | | |
| | |
| Christopher Abbot | |
Registered Investment Companies | |
4 | | |
$ | 3,303.31 | | |
| 0 | | |
| 0 | |
| | |
Pooled Investment Vehicles | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
Other Accounts | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| |
| | |
| | | |
| | | |
| | |
| Robert Benson | |
Registered Investment Companies | |
4 | | |
$ | 3,303.31 | | |
| 0 | | |
| 0 | |
| | |
Pooled Investment Vehicles | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
Other Accounts | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| |
| | |
| | | |
| | | |
| | |
| Kelly Girskis | |
Registered Investment Companies | |
4 | | |
$ | 3,303.31 | | |
| 0 | | |
| 0 | |
| | |
Pooled Investment Vehicles | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
Other Accounts | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| |
| | |
| | | |
| | | |
| | |
| Richard Goss | |
Registered Investment Companies | |
4 | | |
$ | 3,303.31 | | |
| 0 | | |
| 0 | |
| | |
Pooled Investment Vehicles | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
Other Accounts | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| |
| | |
| | | |
| | | |
| | |
| Loretta Tse | |
Registered Investment Companies | |
4 | | |
$ | 3,303.31 | | |
| 0 | | |
| 0 | |
| | |
Pooled Investment Vehicles | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
Other Accounts | |
0 | | |
| 0 | | |
| 0 | | |
| 0 | |
POTENTIAL CONFLICTS OF INTEREST
The Adviser and its affiliates (collectively referred
to herein as “abrdn”) serve as investment advisers for multiple clients, including the Registrant and other investment companies
registered under the 1940 Act and private funds (such clients are also referred to below as “accounts”). The portfolio managers’
management of “other accounts” may give rise to potential conflicts of interest in connection with their management of the
Registrant’s investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have
the same investment objective as the Registrant. Therefore, a potential conflict of interest may arise as a result of the identical investment
objectives, whereby the portfolio manager could favor one account over another. However, the Adviser believes that these risks are mitigated
by the fact that: (i) accounts with like investment strategies managed by a particular portfolio manager are generally managed in
a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts,
differences in cash flows and account sizes, and similar factors; and (ii) portfolio manager personal trading is monitored to avoid
potential conflicts. In addition, the Adviser has adopted trade allocation procedures that require equitable allocation of trade orders
for a particular security among participating accounts.
In some cases, another account managed by the
same portfolio manager may compensate Aberdeen based on the performance-based fees with qualified clients. The existence of such a performance-based
fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment
opportunities.
Another potential conflict could include instances
in which securities considered as investments for the Registrant also may be appropriate for other investment accounts managed by the
Adviser or its affiliates. Whenever decisions are made to buy or sell securities for the Registrant and one or more of the other accounts
simultaneously, the Adviser may aggregate the purchases and sales of the securities and will allocate the securities transactions in a
manner that it believes to be equitable under the circumstances. As a result of the allocations, there may be instances where the Registrant
will not participate in a transaction that is allocated among other accounts. While these aggregation and allocation policies could have
a detrimental effect on the price or amount of the securities available to the Registrant from time to time, it is the opinion of the
Adviser that the benefits from the policies outweigh any disadvantage that may arise from exposure to simultaneous transactions. The Registrant
has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures
adopted under such policies will detect each and every situation in which a conflict arises.
With respect to non-discretionary model delivery
accounts (including UMA accounts) and discretionary SMA accounts, abrdn Inc. will utilize a third party service provider to deliver model
portfolio recommendations and model changes to the Sponsors. abrdn Inc. seeks to treat clients fairly and equitably over time, by delivering
model changes to our service provider and investment instructions for our other discretionary accounts to our trading desk, simultaneously
or approximately at the same time. The service provider will then deliver the model changes to each Sponsor on a when-traded, randomized
full rotation schedule. All Sponsors will be included in the rotation schedule, including SMA and UMA.
UMA Sponsors will be responsible for determining
how and whether to implement the model portfolio or model changes and implementation of any client specific investment restrictions. The
Sponsors are solely responsible for determining the suitability of the model portfolio for each model delivery client, executing trades
and seeking best execution for such clients.
As it relates to SMA accounts, abrdn Inc. will
be responsible for managing the account on the basis of each client’s financial situation and objectives, the day to day investment
decisions, best execution, accepting or rejecting client specific investment restrictions and performance. The SMA Sponsors will collect
suitability information and will provide a summary questionnaire for our review and approval or rejection. For dual contract SMAs, abrdn
Inc. will collect a suitability assessment from the client, along with the Sponsor suitability assessment. Our third party service provider
will monitor client specific investment restrictions on a day to day basis. For SMA accounts, model trades will be traded by the Sponsor
or may be executed through a “step-out transaction,”- or traded away- from the client’s Sponsor if doing so is consistent
with abrdn’s obligation to obtain best execution. When placing trades through Sponsor Firms (instead of stepping them out), we will
generally aggregate orders where it is possible and in the client’s best interests. In the event we are not comfortable that a Sponsor
can obtain best execution for a specific security and trading away is infeasible, we may exclude the security from the model.
Trading costs are not covered by the Wrap Program
fee and may result in additional costs to the client. In some instances, step-out trades are executed without any additional commission,
mark-up, or mark-down, but in many instances, the executing broker-dealer may impose a commission or a mark-up or mark-down on the trade.
Typically, the executing broker will embed the added costs into the price of the trade execution, making it difficult to determine and
disclose the exact added cost to clients. In this instance, these additional trading costs will be reflected in the price received for
the security, not as a separate commission, on trade confirmations or on account statements. In determining best execution for SMA accounts,
abrdn Inc. takes into consideration that the client will not pay additional trading costs or commission if executing with the Sponsor.
While UMA accounts are invested in the same strategies
as and may perform similarly to SMA accounts, there are expected to be performance differences between them. There will be performance
dispersions between UMAs and other types of accounts because abrdn does not have discretion over trading and there may be client specific
restrictions for SMA accounts.
abrdn may have already commenced trading for its
discretionary client accounts before the model delivery accounts have executed abrdn's recommendations. In this event, trades placed by
the model delivery clients may be subject to price movements, particularly with large orders or where securities are thinly traded, that
may result in model delivery clients receiving less favorable prices than our discretionary clients. abrdn has no discretion over transactions
executed by model delivery clients and is unable to control the market impact of those transactions.
Timing delays or other operational factors associated
with the implementation of trades may result in non-discretionary and model delivery clients receiving materially different prices relative
to other client accounts. In addition, the constitution and weights of stocks within model portfolios may not always be exactly aligned
with similar discretionary accounts. This may create performance dispersions within accounts with the same or similar investment mandate.
(a)(3)
DESCRIPTION OF COMPENSATION STRUCTURE
abrdn’s remuneration policies are designed
to support its business strategy as a leading international asset manager. The objective is to attract, retain and reward talented
individuals for the delivery of sustained, superior returns for abrdn’s clients and shareholders. abrdn operates in a highly
competitive international employment market, and aims to maintain its strong track record of success in developing and retaining talent.
abrdn’s policy is to recognize corporate
and individual achievements each year through an appropriate annual bonus scheme. The bonus is a single, fully discretionary variable
pay award. The aggregate value of awards in any year is dependent on the group’s overall performance and profitability. Consideration
is also given to the levels of bonuses paid in the market. Individual awards, which are payable to all members of staff, are determined
by a rigorous assessment of achievement against defined objectives.
The variable pay award is composed of a mixture
of cash and a deferred award, the portion of which varies based on the size of the award. Deferred awards are by default abrdn plc
shares, with an option to put up to 50% of the deferred award into funds managed by abrdn. Overall compensation packages are designed
to be competitive relative to the investment management industry.
Base Salary
abrdn’s policy is to pay a fair salary commensurate
with the individual’s role, responsibilities and experience, and having regard to the market rates being offered for similar roles
in the asset management sector and other comparable companies. Any increase is generally to reflect inflation and is applied in a manner
consistent with other abrdn employees; any other increases must be justified by reference to promotion or changes in responsibilities.
Annual Bonus
The Remuneration Committee determines the key performance
indicators that will be applied in considering the overall size of the bonus pool. In line with practices amongst other asset management
companies, individual bonuses are not subject to an absolute cap. However, the aggregate size of the bonus pool is dependent on
the group’s overall performance and profitability. Consideration is also given to the levels of bonuses paid in the market.
Individual awards are determined by a rigorous assessment of achievement against defined objectives, and are reviewed and approved by
the Remuneration Committee.
abrdn has a deferral policy which is intended to
assist in the retention of talent and to create additional alignment of executives’ interests with abrdn’s sustained performance
and, in respect of the deferral into funds managed by abrdn, to align the interest of portfolio managers with our clients.
Staff performance is reviewed formally at least
once a year. The review process evaluates the various aspects that the individual has contributed to abrdn, and specifically, in the case
of portfolio managers, to the relevant investment team. Discretionary bonuses are based on client service, asset growth and the performance
of the respective portfolio manager. Overall participation in team meetings, generation of original research ideas and contribution to
presenting the team externally are also evaluated.
In the calculation of a portfolio management team’s
bonus, abrdn takes into consideration investment matters (which include the performance of funds, adherence to the company investment
process, and quality of company meetings) as well as more subjective issues such as team participation and effectiveness at client presentations
through key performance indicator scorecards. To the extent performance is factored in, such performance is not judged against any
specific benchmark and is evaluated over the period of a year - January to December. The pre- or after-tax performance of an individual
account is not considered in the determination of a portfolio manager’s discretionary bonus; rather the review process evaluates
the overall performance of the team for all of the accounts the team manages.
Portfolio manager performance on investment matters
is judged over all of the accounts the portfolio manager contributes to and is documented in the appraisal process. A combination
of the team’s and individual’s performance is considered and evaluated.
Although performance is not a substantial portion
of a portfolio manager’s compensation, abrdn also recognizes that fund performance can often be driven by factors outside one’s
control, such as (irrational) markets, and as such pays attention to the effort by portfolio managers to ensure integrity of our core
process by sticking to disciplines and processes set, regardless of momentum and ‘hot’ themes. Short-terming is thus
discouraged and trading-oriented managers will thus find it difficult to thrive in the abrdn environment. Additionally, if any of
the aforementioned undue risks were to be taken by a portfolio manager, such trend would be identified via abrdn’s dynamic compliance
monitoring system.
In rendering investment management services, the
Adviser may use the resources of additional investment adviser subsidiaries of abrdn plc. These affiliates have entered into a memorandum
of understanding (“MOU”) pursuant to which investment professionals from each affiliate may render portfolio management, research
or trading services to abrdn clients. Each investment professional who renders portfolio management, research or trading services under
a MOU or personnel sharing arrangement (“Participating Affiliate”) must comply with the provisions of the Advisers Act, the
1940 Act, the Securities Act of 1933, the Exchange Act, and the Employee Retirement Income Security Act of 1974, and the laws of states
or countries in which the Adviser does business or has clients. No remuneration is paid by the Fund with respect to the MOU/personnel
sharing arrangements.
(a)(4)
Dollar Range of Equity Securities in the
Registrant Beneficially Owned by the Portfolio
Manager as of September 30, 2024 | |
|
| Jason Akus | |
None |
| Ashton Wilson | |
None |
| Christopher Abbot | |
None |
| Robert Benson | |
None |
| Kelly Girkskis | |
None |
| Richard Goss | |
None |
| Loretta Tse | |
None |
(b) Not applicable.
Item 14. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
| Period |
|
(a) Total
No.
of Shares
Purchased
(1) |
|
|
(b)
Average
Price Paid
per
Share |
|
|
(c) Total No.
of Shares
Purchased as
Part of
Publicly
Announced
Plans
or Programs |
|
|
(d) Maximum
No.
of Shares that
May Yet Be
Purchased Under
the Plans or
Programs |
|
| Month #1 (Oct. 1, 2023-Oct. 31, 2023) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #2 (Nov. 1, 2023 – Nov. 30, 2023) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #3 (Dec. 1, 2023– Dec. 31, 2023) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #4 (Jan. 1, 2024 – Jan. 31, 2024) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #5 (Feb. 1, 2024 – Feb. 28, 2024) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #6 (Mar. 1, 2024 – Mar. 31, 2024) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #7 (Apr. 1, 2024 – Apr. 30, 2024) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #8 (May 1, 2024 – May 31, 2024) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #9 (June 1, 2024 – June 30, 2024) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,178,599 |
|
| Month #10 (Jul. 1, 2024 – Jul. 31, 2024) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,326,419 |
|
| Month #11 (Aug. 1, 2024 – Aug. 31, 2024) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,326,419 |
|
| Month #12 (Sep. 1, 2024– Sep. 30, 20244) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,326,419 |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(1) |
On June 30, 2011, the share repurchase program was announced, which has been subsequently reviewed and approved by the Board of Trustees. In March 2024, the Board approved the renewal of the repurchase program to allow the Fund to repurchase up to 12% of its outstanding shares in the open market for a one-year period ending July 14, 2025. Prior to this renewal, in March 2023, the Trustees approved the renewal of the share repurchase program to allow the Fund to repurchase up to 12% of its outstanding shares for a one-year period ending July 14, 2024. |
Item 15. Submission of Matters to a Vote of Security Holders.
During the year ended September 30, 2024, there were no material
changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.
Item 16. Controls and Procedures.
| |
(a) |
The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”) (17 CFR 270.30a-3(c)) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a3(b)) and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d15(b)). |
| |
(b) |
There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 17. Disclosure of Securities Lending Activities for Closed-End
Management Investment Companies
Not applicable
Item 18. Recovery of Erroneously Awarded Compensation.
Not applicable.
Item 19. Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
abrdn Life Sciences Investors
| By: |
/s/ Alan Goodson |
|
| |
Alan Goodson, |
|
| |
Principal Executive Officer of |
|
| |
abrdn Life Sciences Investors |
|
| |
|
| Date: December 9, 2024 |
|
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
| By: |
/s/ Alan Goodson |
|
| |
Alan Goodson, |
|
| |
Principal Executive Officer of |
|
| |
abrdn Life Sciences Investors |
|
| |
|
| Date: December 9, 2024 |
|
| By: |
/s/ Sharon Ferrari |
|
| |
Sharon Ferrari, |
|
| |
Principal Financial Officer of |
|
| |
abrdn Life Sciences Investors |
|
| |
|
| Date: December 9, 2024 |
|
Exhibit 99.CODEETH
CODE OF ETHICS (SOX)
(Principal Executive Officer/President and Principal
Financial Officer/Treasurer)
| I. |
Purpose of the Code/Covered Officers |
Pursuant to Section 406
of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission (“SEC”) has adopted rules requiring annual
disclosure of an investment company’s code of ethics applicable to its principal executive, principal financial and principal accounting
officers. The Funds have adopted this Code of Ethics (the “Code”) pursuant to these rules. The Code applies to the series
(each a “Fund”). The Code specifically applies to each Fund’s President/Principal Executive Officer and Treasurer/Principal
Financial Officer (“Covered Officers”) for the purpose of promoting:
| |
· |
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| |
· |
full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submits to, the SEC and in other public communications made by the Funds; |
| |
· |
compliance with applicable laws, rules and regulations; |
| |
· |
an environment that encourages disclosure of ethical and compliance related concerns; |
| |
· |
the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code without fear of reprisal; and |
| |
· |
accountability for adherence to the Code. |
The Covered Officers are integral
to the Funds’ goal of creating a culture of high ethical standards and commitment to compliance. In their roles, the Covered Officers
will refrain from engaging in any activity that may compromise their professional ethics or otherwise prejudice their ability to carry
out their duties to the Funds.’ They will act in good faith, with due care, competence and diligence, without misrepresenting material
facts or allowing their independent judgment to be subordinated.
| II. |
Actual and Apparent Conflicts of Interest |
Overview: A “conflict
of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or service to, the Funds.
For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper benefits as
a result of his or her position with the Funds.
Certain conflicts of interest
arise out of the relationship between Covered Officers and each Fund and already are subject to conflict of interest provisions in the
Investment Company Act of 1940 (the “1940 Act”) and the Investment Advisers Act of 1940 (the “Advisers Act”).
For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other
property) with the Funds because of their status as “affiliated persons” of the Funds. Each Fund’s Adviser and Sub-adviser
(the “adviser(s)”) have adopted and implemented respective compliance programs and procedures that are designed to prevent,
or identify and correct, violations of these provisions. This Code does not, and is not intended to repeat or replace these programs and
procedures, and such conflicts fall outside of the parameters of this Code. Each Covered Officer should be sensitive to situations that
may give rise to actual as well as apparent conflicts of interest and should encourage his or her colleagues who provide service to the
Funds, whether directly or indirectly, to do the same.
Although typically not presenting
an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between each Fund
and the investment adviser (and distributor to the Aberdeen open-end funds) of which the Covered Officers are also officers or employees.
As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund
or the investment adviser or for both), be involved in establishing policies and implementing decisions that will have different effects
on the investment adviser, distributor and the Funds. The participation of the Covered Officers in such activities is inherent in the
contractual relationship between the Funds and the Adviser and is consistent with the performance by the Covered Officers of their duties
as officers of each Fund. Thus, if performed in conformity with the provisions of the 1940 Act and the Advisers Act, such activities will
be deemed to have been handled ethically. In addition, it is recognized by the Funds’ Board that the Covered Officers may also be
officers or employees of the Funds.
Other conflicts of interest
are covered by this Code, even if such conflicts of interest are not subject to provisions in the 1940 Act and the Advisers Act. The overarching
principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. A defining
question is, “What is the long term interest of current shareholders?” The following list provides examples of conflicts of
interest under this Code, but Covered Officers should keep in mind that these examples are not exhaustive.
Each Covered Officer must:
| |
· |
not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would directly or indirectly benefit personally to the detriment of the Funds; |
| |
· |
not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Funds; |
| |
· |
not use material non-public knowledge of Fund transactions made or contemplated for the Funds to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; |
| |
· |
report at least annually affiliations or other relationships related to conflicts of interest covered by the Funds’ Directors and Officers Questionnaire. |
Any activity or relationship
that would present a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if a member of the Covered
Officer’s family engages in such activity or has such a relationship. There are some conflict of interest situations that should
always be discussed with the Compliance Officer prior to their occurrence, or if foreseen, as soon as reasonably possible after discovery.
Examples of these include:
| |
· |
service on the board of any public company; |
| |
· |
any outside business activity that detracts from the ability of a Covered Officer to devote appropriate time and attention to his or her responsibilities as a Covered Officer of the Funds; |
| |
· |
the receipt of any non-nominal gifts in excess of $100.00; |
| |
· |
the receipt of any entertainment from any company with which the Funds has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; |
| |
· |
any ownership interest in, or any consulting or employment relationship with any of the Funds’ service providers, other than its investment adviser, investment sub-adviser, principal underwriter, administrator or any affiliated person thereof; |
| |
· |
a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Funds for effecting Fund transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership. |
(A) “Covered
Officer” with respect to a Fund means the principal executive officer of the Fund and senior financial officers of the Fund,
including the principal financial officer, controller or principal accounting officer, or persons performing similar functions, regardless
of whether these persons are employed by the Fund or a third party.
(B) “Executive
Officer” of a Fund has the same meaning as set forth in Rule 3b-7 under the Securities Exchange Act of 1934, as amended.
Subject to any changes in that rule, the term “executive officer,” when used in the Code, means the president, any vice president,
any officer who performs a policy making function, or any other person who performs similar policy making functions for a Fund.
(C) “Waiver”
means the approval by a Fund’s CCO of a material departure from a provision of the Code. “Waiver” includes
an “Implicit Waiver,” which is a Fund’s failure to take action within a reasonable period of time regarding
a material departure from a provision of this Code that has been made known to an Executive Officer of the Fund.
| IV. |
Disclosure and Compliance |
Each Covered Officer:
| |
· |
should familiarize himself with the disclosure requirements generally applicable to the Funds; |
| |
· |
should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including the Funds’ Board and auditors, and to governmental regulators and self-regulatory organizations; |
| |
· |
should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the Advisers with the goal of promoting comprehensive, fair, accurate, timely and understandable disclosure in reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; |
| |
· |
should cooperate with the each Fund’s independent accountants, regulatory agencies, and internal auditors in their review of the Funds and its operations; |
| |
· |
should ensure the establishment of appropriate policies and procedures for the protection and retention of accounting records and information as required by applicable law, regulation, or regulatory guidelines and establish and administer financial controls that are appropriate to ensure the integrity of the financial reporting process and the availability of timely, relevant information for the Funds’ safe and sound operation; and |
| |
· |
has the responsibility to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. |
| V. |
Reporting and Accountability |
Each Covered Officer must:
| |
· |
upon adoption of this Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing that he has received, read, and understands this Code; |
| |
· |
annually thereafter affirm that he has complied with the requirements of this Code; |
| |
· |
not retaliate against any other Covered Officer or any employee of the Adviser, or their affiliated persons, or any other employee of a private contractor that provides service to the Funds, for reports of potential violations that are made in good faith; and |
| |
· |
notify the Funds’ CCO promptly if he or she knows or suspects that a violation of applicable laws, regulations, or of this Code has occurred, is occurring, or is about to occur. Failure to do so is itself a violation of this Code. |
See Exhibit A for
the form of PEO/PFO certification.
The Funds’ CCO is responsible
for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in
any particular situation. However, any approvals or Waivers sought by the President will be considered by the Funds’ Audit Committee.
The Funds will follow these
procedures in investigating and enforcing this Code.
| |
· |
The Funds’ Compliance Officer will take all appropriate action to investigate any potential violations reported to him/her. |
| |
· |
If, after such investigation, the Compliance Officer believes that no violation has occurred, he or she is not required to take any further action. The Compliance Officer is authorized to consult, as appropriate, with the chair of the Audit Committee and Counsel to the Independent Board, and is encouraged to do so after consultation with each Fund’s President when, in the Compliance Officer’s opinion such consultation will not increase the risk to shareholders. |
| |
· |
Any matter that the Compliance Officer believes is a violation will be reported to the Audit Committee (the “Committee”). |
| |
· |
If the Committee concurs that a violation has occurred, it will inform and make a recommendation to the full Board, which will consider appropriate action, which may include review of and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Adviser or its Board; or a recommendation to dismiss the Covered Officer. |
| |
· |
Each Fund’s Board will be responsible for granting Waivers, as appropriate. |
| |
· |
Any changes to or Waivers of this Code will, to the extent required, be disclosed as provided by the SEC rules. |
The matters covered in the
Code are of the utmost importance to the Funds and their stockholders and are essential to each Fund’s ability to conduct its business
in accordance with its stated values. Each Covered Officer and each Executive Officer is expected to adhere to these rules (to the
extent applicable) in carrying out his or her duties for the Funds. The conduct of each Covered Officer and each Executive Officer can
reinforce an ethical atmosphere and positively influence the conduct of all officers, employees and agents of the Funds. A Fund will,
if appropriate, take action against any Covered Officer whose actions are found to violate the Code. Appropriate sanctions for violations
of the Code will depend on the materiality of the violation to the Fund.
Sanctions may include, among
other things, a requirement that the violator undergo training related to the violation, a letter or sanction or written censure by the
Board, the imposition of a monetary penalty, suspension of the violator as an officer of a Fund or termination of the employment of the
violator. If a Fund has suffered a loss because of violations of the Code, the Fund may pursue remedies against the individuals or entities
responsible.
| VII. |
Other Policies and Procedures |
This Code shall be the sole
code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable
to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Adviser, principal underwriter,
or other service providers govern or purport to govern the behavior or activities if the Covered Officers who are subject to this Code,
they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds’ and Adviser’s
code of ethics under Rule 17j-1 under the Investment Company Act of 1940 are not part of this Code.
Any amendments to this Code
must be approved or ratified by a majority vote of the each Fund’s Board, including a majority of Independent Board members.
All reports and records prepared
or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise
required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and its Counsel.
This Code is intended solely
for internal use by the Funds and does not constitute an admission, by or on behalf of the Funds, as to any fact, circumstance, or legal
conclusion. This Code is a statement of certain fundamental principles, policies, and procedures that govern the Covered Officers in the
conduct of each Fund’s business. It is not intended and does not create any rights in any employee, investor, supplier, creditor,
shareholder or any other person.
Exhibit A
CODE OF ETHICS
PURSUANT TO THE SARBANES-OXLEY ACT OF 2002
Initial and Annual Certification of Compliance
This is to certify that I have received a copy
of the Code of Ethics Pursuant to the Sarbanes-Oxley Act of 2002 (“Code”) for the following Funds:
List of Funds
I have read and understand the Code. Moreover, I
agree to promptly report to the Chief Compliance Officer any violation or possible violation of this Code of which I become aware. I understand
that violation of the Code will be grounds for disciplinary action or dismissal.
Check one:
Initial
¨ I
further certify that I am subject to the Code and will comply with each of the Code’s provisions to which I am subject.
Annual
¨ I
further certify that I have complied with and will continue to comply with each of the provisions of the Code to which I am subject.
| |
|
| Signature |
Date |
| |
|
| Received
by (name and title): |
Date |
Exhibit 99.CERT
Certification
Pursuant to Rule 30a-2(a) under
the 1940 Act and Section 302 of the Sarbanes-Oxley Act
I, Sharon Ferrari, certify that:
| 1. | I have reviewed this report on Form N-CSR of abrdn Life Sciences Investors (the “Registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this
report; |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to
the filing date of this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the
Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed to the Registrant’s
auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and
report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Registrant’s internal control over financial reporting. |
Date: December 9, 2024
| /s/ Sharon Ferrari |
|
| Sharon Ferrari |
|
| Principal Financial Officer |
|
Certification
Pursuant to Rule 30a-2(a) under
the 1940 Act and Section 302 of the Sarbanes-Oxley Act
I, Alan Goodson, certify that:
| 1. | I have reviewed this report on Form N-CSR of abrdn
Life Sciences Investors (the “Registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this
report; |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to
the filing date of this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the
Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed to the Registrant’s
auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and
report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Registrant’s internal control over financial reporting. |
Date: December 9, 2024
| /s/ Alan Goodson |
|
| Alan Goodson |
|
| Principal Executive Officer |
|
Exhibit 99.906CERT
Certification
Pursuant to Rule 30a-2(b) under
the 1940 Act and Section 906 of the Sarbanes-Oxley Act
Alan Goodson, Principal Executive Officer, and
Sharon Ferrari, Principal Financial Officer, of abrdn Life Sciences Investors (the “Registrant”), each certify that:
| 1. | The Registrant’s periodic report on Form N-CSR for the period ended September 30, 2024
(the “Form N-CSR”) fully complies with the requirements of Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended, as applicable; and |
| 2. | The information contained in the Form N-CSR fairly presents, in all material respects, the financial
condition and results of operations of the Registrant. |
PRINCIPAL EXECUTIVE OFFICER
abrdn Life Sciences Investors
| /s/
Alan Goodson |
|
| Alan Goodson |
|
| Date: December 9, 2024 |
|
PRINCIPAL FINANCIAL OFFICER
abrdn Life Sciences Investors
| /s/
Sharon Ferrari |
|
| Sharon Ferrari |
|
| Date: December 9, 2024 |
|
This certification is being furnished solely pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document.
A signed original of this written statement, or other document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Registrant
and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 99.(c)(1)
FOR
IMMEDIATE RELEASE
For
More Information Contact:
abrdn U.S. Closed-End Funds
Investor Relations
1-800-522-5465
Investor.Relations@abrdn.com
ABRDN
U.S. CLOSED-END FUNDS
ANNOUNCE DISTRIBUTION PAYMENT DETAILS
(Philadelphia, June 28, 2024) - The abrdn U.S.
Closed-End Funds (NYSE: ASGI, HQH, HQL, JEQ, THQ, THW) (NYSE American: IAF), (the “Funds” or individually the “Fund”),
today announced that the Funds paid the distributions noted in the table below on June 28, 2024, on a per share basis to all shareholders
of record as of June 21, 2024 (ex-dividend date June 21, 2024). These dates apply to the Funds listed below with the exception
of abrdn Healthcare Investors (HQH), abrdn Life Sciences Investors (HQL), abrdn Australia Equity Fund, Inc. (IAF) and abrdn Japan
Equity Fund, Inc. (JEQ) which will pay on June 28, 2024, to all shareholders of record as of May 23, 2024 (ex-dividend
date May 22, 2024).
| Ticker | |
Exchange | |
Fund | |
Amount | |
| ASGI | |
NYSE | |
abrdn Global Infrastructure Income Fund | |
$ | 0.2100 | |
| HQH | |
NYSE | |
abrdn Healthcare Investors | |
$ | 0.5900 | |
| HQL | |
NYSE | |
abrdn Life Sciences Investors | |
$ | 0.4800 | |
| IAF | |
NYSE American | |
abrdn Australia Equity Fund, Inc. | |
$ | 0.1200 | |
| JEQ | |
NYSE | |
abrdn Japan Equity Fund, Inc. | |
$ | 0.1200 | |
| THQ | |
NYSE | |
abrdn Healthcare Opportunities Fund | |
$ | 0.1800 | |
| THW | |
NYSE | |
abrdn World Healthcare Fund | |
$ | 0.1167 | |
Each Fund has adopted a distribution policy to provide
investors with a stable distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in
capital.
For the abrdn Healthcare
Investors (HQH), abrdn Life Sciences Investors (HQL), abrdn Australia Equity Fund, Inc. (IAF) and abrdn Japan Equity
Fund, Inc. (JEQ) the stock distributions were automatically paid in newly issued shares of the Fund unless otherwise instructed
by the shareholder to be paid in cash. Shares of common stock were issued at the lower of the net asset value (“NAV”)
per share or the market price per share with a floor for the NAV of not less than 95% of the market price on June 18, 2024. The
reinvestment prices per share for these distributions were as follows: $16.90 for abrdn Healthcare Investors (HQH); $13.68 for abrdn
Life Sciences Investors (HQL); $4.287 for abrdn Australia Equity Fund, Inc. (IAF); and $5.71 for abrdn Japan Equity
Fund, Inc. (JEQ). Fractional shares were generally settled in cash, except for registered shareholders with book entry accounts
at Computershare Investor Services who had whole and fractional shares added to their account.
To have received the abrdn Healthcare Investors (HQH),
abrdn Life Sciences Investors (HQL), abrdn Australia Equity Fund, Inc. (IAF) and abrdn Japan Equity Fund, Inc. (JEQ) quarterly
distributions payable in June 2024 in cash instead of shares of common stock, for shareholders who hold shares in “street
name,” the bank, brokerage or nominee who holds the shares must have advised the Depository Trust Company as to the full and fractional
shares for which they want the distribution paid in cash by June 17, 2024; and for shares that are held in registered form, written
notification for the election of cash by registered shareholders must have been received by Computershare Investor Services prior to
June 17, 2024.
Under applicable U.S. tax
rules, the amount and character of distributable income for each Fund’s fiscal year can be finally determined only as of the
end of the Fund’s fiscal year. However, under Section 19 of the Investment Company Act of 1940, as amended (the
“1940 Act”) and related rules, the Funds may be required to indicate to shareholders the estimated source of certain
distributions to shareholders.
The following tables set forth the estimated amounts of
the sources of the distributions for purposes of Section 19 of the 1940 Act and the rules adopted thereunder. The tables have
been computed based on generally accepted accounting principles. The tables include estimated amounts and percentages for the current
distributions paid this month as well as for the cumulative distributions paid relating to fiscal year to date, from the following sources:
net investment income; net realized short-term capital gains; net realized long-term capital gains; and return of capital. The estimated
compositions of the distributions may vary because the estimated composition may be impacted by future income, expenses and realized
gains and losses on securities and currencies.
The Funds’ estimated sources of the current distribution
paid this month and for its current fiscal year to date are as follows:
| Estimated Amounts of Current Distribution per Share |
| Fund | |
Distribution
Amount | | |
Net Investment
Income | | |
Net Realized Short-
Term Gains** | | |
Net Realized Long-
Term Gains | | |
Return of Capital | |
| ASGI | |
$ | 0.2100 | | |
$ | 0.0399 | | |
| 19 | % | |
| - | | |
| - | | |
$ | 0.1239 | | |
| 59 | % | |
$ | 0.0462 | | |
| 22 | % |
| HQH | |
$ | 0.5900 | | |
| - | | |
| - | | |
$ | 0.0649 | | |
| 11 | % | |
$ | 0.2360 | | |
| 40 | % | |
$ | 0.2891 | | |
| 49 | % |
| HQL | |
$ | 0.4800 | | |
| - | | |
| - | | |
$ | 0.1291 | | |
| 27 | % | |
$ | 0.2367 | | |
| 49 | % | |
$ | 0.1142 | | |
| 24 | % |
| IAF | |
$ | 0.1200 | | |
$ | 0.0108 | | |
| 9 | % | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 0.1092 | | |
| 91 | % |
| JEQ | |
$ | 0.1200 | | |
$ | 0.0096 | | |
| 8 | % | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 0.1104 | | |
| 92 | % |
| THQ | |
$ | 0.1800 | | |
| - | | |
| - | | |
$ | 0.0306 | | |
| 17 | % | |
$ | 0.0810 | | |
| 45 | % | |
$ | 0.0684 | | |
| 38 | % |
| THW | |
$ | 0.1167 | | |
| - | | |
| - | | |
$ | 0.0047 | | |
| 4 | % | |
$ | 0.0081 | | |
| 7 | % | |
$ | 0.1039 | | |
| 89 | % |
| Estimated Amounts of Fiscal Year* to Date Cumulative Distributions per Share |
| Fund |
|
Distribution
Amount |
|
|
Net Investment
Income |
|
|
Net Realized Short-
Term Gains ** |
|
|
Net Realized Long-
Term Gains |
|
|
Return of Capital |
|
| ASGI |
|
$ |
1.3800 |
|
|
$ |
0.2622 |
|
|
|
19 |
% |
|
|
- |
|
|
|
- |
|
|
$ |
0.8142 |
|
|
|
59 |
% |
|
$ |
0.3036 |
|
|
|
22 |
% |
| HQH |
|
$ |
1.4500 |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.1595 |
|
|
|
11 |
% |
|
$ |
0.5800 |
|
|
|
40 |
% |
|
$ |
0.7105 |
|
|
|
49 |
% |
| HQL |
|
$ |
1.1700 |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.3147 |
|
|
|
27 |
% |
|
$ |
0.5768 |
|
|
|
49 |
% |
|
$ |
0.2785 |
|
|
|
24 |
% |
| IAF |
|
$ |
0.3500 |
|
|
$ |
0.0315 |
|
|
|
9 |
% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.3185 |
|
|
|
91 |
% |
| JEQ |
|
$ |
0.3300 |
|
|
$ |
0.0264 |
|
|
|
8 |
% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.3036 |
|
|
|
92 |
% |
| THQ |
|
$ |
1.3500 |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.2295 |
|
|
|
17 |
% |
|
$ |
0.6075 |
|
|
|
45 |
% |
|
$ |
0.5130 |
|
|
|
38 |
% |
| THW |
|
$ |
1.0503 |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.0420 |
|
|
|
4 |
% |
|
$ |
0.0735 |
|
|
|
7 |
% |
|
$ |
0.9348 |
|
|
|
89 |
% |
* ASGI, HQH, HQL, THQ and THW
have a 9/30 fiscal year end. IAF and JEQ have a 10/31 fiscal year end.
**includes currency gains
Where the estimated amounts above show a portion of the
distribution to be a “Return of Capital,” it means that Fund estimates that it has distributed more than its income and capital
gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur for example, when some or
all the money that you invested in a Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s
investment performance and should not be confused with “yield” or “income.”
The amounts and sources of distributions reported in
this notice are only estimates and are not being provided for tax reporting purposes. The final determination of the source of all distributions
for the current year will only be made after year-end. The actual amounts and sources of the amounts for tax reporting purposes will
depend upon the Fund’s investment experience during the remainder of the fiscal year and may be subject to change based on tax
regulations. After the end of each calendar year, a Form 1099-DIV will be sent to shareholders for the prior calendar year that
will tell you how to report these distributions for federal income tax purposes.
The following tables provide the Funds’ total return
performance based on net asset value (NAV) over various time periods compared to the Funds’ annualized and cumulative distribution
rates.
| Fund Performance and Distribution Rate Information |
| Fund |
|
|
Average
Annual Total
Return on NAV
for the 5 Year
Period Ending
05/31/20241 |
|
|
|
Current Fiscal
Period’s
Annualized
Distribution
Rate on NAV |
|
|
|
Cumulative
Total Return
on NAV1 |
|
|
|
Cumulative
Distribution
Rate on NAV2 |
|
| ASGI3 |
|
|
9.20 |
%3 |
|
|
9.34 |
% |
|
|
17.88 |
% |
|
|
5.55 |
% |
| THQ |
|
|
10.89 |
% |
|
|
8.81 |
% |
|
|
13.34 |
% |
|
|
5.45 |
% |
| THW |
|
|
9.56 |
% |
|
|
11.43 |
% |
|
|
12.90 |
% |
|
|
7.62 |
% |
1
Return data is net of all Fund expenses and fees and assumes the reinvestment of all distributions reinvested at prices
obtained under the Fund’s dividend reinvestment plan.
2
Based on the Fund’s NAV as of May 31, 2024.
3
The Fund launched within the past 5 years; the performance and distribution rate information presented reflects data from
inception (July 29, 2020) through May 31, 2024.
| Fund Performance and Distribution Rate Information |
| Fund |
|
|
Average
Annual Total
Return on NAV
for the 5 Year
Period Ending
04/30/20241 |
|
|
|
Current Fiscal
Period’s
Annualized
Distribution
Rate on NAV |
|
|
|
Cumulative
Total Return
on NAV1 |
|
|
|
Cumulative
Distribution
Rate on NAV2 |
|
| HQH |
|
|
6.54 |
% |
|
|
9.63 |
% |
|
|
5.64 |
% |
|
|
4.55 |
% |
| HQL |
|
|
6.11 |
% |
|
|
9.63 |
% |
|
|
7.06 |
% |
|
|
4.52 |
% |
| IAF |
|
|
6.88 |
% |
|
|
10.15 |
% |
|
|
15.73 |
% |
|
|
4.97 |
% |
| JEQ |
|
|
3.87 |
% |
|
|
6.14 |
% |
|
|
19.87 |
% |
|
|
3.00 |
% |
1
Return data is net of all Fund expenses and fees and assumes the reinvestment of all distributions reinvested at prices
obtained under the Fund’s dividend reinvestment plan.
2
Based on the Fund’s NAV as of April 30, 2024.
Shareholders should not draw any conclusions about a
Fund’s investment performance from the amount of the Fund’s current distributions or from the terms of the distribution policy
(the “Distribution Policy”).
While NAV performance may
be indicative of the Fund’s investment performance, it does not measure the value of a shareholder’s investment in the
Fund. The value of a shareholder’s investment in the Fund is determined by the Fund’s market price, which is based on
the supply and demand for the Fund’s shares in the open market.
Pursuant to an exemptive order granted by the Securities
and Exchange Commission, the Funds may distribute any long-term capital gains more frequently than the limits provided in Section 19(b) under
the 1940 Act and Rule 19b-1 thereunder. Therefore, distributions paid by the Funds during the year may include net income, short-term
capital gains, long-term capital gains and/or a return of capital. Net income dividends and short-term capital gain dividends, while
generally taxable at ordinary income rates, may be eligible, to the extent of qualified dividend income earned by the Funds, to be taxed
at a lower rate not to exceed the maximum rate applicable to your long-term capital gains. Distributions made in any calendar year in
excess of investment company taxable income and net capital gain are treated as taxable ordinary dividends to the extent of undistributed
earnings and profits, and then as a return of capital that reduces the adjusted basis in the shares held. To the extent return of capital
distributions exceed the adjusted basis in the shares held, capital gain is recognized with a holding period based on the period the
shares have been held at the date such amount is received.
The payment of
distributions in accordance with the Distribution Policy may result in a decrease in the Fund’s net assets. A decrease in the
Fund’s net assets may cause an increase in the Fund’s annual operating expense ratio and a decrease in the Fund’s
market price per share to the extent the market price correlates closely to the Fund’s net asset value per share. The
Distribution Policy may also negatively affect the Fund’s investment activities to the extent that the Fund is required to
hold larger cash positions than it typically would hold or to the extent that the Fund must liquidate securities that it would not
have sold, for the purpose of paying the distribution. Each Fund’s Board has the right to amend, suspend or terminate the
Distribution Policy at any time. The amendment, suspension or termination of the Distribution Policy may affect the Fund’s
market price per share. Investors should consult their tax advisor regarding federal, state and local tax considerations that may be
applicable in their particular circumstances.
Circular
230 disclosure: To ensure compliance with requirements imposed by the U.S. Treasury, we inform you that any U.S. tax advice
contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose
of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any
transaction or matter addressed herein.
In the United States, abrdn is the
marketing name for the following affiliated, registered investment advisers: abrdn Inc., abrdn Investments Limited, abrdn Asia Limited,
abrdn Private Equity (Europe) Limited, and abrdn ETFs Advisors LLC.
Closed-end funds are
traded on the secondary market through one of the stock exchanges. A Fund’s investment return and principal value will
fluctuate so that an investor’s shares may be worth more or less than the original cost. Shares of closed-end funds may trade
above (a premium) or below (a discount) the net asset value (NAV) of the fund’s portfolio. There is no assurance that a Fund
will achieve its investment objective. Past performance does not guarantee future results.
https://www.abrdn.com/en-us/cefinvestorcenter#
###
Exhibit 99.(c)(2)
FOR IMMEDIATE RELEASE
For More Information Contact:
abrdn U.S. Closed-End Funds
Investor Relations
1-800-522-5465
Investor.Relations@abrdn.com
ABRDN U.S. CLOSED-END
FUNDS
ANNOUNCE DISTRIBUTION PAYMENT DETAILS
(Philadelphia,
September 30, 2024) - The abrdn U.S. Closed-End Funds (NYSE: ASGI, HQH, HQL, IFN, JEQ, THQ) (NYSE American: IAF), (the
“Funds” or individually the “Fund”), today announced that the Funds paid the distributions noted in the table
below on September 30, 2024, on a per share basis to all shareholders of record as of September 23, 2024 (ex-dividend date
September 23, 2024). These dates apply to the Funds listed below with the exception of abrdn Healthcare Investors (HQH), abrdn Life
Sciences Investors (HQL), abrdn Australia Equity Fund, Inc. (IAF), the India Fund Inc. (IFN) and abrdn Japan Equity Fund, Inc.
(JEQ) which paid on September 30, 2024, to all shareholders of record as of August 23, 2024 (ex- dividend date August 23,
2024), and the abrdn Global Infrastructure Income Fund (ASGI) which paid on September 30, 2024, to all shareholders of record as
of September 20, 2024 (ex-dividend date September 20, 2024).
| Ticker | |
Exchange | |
Fund | |
Amount | |
| ASGI | |
NYSE | |
abrdn Global Infrastructure Income Fund | |
$ | 0.2100 | |
| HQH | |
NYSE | |
abrdn Healthcare Investors | |
$ | 0.5900 | |
| HQL | |
NYSE | |
abrdn Life Sciences Investors | |
$ | 0.4900 | |
| IAF | |
NYSE American | |
abrdn Australia Equity Fund, Inc. | |
$ | 0.1200 | |
| IFN | |
NYSE | |
The India Fund, Inc. | |
$ | 0.4900 | |
| JEQ | |
NYSE | |
abrdn Japan Equity Fund, Inc. | |
$ | 0.1200 | |
| THQ | |
NYSE | |
abrdn Healthcare Opportunities Fund | |
$ | 0.1800 | |
Each Fund has adopted a distribution policy to provide
investors with a stable distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in
capital.
For the abrdn Healthcare Investors (HQH), abrdn Life Sciences
Investors (HQL), abrdn Australia Equity Fund, Inc. (IAF), the India Fund Inc. (IFN) and abrdn Japan Equity Fund, Inc. (JEQ)
the stock distributions were automatically paid in newly issued shares of the Fund unless otherwise instructed by the shareholder to
be paid in cash. Shares of common stock were issued at the lower of the net asset value (“NAV”) per share or the market price
per share with a floor for the NAV of not less than 95% of the market price on September 18, 2024. The reinvestment prices per share
for these distributions were as follows: $18.88 for abrdn Healthcare Investors (HQH); $15.36 for abrdn Life Sciences Investors (HQL);
$4.57 for abrdn Australia Equity Fund, Inc. (IAF); $18.28 for the India Fund, Inc. (IFN) and $6.04 for abrdn Japan Equity Fund, Inc.
(JEQ). Fractional shares were generally settled in cash, except for registered shareholders with book entry accounts at Computershare
Investor Services who had whole and fractional shares added to their account.
To have received the abrdn Healthcare Investors (HQH),
abrdn Life Sciences Investors (HQL), abrdn Australia Equity Fund, Inc. (IAF), the India Fund Inc. (IFN) and abrdn Japan Equity Fund, Inc.
(JEQ) quarterly distributions payable in September 2024 in cash instead of shares of common stock, for shareholders who hold shares
in “street name,” the bank, brokerage or nominee who holds the shares must have advised the Depository Trust Company as to
the full and fractional shares for which they want the distribution paid in cash by September 17, 2024; and
for shares that are held in registered form, written notification for the election of cash by registered shareholders must have been
received by Computershare Investor Services prior to September 17, 2024.
Under
applicable U.S. tax rules, the amount and character of distributable income for each Fund’s fiscal year can be finally
determined only as of the end of the Fund’s fiscal year. However, under Section 19 of the Investment Company Act of 1940,
as amended (the “1940 Act”) and related rules, the Funds may be required to indicate to shareholders the estimated
source of certain distributions to shareholders.
The following tables set forth the estimated amounts of
the sources of the distributions for purposes of Section 19 of the 1940 Act and the rules adopted thereunder. The tables have
been computed based on generally accepted accounting principles. The tables include estimated amounts and percentages for the current
distributions paid this month as well as for the cumulative distributions paid relating to fiscal year to date, from the following sources:
net investment income; net realized short-term capital gains; net realized long-term capital gains; and return of capital. The estimated
compositions of the distributions may vary because the estimated composition may be impacted by future income, expenses and realized
gains and losses on securities and currencies.
The Funds’ estimated sources of the current distribution
paid this month and for its current fiscal year to date are as follows:
| Estimated Amounts of Current Distribution per Share |
| Fund | |
Distribution
Amount | | |
Net Investment
Income | | |
Net Realized Short-
Term Gains** | | |
Net Realized Long-
Term Gains | | |
Return of Capital | |
| ASGI | |
$ | 0.2100 | | |
$ | 0.0294 | | |
| 14 | % | |
| - | | |
| - | | |
$ | 0.1176 | | |
| 56 | % | |
$ | 0.0630 | | |
| 30 | % |
| HQH | |
$ | 0.5900 | | |
| - | | |
| - | | |
$ | 0.0767 | | |
| 13 | % | |
$ | 0.2183 | | |
| 37 | % | |
$ | 0.2950 | | |
| 50 | % |
| HQL | |
$ | 0.4900 | | |
| - | | |
| - | | |
$ | 0.1362 | | |
| 28 | % | |
$ | 0.2205 | | |
| 45 | % | |
$ | 0.1333 | | |
| 27 | % |
| IAF | |
$ | 0.1200 | | |
$ | 0.0180 | | |
| 15 | % | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 0.1020 | | |
| 85 | % |
| IFN | |
$ | 0.4900 | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 0.4900 | | |
| 100 | % | |
| - | | |
| - | |
| JEQ | |
$ | 0.1200 | | |
$ | 0.0168 | | |
| 14 | % | |
$ | 0.0024 | | |
| 2 | % | |
| - | | |
| - | | |
$ | 0.1008 | | |
| 84 | % |
| THQ | |
$ | 0.1800 | | |
| - | | |
| - | | |
$ | 0.0342 | | |
| 19 | % | |
$ | 0.0594 | | |
| 33 | % | |
$ | 0.0864 | | |
| 48 | % |
| Estimated Amounts of Fiscal Year* to Date Cumulative Distributions per Share |
| Fund | |
Distribution
Amount | | |
Net Investment
Income | | |
Net Realized Short-
Term Gains ** | | |
Net Realized Long-
Term Gains | | |
Return of Capital | |
| ASGI | |
$ | 1.9900 | | |
$ | 0.2786 | | |
| 14 | % | |
| - | | |
| - | | |
$ | 1.1144 | | |
| 56 | % | |
$ | 0.5970 | | |
| 30 | % |
| HQH | |
$ | 2.0400 | | |
| - | | |
| - | | |
$ | 0.2652 | | |
| 13 | % | |
$ | 0.7548 | | |
| 37 | % | |
$ | 1.0200 | | |
| 50 | % |
| HQL | |
$ | 1.6600 | | |
| - | | |
| - | | |
$ | 0.4615 | | |
| 28 | % | |
$ | 0.7470 | | |
| 45 | % | |
$ | 0.4515 | | |
| 27 | % |
| IAF | |
$ | 0.4700 | | |
$ | 0.0705 | | |
| 15 | % | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 0.3995 | | |
| 85 | % |
| IFN | |
$ | 1.3700 | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1.3700 | | |
| 100 | % | |
| - | | |
| - | |
| JEQ | |
$ | 0.4500 | | |
$ | 0.0630 | | |
| 14 | % | |
$ | 0.0090 | | |
| 2 | % | |
| - | | |
| - | | |
$ | 0.3780 | | |
| 84 | % |
| THQ | |
$ | 1.8900 | | |
| - | | |
| - | | |
$ | 0.3591 | | |
| 19 | % | |
$ | 0.6237 | | |
| 33 | % | |
$ | 0.9072 | | |
| 48 | % |
* ASGI, HQH, HQL and THQ have a 9/30 fiscal year end. IAF
and JEQ have a 10/31 fiscal year end. IFN has a 12/31 fiscal year end.
**includes currency gains
Where the estimated amounts above show a portion of the
distribution to be a “Return of Capital,” it means that Fund estimates that it has distributed more than its income and capital
gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur for example, when some or
all the money that you invested in a Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s
investment performance and should not be confused with “yield” or “income.”
The amounts and sources of distributions reported in
this notice are only estimates and are not being provided for tax reporting purposes. The final determination of the source of all distributions
for the current year will only be made after year-end. The actual amounts and sources of the amounts for tax reporting purposes will
depend upon the Fund’s investment experience during the remainder of the fiscal year and may be subject to change based on tax
regulations. After the end of each calendar year, a Form 1099-DIV will be sent to shareholders for the prior calendar year that
will tell you how to report these distributions for federal income tax purposes.
The following tables provide the Funds’ total return
performance based on net asset value (NAV) over various time periods compared to the Funds’ annualized and cumulative distribution
rates.
| Fund Performance and Distribution Rate Information |
| Fund |
|
|
Average
Annual Total
Return on NAV
for the 5 Year
Period Ending
8/31/20241 |
|
|
|
Current
Fiscal
Period’s
Annualized
Distribution
Rate on NAV |
|
|
|
Cumulative
Total Return
on NAV1 |
|
|
|
Cumulative
Distribution
Rate on NAV2 |
|
| ASGI3 |
|
|
9.26 |
%3 |
|
|
9.56 |
% |
|
|
20.79 |
% |
|
|
8.55 |
% |
| THQ |
|
|
11.93 |
% |
|
|
8.14 |
% |
|
|
25.87 |
% |
|
|
7.36 |
% |
1
Return data is net of all Fund expenses and fees and assumes the reinvestment of all distributions reinvested at prices
obtained under the Fund’s dividend reinvestment plan.
2
Based on the Fund’s NAV as of August 31, 2024.
3
The Fund launched within the past 5 years; the performance and distribution rate information presented reflects data from
inception (July 29, 2020) through August 31, 2024.
| Fund Performance and Distribution Rate Information |
| Fund |
|
|
Average
Annual Total
Return on NAV
for the 5 Year
Period Ending
07/31/20241 |
|
|
|
Current Fiscal
Period’s
Annualized
Distribution
Rate on NAV |
|
|
|
Cumulative
Total Return
on NAV1 |
|
|
|
Cumulative
Distribution
Rate on NAV2 |
|
| HQH |
|
|
8.88 |
% |
|
|
9.80 |
% |
|
|
20.38 |
% |
|
|
6.97 |
% |
| HQL |
|
|
8.83 |
% |
|
|
9.68 |
% |
|
|
23.82 |
% |
|
|
6.86 |
% |
| IAF |
|
|
7.88 |
% |
|
|
9.40 |
% |
|
|
28.48 |
% |
|
|
7.00 |
% |
| IFN |
|
|
11.41 |
% |
|
|
8.68 |
% |
|
|
20.43 |
% |
|
|
4.29 |
% |
| JEQ |
|
|
5.63 |
% |
|
|
6.06 |
% |
|
|
29.90 |
% |
|
|
4.44 |
% |
1
Return data is net of all Fund expenses and fees and assumes the reinvestment of all distributions reinvested at prices
obtained under the Fund’s dividend reinvestment plan.
2
Based on the Fund’s NAV as of July 31, 2024.
Shareholders should not draw any conclusions about a
Fund’s investment performance from the amount of the Fund’s current distributions or from the terms of the distribution policy
(the “Distribution Policy”).
While
NAV performance may be indicative of the Fund’s investment performance, it does not measure the value of a shareholder’s
investment in the Fund. The value of a shareholder’s investment in the Fund is determined by the Fund’s market price,
which is based on the supply and demand for the Fund’s shares in the open market.
Pursuant to an exemptive order granted by the Securities
and Exchange Commission, the Funds may distribute any long-term capital gains more frequently than the limits provided in Section 19(b) under
the 1940 Act and Rule 19b-1 thereunder. Therefore, distributions paid by the Funds during the year may include net income, short-term
capital gains, long-term capital gains and/or a return of capital. Net income dividends and short-term capital gain dividends, while
generally taxable at ordinary income rates, may be eligible, to the extent of qualified dividend income earned by the Funds, to be taxed
at a lower rate not to exceed the maximum rate applicable to your long-term capital gains. Distributions made in any calendar year in
excess of investment company taxable income and net capital gain are treated as taxable ordinary dividends to the extent of undistributed
earnings and profits, and then as a return of capital that reduces the adjusted basis in the shares held. To the extent return of capital
distributions exceed the adjusted basis in the shares held, capital gain is recognized with a holding period based on the period the
shares have been held at the date such amount is received.
The payment of
distributions in accordance with the Distribution Policy may result in a decrease in the Fund’s net assets. A decrease in the
Fund’s net assets may cause an increase in the Fund’s annual operating expense ratio and a decrease in the Fund’s
market price per share to the extent the market price correlates closely to the Fund’s net asset value per share. The
Distribution Policy may also negatively affect the Fund’s investment activities to the extent that the Fund is required to
hold larger cash positions than it typically would hold or to the extent that the Fund must liquidate securities that it would not
have sold, for the purpose of paying the distribution. Each Fund’s Board has the right to amend, suspend or terminate the
Distribution Policy at any time. The amendment, suspension or termination of the Distribution Policy may affect the Fund’s
market price per share. Investors should consult their tax advisor regarding federal, state, and local tax considerations that may
be applicable in their particular circumstances.
Circular
230 disclosure: To ensure compliance with requirements imposed by the U.S. Treasury, we inform you that any U.S. tax advice
contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose
of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any
transaction or matter addressed herein.
In the United States, abrdn is the marketing name for the
following affiliated, registered investment advisers: abrdn Inc., abrdn Investments Limited, and abrdn Asia Limited.
Closed-end funds are
traded on the secondary market through one of the stock exchanges. A Fund’s investment return and principal value will
fluctuate so that an investor’s shares may be worth more or less than the original cost. Shares of closed-end funds may trade
above (a premium) or below (a discount) the net asset value (NAV) of the fund’s portfolio. There is no assurance that a Fund
will achieve its investment objective. Past performance does not guarantee future results.
abrdn.com/en-us/cefinvestorcenter
###
Exhibit 99.(d)
PROXY VOTING POLICY
I. Generally
Rules adopted by the
Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”)
require the Funds to disclose publicly its proxy voting policies and procedures, as well as its actual proxy votes. The SEC rules also
permit the Funds to delegate its proxy voting responsibilities to the Funds’ Investment Manager, Investment Adviser, and Sub-advisers
(collectively “the Advisers”). In connection with this ability to delegate proxy voting responsibilities, the SEC has adopted
rules under the Investment Advisers Act of 1940, as amended, that require the Advisers to adopt and implement written proxy voting
policies and procedures that are reasonably designed to ensure that it votes proxies on behalf of its clients, when given such authority,
in the best interests of those clients.
Consistent with the SEC’s
requirements, the Funds have delegated responsibility for voting its proxy to the Funds’ Investment Manager, Investment Adviser
and Sub-advisers. The Advisers have adopted proxy voting policies and procedures to ensure the proper, and timely, voting of the proxies
on behalf of the Funds. Moreover, the Advisers will assist the Funds in the preparation of each Fund’s complete proxy voting record
on Form N-PX for the twelve-month period ended June 30, by no later than August 31 of each year.
II. Procedures
Each Fund shall ensure that
its investment manager, investment adviser and sub-advisers are compliant with applicable rules and regulations. These rules and
regulations require, in part, that each Fund disclose how it votes each proxy. The rules and regulations also require that the Advisers
disclose that they have (1) adopted and implemented proxy voting policies; and (2) adopted procedures regarding how each portfolio
security is voted in relation to each Fund. The Adviser must disclose that the procedures are the following:
| 2. | are reasonably designed to ensure that the adviser votes proxies in the best interest of the adviser’s
clients; |
| 3. | describe the adviser’s proxy voting procedures to the adviser’s clients and provides copies
of the adviser’s proxy voting procedures on request; |
| 4. | set forth the process by which the adviser evaluates the issues presented by a proxy and records the adviser’s
decision about how the proxy will be voted; |
| 5. | establish procedures for the identification and handling of proxies that involve material conflicts of
interest with the adviser’s clients; and |
| 6. | disclose to the adviser’s clients how the clients may obtain information on how the adviser voted
the clients’ proxies. |
The Funds also shall disclose
to shareholders the policies and procedures that are used to determine how to vote proxies. The Funds include in the Funds’ statement
of additional information appropriate summary disclosure regarding the proxy voting policies and procedures of the Funds’ adviser
and sub-advisers, and any third party retained by the Funds’ investment adviser or sub-adviser to determine how to vote proxies.
In addition, as required by the financial statements’ requirements of Form N-1A and N-2, the Funds’ financial statements
must include a statement that a description of the policies and procedures that the Funds use to vote proxies relating to portfolio securities
is available, without charge: (i) upon request, by calling a specified toll-free (or collect) telephone number; or (ii) on the
Funds’ website; and (iii) on the SEC website at www.sec.gov.
The Funds also shall file
with the SEC, on an annual basis, the complete proxy voting record of each Fund on Form N-PX for the twelve-month period ending June 30th,
by no later than August 31st of each year, which Report on Form N-PX shall be executed by the principal executive
officer of the each Fund. Each Fund’s proxy voting record on the Form N-PX Report shall be made available by each Fund, without
charge, upon request, by calling specified toll-free (or collect) telephone number (but is not available on the Funds’ website).
If a Fund receives a telephonic request for a proxy voting record, the Fund shall send the requested information disclosed in the Fund’s
most-recently filed Report on Form N-PX within three (3) business days of the receipt of the request for this information, by
first-class mail or other means designed to ensure equally prompt delivery.
Sub-advisers to the Funds
must have procedures and internal controls to ensure compliance with proxy voting regulations. Specifically, the sub-advisers must have
procedures for the reporting of proxy voting, and communicating changes in proxy voting policies to the Funds. Prior to Board approval
of new advisers, the Chief Compliance Officer (“CCO”) reviews the proxy voting policies and procedures of the sub-adviser.
The CCO ensures that any inadequate procedures or controls of a sub-adviser are reported to the Board and must be corrected in a timely
manner.
Exhibit 99.13e
U.S.
Registered Advisers
Summary of Proxy Voting Guidelines
as of October 26, 2022
Where clients appoint abrdn
Inc. to vote proxies on their behalf, policies have been established to vote these proxies in the best interests of our clients.
We employ ISS as a service
provider to facilitate electronic voting. We require ISS to provide recommendations based on our own set of parameters tailored to abrdn’s
assessment and approach, but remain conscious that all voting decisions are our own on behalf of our clients. We consider ISS’s
recommendations and those based on our custom parameters as input to our voting decisions. We make use of the ISS standard research and
recommendations and those based on our own custom policy as input to our voting decisions. Where our analysts make a voting decision that
is different from the recommendations based on our custom policy they will provide a rationale for such a decisions which will be made
publicly available in our voting disclosures.
In order to make proxy voting
decisions, an abrdn analyst assesses the resolutions at general meetings in our active investment portfolios. This analysis will be based
on our knowledge of the company, but will also make use of the custom and standard recommendations provided by ISS as described above.
The product of this analysis will be a final voting decision instructed through ISS and applied to all funds for which abrdn have been
appointed to vote. For funds managed by a sub-adviser, we may delegate to the sub-adviser the authority to vote proxies; however, the
sub-adviser will be required to either follow our policies and procedures or to demonstrate that their policies and procedures are consistent
with ours, or otherwise implemented in the best interest of clients.
There may be certain circumstances
where abrdn Inc. may take a more limited role in voting proxies. We will not vote proxies for client accounts in which the client contract
specifies that abrdn Inc. will not vote. We may abstain from voting a client proxy if the voting is uneconomic or otherwise not in clients’
best interests. For companies held only in passively managed portfolios, abrdn Inc. custom recommendations provided by ISS will be used
to automatically apply our voting approach; we have scope to intervene to test that this delivers appropriate results, and will on occasions
intrude to apply a vote more fully in clients’ best interests. If voting securities are part of a securities lending program, we
may be unable to vote while the securities are on loan. However, we have the ability to recall shares on loan or to restrict lending when
required, in order to ensure all shares have voted. In addition, certain jurisdictions may impose share-blocking restrictions at various
times which may prevent abrdn Inc. from exercising our voting authority.
We recognize that there may
be situations in which we vote at a company meeting where we encounter a conflict of interest. Such situations include:
| · | Where a portfolio manager owns the holding in a personal account. |
| · | An investee company that is also a segregated client. |
| · | An investee company where an Executive Director or Officer of our company
or that of abrdn plc or another affiliate is also a Director of that company. |
| · | An investee company where an employee of abrdn plc or an affiliate or subsidiary
is a Director of that company. |
| · | A significant distributor of our products. |
| · | Any other companies which may be relevant from time to time. |
We have adopted procedures
within our proxy voting process to identify where a conflict exists. These procedures are designed to ensure that our voting decisions
are based on our client’s best interests and are not impacted by any conflict.
The implementation of this
policy, along with conflicts of interest, will be reviewed periodically by the Active Ownership team. abrdn’s Global ESG Principles &
Voting Policies are published on our website.
Clients may obtain a free
copy of abrdn Inc.’s proxy voting policies and procedures and/or proxy voting records for their account by contacting us at (215)
405-5700. abrdn publishes ESG Principles & Voting Policies, which describe our approach to investment analysis, shareholder engagement
and proxy voting across companies worldwide. There are published on our website.
Clients that have not granted
abrdn Inc. voting authority over securities held in their accounts will receive their proxies in accordance with the arrangements they
have made with their service providers.
Listed Company ESG Principles & Voting Policies
March 2024
Introduction
Active Ownership and Environmental, Social & Governance (ESG) considerations
are a driver of our investment process, our investment activity, our client journey and our corporate influence.
Through engagement with the companies in which we invest, and by exercising
votes on behalf of our clients, we seek to improve the financial resilience and performance of our clients’ investments. Where we
believe change is needed, we endeavour to catalyse this through our stewardship capabilities.
Our expectations
As global investors, we are particularly aware that ESG structures
and frameworks vary across regions. Furthermore, what we expect of the companies in which we invest varies between different stages of
business development and the underlying history and nature of the company in question. We seek to understand each company’s individual
circumstances and so evaluate how it can best be governed and overseen. As such, we strive to apply the principles and policies set out
on these pages in response to the needs of that individual company at that particular time. Our heritage as a predominantly active fund
manager helps drive this bespoke approach to understanding good governance and risk management.
We have a clear perception of what we consider to be best practice
globally – as set out in this document. However we will reflect the nature of the business, our close understanding of individual
companies and regional considerations, where appropriate, in our approach to applying these policies, which are not exhaustive.
The principles and voting policies noted herein reflect our current
position. We are monitoring and contributing to the many reform agendas and consultations underway in the governance arena, particularly
in the UK, on areas such as market competitiveness, listing rules, the approval of corporate transactions and greater flexibility in remuneration
practices, including wider use of restricted stock. We are actively involved in these discussions, both as a corporate issuer and an investor,
and our position will evolve as rules, guidance and practice develops.
This document has received approval from the Head of Public Markets
and the Chief Sustainability Officer - Investments following consultation with various internal stakeholders.
Our approach to stewardship
We seek to integrate and appraise environmental, social and governance
factors in our investment process.
Our aim is to generate the best long-term outcomes for our clients
, proportionate to the risk preference they have accepted, and we will actively take steps as stewards and owners to protect and enhance
the value of our clients’ assets.
Stewardship is a reflection of this bespoke approach to good governance
and risk management. We seek to understand each company’s specific approach to governance, how value is created through business
success and how investors’ interests are protected through the management of risks that materially impact business success. This
requires us to play our part in the governance process by being active stewards of companies, involved in dialogue with management and
non-executive directors where appropriate, understanding the material risks and opportunities – including those relating to environmental
and social factors and helping to shape the future success of the business.
We will:
| · | Take into consideration, in our investment process, |
| · | the policies and practices on environmental, social and governance matters
of the companies in which we invest. |
| · | Seek to enhance long-term shareholder value through constructive engagement
with the companies in which we invest. |
| · | Actively engage with companies and assets in which we invest where we believe
we can influence or gain insight. |
| · | Seek to exercise voting rights, where held, in a manner consistent with our
clients’ long-term best interests. |
| · | Seek to influence the development of appropriately high standards of corporate
governance and corporate responsibility in relation to environmental and social factors for the benefit of our clients. |
| · | Communicate our Listed Company ESG Principles and Voting Policies to clients,
companies and other interested parties. |
| · | Be accountable to clients within the constraints of professional confidentiality
and legislative and regulatory requirements. |
| · | Be transparent in reporting our engagement and voting activities. |
abrdn is committed to exercising responsible ownership with a conviction
that companies seeking to upgrade their practices in corporate governance and risk management will be more successful in their core activities
and deliver enhanced long-term returns to shareholders. As owners of companies, the process of stewardship is a natural part of our investment
approach as we seek to benefit from their long-term success on our clients’ behalf.
Engagement
It is a central tenet of our active investment approach that we
strive to meet with the management and directors of our investee companies on a regular basis. We will concentrate that engagement
on investee companies undergoing transformation or facing exceptional challenges or opportunities. The discussions we have cover a
wide range of topics, including: strategic, operational, and ESG issues and consider the long-term drivers of value. Engagement with
companies on ESG risks and opportunities is a fundamental part of our investment process. It is a process through which we can
discuss how a company identifies, prioritises and mitigates its key risks and optimises outcomes from its most significant
opportunities. As such, we regard engagement as:
| · | Important to understanding investee companies holistically. |
| · | Helpful when conducting comprehensive ESG analysis. |
| · | Useful to maintaining open dialogue and constructive relationships with companies. |
| · | An opportunity to generate positive change on a company’s holistic
risk management programme – be active with our holdings rather than activist. |
Proxy Voting
Proxy voting is an integral part of our active stewardship approach
and we seek to exercise voting rights in a manner in line with our clients’ best interests. We seek to ensure that voting reflects
our understanding of the companies in which we invest on behalf of our clients. We believe that voting is a vital mechanism for holding
boards and management teams to account, and is an important tool for escalation and shareholder action.
This document includes our process and overarching policy guidelines
which we apply when voting at general meetings. These policies are not exhaustive and we evaluate our voting on a case by case basis.
As a global investment firm we recognise the practical necessity of adopting a regional approach, taking into account differing and developing
market practices. Where a policy is specific to one region this is denoted.
We endeavour to engage with companies regarding our voting decisions
to maintain a dialogue on matters of concern.
Voting Process
In line with our active ownership approach, we review the majority
of general meeting agendas convened by companies which are held in our active equity portfolios.
Analysis is undertaken by a member of our regional investment teams
or our Active Ownership team and votes instructed following consideration of our policies, our views of the company and our investment
insights. To enhance our analysis we may engage with a company prior to voting to understand additional context and explanations, particularly
where there is deviation from what we believe to be best practice.
To supplement our own analysis we make use of the benchmark research
and recommendations provided by ISS, a provider of proxy voting services. In the UK we also make use of the Investment Association’s
(IA) Institutional
Voting Information Service. We have implemented regional voting policy
guidelines with ISS which ISS applies to all meetings in order to produce customised vote recommendations. These custom recommendations
help identify resolutions which deviate from our expectations. They are also used to determine votes where a company is held only in passive
funds. Within our custom policies, however, we do specify numerous resolutions which should be referred to us for active review. For example
we will analyse all proposals marked by ISS as environmental or social proposals.
While it is most common for us to vote in line with a board’s
voting recommendation we will vote our clients’ shares against resolutions which we believe are not consistent with their best interests.
We may also vote against resolutions which conflict with local governance guidelines, such as the IA in the UK. Although we seek to vote
either in favour or against a resolution we do make use of an abstain vote where this is considered appropriate.
For example we may use an abstention to acknowledge some improvement,
but as a means to reserve our position in expectation that further improvement is needed before we can vote in favour. Where we vote against
a resolution we endeavour to inform companies of our rationale.
In exceptional circumstances we may attend and speak at a shareholder
meeting to reinforce our views to the company’s board.
We endeavour to vote all shares for which we have voting authority.
We may not vote when there are obstacles to do so, for example those impacting liquidity, such as share- blocking, or where there is a
significant conflict of interest. We use the voting platform of ISS to instruct our votes.
Where we lend stock on behalf of clients, and subject to the terms
of client agreements, we hold the right to recall shares where it is in clients’ interests to do so and where we take the view that
to maintain full voting weight on a particular meeting or resolution may impact the final vote.
Our votes are disclosed publicly on our website one day after a general
meeting has taken place.
Governance
Strategy
We invest in companies that will create the best outcome for our clients
in line with their investment mandates.
Companies must be clear about the drivers of their business success
and their strategy for maintaining and enhancing it. Investment is a forward-looking process; we seek to understand the opportunity for
a business and its scope for future value-creation over the long term. In order to do this, we need clarity on past business delivery
and its drivers, and on the effective track record of management; we require honest and open reporting to build confidence in that track
record. We seek confidence that companies and their management can maintain their competitive positioning and operational performance
and subsequently enhance returns for investors. A clear strategy and clarity about the drivers of operational success provides the lens
through which we will consider most corporate issues, not least assessing performance and risk management.
| · | We will consider voting against executive or non-executive directors if we
have serious concerns regarding the oversight or implementation of strategy. |
Board of Directors
We believe effective board governance promotes the long-term success
and value creation of the company.
The board should be responsible for establishing the
company’s purpose and strategy, overseeing management in their implementation of strategy and performance against objectives.
The board should ensure a strong framework of control and risk oversight, including material ESG risks. The board should assess and
monitor culture and be engaged with the workforce, shareholders and wider society.
Board Composition
Effective decision making requires a mix of skills around the table
and constructive debate between diverse and different-minded individuals. A range of skills, experience and perspectives should be drawn
together on the board.
These include industry knowledge, experience from other sectors and
relevant geographical knowledge. Independence of thought plays a crucial role in the ability of a board to generate the debate and discussion
that will challenge management, help enhance business performance and improve decision-making. Board assessments will help the board ensure
it has the necessary mix of skills, diversity and quality of individuals to address the risks and opportunities the company faces. Unitary
boards should comprise an appropriate combination of executive and non-executive directors such that no group of individuals dominates
decision- making. We expect the size of the board to reflect the size, nature and complexity of the business. We also expect regular internal
and external board evaluations which include an assessment of board composition and effectiveness.
Leadership
Running businesses effectively for the long term requires effective
collaboration and cooperation, with no individual or small group having unfettered powers. Nor should any individual or small group have
dominant influence over the way a business is run or over major decisions about its operations or future. There should be a division of
responsibility between board leadership and executive leadership of the business. We believe that there should be a division of roles
at the top of the organisation, typically between a Chief Executive Officer (CEO) and an independent Chair.
| · | We will consider supporting the re-election of an existing Chair & CEO
role combination, recognising that this remains common in certain geographies. In reviewing this on a case by case basis we will take
account of the particular circumstances of the company and consider what checks and balances are in place, such as the presence of a strong
Senior Independent Director with a clear scope of responsibility. |
| · | We will generally oppose any re-combination of the roles of CEO and Chair,
unless the move is on a temporary basis due to exceptional circumstances or other mitigating factors. |
| · | We will generally oppose any move of a retiring CEO to the role of Chair. |
Independence
Companies should be led and overseen by genuinely independent boards.
When looking at board composition we generally expect to see a majority of independent directors, with boards identifying their independence
classifications in the Annual Report. It is preferable to see an identified Senior Independent Director (SID) on the board, who will lead
the appraisal of and succession planning for the Chair. We expect SIDs to meet with investors and be a point of contact for escalating
concerns if required.
In assessing a director’s independence we will have due regard
for whether a director:
| i. | Has been an employee of the company within the last five years. |
| ii. | Has had within the last three years a material business relationship
with the company. |
iii. Has received remuneration in addition to director fees or participates in the company’s option or variable incentive schemes, or is a member of the company’s pension scheme.
| iv. | Has close family ties with any of the company’s advisers,
directors or senior employees. |
| v. | Holds cross-directorships or has significant links with other
directors through involvement in other companies or bodies. |
| vi. | Represents a significant shareholder. |
| vii. | Has served on the board for more than 12 years (or 9 for UK
companies). |
| · | We will consider voting against the re-election of non-independent directors
if the board is not majority independent (excluding employee representatives). In doing so we will have regard for whether a company is
controlled and the nature of the non-independence – for example, we are unlikely to vote against shareholder representatives unless
their representation is disproportionate to their shareholding. |
Succession Planning & Refreshment
Regular refreshment of the non-executive portion of a board helps draw
in fresh perspectives, not least in the context of changes to business and emerging opportunities and risks. It also helps limit the danger
of group-think. Thoughtful and proactive succession planning is therefore needed for board continuity, to ensure that a board is populated
by individuals with an appropriate mix of skills, experience and perspective. We expect the board to implement a formal process for the
recruitment and appointment of new directors, and to provide transparency of this in the Annual Report.
| · | We will vote against non-executive directors where there are concerns regarding
board refreshment or excessive tenure. Where there are directors who have served for over 12 years on a board which has seen no refreshment
in 3 years (2 in UK), we will generally vote against their re-election. If a director has served for over 15 years we will generally vote
against their re-election. We will, however, consider the impact on board continuity and the company’s succession planning efforts
prior to doing so. We may also not apply the tenure limit to directors who are founders or shareholder representatives where we believe
this is appropriate. |
Diversity
We believe that companies that make progress in diversity, equity and
inclusion (DEI) are better positioned for long-term sustainability and outperformance. Diversity of thought, paired with a culture of
inclusion, can help companies to tackle increasingly complex challenges and markets. We expect boards to report on how they promote DEI
throughout the business and believe that setting targets is important to addressing imbalances. We recognise the necessity of adopting
a regional approach to diversity, equity and inclusion, allowing us to press for progress with appropriate consideration for the starting
point. We have for several years, actively encouraged progress in gender diversity at all levels, and have expanded our scope in relation
to diversity, equity and inclusion across geographies. In respect of ethnic diversity, this is coming increasingly into focus as we encourage
boards to progress in ensuring that their composition reflects their employee and customer bases.
Our regional specific policies are below. In determining our votes
we will take account of mitigating factors, such as the sudden departure of a female board member. We will also consider any clear progress
being made by the company on diversity and any assurance that diversity shortfalls will soon be addressed.
Gender Diversity
| · | UK: We will generally vote against the Nomination Committee Chair of FTSE
350 companies if the board is not comprised of at least one third female directors. |
| · | We expect companies to seek to comply with the FCA’s diversity targets
and may vote against the Chair of the Nomination Committee if we have concerns regarding the Committee’s efforts in succession planning
to achieve the gender diversity target of 40% female members. For smaller companies, we will take action if the board does not include
at least one female director. |
| · | Europe: We will generally vote against the Nomination Committee Chair of
LargeCap companies if the supervisory board is not comprised of at least 30% female directors, or is not in line with the local standard
if higher. For smaller companies, we will take this action if the supervisory board does not include at least one female director. |
| · | Australia: We will generally vote against the Nomination Committee Chair
of ASX300 companies if the board is not comprised of at least 30% female directors. |
| · | North America: We will generally vote against the Nomination Committee Chair
of LargeCap companies if the board is not comprised of at least 30% female directors. For smaller companies, we will take this action
if the board does not include at least one female director |
Ethnic Diversity
| · | UK: We will generally vote against the Nomination Committee Chair at the
boards of FTSE 100 companies, if the board does not include at least one member from an ethnic minority background. This is in line with
targets set up by the Parker Review. |
| · | US: We will generally vote against the Nomination Committee Chair at the
boards of S&P 1500 & Russell 3000 companies if the board does not include at least one member from a racial or ethnic minority
background. |
Directors’ Time Commitment
Individual directors need sufficient time to carry out their role effectively
and therefore we seek to ensure that all directors maintain an appropriate level of overall commitments such that allows them to be properly
diligent.
| · | We will consider opposing the election or re-election of any director where
there is a concern regarding their ability to dedicate sufficient time to the role. In making this assessment we will have regard to the
ISS classification of ‘overboarding’. |
| · | We will generally oppose the re-election of any director who has attended
fewer than 75% of board meetings in two consecutive years. |
Board Committees
Boards should establish committees, populated by independent and appropriately
skilled non-executive directors, to oversee (as a minimum) the nomination, audit and remuneration processes. It may also be appropriate
for additional committees to be established, such as a risk or sustainability committee. These committees should report openly on an annual
basis about their activities and key decisions taken.
| · | We will consider voting against committee members if we have concerns regarding
the composition of a committee in relation to independence or skills. |
Nomination Committee
This committee has responsibility for leading the process for orderly
non-executive and senior management succession planning and recruitment, and for overseeing the composition of the board including skillset,
experience and diversity. We expect the committee to be comprised of a majority of independent directors with an independent Chair.
| · | We will consider voting against the re-election of the Nomination Committee
Chair if we have concerns regarding the composition of the board or concerns regarding poor succession planning. |
Audit Committee
This committee has responsibility for monitoring the integrity of
the financial statements, reviewing the company’s internal financial controls and risk management systems, reviewing the
effectiveness of the company’s internal audit function and appointing and overseeing the quality of the work done by external
auditors. We prefer the committee to be wholly independent, and expect this at UK and US companies in view of general market
practice and board composition.
In other regions, as a minimum, we expect the committee to be comprised of a majority of independent
directors with an independent Chair. Furthermore we expect at least one member of the committee to have recent and relevant
financial experience.
| · | UK & US: We will generally vote against the re-election of non-independent
members of the Audit Committee. |
| · | Europe: We will generally vote against the re-election of non-independent
members of the Audit Committee if the Committee is not majority independent. We will also generally vote against a non-independent Chair
of the Audit Committee. |
| · | We will generally vote against the re-election of the Audit Committee Chair
if at least one member of the Committee does not have recent and relevant financial experience. |
Remuneration Committee
The committee is responsible for determining the policy and setting
remuneration levels for executive and non- executive directors. The committee should ensure that directors’ remuneration is aligned
with strategy and company performance and should clearly demonstrate that outcomes have had regard to the experience of the company’s
employees and wider society. Remuneration policy should be cognisant of the company’s licence to operate and the potential overall
level of remuneration. We expect remuneration committees to be robust in their approach to developing and implementing remuneration policies,
with formal and transparent procedures for developing policies and for determining remuneration packages. Remuneration committees should
be comprised of a majority of independent directors with an independent Chair and we expect members to have appropriate experience and
knowledge of the business and remuneration practices in the jurisdiction in which they operate. No executive should be involved in setting
their own remuneration.
| · | Where we have significant concerns regarding the company’s remuneration
policy or reward outcomes we may escalate these concerns through a vote against the Chair or members of the Remuneration Committee. |
Director Accountability
We expect to be able to hold boards to account through engagement and
regular director re-elections and directors should feel that they are accountable to investors. We encourage individual, rather than bundled,
director elections. While our preference is for directors to be subject to re-election annually, we expect re-elections to take place
at least every three years. Lengthier board mandates, while not uncommon in some markets, risk divorcing directors from an appropriate
sense of accountability. Directors and management should make themselves available for discussions with major shareholders as we expect
to have open dialogue to share our perspectives and gain confidence that the individuals are carrying out their roles with appropriate
vigour and diligence. A further important element of director accountability to shareholders is that investors should have the right,
both formal and informal, to propose and promote individual directors to be considered for election to the board by all shareholders.
| · | We will generally oppose the re-election of non- independent NEDs who are
proposed for a term exceeding three years. We may not apply this to directors who are shareholder representatives. |
| · | Where we have significant concerns regarding a board member’s performance,
actions or inaction to address issues raised we may vote against their re-election. |
| · | We may vote against directors who decline appropriate requests for meetings
without a clear justification. |
| · | Where a director has held a position of responsibility at a company which
has suffered a material governance failure, we will consider whether we are comfortable to support their re-election at other listed companies. |
| · | We will generally support resolutions to discharge the supervisory board
or management board members from legal liability unless we have serious concerns regarding actions taken during the year under review.
Where there is insufficient information regarding allegations of misconduct, we may prefer to abstain. In exceptional circumstances we
may vote against the discharge resolution to reflect serious ESG concerns if there is not another appropriate resolution. |
| · | We will not support the election of directors who are not personally identified
but are proposed as corporations. |
Reporting
A company’s board should present a fair, balanced and understandable
assessment of the company’s position and prospects – financial and non-financial – and of how it has fulfilled its responsibilities.
We support the principle of full disclosure of relevant and useful information, subject to issues of commercial confidentiality and prejudice.
Boilerplate disclosure should be avoided. We encourage companies to consider using the appropriate globally developed standards and would
particularly encourage the use of those created by the Taskforce for Climate related Financial Disclosures (TCFD), the International Integrated
Reporting Council (IIRC), the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI). Audited reporting
and financial numbers should be published ahead of any relevant shareholder meetings. We continue to monitor the evolving reporting landscape
and consider new reporting developments as they emerge, either voluntary or regulatory.
| · | We may consider voting against a company’s Annual Report & Accounts
if we have concerns regarding timely provision or adequacy of disclosure. |
Political Donations & Lobbying
Companies should be consistent in their public statements and not undermine
these in private commentary to market participants or to politicians and regulators.
We welcome transparency from companies about their lobbying activities
and believe that good companies have nothing to hide in this respect. Similarly we encourage transparency of any political donations that
companies deem appropriate – and we expect a clear explanation of why such donations are an appropriate use of corporate funds.
Risk & Audit
The board is responsible for determining the company’s risk appetite,
establishing procedures to manage risk and for monitoring the company’s internal controls. We expect boards to conduct robust assessments
of the company’s material risks and report to shareholders on risks, controls and effectiveness. The introduction of global accounting
standards has led to much greater investor confidence in the accounts produced by companies around the world. It has also assisted in
creating consistency of reporting across companies, enabling fairer comparisons between different operating businesses. We therefore encourage
companies seeking international investment to report under International Financial Reporting Standards (IFRS) or US GAAP. As a firm abrdn
supports the continued development of high quality global accounting standards.
An independent audit, delivered by a respected audit firm, is a required
element for investor confidence in reporting by companies. We strongly favour meaningful, transparent and informative auditor reports,
giving us additional insights into the audit process and accounting outcomes. Audit fees must be sufficient to pay for an appropriately
in-depth assurance process. We would be concerned if a company sought to make unjustified savings in this respect as the cost in terms
of damage to audit effectiveness and confidence in the company’s accounts would be much more substantial.
The independence of the auditor and the standard of their work, particularly
in challenging management, should be subject to regular assessment that is appropriately disclosed. Even when individuals carrying out
the audit are refreshed, we believe that the independence of the audit firm erodes over time and we will encourage a tender process and
change of audit firm where an engagement has lasted for an extended period. In order to demonstrate the level of independence, companies
should not have the same audit firm in place for more than 20 years.
The relationship with the auditor should be mediated through the audit
committee. Where we are significant shareholders, we expect to be consulted on plans to tender and replace auditors.
| · | We will generally vote against the re-election of an auditor which has a
tenure of 20 years or over, if there are no plans for rotation in the near term. |
| · | We will consider voting against the auditors if we have concerns regarding
the accounts presented or the audit procedures used. |
| · | We will vote against the approval of auditor fees if we have concerns regarding
the level of fees or the balance of non-audit and audit fees. |
Remuneration
Remuneration policies and the overall levels of pay should be aligned
with strategy, attracting and retaining talent and incentivising the decisions and behaviours needed to create long-term value. The component
parts of remuneration should be structured so as to link rewards to corporate and individual performance and they should be considered
in the context of the remuneration policies when taken as a whole. We recognise the benefits of simplicity in forming the policy, which
should clearly link outcomes and expectations for those receiving the remuneration, as well as external stakeholders. The structure should
be transparent and understandable.
A company’s annual report should contain an informative statement
of remuneration policy which communicates clearly to stakeholders how it has developed and evolved. This should include details of any
stress testing that may have been undertaken to understand the policy outcomes for different business scenarios. The remuneration committee
should provide a clear description of the application of policy and the outcomes achieved.
Base salary should be set at a level appropriate for the role and responsibility
of the executive. We discourage increases which are driven solely by peer benchmarking, and expect increases to be aligned with the wider
workforce. Consideration should also be given to the knock-on impact to variable remuneration potential. Pension arrangements and benefits
should be clearly disclosed. We generally expect pension structures to be aligned with the wider workforce.
A company should structure variable, performance- related pay to incentivise
and reward management in a manner that is aligned with the company’s sustainable performance and risk appetite over the long term.
We expect all variable pay to be capped, preferably with reference to base salary. In the UK we expect variable pay to be capped with
reference to base salary. In other markets, if variable pay is capped at a number of shares, we expect the value of grants to be kept
under review annually to ensure the value remains appropriate and is not excessive.
Performance metrics used to determine variable pay should be clearly
disclosed and aligned with the company’s strategy. A significant portion of performance metrics should seek to measure significant
improvements in the underlying financial performance of the company. We also encourage the inclusion of non-financial metrics linked to
targets which are aligned with the company’s progress on its ESG strategy. Where possible we expect these targets to be quantifiable
and disclosed.
Variable pay arrangements should incentivise participants to achieve
above-average performance through the use of challenging targets. We encourage sliding-scale performance measures and expect performance
target ranges to be disclosed to enable shareholders to assess the level of challenge and pay for performance alignment. We expect annual
bonus targets to be disclosed retrospectively and encourage the disclosure of long term incentive (LTI) targets at the beginning of the
performance period, but at minimum we expect retrospective disclosure. Where bonus or LTI targets are not disclosed due to commercial
sensitivity we expect an explanation of why the targets continue to be considered sensitive retrospectively and expect some detail regarding
the level of achievement vs target. Where a share price metric is being used, we expect this to be underpinned by a challenging measure
of underlying performance.
We encourage settlement of a portion of the annual bonus in shares
which are deferred for at least one year.
We expect settlement of long term incentives to be in shares, with
rationale provided for any awards settled in cash. Long term incentives should have a performance period of no less than three years.
In the UK we expect a further holding period of two years to be applied, and we encourage this in other markets.
We do not generally support value creation plans. We will consider
supporting the use of restricted share plans in the UK which have been structured consistent with the guidelines of the Investment Association.
We expect appropriate malus and clawback provisions to be applied to
variable remuneration plans.
We expect shareholding guidelines to be adopted for executive directors
and encourage the adoption of post- departure shareholding guidelines.
We expect details of any use of discretion to be disclosed and its
use should be justifiable, appropriate and clearly explained. We would expect policies to be sufficiently robust so that discretion is
only necessary in exceptional circumstances. We do not generally support exceptional awards, and are particularly sensitive to such awards
being granted to reward a corporate transaction.
We expect executive service contracts to provide for a maximum notice
period of 12 months. We will consider local best practice provisions related to severance arrangements when voting.
Non-executive fees should reflect the role’s level of responsibility
and time commitment. We do not support NED’s participation in option or performance-related arrangements. However we do support
the payment of fees in shares, particularly where conservation of cash is an issue.
In the UK our expectations of companies are aligned with the Investment
Association’s Principles of Remuneration.
Where significant changes to remuneration arrangements are being considered,
we would expect remuneration committees to consult with their largest shareholders prior to finalising any changes. Where any increase
to variable remuneration is proposed, we would expect this to be accompanied by a demonstrable increase in the stretch of the targets.
Furthermore we expect any increases to remuneration to be subject to shareholder approval.
In response to the issues arising from the cost of living crisis being
experienced by many people in the UK, we expect companies to focus additional capacity towards those members of the workforce who need
it most. We expect Remuneration Committees to take into account factors arising from the cost of living crisis when deliberating over
executive pay outcomes. We would be concerned by reputational issues arising from decisions made in these unusual circumstances and may
make this a factor in our voting decisions at relevant AGMs.
In line with the expectations set out above we will generally vote
against the appropriate resolution(s) where:
We consider the overall reward potential or outcome to be excessive.
| · | A significant increase to salary has been granted which is not aligned with
the workforce or is not sufficiently justified. |
| · | A significant increase to performance-related pay has been granted which
is not sufficiently justified, is not accompanied by an increase in the level of stretch required for achievement or results in the potential
for excessive reward. |
| · | There is no appropriate cap on variable incentive schemes. |
| · | Performance targets for annual bonus awards are not disclosed retrospectively
and the absence of disclosure is not explained. |
| · | Performance targets for long term incentive awards are not disclosed up front
and there is no compelling explanation regarding the absence of disclosure or a commitment to disclose retrospectively. |
| · | Performance targets are not considered sufficiently challenging, either at
threshold, target or maximum. |
| · | Relative performance targets allow vesting of awards for below median performance. |
| · | Retesting provisions apply. |
| · | Incentives that have been conditionally awarded have been repriced or performance
conditions changed part way through a performance period. |
| · | We have concerns regarding the use of discretion or the grant of exceptional
awards. |
| · | Pension arrangements are excessive . |
| · | Pension arrangements are not aligned with the wider workforce (UK). |
Investor Rights
The interests of minority shareholders must be protected and any
major, or majority, investor should not enjoy preferential treatment. The structure of ownership or control should minimise the
potential for abuse of public shareholders.
Corporate Transactions
Companies should not make significant changes to their structure or
nature without being fully transparent to their investors. Shareholders should have the opportunity to vote on significant corporate activity,
such as mergers and acquisitions. Where a transaction is with a related party, only independent shareholders should have a vote. Even
in markets where no vote is given to shareholders in these circumstances, investors need transparent disclosure of the reasons for any
such major change. Companies should expect that shareholders may want to discuss and debate proposed developments
Diversification beyond the core skills of the business needs to be
justified as it is more often than not a distraction from operational performance. All major deals need to be clearly explained and justified
in the context of the pre- existing strategy and be subject to shareholder approval.
| · | We will vote on corporate transactions on a case by case basis. |
Dividends
We will generally support the payment of dividends but will 13
crutinize the proposed level where it appears excessive given the company’s financial position.
Share Capital
The board carries responsibility for prudent capital management and
allocation.
Share Issuance
We will consider capital raises which are proposed for a specific purpose
on a case by case basis but recognise that it can be beneficial for companies to have some general flexibility to issue shares to raise
capital.
However we expect issuances to be limited to the needs of the business
and companies should not issue significant portions of shares unless offering these on a pro-rata basis to existing shareholders to protect
against inappropriate dilution of investments.
| · | Where a company seeks a general authority to issue shares we generally expect
this to be limited to 25% of the company’s share capital for pre- emptive issuances. In the UK we are aligned with the guidance
of the Investment Association Share Capital Management Guidelines. |
| · | Where a company seeks a general authority to issue shares we generally expect
this to be limited to 10% of the company’s share capital for non-pre-emptive issuances. In the UK we are aligned with the guidance
of the Investment Association Share Capital Management Guidelines and those of the Pre-Emption Group. |
| · | We will not generally support share issuances at investment trusts unless
there is a commitment that shares would only be issued at a price at or above net asset value. |
When considering our votes we will, however, take account of the company’s
circumstances and any further detail regarding proposed capital issuance authorities prior to voting.
Following changes to the UK’s Pre-Emption Group Guidelines in
November 2022, which reflect an increase on previous limits, we will hold the Chair of the company accountable for any perceived misuse
of the increased flexibility through a vote against their re-election.
Buyback
We recognise that share buybacks can be a flexible means of returning
cash to shareholders.
| · | We will generally support buyback authorities of up to 10% of the issued
share capital. In the UK we will generally support authorities which are in line with the levels permitted under the Listing Rules. |
Related Party Transactions
The nature of relations – particularly any related party transactions
(RPTs) – with parent or related companies, or other major investors, must be disclosed fully.
Related party transactions must be agreed on arm’s length terms
and be made fully transparent. Where they are material, they should be subject to the approval of independent shareholders.
| · | We will vote against RPTs where there is insufficient transparency of the
nature of the transaction, the rationale, the terms or the views and assessment of directors and advisors. |
Article/Bylaw amendments
While it is standard to see proposals from companies to amend their
articles of association or bylaws, we will review these on a case by case basis. When doing so we expect full transparency of the proposed
changes to be disclosed.
| · | We will vote against amendments which will reduce shareholder rights. |
Anti-Takeover Defences
There should be no artificial structures put in place to entrench management
and protect companies from takeover. The best defence from hostile takeover is strong operational delivery.
| · | We will generally vote against anti-takeover/‘poison pill’ proposals. |
Voting Rights
We are strong supporters of the principle of ‘one share, one
vote’ and therefore favour equal voting rights for all shareholders.
| · | We will generally vote against proposals which seek to introduce or continue
capital structures with multiple voting rights. |
| · | We will consider voting against proposals to raise new capital at companies
with multiple share classes and voting rights. |
General Meetings
Shareholder meetings provide an important opportunity to hold boards
to account not only through voting on the proposed resolutions but also by enabling investors the opportunity to raise questions, express
views and emphasise concerns to the entire board. We may make a statement at a company’s AGM as a means of escalation to reinforce
our views to a company’s board.
We welcome the opportunity to attend meetings virtually, being of the
view that this can increase participation given obstacles such as location or meeting concentration.
However we are not supportive of companies adopting virtual-only meetings
as we believe this format reduces accountability. Our preference is for a hybrid meeting format to balance the flexibility of remote attendance
with the accountability of an in-person meeting.
| · | We will generally support resolutions seeking approval to shorten the EGM
notice period to minimum 14 days, unless we have concerns regarding previous inappropriate use of this flexibility. |
| · | We will generally support proposals to enable virtual meetings to take place
as long as there is confirmation that the format will be hybrid, with physical meetings continuing to take place (unless prohibited by
law). |
We expect virtual attendees to have the same rights to speak and raise
questions as those attending in-person. We will generally vote against proposals which permit wholly virtual general meetings.
Sustainability
As part of strategic planning, boards need to have oversight of, and
clearly articulate, the key opportunities and risks affecting the sustainability of the business model. This includes having a process
for, and transparent disclosure of, potential and emerging opportunities and risks and the actions being taken to address them.
The effective management of risks extends to long-term issues that
are hard to measure and whose timeframe is uncertain and will include the management of environmental and social issues. We use the UN
Global Compact’s four areas of focus in assessing how companies are performing in this area. Specifically we expect companies to
be able to demonstrate how they manage their exposures under the following headings.
The Environment
It is generally accepted that companies are responsible for the effects
of their operations and products on the environment. The steps they take to assess and reduce those impacts can lead to cost savings and
reduce potential reputational damage. Companies are held responsible for their impact on the climate and they face increased regulation
from world governments on activities that contribute to climate change.
We expect that companies will:
| · | Identify, manage and reduce their environmental impacts. |
| · | Understand the impact of climate change along the company value chain. |
| · | Develop group-level climate policies and, where relevant, set targets to
manage the impact, report on policies, practices and actions taken to reduce carbon and other environmental risks within their operations. |
| · | Comply with all environmental laws and regulations, or recognised international
best practice as a minimum. |
Where we have serious concerns regarding a board’s actions, or
inaction, in relation to the environment we will consider taking voting action on an appropriate resolution.
We will use the indicators within the Carbon Disclosure Project to
identify companies which are not fulfilling their climate commitments. Where appropriate we will take voting action to encourage better
practice among companies which we deem to be laggards.
Labour and employment
Companies that respect internationally recognised labour rights
and provide safe and healthy working environments for employees are likely to reap the benefits. This approach is likely to foster a
more committed and productive workforce, and help reduce damage to reputation and a company’s license to operate. We expect
companies to comply with all employment laws and regulations and adopt practices in line with the International Labour
Organization’s core labour standards. a minimum.
In particular, companies will:
| · | Take affirmative steps to ensure that they uphold decent labour standards. |
| · | Adopt strong health and safety policies and programmes to implement such
policies. |
| · | Adopt equal employment opportunity and diversity policies and a programme
for ensuring compliance with such policies. |
| · | Adopt policies and programmes for investing in employee training and development. |
| · | Adopt initiatives to attract and retain talented employees, foster higher
productivity and quality, and encourage in their workforce a commitment to achieving the company’s purpose. |
| · | Ensure policies are in place for a company’s suppliers that promote
decent labour standards, and |
| · | programmes are in place to ensure high standards of labour along supply chains. |
| · | Report regularly on its policy and implementation of managing human capital. |
Where we have serious concerns regarding a board’s actions, or
inaction, in relation to labour and employment we will consider taking voting action on an appropriate resolution.
Human rights
We recognise the impact that human-rights issues can have on our investments
and the role we can play in stimulating progress. We draw upon a number of international, legal and voluntary agreements for guidance
on human-rights responsibilities and compliance.
Our primary sources are the International Bill of Rights and the core
conventions of the International Labour Organisation (ILO), which form the list of internationally agreed human rights, and the UN Guiding
Principles on Business and Human Rights (UNGPs), which clarifies the roles of states and businesses. We encourage companies to use the
UNGPs Reporting Framework and encourage disclosure in line with this guidance.
We expect companies to:
| · | Continually work to understand their actual and potential impacts on human
rights. |
| · | Establish systems that actively ensure respect for human rights. |
| · | Take appropriate action to remedy any infringements on human rights. |
Where we have serious concerns regarding a board’s actions, or
inaction, in relation to human rights we will consider taking voting action on an appropriate resolution.
Business ethics
As institutions of wealth and influence, companies have a significant
impact on the prosperity of their local communities and the wider world. Having a robust code of ethics and ensuring professional conduct
mean companies operate more effectively, particularly when it comes to ethical principles governing decision-making. A company’s
failure to conform to internationally recognised standards of business ethics on matters such as bribery and corruption, can increase
its risk of facing investigation, litigation and fines. This could undermine its license to operate, and affect its reputation and image.
We expect companies to have policies in place to support the following:
| · | Ethics at the heart of the organisation’s governance. |
| · | A zero-tolerance policy on bribery and corruption. |
| · | How people are rewarded, as pay can influence behaviour. |
| · | Respect for human rights. |
| · | Ethical training for employees. |
Where we have serious concerns regarding a board’s actions, or
inaction, related to business ethics we will consider taking voting action on an appropriate resolution.
Environmental & Social Resolutions
We will review any resolution at company meetings we have identified
as covering environmental and social factors. The following will detail our overarching approach and expectations.
Our approach to vote analysis is consistent across active and quantitative
investment strategies:
| · | Review the resolution, proponent and board statements, existing disclosures,
and external research. |
| · | Engage with the company, proponents, and other stakeholders as required. |
| · | Involve thematic experts, regional specialists, and investment analysts in
decision-making to harness a wide range of expertise and include all material factors in our analysis. |
| · | Ensure consistency by using our own in-house guidance to frame case-by-case
analysis. |
| · | Monitor the outcomes of votes. |
| · | Follow-up with on-going engagement as required. |
Given the nature of the topics covered by these resolutions we do not
apply binary voting policies. We adopt a nuanced approach to our voting research and outcomes and will consider the specific circumstances
of the company concerned. Our objective is not to vote in favour of all shareholder resolutions but to determine the best outcome for
the company in the context of the best outcome for our clients. There are instances where we are supportive of the spirit of a resolution
however there may be a reason which prevents our support for the proposal. For example, where the purpose of the resolution is unclear,
where the wording is overly prescriptive, when suggested implementation is overly burdensome or where the proposal strays too closely
to the board’s responsibility for setting the company’s strategy.
Management Proposals
We are supportive of the steps being taken by companies to provide
transparent, detailed reporting of their ESG strategies and targets. While shareholder proposals on environmental and social topics have
been common on AGM agendas for several years, an increasing number of companies are presenting management proposals, such as so called
‘say on climate’ votes, for shareholder approval. While we welcome the intention of accountability behind these votes, we
have reservations about the potential for them to limit the scope for subsequent investor challenge and diminish the direct responsibility
and accountability of the board and individual directors. We believe it is the role of the board and the executive to develop and apply
strategy, including ESG strategies, and we will continue to use existing voting items to hold boards to account on the implementation
of these strategies. As active investors we also regularly engage with investee companies on ESG topics and find this dialogue to be the
best opportunity to provide feedback.
We will review the appropriateness of ‘say on climate’
votes and consider if other voting mechanisms should be applied to ensure both Boards and Executives apply the appropriate rigour to initiate
and deliver strategies to support the climate transition.
Shareholder Proposals
The number of resolutions focused on environmental and social (E&S)
issues filed by shareholders continues to grow rapidly. The following provides an overview of some of the factors we consider when assessing
the most prevalent themes for shareholder proposals.
Climate Change
We are members of the Net Zero Asset Managers Initiatives and this
is reflected in our Active Ownership approach. We encourage the companies in which we invest to demonstrate a robust methodology underpinning
Paris aligned goals and targets and are supportive of resolutions that will help companies to achieve this. Once a credible climate strategy
is in place, we prioritise evidence of implementation over requests to re-draft strategies and targets after only a year or two.
A growing number of resolutions call on companies to increase the transparency
of their reporting on climate- related lobbying. These proposals typically encompass direct lobbying undertaken by the company and indirect
lobbying undertaken by trade associations and other organisations of which it is a member or supporter.
Lobbying contrary to the objectives of the Paris Agreement is effective
in creating climate policy inertia and impeding the transition to net zero economies.
We do not evaluate resolutions in isolation. Our approach recognises
the links between corporate governance, strategy and climate approach. Where a company’s operational response to climate change
is inadequate, the effectiveness of board oversight and corporate governance may also be called into question.
We expect and encourage companies to:
| · | Demonstrate that a robust methodology underpins Paris aligned, net zero goals
and targets. |
| · | Set targets for absolute emission reduction, not just carbon intensity, to
show a clear pathway to net zero. |
| · | Report in alignment with the TCFD framework. |
| · | Link targets to remuneration and ensure they are reflected in capital expenditure
and R&D plans. |
| · | Carefully manage climate-related lobbying by ensuring appropriate oversight,
transparent disclosure of activities, and alignment of activities with the company’s strategy and publicly stated positions. |
Diversity, Equity & Inclusion
Diversity, Equity & Inclusion (DEI) is an important and growing
theme for shareholder resolutions. In recent years resolutions have focussed on racial equity audits, pay gap reporting, transparent disclosure
of DEI metrics and assessments of the efficacy of DEI programmes.
A racial equity audit is an independent analysis of a company’s
business practices designed to identify practices that may have a discriminatory effect.
We are supportive of racial equity audits in relation to internal and
external DEI programmes. It is appropriate that these programmes should have KPIs and audit mechanisms in place to measure and evaluate
outcomes. Some proposals request racial equity audits of provision of services. We are aware that measuring provision of service is challenging
and gathering racial data on customers can be difficult and inappropriate. There are also multiple different factors that can influence
service provision and which could be misconstrued as being racially motivated. We will however, support resolutions which are not unduly
prescriptive and allow companies to carry out audits within a reasonable timeframe, at a reasonable cost, and excluding confidential or
proprietary information.
We consider standardised gender pay gap disclosure to be an important
tool for assessing how companies are addressing gender inequality. Reporting on gender pay gaps across global operations can help companies
to remain ahead of the regulatory curve. It also enables them to offer better opportunities and remuneration for women around the world.
We are therefore supportive of resolutions which are likely to deliver these benefits.
Proposals must be carefully drafted to achieve these outcomes. For
instance, in the past we have been unable to support resolutions which called for global median gender and racial pay gap reporting as
it was unclear how this would reveal potential pay disparities at a local level and how it could be implemented by companies with operations
in jurisdictions where collection of racial identity data is illegal.
In the US market we support public disclosure of EEO-1 forms by companies.
The EEO-1 form details a comprehensive breakdown of workforce by race and gender according to ten employment categories. The form is submitted
privately to the US Equal Employment Opportunity Commission on an annual basis. When publicly disclosed, it offers investors and other
stakeholders data in a standardised and comparable form. We have used our engagement programme to ask the companies in which we invest
to disclose this form for their US operations while making it central to our D&I voting approach and supporting resolutions that request
it.
Human Rights
As a supporter of the UN Guiding Principles on Business and Human Rights
(UNGPs), we expect companies to demonstrate how human rights due diligence is conducted across operations, services, product use and the
supply chain. Companies can have a significant impact on human rights directly through operations and provision of services, and indirectly
through product use and the supply chain. In recent years the sale and end-use of controversial technologies, such as facial recognition
software, has emerged as a prominent theme.
We expect and encourage companies to:
| · | Have robust due diligence processes to assess the actual and potential human
rights impacts of their operations, services, product use and supply chain. |
| · | Conduct customer and supplier vetting processes commensurate with the risk
of human rights abuse. |
| · | Publicly disclose information about the operation of these processes and
utilise the UNGPs’ Reporting Framework. This will improve the standard and consistency of human rights reporting and enable more
informed investment decision making. |
Corporate Lobbying & Political Contributions
Corporate lobbying and political contributions are a recurrent theme
of shareholder resolutions, particularly in the US. These proposals typically encompass direct lobbying undertaken by the company and
indirect lobbying undertaken by trade associations and other organisations of which it is a member or supporter.
Proposals may also request the disclosure of more information regarding
the process and rationale for political contributions. We expect companies to make transparent, consolidated disclosures of direct and
indirect lobbying and political expenditure. This disclosure should be underpinned by a coherent policy that: explains public policy priorities
and the rationale for associated expenditure, identifies the management positions responsible for public policy engagement, and provides
appropriate mechanisms for board oversight.
These measures should mitigate the risks associated with corporate
lobbying and political contributions, protecting the interest of shareholders and other stakeholders.
Nuclear Energy
In the Japanese market nuclear energy is a recurrent theme of shareholder
resolutions. The Japanese government is seeking to reduce the nation’s reliance on coal and its energy strategy presents safe nuclear
power generation as an important source of base-load power. In this context, resolutions which seek to limit or cease the nuclear operations
of an individual company do not appear to be in the best interests of shareholders and other stakeholders. The health & safety risks
associated with nuclear energy are high, must be managed carefully across the industry, and are an important consideration in our voting.
Important Information
This document is strictly for information purposes only and should
not be considered as an offer, investment recommendation, or solicitation, to deal in any of the investments or funds mentioned herein
and does not constitute investment research. abrdn does not warrant the accuracy, adequacy or completeness of the information and materials
contained in this document and expressly disclaims liability for errors or omissions in such information and materials.
Any research or analysis used in the preparation of this document has
been procured by abrdn for its own use and may have been acted on for its own purpose. The results thus obtained are made available only
coincidentally and the information is not guaranteed as to its accuracy. Some of the information in this document may contain projections
or other forward looking statements regarding future events or future financial performance of countries, markets or companies. These
statements are only predictions and actual events or results may differ materially. The reader must make their own assessment of the relevance,
accuracy and adequacy of the information contained in this document and make such independent investigations, as they may consider necessary
or appropriate for the purpose of such assessment. This material serves to provide general information and is not meant to be investment,
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Applying ESG and sustainability criteria in the investment process
may result in the exclusion of securities within the universe of potential investments. The interpretation of ESG and sustainability criteria
is subjective meaning that products may invest in companies which similar products do not (and thus perform differently) and which do
not align with the personal views of any individual investor. Furthermore, the lack of common or harmonized definitions and labels regarding
ESG and sustainability criteria may result in different approaches by managers when integrating ESG and sustainability criteria into investment
decisions. This means that it may be difficult to compare strategies within ostensibly similar objectives and that these strategies will
employ different security selection and exclusion criteria. Consequently, the performance profile of otherwise similar vehicles may deviate
more substantially than might otherwise be expected. Additionally, in the absence of common or harmonized definitions and labels, a degree
of subjectivity is required and this will mean that a product may invest in a security that another manager or an investor would not.
abrdn plc is registered in Scotland (SC286832) at 1 George Street,
Edinburgh EH2 2LL.
abrdn Life Sciences Inve... (NYSE:HQL)
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abrdn Life Sciences Inve... (NYSE:HQL)
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