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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| abrdn National Municipal Income Fund | AMEX:VFL | AMEX | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.16 | 1.58% | 10.29 | 10.26 | 10.13 | 10.19 | 29,605 | 00:06:21 |
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: | 811-07410 | |
| Exact name of registrant as specified in charter: | abrdn National Municipal Income Fund | |
| Address of principal executive offices: | 1900 Market Street, Suite 200 | |
| Philadelphia, PA 19103 | ||
| Name and address of agent for service: | Sharon Ferrari | |
| abrdn Inc. | ||
| 1900 Market Street Suite 200 | ||
| Philadelphia, PA 19103 | ||
| Registrant’s telephone number, including area code: | 1-800-522-5465 | |
| Date of fiscal year end: | September 30 | |
| Date of reporting period: | September 30, 2024 |
Item 1. Reports to Stockholders.
(a)
| 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. |
| 2 | Assuming the reinvestment of dividends and distributions. |
| 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. |
| 4 | The Bloomberg Municipal Bond Index consists of the long-term investment grade tax exempt bonds. Indexes are unmanaged and provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
| abrdn National Municipal Income Fund | 1 |
| 2 | abrdn National Municipal Income Fund |
| 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 Director and legal fees) and assumes the reinvestment of all distributions. |
| 2 | Net asset value – measures the total value of the Fund’s assets less liabilities, divided by the number of shares issued and outstanding. |
| 3 | The Bloomberg Municipal Bond Index tracks the performance of investment-grade, tax-exempt bonds with a maturity of at least one year. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
| 4 | Source: U.S. Federal Reserve |
| 5 | Source: U.S. Federal Reserve (data as of September 30, 2024) |
| 6 | Source: Trading Economics (data as of September 30, 2024) |
| 7 | Source: Trading Economics (data as of September 30, 2024) |
| 8 | Leverage – usually refers to a fund being exposed by more than 100% of its net asset value to assets or markets; typically resulting from the use of debt or derivatives. |
| 9 | Source: Bloomberg (data as of September 30, 2024) |
| 10 | Coupon – The interest rate stated on a bond when it’s issued. Typically, coupons are paid semi-annually. |
| 11 | Volatility – If the price of a fund moves significantly over a short period of time it is said to be 'volatile' or has 'high volatility'. If the price remains relatively stable, it is said to have 'low volatility'. Volatility can be used as a measure of risk. |
| 12 | Yield – The profit investors generate after holding a security or an asset. |
| abrdn National Municipal Income Fund | 3 |
| 13 | S&P Global Ratings, Fitch Ratings and Moody’s Investors Service are independent, unaffiliated research companies that rate fixed income securities on the basis of risk and the borrower’s ability to make interest payments. S&P and Fitch assign ratings ranging from AAA (reliable and stable) to D (high risk) to communicate the agency’s opinion of relative level of credit risk. |
| 14 | Tailwinds – A condition that could support growth, revenue or profits. |
| 15 | Source: LSEG Lipper (data as of 30 September 2024) |
| 16 | Source: Bank of America Global Research (data as of 30 September 2024) |
| 17 | Duration – an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
| 18 | S&P Global Ratings’ credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Typically, ratings are expressed as letter grades that range, for example, from AAA to D to communicate the agency’s opinion of relative level of credit risk. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. |
| 4 | abrdn National Municipal Income Fund |
| abrdn National Municipal Income Fund | 5 |
| 1 Year | 3 Years | 5 Years | 10 Years | |
| Net Asset Value (NAV) | 26.04% | -2.00% | 0.88% | 3.25% |
| Market Price | 36.06% | -2.90% | 1.01% | 3.62% |
| Bloomberg Municipal Bond Index | 10.37% | 0.09% | 1.39% | 2.52% |
| 6 | abrdn National Municipal Income Fund |
| Credit Rating | As a percentage of total investments |
| AAA | 4.2% |
| AA | 41.2% |
| A | 18.2% |
| BBB | 19.7% |
| BB | 2.9% |
| B | 0.2% |
| Below B | 0.6% |
| Non-Rated | 13.0% |
| 100.0% |
| (1) | Generally, the credit ratings range from AAA (highest) to D (lowest). Where bonds held in the Fund are rated by multiple rating agencies (Moody’s, Fitch and S&P), the Higher of the ratings is used. This may not be consistent with data from the benchmark provider. Quality distribution represents ratings of the underlying securities held within the Fund, and not ratings of the Fund itself. |
| Sector Exposure(2) | As a percentage of total investments |
| Hospital | 14.8% |
| Airport | 10.3% |
| Higher Education | 5.8% |
| Charter School | 5.5% |
| Local Authorities | 5.2% |
| Appropriations | 5.1% |
| Nuclear Power | 4.7% |
| Tobacco Master Securities | 4.5% |
| Others | 44.1% |
| 100.0% |
| (2) | Top 8 sectors are broken out. All remaining sectors grouped into Others. |
| abrdn National Municipal Income Fund | 7 |
| States | As a percentage of net assets |
| New York | 26.7% |
| California | 19.7% |
| Texas | 15.4% |
| Illinois | 9.9% |
| Florida | 8.6% |
| Puerto Rico | 8.4% |
| Georgia | 7.6% |
| Pennsylvania | 7.5% |
| Colorado | 6.1% |
| Alabama | 5.7% |
| Minnesota | 4.7% |
| Wisconsin | 4.4% |
| New Hampshire | 4.4% |
| Washington | 4.1% |
| District of Columbia | 3.9% |
| Arizona | 3.7% |
| Idaho | 3.0% |
| Massachusetts | 2.7% |
| Ohio | 2.5% |
| Tennessee | 2.2% |
| Louisiana | 2.1% |
| Other, less than 2% each | 11.4% |
| Short-Term Investment | – |
| Liabilities in Excess of Other Assets | (64.7%) |
| 100.0% |
| Top Ten Holdings | As a percentage of net assets |
| Hillsborough County Industrial Development Authority, Series A 08/01/2055 | 3.7% |
| GDB Debt Recovery Authority of Puerto Rico 08/20/2040 | 3.7% |
| New York Liberty Development Corp., (BAM), Series A 11/15/2046 | 3.6% |
| Metropolitan Washington Airports Authority Aviation Revenue, Series A 10/01/2049 | 3.4% |
| Municipal Electric Authority of Georgia, (BAM), Series A 01/01/2056 | 3.4% |
| State of New York Mortgage Agency Homeowner Mortgage Revenue, (SONYMA), Series 261 10/01/2054 | 3.4% |
| Irvine Facilities Financing Authority, Series A 05/01/2053 | 3.3% |
| Golden State Tobacco Securitization Corp., Series B-2 06/01/2066 | 3.2% |
| Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue, Series A-1 07/01/2051 | 3.2% |
| Illinois Finance Authority, Series A 08/15/2051 | 3.1% |
| 8 | abrdn National Municipal Income Fund |
| abrdn National Municipal Income Fund | 9 |
| 10 | abrdn National Municipal Income Fund |
| abrdn National Municipal Income Fund | 11 |
| 12 | abrdn National Municipal Income Fund |
| Assets | |
| Investments, at value (cost $242,502,331) | $ 249,202,722 |
| Short-term investment, at value (cost $1) | 1 |
| Cash | 6,739 |
| Interest and dividends receivable | 2,900,227 |
| Prepaid expenses in connection with preferred shares (Note 6) | 40,489 |
| Prepaid expenses | 7,074 |
| Total assets | 252,157,252 |
| Liabilities | |
| Liquidation value of preferred shares | 99,000,000 |
| Payable for investments purchased | 1,646,451 |
| Trustee fees payable | 45,625 |
| Investment management fees payable (Note 3) | 40,769 |
| Investor relations fees payable (Note 3) | 18,646 |
| Administration fees payable (Note 3) | 16,380 |
| Other accrued expenses | 47,124 |
| Total liabilities | 100,814,995 |
| Net Assets | $151,342,257 |
| Composition of Net Assets | |
| Common stock (par value $0.001 per share) (Note 5) | $ 12,278 |
| Paid-in capital in excess of par | 180,134,984 |
| Accumulated loss | (28,805,005) |
| Net Assets | $151,342,257 |
| Net asset value per share based on 12,278,003 shares issued and outstanding | $12.33 |
| abrdn National Municipal Income Fund | 13 |
| Net Investment Income | |
| Investment Income: | |
| Interest and amortization of discount and premium and other income | $ 12,023,934 |
| Total investment income | 12,023,934 |
| Expenses: | |
| Investment management fee (Note 3) | 972,206 |
| Administration fee (Note 3) | 194,441 |
| Trustees' fees and expenses | 171,365 |
| Legal fees and expenses | 159,479 |
| Independent auditors’ fees and tax expenses | 103,683 |
| Investor relations fees and expenses (Note 3) | 59,609 |
| Insurance expense | 33,783 |
| Transfer agent’s fees and expenses | 21,149 |
| Reports to shareholders and proxy solicitation | 17,641 |
| Custodian’s fees and expenses | 1,978 |
| Miscellaneous | 27,897 |
| Total operating expenses, excluding dividend expense | 1,763,231 |
| Dividend and related expenses on preferred shares (Note 6) | 4,553,059 |
| Total operating expenses before reimbursed/waived expenses | 6,316,290 |
| Expenses waived (Note 3) | (181,437) |
| Net expenses | 6,134,853 |
| Net Investment Income | 5,889,081 |
| Net Realized/Unrealized Gain/(Loss): | |
| Net realized gain/(loss) from: | |
| Investments | (3,971,465) |
| (3,971,465) | |
| Net change in unrealized appreciation/depreciation on: | |
| Investments | 29,369,060 |
| 29,369,060 | |
| Net realized and unrealized gain from investments | 25,397,595 |
| Change in Net Assets Resulting from Operations | $31,286,676 |
| 14 | abrdn National Municipal Income Fund |
| For the Year Ended September 30, 2024 | For the Period From April 1, 2023 to September 30, 2023 | For the Year Ended March 31, 2023(a) | |
| Increase/(Decrease) in Net Assets: | |||
| Operations: | |||
| Net investment income | $5,889,081 | $2,958,343 | $8,659,677 |
| Net realized loss from investments | (3,971,465) | (4,724,472) | (24,543,349) |
| Net change in unrealized appreciation/depreciation on investments | 29,369,060 | (14,222,498) | (10,657,292) |
| Net increase/(decrease) in net assets resulting from operations | 31,286,676 | (15,988,627) | (26,540,964) |
| Distributions to Shareholders From: | |||
| Distributable earnings | (5,954,833) | (2,701,161) | (8,622,394) |
| Return of capital | – | – | (1,132,057) |
| Net decrease in net assets from distributions | (5,954,833) | (2,701,161) | (9,754,451) |
| Cost of Shares Redeemed | – | – | (103,710,362) |
| Change in net assets | 25,331,843 | (18,689,788) | (140,005,777) |
| Net Assets: | |||
| Beginning of year | 126,010,414 | 144,700,202 | 284,705,979 |
| End of year | $151,342,257 | $126,010,414 | $144,700,202 |
| (a) | Audited by a different independent registered public accounting firm. |
| abrdn National Municipal Income Fund | 15 |
| Cash flows from operating activities: | |
| Net increase/(decrease) in net assets resulting from operations | $ 31,286,676 |
| Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: | |
| Investments purchased | (183,713,606) |
| Investments sold and principal repayments | 184,868,076 |
| Net change in short-term investments, excluding foreign government | (1) |
| Net amortization/accretion of premium/(discount) | (931,019) |
| Decrease in interest, dividends and other receivables | 66,361 |
| (Increase) decrease in due from Investment Manager | 248,995 |
| Increase in prepaid expenses | (37,383) |
| Increase in accrued investment management fees payable | 40,769 |
| Decrease in other accrued expenses | (181,168) |
| Net change in unrealized appreciation of investments | (29,369,060) |
| Net realized loss on investments transactions | 3,971,465 |
| Net cash provided by operating activities | 6,250,105 |
| Cash flows from financing activities: | |
| Decrease in payable to custodian | $ (288,533) |
| Distributions paid to shareholders | (5,954,833) |
| Net cash used in financing activities | (6,243,366) |
| Net change in cash | 6,739 |
| Unrestricted and restricted cash and foreign currency, beginning of year | – |
| Unrestricted and restricted cash and foreign currency, end of year | $6,739 |
| Supplemental disclosure of cash flow information: | |
| Cash paid for dividend and related expenses on preferred shares | $4,553,059 |
| 16 | abrdn National Municipal Income Fund |
| For the Year Ended September 30, | For the Period From April 1, 2023 to September 30, | For the Fiscal Years Ended March 31, | ||||
| 2024 | 2023 (a) | 2023 (b) | 2022 (b) | 2021 (b) | 2020 (b) | |
| PER SHARE OPERATING PERFORMANCE: | ||||||
| Net asset value per common share, beginning of year | $10.26 | $11.79 | $13.59 | $14.84 | $13.71 | $14.44 |
| Net investment income(c)(d) | 0.48 | 0.24 | 0.47 | 0.51 | 0.58 | 0.54 |
| Net realized and unrealized gains/(losses) on investments | 2.08 | (1.55) | (1.73) | (1.12) | 1.12 | (0.57) |
| Total from investment operations applicable to common shareholders | 2.56 | (1.31) | (1.26) | (0.61) | 1.70 | (0.03) |
| Distributions to common shareholders from: | ||||||
| Net investment income | (0.49) | (0.22) | (0.48) | (0.54) | (0.51) | (0.55) |
| Net realized gains | – | – | – | (0.10) | (0.06) | (0.15) |
| Return of capital | – | – | (0.06) | – | – | – |
| Total distributions | (0.49) | (0.22) | (0.54) | (0.64) | (0.57) | (0.70) |
| Net asset value per common share, end of year | $12.33 | $10.26 | $11.79 | $13.59 | $14.84 | $13.71 |
| Market price, end of year | $11.17 | $8.61 | $10.67 | $12.65 | $13.12 | $12.24 |
| Total Investment Return Based on(e): | ||||||
| Market price | 36.06% | (17.48%) | (11.51%) | 0.92% | 12.11% | 1.35% |
| Net asset value | 26.04% | (11.01%) | (9.25%) | (4.15%) | 13.20% | (0.24%) |
| Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data: | ||||||
| Net assets applicable to common shareholders, end of year (000 omitted) | $151,342 | $126,010 | $144,700 | $284,706 | $67,182 | $62,085 |
| Average net assets applicable to common shareholders (000 omitted)(f) | $144,052 | $141,600 | $– | $– | $– | $– |
| Net operating expenses, net of fee waivers | 4.26% | 4.11%(g) | 2.89% | 1.57% | 1.66% | 2.27% |
| Gross operating expenses, excluding fee waivers | 4.38% | 4.58%(g) | 2.89% | 1.57% | 1.66% | 2.27% |
| Net operating expenses, net of fee waivers, excluding dividend expense | 1.10% | 1.01%(g) | 1.39% | 1.04% | 1.02% | 1.11% |
| Net Investment income(h) | 4.09% | 4.17%(g) | 3.83% | 3.45% | 4.03% | 3.69% |
| Portfolio turnover | 72% | 65% | 94% | 75% | 19% | 33% |
| Total leverage (preferred stock) outstanding (000 omitted)(i) | $99,000 | $99,000 | $99,000 | $135,000 | $30,000 | $30,000 |
| Net asset coverage per share of preferred shares, end of period(i) | $252,871 | $227,283 | $246,162 | $310,893 | $323,942 | $306,949 See Accompanying Notes to Financial Statements.
|
| abrdn National Municipal Income Fund | 17 |
| For the Year Ended September 30, | For the Period From April 1, 2023 to September 30, | For the Fiscal Years Ended March 31, | ||||
| 2024 | 2023 (a) | 2023 (b) | 2022 (b) | 2021 (b) | 2020 (b) | |
| Liquidation value per share of preferred shares(i) | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 |
| (a) | Effective as of the close of business on July 7, 2023, abrdn assumed responsibility for the management of the Fund from Delaware Management Company, a series of Macquarie Investment Management Business Trust. |
| (b) | Beginning with the period 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) | Net investment income is reduced by dividends paid to preferred shareholders from net investment income of $0.37, $0.18, $0.28, $0.08, $0.08, $0.17, and $0.18 per share for the fiscal year ended September 30, 2024, period ended September 30, 2023 and for the years ended March 31, 2023, 2022, 2021, 2020, and 2019, respectively. |
| (d) | Based on average shares outstanding. |
| (e) | 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. |
| (f) | Average net assets applicable to common shareholders were not shown for the fiscal years ended March 31, 2023, 2022, 2021, 2020, and 2019. |
| (g) | Annualized. |
| (h) | The ratio of net investment income excluding dividend expense to average net assets for the fiscal year ended September 30, 2024 was 7.12%. The annualized ratio of net investment income excluding dividend expense to average net assets for the period ended September 30, 2023 was 6.80%. The ratio of net investment income excluding dividend expense to average net assets for the years ended March 31, 2023, 2022, 2021, 2020, and 2019 were 5.33%, 3.98%, 4.67%, 4.84%, and 5.45%, respectively. |
| (i) | In March 2012, the Fund issued a series of 300 variable rate preferred shares, with a liquidation preference of $100,000 per share (Series 2017 Shares). The Series 2017 Shares were redeemed on February 2, 2016 and replaced with Series 2021 Shares, which were the same amount and value as the Fund’s Series 2017 Shares. On April 25, 2019, the Fund redeemed the Series 2021 Shares, and replaced them with Series 2049 Muni-MultiMode Preferred Shares (Series 2049), which have the same amount and value as the Series 2021 Shares. When the Fund acquired Delaware Investments Colorado Municipal Income Fund, Inc. and Delaware Investments Minnesota Municipal Income Fund II, Inc. on February 11, 2022, it also acquired the Series 2049 preferred shares used as leverage by those funds, which are reflected in the value of preferred shares outstanding in the table above. 36,000,000 were redeemed to fund the tender offer on December 16, 2022. |
| 18 | abrdn National Municipal Income Fund |
| abrdn National Municipal Income Fund | 19 |
| Security Type | Standard Inputs |
| Debt and other fixed-income securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, credit quality, yield, and maturity. |
| Investments, at Value | Level 1 – Quoted Prices | Level 2 – Other Significant Observable Inputs | Level 3 – Significant Unobservable Inputs | Total |
| Assets | ||||
| Investments in Securities | ||||
| Municipal Bonds | $– | $249,202,722 | $– | $249,202,722 |
| Short-Term Investment | 1 | – | – | 1 |
| Total Investments | $1 | $249,202,722 | $– | $249,202,723 |
| Total Investment Assets | $1 | $249,202,722 | $– | $249,202,723 |
| 20 | abrdn National Municipal Income Fund |
| abrdn National Municipal Income Fund | 21 |
| 22 | abrdn National Municipal Income Fund |
| abrdn National Municipal Income Fund | 23 |
| Tax Cost of Securities | Unrealized Appreciation | Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) |
| $242,153,024 | $10,223,968 | $(3,174,269) | $7,049,699 |
| 24 | abrdn National Municipal Income Fund |
| September 30, 2024 | September 30, 2023 | March 31, 2023 | |
| Distributions paid from: | |||
| Ordinary Income | $- | $- | $53,547 |
| Tax Exempt Distributions | 5,954,833 | 2,701,161 | 8,568,847 |
| Return of Capital | - | - | 1,132,057 |
| Total tax character of distributions | $5,954,833 | $2,701,161 | $9,754,451 |
| Undistributed Ordinary Income | $- |
| Undistributed Long-Term Capital Gains | - |
| Total undistributed earnings | $- |
| Accumulated Capital and Other Losses | $- |
| Capital loss carryforward | $(35,699,649)* |
| Other currency gains | - |
| Other Temporary Differences | (155,053) |
| Unrealized Appreciation/(Depreciation) | 7,049,697** |
| Total accumulated earnings/(losses) – net | $(28,805,005) |
| * | On September 30, 2024, the Fund had a net capital loss carryforward of $(35,699,649) which will be available to offset like amounts of any future taxable gains. .. The Fund is permitted to carry forward capital losses for an unlimited period, and capital losses that are carried forward will retain their character as either short-term or long-term capital losses. The breakdown of capital loss carryforwards are as follows: |
| Amounts | Expires |
| $18,920,528 | Unlimited (Short—Term) |
| 16,779,121 | Unlimited (Long—Term) |
| abrdn National Municipal Income Fund | 25 |
| 26 | abrdn National Municipal Income Fund |
| abrdn National Municipal Income Fund | 27 |
| Votes For | Votes Against/ Withheld | |
| Christian Pittard (common & preferred) | 9,823,801 | 346,551 |
| Todd Reit (common & preferred) | 9,843,574 | 326,778 |
| Nancy Yao (preferred only) | 990 | - |
| C. William Maher (preferred only) | 990 | - |
| 28 | abrdn National Municipal Income Fund |
| abrdn National Municipal Income Fund | 29 |
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| abrdn National Municipal Income Fund | 39 |
| 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 | Trustee and Vice President | Since 2023 | 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 | |||||
| C. William Maher co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1961 | Preferred Share 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; 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. |
| 40 | abrdn National Municipal Income 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 | Number of Registered Investment Companies ("Registrants") consisting of Investment Portfolios ("Portfolios") in Fund Complex* Overseen by Board Members | Other Directorships Held by Board Member** |
| Nancy Yao co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1972 | Preferred Share Trustee | Since 2023 | Ms. Yao is an assistant professor adjunct and assistant dean at the David Geffen School of Drama at Yale University where she teachings financial accounting and governance to graduate students. Ms. Yao has over 25 years of Asia, finance, and governance experience in for profit and non-profit places like Goldman Sachs, Yale-China Association, and CFRA. She is a board member of the National Committee on U.S.-China Relations and a member of the Council on Foreign Relations. She received her MBA from the Yale School of Management and her AB in Diplomacy and World Affairs at Occidental College. | 8 Registrants consisting of 8 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 National Municipal Income Fund | 41 |
| 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 |
| Joseph Andolina** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1978 | Chief Compliance Officer; Vice President | 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. |
| Sharon Ferrari** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1977 | Vice President; 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. |
| Katie Gebauer** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1986 | Vice President | Since 2023 | Currently, Chief Compliance Officer—ETFs and serves as the Chief Compliance Officer for abrdn ETFs Advisors LLC. Ms. Gebauer joined abrdn Inc. in 2014. |
| Alan Goodson** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1974 | President | President Since 2024; Fund Officer 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. |
| Heather Hasson** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1982 | Vice President | Since 2023 | Currently, Senior Product Solutions and Implementation Manager, Product Governance US for abrdn Inc. Ms. Hasson joined the company in November 2006. |
| Robert Hepp** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1986 | Vice President | Since 2023 | Currently, Senior Product Governance Manager – US for abrdn Inc. Mr. Hepp joined abrdn Inc. as a Senior Paralegal in 2016. |
| Megan Kennedy** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1974 | Vice President, Secretary | Since 2023 | Currently, Senior Director, Product Governance for abrdn Inc. Ms. Kennedy joined abrdn Inc. in 2005. |
| Andrew Kim** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1983 | Vice President | Since 2023 | Currently, Senior Product Governance Manager – US for abrdn Inc. Mr. Kim joined abrdn Inc. as a Product Manager in 2013. |
| Miguel Laranjeiro abrdn Inc. 875 Third Ave 4th Floor, Suite 403 New York, NY 10022 Year of Birth: 1983 | Vice President | Since 2023 | Currently, Investment Director, Municipals for abrdn. Mr. Laranjeiro joined abrdn in 2018. |
| 42 | abrdn National Municipal Income 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 |
| Michael Marsico** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1980 | Vice President | Since 2023 | Currently, Senior Product Manager – US for abrdn Inc. Mr. Marsico joined abrdn Inc. as a Fund Administrator in 2014. |
| Jonathan Mondillo** abrdn Inc. 875 Third Ave 4th Floor, Suite 403 New York, NY 10022 Year of Birth: 1983 | Vice President | Since 2023 | Currently, Head of U.S. Fixed Income. He joined the firm in 2018. Previously he managed mutual funds at Alpine Woods Capital Investors, LLC. |
| 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. |
| 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. |
| * | 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. |
| abrdn National Municipal Income Fund | 43 |
(b) Not applicable.
Item 2. Code of Ethics.
| (a) | As of September 30, 2024, abrdn National Municipal Income Fund (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”). |
| (b) | Definitional. |
| (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. |
| (e) | Not applicable |
| (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 | $ | 85,400 | $ | 0 | $ | 0 | $ | 0 | ||||||||
| Percentage approved pursuant to pre-approval exception5 | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
| September 30, 2023 | $ | 80,000 | $ | 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 Trustees 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 between the independent auditor and the Registrant, consistent with the 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. 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. 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. |
| (f) | Not applicable. |
| (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 | $ | 0 | $ | 0 | $ | 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.
| (h) | Not applicable. |
(i) Not applicable.
(j) Not applicable.
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:
C. Willam Maher
Nancy Yao
Todd Reit
| (b) | Not applicable. |
Item 6. Schedule of Investments.
(a) Included as part of the Report to Shareholders filed under Item 1 of this Form N-CSR.
(b) Not applicable.
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 (c) and policies of the Adviser are included as Exhibit (d).
Item 13. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) PORTFOLIO MANAGER BIOGRAPHIES
As of the date of filing this report, the individuals listed below have primary responsibility for the day-to-day management of their respective sleeves of the Fund’s portfolio.
| Individual & Position | Past Business Experience | Served on the Fund Since |
|
Miguel Laranjeiro Investment Director |
Miguel Laranjeiro is an Investment Director within the Municipals team at abrdn where he is responsible for asset allocation and investment managment decisions for the abrdn Ultra Short Municipal Income Fund, abrdn Short Duration High Yield Municipal Fund and abrdn Intermediate Municipal Income Fund at abrdn. Miguel experience includes municipal credit analysis in the high yield sector as well as high grade tax backed sectors. Miguel joined the company in 2018 from Alpine Woods Capital Investors where he was focused on credit analysis in the Public Finance sector for Alpine's two municipal funds, Alpine Ultra Short Municipal Income Fund (ATOIX) and Alpine High Yield Managed Duration Fund (AHYMX). Previously, Miguel worked for Thomson Reuters as an analyst focused primarily on Fundamentals Analysis in the Emerging Markets sectors. | 2023 |
|
Jonathan Mondillo Head of US Fixed Income |
Jonathan Mondillo is Head of US Fixed Income at abrdn. He is responsible for overseeing all public and private markets fixed income teams in the region, which include IG Credit, HY Credit, Municipals, and USPP. He is further responsible for five municipal bond and infrastructure debt funds that invest in both investment grade and high yield credits. Jonathan joined the firm in 2018 from Alpine Woods Capital Investors, LLC, when two mutual funds he managed were acquired by abrdn. Prior to that, Jonathan worked for Fidelity Capital Markets. Jonathan graduated with a B.S. in Finance from Bentley University. | 2023 |
(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) | ||||||||
| Jonathan Mondillo1 | Registered Investment Companies | 5 | $ | 1,137.82 | 0 | $ | 0 | ||||||
| Pooled Investment Vehicles | 1 | $ | 75.75 | 0 | $ | 0 | |||||||
| Other Accounts | 8 | $ | 1,930.82 | 0 | $ | 0 | |||||||
| Miguel Laranjeiro 1 | Registered Investment Companies | 5 | $ | 1,137.82 | 0 | $ | 0 | ||||||
| Pooled Investment Vehicles | 1 | $ | 75.75 | 0 | $ | 0 | |||||||
| Other Accounts | 8 | $ | 1,930.82 | 0 | $ | 0 | |||||||
1 Includes accounts managed by the US Municipals Team and US Investment Grade Fixed Income Team, of which the portfolio manager is a member.
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 | ||||
| Miguel Laranjeiro | None | |||
| Jonathan Mondillo | None |
(b) Not applicable.
Item 14. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
|
Period
|
(a) Total No. (1) |
(b) Average |
(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) | — | — | — | — |
| Month #2 (Nov. 1, 2023 – Nov. 30, 2023) | — | — | — | — |
| Month #3 (Dec. 1, 2023– Dec. 31, 2023) | — | — | — | — |
| Month #4 (Jan. 1, 2024 – Jan. 31, 2024) | — | — | — | — |
| Month #5 (Feb. 1, 2024 – Feb. 28, 2024) | — | — | — | — |
| Month #6 (Mar. 1, 2024 – Mar. 31, 2024) | — | — | — | — |
| Month #7 (Apr. 1, 2024 – Apr. 30, 2024) | — | — | — | — |
| Month #8 (May 1, 2024 – May 31, 2024) | — | — | — | — |
| Month #9 (June 1, 2024 – June 30, 2024) | — | — | — | — |
| Month #10 (Jul. 1, 2024 – Jul. 31, 2024) | — | — | — | — |
| Month #11 (Aug. 1, 2024 – Aug. 31, 2024) | — | — | — | — |
| Month #12 (Sep. 1, 2024– Sep. 30, 2024) | — | — | — | 1,227,800 |
| Total |
| (1) | On September 11, 2024, the Fund publicly announced that the Board of Trustees had approved an open market share repurchase program (the “Program”). Under the terms of the Program, the Fund is permitted to repurchase up to 10% of its outstanding shares of common stock in the open market during any 12 month period as of September 30 of the prior year. 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. |
Item 15. Submission of Matters to a Vote of Security Holders.
During the period 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.
| (a)(1) | Code of Ethics of the Registrant for the period covered by this report as required pursuant to Item 2 of this Form N-CSR. |
| (a)(2) | Any policy required by the listing standards adopted pursuant to Rule 10D-1 under the Exchange Act (17 CFR 240.10D-1) by the registered national securities exchange or registered national securities association upon which the registrant’s securities are listed. Not applicable. |
| (a)(3) | The certifications of the registrant as required by Rule 30a-2(a) under the Act are exhibits to this Form N-CSR. |
| (a)(4) | Any written solicitation to purchase securities under Rule 23c-1 under the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable. |
| (a)(5) | Change in Registrant’s independent public accountant. Not applicable. |
| (b) | The certifications of the registrant as required by Rule 30a-2(b) under the Act are exhibits to this Form N-CSR. |
| (c) | Proxy Voting Policy of Registrant |
| (d) | Proxy Voting Policies and Procedures of Adviser. |
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 National Municipal Income Fund
| By: | /s/ Alan Goodson | ||
| Alan Goodson, | |||
| Principal Executive Officer of | |||
| abrdn National Municipal Income Fund | |||
| 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 National Municipal Income Fund | |||
| Date: December 9, 2024 | |||
| By: | /s/ Sharon Ferrari | ||
| Sharon Ferrari, | |||
| Principal Financial Officer of | |||
| abrdn National Municipal Income Fund | |||
| 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. |
| III. | Definitions |
(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. |
| VI. | Sanctions |
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.
| VIII. | Amendments |
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.
| IX. | Confidentiality |
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.
| X. | Internal Use |
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
________________________________
Name (please print)
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 National Municipal Income Fund (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 National Municipal Income Fund (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 National Municipal Income Fund (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 National Municipal Income Fund
| /s/ Alan Goodson | |
| Alan Goodson | |
| Date: December 9, 2024 |
PRINCIPAL FINANCIAL OFFICER
abrdn National Municipal Income Fund
| /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 99.13c
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:
| 1. | are written; |
| 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 99.13d
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 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. |
| · | Tax transparency. |
| · | 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, legal or tax advice for any particular investor. No warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader, any person or group of persons acting on any information, opinion or estimate contained in this document. abrdn reserves the right to make changes and corrections to any information in this document at any time, without notice. This material is not to be reproduced in whole or in part without the prior written consent of abrdn.
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.
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