If Common Shares or Preferred Shares are sold to or through underwriters, a prospectus or prospectus supplement will set forth any applicable sales load and the estimated offering expenses borne by the Fund. Offering expenses payable by the Fund will be deducted from the proceeds, before expenses, to the Fund. Shareholders who participate in the Fund's Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”) may be subject to fees on certain transactions. The Plan Agent's (as defined under "Dividend Reinvestment and Optional Cash Purchase Plan" in the Fund’s Prospectus) fees for the handling of the reinvestment of dividends will be paid by the Fund; however, participating shareholders will pay a $0.02 per share fee incurred in connection with open-market purchases in connection with the reinvestment of dividends, capital gains distributions and voluntary cash payments made by the participant, which will be deducted from the value of the dividend. For optional share purchases, shareholders will also be charged a $2.50 fee for automatic debits from a checking/savings account, a $5.00 one-time fee for online bank debit and/or $5.00 for check. Shareholders will be subject to $0.12 per share fee and either a $10.00 fee (for batch orders) or $25.00 fee (for market orders) for sales of shares held in a dividend reinvestment account. Per share fees include any applicable brokerage commissions the Plan agent is required to pay. For more details about the Plan, see "Dividend Reinvestment and Optional Cash Purchase Plan" in the Fund’s Prospectus. The Adviser receives a monthly fee at an annual rate of 1.25% of the Fund’s average daily Managed Assets. The advisory fee percentage calculation assumes the use of leverage by the Fund as discussed in note (5) and (6). To derive the annual advisory fee as a percentage of the Fund’s net assets (which are the Fund’s total assets less all of the Fund’s liabilities including the liquidation preference on the Preferred Shares), the Fund’s average Managed Assets for the current fiscal year ended October 31, 2024 were multiplied by the annual advisory fee rate and then divided by the Fund’s average net assets for the same period. The percentage in the table is based on total borrowings of $240,000,000 (the balance outstanding under the Fund’s Credit Facility as of October 31, 2024, representing approximately 21.8% of the Fund’s Managed Assets) and an average interest rate during the fiscal year ended October 31, 2024 of 6.83%. There can be no assurances that the Fund will be able to obtain such level of borrowing (or to maintain its current level of borrowing), that the terms under which the Fund borrows will not change, or that the Fund’s use of leverage will be profitable. The Fund currently intends during the next twelve months to maintain a similar proportionate amount of borrowings but may increase such amount to 33 1/3% of the average daily value of the Fund’s total assets. Based on 1,600,000 shares of Preferred Shares outstanding as of October 31, 2024 with an aggregate liquidation preference of $40 million and an annual dividend rate equal to 5.250% of such liquidation preference. The costs associated with the Preferred Shares are borne entirely by Common Shareholders. The Adviser contractually agreed to limit total "Other Expenses" of the Fund (excluding any interest, taxes, brokerage fees, short sale dividend and interest expenses and non-routine expenses) as a percentage of net assets attributable to common shares of the Fund to 0.25% per annum of the Fund's average daily net assets until September 20, 2025. The Fund may repay any such reimbursement from the Adviser, within three years of the reimbursement, provided that the following requirements are met: the reimbursements do not cause the Fund to exceed the lesser of the applicable expense limitation in the contract at the time the fees were limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by the Adviser. Because interest expenses and investment related expenses are not subject to the reimbursement agreement, interest expenses and investment related expenses are included in the “Total annual expenses after expense reimbursement” line item. The examples above should not be considered representations of future expenses. Actual expenses may be higher or lower than those shown. The examples assume that all dividends and distributions are reinvested at net asset value. The Fund’s actual rate of return may be greater or less than the hypothetical 5% return shown in the examples. For more complete descriptions of certain of the Fund’s costs and expenses, see “Management of the Fund - Advisory Agreements” in the Fund’s Prospectus. The asset coverage ratio for the Revolving Credit Facility is calculated by dividing net assets plus the amount of any borrowings, including Series A Perpetual Preferred Shares, for investment purposes by the amount of any senior securities, which includes the Revolving Credit Facility, and then multiplying by $1,000. The asset coverage ratio for the Fund's total leverage is calculated by dividing net assets plus the amount of any borrowings for investment purposes by the amount of any borrowings, and then multiplying by $1,000. 0001503290falseSource: Bloomberg L.P. 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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: 811-22485
   
Exact name of registrant as specified in charter: abrdn Income Credit Strategies 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: October 31
   
Date of reporting period: October 31, 2024

 

 

 

 

 

 

Item 1. Reports to Stockholders.

 

  (a)  

 

 

 

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abrdn Income Credit Strategies Fund (ACP)
Annual Report
October 31, 2024
abrdn.com

 

 

Letter to Shareholders  (unaudited) 

Dear Shareholder,
We present the Annual Report, which covers the activities of abrdn Income Credit Strategies Fund ("ACP" or the “Fund”), for the fiscal year ended October 31, 2024. The Fund's primary investment objective is to seek a high level of current income, with a secondary objective of capital appreciation.
On July 22, 2024 the Fund announced that it had successfully completed the reorganization of First Trust High Income Long/Short Fund ("FSD") into ACP after the close of regular business on July 19, 2024 (the "FSD Reorganization"). In the FSD Reorganization, common shareholders of FSD received an amount of ACP common shares with a net asset value equal to the aggregate net asset value of their holdings of FSD common shares, as determined at the close of regular business on July 19, 2024. Any applicable fractional shares were paid as cash-in-lieu to the applicable holder.
On September 23, 2024 the Fund announced that it had successfully completed the reorganization of First Trust/abrdn Global Opportunity Income Fund ("FAM") into ACP after the close of regular business on September 20, 2024 (the "FAM Reorganization"). In the FAM Reorganization, common shareholders of FAM received an amount of ACP common shares with a net asset value equal to the aggregate net asset value of their holdings of FAM common shares, as determined at the close of regular business on September 20, 2024. Any applicable fractional shares were paid as cash-in-lieu to the applicable holder.
Both Reorganizations were structured as a tax-free transaction. Please see the Notes to Financial Statements for further information.
Total Investment Return1
For the fiscal year ended October 31, 2024, the total return to shareholders of the Fund based on the net asset value (“NAV”) and market price of the Fund, respectively, compared to the Fund’s benchmark, is as follows:
NAV2,3 19.89%
Market Price2 34.41%
ICE BofAML Global High Yield Constrained (Hedged USD) Index4 16.79%
For more information about Fund performance, please visit the Fund on the web at www.abrdnacp.com. Here, you can view quarterly commentary on the Fund's performance, monthly fact sheets, distribution and performance information, and other Fund literature.
NAV, Market Price and Premium(+)/Discount(-)
The below table represents a comparison between the current fiscal year end and the prior fiscal year end of the Fund's market price to NAV and associated Premium(+) and Discount(-).
       
  NAV Closing
Market
Price
Premium(+)/
Discount(-)
10/31/2024 $6.53 $6.49 -0.61%
10/31/2023 $6.52 $5.78 -11.35%
During the fiscal year ended October 31, 2024, the Fund’s NAV was within a range of $6.51 to $7.13 and the Fund’s market price traded within a range of $5.89 to $7.04. During the fiscal year ended October 31, 2024, the Fund’s shares traded within a range of a premium(+)/discount(-) of -9.52% to 3.71%.
Series A Perpetual Preferred Shares
As of October 31, 2024, the Fund's 5.25% Series A Perpetual Preferred Shares with a liquidation value of $40 million, are rated A2 by Moody's Investors Service. The Preferred Shares are listed on the New York Stock Exchange ("NYSE") under the ticker symbol "ACP PRA." A more detailed description of the Fund's Preferred Shares can be found in the Notes to Financial Statements.
Distribution Policy
Distributions to common shareholders for the fiscal year ended October 31, 2024 totaled $1.20 per share. Based on the market price of $6.49 on October 31, 2024, the distribution rate over the fiscal year ended October 31, 2024 was 18.49%. Based on the NAV of $6.53 on October 31, 2024, the distribution rate for the fiscal year ended October 31, 2024 was 18.38%. Since all distributions are paid after deducting applicable withholding taxes, the effective distribution rate may be higher for those U.S. investors who are able to claim a tax credit.
 
{foots1}
1 Past performance is no guarantee of future results. Investment returns and principal value will fluctuate and shares, when sold, may be worth more or less than original cost. Current performance may be lower or higher than the performance quoted. Net asset value return data includes investment management fees, custodial charges and administrative fees (such as Trustee and legal fees) and assumes the reinvestment of all distributions.
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2 Assuming the reinvestment of dividends and distributions.
{foots1}
3 The Fund’s total return is based on the reported NAV for each financial reporting period end and may differ from what is reported on the Financial Highlights due to financial statement rounding or adjustments.
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4 The ICE BofAML Global High Yield Constrained (Hedged USD) Index tracks the performance of U.S. dollar-, Canadian dollar-, British pound- and euro-denominated below-investment-grade corporate debt publicly issued in the major domestic or eurobond markets. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
abrdn Income Credit Strategies Fund 1

 

Letter to Shareholders  (unaudited)  (continued)

On November 11, 2024 and December 10, 2024 the Fund announced that it will pay on November 29, 2024 and January 10, 2025, respectively, a distribution of U.S $0.10 U.S and $0.0775 per share, respectively, to all shareholders of record as of November 21, 2024 and December 30, 2024, respectively.
On December 10, 2024 the Fund announced that is has reduced its monthly distribution from U.S. $0.10 per share to U.S. $0.0775 per share, commencing with the distribution payable on January 10, 2025 to shareholders of record as of December 30, 2024. This represents a change in the annualized distribution rate from 18% to 14% based on NAV as of December 9, 2024. The Fund intends to maintain this distribution level for at least the next 12 months unless there is significant and unforeseen changes in market conditions.
The Fund's policy is to provide common shareholders with a stable monthly distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital, which is a non-taxable return of capital. This policy is subject to an annual review as well as regular review at the Board of Trustees' (the "Board") quarterly meetings, unless market conditions require an earlier evaluation.
Revolving Credit Facility
On July 22, 2024, the Fund's senior secured 364-day Revolving Credit Facility with BNP Paribas was amended to extend the scheduled commitment termination date to July 21, 2025 with a committed facility amount of $300,000,000. The Fund's outstanding balance as of October 31, 2024 was $240,000,000 on the Revolving Credit Facility. Under the terms of the loan facility and applicable regulations, the Fund is required to maintain certain asset coverage ratios for the amount of its outstanding borrowings. The Board regularly reviews the use of leverage by the Fund. A more detailed description of the Fund's Revolving Credit Facility can be found in the Notes to Financial Statements.
Unclaimed Share Accounts
Please be advised that abandoned or unclaimed property laws for certain states require financial organizations to transfer (escheat) unclaimed property (including Fund shares) to the state. Each state has its own definition of unclaimed property, and Fund shares could be considered “unclaimed property” due to account inactivity (e.g., no owner-generated activity for a certain period), returned mail (e.g., when mail sent to a shareholder  is returned to the Fund's transfer agent as undeliverable), or a combination of both. If your Fund shares are categorized as unclaimed, your financial advisor or the Fund's transfer agent will follow the applicable state’s statutory requirements to contact you, but if unsuccessful, laws may require that the shares be escheated to the appropriate state. If this happens, you will have to contact the state to recover your property, which may involve time and expense. For more information on unclaimed
property and how to maintain an active account, please contact your financial adviser or the Fund's transfer agent.
Open Market Repurchase Program
On June 12, 2018, the Board approved an open market share repurchase program (the “Program”). Under the terms of the Program, the Fund is permitted to repurchase, in the open market, up to 10% of its outstanding shares of common stock as of June 12, 2018. 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.
On a quarterly basis, the Fund's Board will receive information on any transactions made pursuant to this Program during the prior quarter.  If shares are repurchased, the Fund reports repurchase activity on the Fund's website on a monthly basis. For the fiscal year ended October 31, 2024, the Fund did not repurchase any shares through the Program.
Portfolio Holdings Disclosure
The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year are included in the Fund's semi-annual and annual reports to shareholders. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. These reports are available on the SEC’s website at http://www.sec.gov. The Fund makes the information available to shareholders upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465.
Proxy Voting
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by August 31 of the relevant year: (1) upon request without charge by calling Investor Relations toll-free at 1-800-522-5465; and (2) on the SEC’s website at http://www.sec.gov.
Investor Relations Information
As part of abrdn’s commitment to shareholders, we invite you to visit the Fund on the web at www.abrdnacp.com. Here, you can view monthly fact sheets, quarterly commentary, distribution and performance information, as well as other Fund literature. Enroll in abrdn's email services to receive content related to your fund. In addition, you will receive monthly factsheets based on your
 
2 abrdn Income Credit Strategies Fund

 

Letter to Shareholders  (unaudited)  (concluded)

preferences. Sign up today at https:// www.abrdn.com/en-us/cefinvestorcenter/contact-us/preferences.
Contact Us:
Visit: https://www.abrdn.com/en-us/cefinvestorcenter
Email: Investor.Relations@abrdn.com; or
Call: 1-800-522-5465 (toll free in the U.S.).
Yours sincerely,
/s/ Alan Goodson
Alan Goodson
President 
{foots1}
All amounts are U.S. Dollars unless otherwise stated.
abrdn Income Credit Strategies Fund 3

 

Report of the Investment Adviser  (unaudited) 

Market/Economic Review
The global high-yield bond market witnessed a strong performance over the fiscal year ended October 31, 2024, as evidenced by a total return of over 16% for the ICE BofAML Global High Yield Constrained Index1. While it was not a straight-line performance from start to finish, there was little in the way of true market turbulence that served as a disruption to the rally. In fact, there were only two months (April and October) where the asset class generated a negative total return. In each of those months, corporate credit spreads2 were tighter, with higher government bond yields3 serving as the lone detriment to generating additional months of positive total returns.
The Fund’s fiscal year started with two strong months to close out 2023, with the Fund providing a total return of over 7% in November and December. Investors acknowledged that recessionary fears had been overblown, with expectations for a ‘soft-landing’ becoming consensus. With inflation under control, the prospect of increasingly accommodative central banks amid a stable global economy increased the demand for risk assets such as high yield.
As government bond markets rallied, so did high yield assets, propelling overall yields lower and giving companies in need of capital an opportunity to refinance existing bonds in a facilitative market. Financial markets across the globe continued to shrug existing geopolitical concerns off, preferring to focus on corporate earnings that exceeded expectations, with a market backdrop that rewarded both stocks and bonds of companies that carried a higher risk profile. While the market ebullience of November and December eventually became more tempered, the result was a steady grind tighter for corporate credit spreads throughout the period, led by lower rated4 companies.
The European Central Bank started cutting rates in June 2024 and optimism for rate cuts increased in the U.S. Indeed, the U.S. Federal Reserve (Fed) lowered the target range for its fed funds rate by 50 basis points (bps) to 4.75-5.00% in September 2024 and by another
25 bps to 4.50-4.75% shortly after the end of the reporting period. This benefited lower-rated5 credits, with CCC-rated bonds outpacing their higher-quality cohorts throughout the entire period.
U.S. Treasuries sold off later in the review period after stronger-than-expected economic data along with increased speculation of a potentially inflationary Trump presidency. Despite spreads in the U.S. reaching a post global-financial-crisis low, it was not enough to offset the rates drag.
Performance Review
The abrdn Income Credit Strategies Fund returned 19.89% on a net asset value6 basis for the fiscal year ended October 31, 2024. This compared to a return of 16.79% for its performance target, the ICE BofAML Global High Yield Constrained Index (hedged to U.S. dollars). The Fund's unlevered NAV return was 14.03% for the fiscal year ended October 31, 2024, demonstrating that the decision to use leverage had a positive impact on the fund, adding 6.23% to Fund performance over that timeframe.
Strong credit selection in the U.S. aided performance as top performers such as wireline operator Frontier Communications, office supply distributor Staples, golf cart producer Club Car, and building products manufacturer Cornerstone each had an outsized contribution to total returns. Additionally, the Fund’s position in global copper producer First Quantum was additive to performance. Its bonds bounced back after selling off at the end of the prior fiscal year due to political unrest in Panama that resulted in a mine shutdown.
Also, European credits such as Kantar Global, the parent company of European cable provider United Group, and supermarket operator Bellis Topco served as positive contributors to the Fund’s performance, with both companies’ bonds performing strongly during the review period.
 
{foots1}
1The ICE BofAML Global High Yield Constrained Index is designed to represent the performance of eligible corporate debt issuers classified as below investment grade. These issuers are located in countries with a foreign currency long-term debt rating of investment-grade. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. Index performance is not an indication of the performance of the Fund itself. For complete fund performance, please visit abrdn.us.
{foots1}
2The difference in the expected total return (combining interest payments and changes in price) between corporate and government bonds with the same maturity but different levels of risk, reflecting the likelihood of repayment by the issuer.
{foots1}
3The income investors receive from holding a security or other asset.
{foots1}
4S&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. Moody’s credit ratings range from Aaa to C, with Aaa being the highest quality and C the lowest quality.
{foots1}
5Credit quality – 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.
{foots1}
6A key measure of the value of a company, fund or trust – the total value of assets less liabilities, divided by the number of shares.
4abrdn Income Credit Strategies Fund

 

Report of the Investment Adviser  (unaudited)  (continued)

Conversely, the Fund’s lack of exposure to deeply distressed credits such as Bausch Health and Lumen Technologies, both of which are U.S. companies that attempted market restructurings, negatively affected relative performance. During the review period, companies rated CC and lower were the top-performing bonds in the overall market, as investors went bargain hunting for low-dollar priced, highly leveraged capital structures.
Similarly, while the Fund’s overall credit selection was broadly positive, a handful of credits that performed poorly negatively affected the Fund. These laggards included French telecom company Altice France and glass packaging manufacturer Ardagh Packaging. 
In terms of activity, after a quiet period in the primary market in terms of new insurance during most of 2023, the past 12 months witnessed a return to normalized levels of issuance. Companies were eager to refinance existing debt at attractive all-in yields. We were active in the new issue market while remaining selective and limiting participation to deals where we saw a compelling case for fundamental improvement.
Conversely, we took profits during market strength in some of our lower-rated holdings, choosing to recycle proceeds into credits that had better potential. Over the course of the year, this resulted in the Fund’s exposure to CCC-rated credits coming down on the margin, while exposure to single B-rated credits increased. Concurrent with this, the Fund paid down leverage7 towards the latter part of the review period, preparing for a time of increased volatility.8
We also used currency forward9derivatives10 to remove the currency risk11 from the Fund’s return. During the review period, the Fund's performance was negatively impacted by about 1.2% due to the use currency forward derivatives, although this loss was mitigated by an equivalent gain from the non-dollar assets in dollar terms. Ultimately, currency derivatives are used purely for hedging12 purposes as we do not want to take currency views when managing the Fund.
The monthly distribution reflects the Fund’s current policy to provide shareholders with a relatively stable cash flow per share. This policy
did not have a material effect on the Fund’s investment strategy over the reporting period. During the fiscal ended October 31, 2024, the distributions were comprised of ordinary income and a return of capital.
Outlook
Shortly after the close of the reporting period, Donald Trump won the U.S. presidential election, with the Republican party sweeping Congress. Equity and credit markets continued to perform well, but U.S. Treasuries sold off with the yield curve13 steepening14 sharply. Nearly universally, all sectors have traded up and higher risk credits have outperformed. We expect the outlook for credit markets to be affected by, but not depend on, how the president-elect and the Republican party choose to prioritize the initiatives highlighted during the presidential campaign. A focus on tariffs and immigration could outweigh the positive impulses of lower taxes and deregulation. More importantly, however, would be the path that central banks take going forward as dictated by upcoming economic data, which remains the primary driver of market sentiment at this point.
In the near term, we expect markets to remain in the honeymoon phase, even though credit spreads are now through post-financial-crisis tights. We continue to look for discrete opportunities but are not afraid to invest when needed. With the complexity of the current geopolitical situation, we believe that volatility could return at some point, particularly given the lofty valuations across markets. However, patient investors, like us, can look to take advantage of these market dislocations to identify attractive investment opportunities.
Risk Considerations
Past performance is not an indication of future results. Foreign securities in which the Fund may invest may be more volatile, harder to price and less liquid than U.S. securities. They are subject to risks associated with less stringent accounting and regulatory standards, the impact of currency exchange rate fluctuation, political and economic instability, reduced information about issuers, higher transaction costs and delayed settlement.
 
{foots1}
7Usually 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.
{foots1}
8If the price of an asset, fund, or market moves significantly over a short period of time, it is said to be ‘volatile’ or to have ‘high volatility.’ If the price remains relatively stable, it is said to have ‘low volatility.’ Volatility can be used as a measure of risk, indicating the potential for large price fluctuations.
{foots1}
9An agreement between two parties to buy or sell a specific currency or asset at a predetermined price on a fixed date in the future.
{foots1}
10A financial contract whose value is based on an underlying asset.
{foots1}
11The risk of financial losses arising from fluctuations in exchange rates, which can affect the value of assets, liabilities, or transactions denominated in foreign currencies.
{foots1}
12To reduce risk by taking an offsetting position in a related asset.
{foots1}
13A graph that plots yields (the income investors receive from holding a bond) against different maturity dates for bonds of the same credit quality (which measures the likelihood of the lender receiving their money back).
{foots1}
14A situation where the spread between long-term and short-term bond yields widens, indicating that the former are rising relative to the latter. Bond yields represent the income investors receive from holding a bond, expressed as a percentage of the bond's price.
abrdn Income Credit Strategies Fund5

 

Report of the Investment Adviser  (unaudited)  (concluded)

Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the actual or perceived financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase) and issuer risk (the value of a security may decline for reasons related to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services.
The Fund’s investments in high-yield bonds (commonly referred to as “junk bonds”) and other lower-rated securities involved a greater risk
of default and will subject the Fund to substantial risk of loss. Investments in high-yield bonds are speculative and issuers of these securities are generally considered to be less financially secure and less able to repay interest and principal than issuers of investment-grade securities. Prices of high-yield bonds tend to be very volatile. These securities are less liquid than investment-grade debt securities and may be difficult to price or sell, particularly in times of negative sentiment toward high-yield securities.
abrdn Investments Limited 
 
6abrdn Income Credit Strategies Fund

 

Total Investment Return  (unaudited) 

The following table summarizes the average annual Fund performance compared to the Fund’s primary benchmark for the 1-year, 3-year, 5-year and 10-year periods ended October 31, 2024.
 1 Year3 Years5 Years10 Years
Net Asset Value (NAV)19.89%0.94%2.16%3.12%
Market Price34.41%-1.86%3.99%4.08%
ICE BofAML Global High Yield Constrained (Hedged USD) Index16.79%2.90%4.03%4.86%
Performance of a $10,000 Investment (as of October 31, 2024)
This graph shows the change in value of a hypothetical investment of $10,000 in the Fund for the periods indicated. For comparison, the same investment is shown in the indicated index.
tm2430769d1arpfei003.jpg
abrdn Investments Limited and abrdn Inc. assumed responsibility for the management of the Fund as investment adviser and sub adviser, respectively, on December 1, 2017. Performance prior to this date reflects the performance of an unaffiliated investment adviser. The performance above reflects fee waivers and/or expense reimbursements made by the Fund’s current and/or former investment adviser. Absent such waivers and/or reimbursements, the Fund’s returns would be lower. Additionally, abrdn Inc. entered into an agreement with the Fund to limit investor relations services fees. This agreement aligns with the term of the advisory agreement and may not be terminated prior to the end of the current term of the advisory agreement. See Note 3 in the Notes to Financial Statements.
Returns represent past performance. Total investment return at NAV is based on changes in the NAV of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. All return data at NAV includes fees charged to the Fund, which are listed in the Fund’s Statement of Operations under “Expenses.” Total investment return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. The Fund’s total investment return is based on the reported NAV as of the financial reporting period end date of October 31, 2024. Because the Fund’s shares trade in the stock market based on investor demand, the Fund may trade at a price higher or lower than its NAV. Therefore, returns are calculated based on both market price and NAV. Past performance is no guarantee of future results. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received from the Fund. The current performance of the Fund may be lower or higher than the figures shown. The Fund’s yield, return, market price and NAV will fluctuate. Performance information current to the most recent month-end is available at www.abrdnacp.com or by calling 800-522-5465.
The gross operating expense ratio excluding fee waivers based on the fiscal year ended October 31, 2024 was 4.44%. The net operating expense ratio net of fee waivers based on the fiscal year ended October 31, 2024 was 4.28%. The net operating expense ratio, net of fee waivers and excluding interest expense based on the fiscal year ended October 31, 2024, was 2.04%. 
abrdn Income Credit Strategies Fund7

 

Portfolio Composition  (as a percentage of net assets) (unaudited) 
As of October 31, 2024

Quality of Investments(1)(2)
As of October 31, 2024, 0.2% of the Fund’s investments were invested in securities where either the issue or the issuer was rated “A” or better by S&P Global Ratings ("S&P"), Moody's Investors Service, Inc. ("Moody's") or Fitch Ratings, Inc. ("Fitch") or, if unrated, was judged to be of equivalent quality by abrdn Investments Limited (the "Adviser"). The following table shows the ratings of securities held by the Fund as of October 31, 2024, compared with April 30, 2024 and October 31, 2023:
DateAAA/Aaa
%
A
%
BBB/Baa
%
BB/Ba
%
B
%
B or below
%
NR
%
October 31, 20240.10.10.213.259.623.33.5
April 30, 20240.00.00.216.958.421.23.3
October 31, 20230.01.00.018.753.923.82.6
Geographic Composition(2)
The following chart summarizes the composition of the Fund’s portfolio by geographic classification.
DateEurope
%
United States
%
United Kingdom
%
Other
%
October 31, 202433.430.523.812.3
April 30, 202427.434.422.016.2
October 31, 202340.735.214.29.9
Maturity Composition(2)
The average maturity of the Fund’s total investments was 4.9 years as of October 31, 2024, compared with 4.3 years as of April 30, 2024, and 5.0 years as of October 31, 2023. The following table shows the maturity composition of the Fund’s investments as of October 31, 2024, compared with April 30, 2024 and October 31, 2023:
Date0 to 5 Years
%
5 to 10 Years
%
10 Years & Over
%
October 31, 202483.712.53.8
April 30, 202484.512.23.3
October 31, 202358.637.63.8
Effective Duration
As of October 31, 2024, the effective duration* of the Fund was 2.6 years.
*Effective duration is a measure of how sensitive bond prices are to changes in interest rates, taking into account any call or put features in the bond.
(1)For financial reporting purposes, credit quality ratings shown above reflect the lowest rating assigned by either S&P, Moody’s or Fitch if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated NR are not rated by these rating agencies. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. The Investment Manager evaluates the credit quality of unrated investments based upon, but not limited to, credit ratings for similar investments.
(2)% reflected in below table do not reflect exposure to derivatives. 
8abrdn Income Credit Strategies Fund

 

Portfolio of Investments  
As of October 31, 2024

 Shares or
Principal
Amount
Value
CORPORATE BONDS—120.3% 
AUSTRIA—1.3%  
Benteler International AG   
9.38%, 05/15/2028(a)(b)EUR 3,000,000$     3,374,634
10.50%, 05/15/2028(a)(b)$6,819,000    7,049,436
Total Austria 10,424,070
BRAZIL—3.2%  
Banco do Brasil SA, VRN, (fixed rate to 04/15/2025, variable rate thereafter), 8.75%, 04/15/2025(a)(c)    440,000446,618
Braskem Netherlands Finance BV, 8.00%, 10/15/2034(a)(b)  4,164,0004,153,590
Guara Norte SARL, 5.20%, 06/15/2034(a)(d)    362,730343,690
Minerva Luxembourg SA   
4.38%, 03/18/2031(a)(b) 2,500,000    2,115,903
8.88%, 09/13/2033(a)(b) 10,002,000   10,502,490
Samarco Mineracao SA, 0.00% Cash or 9.00% PIK, 06/30/2031(a)(b)(e)  8,816,7598,372,813
Yinson Boronia Production BV, 8.95%, 07/31/2042(a)(b)(d)    316,000334,609
Total Brazil 26,269,713
CANADA—2.9%  
Bellatrix Exploration Ltd., 12.50%, 12/15/2023(b)(d)(f)(g)(h)    456,000
Enerflex Ltd., 9.00%, 10/15/2027(a)(b) 12,939,00013,431,355
Saturn Oil & Gas, Inc., 9.63%, 06/15/2029(a)(b)(d) 10,671,00010,537,985
Total Canada 23,969,340
CHINA—0.0%  
Kaisa Group Holdings Ltd., 9.38%, 06/30/2024(a)(b)(f) 3,609,000171,428
COLOMBIA—0.0%  
Ecopetrol SA, 8.88%, 01/13/2033(b) 410,000421,230
ECUADOR—0.1%  
International Airport Finance SA, 12.00%, 03/15/2033(a)(b)(d) 448,684478,552
FRANCE—6.5%  
Bertrand Franchise Finance SAS   
FRN, 6.96%, 07/18/2030(a)(b)(i)EUR1,812,0001,980,050
FRN, 6.96%, 07/18/2030(a)(b)(i) 2,400,0002,622,582
Cerba Healthcare SACA, 3.50%, 05/31/2028(a)(b) 10,000,0009,076,544
Iliad Holding SASU, 8.50%, 04/15/2031(a)(b)$5,011,0005,338,073
Laboratoire Eimer Selas, 5.00%, 02/01/2029(a)(b)EUR13,500,00012,759,763
Nova Alexandre III SAS   
FRN, 8.43%, 07/15/2029(a)(b)(i) 4,147,0004,420,681
FRN, 8.43%, 07/15/2029(a)(b)(i) 5,600,0005,969,571
Societe Generale SA, VRN, (fixed rate to 11/22/2027, variable rate thereafter), 9.38%, 11/22/2027(a)(c)$10,420,00010,897,861
Total France 53,065,125
 Shares or
Principal
Amount
Value
  
GEORGIA—0.1%  
Georgian Railway JSC, 4.00%, 06/17/2028(a)(b)$     345,000$ 303,360
TBC Bank JSC, VRN, (fixed rate to 07/30/2029, variable rate thereafter), 10.25%, 07/30/2029(a)(c)    294,000291,062
Total Georgia 594,422
GERMANY—9.6%  
ASK Chemicals Deutschland Holding GmbH, 10.00%, 11/15/2029(a)(b)EUR 6,635,0007,298,414
HT Troplast GmbH   
9.38%, 07/15/2028(a)(b) 7,884,000    8,861,395
9.38%, 07/15/2028(a)(b) 10,600,000   11,914,102
IHO Verwaltungs GmbH, 8.75%, 05/15/2028(a)(b)  3,000,0003,464,364
Motel One GmbH/Muenchen   
7.75%, 04/02/2031(a)(b) 1,725,000    1,991,531
7.75%, 04/02/2031(a)(b) 2,300,000    2,655,374
PrestigeBidCo GmbH, FRN, 6.93%, 07/01/2029(a)(b)(i)  7,156,0007,874,815
Standard Profil Automotive GmbH   
6.25%, 04/30/2026(a)(b) 3,500,000    2,791,384
6.25%, 04/30/2026(a)(b) 16,741,000   13,351,587
TK Elevator Holdco GmbH, 6.63%, 07/15/2028(a)(b) 17,212,50018,724,767
Total Germany 78,927,733
IRELAND—1.1%  
Cimpress PLC, 7.38%, 09/15/2032(a)(b)$8,831,0008,694,067
ITALY—1.8%  
Optics Bidco SpA, Series 2038, 7.72%, 06/04/2038(a)(b) 3,273,0003,471,931
Rossini SARL, FRN, 7.22%, 12/31/2029(a)(b)(i)EUR3,837,0004,197,904
Telecom Italia Capital SA, 7.72%, 06/04/2038$6,567,0006,835,117
Total Italy 14,504,952
JAMAICA—0.2%  
Digicel Intermediate Holdings Ltd./Digicel International Finance Ltd./Difl U.S., 0.00% Cash or 9.00% PIK, 05/25/2027(b)(e) 1,489,0441,496,475
JERSEY—1.4%  
Aston Martin Capital Holdings Ltd., 10.00%, 03/31/2029(a)(b) 11,740,00011,405,155
KAZAKHSTAN—0.1%  
KazMunayGas National Co. JSC, 5.75%, 04/19/2047(a) 806,000711,119
LUXEMBOURG—11.6%  
Albion Financing 2 SARL, 8.75%, 04/15/2027(a)(b) 11,735,00012,024,103
Altice Financing SA, 5.75%, 08/15/2029(a)(b) 2,875,0002,357,861
Cidron Aida Finco SARL   
6.25%, 04/01/2028(a)(b)GBP5,993,0007,447,164
6.25%, 04/01/2028(a)(b) 8,100,00010,065,414
Cullinan Holdco SCSp, 4.63%, 10/15/2026(a)(b)EUR4,732,0004,520,577
 
abrdn Income Credit Strategies Fund9

 

Portfolio of Investments   (continued)
As of October 31, 2024

 Shares or
Principal
Amount
Value
CORPORATE BONDS (continued) 
LUXEMBOURG (continued)  
HSE Finance SARL, 5.63%, 10/15/2026(a)(b)EUR  11,700,000$ 5,410,745
LHMC Finco 2 SARL   
7.250% Cash or 8.000% PIK, 10/02/2025(a)(b)(e) 155,010      168,615
7.250% Cash or 8.000% PIK, 10/02/2025(a)(b)(e) 5,201,647    5,658,205
Monitchem HoldCo 3 SA   
8.75%, 05/01/2028(a)(b) 9,260,000   10,202,601
8.75%, 05/01/2028(a)(b) 12,500,000   13,772,409
PLT VII Finance SARL   
FRN, 6.98%, 06/15/2031(a)(b)(i) 2,200,000    2,396,879
FRN, 6.98%, 06/15/2031(a)(b)(i) 3,000,000    3,268,471
Summer BC Holdco A SARL, 9.25%, 10/31/2027(a)(b) 16,128,84217,588,006
Total Luxembourg 94,881,050
MEXICO—1.1%  
Braskem Idesa SAPI, 6.99%, 02/20/2032(a)(b)$ 1,316,000977,329
Buffalo Energy Mexico Holdings/Buffalo Energy Infrastructure/Buffalo Energy, 7.88%, 02/15/2039(a)(b)(d)    843,000869,146
Cemex SAB de CV, VRN, (fixed rate to 03/14/2028, variable rate thereafter), 9.13%, 03/14/2028(a)(c)    225,000239,534
Petroleos Mexicanos   
3.75%, 11/16/2025(a)GBP3,192,0003,957,793
6.50%, 03/13/2027$2,250,0002,207,905
6.75%, 09/21/2047 875,000626,465
Unifin Financiera SAB de CV, 8.38%, 01/27/2028(a)(b)(f)(g) 3,000,00090,000
Total Mexico 8,968,172
NETHERLANDS—0.6%  
Ziggo Bond Co. BV   
5.13%, 02/28/2030(a)(b) 2,700,0002,443,788
5.13%, 02/28/2030(a)(b) 3,000,0002,714,608
Total Netherlands 5,158,396
NIGERIA—0.5%  
Access Bank PLC, 6.13%, 09/21/2026(a) 526,000499,842
BOI Finance BV, 7.50%, 02/16/2027(a)(j)EUR464,000482,266
IHS Netherlands Holdco BV, 8.00%, 09/18/2027(a)(b)$3,130,0003,126,905
Total Nigeria 4,109,013
OMAN—0.0%  
EDO Sukuk Ltd., 5.88%, 09/21/2033(a) 250,000259,617
PERU—0.0%  
Petroleos del Peru SA, 5.63%, 06/19/2047(a) 522,000341,509
SLOVENIA—2.5%  
Summer BidCo BV   
10.000% Cash or 10.750% PIK, 02/15/2029(a)(b)(e)EUR7,735,8148,860,858
10.000% Cash or 10.750% PIK, 02/15/2029(a)(b)(e) 10,400,00011,912,506
Total Slovenia 20,773,364
 Shares or
Principal
Amount
Value
  
SOUTH AFRICA—0.1%  
Eskom Holdings SOC Ltd.   
7.13%, 02/11/2025(a)$ 330,000$       329,967
8.45%, 08/10/2028(a) 200,000      208,916
Liquid Telecommunications Financing PLC, 5.50%, 09/04/2026(a)(b)    400,000288,080
Transnet SOC Ltd., 8.25%, 02/06/2028(a)    200,000203,280
Total South Africa 1,030,243
SPAIN—1.4%  
Grifols SA   
3.88%, 10/15/2028(a)(b)EUR10,300,000   10,176,321
4.75%, 10/15/2028(a)(b)$1,000,000      921,485
Total Spain 11,097,806
SWEDEN—1.0%  
Assemblin Caverion Group AB, FRN, 6.83%, 07/01/2031(a)(b)(i)EUR 4,722,0005,127,315
Intrum AB   
3.50%, 07/15/2026(a)(b) 2,300,000    1,851,350
9.25%, 03/15/2028(a)(b) 2,000,000    1,612,905
Total Sweden 8,591,570
SWITZERLAND—3.4%  
Consolidated Energy Finance SA   
5.63%, 10/15/2028(a)(b)$4,048,0003,298,836
12.00%, 02/15/2031(a)(b) 12,772,00012,456,509
Selecta Group BV   
8.00%, 04/01/2026(a)(b)EUR5,400,0005,831,998
9.250% Cash or 10.000% PIK, 07/01/2026(a)(b)(e) 6,124,3065,998,873
Total Switzerland 27,586,216
TANZANIA—0.1%  
HTA Group Ltd., 7.50%, 06/04/2029(a)(b)$446,000453,500
TRINIDAD—0.1%  
Heritage Petroleum Co. Ltd., 9.00%, 08/12/2029(a)(b) 632,000661,704
TURKEY—0.8%  
WE Soda Investments Holding PLC, 9.50%, 10/06/2028(a)(b) 5,742,0005,915,408
Yapi ve Kredi Bankasi AS, VRN, (fixed rate to 01/17/2029, variable rate thereafter), 9.25%, 01/17/2034(a)(b) 262,000275,559
Total Turkey 6,190,967
UKRAINE—0.0%  
Ukraine Railways Via Rail Capital Markets PLC, 8.25%, 07/09/2026(a)(f) 460,000393,875
UNITED KINGDOM—28.8%  
888 Acquisitions Ltd., 7.56%, 07/15/2027(a)(b)EUR16,650,00017,699,009
BCP V Modular Services Finance II PLC, 6.13%, 11/30/2028(a)(b)GBP6,100,0007,532,067
BCP V Modular Services Finance PLC, 6.75%, 11/30/2029(a)(b)EUR17,823,00016,818,193
Bellis Acquisition Co. PLC   
8.13%, 05/14/2030(a)(b)GBP2,900,0003,694,991
8.13%, 05/14/2030(a)(b) 5,900,0007,517,394
 
10abrdn Income Credit Strategies Fund

 

Portfolio of Investments   (continued)
As of October 31, 2024

 Shares or
Principal
Amount
Value
CORPORATE BONDS (continued) 
UNITED KINGDOM (continued)  
Bracken MidCo1 PLC, 6.750% Cash or 7.500% PIK, 11/01/2027(a)(b)(e)GBP  10,000,000$ 12,604,381
Connect Finco SARL/Connect U.S. Finco LLC, 9.00%, 09/15/2029(a)(b)$16,908,00016,060,033
Edge Finco PLC, 8.13%, 08/15/2031(a)(b)GBP 4,000,0005,210,671
eG Global Finance PLC, 11.00%, 11/30/2028(a)(b)EUR 7,800,0009,354,105
EnQuest PLC, 11.63%, 11/01/2027(a)(b)$23,350,00023,606,009
Galaxy Finco Ltd., 9.25%, 07/31/2027(a)(b)GBP16,200,00020,909,991
Iceland Bondco PLC, 10.88%, 12/15/2027(a)(b)  9,400,00012,996,034
INEOS Quattro Finance 2 PLC, 9.63%, 03/15/2029(a)(b)$ 3,519,0003,727,759
Intu Properties PLC, 11.00%, 12/04/2024(g)(h)GBP 4,765,1266,200,923
Motion Finco SARL, 7.38%, 06/15/2030(a)(b)EUR 8,200,0008,921,422
OEG Finance PLC, 7.25%, 09/27/2029(a)(b)  3,499,0003,901,188
Project Grand U.K. PLC, 9.00%, 06/01/2029(a)(b) 19,148,00021,578,051
Punch Finance PLC   
6.13%, 06/30/2026(a)(b)GBP2,740,000    3,501,827
6.13%, 06/30/2026(a)(b) 3,700,000    4,728,745
Sherwood Financing PLC, 6.00%, 11/15/2026(a)(b)  8,900,00011,084,776
Stonegate Pub Co. Financing PLC, FRN, 10.17%, 07/31/2029(a)(b)(i)EUR10,040,00011,357,849
Virgin Media Vendor Financing Notes III DAC, 4.88%, 07/15/2028(a)(b)GBP6,200,0007,454,960
Total United Kingdom 236,460,378
UNITED STATES—38.5%  
Adams Homes, Inc., 9.25%, 10/15/2028(a)(b)$5,683,0005,945,714
Affinity Interactive, 6.88%, 12/15/2027(a)(b) 23,894,00019,566,933
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc., 2.13%, 08/15/2026(a)(b)EUR10,000,0009,194,206
CD&R Smokey Buyer, Inc./Radio Systems Corp., 9.50%, 10/15/2029(a)(b)$8,222,0008,328,228
CHS/Community Health Systems, Inc.   
6.00%, 01/15/2029(a)(b) 985,000927,610
5.25%, 05/15/2030(a)(b) 12,110,00010,568,791
10.88%, 01/15/2032(a)(b) 10,106,00010,830,743
Citigroup, Inc., (fixed rate to 01/30/2025, variable rate thereafter), Series V, 4.70%, 01/30/2025(c) 3,935,0003,909,434
Cloud Software Group, Inc.   
6.50%, 03/31/2029(a)(b) 850,000830,079
9.00%, 09/30/2029(a)(b) 6,266,0006,265,431
8.25%, 06/30/2032(a)(b) 10,890,00011,193,261
Cornerstone Building Brands, Inc.   
6.13%, 01/15/2029(a)(b) 7,356,0006,574,590
9.50%, 08/15/2029(a)(b) 7,723,0007,950,504
 Shares or
Principal
Amount
Value
  
   
CSC Holdings LLC   
11.25%, 05/15/2028(a)(b)$  2,452,000$     2,390,746
6.50%, 02/01/2029(a)(b) 3,441,000    2,908,708
5.75%, 01/15/2030(a)(b) 5,407,000    2,848,167
4.13%, 12/01/2030(a)(b) 3,925,000    2,897,167
5.00%, 11/15/2031(a)(b) 862,000      421,298
Dcli Bidco LLC, 7.75%, 11/15/2029(a)(b)  8,060,0008,196,229
Encore Capital Group, Inc., 9.25%, 04/01/2029(a)(b)  3,760,0004,003,468
Fiesta Purchaser, Inc., 9.63%, 09/15/2032(a)(b) 14,972,00015,649,513
Helios Software Holdings, Inc./ION Corporate Solutions Finance SARL, 7.88%, 05/01/2029(a)(b)EUR 9,253,00010,183,213
ITT Holdings LLC, 6.50%, 08/01/2029(a)(b)$11,321,00010,461,656
MajorDrive Holdings IV LLC, 6.38%, 06/01/2029(a)(b) 13,573,00013,014,282
Moss Creek Resources Holdings, Inc., 8.25%, 09/01/2031(a)(b) 13,197,00012,930,372
Nabors Industries, Inc., 8.88%, 08/15/2031(a)(b) 10,042,0009,493,946
Neptune Bidco U.S., Inc., 9.29%, 04/15/2029(a)(b) 16,345,00015,274,872
New Cotai LLC, 5.00%, 02/02/2027(g)(h)  1,172,5822,663,170
Paramount Global, (fixed rate to 02/28/2027, variable rate thereafter), 6.25%, 02/28/2057(b) 1,000,000897,617
Sabre GLBL, Inc.   
8.63%, 06/01/2027(a)(b) 1,896,0001,830,133
11.25%, 12/15/2027(a)(b) 9,951,00010,251,737
Sanchez Energy Corp., 7.25%, 07/15/2023(f)(g) 257,0004,176
Staples, Inc.   
10.75%, 09/01/2029(a)(b) 14,111,00013,645,100
12.75%, 01/15/2030(a)(b) 153,761122,198
Uniti Group LP/Uniti Group Finance 2019, Inc./CSL Capital LLC   
10.50%, 02/15/2028(a)(b) 5,190,0005,528,229
Series MAY, 10.50%, 02/15/2028(a)(b) 475,000505,955
Univision Communications, Inc.   
8.00%, 08/15/2028(a)(b) 9,458,0009,611,664
8.50%, 07/31/2031(a)(b) 12,161,00011,953,528
Venture Global LNG, Inc., VRN, (fixed rate to 09/30/2029, variable rate thereafter), 9.00%, 09/30/2029(a)(c) 16,323,00016,321,777
Vistra Corp., VRN, (fixed rate to 10/15/2026, variable rate thereafter), 8.00%, 10/15/2026(a)(c) 6,235,0006,404,336
Vital Energy, Inc.   
7.75%, 07/31/2029(a)(b) 1,335,0001,309,995
9.75%, 10/15/2030(b) 4,612,0004,866,163
7.88%, 04/15/2032(a)(b) 415,000398,822
Walgreens Boots Alliance, Inc., 8.13%, 08/15/2029(b) 16,462,00016,361,937
Total United States 315,435,698
 
abrdn Income Credit Strategies Fund11

 

Portfolio of Investments   (continued)
As of October 31, 2024

 Shares or
Principal
Amount
Value
CORPORATE BONDS (continued) 
ZAMBIA—1.5%  
First Quantum Minerals Ltd.   
6.88%, 10/15/2027(a)(b)$  12,140,000$    12,058,432
8.63%, 06/01/2031(a)(b) 285,000      288,316
Total Zambia 12,346,748
Total Corporate Bonds 985,873,207
GOVERNMENT BONDS—3.0% 
ANGOLA—0.1%  
Angola Government International Bonds, 9.13%, 11/26/2049(a)  1,444,000    1,205,740
ARGENTINA—0.2%  
Argentina Republic Government International Bonds   
4.13%, 07/09/2035(b)(d)(k) 2,949,6721,627,952
5.00%, 01/09/2038(b)(d)(k) 543,200323,129
Total Argentina 1,951,081
CANADA—0.1%  
CPPIB Capital, Inc., 1.95%, 09/30/2029(a)CAD   838,000      565,564
COLOMBIA—1.3%  
Colombia Government International Bonds, 8.38%, 11/07/2054(b)$10,769,00010,475,068
DOMINICAN REPUBLIC—0.0%  
Dominican Republic International Bonds, 5.50%, 02/22/2029(a)(b) 359,000352,089
ECUADOR—0.1%  
Ecuador Government International Bonds, 5.50%, 07/31/2035(a)(d)(k) 1,431,800790,004
EGYPT—0.2%  
Egypt Government International Bonds   
8.50%, 01/31/2047(a) 1,223,000969,169
7.90%, 02/21/2048(a) 928,000696,300
Total Egypt 1,665,469
GEORGIA—0.0%  
Georgia Government International Bonds, 2.75%, 04/22/2026(a) 200,000187,236
IRAQ—0.1%  
Iraq International Bonds, 5.80%, 01/15/2028(a)(b)(d) 707,438679,543
IVORY COAST—0.1%  
Ivory Coast Government International Bonds, 6.63%, 03/22/2048(a)(d)EUR919,000807,109
KENYA—0.1%  
Republic of Kenya Government International Bonds, 8.25%, 02/28/2048(a)$873,000731,382
NIGERIA—0.1%  
Nigeria Government International Bonds, 7.63%, 11/28/2047(a) 634,000483,425
OMAN—0.2%  
Oman Government International Bonds, 7.00%, 01/25/2051(a) 1,590,0001,697,401
RWANDA—0.1%  
Rwanda International Government Bonds, 5.50%, 08/09/2031(a) 532,000447,146
 Shares or
Principal
Amount
Value
  
SAUDI ARABIA—0.1%  
Saudi Government International Bonds, 4.38%, 04/16/2029(a)$     745,000$       734,995
SENEGAL—0.1%  
Senegal Government International Bonds, 6.75%, 03/13/2048(a)(d)    858,000      605,096
TURKEY—0.0%  
Istanbul Metropolitan Municipality, 10.50%, 12/06/2028(a)(b)    290,000      316,484
UKRAINE—0.0%  
Ukraine Government International Bonds   
3.00%, 02/01/2030(a)(k) 15,0207,247
1.75%, 02/01/2034(a)(k) 137,49065,651
3.00%, 02/01/2034(a)(k) 56,13021,049
1.75%, 02/01/2035(a)(k) 82,49438,360
3.00%, 02/01/2035(a)(k) 47,43423,148
1.75%, 02/01/2036(a)(k) 54,99625,154
3.00%, 02/01/2036(a)(k) 39,52819,082
Total Ukraine 199,691
UZBEKISTAN—0.1%  
National Bank of Uzbekistan, 4.85%, 10/21/2025(a) 300,000294,555
Republic of Uzbekistan International Bonds, 3.70%, 11/25/2030(a) 260,000218,530
Total Uzbekistan 513,085
Total Government Bonds 24,407,608
BANK LOANS—2.9% 
LUXEMBOURG—0.6%  
Albion Financing 3 SARL 2024 USD Term Loan B, 9.10%, 08/16/2029(i) 4,987,5004,999,969
UNITED KINGDOM—2.1%  
Amber Finco PLC 2024 EUR Term Loan B, 06/11/2029(i)(l)EUR3,500,0003,818,683
CD&R Firefly Bidco Ltd. 2024 GBP Term Loan B5, 06/21/2028(i)(l)GBP9,700,00012,512,926
Impala Bidco 0 Ltd. GBP Term Loan B, 9.95%, 06/08/2028(i) 1,000,0001,205,636
Total United Kingdom 17,537,245
UNITED STATES—0.2%  
Masorange Holdco Ltd. 2024 USD Term Loan B4, 8.10%, 03/25/2031(i)$995,000993,756
MLN U.S. HoldCo LLC   
USD 2nd Lien Term Loan B1, 12.08%, 10/18/2027(g)(i) 1,928,718154,297
2022 Third Out Term Loan, 14.63%, 10/18/2027(i) 971,20029,136
Total United States 1,177,189
Total Bank Loans 23,714,403
COMMON STOCKS—0.9% 
AUSTRALIA—0.0%  
BIS Industries Ltd.(g)(h)(m) 804,308
 
12abrdn Income Credit Strategies Fund

 

Portfolio of Investments   (continued)
As of October 31, 2024

 Shares or
Principal
Amount
Value
COMMON STOCKS (continued) 
HONG KONG—0.2%  
Studio City International Holdings Ltd.(g)(m)    183,525$     1,154,869
Studio City International Holdings Ltd., ADR(g)(m)     98,050      616,999
Total Hong Kong 1,771,868
UNITED STATES—0.7%  
Foresight Energy LLC(g)(h)(m)     74,057      809,448
Kca Kelly Topco(g)(h)     11,090      829,865
Larchmont Intermediate Holdco LLC(g)(h)      1,661       24,869
New Cotai LLC(g)(h)(m)    971,487      882,110
Thunderbird Resources Equity, Inc.(g)(h)(m)          7            – 
True Religion Common(g)(h)(m)         61    3,075,529
Total United States 5,621,821
Total Common Stocks 7,393,689
PREFERRED STOCKS—0.0% 
UNITED STATES—0.0%  
True Religion Preferred(g)(h)(m)         64      318,675
Total Preferred Stocks 318,675
SHORT-TERM INVESTMENT—7.6% 
State Street Institutional U.S. Government Money Market Fund, Premier Class, 4.82%(n) 62,641,26062,641,260
Total Short-Term Investment 62,641,260
Total Investments
(Cost $1,120,520,597)(o)—134.7%
 1,104,348,842
Liabilities in Excess of Other Assets—(34.7%) (284,545,800)
Net Assets—100.0% $819,803,042
    
(a)Denotes a security issued under Regulation S or Rule 144A.
(b)The maturity date presented for these instruments represents the next call/put date.
(c)Perpetual maturity. Maturity date presented represents the next call date.
(d)Sinkable security.
(e)Payment-in-kind security for which part of the income earned may be paid as additional principal.
(f)Security is in default.
(g)Illiquid security.
(h)Level 3 security. See Note 2(a) of the accompanying Notes to Financial Statements.
(i)Variable or Floating Rate security. Rate disclosed is as of October 31, 2024.
(j)Denotes the security is government guaranteed.
(k)Step bond. Rate disclosed is as of October 31, 2024.
(l)This position represents an unsettled loan commitment at period end. Certain details associated with this purchase are not known prior to the settlement date, including coupon rate.
(m)Non-income producing security.
(n)Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2024.
(o)See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities.
 Amounts listed as “–” are $0 or round to $0.
    
ADRAmerican Depositary Receipt
BRLBrazilian Real
CADCanadian Dollar
CNYChinese Yuan Renminbi
EUREuro Currency
FRNFloating Rate Note
GBPBritish Pound Sterling
HKDHong Kong Dollar
NZDNew Zealand Dollar
PIKPayment-In-Kind
PLCPublic Limited Company
USDU.S. Dollar
VRNVariable Rate Note
 
As of October 31, 2024, the Fund held the following forward foreign currency contracts:
    
Purchase Contracts
Settlement Date
CounterpartyCurrency
Purchased
Amount
Purchased
Currency
Sold
Amount
Sold
Fair ValueUnrealized
Appreciation/
(Depreciation)
Brazilian Real/United States Dollar     
11/21/2024Goldman Sachs & Co.BRL5,230,000USD934,733$902,685$(32,048)
British Pound/United States Dollar     
11/19/2024Citibank N.A.GBP1,888,167USD2,449,6242,434,646(14,978)
11/19/2024HSBC Bank PLCGBP2,831,844USD3,674,4843,651,445(23,039)
11/19/2024Morgan Stanley & Co.GBP2,989,857USD3,908,7253,855,190(53,535)
11/19/2024Royal Bank of CanadaGBP2,150,500USD2,795,2592,772,904(22,355)
Canadian Dollar/United States Dollar     
11/19/2024HSBC Bank PLCCAD3,989USD2,8712,867(4)
Chinese Renminbi/United States Dollar     
11/20/2024BarclaysCNY16,231,000USD2,306,8372,283,874(22,963)
abrdn Income Credit Strategies Fund13

 

Portfolio of Investments   (concluded)
As of October 31, 2024

Purchase Contracts
Settlement Date
CounterpartyCurrency
Purchased
Amount
Purchased
Currency
Sold
Amount
Sold
Fair ValueUnrealized
Appreciation/
(Depreciation)
Euro/United States Dollar     
11/19/2024Citibank N.A.EUR1,371,835USD1,495,799$1,493,141$(2,658)
11/19/2024Goldman Sachs & Co.EUR6,042,945USD6,558,1866,577,29819,112
11/19/2024Royal Bank of CanadaEUR1,733,953USD1,898,8101,887,279(11,531)
11/19/2024UBS AGEUR1,246,836USD1,362,7071,357,089(5,618)
Hong Kong Dollar/United States Dollar     
11/19/2024Deutsche Bank AGHKD29,532USD3,8023,800(2)
11/19/2024Morgan Stanley & Co.HKD55,457USD7,1407,136(4)
11/19/2024UBS AGHKD1,797,473USD231,387231,287(100)
New Zealand Dollar/United States Dollar     
11/19/2024Royal Bank of CanadaNZD34,642USD21,10920,708(401)
 $27,481,349$(170,124)
    
Sale Contracts
Settlement Date
CounterpartyCurrency
Purchased
Amount
Purchased
Currency
Sold
Amount
Sold
Fair ValueUnrealized
Appreciation/
(Depreciation)
United States Dollar/Brazilian Real     
11/21/2024BarclaysUSD892,089BRL5,230,000$902,685$(10,596)
United States Dollar/British Pound     
11/19/2024Goldman Sachs & Co.USD154,492,591GBP117,927,793152,058,8172,433,774
11/19/2024UBS AGUSD773,841GBP594,067766,0047,837
United States Dollar/Canadian Dollar     
11/19/2024Morgan Stanley & Co.USD576,993CAD786,445565,15211,841
11/19/2024Royal Bank of CanadaUSD3,861CAD5,3133,81843
United States Dollar/Chinese Renminbi     
11/20/2024Goldman Sachs & Co.USD2,299,790CNY16,231,0002,283,87415,916
United States Dollar/Euro     
11/19/2024HSBC Bank PLCUSD1,887,210EUR1,743,2581,897,407(10,197)
11/19/2024Royal Bank of CanadaUSD367,616,911EUR334,074,435363,615,2574,001,654
11/19/2024Royal Bank of CanadaUSD7,189,851EUR6,635,0007,221,706(31,855)
United States Dollar/Hong Kong Dollar     
11/19/2024Royal Bank of CanadaUSD820,646HKD6,374,600820,244402
11/19/2024UBS AGUSD54,471HKD423,10254,44229
United States Dollar/New Zealand Dollar     
11/19/2024Royal Bank of CanadaUSD21,215NZD34,65720,716499
 $530,210,122$6,419,347
Unrealized appreciation on forward foreign currency exchange contracts$6,491,107
Unrealized depreciation on forward foreign currency exchange contracts$(241,884)
 
See accompanying Notes to Financial Statements.
14abrdn Income Credit Strategies Fund

 

Statement of Assets and Liabilities 
As of October 31, 2024

Assets  
Investments, at value (cost $1,057,879,337) $ 1,041,707,582
Short-term investment, at value (cost $62,641,260)  62,641,260
Foreign currency, at value (cost $2,840,333) 2,795,374
Cash 696
Receivable for investments sold 2,001,464
Interest and dividends receivable 21,546,010
Unrealized appreciation on forward foreign currency exchange contracts 6,491,107
Prepaid expenses in connection with the shelf registration (Note 5) 74,286
Prepaid expenses in connection with Revolving Credit Facility (Notes 7 & 8) 3,142
Prepaid expenses 27,673
Total assets 1,137,288,594
Liabilities  
Revolving Credit Facility payable (Note 8) 240,000,000
Payable for investments purchased 35,440,601
Investment advisory fees payable (Note 3) 1,064,187
Unrealized depreciation on forward foreign currency exchange contracts 241,884
Dividend payable on preferred shares 180,835
Administration fees payable (Note 3) 115,203
Investor relations fees payable (Note 3) 8,803
Other accrued expenses 434,039
Total liabilities 277,485,552
Cumulative Preferred Shares, $0.001 par value  
Series A Preferred Shares
(5.25%, $25.00 liquidation value per share, 1,600,000 shares outstanding) (Note 7)
40,000,000
Net Assets Applicable to Common Shareholders $819,803,042
Composition of Net Assets Attributable to Common Shareholders  
Common stock (par value $0.001 per share) (Note 5) $ 125,471
Paid-in capital in excess of par  1,245,228,668
Accumulated loss  (425,551,097)
Net Assets $819,803,042
Net asset value per share based on 125,470,678 common shares issued and outstanding $6.53
 
See accompanying Notes to Financial Statements.
abrdn Income Credit Strategies Fund 15

 

Statement of Operations 
For the Year Ended October 31, 2024

Net Investment Income  
Investment Income:  
Dividends and other income $ 353
Interest income (net of foreign withholding taxes of $103,311)  60,225,834
Total investment income 60,226,187
Expenses:  
Investment advisory fee (Note 3)  8,401,543
Administration fee (Note 3)  832,891
Trustees' fees and expenses  349,650
Legal fees and expenses  163,072
Independent auditors’ fees and tax expenses  113,440
Reports to shareholders and proxy solicitation  111,450
Shelf registration and at-the-market offering expenses  107,729
Investor relations fees and expenses (Note 3)  86,542
Custodian’s fees and expenses  52,408
Transfer agent’s fees and expenses  33,734
Miscellaneous  326,200
Total operating expenses, excluding interest expense 10,578,659
Interest expense and commitment fee on credit facility (Note 8)  10,785,324
Total operating expenses before reimbursed/waived expenses 21,363,983
Investment advisor waiver (785,849)
Net expenses 20,578,134
 
Net Investment Income 39,648,053
Net Realized/Unrealized Gain/(Loss):  
Net realized gain/(loss) from:  
Investments (Note 2j) (8,891,196)
Forward foreign currency exchange contracts (11,470,627)
Foreign currency transactions 333,431
  (20,028,392)
Net change in unrealized appreciation/depreciation on:  
Investments (Note 2j) 52,917,586
Forward foreign currency exchange contracts 5,647,380
Foreign currency translation (271,111)
  58,293,855
Net realized and unrealized gain from investments, forward foreign currency exchange and foreign currencies 38,265,463
Change in Net Assets Resulting from Operations $77,913,516
Total distributions to preferred shareholders  (2,105,833)
Net Increase in Net Assets Attributable to Common Shareholders Resulting from Operations $75,807,683
 
See accompanying Notes to Financial Statements.
16 abrdn Income Credit Strategies Fund

 

Statements of Changes in Net Assets 

  For the
Year Ended
October 31, 2024
For the
Year Ended
October 31, 2023
Increase/(Decrease) in Net Assets:    
Operations:    
Net investment income $39,648,053 $24,270,505
Net realized loss from investments, forward foreign currency exchange contracts and foreign currency transactions (20,028,392) (57,259,020)
Net change in unrealized appreciation on investments, forward foreign currency exchange and foreign currency translations 58,293,855 63,258,523
Net increase in net assets applicable to common shareholders resulting from operations 77,913,516 30,270,008
Distributions to Preferred Shareholders from:    
Distributable earnings (2,105,833) (2,100,000)
Net decrease in net assets from distributions to preferred shareholders (2,105,833) (2,100,000)
Net decrease in net assets attributable to common shareholders resulting from operations 75,807,683 28,170,008
Distributions to Common Shareholders from:    
Distributable earnings (37,208,284) (30,876,177)
Return of capital (45,277,611) (20,763,307)
Net decrease in net assets applicable to common shareholders from distributions (82,485,895) (51,639,484)
Proceeds from at-the-market offering resulting in the issuance of 0 and 488,323 shares of common stock, respectively (Note 5) 3,983,457
Proceeds from shares issued from the reorganization resulting in the issuance of 73,330,068 and 26,763,172 shares of common stock, respectively (Note 13) 486,432,247 192,397,770
Expenses in connection with the at-the-market stock offering (Note 5) (2,888)
Reinvestment of dividends resulting in the issuance of 30,660 and 41,073 shares of common stock, respectively 204,792 285,066
Change in net assets from capital transactions 486,637,039 196,663,405
Change in net assets applicable to common shareholders 479,958,827 173,193,929
Net Assets:    
Beginning of year 339,844,215 166,650,286
End of year $819,803,042 $339,844,215
Amounts listed as “–” are $0 or round to $0. 
See accompanying Notes to Financial Statements.
abrdn Income Credit Strategies Fund 17

 

Statement of Cash Flows   
For the Year Ended  October 31, 2024

Cash flows from operating activities:  
Net increase/(decrease) in net assets resulting from operations $ 77,913,516
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used in operating activities:
 
Investments purchased  (1,001,365,857)
Investments sold and principal repayments  953,210,805
Net change in short-term investments, excluding foreign government bonds  (49,029,326)
Net amortization/accretion of premium/(discount)  (6,993,709)
Net payment-in-kind interest income  (1,716,368)
Increase in interest, dividends and other receivables*  (4,183,629)
Net change in unrealized appreciation on forward foreign currency exchange contracts  (5,647,380)
Decrease in prepaid expenses  36,071
Increase in accrued investment advisory fee payable  643,386
Decrease in other accrued expenses*  (417,782)
Net change in unrealized appreciation of investments  (52,917,586)
Net change in unrealized depreciation on foreign currency translation  271,111
Net realized loss on investments transactions  8,891,196
Net cash used in operating activities (81,305,552)
Cash flows from financing activities:  
Repayment of Revolving Credit Facility (60,000,000)
Borrowings on Revolving Credit Facility 195,000,000
Distributions paid to shareholders (84,386,936)
Net cash provided by financing activities 50,613,064
Effect of exchange rate on cash (44,915)
Net increase in cash from Reorganizations 33,511,967
Net change in cash 2,774,564
Unrestricted and restricted cash and foreign currency, beginning of year 21,506
Unrestricted and restricted cash and foreign currency, end of year $2,796,070
Supplemental disclosure of cash flow information:  
Cash paid for interest and fees on borrowing  $10,785,324
    
* Excludes cash flows prior to the reorganizations (Note 13). Changes in assets and liabilities includes the balances of the acquired funds at the date of the reorganizations and activity of the combined fund from the date of the reorganizations through October 31, 2024.
See accompanying Notes to Financial Statements.
18 abrdn Income Credit Strategies Fund

 

Statement of Cash Flows    (concluded)
For the Year Ended  October 31, 2024

Reconciliation of unrestricted and restricted cash to the statement of assets and liabilities  
  Year Ended
October 31, 2024
Cash $ 696
Foreign currency, at value  2,795,374
  $2,796,070
 
See accompanying Notes to Financial Statements.
abrdn Income Credit Strategies Fund 19

 

Financial Highlights 

  For the Fiscal Years Ended October 31,
  2024 2023 2022 2021 2020
PER SHARE OPERATING PERFORMANCE:          
Net asset value per common share, beginning of year $6.52 $6.72 $10.45 $10.15 $12.46
Net investment income(a) 0.56 0.57 0.87 0.98 0.87
Net realized and unrealized gains/(losses) on investments, forward foreign currency exchange contracts and foreign currency transactions 0.68 0.47 (3.35) 1.11 (1.07)
Total from investment operations applicable to common shareholders 1.24 1.04 (2.48) 2.09 (0.20)
Distributions to preferred shareholders from:          
Net investment income (0.03) (0.05) (0.09) (0.05)
Net increase/(decrease) in net assets attributable to common shareholders resulting from operations 1.21 0.99 (2.57) 2.04
Distributions to common shareholders from:          
Net investment income (0.54) (0.72) (1.20) (1.13) (0.77)
Return of capital (0.66) (0.48) (0.07) (0.63)
Total distributions (1.20) (1.20) (1.20) (1.20) (1.40)
Capital Share Transactions:          
Offering costs for preferred shares charged to paid-in-capital (0.11)
Impact of shelf offering 0.01 0.04
Dilutive effect of rights offer (Note 5) (0.43) (0.71)
Total capital share transactions 0.01 0.04 (0.54)
Net asset value per common share, end of year $6.53 $6.52 $6.72 $10.45 $10.15
Market price, end of year $6.49 $5.78 $6.37 $11.30 $9.18
Total Investment Return Based on(b):          
Market price 34.41% 8.05% (34.92%) 37.13% (6.16%)
Net asset value 19.89%(c) 15.54%(c) (25.76%)(c) 14.69% (5.65%)
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data:          
Net assets including liquidation value of preferred shares, end of year(000 omitted) $859,803 $379,844 $206,650 $283,077 $–
Net assets applicable to common shareholders, end of year (000 omitted) $819,803 $339,844 $166,650 $243,077 $176,871
Average net assets applicable to common shareholders (000 omitted) $480,689 $294,262 $206,720 $218,990 $181,152
Gross operating expenses, excluding fee waivers 4.44% 4.80% 3.95% 3.01% 3.24%
Net operating expenses, net of fee waivers 4.28% 4.56% 3.70% 2.86% 3.06%
Net operating expenses, net of fee waivers/recoupment, excluding interest expense, commitment fee and loan servicing fees 2.04% 2.26% 2.48% 2.24% 2.15%
Net Investment income 8.25% 8.25% 10.10% 8.75% 8.26%
Portfolio turnover 76%(d) 83% 66% 63% 97%
Senior securities (loan facility) outstanding (000 omitted) $240,000 $105,000 $88,000 $118,000 $81,200
Asset coverage ratio on senior securities at year end(e) 458% 462% 335% 340% 318%
Perpetual preferred shares (000 omitted) $40,000 $40,000 $40,000 $40,000 $–
Asset coverage per $1000 on senior securities at year end $4,583 $4,618 $3,348 $3,399 $3,178
See accompanying Notes to Financial Statements.
20 abrdn Income Credit Strategies Fund

 

Financial Highlights  (concluded)

  For the Fiscal Years Ended October 31,
  2024 2023 2022 2021 2020
Asset coverage ratio on total leverage at year end(f) 393% 334% 230% 254% 318%
Asset coverage per $1,000 on total leverage at year end $3,928 $3,344 $2,302 $2,538 $3,178
Involuntary Liquidating Preference Per Unit $25.00 $25.00 $25.00 $25.00 $
Average Market Value Per Unit $23.63 $22.21 $24.40 $26.56 $
    
(a) Based on average shares outstanding.
(b) 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.
(c) The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments.
(d) The portfolio turnover calculation excludes $347,438,325 and $516,168,819 of proceeds received and cost of investments related to rebalancing the portfolio after the fund reorganizations which occurred on July 19, 2024 and September 20, 2024.
(e) Asset coverage ratio is calculated by dividing net assets plus the amount of any borrowings, including Series A Perpetual Preferred Shares, for investment purposes by the amount of any senior securities, which includes the revolving credit facility and then multiplying by $1,000.
(f) Asset coverage ratio is calculated by dividing net assets as of each fiscal period end plus the amount of any borrowings for investment purposes outstanding as of each fiscal period end by the amount of any borrowings as of each fiscal period end, and then multiplying by $1,000.
Amounts listed as “–” are $0 or round to $0. 
See accompanying Notes to Financial Statements.
abrdn Income Credit Strategies Fund 21

 

Notes to  Financial Statements 
October 31, 2024

1.  Organization
abrdn Income Credit Strategies Fund (the “Fund” or "ACP") is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a closed-end management investment company. The Fund is diversified for purposes of 1940 Act. Pursuant to guidance from the Securities and Exchange Commission (the "SEC"), the Fund’s classification changed from a non-diversified fund to a diversified fund. As a result of this classification change, the Fund is limited in the proportion of its assets that may be invested in the securities of a single issuer. The Fund’s primary investment objective is to seek a high level of current income, with a secondary objective of capital appreciation. The Fund commenced operations on January 27, 2011.
Fund Reorganizations
On July 19, 2024, the Fund acquired the assets and assumed the liabilities of First Trust High Income Long/Short Fund ("FSD") pursuant to a plan of reorganization approved by the Board of Trustees (the "Board") on October 20, 2023 ("FSD Reorganization"). In the FSD Reorganization, common shareholders of FSD received an amount of ACP common shares with a net asset value ("NAV") equal to the aggregate NAV of their holdings of FSD common shares, as determined at the close of regular business on July 19, 2024. Any applicable fractional shares were paid as cash-in-lieu to the applicable holder. The FSD Reorganization was structured as a tax-free transaction. The Fund is considered the tax survivor and accounting survivor of the FSD Reorganization.
The following is a summary of the NAV per share issued as of July 19, 2024.
Acquired Fund ACP NAV per
Share ($) July 19, 2024
Conversion Ratio Shares Issued
First Trust High Income Long/Short Fund 6.6326 1.893482 63,035,894
On September 20, 2024, the Fund acquired the assets and assumed the liabilities of First Trust/abrdn Global Opportunity Income Fund ("FAM") pursuant to a plan of reorganization approved by the Board on October 20, 2023 ("FAM Reorganization"). In the FAM Reorganization, common shareholders of FAM received an amount of ACP common shares with a NAV equal to the aggregate NAV of their holdings of FAM common shares, as determined at the close of regular business on September 20, 2024. Any applicable fractional shares were paid as cash-in-lieu to the applicable holder. The FAM Reorganization was structured as a tax-free transaction. The Fund is considered the tax survivor and accounting survivor of the FAM Reorganization.
The following is a summary of the NAV per share issued as of September 20, 2024.
Acquired Fund ACP NAV per
Share ($) September 20, 2024
Conversion Ratio Shares Issued
First Trust/abrdn Global Opportunity Income Fund 6.6387 1.014883 10,294,174
2.  Summary of Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946 Financial Services-Investment Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to generally accepted accounting principles in the United States of America ("U.S. GAAP"). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Fund are maintained in U.S. Dollars and the U.S. Dollar is used as both the functional and reporting currency.
a.  Security Valuation:
The Fund values its securities at current fair value, consistent with regulatory requirements. "Fair value" is defined in the Fund's Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to transact at the measurement date, also known as market value. Pursuant to Rule 2a-5 under the 1940 Act, the Board designated abrdn Investments Limited (the "Adviser") as the valuation designee ("Valuation Designee") for the Fund to perform the fair value determinations relating to Fund investments for which market quotations are not readily available or deemed unreliable.
In accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair
 
22 abrdn Income Credit Strategies Fund

 

Notes to  Financial Statements  (continued)
October 31, 2024

value. The hierarchy assigns Level 1, the highest level, measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for similar assets, and Level 3, the lowest level, measurements to valuations based upon unobservable inputs that are significant to the valuation. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.
Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider. If there are no current day bids, the security is valued at the previously applied bid. Pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size and the strategies employed by the Valuation Designee generally trade in round lot sizes. In certain circumstances, some trades may occur in smaller “odd lot” sizes which may be effected at lower, or higher, prices than institutional round lot trades. Short-term debt securities (such as commercial paper and U.S. treasury bills) having a remaining maturity of 60 days or less are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service, or on the basis of amortized cost, if it represents the best approximation of fair value. Debt and other fixed-income securities are generally determined to be Level 2 investments.
Short-term investments are comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. The Fund sweeps available cash into the State Street Institutional U.S. Government Money Market Fund, which has elected to qualify as a “government money market fund” pursuant to Rule 2a-7 under the 1940 Act, and has an objective, which is not guaranteed, to maintain a $1.00 per share NAV. Generally, these investment types are categorized as Level 1 investments.
Senior loans are valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as ratings, tranche type, industry, company performance, spread, individual trading characteristics, institutional-size trading in similar groups of securities and other market data.