Shires Inc. Regulatory News (SHRS)

SHIRES INCOME PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2019

Legal Entity Identifier (LEI): 549300HVCIHNQNZAYA89

The Company

Shires Income PLC (the "Company") is an investment trust. Its Ordinary shares are listed on the premium segment of the London Stock Exchange.

Investment Objective

The Company's investment objective is to provide shareholders with a high level of income, together with the potential for growth of both income and capital from a diversified portfolio substantially invested in UK equities but also in preference shares, convertibles and other fixed income securities.

Benchmark

The Company's benchmark is the FTSE All-Share Index (total return).

Management

The Company's Manager is Aberdeen Standard Fund Managers Limited ("ASFML", the "AIFM" or the "Manager") which has delegated the investment management of the Company to Aberdeen Asset Managers Limited ("AAML" or the "Investment Manager"). Both companies are wholly owned subsidiaries of Standard Life Aberdeen plc, which was formed by the merger of Aberdeen Asset Management PLC and Standard Life plc in August 2017. Aberdeen Standard Investments is a brand of the investment businesses of the merged entity.

Website

Up to date information can be found on the Company's website: www.shiresincome.co.uk

COMPANY OVERVIEW - FINANCIAL HIGHLIGHTS

For further information, please contact:

Scott Anderson

Aberdeen Standard Fund Managers Limited

0131 222 1863*

* Calls may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary.

COMPANY OVERVIEW - CHAIRMAN'S STATEMENT

It is my pleasure, in the Company's 90th year, to welcome you to the 2019 Annual Report.

Performance

In the year to 31 March 2019, the Company's net asset value ("NAV") per share increased by 4.0% on a total return basis, compared to a total return from the benchmark, the FTSE All-Share Index, of 6.4%. However, the Ordinary share price total return was stronger, at 8.0%, and at the end of the year the shares were trading at a premium of 0.6% to the NAV per share (including income).

While the overall relative return performance against the benchmark index for the year was disappointing, the Company's longer-term performance record remains good, delivering a positive capital return, outperforming the benchmark over three and five years and delivering an above average and growing dividend income.

The Board was encouraged by the total return of the equity portfolio, of 7.5%, which outperformed the return of 6.4% from the benchmark. However, the overall NAV total return was reduced by the performance of the Company's preference shares which, although continuing to make an important contribution to the Company's revenue stream and providing greater stability to the overall NAV, were impacted during the year by the performance of the underlying sectors.

Following a relatively strong start to the year, markets fell sharply in the final quarter of 2018, driven mainly by concerns over growth prospects across the US, Europe and Asia, and the prospects of a trade war between the US and China. These fears receded during the first quarter of 2019, with some progress on trade discussions between the US and China and a moderation of the outlook for interest rate increases. However, tensions have risen again recently and this looks likely to be a long running dispute. In the UK, there was continuing uncertainty over the outcome of Brexit negotiations between the UK and Europe and whether a deal would be agreed by the UK Parliament. The initial departure date of 29 March 2019 passed without an agreed deal and was extended until later in the year.

More detail on markets and the Company's performance for the year are covered in the Investment Manager's Review.

Earnings

The Company's revenue return for the year was 13.06p per share, compared to 13.69p per share for the previous year. This decrease reflects fewer special dividends received during the year and lower income from option writing.

Dividend

The Board is proposing a final dividend of 4.20p per Ordinary share (2018 - 4.00p), which will be paid on 26 July 2019 to Shareholders on the register on 5 July 2019. This final dividend brings total Ordinary share dividends for the year to 13.20p per share (2018 - 13.00p), slightly higher than the revenue return for the year. The Company has significant accumulated revenue reserves which are available to fund the cost of the dividend to the extent that this exceeds current year earnings. Following the payment of the final dividend, the revenue reserve will represent 1.2 times the current annual Ordinary share dividend cost.

Subject to unforeseen circumstances, it is proposed to continue to pay three quarterly interim dividends of 3.00p each per Ordinary share and, as in previous years, the Board will decide on next year's final dividend having reviewed the full year results.

Discount/Premium

As stated above, at the end of the year the Company's Ordinary shares were trading at a premium of 0.6% to the NAV per share (including income) compared to a discount of 3.1% at the end of the previous year. During the course of the year, with the shares trading at a premium to the NAV and in response to investor demand, the Company was able to issue a total of 157,000 new Ordinary shares on a non-dilutive basis. The Company has continued to issue shares since the year end.

The Board and Manager monitor the discount/premium of the Company's shares on an ongoing basis and will consider future issuance if there is sufficient investor demand. The Board will seek to renew the appropriate authorities at the Annual General Meeting.

Gearing

The Board continually monitors the level of gearing and, although the absolute level may look high as in previous years, strategically we take the view that it is deployed notionally into fixed interest securities which brings diversification to the Company's total revenue stream and with lower volatility than would be expected from a portfolio invested exclusively in equities. The Company's gearing level fell marginally during the year, decreasing from 20.8% to 19.6%. The Board takes the view that the enhanced balance of assets arising from a combination of fixed income securities and equities allows for an appropriate level of risk within the portfolio in order to achieve the overall investment objective.

The Company has a £20 million loan facility, of which £19 million was drawn down at the year end. Details of the loan facility are set out in note 13 to the financial statements.

Annual General Meeting (including Voting Arrangements)

The Annual General Meeting ("AGM") will be held at 12 noon on Thursday 4 July 2019 at the offices of Standard Life Aberdeen in London. The Company's fund manager, Iain Pyle, will make a presentation and lunch will be available following the Meeting. This is a good opportunity for shareholders to meet the Board and Investment Manager, and to ask questions formally or informally, and we would encourage you to attend.

If you hold your shares in the Company via a share plan or a platform and would like to attend and/or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform.

Further details on how to attend and vote at Company Meetings for holders of shares via other share plans and platforms can be found on the AIC's website at: theaic.co.uk/aic/shareholder-voting-consumer-platforms.

Electronic Communications

The Board is proposing to take advantage of the ability, under the Company's Articles of Association, to communicate electronically with shareholders as well as making documents available on its website instead of sending out paper versions. Increased use of electronic communications will deliver savings to the Company in terms of administration, printing and postage costs, as well as accelerating the provision of information to shareholders. The reduced use of paper will also bring environmental benefits. The Company will therefore be writing to you later in the year seeking your consent to communicate with you electronically noting that shareholders will be provided with regular opportunities to request a paper version.

Board Composition

Having served as a Director since 2008, Andrew Robson will retire from the Board at the Company's AGM in 2020. However, to facilitate a smooth transition of matters pertaining to the Audit Committee, Robin Archibald will be appointed as Chairman of the Audit Committee in place of Andrew immediately following the AGM on 4 July 2019. This will ensure an orderly handover of the Audit Committee Chair responsibilities while continuing to allow us to benefit from Andrew's detailed knowledge of the Company.

The Board has commenced a process to appoint a new independent non-executive Director which it hopes to complete later in the year.

Outlook

Although stockmarkets have performed reasonably well since the start of 2019, there are reasons for caution. Economic data globally continues to indicate uncertainty over the growth and inflation outlook and a lack of confidence from businesses in the UK and in Continental Europe is leading to disappointing investment levels. In the UK, although the prospect of a no-deal exit from the EU seems unlikely, any departure will probably be followed by a new period of uncertainty regarding the UK's future relations with its largest trading partner.

However, as we have stated in previous years, we believe that the Company's portfolio is well diversified in terms of asset class, sector and geographic exposure and that, despite the various uncertainties facing markets at the current time, the Investment Manager's focus on investing in good quality companies with strong fundamentals should benefit the portfolio over the longer term in meeting the Company's income and growth investment objective.

Robert Talbut

Chairman

28 May 2019

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Business Model

The business of the Company is that of an investment company which qualifies as an investment trust for tax purposes. The Directors do not envisage any change in this activity in the foreseeable future.

Investment Objective

The Company's investment objective is to provide shareholders with a high level of income, together with the potential for growth of both income and capital from a diversified portfolio substantially invested in UK equities but also in preference shares, convertibles and other fixed income securities.

Investment Policy

In pursuit of its objective, the Company's policy is to invest principally in the ordinary shares of UK quoted companies, and in preference shares, convertibles and other fixed income securities with above average yields.

The Company generates income primarily from ordinary shares, preference shares, convertibles and other fixed income securities. It also achieves income by writing call and put options on shares owned, or shares the Company would like to own. By doing so, the Company generates premium income..

Risk Diversification

In order to ensure adequate diversification, the Board sets absolute limits on maximum holdings and exposures in the portfolio from time to time. These limits do not form part of the investment policy and can be changed or over-ridden with Board approval. The current limits are disclosed under the heading "Board Investment Limits" below.

Gearing

The Directors are responsible for determining the gearing strategy of the Company. Gearing is used with the intention of enhancing long-term returns. Gearing is subject to a maximum equity gearing level of 35% of net assets at the time of draw down. Any borrowing, except for short-term liquidity purposes, is used for investment purposes.

Delivering the Investment Policy

The Directors are responsible for determining the investment objective and investment policy of the Company, although any significant changes are required to be approved by shareholders at a general meeting. Day-to-day management of the Company's assets has been delegated, via the AIFM, to the Investment Manager.

Board Investment Limits

In order to ensure adequate diversification, the Board has set absolute limits on maximum holdings and exposures in the portfolio at the time of acquisition. These can only be over-ridden with Board approval. The current limits include the following:

- Maximum 10% of total assets invested in the equity securities of overseas companies;

- Maximum 7.5% of total assets invested in the securities of one company (excluding Aberdeen Smaller Companies Income Trust PLC);

- Maximum 5% of quoted investee company's ordinary shares (excluding Aberdeen Smaller Companies Income Trust PLC); and

- Maximum 10% of total assets invested directly in AIM holdings.

Preference shares

The Company also invests in preference shares, primarily to enhance the income generation of the Company. The majority of these investments are in large financial institutions. Issue sizes are normally relatively small and associated low volumes of trading could give rise to a lack of liquidity. A maximum of 7.5% of total assets may be invested in the preference shares of any one company. In addition, the Company cannot hold more than 10% of any investee company's preference shares.

Traded options contracts

The Company enters into traded option contracts, also primarily to enhance the income generation of the Company. The risks associated with these option contracts are managed through the principal guidelines below, which operated in the year under review:

- Call options written to be covered by stock;

- Put options written to be covered by net current assets/borrowing facilities;

- Call options not to be written on more than 100% of a holding of stock;

- Call options not to be written on more than 30% of the equity portfolio; and

- Put options not to be written on more than 30% of the equity portfolio.

Benchmark

In assessing its performance, the Company compares its returns with the returns of the FTSE All-Share Index (total return).

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determining the progress of the Company in pursuing its investment policy. The main KPIs identified by the Board in relation to the Company, which are considered at each Board meeting, are shown in the following table:

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The risks and uncertainties faced by the Company are reviewed by the Audit Committee in the form of a risk matrix and the principal risks and uncertainties facing the Company at the current time, together with a description of the mitigating actions the Board has taken, are set out in the table below. The Board has carried out a robust assessment of these risks, which include those that would threaten its business model, future performance, solvency or liquidity. The principal risks associated with an investment in the Company's shares are published monthly in the Company's factsheet and they can also be found in the pre-investment disclosure document ("PIDD") published by the Manager, both of which are available on the Company's website.

External Agencies

In addition to the services provided to the Company by the Standard Life Aberdeen Group, the Board has contractually delegated to external agencies certain services, including: depositary services (which include the safekeeping of the Company's assets) (BNP Paribas Securities Services, London Branch) and share registration services (Equiniti Limited). Each of these services was entered into after full and proper consideration by the Board of the quality and cost of services offered. In addition, day-to-day accounting and administration services are provided, through delegation by the Manager, by BNP Paribas Securities Services.

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective way to achieve this is through subscription to, and participation in, the promotional programme run by the Standard Life Aberdeen Group on behalf of a number of investment trusts under its management. The Company's financial contribution to the programme is matched by the Standard Life Aberdeen Group. The Manager's marketing and investor relations teams report to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make-up of that register. A significant proportion of the Company's Ordinary shares is owned through the Aberdeen Standard Investments savings plans.

The purpose of the promotional programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of the Company is key and therefore the Company also supports the Manager's investor relations programme which involves regional roadshows, promotional and public relations campaigns.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow it to fulfil its obligations. The Board also recognises the benefits of and is supportive of the principle of diversity in its recruitment of new Board members. The Board will not display any bias for age, gender, race, sexual orientation, religion, ethnic or national origins, or disability in considering the appointment of its Directors. In view of its size, the Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment, with the aim of retaining a small, cohesive board with the requisite skills and experience to acquit the Board's responsibilities well.

At 31 March 2019, there were three male Directors and one female Director.

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated the day-to-day management and administrative functions to the Manager. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is set out below.

Socially Responsible Investment Policy

The Directors, through the Investment Manager, encourage companies in which investments are made to adhere to best practice in the area of corporate governance and socially responsible investing. The Investment Manager believes that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies in both areas.

The Investment Manager's ultimate objective, however, is to deliver superior investment returns for the Company's shareholders. Accordingly, whilst the Investment Manager will seek to favour companies which pursue best practice in these areas, this must not be to the detriment of the return on the investment portfolio.

UK Stewardship Code and Proxy Voting as an Institutional Shareholder

Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager.

The full text of the Company's response to the Stewardship Code may be found on its website.

Modern Slavery Act

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Viability Statement

The Board considers the Company, with no fixed life, to be a long term investment vehicle but, for the purposes of this viability statement, has decided that three years is an appropriate period over which to report. The Board considers that this period reflects a balance between a longer term investment horizon and the inherent uncertainties within equity markets.

In assessing the viability of the Company over the review period, the Directors have focused upon the following factors:

- The principal risks and uncertainties detailed above and the steps taken to mitigate these risks.

- The ongoing relevance of the Company's investment objective.

- The liquidity of the Company's portfolio. The majority of the portfolio is invested in readily realisable listed securities.

- The level of ongoing expenses. The Company's annual expenses, excluding the cost of the dividend, are expected to continue to be more than covered by annual investment income.

- The level of gearing. This is closely monitored and the financial covenants attached to the Company's borrowings provide for significant headroom.

- Regulatory or market changes.

In making its assessment, the Board has considered that there are other matters that could have an impact on the Company's prospects or viability in the future, including a large economic shock, significant stock market volatility, and changes in regulation or investor sentiment.

Taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of approval of this Report.

Outlook

The Board's view on the general outlook for the Company can be found in the Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included in its report.

On behalf of the Board

Robert Talbut

Chairman

28 May 2019

STRATEGIC REPORT - RESULTS

Financial Summary

PERFORMANCE (TOTAL RETURN)

DIVIDENDS

TEN YEAR FINANCIAL RECORD

CUMULATIVE PERFORMANCE A

Rebased to 100 at 31 March 2006

STRATEGIC REPORT - INVESTMENT MANAGER'S REVIEW

Highlights

- NAV total return of 4.0% compared to the benchmark total return of 6.4%

- Ordinary share price total return of 8.0%

- Equity portfolio outperformed the benchmark with the preference share portfolio underperforming

- Revenue per share fell by 4.6% due to a lower number of special dividends compared to the previous year and less income from option writing

- Good longer term performance record, with the NAV outperforming the benchmark over three and five years on a total return basis

Portfolio Strategy

We take a long term approach to investing, believing that whilst there might be volatility in the short and even medium term, share prices will ultimately reflect the fundamental value of a company. Consequently there has been no change to our approach to the construction of the portfolio during the year under review. The Company's investment portfolio is invested in equities, preference shares and convertible shares. At the year-end 74.1% of the portfolio was invested in equities, 25.3% was invested in preference shares and 0.6% was invested in convertibles.

Equity Market Review

Looking over the whole 12 months to 31 March 2019 one could be forgiven for thinking it was a benign year in the UK equity market. The FTSE All-Share Index benchmark rose by 6.4% on a total return basis, roughly in line with the 30 year average return on equity markets. However, this doesn't reflect what a volatile period for markets the last year was.

The period got off to a flying start, with the market up 11% before the end of May - although that was the peak for the year. The global economic outlook was upbeat with expectations for 2018 to be the best year for growth since 2011. In the UK, the economy put a weak start to the year, exaggerated by a period of cold weather, behind it and growth began to pick up. However, there were warning signs: global industrial indicators began to slow and the global outlook was threatened by a growing trade spat between an increasingly protectionist US administration and China.

Markets drifted slowly downwards through summer. The most significant economic move was the increase of the US 10 year yield through the 3% level. Rising real interest rates reflected continued strong economic growth, particularly in the US, where manufacturing and employment data continued to improve. This put pressure on market valuations, yet risk factors such as inflation and wage growth appeared reasonably well controlled.

The end of September marked a shift in sentiment, however. Markets sold off sharply and from that point to the December low the benchmark fell almost 13%. The sell-off in the second half was prompted by more weak headlines. Economic data in the second half of 2018 turned negative: US industrial indicators fell, European and UK GDP expectations were downgraded and some previously robust economies looked particularly weak, with Germany just avoiding recession. In Asia, Chinese macro and momentum indicators continued to deteriorate as trade issues weighed on the economic outlook. The last quarter of 2018 also saw a sharp fall in the price of oil, with Brent crude declining from a high of $86 per barrel at the start of October to under $50 by the end of December. The fall was driven by higher than expected supply and did not reverse until OPEC agreed to limit supply in January.

In stock markets, the fall in valuations was felt most strongly at the extremes. Those stocks that were very highly valued sold off, particularly after some poor earnings from technology companies. At the same time, risk aversion meant that highly cyclical stocks such as industrials also fell sharply. For the first time in an extended period, value outperformed growth, although this change in direction for the market proved short lived.

As sometimes happens, the turn of the calendar year marked a change in direction for the markets and year to date 2019 has seen a rebound, largely reversing any losses since September 2018. Good news has generally outweighed bad in early 2019 but there are two main themes worth highlighting. Firstly, emerging markets: the US and China made progress on trade discussions. With the prospect of Chinese government stimulus also having an impact in the second half, sentiment on the region has improved and related stocks have performed much better. Recent data from China has backed up this optimism: the economy expanded by 6.4% in the first quarter, ahead of estimates. A recent rise in tensions between the two countries has again raised concerns and led to a dip in markets - a reminder that global trade and protectionism is likely to be an issue for markets for some time to come.

Secondly, the outlook for interest rate rises has moderated significantly. The messaging for the US Federal Reserve is now that a cut in rates is as likely as a rise, and the rate rise cycle is assumed by many to have come to an end for now. The flattening of rate expectations reflects concerns around the pace of growth in the US economy, but helps equity valuations. The Fed has been followed by the European Central Bank which has also opened the possibility of a rate cut.

There are a number of implications arising from this. Reduced expectations for US rate rises mean the US Dollar becomes less attractive, something that is particularly beneficial for emerging markets. Thinking ahead, the change in the rates outlook has caused the yield curve to invert, with 10 year government bonds now yielding less than three month equivalents, indicating that the bond market does not believe that rates will go up over the medium to long term. Historically, this has been a very good predictor of recessions: the last three recessions in particular have been preceded by a yield curve inversion and although there is usually a 12-18 month lag, it is a signal to be aware of and a reason to be cautious.

After all that volatility, the UK market finished the period roughly where it started in terms of valuation. It also feels like little has changed in terms of politics, with the exit from the EU pushed back until October. While there is little more clarity on the final outcome, the UK parliament has acted to largely rule out an exit with no deal. That leaves an agreed deal or a further referendum as the two most likely outcomes. In either case, the impact on the UK market overall may be muted, but domestic equities which trade on a discount could be expected to rally - provided, of course any prospects of an early general election can be put to one side.

In terms of sector performance for the year, the best performers were the more defensive sectors, offering stable growth, and the resource sectors. The search for low risk growth was a continuation of a trend seen since 2009. The low yield environment and the cautious approach of many investors continue to drive investment into those companies that can deliver stable returns. Examples are Beverages (+31% for the period), Personal Goods (+13%), Healthcare (+21%) and Food Producers (+9%) all of which outperformed over the year.

In many ways, the resources sectors are the opposite of the above: they are more volatile and tend to benefit from inflation and rising interest rates. However, exposure to commodity prices trumps all other drivers and the period was good for oil and industrial metals. Oil closely followed the deviations of markets through the year, rising from $67 per barrel to peak at $86 in October before falling back to below $50 in December and then recovering to almost $70 at the end of March. The oil & gas sector delivered a 16% return in the period, with the oil majors helped by strong cash generation. For the miners, continuing strong metal prices and the improving sentiment to emerging markets were the dominant drivers, and the sector returned an impressive 22% return in the period.

The weaker sectors during the year were harder to group together, but broadly they were those sectors most exposed to the domestic UK economy or to interest rates. Financials were weak as expectations for interest rate increases waned, leaving banks -6% and life insurers -8% on the year. Industrials lagged the market, as did general retailers and travel and leisure companies, which are much more exposed to the outlook for the UK and to political uncertainty.

Investment Performance

The net asset value ("NAV") total return for the year was 4.0%, compared to the FTSE All-Share Index benchmark return of 6.4%.

The equity portfolio delivered a return of 7.5% for the year, outperforming the benchmark by 1.1%. By sector, the greatest positive contributions came from Mining, Telecommunications and Technology. Underweight positions in Consumer Goods, Consumer Services and Oil & Gas detracted from performance. The performance of the equity portfolio should be seen in the context of what was a difficult market for income investors, with traditional income sectors like telecoms and financials underperforming.

Five stocks stood out as material positive contributors this year. Telecom Plus was the largest single contributor, as the stock rallied strongly on robust earnings and a re-rating. The company sells long term utility contracts and did well as energy prices increased throughout the year. The shares increased in value by 30%.

Shares in John Laing increased by 45% as the company continued to increase the value of its investments. Having bought into the company when the shares traded at a discount to NAV, the valuation has increased and the shares now trade at a small premium. We still see this as an attractive valuation given the cautious assumptions in the NAV and the track record of compound growth over time.

Inmarsat's shares delivered a return of almost 60% following a bid for the company. While the investment case on Inmarsat was not based on a bid, it did reflect the long term strategic value of the company's satellite network and a corporate offer has seen this realised earlier than we might have anticipated.

BHP Billiton benefitted from the continued strong backdrop for commodities. The company also continues to maintain spending discipline, delivering high levels of free cashflow. Finally, Experian's shares continued to deliver on stable earnings growth over the year, proving the resilience of the business model.

The largest negative contributor was GVC, with its shares down by 36% over the year. The underlying performance of the company has actually been very solid, with earnings and cashflow growing. However, this has been trumped by increasing regulation of the UK gaming sector, with a higher tax take and weakening sentiment on the space. The company now trades with over 10% free cash yield in 2020, even ahead of the benefit of the regulation of sports gaming in the US, so with a 5.4% yield we believe it is one to hold onto for the longer term.

The second greatest negative for the portfolio was our underweight position in Royal Dutch Shell. The shares in the company delivered a return of almost 14% this year, helped by oil trading higher over the period and by strong cash generation as oil & gas companies generally maintained discipline after the last fall in the oil price. We have historically maintained an underweight position in the sector due to the high level of cyclicality, but we reduced the underweight this year, seeing positive signs from both Royal Dutch Shell and BP that capital discipline will hold and support dividends which currently generate a yield of almost 6%.

Thirdly, the holding in Aberdeen Smaller Companies Income Trust was a detractor, with the shares down by 0.4% over the year. The shares have underperformed the benchmark index modestly, reflecting primarily a difficult period in October to December last year when smaller companies were broadly out of favour as the market looked for lower risk investments. The company has since bounced back strongly, with the NAV up 22% year to date at the end of March. Furthermore, the company continues to trade at a material discount to NAV, something we hope will close over time and provide a tailwind to performance.

Gearing and Preference Share Portfolio

Gearing decreased marginally during the year from 20.8% to 19.6%. The gearing is notionally invested in the preference share portfolio. At the year-end these securities had a value of £24.0 million, materially in excess of net indebtedness which stood at £16.1 million. This part of the portfolio provides a core level of high income and would, in normal conditions, be expected to be more resilient than equities in the event of a fall in the market.

The preference share portfolio lagged the performance of the equity portfolio over the year, with its value declining by 3.4% in total return terms. While we should not expect significant capital growth from the preference shares, and all holdings continued to pay very meaningful dividends to support the income of the Company, the fall in valuation across the year is disappointing. In our view this reflects not on preference shares as an asset class but on the underlying sectors.

The issuers of preference shares have come predominantly from the financial sector and the Company's holdings reflect this. Amongst the preference shares held, RSA, Standard Chartered, Santander, Aviva and Ecclesiastical Insurance are all in the banking or insurance sector. As stated above, these are sectors that performed poorly during the year - in the UK market, the banking sector fell by 6% and the life insurance sector fell by 8%. As such, it should come as no surprise that the preference shares have followed the performance of the underlying equities. Indeed, over the longer term the preference share portfolio has performed better than the equities.

Revenue Account

Earnings per share decreased by 4.6% over the year to 13.06p. The Company aims to invest in companies with the ability to grow their dividends over time and a number of holdings delivered dividend growth during the period. The fall in the level of investment income, and consequently the net earnings for the year, was caused by a lower number of special dividends compared to the previous year as well as less income from option writing.

The following table details the Company's main sources of income over the last five years.

Portfolio Activity

Nine new positions were added in the year and nine exited, maintaining the number of equity positions in the portfolio at 46. The turnover, at a level in excess of 20%, is higher than we might normally expect but reflects a change in fund manager at the start of the financial year. That change brought with it new ideas and different views on existing positions, so has driven a degree of activity which is greater than normal for the Company.

The first names added to the portfolio in the year reflected us taking advantage of broader analyst coverage of UK equities and a wider peer review process following the merger of Aberdeen Asset Management with Standard Life. All three of the names featured on the Manager's UK Equities team's "Winners' List", which aims to select twenty best ideas and has delivered strong above market returns over its life. Importantly, they have the characteristics we continue to look for in stock ideas for the portfolio - long term, resilient, growth potential, strong management and an income component to potential returns. Where companies in the list meet these criteria we would expect to hold them in the future.

John Laing is an investor in public infrastructure projects. The company has investments in around 40 projects globally and has significantly broadened its exposure in recent years. The stock traded at a discount to NAV, despite a track record of double digit NAV growth each year and we believe the market under-appreciates the growth potential.

GVC is a leading gaming company. It runs online gambling sites and recently expanded in the UK through the acquisition of Ladbrokes. Over time the management team has demonstrated an ability to grow the business and to position it for increased regulation of the industry. As one of the few operators with its own online technology and a strong reputation in the industry, GVC is well placed to benefit from the potential regulation of the US sports gambling industry.

We started a position in Countryside Properties, a UK focused housebuilder. While this is a highly cyclical sector, Countryside is differentiated from its peers as a large proportion of its business comes from partnerships with local councils to develop affordable housing. This provides a much lower risk business, with a high degree of certainty on revenue from longer duration projects, often running for ten year plus periods.

In June we started a new position in Bodycote. The company is a UK engineer with a strong market position in metal technology such as isostatic pressing. Recent increases in the technical expertise of the business have created a more defensible position under-appreciated in its valuation.

We also started a new position in Ashmore following addition to the UK winners list. Ashmore has a pre-eminent position in Emerging Market debt. Throughout the cycle Ashmore's robust balance sheet has allowed it to pay a decent dividend, invest/acquire selectively and grow from a position of strength. Given concerns around Emerging Markets in the summer, its valuation was back at highly attractive levels with a 4% yield.

In December we started a position in St James' Place. This wealth adviser has demonstrated an ability to continue to grow assets under management over time, delivering net inflows from client wealth creation and addition of new advisers. The stock has an attractive yield at 5% and while inflows are slowing due to UK market uncertainty, they are still positive and the dividend was increased by 12.5% last year.

Inchcape, another new position at the end of 2018, is a distributor of cars globally, with strong market positions in Asia, Australia and Latin America, plus a UK business. The shares have been weak due to concerns around new car sales, but these have been impacted by temporary testing issues and we see this as a good opportunity to build a position in high quality distribution business with a 4.5% yield.

Diversified Gas & Oil ("DGOC") is a mid-cap gas producer in the Eastern US. Historically, we have been cautious of this sector due to cyclicality and the high level of risk inherent in oil & gas exploration. DGOC is different, as it is exposed to US natural gas, for which the price has been very stable in recent years at a low level that still allows the company to deliver healthy profits. Growth comes from bolt on deals and near field drilling rather than exploration and recent acquisitions of cash generative assets should allow for meaningful dividend growth. The company is AIM listed but intends to transfer to the main market.

We also started a new position in Abcam. This is a high quality company producing antibodies for use in medical research. It has delivered sustainable growth over time and is well positioned to continue to do so, with the launch of additional innovative products to provide upside optionality. The yield is low, but has been a source of dividend growth over time, with an 18% increase last year.

The final new position was Howden Joinery. This company is the largest manufacturer of kitchens in the UK, supplying exclusively to trade customers. The company provides attractive access to the domestic economy (where the portfolio has been underweight) with strong quantitative quality metrics, such as high return on invested capital and high margins. Its leading market share and vertical integration make it a resilient business, generating 7% free cashflow yield.

Moving onto the positions we exited throughout the year.

Nestle was a sub scale positon in the portfolio, and while we recognise the long term growth potential and defensive nature of the business, the outlook for growth from consumer goods has slowed from recent years and there is not sufficient difference to consensus to merit a position in what is a relatively concentrated portfolio, especially given the yield is below market levels.

We also sold out of Rolls Royce. The stock has performed well on a two year view, with new management delivering a compelling investment case based on significant improvement in free cash flow by 2020. We have limited conviction in the delivery of this target, however, and the current yield does not merit the risk.

The decision was taken to exit the position in Gima following a downgrade of the stock to a sell rating by our analyst. Recent updates from Gima's main client have indicated that volumes could be reduced, something that is not yet reflected in expectations.

In the middle of 2018 we exited a number of positions that performed well earlier in the year. Rotork and Big Yellow Group are high quality companies that can continue to deliver stable growth, but appeared more fully valued in mid-2018. We also sold the holding in Compass Group: another very well run company, but likely to face pressure from wage growth and increased competition. Finally, we exited Manx Telecom following a downgrade from our sector analyst who sees limited ability for the company to grow in its home market.

Moving into 2019, we took the decision to sell out of Sage. This was a relatively recent reintroduction to the portfolio in the second half of 2018, but with the shares outperforming the market by over 10% the valuation looked more reasonable. Given more attractive valuations and yields elsewhere we chose to move on.

In February we sold out of Kone. The company, which manufactures and maintains lift equipment, has held up well despite signals for slowing growth globally and increasing risk of slowing in China which is its most important market. With the dividend yield below market levels and an earnings multiple of 23x we decided to move to more keenly valued names with higher income.

Finally, we also sold out of a small remaining position in RELX in February. This is a high quality company, but concerns are rising about its pricing power in academic publishing. With a relatively low yield and the share price at the top of its range we decided to take profits for now. However, we will continue to monitor the company as we appreciate the merits of the business model and an extremely high quality management team.

Stewardship

We believe that, as long term owners of the businesses in which we are invested, it is not sufficient merely to seek out assets that we believe to be undervalued, it is also incumbent upon us to take a proactive approach to our stewardship of these companies. Therefore, we engage extensively with our investee companies. We have attended a range of meetings with chairmen, non-executive directors and other stakeholders. Topics covered have included the composition of the board, environmental and social issues, and remuneration. Risk is a very broad subject that is interpreted in varying manners by different companies. However, by engaging on this subject we secure a deeper understanding of how the boards of our investee companies perceive and seek to manage these issues. Such interactions also enable us to push for improved disclosure and better management practices and on occasion different decisions where appropriate. We have had conversations regarding companies' financing choices. We find that it is always worthwhile communicating our preference for conservatively structured balance sheets that place a company's long term fortunes ahead of possible short term share price gains. Such activity is by its nature time consuming but we regard it as an integral aspect of our role as long term investors.

Outlook

The second half of 2018 was a tough time for stock markets, and the defensive nature of the Company's portfolio allowed it to outperform. We have seen a bounce in the market in the first quarter of 2019 and the Company's performance has kept pace with it. That bounce now means valuations are largely back where they were before the last quarter of 2018, with a price to earnings multiple of just below 13x. With the recovery priced in it is now prudent not to ignore the data that prompted a sell-off in the first place and we maintain a relatively cautious outlook, especially given our longer term approach to investing. Although valuations have rebounded, economic data still points to slowing growth and a lack of confidence from business in the UK and in Continental Europe. While we do not expect to see a recession in 2019, it is clear that we are getting closer to the end of the economic cycle. That cycle has likely been extended now that the risk of the Federal Reserve raising interest rates too quickly or aggressively has been removed. But markets are now pricing in a continuation of current trends, so at the very least the easy re-rating of stocks after the late-2018 panic is now done.

The UK, frustratingly, still feels in a holding pattern until Brexit is resolved - something that now may not happen until October. A no-deal exit seems unlikely, but we now have to be aware of the risk of a change in government. To say that is a risk does not reflect any political bias: Labour policies have clearly been less market friendly than those of the current government and this outcome raises the possibility of a de-rating of UK equities compared to other markets. Sectors such as utilities, which are exposed to nationalisation, and financial services, which are exposed to regulation, would be most impacted, but we would expect the negative implications to be reflected in an increased country discount factor applied to all UK stocks.

The cautious outlook on the market needs to be considered in our investment decisions, but it should not be seen as a barrier to achieving returns. Many high quality companies have managed to grow their earnings and dividends through the cycle and these are exactly the kind of companies we are looking for. While Vodafone, one of the Company's holdings, has announced a cut in its dividend, dividend growth in general for UK companies is forecast to remain positive in 2019, albeit at a lower rate of increase than in previous years. Furthermore, the portfolio has proven to be defensive. The position in preference shares and the weighting to high quality companies naturally makes it resilient and it is positioned to continue to deliver a high level of income to investors. Furthermore, attractive valuations for UK, dividend paying, stocks means there are plenty of opportunities to find attractive entry points for companies that can deliver superior returns over the longer term, consistent with the Company's investment objective.

Aberdeen Asset Managers Limited

28 May 2019

INVESTMENT PORTFOLIO - EQUITIES

AS AT 31 MARCH 2019

INVESTMENT PORTFOLIO - OTHER INVESTMENTS

AS AT 31 MARCH 2019

DISTRIBUTION OF ASSETS AND LIABILITIES

DIRECTORS' REPORT (EXTRACT)

The Directors present their report and audited financial statements for the year ended 31 March 2019.

Results and Dividends

The financial statements for the year ended 31 March 2019 are contained below. Dividends paid and proposed for the year amounted to 13.2p per Ordinary share.

First, second and third interim dividends for the year, each of 3.0p per Ordinary share, were paid on 26 October 2018, 25 January 2019 and 26 April 2019 respectively. The Directors recommend a final dividend of 4.2 per Ordinary share, payable on 26 July 2019 to shareholders on the register on 5 July 2019. The ex-dividend date is 4 July 2019. Under International Financial Reporting Standards ("IFRS") the third interim and final dividends will be accounted for in the financial year ended 31 March 2020. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.

Investment Trust Status

The Company is registered as a public limited company (registered in England and Wales No. 00386561) and is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company has been approved by HM Revenue & Customs as an investment trust subject to it continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 April 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 March 2019 so as to enable it to comply with the ongoing requirements for investment trust status.

Individual Savings Accounts

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

Capital Structure

During the year the Company issued 157,000 Ordinary shares of 50p each under its non pre-emptive allotment authority, raising £396,000 in aggregate on a non-dilutive basis. The issued Ordinary share capital at 31 March 2019 consisted of 30,154,580 Ordinary shares of 50p each and 50,000 3.5% Cumulative Preference Shares of £1 each. A further 150,000 Ordinary shares have been issued since the year end and up to the date of this Report.

Each Ordinary and Cumulative Preference share carries one vote at general meetings of the Company. The Cumulative Preference shares carry a right to receive a fixed rate of dividend and, on a winding up of the Company, to the payment of such fixed cumulative preferential dividends to the date of such winding up and to the repayment of the capital paid up on such shares in priority to any payment to the holders of the Ordinary shares.

The Ordinary shares, excluding any treasury shares, carry a right to receive dividends and, on a winding up or other return of capital, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

There are no restrictions on the transfer of Ordinary or Cumulative Preference shares in the Company other than certain restrictions which may from time to time be imposed by law.

Management Agreement

The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML"), a wholly owned subsidiary of Standard Life Aberdeen plc, as its alternative investment fund manager. ASFML has been appointed to provide investment management, risk management, administration and company secretarial services and promotional activities to the Company. The Company's portfolio is managed by Aberdeen Asset Managers Limited ("AAML") by way of a group delegation agreement in place between ASFML and AAML. In addition, ASFML has sub-delegated administrative and secretarial services to Aberdeen Asset Management PLC and promotional activities to AAML. Details of the management fee and fees payable for promotional activities are shown in notes 4 and 5 to the financial statements.

The management agreement is terminable on not less than six months' notice. In the event of termination by the Company on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period.

Substantial Interests

As at 31 March 2019, the following interests in the issued Ordinary share capital of the Company had been disclosed in accordance with the requirements of the FCA's Disclosure Guidance and Transparency Rules:

A Non-beneficial interest

There have been no changes notified to the Company between the year end and the date of approval of this Report.

Directors

The Board comprises four non-executive Directors, each of whom is considered by the Board to be independent of the Company and the Manager.

Mr Robson is a non-executive director of Witan Pacific Investment Trust PLC ("WPC"). WPC operates a multi-manager structure and Aberdeen Standard Investments (Asia) Limited, part of the Standard Life Aberdeen Group, manages a part of WPC's assets. Notwithstanding this relationship and the fact that Mr Robson has served as a Director of the Company for 11 years, the remainder of the Board is unanimous in its opinion that Mr Robson remains independent in his role as a Director of the Company.

The Directors attended scheduled Board and Committee meetings during the year ended 31 March 2019 as shown in the following table (with their eligibility to attend the relevant meetings in brackets):

The Board meets more frequently when business needs require require and has regular dialogue between formal board meetings, including with the Manager.

Under the terms of the Company's Articles of Association, Directors must retire and be subject to appointment at the first Annual General Meeting after their appointment by the Board, and be subject to re-appointment every three years thereafter. Directors with more than nine years' service are subject to annual re-appointment. However, in light of the publication of the UK Code of Corporate Governance in July 2018 which stipulates that all directors of a Company with a premium listing should seek annual re-election, the Board has decided that all Directors will retire annually with effect from the Annual General Meeting in 2019. Accordingly, Messrs Archibald, Robson and Talbut and Ms Glen will retire at the Annual General Meeting and, being eligible, offer themselves for re-appointment.

The Board believes that all the Directors seeking re-appointment remain independent of the Manager and free from any relationship which could materially interfere with the exercise of their judgement on issues of strategy, performance, resources and standards of conduct. The Board believes that each Director has the requisite high level and range of business, investment and financial experience which enables the Board to provide clear and effective leadership and proper governance of the Company. Mr Talbut has extensive fund management experience and has held a number of senior positions in the financial services sector, Mr Robson is a Chartered Accountant and brings a wide range of accounting and financial experience to the Board, Ms Glen is a lawyer who has held significant roles within the financial services sector and Mr Archibald, who is also a Chartered Accountant, has significant corporate finance experience within the investment trust sector. All of the Board members have substantial experience of serving as directors, including as non-executive directors of investment companies.

Following formal performance evaluations, each Director's performance continues to be effective and each Director demonstrates commitment to the role. Their individual performances contribute to the long-term sustainable success of the Company. The Board therefore recommends the re-appointment of each of the Directors at the Annual General Meeting.

Directors' and Officers' Liability Insurance

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. In addition, the Company has entered into a separate deed of indemnity with each of the Directors reflecting the scope of the indemnity in the Articles of Association. Under the Articles of Association, each Director is entitled to be indemnified out of the assets of the Company to the extent permitted by law against any loss or liability incurred by him or her in the execution of his or her duties in relation to the affairs of the Company.

Management of Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, each Director prepares a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his or her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his or her wider duties is affected. Each Director is required to notify the Company Secretary of any potential, or actual, conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

No Director has a service contract with the Company although all Directors are issued with letters of appointment. Other than the deeds of indemnity referred to above and the Directors' letters of appointment, there were no contracts during, or at the end of the year, in which any Director was interested.

The Company has a policy of conducting its business in an honest and ethical manner. The Company takes a zero-tolerance approach to bribery and corruption and has procedures in place that are proportionate to the Company's circumstances to prevent them. The Manager also adopts a group-wide zero-tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption. Copies of the Manager's anti-bribery and corruption policies are available on its website.

In relation to the corporate offence of failing to prevent tax evasion, it is the Company's policy to conduct all business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion whether under UK law or under the law of any foreign country and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships.

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code as published in April 2016 (the "UK Code") which is available on the Financial Reporting Council's website: frc.org.uk.

The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance as published in July 2016 (the "AIC Code") by reference to the AIC Corporate Governance Guide for investment Companies (the "AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment trusts. The AIC Code and AIC Guide are available on the AIC's website: theaic.co.uk.

The Board considers that reporting in accordance with the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders.

The Board confirms that, during the year, the Company complied with the recommendations of the AIC Code

and the relevant provisions of the UK Code, except as set out below.

The UK Code includes provisions relating to:

- the role of the chief executive (A.1.2);

- executive directors' remuneration (D.1.1 and D.1.2); and

- the need for an internal audit function (C.3.6).

For the reasons set out in the AIC Guide, and as explained in the UK Code, the Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions.

The full text of the Company's Corporate Governance Statement will be available on its website.

The Board notes the content of the new UK Code of Corporate Governance published by the FRC in July 2018 (the "2018 UK Code"), which is applicable for accounting periods beginning on or after 1 January 2019, and the new AIC Code of Corporate Governance published in February 2019 (the "2019 AIC Code"). The Board expects the Company to be compliant with the relevant provisions of the new codes for the year ending 31 March 2020 and will report its compliance in next year's Annual Report.

The Board and its Committees

Mr Talbut is the Chairman of the Board. Mr Robson has been appointed Senior Independent Director with effect from 16 May 2019.

The Board has appointed committees with specific responsibilities as set out below. Copies of the terms of reference of each committee are available on the Company's website, or upon request from the Company.

The Company does not have, or require, a specific nominations committee but the business of nominations and succession planning is covered regularly as part of routine Board business.

Audit Committee

The Audit Committee comprises all Directors of the Company and is chaired by Mr Robson. From the conclusion of the Annual General Meeting on 4 July 2019, the Audit Committee will be chaired by Mr Archibald.

Management Engagement Committee

The Management Engagement Committee comprises all Directors of the Company and is chaired by Mr Talbut. The purpose of the Committee is to review the terms of the agreements with the Manager including, but not limited to, the management fee, and also to review the performance of the Manager in relation to the achievement of the Company's objectives. These reviews were conducted during the year and the outcomes are noted below. In addition, the Committee conducts an annual review of the performance, terms and conditions of the Company's other main third party suppliers.

The key terms of the management agreement and fees payable to the Manager are set out above and in notes 4 and 5 to the financial statements. The Board believes the fee arrangements are competitive with reference to other investment trusts with a similar investment mandate and are priced appropriately given the level of service provided by the Standard Life Aberdeen Group. As stated above, the Committee reviews the performance of the Manager annually. The Board is satisfied with the Company's performance since the appointment of the Standard Life Aberdeen Group as Manager in 2008 and believes that the Investment Manager has positioned the portfolio well in order to seek to achieve good medium-term and long-term performance in line with the Company's investment objective. It therefore considers the continuing appointment of the Manager on the terms agreed to be in the best interests of shareholders at this time.

Remuneration Committee

The Remuneration Committee comprises all Directors and is chaired by Ms Glen. The Committee's duties include reviewing the Company's remuneration policy and determining Directors' remuneration.

Going Concern

The Company's assets comprise mainly readily realisable securities which can be sold to meet funding commitments if necessary. The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants. The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of this Report. For these reasons, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Accountability and Audit

Each Director confirms that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and they have taken all the steps that they could reasonably be expected to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

Independent Auditor

The Company's Auditor, Ernst & Young LLP, has indicated its willingness to remain in office. The Board will place resolutions before the Annual General Meeting to re-appoint Ernst & Young LLP as Auditor for the ensuing year and to authorise the Directors to determine its remuneration.

Relations with Shareholders

The Directors place a great deal of importance on communication with shareholders. Shareholders and investors may obtain up to date information on the Company through its website and the Manager's Customer Services Department.

All shareholders have the opportunity to put questions to the Board at the Annual General Meeting and a presentation from the Investment Manager covers the investment performance and strategy during the financial year and the outlook for the year ahead.

Representatives from the Board make themselves available to meet with institutional shareholders in order to gauge their views. The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the management group (including the Company Secretary or the Manager) in situations where direct communication is required. In addition, the Company Secretary only acts on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds personally as appropriate.

It is the Company's aim to give at least 20 working days' notice to shareholders of the Annual General Meeting. As recommended by the AIC Code, the Company makes available the proxy votes cast at general meetings.

Annual General Meeting

The Annual General Meeting will be held at the offices of Standard Life Aberdeen plc, Bow Bells House, 1 Bread Street, London EC4M 9HH on Thursday 4 July 2019 at 12 noon.

By order of the Board

Aberdeen Asset Management PLC

Company Secretary

1 George Street

Edinburgh EH2 2LL

28 May 2019

STATEMENT OF COMPREHENSIVE INCOME

BALANCE SHEET

The accompanying notes are an integral part of these financial statements. ​​​STATEMENT OF CHANGES IN EQUITY

CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2019