Annual Financial Report

RNS Number : 3802A

Shires Income PLC

29 May 2019

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

Net asset total return^A		Share price total return^A
2019	+4.0%	2019	+8.0%
2018	+3.3%	2018	+12.2%
Benchmark index total return		Earnings per share (revenue)
2019	+6.4%	2019	13.06p
2018	+1.2%	2018	13.69p
Dividend per Ordinary share		Dividend yield^A
2019	13.20p	2019	4.9%
2018	13.00p	2018	5.0%
^A Alternative Performance Measure

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

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:

KPI	Description
Performance of NAV	The Board considers the Company's NAV total return figures to be the best indicator of performance over time and this is therefore the main indicator of performance used by the Board.
Revenue return per Ordinary share	The Board monitors the Company's net revenue return (earnings per share).
Dividend per share	The Board monitors the Company's annual dividends per Ordinary share and the extent to which dividends are covered by current net revenue and revenue reserves.
Performance against benchmark index	The Board measures performance over the medium to long term, on a total return basis against the benchmark index - the FTSE All-Share Index (total return).
Share price performance	The Board monitors the performance of the Company's share price on a total return basis.
Discount/premium to NAV	The discount/premium relative to the NAV per share represented by the share price is closely monitored by the Board.
Ongoing charges	The Board monitors the Company's operating costs carefully.

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.

Description

Mitigating Action

Investment performance -

performance of the portfolio when measured against the benchmark.

The Board meets the Manager on a regular basis and keeps investment performance under close review. Representatives of the Investment Manager attend all Board meetings and a detailed formal appraisal of the Standard Life Aberdeen Group is carried out annually by the Management Engagement Committee.

The Board sets, and monitors, the investment restrictions and guidelines, and receives regular reports which include performance reporting on the implementation of the investment policy, the investment process, risk management and application of the guidelines.

Investment risk within the portfolio is managed in three ways:

- Adherence by the Investment Manager to the investment process in order to minimise investments in poor quality companies and/or overpaying.

- Diversification of investment - seeking to invest in a wide variety of companies with strong balance sheets and the earnings power to pay increasing dividends. In addition, investments are diversified by sector in order to reduce the risk of a single large exposure. The Company invests mainly in equities, preference shares and convertibles.

- Adherence by the Investment Manager to the investment limits set by the Board.

Investment in UK smaller companies

Rather than holding a number of smaller companies' shares, the Company invests indirectly into this part of the equity market through one holding in Aberdeen Smaller Companies Income Trust PLC, which is also managed by the Manager. The Directors regularly review this holding (representing 8.7% of the Company's portfolio). All of the directors of Aberdeen Smaller Companies Income Trust PLC are independent of Shires Income PLC. The Manager does not charge any management fee in respect of the amount of the Company's assets attributable to this holding.

Investment in preference shares

The Company has longstanding holdings in a number of preference shares with no fixed redemption dates (representing 25.3% of the Company's portfolio). The Directors regularly review these investments, which are held primarily to enhance the income generation of the Company. By their nature, their price movements will be subject to a number of factors and, in normal market conditions, will tend to respond less to pricing movements in equity markets. Issue sizes of these preference shares are normally relatively small and with associated low secondary market liquidity. The Board also considers the long-term nature of these investments and the impact of any potential changes on duration on the portfolio and its returns.

In view of the proposal by Aviva plc in March 2018, which was subsequently withdrawn, to cancel certain preference share issuances at par, there remains some uncertainty over the longer-term future prospects for preference shares in general, and the Board and the Manager will keep them closely under review. However, the Board has reviewed the potential for securing alternative high income streams from other fixed income securities and believe that such options might be available to the Company.

Failure to maintain and grow the dividend over the longer term - the level of the Company's dividends and future dividend growth will depend on the performance of the underlying portfolio.

The Directors review detailed income forecasts at each Board meeting. The Company has built up significant revenue reserves which can be drawn upon should there be a shortfall in revenue returns in a year, in order to maintain dividend payments.

Widening of discount - a number of factors including the setting of an unattractive strategic investment proposition, changing investor demand and investment underperformance may lead to a decrease in demand for the Company's shares and a widening of the difference between the share price and the net asset value per share.

The Board monitors the Company's Ordinary share price relative to the net asset value per share and keeps the level of discount or premium at which the Company's shares trade under review. The Board also keeps the investment objective and policy under review and holds an annual strategy meeting where it reviews investor relations reports and updates from the Investment Manager and the Company's Broker.

The Directors are updated at each Board meeting on the composition of, and any movements in, the shareholder register, which is retail investor dominated.

Gearing - a fall in the value of the Company's investment portfolio could be exacerbated by the impact of gearing. It could also result in a breach of loan covenants.

The Board sets the gearing limits within which the Investment Manager can operate. Gearing levels and compliance with loan covenants are monitored on an ongoing basis by the Manager and at regular Board meetings. In the event of a possible impending covenant breach, appropriate action would be taken to reduce borrowing levels. The financial covenants attached to the Company's borrowings currently provide for significant headroom. The maximum equity gearing level is 35% of net assets at the time of draw down, which constrains the amount of gearing that can be invested in equities which are more volatile than the fixed interest part of the portfolio.

The Company's gearing can be reduced without any significant financial penalties for early repayment and at relatively short notice.

The Board and the Investment Manager keep under review options available to protect a portion of the portfolio from a sudden decline in markets.

Operational - the Company is dependent on third parties for the provision of all systems and services (in particular, those of the Standard Life Aberdeen Group) and any control failures and gaps in their systems and services could result in a loss or damage to the Company.

The Board receives reports from the Manager on its internal controls and risk management and receives assurances from all its other significant service providers on at least an annual basis, including on matters relating to cyber security. Written agreements are in place with all third party service providers.

The Manager monitors closely the control environments and quality of services provided by third parties, including those of the Depositary and Custodian, through service level agreements, regular meetings and key performance indicators.

Regulatory - failure to comply with relevant laws and regulations could result in fines, loss of reputation and potentially loss of an advantageous tax regime.

The Board and Manager monitor changes in government policy and legislation which may have an impact on the Company and the Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager.

The Board is kept aware of proposed changes to laws and regulations, considers the changes and applies them as appropriate, if they are not already being met.

From time to time the Board employs external advisers to advise on specific matters.

Financial, economic and political - the financial, economic and political risks associated with the portfolio could result in losses to the Company.

The financial and economic risks associated with the Company include market risk, liquidity risk and credit risk, all of which the Investment Manager seeks to mitigate. Further details of the steps taken to mitigate the financial risks associated with the portfolio are set out in note 18 to the financial statements.

Political risk includes a disorderly exit from the European Union, any regulatory changes resulting from a different political environment, and wider geo-political issues.

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

	31 March 2019	31 March 2018	% change
Total investments	£94,971,000	£96,541,000	-1.6
Shareholders' funds	£80,057,000	£80,465,000	-0.5
Market capitalisation^A	£80,513,000	£77,994,000	+3.2
Net asset value per share	265.49p	268.24p	-1.0
Share price	267.00p	260.00p	+2.7
Premium/(discount) to NAV (cum-income)^B	0.6%	(3.1%)

Net gearing^B	19.6%	20.8%

Dividend and earnings
Revenue return per share^C	13.06p	13.69p	-4.6
Dividend per share^D	13.20p	13.00p	+1.5
Dividend cover^B	0.99	1.05
Revenue reserves^E	£6,819,000	£6,795,000

Operating costs
Ongoing charges ratio^B	0.98%	0.95%
^A Represents the number of Ordinary shares in issue in the Company multiplied by the Company's share price.
^B Considered to be an Alternative Performance Measure.
^C Measures the revenue earnings for the year divided by the weighted average number of Ordinary shares in issue (see Statement of Comprehensive Income).
^D The figures for dividend per share reflect the years in which they were earned (see note 9).
_E The revenue reserve figure does not take account of payment of the third interim or final dividend amounting to £2,178,000 (2018 - £2,100,000) combined.

PERFORMANCE (TOTAL RETURN)

	1 year	3 year	5 year
	% return	% return	% return
Net asset value^A	+4.0	+33.7	+36.4
Share price^A (based on mid-market)	+8.0	+54.5	+37.0
FTSE All-Share Index	+6.4	+31.3	+34.5

^A Considered to be an Alternative Performance Measure.
All figures are for total return and assume re-investment of net dividends excluding transaction costs.
Source: Aberdeen Standard Fund Managers, Morningstar & Factset

DIVIDENDS

	Rate per share	xd date	Record date	Payment date
First interim dividend	3.00p	4 October 2018	5 October 2018	26 October 2018
Second interim dividend	3.00p	3 January 2019	4 January 2019	25 January 2019
Third interim dividend	3.00p	4 April 2019	5 April 2019	26 April 2019
Proposed final dividend	4.20p	4 July 2019	5 July 2019	26 July 2019
	_______
2018/19	13.20p
	_______

First interim dividend	3.00p	5 October 2017	6 October 2017	27 October 2017
Second interim dividend	3.00p	4 January 2018	5 January 2018	26 January 2018
Third interim dividend	3.00p	5 April 2018	6 April 2018	27 April 2018
Final dividend	4.00p	5 July 2018	6 July 2018	27 July 2018
	_______
2017/18	13.00p
	_______

TEN YEAR FINANCIAL RECORD

Year to 31 March	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Revenue available for ordinary dividends (£'000)	3,512	3,292	3,615	3,556	3,789	3,877	3,617	3,925	4,106	3,920
Per share (p)
Net revenue earnings	11.8	11.1	12.2	11.9	12.6	12.9	12.1	13.1	13.7	13.1
Net dividends paid/proposed	12.00	12.00	12.00	12.00	12.00	12.25	12.25	12.75	13.00	13.20
Net total earnings	85.3	22.6	7.4	53.5	26.0	23.1	(17.8)	54.5	9.4	10.3
Net asset value	186.8	197.5	192.9	234.4	248.4	259.5	229.4	271.6	268.2	265.5
Share price (mid-market)	184.0	190.0	194.5	233.0	252.3	252.0	202.0	243.3	260.0	267.0
	____	_____	____	_____	____	____	____	____	____	_____
Shareholders' funds (£m)	55.5	58.6	57.3	70.3	78.7	77.8	68.8	81.5	80.5	80.1
	____	_____	____	_____	____	____	____	____	____	_____

The figures for 2011 to 2019 are for the Company only, following the dissolution of the subsidiaries in May 2011.

CUMULATIVE PERFORMANCE ^A

Rebased to 100 at 31 March 2006

As at 31 March	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Net asset value	100.0	157.3	166.2	162.4	197.3	209.1	218.5	193.1	228.7	225.8	223.5
Net asset value total return^A	100.0	177.0	199.5	207.8	268.3	299.2	328.1	305.2	379.9	392.6	408.2
Share price performance	100.0	168.8	174.3	178.4	213.8	231.4	231.2	185.3	223.2	238.5	245.0
Share price total return^A	100.0	190.9	210.2	229.8	292.2	333.1	349.4	295.5	376.6	422.6	456.4
Benchmark performance	100.0	146.7	154.6	151.3	170.4	179.2	184.6	171.1	201.1	196.3	200.5
Benchmark total return^A	100.0	152.3	165.6	167.9	196.0	213.3	227.3	218.4	266.4	269.7	286.8

NAV figures are based on Company only values following the dissolution of the subsidiaries in May 2011.
^ATotal return figures are based on reinvestment of net income.

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.

	2019	2018	2017	2016	2015
	%	%	%	%	%
Ordinary dividends	58.5	59.1	54.0	53.0	54.6
Preference dividends	34.4	33.0	35.8	37.7	35.0
Aberdeen Smaller Companies	4.9	4.4	4.6	4.8	4.3
Fixed interest and bank interest	0.2	0.1	0.1	0.2	0.2
Traded option premiums	2.0	3.4	5.5	4.3	5.9
Total	100.0	100.0	100.0	100.0	100.0

Total income (£'000s)	4,712	4,916	4,695	4,361	4,665

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

	Valuation	Total	Valuation
	2019	portfolio	2018
Company	£'000	%	£'000
Aberdeen Smaller Companies Income Trust	8,301	8.7	8,769
BP	3,481	3.7	2,090
Royal Dutch Shell 'B'	3,229	3.4	3,028
Prudential	2,695	2.8	2,641
British American Tobacco	2,444	2.6	2,954
AstraZeneca	2,216	2.3	2,864
Chesnara	2,066	2.2	3,007
Vodafone	1,983	2.1	2,083
Imperial Brands	1,902	2.0	1,286
St. James Place	1,865	2.0	-
Ten largest investments	30,182	31.8
HSBC Holdings	1,789	1.9	1,910
GlaxoSmithKline	1,755	1.8	2,453
Diageo	1,682	1.8	1,148
John Laing	1,663	1.8	-
Croda International	1,605	1.7	1,455
Unilever	1,604	1.7	2,986
London Stock Exchange	1,584	1.7	-
Unibail-Rodamco	1,545	1.6	1,311
GVC Holdings	1,533	1.6	-
National Grid	1,520	1.6	1,115
Twenty largest investments	46,462	49.0
Rio Tinto	1,472	1.5	975
BHP Billiton	1,459	1.5	2,049
Saga	1,372	1.5	-
Close Brothers	1,315	1.4	1,500
Standard Chartered	1,300	1.4	1,158
Schroders	1,276	1.3	1,642
Diversified Gas & Oil	1,218	1.3	-
Associated British Foods	1,170	1.2	473
Novo-Nordisk	1,170	1.2	886
Assura	1,091	1.1	1,101
Thirty largest investments	59,305	62.4
Telecom Plus	1,087	1.1	739
Experian	1,087	1.1	1,199
Bodycote	1,080	1.1	-
Countryside Properties	989	1.0	-
Weir Group	955	1.0	1,207
Inchcape	904	1.0	-
Ultra Electronic Holdings	684	0.7	593
BBA Aviation	640	0.7	1,371
Howden Joinery	627	0.7	-
Londonmetric Property	578	0.6	995
Forty largest investments	67,936	71.4
Abcam	547	0.6	-
Nordea Bank	519	0.5	1,296
Ashmore	458	0.5	-
Euromoney Institutional Investor	440	0.5	428
Inmarsat	350	0.4	828
Hansteen	150	0.2	392
Total equity investments	70,400	74.1

INVESTMENT PORTFOLIO - OTHER INVESTMENTS

AS AT 31 MARCH 2019

	Valuation	Total	Valuation
	2019	portfolio	2018
Company	£'000	%	£'000
Convertibles
Balfour Beatty Cum Conv 10.75p 01/07/2020	530	0.6	550
	______	______
Total Convertibles	530	0.6
	______	______
Preference shares_A
Ecclesiastical Insurance Office 8 5/8%	6,106	6.4	6,233
Royal & Sun Alliance 7 3/8%	5,220	5.5	5,699
General Accident 7.875%	4,329	4.6	4,896
Santander 10.375%	4,209	4.4	4,816
Standard Chartered 8.25%	3,348	3.5	3,842
R.E.A. Holdings 9%	829	0.9	1,086
	______	______
Total Preference shares	24,041	25.3
	______	______
Total Other Investments	24,571	25.9
	______	______
Total Investments	94,971	100.0
	______	______

^A None of the preference shares listed above have a fixed redemption date.
Purchases and/or sales of portfolio holdings effected during the year result in 2018 and 2019 values not being directly comparable.

DISTRIBUTION OF ASSETS AND LIABILITIES

			Movement during the year
	Valuation at				Gains/	Valuation at
	31 March 2018		Purchases	Sales	(losses)	31 March 2019
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	69,419	86.2	22,743	(23,742)	1,980	70,400	87.9
Convertibles	550	0.7	-	-	(20)	530	0.7
Preference shares	26,572	33.0	-	(100)	(2,431)	24,041	30.0
Total investments	96,541	119.9	22,743	(23,842)	(471)	94,971	118.6
Current assets	3,197	4.0				4,323	5.4
Current liabilities	(9,276)	(11.5)				(9,239)	(11.5)
Non current liabilities	(9,997)	(12.4)				(9,998)	(12.5)
	______	______				______	______
Net assets	80,465	100.0				80,057	100.0
	______	______				______	______
Net asset value per Ordinary share	268.2p					265.5p
	______					______

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:

Shareholder	Number of Ordinary shares held	% of Ordinary shares held
Aberdeen Asset Managers Limited Retail Plans^A	5,498,534	18.2

^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):

Director	Board	Audit Committee	Management Engagement Committee	Remuneration Committee
Robert Talbut	5 (5)	2 (2)	1 (1)	1 (1)
Robin Archibald	5 (5)	2 (2)	1 (1)	1 (1)
Marian Glen	5 (5)	2 (2)	1 (1)	1 (1)
Andrew Robson	5 (5)	2 (2)	1 (1)	1 (1)

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

		Year ended			Year ended
		31 March 2019			31 March 2018
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Losses on investments at fair value	11	-	(466)	(466)	-	(2,357)	(2,357)
Currency gains/(losses)		-	14	14	-	(37)	(37)

Income	3
Dividend income		4,536	-	4,536	4,665	-	4,665
Interest income		5	-	5	1	1,482	1,483
Stock dividends		74	-	74	79	-	79
Traded option premiums		94	-	94	167	-	167
Money market interest		3	-	3	4	-	4
		_______	_______	______	_______	_______	_______
		4,712	(452)	4,260	4,916	(912)	4,004
		_______	_______	______	_______	_______	_______
Expenses
Management fee	4	(203)	(203)	(406)	(215)	(215)	(430)
Administrative expenses	5	(372)	-	(372)	(404)	-	(404)
Finance costs	7	(173)	(173)	(346)	(172)	(172)	(344)
		_______	_______	______	_______	_______	_______
		(748)	(376)	(1,124)	(791)	(387)	(1,178)
		_______	_______	______	_______	_______	_______
Profit/(loss) before taxation		3,964	(828)	3,136	4,125	(1,299)	2,826

Taxation	8	(44)	-	(44)	(19)	-	(19)
		_______	_______	______	_______	_______	_______
Profit/(loss) attributable to equity holders of the Company		3,920	(828)	3,092	4,106	(1,299)	2,807
		_______	_______	______	_______	_______	_______
Earnings per Ordinary share (pence)	10	13.06	(2.76)	10.30	13.69	(4.33)	9.36
		_______	_______	______	_______	_______	_______

The Company does not have any income or expense that is not included in profit for the year, and therefore the "Profit for the year" is also the "Total comprehensive income for the year", as defined in IAS 1 (revised).
The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these financial statements.

BALANCE SHEET

		As at	As at
		31 March 2019	31 March 2018
	Notes	£'000	£'000
Non-current assets
Ordinary shares		70,400	69,419
Convertibles		530	550
Preference shares		24,041	26,572
		__________	__________
Securities at fair value	11	94,971	96,541
		__________	__________
Current assets
Other receivables	12	1,410	935
Cash and cash equivalents		2,913	2,262
		__________	__________
		4,323	3,197
		__________	__________
Creditors: amounts falling due within one year
Other payables		(239)	(276)
Short-term borrowings		(9,000)	(9,000)
		__________	__________
	13	(9,239)	(9,276)
		__________	__________
Net current liabilities		(4,916)	(6,079)
		__________	__________
Total assets less current liabilities		90,055	90,462

Non-current liabilities
Long-term borrowings	13	(9,998)	(9,997)
		__________	__________
Net assets		80,057	80,465
		__________	__________
Share capital and reserves
Called-up share capital	15	15,127	15,049
Share premium account		19,626	19,308
Capital reserve	16	38,485	39,313
Revenue reserve		6,819	6,795
		__________	__________
Equity shareholders' funds		80,057	80,465
		__________	__________
Net asset value per Ordinary share (pence)	17	265.49	268.24
		__________	__________

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

STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2019
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2018	15,049	19,308	39,313	6,795	80,465
Issue of ordinary share	78	318	-	-	396
(Loss)/profit for the year	-	-	(828)	3,920	3,092
Equity dividends (see note 9)	-	-	-	(3,896)	(3,896)
	_______	________	_______	_______	_______
As at 31 March 2019	15,127	19,626	38,485	6,819	80,057
	_______	________	_______	_______	_______

Year ended 31 March 2018
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2017	15,049	19,308	40,612	6,508	81,477
(Loss)/profit for the year	-	-	(1,299)	4,106	2,807
Equity dividends (see note 9)	-	-	-	(3,819)	(3,819)
	_______	________	_______	_______	_______
As at 31 March 2018	15,049	19,308	39,313	6,795	80,465
	_______	________	_______	_______	_______

The Company has aggregate realised and distributable reserves of £31,875,000 as at 31 March 2019 (2018 - £27,303,000), comprising capital reserve - realised of £25,056,000 (2018 - £18,805,000) and revenue reserve of £6,819,000 (2018 - £6,795,000). The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.

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

CASH FLOW STATEMENT

	Year ended	Year ended
	31 March 2019	31 March 2018
	£'000	£'000
Net cash inflow from operating activities
Dividend income received^A	4,440	4,740
Interest income received	5	-
Options premium received	67	176
Money market interest received	3	4
Management fee paid	(413)	(426)
Other cash expenses	(363)	(415)
	_________	__________
Cash generated from operations	3,739	4,079

Interest paid	(342)	(310)
Overseas tax paid	(45)	(26)
	_________	__________
Net cash inflows from operating activities	3,352	3,743
	_________	__________
Cash flows from investing activities
Purchases of investments{A}	(22,672)	(11,251)
Sales of investments	23,457	11,859
	_________	__________
Net cash inflow from investing activities	785	608
	_________	__________
Cash flows from financing activities
Equity dividends paid	(3,896)	(3,819)
Issue of Ordinary shares	396	-
Loan arrangement fees	-	(6)
	_________	__________
Net cash outflow from financing activities	(3,500)	(3,825)
	_________	__________
Increase in cash and cash equivalents	637	526
	_________	__________
Reconciliation of net cash flow to movements in cash and cash equivalents
Increase in cash and cash equivalents as above	637	526
Net cash and cash equivalents at start of year	2,262	1,773
Effect of foreign exchange rate changes	14	(37)
	_________	__________
Net cash and cash equivalents at end of year	2,913	2,262
	_________	__________

^A Non-cash dividends during the year comprised stock dividends of £74,000 (2018 - £79,000).

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2019

1.	Principal activity
	The Company is a closed-end investment company, registered in England and Wales No 00386561, with its Ordinary shares listed on the London Stock Exchange.

2.	Accounting policies
	(a)	Basis of accounting
		The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRSs") which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and International Financial Reporting Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.

		The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and thus, they continue to adopt the going concern basis in preparing the financial statements. Further detail is included in the Directors' Report (unaudited).

		The Company's financial statements are presented in sterling, which is also the functional currency as it is the currency in which shares are issued and expenses are generally paid. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.

		Where presentational guidance set out in the Statement of Recommended Practice ("SORP"): 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies ("AIC"), is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP issued in November 2014 and updated in February 2018 with consequential amendments.

		Significant accounting judgements, estimates and assumptions
		The preparation of financial statements requires the use of certain significant accounting judgements, estimates and assumptions which requires management to exercise its judgement in the process of applying the accounting policies and are continually evaluated. The Directors do not consider there to be any significant estimates within the financial statements. Special dividends are assessed and credited to capital or revenue according to their circumstances.

		New and amended accounting standards and interpretations
		At the date of authorisation of these financial statements, the following amendments to Standards and Interpretations were assessed to be relevant and are all effective for annual periods beginning on or after 1 January 2019:
		- IFRIC 23 - Uncertainty over Income Tax Treatments

		In addition, a number of Standards are subject to review under the Annual Improvements to IFRSs 2015 - 2017 Cycle, for annual periods beginning on or after 1 January 2019.

		The Company intends to adopt the Standards and Interpretations in the reporting period when they become effective and the Board does not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the Company's financial results in the period of initial application although there may be revised presentations to the Financial Statements and additional disclosures.

	(b)	Investments
		The Company classifies its investments based on their contractual cash flow characteristics and the Company's business model for managing the assets. The business model, which is the determining feature, is such that the portfolio of investments is managed, performance and risk is evaluated, on a fair value basis. The Manager is also compensated based on the fair value of the Company's assets. Consequently, all investments are measured at fair value through profit or loss.

		Investments are recognised and de-recognised at the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured at fair value. For listed investments, this is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange.

		Gains and losses arising from the changes in fair value are included in net profit or loss for the period as a capital item. Transaction costs are treated as a capital cost.

		The Company has adopted the classification and measurement provisions of IFRS 9 'Financial Instruments' which replaces IAS 39 'Financial Instruments: Recognition and Measurement'. It makes changes to classification and measurement of financial assets and introduces an 'expected credit loss' model for the impairment of financial assets.

		The adoption of IFRS 9 did not result in any change to the classification or measurement of financial instruments in either the current or prior year. The Company's investments remain classified as fair value through profit or loss. Under IAS 39 the Company carried its investments at fair value through profit or loss under a designation option; on adoption of IFRS 9, the investments are classified as fair value through profit or loss.

	(c)	Income
		The Company adopted IFRS 15 'Revenue from contracts with customers' on its effective date of 1 January 2018. IFRS 15 replaces IAS 18 'Revenue' and establishes a five-step model to account for revenue arising from contracts with customers. In addition, guidance on interest and dividend income have been moved from IAS 18 to IFRS 9 without significant changes to the requirements. Therefore, there was no impact of adopting IFRS 15 for the Company.

		Dividend income from equity investments, which have a discretionary dividend, is recognised when the shareholders' rights to receive payment have been established, normally the ex-dividend date.

		If a scrip dividend is taken in lieu of a cash dividend, the net amount of the cash dividend declared is credited to the revenue account. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised as capital.

		Interest from deposits is dealt with on an accruals basis.

		Underwriting commission is recognised when the underwriting services are provided and is taken to revenue, unless any shares underwritten are required to be taken up, in which case the proportionate commission received is deducted from the cost of the investment.

	(d)	Expenses
		All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, all expenses have been presented as revenue items except those where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Accordingly the management fee and finance costs have been allocated 50% to revenue and 50% to capital, in order to reflect the Directors' expected long-term view of the nature of the future investment returns of the Company.

	(e)	Borrowings
		Short-term borrowings, which comprise interest bearing bank loans are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. The finance costs, being the difference between the net proceeds of borrowings and the total amount of payments that require to be made in respect of those borrowings, are amortised over the life of the borrowings.

		Long-term borrowings are measured initially at the fair value of the consideration received, net of any issue expenses, and subsequently at amortised cost using the effective interest method.

	(f)	Taxation
		The tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company has no liability for current tax.

		Deferred tax is recognised in respect of all temporary differences at the Balance Sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Balance Sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise, using tax rates that are expected to apply at the date the deferred tax position is unwound.

	(g)	Foreign currencies
		Monetary assets and liabilities, comprising current assets, current liabilities and non-current liabilities and non-monetary assets comprising non-current assets held at fair value which are denominated in foreign currencies are converted into sterling at the rate of exchange ruling at the reporting date. Transactions during the year in foreign currencies are converted at the rate of exchange ruling at the transaction date. Gains or losses on monetary assets and liabilities arising from a change in exchange rates subsequent to the date of a transaction are included as a currency gain or loss in revenue or capital column of the Statement of Comprehensive Income, depending on whether the gain or loss is of a revenue or capital nature. Gains or losses on non-monetary assets arising from a change in exchange rates subsequent to the date of a transaction are included as a gain or loss on investments in the capital column of the Statement of Comprehensive Income.

	(h)	Derivatives
		The Company may enter into certain derivatives (e.g. traded options). Traded option contracts are restricted to writing out-of-the-money options with a view to generating income. Premiums received on traded option contracts are recognised as income evenly over the period from the date they are written to the date when they expire or are exercised or assigned. Gains and losses on the underlying shares acquired or disposed of as a result of options exercised are included in the capital account. Unexpired traded option contracts at the year end are accounted for at their fair value.

	(i)	Cash and cash equivalents
		Cash and cash equivalents comprises cash in hand and at banks and short-term deposits.

	(j)	Other receivables
		The Company has adopted the classification and measurement provisions of IFRS 9 'Financial Instruments' which replaces IAS 39 'Financial Instruments: Recognition and Measurement'. Financial assets previously classified as other receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. As such they are measured at amortised cost. Other receivables held by the Company do not carry any interest, they have been assessed as having immaterial expected credit losses over their lifetime due to their short-term nature.

	(k)	Other payables
		Payables are non-interest bearing and are stated at their undiscounted cash flows.

	(l)	Dividends payable
		Final dividends are recognised from the date on which they are approved by shareholders. Interim dividends are recognised when paid.

	(m)	Nature and purpose of reserves
		Share premium account
		The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising ordinary shares of 50p per share.

		Capital reserve
		This reserve reflects any realised gains or losses in the period together with any unrealised increases and decreases that have been recognised in the Statement of Comprehensive Income. These include gains and losses from foreign currency exchange differences.

		Additionally, expenses, including finance costs, are charged to this reserve in accordance with (d) above.

		Revenue reserve
		This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.

	(n)	Segmental reporting
		The Directors are of the opinion that the Company is engaged in a single segment of business activity, being investment business. Consequently, no business segmental analysis is provided.

		2019	2018
3.	Income	£'000	£'000
	Income from listed investments
	UK dividend income	4,176	4,427
	Overseas dividend income	360	238
	Money market interest	3	4
	Stock dividends	74	79
		_________	__________
		4,613	4,748
		_________	__________
	Other income from investment activity
	Deposit interest	5	1
	Traded option premiums	94	167
		_________	__________
		99	168
		_________	__________
	Total income	4,712	4,916
		_________	__________

		2019			2018
		Revenue	Capital	Total	Revenue	Capital	Total
4.	Management fees	£'000	£'000	£'000	£'000	£'000	£'000
	Management fees	203	203	406	215	215	430
		_______	_______	______	_______	______	_______

	The management fee is based on 0.45% per annum up to £100 million and 0.40% over £100 million, by reference to the net assets of the Company and including any borrowings up to a maximum of £30 million, and excluding commonly managed funds, calculated monthly and paid quarterly. The fee is allocated 50% to revenue and 50% to capital. The agreement is terminable on not less than six months' notice. The total of the fees paid and payable during the year to 31 March 2019 was £406,000 (2018 - £430,000) and the balance due to Aberdeen Standard Fund Managers Limited ("ASFML") at the year end was £99,000 (2018 - £105,000). The Company held an interest in a commonly managed investment trust, Aberdeen Smaller Companies Income Trust PLC, in the portfolio during the year to 31 March 2019 (2018 - same). The value attributable to this holding is excluded from the calculation of the management fee payable by the Company.

		2019	2018
5.	Administrative expenses	£'000	£'000
	Directors' remuneration	110	115
	Auditor's remuneration:
	Fees payable to the Company's Auditor for the audit of the Company's annual accounts	21	21
	Non-audit services
	- fees payable to the Company's Auditor for iXBRL tagging services	2	2
	Promotional activities	58	78
	Professional fees	3	35
	Directors' & Officers' liability insurance	11	10
	Trade subscriptions	39	27
	Share plan costs	22	17
	Registrars fees	40	33
	Printing, postage and stationery	26	25
	Other administrative expenses	40	41
		_________	________
		372	404
		_________	_________

	The management agreement with ASFML also provides for the provision of promotional activities, which ASFML has delegated to Aberdeen Asset Managers Limited. The total fees paid and payable under the management agreement in relation to promotional activities were £58,000 (2018 - £78,000). The Company's management agreement with ASFML also provides for the provision of company secretarial and administration services to the Company; no separate fee is charged to the Company in respect of these services, which have been delegated to Aberdeen Asset Management PLC.

	With the exception of Directors' remuneration and Auditor's remuneration for the statutory audit, all of the expenses above, including fees for non-audit services, include irrecoverable VAT where applicable.

6.	Directors' remuneration
	The Company had no employees during the year (2018 - nil). No pension contributions were paid for Directors (2018 - £nil).

		2019			2018
		Revenue	Capital	Total	Revenue	Capital	Total
7.	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	On bank loans	173	173	346	172	172	344
		_____	______	_____	______	______	_____

				2019			2018
			Revenue	Capital	Total	Revenue	Capital	Total
8.	Taxation		£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of the charge for the year
		Overseas tax	44	-	44	19	-	19
			_____	______	_____	______	______	_____
		Total tax charge	44	-	44	19	-	19
			_____	______	_____	______	______	_____

	(b)	Factors affecting the tax charge for the year
		The tax assessed for the year is lower than the effective rate of corporation tax in the UK. The differences are explained in the reconciliation below:

			2019			2018
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Profit before taxation	3,964	(828)	3,136	4,125	(1,299)	2,826

		Corporation tax at an effective rate of 19% (2018 - 19%)	753	(157)	596	784	(247)	537
		Effects of:
		Non-taxable UK dividend income	(776)	-	(776)	(844)	-	(844)
		Excess management expenses not utilised	91	72	163	105	73	178
		Overseas withholding tax	44	-	44	19	-	19
		Non-taxable overseas dividends	(68)	-	(68)	(45)	-	(45)
		Losses on investments not taxable	-	88	88	-	167	167
		(Gains)/losses on currency movements	-	(3)	(3)	-	7	7
			_____	______	_____	______	______	_____
		Total tax charge	44	-	44	19	-	19
			_____	______	_____	______	______	_____

		At 31 March 2019 the Company had surplus management expenses and loan relationship debits with a tax value of £4,432,000 (2018 - £4,288,000) in respect of which a deferred tax asset has not been recognised. This is because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses.

		2019	2018
9.	Dividends	£'000	£'000
	Amounts recognised as distributions to equity holders in the period:
	Third interim dividend for 2018 of 3.00p (2017 - 3.00p) per share	900	900
	Final dividend for 2018 of 4.00p (2017 - 3.75p) per share	1,200	1,125
	First two interim dividends for 2019 totalling 6.00p (2018 - 6.00p) per share	1,800	1,800
	Refund of unclaimed dividends from previous periods	(6)	(8)
		_________	________
		3,894	3,817
		_________	________
	3.5% Cumulative Preference shares	2	2
		_________	________
	Total	3,896	3,819
		_________	________

	The third interim dividend of 3.00p for the year to 31 March 2019, which was paid on 26 April 2019, and the proposed final dividend of 4.20p for the year to 31 March 2019, payable on 26 July 2019, have not been included as liabilities in these financial statements.

	Set out below are the total ordinary dividends payable in respect of the financial year, which is the basis on which the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered:

		2019	2018
		£'000	£'000
	Three interim dividends for 2019 totalling 9.00p (2018 - 9.00p) per share	2,705	2,700
	Proposed final dividend for 2019 of 4.20p (2018 - 4.00p) per share	1,273	1,200
		_________	________
		3,978	3,900
		_________	________

	The amount reflected above for the cost of the proposed final dividend for 2019 is based on 30,304,580 Ordinary shares, being the number of Ordinary shares in issue at the date of this Report.

		2019	2018
10.	Returns per share	£'000	£'000
	Returns per Ordinary share are based on the following figures:
	Revenue return	3,920	4,106
	Capital return	(828)	(1,299)
		_________	________
	Total return	3,092	2,807
		_________	________
	Weighted average number of Ordinary shares	30,021,438	29,997,580
		_________	________

					2019	2018
					Listed	Listed
					investments	investments
11.	Non-current assets - Securities at fair value				£'000	£'000
	Opening book cost				76,033	76,532
	Opening investment holdings gains				20,508	21,294
	Opening valuation				96,541	97,826
	Purchases				22,743	11,313
	Sales - proceeds				(23,842)	(11,727)
	Sales - net realised gains/(losses)				6,608	(1,567)
	Accreted cost adjustment{A}				-	1,482
	Fair value movement in the year				(7,079)	(786)
					_________	________
	Total investments held at fair value through profit or loss				94,971	96,541
					_________	________

	{A} In 2018 and following a review of the previous accounting treatment, the Company changed the classification of its preference shares to 'equity securities' and reversed the accumulated amortisation of £1,482,000 that had been recorded in prior years. There was no impact on the fair value of investments as a result of this change, nor on the net asset value per share of the Company, the revenue or capital earnings per share, or any of the individual reserve balances.

				2019		2018
				Listed		Listed
				investments		investments
				£'000		£'000
	Closing book cost			81,542		76,033
	Closing investment holdings gains			13,429		20,508
				_________		________
	Total investments held at fair value through profit or loss			94,971		96,541
				_________		________

				2019		2018
	(Losses)/gains on investments			£'000		£'000
	Net realised gains/(losses) on sales of investments{A}			6,615		(1,472)
	Cost of call options exercised			(7)		(95)
				_________		________
	Net realised gains/(losses) on sales			6,608		(1,567)
	Movement in fair value of investments			(7,003)		(701)
	Cost of put options assigned			(76)		(85)
	Movement in appreciation of traded options held			5		(4)
				_________		________
				(466)		(2,357)
				_________		________

	{A} Includes losses realised on the exercise of traded options of £83,000 (2018 - £179,000) which are reflected in the capital column of the Statement of Comprehensive Income.

	The cost of the exercising of call options and the assigning of put options is the difference between the market price of the underlying shares and the strike price of the options. The premiums earned on options expired, exercised or assigned of £94,000 (2018 - £167,000) have been dealt with in the revenue account.

	The movement in the fair value of traded option contracts has been calculated in accordance with the accounting policy stated in note 2(h) and has been charged to the capital reserve.

	During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Statement of Comprehensive Income. The total costs on purchases of investments in the year was £97,000 (2018 - £41,000). The total costs on sales of investments in the year was £9,000 (2018 - £3,000). The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.

	All investments are categorised as held at fair value through profit and loss and were designated as such upon initial recognition.

	At 31 March 2019 the Company held the following investments comprising more than 3% of the class of share capital held:

							Class
		Country of	Number of		Class of		held
	Company	Incorporation	shares held		shares held		%
	Aberdeen Smaller Companies Income Trust PLC	Scotland	3,120,476		Ordinary		14.1
	Ecclesiastical Insurance Office	England	4,240,000		8 5/8% Cum Pref		4.0
	Royal & Sun Alliance	England	4,350,000		7 3/8% Cum Pref		3.5
	General Accident	Scotland	3,548,000		7.875% Cum Pref		3.2

		2019	2018
12.	Other receivables	£'000	£'000
	Amount due from brokers	395	-
	Accrued income and prepayments	1,015	917
	Other debtors	-	2
	Option contract premium	-	16
		_________	________
		1,410	935
		_________	________
	None of the above amounts are overdue.

		2019	2018
13.	Current liabilities	£'000	£'000
	Short-term bank loans	9,000	9,000
	Amount due to brokers	7	-
	Option contracts	-	48
	Other creditors	232	228
		_________	________
		9,239	9,276
		_________	________

	Included above are the following amounts owed to ASFML for management and saving scheme services and for the promotion of the Company.

		2019	2018
		£'000	£'000
	Other creditors	122	133
		_________	________

		2019	2018
	Non-current liabilities	£'000	£'000
	Long-term bank loan	10,000	10,000
	Loan arrangement fees	(2)	(3)
		_________	________
		9,998	9,997
		_________	________

	The Company has an agreement with Scotiabank Europe PLC to provide a loan facility to 30 October 2020 for up to £20,000,000. A £10,000,000 fixed rate loan was drawn down on 1 November 2017 at a rate of 1.956%. This rate is fixed until maturity on 30 October 2020. In addition, at the year end £9,000,000 had been drawn down at an all-in interest rate of 1.685%, maturing on 4 April 2019. At the date of signing this report the amount drawn down was unchanged at £9,000,000 with an all-in interest rate of 1.68789%, maturing on 3 June 2019.

	The terms of the Scotiabank Europe facility contain covenants that gross borrowings may not exceed one-third of adjusted net assets and that adjusted net assets may not be less than £37 million. The Company has met these covenants with significant headroom since inception of the agreement until the date of this Report.

	The arrangement expenses incurred on the draw down of the loan are being amortised over the three year term of the loan resulting in a reduction to the carrying value of the loan drawn down being reduced by £2,000 (2018 - £3,000).

		2019	2018
14.	Analysis of changes in financing during the year	£'000	£'000
	Opening balance at 1 April	18,997	19,000
	Cashflow:
	Loan arrangement fees	-	(6)
	Non cash:
	Unamortised loan arrangement fees	_________	________

	Closing balance at 31 March	18,998	18,997
		_________	________

		2019		2018
15.	Called up share capital	Number	£'000	Number	£'000
	Allotted, called up and fully paid Ordinary shares of 50 pence each:
	Balance brought forward	29,997,580	14,999	29,997,580	14,999
	Ordinary shares issued	157,000	78	-	-
	Balance carried forward	30,154,580	15,077	29,997,580	14,999
	3.5% Cumulative Preference shares of £1 each	50,000	50	50,000	50
			________		_______
			15,127		15,049
			________		________

	During the year the Company issued 157,000 (2018 - none) Ordinary shares of 50p each for proceeds of £396,000 (2018 - £nil).

	Following the year end the Company has issued a further 150,000 Ordinary shares for proceeds of £407,000.

	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.

		2019	2018
16.	Capital reserve	£'000	£'000
	At 31 March 2018	39,313	40,612
	Net gain/(losses) on sales of investments during year	6,608	(1,567)
	Movement in fair value increases/(decreases) of investments	(7,079)	(786)
	Accreted cost adjustment charged to capital	-	1,482
	Management fees	(203)	(215)
	Interest on bank loans	(173)	(172)
	Currency gains/(losses)	14	(37)
	Capital gain/(loss) on traded options	5	(4)
		_________	________
	At 31 March 2019	38,485	39,313
		_________	________

	The capital reserve includes gains of £13,429,000 (31 March 2018 - gains of £20,508,000), which relate to the revaluation of investments held at the reporting date.

17.	Net asset value per Ordinary share
	The net asset value per share and the net assets attributable to the Ordinary shareholders at the year end were as follows:

		2019	2018
	Net assets attributable	£80,057,000	£80,465,000
	Number of Ordinary shares in issue	30,154,580	29,997,580
	Net asset value per share	265.49p	268.24p

18.	Financial instruments
	Risk management
	The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company may from time to time use FTSE options for protection of the loss of value to the portfolio.

	Subject to Board approval, the Company also has the ability to enter into derivative transactions, in the form of traded options, for the purpose of enhancing income returns and portfolio management. During the year, the Company entered into certain derivative contracts. As disclosed in note 3, the premium received and fair value changes in respect of options written in the year were £94,000 (2018 - £167,000). Positions closed during the year realised a loss of £83,000 (2018 - £179,000). The largest position in derivative contracts held during the year at any given time was £44,000 (2018 - £94,000). The Company had no open positions in derivative contracts at 31 March 2019 (2018 - liability £48,000) as disclosed in note 13.

	The Board has delegated the risk management function in relation to financial instruments to Aberdeen Standard Fund Managers Limited ("ASFML") under the terms of its management agreement with ASFML (further details of which are included under note 4). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors given their relatively low value.

	Risk management framework
	The directors of ASFML collectively assume responsibility for ASFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.

	ASFML is a fully integrated member of the Standard Life Aberdeen Group (the "Group"), which provides a variety of services and support to ASFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Asset Managers Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.

	The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group's CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.

	The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Group's CEO. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SHIELD").

	The Group's corporate governance structure is supported by several committees to assist the board of directors of Standard Life Aberdeen plc, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.

	Risk management
	The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.

	(i)	Market risk
		The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.

		Interest rate risk
		Interest rate movements may affect:
		- the fair value of the investments in convertibles and preference shares;
		- the level of income receivable on cash deposits; and
		- interest payable on the Company's variable rate borrowings.

		Management of the risk
		The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

		The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. The fixed rate facilities are used to finance opportunities at low rates and, the revolving and uncommitted facilities to provide flexibility in the short-term. Current bank covenant guidelines state that the gross borrowings will not exceed one-third of adjusted net assets.

		The Board reviews on a regular basis the value of investments in convertibles and preference shares.

		Interest rate profile
		The interest rate risk profile of the portfolio of financial assets and liabilities (excluding ordinary shares and convertibles) at the Balance Sheet date was as follows:

			Weighted
			average
			period		Weighted
			for which		average
			rate is		interest		Fixed		Floating
			fixed		rate		rate		rate
		As at 31 March 2019	Years		%		£'000		£'000
		Assets
		UK preference shares	-		8.49		24,041		-
		Cash and cash equivalents	-		0.50		-		2,913
							_________		________
		Total assets					24,041		2,913
							_________		________
		Liabilities
		Short-term bank loans	0.01		1.69		(9,000)		-
		Long-term bank loans	1.59		1.96		(9,998)		-
							_________		________
		Total liabilities					(18,998)		-
							_________		________

			Weighted
			average
			period		Weighted
			for which		average
			rate is		interest		Fixed		Floating
			fixed		rate		rate		rate
		As at 31 March 2018	Years		%		£'000		£'000
		Assets
		UK preference shares	-		8.50		26,572		-
		Cash and cash equivalents	-		0.29		-		2,262
							_________		________
		Total assets					26,572		2,262
							_________		________
		Liabilities
		Short-term bank loans	0.09		1.45		(9,000)		-
		Long-term bank loans	2.58		1.96		(9,997)		-
							_________		________
		Total liabilities					(18,997)		-
							_________		________

		The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans.
		The cash assets consist of cash deposits on call earning interest at prevailing market rates.
		The UK preference shares assets have no maturity date.
		Short-term debtors and creditors (with the exception of bank loans) have been excluded from the above tables.
		Interest rate sensitivity
		The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the Balance Sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.

		If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's:
		- profit before tax for the year ended 31 March 2019 would increase/decrease by £29,000 (2018 - £23,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances. These figures have been calculated based on cash positions at each year end.
		- profit before tax for the year ended 31 March 2019 would increase/decrease by £1,015,000 (2018 - increase/decrease by £1,183,000). This is mainly attributable to the Company's exposure to interest rates on its investments in convertibles and preference shares.

		In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. The risk parameters used will also fluctuate depending on the current market perception.

		Currency risk
		A small proportion of the Company's investment portfolio is invested in overseas securities whose values are subject to fluctuation due to changes in exchange rates.

		Management of the risk
		The revenue account is subject to currency fluctuations arising on dividends received in foreign currencies and, indirectly, due to the impact of foreign exchange rates upon the profits of investee companies. The Company does not hedge this currency risk. The Company does not have any exposure to foreign currency liabilities. No currency sensitivity analysis has been prepared as the Company considers any impact to be immaterial to the financial statements.

		Price risk
		Price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.

		Management of the risk
		It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. The allocation of assets to specific sectors and the stock selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on recognised stock exchanges.

		Price sensitivity
		If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the profit before tax attributable to Ordinary shareholders for the year ended 31 March 2019 would have increased/decreased by £7,040,000 (2018 - increase/decrease of £6,942,000). This is based on the Company's equity portfolio held at each year end.

	(ii)	Liquidity risk
		This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

		Management of the risk
		Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary.

		Short-term flexibility is achieved through the use of loan facilities, details of which can be found in note 13. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis.

		The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise a revolving loan facility and a fixed term loan facility. The Board has imposed a maximum equity gearing of 35% which constrains the amount of gearing that can be invested in equities which, in normal market conditions, are more volatile than the convertibles and preference shares within the portfolio. Details of borrowings at 31 March 2019 are shown in note 13.

		Maturity profile
		The maturity profile of the Company's financial liabilities at the Balance Sheet date was as follows:

				Within		Within		More than
				1 year		1-5 years		5 years
		At 31 March 2019		£'000		£'000		£'000
		Trade and other payables		(197)		-		-
		Short-term bank loans		(9,013)		-		-
		Long-term bank loans		(196)		(10,113)		-
				_________		________		_________
				(9,406)		(10,113)		-
				_________		________		_________

				Within		Within		More than
				1 year		1-5 years		5 years
		At 31 March 2018		£'000		£'000		£'000
		Trade and other payables		(276)		-		-
		Short-term bank loans		(9,012)		-		-
		Long-term bank loans		(196)		(10,310)		-
				_________		________		_________
				(9,484)		(10,310)		-
				_________		________		_________

	(iii)	Credit risk
		This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

		Management of the risk
		The risk is managed as follows:
		- where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default;
		- transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Company of default;
		- investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker;
		- the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the Custodian's records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. The Standard Life Aberdeen Group's Compliance department carries out periodic reviews of the Custodian's operations and reports its finding to the Standard Life Aberdeen Group's Risk Management Committee and to the Board of the Company. This review will also include checks on the maintenance and security of investments held;
		- transactions involving derivatives, structured notes and other arrangements wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest are subject to rigorous assessment by the Investment Manager of the credit worthiness of that counterparty. The Company's aggregate exposure to each such counterparty is monitored regularly by the Board; and
		- cash is held only with reputable banks with high quality external credit enhancements.

		It is the Investment Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties.

		None of the Company's financial assets is secured by collateral or other credit enhancements.

		Credit risk exposure
		In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 March 2019 was as follows:

			2019				2018
			Balance		Maximum		Balance		Maximum
			Sheet		exposure		Sheet		exposure
			£'000		£'000		£'000		£'000
		Non-current assets
		Quoted convertibles and preference shares at fair value through profit or loss	24,571		24,571		27,122		27,122
		Current assets
		Trade and other receivables	395		395		18		18
		Accrued income	1,003		1,003		905		905
		Cash and cash equivalents	2,913		2,913		2,262		2,262
			_________		________		_________		________
			28,882		28,882		30,307		30,307
			_________		________		_________		________

		None of the Company's financial assets is past its due date.

		Fair value of financial assets and liabilities
		The fair value of the long-term loan has been calculated at £10,034,000 as at 31 March 2019 (2018 - £10,034,000) compared to an accounts value in the financial statements of £9,998,000 (2018 - £9,997,000) (note 13). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. The carrying values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. Traded options contracts are valued at fair value which have been determined with reference to quoted market values of the contracts. The contracts are tradeable on a recognised exchange. For all other short-term debtors and creditors, their book values approximates to fair values because of their short-term maturity.

19.	Fair value hierarchy
	IFRS 13 'Financial Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and
	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	The financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy at 31 March 2019 as follows:

				Level 1	Level 2	Level 3	Total
			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments		a)	94,971	-	-	94,971

	Financial liabilities at fair value through profit or loss
	Derivatives		b)	-	-	-	-
				_______	______	_______	______
	Net fair value			94,971	-	-	94,971
				_______	______	_______	______

				Level 1	Level 2	Level 3	Total
	As at 31 March 2018		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments		a)	96,541	-	-	96,541

	Financial liabilities at fair value through profit or loss
	Derivatives		b)	-	(48)	-	(48)
				_______	______	_______	______
	Net fair value			96,541	(48)	-	96,493
				_______	______	_______	______

	a)	Quoted investments
		The fair value of the Company's quoted investments has been determined by reference to their quoted bid prices at the reporting date. Quoted investments included in Fair Value Level 1 are actively traded on recognised stock exchanges.

	b)	Derivatives
		The fair value of the Company's investments in Exchange Traded Options has been determined using observable market inputs on an exchange traded basis although not actively traded and therefore has been classed as Level 2.

		The fair value of the Company's investments in Over the Counter Options has been determined using observable market inputs other than quoted prices and included within Level 2.

20.	Capital management policies and procedures
	The Company's capital management objectives are:
	- to ensure that the Company will be able to continue as a going concern; and
	- to maximise the return to its equity shareholders through an appropriate balance of equity capital and debt.

	The capital of the Company consists of equity, comprising issued capital, reserves and retained earnings.

	The Board monitors and reviews the broad structure of the Company's capital. This review includes the nature and planned level of gearing, which takes account of the Investment Manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained. The Company is not subject to any externally imposed capital requirements.

21.	Related party transactions
	Directors' fees and interests
	Fees payable during the year to the Directors and their interests in shares of the Company are disclosed within the Directors' Remuneration Report.

	Transactions with the Manager
	The Company has an agreement with Aberdeen Standard Fund Managers Limited for the provision of management, secretarial, accounting and administration services and for the carrying out of promotional activities in relation to the Company. Details of transactions during the year and balances outstanding at the year end are disclosed in notes 4 and 5.

Additional Notes to Annual Financial Report

The Annual General Meeting will be held on 4 July 2019 at 12 noon at Bow Bells House, 1 Bread Street, London EC4M 9HH.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 March 2019 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2018 and 2019 statutory accounts received unqualified reports from the Company's auditor and did not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under S.498 of the Companies Act 2006. The financial information for 2018 is derived from the statutory accounts for 2018 which have been delivered to the Registrar of Companies. The 2019 accounts will be filed with the Registrar of Companies in due course.

The Annual Report and Accounts will be posted to shareholders in June 2019 and copies will be available from the registered office of the Manager and on the Company's website, www.shiresincome.co.uk.*

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested.

By order of the Board

Aberdeen Asset Management PLC

Company Secretary

28 May 2019

* Neither the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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