Annual Financial Report

SHIRES INCOME PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2025

Legal Entity Identifier (LEI): 549300HVCIHNQNZAYA89

The Company

Shires Income PLC (the "Company") is an investment trust. Its Ordinary shares are listed on the main market 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).

Website

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

Performance Highlights

For further information please contact:

Paul Finlayson 

abrdn Fund Managers Limited

07990 130 451

Financial Calendar

Highlights

Chairman's Statement

Highlights

·  Increase of 2.8% in the dividend to 14.80p per share, providing a yield of 5.8% based on the year end share price.

·  NAV total return of 9.4%.

·  Share Price total return of 22.4%, reflecting a narrowing of the Company's discount to 3.7% at the year end, helped by an active use of share buy backs.

Performance

In a positive year for global equity markets, the Company's net asset value ("NAV") total return for the year ended 31 March 2025 was 9.4%. The share price total return was an encouraging 22.4%, reflecting a significant narrowing of the discount at which the share price trades to the NAV, to 3.7%. These returns compare to a total return of 10.5% from the FTSE All-Share Index.

While the performance of the equity portfolio lagged the benchmark return, the Company benefited from its holding of fixed interest securities which delivered a total return of 17.5%. These holdings represent around 20% of the portfolio and are an attractive differentiating factor for the Company. During the year, the Company continued to make use of its ability to invest outside the UK, with 4.8% of the portfolio invested in overseas equities at the financial year end.

More detailed information on performance for the year and investment activity within the portfolio, as well as the investment style adopted for the portfolio, are contained in the Investment Manager's Review.  

Earnings and Dividends

The Company's revenue earnings per share for the year were 14.80p (2024: 14.75p). Income from the Company's investments over the year to 31 March 2025 increased by 13.1% from the previous financial year. This was attributable largely to the increased level of income from a larger portfolio of assets, following the Company's combination with abrdn Smaller Companies Income Trust plc ("aSCIT") in December 2023, which resulted in an issue of some 11.3 million new shares.

The changes in allocation of management fees and finance costs which have been charged to revenue and capital in the ratio of 40:60 since 1 April 2024 (previously 50:50) had a positive impact on net revenue earnings. The Company also benefited from the flexibility of having a direct allocation to smaller and mid cap companies and no longer relying on the holding in aSCIT for its exposure to UK small cap investments.

The Company has paid three interim dividends of 3.20p per Ordinary share (2024: 3.20p). Taking account of the revenue outcome for the year and the outlook for the forthcoming year, the Board is pleased to propose a final increased dividend of 5.20p per Ordinary share (2024: 4.80p). The final dividend will be paid on 31 July 2025 to shareholders on the register on 4 July 2025, subject to shareholder approval at the AGM. The final dividend brings total dividends for the year to 14.80p per share, an increase on last year's dividend of 2.8% and ahead of CPI of 2.6% for the 12 months to the end of March 2025. Based on the year end share price of 255.5p, the total dividends equate to a dividend yield of 5.8%, one of the higher yields available from the UK Equity Income Sector and one which the Board believes should be attractive in the current interest rate environment.

With the total dividends for the year covered by earnings, revenue reserves will stand at 70% (2024: 69%) of the current dividend cost, giving a buffer if income were to fall in future periods. The Board believes that sustaining (and growing) dividends is an important feature of the Company and considers not only the annual payout but what reserves (revenue and realised capital) might be deployed in the future to give shareholders an attractive and competitive level of income from a quality portfolio of investments, without sacrificing the potential for capital growth or chasing an unnaturally high yield.

The rate of interim dividend was last adjusted in 2021. The Board is mindful that increases in the overall dividend means that the final dividend has become an increased proportion of the total annual payment. In respect of the year ending 31 March 2026, the Board has therefore decided to increase the rate of each of the next three interim dividends from 3.20p to 3.45p per share to create a more even balance between the rates of the interim and final dividends. The amount of final dividend will continue to be determined once the annual results are known and taking into account the outlook for the next year. In common with other income funds, we encourage investors to consider the reinvestment of dividends as the impact of compounded total return can be significant over time. Irrespective of reinvestment, we hope that an increase in dividends and a balance between the quarterly payments should be well received by those who use the income from the Company as part of their annual financial planning.

Cancellation of Share Premium Account

Following shareholder approval at the Company's AGM on 5 July 2024, the Company received court approval, by way of a court order dated 13 August 2024. for cancellation of the Share Premium Account. The court order was registered at Companies House on 16 August 2024 at which point cancellation of the Share Premium Account became effective. Approximately £50 million previously standing to the credit of the Share Premium Account, and undistributable, has been transferred to a newly created distributable special reserve which is available to fund the cost of share buy backs and future dividend payments, if required.

The Board believes that it is in the Company's interest to have this flexibility in its reserves, although the Board has no current intention of using the new reserve for dividend payments which will continue to be resourced through net revenue and revenue reserves.

Discount and Share Buy Backs

At the end of the Company's financial year in 2024, the discount at which its shares traded to NAV stood at 13.3%. Some of this widening reflected headwinds across the investment trust sector in general and some was a result of dislocation when the Aberdeen share plans moved to Interactive Investor in 2023. The Board was uncomfortable with the Company's rating, which had typically been close to NAV and, having initiated a buyback programme for the first time in the Company's history in 2023, continued modest buybacks in 2024.

In accordance with the share buy-back authority provided by shareholders at the Annual General Meeting, the Company bought back 1.2 million Ordinary shares during the year (2.8% of the issued share capital) at a cost of £2.8 million. This provided an enhancement to NAV of approximately 0.3% for continuing shareholders. All shares bought back are held in treasury.

With an average discount of 10.1% over the financial year, we are pleased to report that, by providing liquidity in the Company's shares described above, whilst also purchasing amounts appropriate to the Company's size, the Company's discount to NAV tightened to 3.7% at the year-end and at the time of writing continues to be below 5%.

The Board will seek renewal of the share buyback authority at the AGM and will continue to buy back shares if it considers it is in the best interests of shareholders to do so.

Gearing

The Company has a £20 million loan facility of which £19 million was drawn down at the year end. Net of cash, this represented gearing of 16.5%, compared to 16.4% at the start of the year. The weighted average borrowing cost at the year-end was 4.9% (31 March 2024: 5.3%) and the gearing provided a positive contribution to performance during the year.

The Board monitors the level of gearing regularly. Strategically, the view is taken that the borrowings are notionally invested in the less volatile fixed income part of the portfolio which generates a higher and more secure level of income, giving the Investment Manager greater scope to invest in a range of equity stocks with lower yields and higher growth prospects. The Board believes that this combination puts the Company in the best position to achieve a high and potentially growing level of dividend and to deliver some capital appreciation for shareholders - as has been the case in the past.

Board and Governance

As reflected in the governance statements later in the Annual Report, the Board has functioned well, both in constructive engagement with the Manager and in exploring ways to improve shareholder value. There have been some changes to the ways in which the Board delegates to Board committees and to the individual responsibilities of Board members. These are designed to make this small board as effective as possible, and to utilise the experience on the Board with regards to specific areas of governance and oversight. 

The Board and the Company continue to be well-supported by the Manager in terms of portfolio management and administration. The Board has been exploring with the Manager how to engage more directly with private investors, who form a large part of the Company's ownership, to understand better what they want from their investment in the Company, and to encourage investment in the Company's shares. The Board welcomes comments and questions from investors, or prospective investors, which can be posed through the Company Secretary at: [email protected]

Annual General Meeting ("AGM") and Online Shareholder Presentation

The Company's AGM will take place at 12 noon on Tuesday 8 July 2025 at Aberdeen's London office, 18 Bishops Square, London E1 6EG and all shareholders are warmly invited to attend. As well as the formal business of the meeting, the Investment Manager will provide a short presentation on the Company and there will be an opportunity for shareholders to ask questions of the Manager and the Board.

Irrespective of whether you can attend, we encourage all shareholders to complete and return the Proxy Form enclosed with the Annual Report to ensure that your votes are represented at the meeting. If you hold your shares via a platform or through a nominee holding and would like to attend and / or vote at the AGM, then you will need to make arrangements with the administrator of your platform or nominee.

Our Online Shareholder Presentation has been a popular informal forum for shareholders and we are pleased to hold another online presentation on Tuesday 24 June 2025 at 11.00am. The event will feature a chat between the Chairman and Investment Manager and will be followed by a live question and answer session. Full details on how to register for the event can be found on the Company's website at: shiresincome.co.uk

Should you be unable to attend the online event, it will be made available on the Company's website shortly afterwards. For those wishing to submit questions in advance, you can do so using the following email address: [email protected]

Outlook

We are pleased to report a good performance over this financial year and an increase in the Company's dividend (above CPI). The Company's focus continues to be on delivering a high level of income and capital growth for shareholders. We believe that the Investment Manager is well positioned to achieve this, as has also been the case during some other turbulent market periods in the last decade or so, caused often by exogenous events such as Covid or changing interest rates - or, as now, geopolitical uncertainty. We will continue to use the buy back authority when appropriate if the share price rating falters, to endeavour to offer secondary market liquidity. We would also like to grow the Company by issuing more shares, as we have done in the past, if it is practical and there is demand to do so.

We cannot predict how global markets will fare over the coming 12 months. However, with the volatility we have seen, particularly in the US market, the UK may be seen as a more attractive market to invest in than previously. With a high level of income compared to other markets, our UK focus can offer resilient income for investors. This is one of the attractions of investing in a closed-ended company, with modest equity gearing, which can provide above average income for shareholders from a well-diversified portfolio of quality investments.

Robin ArchibaldChairman28 May 2025

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.

Benchmark

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

Investment Objective

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

Investment Policy

The Company's investment 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 may also use derivatives to enhance income generation.

Gearing

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

Diversification of Risk and Investment Restrictions

In order to ensure adequate diversification, limits are set within the investment policy which the AIFM and Investment Manager must operate. All of these limits are measured at the point of acquisition of investments, unless otherwise stated, as follows:

General Investment Limits

·  a maximum of 20% of total assets may be invested in the equity securities of overseas companies;

·  a maximum of 7.5% of total assets may be invested in the securities of one company;

·  any investment must not represent more than 5% of a quoted investee company's ordinary shares; and 

·  a maximum of 10% of total assets may be invested directly in AIM holdings.

Limits in Relation to Preference Shares

·  a maximum of 7.5% of total assets may be invested in the preference shares of any one company; and

·  the Company may not hold more than 10% of any investee company's preference shares.

Limits in Relation to Traded Option Contracts

There are principal guidelines put in place to manage the risks associated with these contracts, including:

·  call options written are to be covered by stock;

·  put options written are to be covered by net current assets/borrowing facilities;

·  call options are not to be written on more than 10% of the equity portfolio; and

·  put options are not to be written on more than 10% of the equity portfolio.

There was no option premium income generated during the year ended 31 March 2025.

The Board assesses on a regular basis with the Investment Manager the applicability of these investment limits, the use of gearing and risk diversification, whilst aiming to meet the overall investment objectives of the Company.

In accordance with the Listing Rules, the Company will not make any material change to its published investment policy without the prior approval of the FCA and the approval of its shareholders by ordinary resolution. 

Promoting the Success of the Company

The Board's statement below describes how the Directors have discharged their duties and responsibilities over the course of the financial year under section 172 (1) of the Companies Act 2006 and how they have promoted the success of the Company for the benefit of the members as a whole.

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 table below:

Principal and Emerging Risks and Uncertainties

The Board carries out a regular review of the risk environment in which the Company operates, changes to that environment and to individual risks. The Board also identifies emerging risks which might impact the Company. The Board has carried out a robust assessment of the Company's principal and emerging risks, which include those that would threaten its business model, future performance, solvency, liquidity or reputation and has endeavoured to find means of mitigating those risks, wherever practical.

There are a number of other risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects.

The principal risks and uncertainties faced by the Company are reviewed by the Audit Committee in the form of a risk matrix. The assessment of risks and their mitigation continues to be an area of significant focus for the Audit Committee. 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.

In addition to these risks, the conflicts in Ukraine, the Middle East and other geo-political tensions continue to present exogenous risks as does the recent introduction of trade tariffs and the impact that has on global trade and financial markets.

The most significant direct issue that the Company faced during the year was the increasing discounts to net asset value that have affected the entire investment company sector, including income funds, resulting from selling pressure and lack of investor demand, although this has been partially mitigated by increased use of share buy backs and other capital mechanisms.

The principal risks associated with an investment in the Company's shares are published monthly in the Company's factsheet and they can be found in the pre-investment disclosure document ("PIDD") published by the Manager, both of which are available on the Company's website.

External Agencies

In addition to the services provided to the Company by the Aberdeen Group, the Board has contractually delegated certain services to external service suppliers, including: depositary services (which include the safekeeping of the Company's assets) (BNP Paribas Trust Corporation UK Limited) 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 the Administrator, BNP Paribas Securities Services.

Promotional Activities

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the rating of the Company's shares. The Board believes one effective way to achieve this is through subscription to, and participation in, the promotional programme run by the 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 Aberdeen Group. The Company also supports the Manager's investor relations programme which involves regional roadshows to existing and potential shareholders, promotional and public relations campaigns. The Manager's promotional and investor relations teams report to the Board on a quarterly basis giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make up of that register.

The purpose of the promotional and investor relations programmes 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. The promotional programme includes commissioning independent paid for research on the Company, most recently from Kepler Trust Intelligence. A copy of the latest research note is available from the Company's website.

The Board continues to explore with the Manager ways to support retail investment through platforms and improved communication with the underlying holders, as well as voting participation in general meetings.

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 or environmental matters.

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.

Environmental, Social and Governance ("ESG") Matters

The Board is supportive of the Investment Manager's approach to ESG issues, including climate change, and welcomes its active engagement with company management.

Sustainability Disclosure Requirements ("SDR")

In November 2023, the Financial Conduct Authority ("FCA") published its sustainability disclosure requirements and investment labels regime ("SDR") to address concerns about misleading sustainability claims. SDR includes an opt-in labelling regime for sustainable investment products, additional disclosure requirements and restrictions on the use of sustainability terms. It also establishes anti-greenwashing ("AGW") rules. Investment trusts and their managers are in scope of the SDR. Although investment trusts are not directly in scope of the AGW requirements, the rules apply indirectly to them, mostly via obligations imposed on their managers.

Although Environmental, Social and Governance ("ESG") factors are taken into consideration by the Investment Manager as part of its investment analysis, the Company itself does not have an explicit sustainability objective and so under SDR is categorised as "Non-labelled" rather than "Labelled" or "Other".

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.

Under Listing Rule 11.4.22(R), the Company, as a closed ended investment company, is exempt from complying with the Task Force on Climate-related Financial Disclosures.

The UK Stewardship Code and Proxy Voting

The Company supports the UK Stewardship Code, and seeks to play its role in supporting good stewardship of the companies in which it invests. 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. Aberdeen is a signatory to the UK Stewardship Code which aims to enhance the quality of engagement by investors with investee companies in order to improve their socially responsible performance and the long-term investment return to shareholders. While delivery of stewardship activities has been delegated to the Manager, the Board acknowledges its role in setting the tone for the effective delivery of stewardship on the Company's behalf.

The Board has also given discretionary powers to the Manager to exercise voting rights on resolutions proposed by the investee companies within the Company's portfolio. The Manager reports on a quarterly basis on stewardship (including voting) issues.

Board Diversity

The Board's disclosures in relation to its diversity are included in the Report of the Directors below.

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, irrespective of any exogenous risks that the Company may face. The Board considers that this period reflects a balance between a longer-term investment horizon, the inherent uncertainties within equity markets and the specifics of a closed-end investment company where its central purpose is different from other listed commercial and industrial companies. 

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 revenue expenses, excluding the cost of the dividend, are expected to continue to be covered by investment income. 

·  The level of gearing. This is closely monitored and stress testing is carried out by the Manager. The financial covenants attached to the Company's borrowings provide for significant headroom.

·  Regulatory or market changes.

·  The robustness of the operations of the Company's third party service providers.

·  The operation of share buy backs undertaken by the Company.

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 the current geo-political uncertainty associated with the imposition of global tariffs and an escalating trade war between China and the USA, economic shocks, significant stock market volatility, and changes in regulation or investor sentiment, including to income levels.

Taking into account the Company's current position and the potential impact of its principal risks and uncertainties and emerging risks, 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 the Investment Manager's Review.

On behalf of the Board Robin Archibald Chairman28 May 2025

Promoting the Success of the Company

How the Board Meets its Obligations Under Section 172 of the Companies Act

The Board is required to describe to the Company's shareholders how the Directors have discharged their duties and responsibilities over the course of the financial year under section 172 (1) of the Companies Act 2006 (the "Section 172 Statement"). The Board provides below an explanation of how the Directors have promoted the success of the Company for the benefit of its members as a whole, taking into account, amongst other things, the likely long-term consequences of decisions, the need to foster business relationships with all stakeholders and the impact of the Company's operations on the environment.

The Purpose of the Company and Roleof the Board

The purpose of the Company is to act as an investment vehicle to provide, over time, financial returns (both income and capital) to its shareholders. Investment trusts, such as the Company, are long-term investment vehicles and are typically externally managed, have no employees, and are overseen by an independent non-executive board of directors.

The Board, which, at the year end, comprised five independent non-executive Directors with a broad range of skills and experience across all major functions that affect the Company, retains responsibility for taking all decisions relating to the Company's investment objective and policy, gearing, corporate governance and strategy, and for monitoring the performance of the Company's service providers.

The Board's philosophy is that the Company should operate in a transparent culture where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike. The Board reviews the culture and manner in which the Manager and Investment Manager operate at its regular meetings and receives regular reporting and feedback from the other key service providers. The Board is very conscious of the ways it promotes the Company's culture and ensures as part of its regular oversight that the integrity of the Company's affairs is foremost in mind in the way that the activities are managed and promoted. The Board works very closely with the Manager and Investment Manager in reviewing how stakeholder issues are handled, ensuring good governance and responsibility in managing the Company's affairs, as well as visibility and openness in how the affairs are conducted.

The Company's main stakeholders have been identified as its shareholders, the Manager/Investment Manager, service providers, investee companies, its debt provider and, more broadly, the investment community. 

How the Board Engages with Stakeholders

The Board considers its stakeholders at Board meetings and receives feedback on the Manager's interactions with them.

The Board and Manager also continue to consider how best to engage with private investors who invest through platforms, not least to increase voting participation at general meetings of the Company and to try and increase investor demand for diversified income from retail investors.

Specific Examples of Stakeholder Consideration During the Year

While the importance of giving due consideration to the Company's stakeholders is not a new requirement, and is considered during every Board decision, the Directors were particularly mindful of stakeholder considerations during the following decisions undertaken during the year ended 31 March 2025.

Management of the Portfolio

The Investment Manager's Review details the key investment decisions taken during the year. The overall shape and structure of the investment portfolio is an important factor in delivering the Company's stated investment objective. 

During the year, the Board, through the Management Engagement Committee, decided that the continuing appointment of the Manager was in the best interests of shareholders.

Dividend

Following the payment of the final dividend for the year, of 5.20p per Ordinary share, total dividends for the year will amount to 14.80p per Ordinary share, representing a dividend yield of 5.8% based on the share price of 255.5p at the end of the financial year. This is in accordance with the Company's objective to provide shareholders with a high level of income.

In deciding on the level of dividend for the year, the Board took into account the revenue earnings per Ordinary share for the year, forecast revenues for subsequent years and the level of revenue reserves as well as the impact of share buy backs.

Through meetings with shareholders and feedback from the Manager and the Company's Stockbroker, the Board remains conscious of the importance that shareholders place on the level, and sustainability, of dividends paid by the Company. 

Allocation of Costs

As explained in last year's Annual Report, the Board decided that, with effect from 1 April 2024, management fees and finance costs would be charged 40% to Revenue and 60% to Capital (previously 50% to Revenue and 50% to Capital). Following the completion of the merger of the Company with abrdn Smaller Companies Income Trust PLC in December 2023, the Board considered that this allocation better reflects the expected long-term view of the nature of the future investment returns of the enlarged portfolio and is consistent with the treatment adopted by other UK Equity Income investment trusts. The Board therefore considers that this change is in the best interests of shareholders.

Share Buy Backs

During the year, the Company bought back 1,154,946 Ordinary shares to be held in treasury, providing a small accretion to the NAV per share and a degree of liquidity to the market at times when the discount to the NAV per share had widened in normal market conditions. The Board liaises closely with the Manager and Stockbroker in how buy backs might be applied in light of supply and demand for shares on a retail register such as the Company has. It is the view of the Board that this policy of periodically using buy back powers, but not in a mechanical fashion, is in the interest of all shareholders.

Cancellation of Share Premium Account

Following shareholder approval at the Company's AGM on 5 July 2024, the Company received court approval by way of a court order dated 13 August 2024 for cancellation of the Share Premium Account. The court order was registered at Companies House on 16 August 2024 at which point cancellation of the Share Premium Account became effective. Consequently, the amount of approximately £50 million previously standing to the credit of the Share Premium Account was transferred to a newly created distributable reserve which is available to fund the cost of share buy backs and dividend payments. The Board considers that it is in shareholders' interests for the Company to have this flexibility, although it has no current intention of making use of the new reserve for dividend payments which will continue to be resourced through net revenue and revenue reserves.

Online Shareholder Presentation

As explained in the Chairman's Statement, to encourage and promote interaction and engagement with the Company's shareholders, the Board has again decided to hold an interactive Online Shareholder Presentation which will be held at 11.00am on 24 June 2025. The event will feature a chat between the Chairman and Investment Manager and will be followed by a live question and answer session. The online presentation is being held ahead of the Annual General Meeting in order to allow shareholders to submit their proxy votes prior to the meeting.

On behalf of the BoardRobin Archibald Chairman28 May 2025

Performance

Performance (Total Return)

Dividends

Ten Year Financial Record

Cumulative Performance

Rebased to 100 at 31 March 2015

Investment Manager's Review

Highlights

·  NAV total return of 9.4% over the year ended 31 March 2025, compared to a total return of 10.5% from the FTSE All-Share Index.

·  The portfolio slightly lagged the benchmark, as we would expect given the defensive and income focused nature of the portfolio and the weighting to fixed income. However, it delivered the target of positive growth of income and capital in absolute terms.

·  Revenue return per share increased to 14.80p per share (2024: 14.75p).

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 should 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 other fixed income instruments. At the year end, 81% of the portfolio was invested in equities and 19% was invested in fixed income, roughly in line with the weightings at the end of the prior year.

While the portfolio is primarily focused on UK listed companies, we have the ability to invest up to 20% of the assets in overseas companies, with the aim of improving diversification and finding opportunities not available to investors in the UK market. The limit was increased from 10% to 20% during the year in order to increase flexibility. However, we see valuations in the UK as particularly attractive and it is notable that overseas exposure has actually reduced compared to the prior year. As at the year end we held four overseas companies, making up 4.8% of the portfolio, compared to eight positions and 9.4% at the prior year end.

Equity Market Review

The year to the end of March 2025 was a good one for equity markets globally. The MSCI World index delivered a total return of 7.5%, even though it fell by almost 7% from its highs in the middle of February to the end of March. US markets continued to perform well, with the S&P 500 returning 8.5% over the period, but equity market performance was much more consistent across the world last year than it has been for some time. Europe almost kept pace with a 7.5% return from the MSCI Europe Index and the MSCI Emerging Markets Index also did well, returning 8.6% in US Dollar terms. Notwithstanding the amount of negative press around UK equities, the UK market as measured by the FTSE All-Share Index performed even better, returning 10.5% for the year.

While performance for different equity markets was more balanced over the 12 months, this reflected different winners and losers at different points in the year. For much of the period, the US led the way, with large cap technology stocks such as Nvidia leading the market higher. Continued strong earnings and flows into US index trackers supported share prices, with the election of Donald Trump as President in November giving the US market a push into the calendar year end. However, this reversed in early 2025. Growing concerns over trade policy in the US, combined with high valuations, led to a pullback in US equities. At the same time, the removal of government borrowing restrictions in Germany provided a potential source of stimulus for the European economy, boosting European markets and causing a rotation out of US into European equities. Between January and March, Europe outperformed the US by around 10%. We had been hoping for a broadening out of equity returns away from a concentrated set of companies in the US for some time and the rotation is a welcome, and healthy, development for markets.

Within the UK market, financial stocks were the stand-out performers, with banks up by 56% and the insurance sector up by 20%. Over the year, interest rates and bond yields remained at high levels, boosting bank returns, while the market has slowly understood the strength of the UK banks hedge position, which helps protect them from falling interest rates over the next few years. The combination of earnings upgrades for the sector and valuations which remain low compared to history has been a powerful combination. Another sector that has performed well has been capital goods, with defence stocks performing well and also UK construction and industrial companies as activity levels have remained robust. The outlook for increased government spending has supported construction companies.

The sectors that have lagged the market have been the more cyclical ones. Shares in consumer goods have been weak, reflecting concerns about the UK domestic economy, while materials and energy have also lagged as global growth has slowed, especially in China which drives much of the world's commodity demand. While some sectors have benefitted from higher interest rates, the reverse has also been true for sectors that correlate negatively with yields. Healthcare was up slightly, but lagged the market, while the real estate sector fell 10% over the period.

Investment Performance

The net asset value ("NAV") total return for the year was 9.4%, a strong return. This compares to a total return of 10.5% from the FTSE All-Share Index.

The largest negative impact on performance over the period was the weighting towards smaller companies. Over the long term, small and mid-cap companies in the UK have delivered markedly superior returns to large caps. They are more likely to grow and, in turn, to deliver dividend growth. As an active manager, we see more ability to deliver differentiated returns from small and mid-cap companies, given they are less well analysed and understood by market participants. Furthermore, we have a genuinely size agnostic approach to investing. That means that the portfolio is more likely to have an underweight exposure to large companies and an overweight exposure to small companies compared to the benchmark. However, this weighting towards smaller companies did not work well during the year as returns within the benchmark were heavily skewed towards larger companies. The FTSE 100 Index returned 11.9%, but the mid-cap FTSE 250 Index returned only 1.1%, an unusually wide spread between the two.

Why was this the case? We don't see compelling fundamental reasons - earnings revisions from the FTSE 250 have been comparable to the FTSE 100. But we do see an impact from lower liquidity in the UK market and there is a clear correlation with negative sentiment on the UK and investor caution. The FTSE 250 is slightly more domestically focused and is seen as higher risk by investors. However, it very rarely trades at a valuation discount to the FTSE 100, with the most recent occurrences during the Covid-19 pandemic and immediately following the Brexit vote in 2016, yet it currently trades at an approximate 10% discount on a price to earnings multiple. Smaller companies tend to underperform when UK bond yields rise, as investors are more risk averse, and growth is discounted to a greater extent. Our hope would be that, as interest rates come down and sentiment towards the UK improves, we will see a recovery in UK mid cap stocks.

On an individual stock basis, the top performers included Morgan Sindall, which returned 50% as it continued to deliver strong earnings upgrades, benefiting from tightness in the fit-out market and robust construction demand in the UK. Imperial Brands (+72%) delivered improved cashflows and was helped by a consistent high level of share buybacks through the year. Banks in general were particularly strong, boosted by higher for longer interest rates and low starting valuations. Within the portfolio, NatWest (+83%), HSBC (+54%), Standard Chartered (+74%), and OSB (+30%) all delivered notably positive returns. Games Workshop (+46%), was another smaller-cap holding that delivered earnings upgrades and re-rated over the course of the year.

The greatest detractors from performance this year were companies where there were unexpected, company specific events. Wood Group (-79%) fell sharply after announcing an investigation into internal accounting procedures. Two potential bids for the company demonstrated the attractions of the underlying business, but uncertainty and bad timing meant these did not complete, leaving the company in a weak position. We retain a small position in the portfolio and the company remained in discussions with one potential acquirer as at the year end. Close Brothers (-33%) also fell as the company dealt with the fall out of an FCA investigation into historical motor finance loans. We see the impact of this as reflected in the price and hope for some relief on an outcome of a recent Supreme Court hearing. Novo-Nordisk (-40%) was another detractor, due to increased competition to its GLP-1 weight loss drugs. We have been reducing the holding for some time after a period of strong performance, and the holding has still had a positive contribution to performance over the last five years. Conduit (-30%) underperformed due to exposure to the fires in Los Angeles at the start of 2025, while Melrose Industrials (-30%) was impacted by concerns over global trade and the pace at which free cashflow is generated.

Gearing and Fixed Income Portfolio

Gearing (net of cash) was stable over the year, moving from 16.4% to 16.5%. The gearing is notionally invested in the portfolio of preference shares and fixed interest securities. At the year end these securities had a value of £23.5 million, materially in excess of net indebtedness which stood at £17.7 million.

The fixed income portfolio delivered a return of 17.5% over the period. Values were helped by the stabilisation of bond yields and by strong underlying performance of the issuing companies which are primarily in the banking and insurance sectors. Although this portion of the portfolio has generally very low turnover, there were some changes during the year. This was largely driven by the tender offer for the RSA preference shares in July 2024. A change of capital rules for insurance companies means that preference shares are less valuable to issuers, making it more attractive for insurers such as RSA to retire them. From our point of view, the tender offer came at attractive terms, with an implied yield of 6% resulting in an uplift in the value of around 10% and pricing the preference shares at a level last seen in a much lower interest rate environment.

We reinvested the proceeds of the RSA tender offer into Nationwide Building Society perpetual debt at a 7.8% yield, thereby delivering an increase in income generation for shareholders alongside the gain in capital value. Overall, this is a positive development, and it sets an encouraging precedent for terms on any future tender offers. So far in 2025 we have also seen Aviva tender to redeem outstanding General Accident preference shares at terms we see as similarly attractive for holders.

Revenue Account

This year marks the first full year post the merger with abrdn Smaller Companies Income Trust PLC at the end of 2023 and, as such, the period reflects greater income generation from a larger portfolio, offset by the higher share count following the completion of the merger. The income generation from the portfolio was resilient through the year, despite an increased use of buybacks by UK companies and the resultant slowing of dividend growth and lower special dividends.

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

Portfolio Activity

The year under review was an active period for the portfolio. Although we invest for the long term, we always try to remain active, deploying capital to enhance income and to react to market events and changes in valuation. If we feel a company is fairly valued, or if the outlook has deteriorated, we should not be slow to act and to redeploy capital to more attractive opportunities. The impetus to make changes has felt particularly strong this year, with an uncertain and somewhat volatile outlook. With UK equity valuations low and many companies attractively valued, it is sensible to be active and take advantage of opportunities. Looking back to the portfolio at the end of the prior financial year, 21 positions have been exited completely, with 17 new holdings replacing them.

The majority of trading during the year was in response to company specific factors, although the one common driver of trading decisions was the need to protect and enhance income generation. The primary aim of Shires Income is clear: to deliver a high, and over time growing, level of income to shareholders. At a time when we see market levels as relatively high and the importance of income for total return as increasing, many decisions during the year were made to enhance income. Below, we briefly discuss the new positions and portfolio exits in chronological order through the course of the year. While this is extensive, it is hopefully a useful insight into the decisions made on your behalf and how the portfolio is run.

In April, we added a new position in construction contractor Kier Group. The company has delivered significant balance sheet improvement in recent years and was about to resume paying dividends. We like the company given structurally supportive industry trends, high cash generation and still low valuation, despite a period of outperformance. The free cash flow yield at close to 20% supports dividend growth and continued deleveraging. The shares trade on a 6x price to earnings multiple compared to peers on 9-10x. Another trade was to switch the holding in Mondi into Smurfit Westrock. This reflected our preference in the paper and packaging sector, and we see greater upside in the medium term from Smurfit Westrock as it delivers on a significant acquisition in the US market, with material self-help potential.

In May we started a new position in Reckitt Benckiser. The portfolio has generally had an underweight exposure to the consumer staples sector in recent years, given unattractive valuations, low yields and limited genuine growth. A recent sell-off in the shares offered an opportunity to gain sector exposure at a material discount to the peer group and with a yield over 4.5%. The company has struggled operationally in recent years, but there are signs of a turnaround under new management and the underlying brands remain high quality. We also sold out of IT distributor SoftCat in May. This had been in the portfolio for two years and it grew over that time. The shares had re-rated and traded in excess of 25x price to earnings, while the dividend yield had compressed to just 2% at the point of sale. It remains a well-run company with growth potential, but there was more obvious value elsewhere.

We exited one position in June, Greggs. The company had performed very well since it was added to the portfolio in November 2023, and we continue to like the business model and the potential for strong medium-term growth as it expands its offering and rolls out more stores. However, with the yield compressed and the shares trading at over 21x earnings, this was another one we saw as more fairly valued. 

In July we started a new position in UK reinsurance company Conduit. This is a relatively new reinsurance business which is set to deliver earnings growth as its book matures and it benefits from positive market trends. The company has recently demonstrated strong premium growth and improved underwriting profitability. The shares had a 6% dividend yield at the time of purchase and the position helped to diversify the portfolio. At the same time, we sold out of AXA. The French insurer had performed very well since purchase, but had no further income this financial year.

In August we sold out of the position in Lloyds, again reflecting the timing of dividends and the need to generate income through the year. Capital was reallocated to NatWest. Similarly, we switched the holding in BHP into Rio Tinto, a company with very similar drivers but more near-term income. A more meaningful trade in August was to start a position in Dutch technology company ASML. When adding overseas companies to the portfolio, we generally look for something that can't be found in the UK market, and ASML is a prime example of this. The company designs and manufactures the lithography machines essential in the production of today's cutting-edge semiconductors. It has extremely high technical barriers to entry, making products that are essential for one of the highest growth parts of the market and is a genuine diversifier in the portfolio. While it screens as relatively expensive, a recent pullback in its share price means it has de-rated in the last few months and we expect growth to make it look much more reasonably priced a few years from now. We should not forget that the company's end markets are cyclical, but it is one to hold for the long term. The purchase was funded by selling the position in French utility company Engie. This had been an excellent performer since its introduction into the portfolio but we had downgraded it and it had no more income this year - time to take profit.

At the other end of the market cap spectrum, we started a new position in ME Group. This UK mid-cap company operates automated photo booths and laundromats. A somewhat niche market, but one with high returns on capital and plenty of room for growth as it rolls out the self-service, high capacity, laundry model into Europe and Asia. It is a company that our small-cap team like and is a great example of Aberdeen teams working together to find interesting and differentiated income opportunities. We also started a new position in UK property REIT London Metric in August. This is a liquid property company with a high-quality management team and solid performance through the economic cycle. It has an excellent track record of delivering dividend growth and the recent 19% year-on-year increase in dividend takes it to a very attractive 5.9% yield. The purchase was funded by selling the holding in Dutch bank ING. Since purchase in April 2023, the holding had delivered a total return of 65%, outperforming the benchmark by 50%. However, with no income in the next six months we again chose to prioritise other ideas. Another overseas exit this month was Mercedes-Benz. Again, the driver was a lack of income in the near term but very much combined with some difficult trends in auto markets which made us less optimistic on the near-term prospects for the company.

There was only one meaningful trade in September, switching UK housebuilder Berkeley Group into peer Barratt. The move came ahead of Barratt going ex-dividend, so we captured some additional income, but the investment primarily reflected the fact that Barratt had lagged the sector following its deal to buy Redrow.

The remaining holding in GSK was sold in October. This is our least preferred large-cap pharma company and, while the recent Zantac litigation progress has been positive, this has been offset by some uncertainty on vaccine sales rates.

In November, one new holding was added, French listed Gaztransport Et Technigaz ("GTT"), with the position funded by selling TotalEnergies to maintain the weight to energy. GTT provides the membrane containment technology to liquefied natural gas ("LNG") carriers, which ship cooled gas between international markets. This is a growing market as LNG import and export capacity expands. The market will require greater tanker capacity and GTT dominates this space with high technological barriers to entry. It has a strong order book, and we expect that, as the tanker fleet ages in the next few years, we will see a growing replacement market, supporting long term cashflows. The company has a strong balance sheet, provides a high return on capital and pays a high dividend yield. This switch also reduces commodity price leverage in the portfolio. Given a mixed outlook for energy demand in 2025, we don't think that is a bad thing.

In December the weight in Standard Chartered was reduced, with the capital used to buy back into ING. ING was only sold in August, but Standard Chartered outperformed it by 30% in the four months since, and with a defensive mix and high yield it looked attractive. The other notable trade in the month was to exit animal genetics provider Genus. While Genus remains a high-quality business with high barriers to entry, underperformance meant it had fallen below our minimum position size, forcing the question of "up or out". With risks to the timing of its disease resistant genetics and low yield we chose to move on.

At the start of January, we started a new position in UK bank Barclays. The position was funded by selling down some of the holding in NatWest which had performed very well. The move helped to diversify the exposure to UK banks and to increase exposure to capital markets where we saw more potential for positive surprise in 2025. During January we also switched the position in Aviva preference shares into the equity. The preference shares deliver a reliable, high yield, but equities generally have better long-term growth prospects. In the case of Aviva, the equity also offered a premium yield to the preference shares and there is an opportunity for the company to extract meaningful synergies from the recent acquisition of Direct Line, resulting in some earnings upgrades. That makes the equity relatively more attractive. The position in Italian utility Enel was also sold during the month. The share had risen by approximately 30% since the addition to the portfolio in mid-2023 and we had become less attracted to the company.

During February there were changes to the UK consumer discretionary exposure, with the holding in Dr. Martens sold and the proceeds reinvested into Dunelm. Although we see good long-term potential from Dr. Martens under new management, the share price had rallied and the shares do not deliver a meaningful income. By contrast, Dunelm had de-rated due to concerns around the UK consumer and remains a high quality, cash generative, retailer. With a special dividend coming up and a business model that continues to win market share through the cycle, we saw it as a better balance of risk and reward in the current environment. The exposure to UK housebuilders was also changed in February, switching from Barratt Redrow into Taylor Wimpey. The change reflected a materially higher dividend yield from Taylor Wimpey, making it a more attractive way to gain exposure to market improvement for the portfolio. Finally, we also switched holdings in European banks during the month, selling ING and buying Italian bank Intesa Sanpaolo. Intesa Sanpaolo has a higher dividend yield and its weighting to investment services offers stronger long term growth and better protection for income if interest rates move lower in Europe.

Closing the year, March was an active month for trading. At the start of the month, we sold out of the remaining position in 4Imprint, reflecting potential headwinds from higher tariffs and slower economic activity in the US. We like the company, but saw it as fairly priced at those levels, with the dividend yield only marginally above the benchmark level. We also started a new position in self-storage provider Safestore. The shares have been very weak recently and now offer a yield of over 5%. The shares are trading at a material discount to asset value, providing downside protection. We also sold out of the remaining position in Novo-Nordisk. This has been a great holding over recent years but has moved down our order of preference in the healthcare sector as competition has increased and it offers limited yield.

At the end of the month, we switched UK bank exposure back from NatWest to Lloyds. This provided an income benefit due to dividend timing and there is potential for some near-term catch-up for Lloyds on clarity over investigations into historic motor finance deals. We also bought back into 4Imprint - an unusually quick turnaround! Since we sold the position, the share price had fallen on US activity concerns and all the reasons we like the company for the long term continue to apply. Having sold the shares 30% higher earlier in the month we were happy to buy them back with concerns more reflected, even if we are likely to see some more tariff turbulence in the short term. The purchase was funded by selling Games Workshop. This is a great company, but we consider that the shares are now more reasonably priced having more than doubled since the position was added to the portfolio.

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 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 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.

Consideration of Environmental, Social and Governance ("ESG") factors form an important part of our process. Whilst the management of the Company's investments is not undertaken with any specific instructions to exclude certain asset types or classes, we take these factors into account as part of the investment process. ESG investment is about active engagement with the goal of improving the performance of assets held by the Company. We aim to make the best possible investments for the Company by understanding the whole picture of the investments - before, during and after an investment is made. That includes understanding the ESG risks and opportunities they present, and how these could affect longer term performance and valuation.

Outlook

The 2025/2026 financial year has certainly started with a high degree of volatility. A very active new US administration has turned global trade relations upside down in recent weeks, causing markets to swing one way or the other depending on the latest statements. As such, by the time we reach our AGM in July any outlook statement may be more redundant than usual!

Despite the short term unpredictability of markets, we are seeing some events happen that have been well flagged. After an almost unprecedented period of market leadership, US equities are struggling this year as concerns build around the strength of the domestic economy and the consumer in particular. While the potential for inflationary tariffs have acted as a catalyst for this, it would be no surprise if we saw a US downturn after such a strong period of growth. At the same time, international markets have held up well, helped by government stimulus in Europe and by much lower starting valuations. Given the extent of US outperformance in the last decade and the still extreme weighting of global equity funds to the US, we consider there is significant runway for this trend to continue. Diversification for all investors should be at the top of the agenda. Any holder of a global index tracker has around 70% of their assets in US large cap companies and April's changes should be a trigger to look closely at that allocation.

Any change in equity allocation should favour UK markets - a small outflow from the US becomes a big inflow if it crosses the Atlantic. UK companies remain cheap on any objective measure and the high level of distributions should prove very attractive to investors at a time when market directions are uncertain. Our focus today is to lean into UK domestic markets and continue to find those companies with resilient cashflows supporting high distributions through the economic cycle. While the portfolio is style agnostic, the opportunities in value stocks remain compelling in our view and we continue to steer in this direction. Low starting values protect the downside in the event of a recession while providing the potential for higher returns in the eventual cyclical upturn - even if great care is needed to avoid the value traps.

An important part of the portfolio positioning remains having an overweight exposure to UK small and mid-cap companies. This has not worked so far in 2025, with rising bond yields at the start of the year acting as a headwind to this part of the market. However, we remain convinced this is the place to be. The fundamentals for UK mid-caps have been robust and there are bargains to be found, with quality companies at very reasonable prices. The expectation is that we will see a faster pace of interest rate cuts from the Bank of England this year, and that will help government finances, allow bond yields to move lower and act as a tailwind. Following the merger with abrdn Smaller Companies Income Trust in 2023 we are able to take more small-cap exposure directly, increasing the allocation to high conviction ideas and maximising income generation from this segment of the market. However, we continue to work closely with our small-cap team to identify opportunities.

A return to international and mid-cap outperformance would also likely benefit active management. While benchmarks and passive index trackers think in terms of market capitalisation, active managers tend to think about the opportunity set as more equally weighted. This matters - in the UK, the large cap FTSE 100 Index makes up over 85% of the FTSE All-Share Index by market-cap, but only 20% of the constituents. There are plenty of opportunities out there for the year ahead. Our focus remains squarely on meeting the income objective and growing income over time, while also preserving capital and maintaining the potential for long term growth.

Iain PyleAberdeen28 May 2025

Investment Portfolio - Equities

Investment Portfolio - Other Investments

Distribution of Assets and Liabilities

Directors' Report (extract)

The Directors present their report and audited financial statements for the year ended 31 March 2025.

Results and Dividends

The financial statements for the year ended 31 March 2025 are contained below. Dividends paid and proposed for the year amounted to 14.80p per Ordinary share.

First, second and third interim dividends for the year, each of 3.20p per Ordinary share, were paid on 31 October 2024, 31 January 2025 and 30 April 2025 respectively. The Directors recommend a final dividend of 5.20p per Ordinary share, payable on 31 July 2025 to shareholders on the register on 4 July 2025. The ex-dividend date is 3 July 2025. Under UK-adopted international accounting standards the third interim and final dividends will be accounted for in the financial year ended 31 March 2026. 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. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 March 2025 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

The issued Ordinary share capital as at 31 March 2025 comprised 40,214,596 Ordinary shares of 50p each and 2,018,478 Ordinary shares held in treasury. The Company also has 50,000 3.5% Cumulative Preference shares of £1 each.

During the year the Company bought back 1,154,946 Ordinary shares at a discount to net asset value, to hold in treasury.

Voting Rights

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 abrdn Fund Managers Limited ("aFML"), a wholly owned subsidiary of Aberdeen Group plc, as its alternative investment fund manager. aFML has been appointed to provide investment management, risk management, administration, company secretarial services and promotional activities to the Company. The Company's portfolio is managed by abrdn Investments Limited by way of a group delegation agreement in place between aFML and abrdn Investments Limited. In addition, aFML has sub-delegated administrative and company secretarial services to abrdn Holdings Limited and promotional activities to abrdn Investments Limited. 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

Information provided to the Company by major shareholders pursuant to the FCA's Disclosure Guidance and Transparency Rules is published by the Company via a Regulatory Information Service.

The table below sets out the interests in 3% or more of the issued share capital of the Company, of which the Board was aware as at 31 March 2025.

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

Directors

At the end of the year the Board comprised four non-executive Directors, each of whom is considered by the Board to be independent of the Company and the Manager. Robert Talbut retired as a Director at the Annual General Meeting on 5 July 2024.

The Directors attended scheduled Board and Committee meetings during the year ended 31 March 2025 as follows (relevant meetings in brackets):

The Board meets more frequently when business needs require and has regular dialogue between formal Board meetings, including with the Manager. During the year, there were an additional four Board/Board Committee meetings held, principally in relation to share buy backs, the approval of the Annual and Half Yearly Reports and the Company's positioning in light of sector issues. 

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. However, the Board has decided that all Directors will seek annual re-appointment after initial appointment to the Board.

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, oversight and proper governance of the Company. 

Following formal performance evaluations, each Director's performance continues to be effective and demonstrates commitment to the role, and their individual performances contribute to the long-term sustainable success of the Company. All of the Directors have demonstrated that they have sufficient time and commitment to fulfil their directorial roles with the Company. The Board therefore recommends the re-appointment of each of the Directors at the Annual General Meeting.

Board's Policy on Tenure

In normal circumstances, it is the Board's expectation that Directors will not serve beyond the Annual General Meeting following the ninth anniversary of their appointment. However, the Board takes the view that independence of individual Directors is not necessarily compromised by length of tenure on the Board and that continuity and experience can add significantly to the Board's strength. The Board believes that recommendation for re-election should be on an individual basis following a rigorous review which assesses the contribution made by the Director concerned, but also taking into account the need for regular refreshment and diversity, as well as providing continuity of experience of the Company. 

It is the Board's policy that the Chairman of the Board will not normally serve as a Director beyond the Annual General Meeting following the ninth anniversary of his/her appointment to the Board. However, this may be extended in certain circumstances including the facilitation of effective succession planning and the development of a diverse Board. In such a situation the reasons for the extension will be fully explained to shareholders and a timetable for the departure of the Chairman clearly set out.

The Role of the Chairman and Senior Independent Director

The Chairman is responsible for providing effective leadership to the Board, by setting the tone of the Company, demonstrating objective judgement and promoting a culture of openness and debate. The Chairman facilitates the effective contribution and encourages active engagement by each Director. In conjunction with the Company Secretary, the Chairman ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chairman acts upon the results of the Board evaluation process by recognising strengths and addressing any weaknesses and also ensures that the Board engages with major shareholders and that all Directors understand shareholder views.

The Senior Independent Director acts as a sounding board for the Chairman and acts as an intermediary for other Directors, when necessary. Working closely with the other Directors, the Senior Independent Director takes responsibility for an orderly succession process for the Chairman, and leads the annual appraisal of the Chairman's performance. The Senior Independent Director is also available to shareholders to discuss any concerns they may have.

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 proper 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, which may be amended from time to time to reflect regulatory and other changes. 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.

Board Diversity

The Board recognises the importance of having a range of skilled and experienced individuals with the right knowledge, including of the Company, represented on the Board in order to allow it to fulfil its obligations. The Board also recognises the benefits 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, socio-economic background, 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. In doing so, the Board will take account of the targets set out in the FCA's Listing Rules, which are set out in the tables below.

The Board has resolved that the Company's year end date is the most appropriate date for disclosure purposes. The following information has been provided by each Director through the completion of questionnaires. There have been no changes since the year end.

Table for reporting on gender as at 31 March 2025

Table for reporting on ethnic background as at 31 March 2025

Notes:

1. Meets target that at least 40% of Directors are women as set out in LR 6.6.6R (9)(a)(i).

2. Does not meet target that at least one Director is from a minority ethnic background as set out in LR 6.6.6R (9)(a)(iii). The Directors will take this into account when making future Board appointments.

3. This column is not applicable as the Company is externally managed and does not have any executive staff. Specifically, it does not have either a CEO or CFO. The Company considers that the roles of Chairman of the Board, Senior Independent Director and Chair of the Audit Committee are Senior Board Positions and, accordingly, that the Company meets in spirit the requirement that at least one of the Senior Board Positions is held by a woman as set out in LR 6.6.6R (9)(a)(ii).

Corporate Governance

The Company is committed to high standards of corporate governance and the Board is accountable to the Company's shareholders for good governance. The Board has considered the principles and provisions of the AIC Code of Corporate Governance as published in February 2019 (the "AIC Code"). The AIC Code addresses the principles and provisions set out in the UK Corporate Governance Code as published by the FRC in July 2018 (the "UK Code"), as well as setting out additional provisions on issues that are of specific relevance to investment trusts.

The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the FRC, provides more relevant information to shareholders than if it had adopted the UK Code. The AIC Code is available on the AIC's website: theaic.co.uk. It includes an explanation of how the AIC Code adapts the principles and provisions set out in the UK Code to make them relevant for investment trusts.

The Board confirms that, during the year, the Company complied with the principles and provisions of the AIC Code. 

Further details of the Company's compliance with the AIC Code can be found on its website.

The Board is conscious of the FRC's recent updates to the UK Corporate Governance Code, and the corresponding updates to the AIC Code, some of which will apply to the Company's financial year beginning on 1 April 2025. It is the Board's intention that the Company will comply with all relevant provisions of the new codes.

Going Concern

The Company's assets consist mainly of equity shares in companies listed on the London Stock Exchange. The Board has performed stress testing and liquidity analysis on the portfolio and considers that, in the absence of unforeseen circumstances, the majority of the Company's investments are realisable within a relatively short timescale.

The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants, including the headroom available. At the year end, the Company had a £20 million loan facility which is due to mature in April 2027.

Having taken these factors into account, 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 the period to 30 June 2026, which is 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 communications with shareholders. Shareholders and investors may obtain up to date information on the Company through its website.

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, and representatives from the Manager meet with major shareholders on at least an annual basis in order to gauge their views. 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.

Directors make themselves available to attend meetings with the Company's largest shareholders and meet other shareholders at the Annual General Meeting and, as explained in the Chairman's Statement, the Company will hold an Online Shareholder Presentation in advance of the Annual General Meeting this year including the opportunity for an interactive question and answer session.

The notice of the Annual General Meeting is, where practicable, sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Manager at the meeting. Further details regarding the arrangements for this year's Annual General Meeting and separate Online Shareholder Presentation are set out in the Chairman's Statement.

Annual General Meeting

The Annual General Meeting will be held at 18 Bishops Square, London E1 6EG on Tuesday 8 July 2025 at 12 noon.

By order of the Boardabrdn Holdings Limited Company Secretary1 George StreetEdinburgh EH2 2LL28 May 2025

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements, in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year, and under that law they have chosen to prepare the financial statements in accordance with UK-adopted international accounting standards. 

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. 

In preparing these financial statements, the Directors are required to: 

·  select suitable accounting policies in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' and then apply them consistently; 

·  make judgments and estimates that are reasonable and prudent;

·  present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·  provide additional disclosures when compliance with the specific requirements in UK-adopted international accounting standards is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance;

·  state whether the financial statements have been prepared in accordance with UK-adopted international accounting standards subject to any material departures disclosed and explained in the notes to the financial statements; and 

·  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, but not for the content of any information included on the website that has been prepared or issued by third parties. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Board confirms that to the best of its knowledge:

·  the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

·  in the opinion of the Directors, the Annual Report taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's position and performance, business model and strategy; and

·  the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

On behalf of the BoardRobin Archibald Chairman28 May 2025

Statement of Comprehensive Income

Balance Sheet

Statement of Changes in Equity

Cash Flow Statement

Notes to the Financial Statements

For the year ended 31 March 2025