Aberdeen Smaller Companies High Income Trust PLC

Half-Yearly Report For The Six months ended 30th Jun 14

Phil Webster CFA, Senior Investment Manager

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Objective

• The objective of the Company is to provide a high and growing dividend and capital growth from a portfolio invested principally in the ordinary shares of smaller UK companies and UK fixed income securities.

Benchmark

• FTSE SmallCap Index - excluding Investment Companies (total return)

Aberdeen Smaller Companies High Income Trust PLC

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Financial highlightsFor six months ended 30 Jun 14

A Based on IFRS net asset value excluding dividend adjustment of 1.60p (31 Dec 13 - 1.60p)Source: Aberdeen Smaller Companies High Income Trust PLC Half Yearly Report, 30 Jun 14

30 Jun 14 31 Dec 13 % change

Equity shareholders’ funds (£’000) 50,669 52,618 -3.7

Net asset value per share 229.17p 237.99p -3.7

Share price (mid-market) 210.00p 223.00p -5.8

Discount to net asset valueA 7.7% 5.7%

Net Gearing 20% 19%

Dividend yield 3.0% 2.8%

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Aberdeen Smaller Companies High Income Trust (ASCHIT)

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ASCHIT SMXX Index

Source: Aberdeen Asset Management, 31 Dec 13

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Aberdeen Smaller Companies HIT performancePerformance to 30 Jun 14

• The Trust has lagged the index over the short-term

• Stock specifics drove the short-term underperformance but post management meetings we remain comfortable holders.

• In this more volatile period we see a number of attractive valuation opportunitiesA Source: Aberdeen Asset Management, Markit iBoxx, Morningstar & FactsetAll figures are for total return and assume re-investment of net dividends excluding transaction costs Past Performance is not a guide to future results

Six months nded30 Jun 14

%

1 year ended30 Jun 14

%

3 year ended30 Jun 14

%

5 year ended30 Jun 14

%

Share price -4.5 +16.3 +77.1 +253.7

Net asset value per share -2.4 +23.7 +56.8 +235.9

FTSE SmallCap Index (ex IC’s) +0.4 +25.3 +62.6 +143.7

FTSE All-Share Index +1.6 +13.1 +29.2 +96.7

Markit iBoxx Sterling Non-Gilts 1 - 15 Years IndexA +3.8 +5.7 +20.7 +46.9

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Dividends and earnings

30 Jun 14 30 Jun 13 % change

Revenue return per shareD 3.99p 3.66p 9.0

Dividends per shareE 3.20p 3.10p 3.2

Dividend cover 1.0 0.96

Revenue reservesF £2,227,000 £2,052,000

D Measures the revenue earnings for the year divided by the average cum income net asset value throughout the year.E The figures for dividends per share reflect the years in which they were earned. F The revenue reserve figure does not take account of the fourth interim dividend amounting to £354,000 (2012 – (£343,000)Source: Aberdeen Smaller Companies High Income Trust PLC, Annual Report 31 Dec 13, Interim Report 14

• The backdrop for income remains tough with yields near historic lows

• We are encouraged by the improving revenue return which is testament to the work we have done to improve the underlying revenue generation of the Trust

• The Board remain committed to a progressive dividend policy

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Asset class segmentation

Assets £’000 %

Equities 52,596 103.8

Fixed Income 3,193 6.3

Convertibles 1,043 2.0

Preference shares 3,246 6.4

Total Investments 60,078 118.5

Cash 591 1.2

Debt (10,000) (19.7)

Net Assets 50,669 100.00

• The allocation has remained broadly flat since the year-end 2013. We remain happy with our current asset allocation with equity yield still more attractive than bonds although we are mindful of increased volatility

• We have kept the equity gearing under control given stretched valuations

• We would like to increase the fixed income portfolio, however, with interest rates remaining low it remains tough to find attractive opportunities, relative to equity

Source: Aberdeen Asset Management – 30 June 14

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Top twenty holdings

Source: Aberdeen Asset Management. The above securities have been included for illustrative purposes only

Dec 13Rank Top 20 holdings % of fund1 RPC Group 4.92 Fenner 4.53 Wilmington Group 4.34 Euromoney 3.85 XP Power 3.86 Dechra Pharmaceuticals 3.17 Close Brothers Group 3.08 Elementis 3.09 Chesnara 3.010 Interserve 2.911 TT Electronics 2.912 Berendsen 2.913 Helical Bar 2.814 Bellway 2.715 Morgan Sindall Group 2.616 Bloomsbury Publishing 2.617 Rathbone Brothers 2.518 BBA Aviation 2.419 Hiscox 2.220 Numis Corp 2.2

Total 62.0

Jun 14Rank Top 20 holdings % of fund1 RPC Group 4.12 Wilmington Group 3.93 XP Power 3.54 Fenner 3.45 Dechra Pharmaceuticals 3.36 Euromoney 3.27 TT Electronics 3.28 Helical Bar 3.19 Berendsen 3.110 Morgan Sindall Group 3.011 Chesnara 3.012 Rathbone Brothers 3.013 Elementis 2.914 Interserve 2.915 Close Brothers Group 2.916 Bellway 2.717 Bloomsbury Publishing 2.718 Devro International 2.619 BBA Aviation 2.620 James Fisher & Sons 2.5

Total 61.5

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Equity portfolio activity

New Entrants: Manx Telecom

(IPO)

Abcam

Additions: Hansteen Dechra Pharmaceutic

als

Devro Acal

Reductions: Oxford Instruments

RPC Restaurant Group

Bellway

Exited:

To 30 Jun 14

Source: Aberdeen Asset Management PLC, Jun 14

• After exiting a number of larger companies including Weir Group and Melrose in the previous period the first half has seen no additional exits.

• We have initiated two new positions; Manx Telecom at IPO and Abcam which we have been following for a number of years but were waiting for a period of weakness to initiate a holding

• The additions/reductions are more recent to give you an idea of valuation driven movements across the portfolio.

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Fixed Income / Preference Shares portfolio – largest investments

Company Sector Market Value£’000

Total portfolio%

NatWest Bank 5.98% Banks 943 1.6

Stagecoach 5.75% 2016 Transportation 650 1.1

Wales & West 6.75% 2018-36 Utility 569 0.9

Electricite De France 6%A Sov. Owned/Supp 532 0.8

Anglian Water Serv Finance 4.5% 2026 Utility Other 499 0.8

Fixed Income investments 3,193 5.3

As at 30 Jun 14

Company Sector Market Value£’000

Total portfolio%

Aviva 8.75% Financial Services 1,270 2.1

General Accident 8.875% Financial Services 1,229 2.0

Balfour Beatty Cum Conv 10.75% Construction 1,035 1.7

Ecclesiastical Insurance 8.625% Financial Services 747 1.2

Preference/Convertible investments 4,281 7.0

• A stable period with no changes made to either the fixed income or Preference share portfolio

• We see very few attractive valuation or yield opportunities across the bond market without sacrificing quality.

• The running yield at c5.5% remains attractive and would be difficult to replace in the current environment

Source: Aberdeen Asset Management.

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• At the outset of the year we spoke about stretched valuations and the large number of average IPO that were coming to market.

• With rising volatility we have seen a pullback especially in highly-valued smaller companies.

• Earnings growth has been broadly in line with expectations across the Trust’s holdings. There remains some uncertainty that estimates will be met at the full-year.

• The Trust has performed pretty well through this environment with the majority of the underperformance driven by a handful of names; Fenner, Wilmington and Euromoney

• We also suffered from not holding any Oil & Gas companies but we have gained from the recent weakness in the oil price so we will not see this drag on the second half performance.

• There are a number of equities now looking attractively valued. We have been adding to a number of our holdings on weakness where the medium-term growth is intact.

• It’s going to take time for yields on bonds to move out towards attractive levels. For now we therefore see very little movement in the fixed income portfolio.

• Summation: Smaller companies have been weaker in the short-term. Our quality bias and balance sheet strength give us comfort to add to our holdings on weakness. Valuations are looking more attractive across the smaller companies market.

What does the second half of 2014 hold for smaller companies?

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Should you wish further information please do not hesitate to contact us:

Contact details

Private investors: 0500 00 00 40

Institutional investors:

Kenneth Harper +44 (0)131 528 4224or

Andrew Leigh +44 (0)207 463 6312

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Issued by Aberdeen Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority in the United

Kingdom. A member of the Aberdeen Asset Management group of companies. Registered Office: 10 Queen’s Terrace,

Aberdeen, AB10 1YG.

Viewers should remember that the price of shares and the income from them may go down as well as up and investors may

not get back the full amount invested on disposal of the shares. Past performance is no guarantee of future performance. The

use of gearing is likely to lead to a volatility in the Net Asset Value (NAV), meaning that a relatively small movement either

down or up in value of the trusts total assets, will result in a magnified movement in the same direction, of that NAV.

There is no guarantee that the market price of shares in investment trusts will fully reflect their underlying NAV. Investment

trusts should be considered only as part of a balanced portfolio, of which they should not form a disproportionate part. Under

no circumstances should this information be considered as an offer, or solicitation, to deal in investments.

This information does not constitute advice or a personal recommendation for which the duty of suitability would be owed by

us, and you should seek your own advice as to the suitability of any investment matter mentioned here.

The information contained herein, including any expressions of opinion or forecast, has been obtained from or is based upon,

sources believed by us to be reliable but is not guaranteed as to the accuracy or completeness.

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