Aberdeen UK Tracker Trust : Circ re. General Meetings

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Aberdeen UK Tracker Trust plc (the 'Company' or 'AUKT')

Recommended Proposals for the Reconstruction and Winding-Up of the Company

06 March 2017

On 30 November 2016, the Company announced that the Board had undertaken a review of the Company's investment mandate, market position and prospects for growth and that it had agreed heads of terms with Aberdeen Diversified Income and Growth Trust plc ('ADIGT') (formerly BlackRock Income Strategies Trust plc), in respect of a merger with ADIGT to be effected by way of a scheme of reconstruction of the Company under Section 110 of the Insolvency Act 1986 ('the Scheme').

The Company is today sending a circular to Shareholders in connection with the Proposals (the 'Circular').

The Proposals, which are unanimously recommended by the Board, comprise a members' voluntary liquidation (solvent liquidation) and a scheme of reconstruction of the Company pursuant to which Shareholders will be entitled, in respect of their shareholdings, to:

(a) elect to receive ADIGT New Ordinary Shares (the 'Rollover Option'); and/or

(b) elect to receive cash (the 'Cash Option').

Shareholders can make different Elections in respect of different parts of their holdings. The Cash Option is limited to 60 per cent. of the Cash NAV (which, for the avoidance of doubt, is subject to a discount of 2.75 per cent.). Should total Elections for the Cash Option exceed 60 per cent. of the Cash NAV, aggregate excess elections will be scaled back into ADIGT New Ordinary Shares on a pro ratabasis. The enhancement from the Discount will be applied to the Rollover Pool and will be for the benefit of those Shareholders who have elected for the Rollover Option

Background to and rationale for the Proposals

The Board has carried out a strategic review of the current investment mandate and determined that investors seeking exposure to a liquid UK equity index are today more likely to look to gain such exposure via ETFs, which take a passive investment management approach and are associated with lower ongoing charges than can be provided within the investment company structure. Increasing regulatory costs have limited the scope for overall cost reductions to enable the Company to compete with an ever-increasing range of global tracker products.

The reducing appetite for an index tracking mandate in a closed-end form, which the Board has seen, has contributed to the Company's shares trading at a persistent discount to their Net Asset Value despite continued share buybacks. Indeed, this was exacerbated when it became clear that the Company's largest, and long-term, shareholder was seeking an exit, and such an exit would have had significant further knock-on consequences upon the size of the Company.

The Board has previously reviewed the issues facing the Company and has undertaken varied promotional initiatives in association with the Manager to increase the investing community's awareness of the Company and therefore demand for its shares. Despite consistently achieving its investment objective, the Company's trading experience demonstrates that index tracking is not attracting sufficient new demand in an investment company structure, for the reasons outlined above.

As part of its review, the Board considered all options open to the Company, and concluded that, especially with the changes witnessed in the pension and savings market in recent years, existing Shareholders who do not seek to realise their shares for cash under the Scheme will be well served with the new investment objective being proposed by ADIGT, which will aim to target consistent total returns with lower volatility than equities and an attractive target dividend yield. Indeed, this is a policy that the Board had under active consideration for the Company before the possibility of a rollover into ADIGT became clear.

The focus of ADIGT will be on delivering greater capital stability over the medium term than a long-only equity strategy (like that of the Company) and with volatility significantly less than that of equities.

The Board believes that a closed ended vehicle with the ability to allocate capital in a very flexible, unconstrained approach across the entire asset class spectrum should be an appealing proposition to a wide range of investors. A growing number of investors are seeking exposure to diversified multi-asset investment mandates as witnessed by the growth over the last ten years in the Investment Association's 'Mixed Asset' sector with funds under management growing from £66.3 billion (2007) to £171.9 billion (December 2016) (source: Investment Association)

The Board believes that ADIGT should provide to shareholders the benefit of such a strategy allowing for investment in a highly diversified, multi-asset approach to generating long-term income and capital returns with lower volatility than equity markets. ADIGT's portfolio will include, but will not be limited to, listed equities, property, social and renewable infrastructure, emerging market bonds, loans, asset-backed securities, insurance linked securities, private equity, farmland and aircraft leasing.

Benefits of the Proposals

The Directors believe that the Proposals should provide the following benefits for Shareholders:

- Shareholders may roll their investment into ADIGT, allowing for investment in a highly diversified, multi-asset approach to targeting highly attractive long-term income and capital returns with lower volatility than equity markets;

- Shareholders electing to receive shares in ADIGT in respect of their entitlements in the liquidation should expect to receive at least 103.59 per cent. of NAV, or at least 97.21 per cent. of NAV if electing for cash in respect of their entitlements in the liquidation (both on the basis of a cum income NAV per Share in the Company of 366.70 pence on 28 February 2017);

- Shareholders who roll their investment into ADIGT will have an investment in a larger company that may result in better liquidity for their shares trading on the London Stock Exchange compared to the current level of trading liquidity in the Company's shares;

- Shareholders who roll their investment into ADIGT should be exposed to an above market target dividend yield, with dividends being paid quarterly;

- to utilise fully the investment trust structure via investment in certain less liquid asset classes; and

- the option to elect for cash at a tighter level than the prevailing current discount to net asset value subject to the Cash Pool Cap, which will be satisfied through a realisation of the portfolio.

Illustrative financial effects of the Proposals

As at 29 November 2016, the day prior to the announcement of the Proposals, the Company's share price was 320.75 pence, representing a discount to the cum income NAV as at that date of 5.5 per cent. On 28 February 2017, the latest practicable date prior to the publication of the Circular, the Company's share price was 344.50 pence, representing a discount to cum income NAV as at that date of 6.1 per cent. and ADIGT's share price was 113.25 pence and the NAV per ADIGT New Ordinary Share at that date was 123.71 pence.

Had the Scheme been implemented on 28 February 2017 (the latest practicable date before the publication of the Circular) on the basis of a AUKT FAV per Share at that date of 379.9222 pence and a ADIGT FAV per Share (assuming there was full take up of the Tender Offer) at that date of 123.0126 pence and assuming (for illustrative purposes only) that: (i) the holders of 40 per cent. of the Shares in issue elect or are deemed to elect for the Rollover Option and the remaining Shareholders elect for the Cash Option; and (ii) the costs of the Scheme payable by the Company total £680,402 (excluding any portfolio reorganisation costs, the costs of the Liquidator and a Liquidators' retention of £100,000), a holder electing for the Rollover Option would receive in net asset value terms 103.59 per cent. (a NAV per Share uplift of 3.59 per cent.) and Shareholders electing for the Cash Option would receive 97.21 per cent. of cum income NAV.

Therefore, a holder of 1,000 Ordinary Shares who elects for the Rollover Option would receive 3,088 ADIGT New Ordinary Shares with an aggregate net asset value of £3,798 and an illustrative aggregate market value of £3,486. The market value is an illustrative figure only, derived by applying ADIGT's current discount to NAV. If a discount of 5.0 per cent., the level of discount referred to by the ADIGT Board as part of their proposed discount control policy, is applied then the illustrative aggregate market value would be £3,608. It is noted that the actual market value will depend on ADIGT's discount to NAV at the date of completion. A holder of 1,000 Ordinary Shares who elects for the Cash Option would receive £3,564.

It should be emphasised that the figures above are given for illustrative purposes only and should not be regarded as a forecast of any of the metrics referenced, all of which will be calculated as at the Calculation Date. The market movements for both the Company and ADIGT's investment portfolios will or could affect the actual figures in the period up to the Calculation Date.

Proposed Interim Dividends

The Directors are intending to declare an interim dividend in relation to the financial year ending 31 December 2016 and the financial period ending 6 April 2017, respectively, to Shareholders on the Register at 6.00 p.m. on 17 March 2017. This dividend will be paid prior to, and is not dependent on, the implementation of the Proposals. The record date for the interim dividend is 17 March 2017 and the Ordinary Shares will go ex-dividend on 16 March 2017. A further announcement will be made shortly.

Any interim dividend paid, or declared and intended to be paid, by ADIGT to its shareholders for the period up to the Effective Date of the Scheme will be to the benefit of holders of ADIGT shares only.

Conditions to the implementation of the Scheme

Implementation of the Scheme is conditional, inter alia, upon:

(i) the passing of all Resolutions to be proposed at (a) the First GM and (b) the Second GM (or at any adjournments thereof) and upon any conditions of such Resolutions being fulfilled;

(ii) the ADIGT Resolution(s) becoming unconditional in all respects;

(iii) the UKLA having acknowledged to ADIGT or its agents (and such acknowledgement not having been withdrawn) that the application for the admission of the ADIGT New Ordinary Shares to be issued to Shareholders pursuant to the Scheme (i) to listing on the premium segment of the Official List has been approved and will become effective as soon as a dealing notice has been issued by the FCA and any listing conditions having been satisfied; and (ii) to trading on the main market of the London Stock Exchange having acknowledged to the Company or its agent (and such acknowledgement not having been withdrawn) that the ADIGT New Ordinary Shares will be admitted to trading; and

(iv) the Directors resolving to proceed with the Scheme.

In the event that condition (i)(a), (ii), or (iii) fails to be satisfied, the Second GM will be adjourned indefinitely and the Scheme will lapse.

Shareholder Meetings

The implementation of the Proposals will require two general meetings of the Company. The notices convening the First General Meeting (to be held at 11.00 a.m. on 29 March 2017) and the Second General Meeting (to be held at 11.00 a.m. on 6 April 2017) are set out on pages 55 to 60 of the Circular. Both General Meetings will be held at Bow Bells House, 1 Bread Street, London EC4M 9HH.

Voting intentions

Aviva Investors Global Services Limited, as agent on behalf of its underlying clients, has discretionary management control over approximately 24.61 per cent. of the Ordinary Shares and has given the Company a non-legally binding letter of intent to vote in favour of any shareholder resolutions in relation to the Proposals, should it remain a shareholder at the time of the relevant General Meetings.

1607 Capital Partners, LLC, as agent on behalf of its underlying clients, has discretionary management control over approximately 18.87 per cent. of the Ordinary Shares and has given the Company a non-legally binding letter of intent to vote in favour of any shareholder resolutions in relation to the Proposals, should it remain a shareholder at the time of the relevant General

This announcement does not contain all the information which is contained in the Circular and Shareholders should read the Circular to make an informed Election under the Proposals.

Defined terms used in this announcement have the meanings given in the Circular unless the context otherwise requires.

Timetable

Ex-dividend date for interim dividend to Ordinary Shareholders	16 March
Record date for interim dividend to Ordinary Shareholders	17 March
Latest time and date for receipt of Savings Scheme Forms of Election	1.00 p.m. on 20 March
Latest time and date for receipt of Forms of Direction from Savings Scheme Participants for First General Meeting	11.00 a.m. on 22 March
Latest time and date for receipt of Forms of Proxy from Shareholders for First General Meeting	11.00 a.m. on 27 March
Latest time and date for receipt of the Forms of Election and/or TTE Instructions from Ordinary Shareholders	1.00 p.m. on 27 March
Record Date for entitlement to the Scheme	6.00 p.m. on 28 March
First General Meeting	11.00 a.m. on 29 March
Latest time and date for receipt of Forms of Direction from Savings Scheme Participants for Second General Meeting	11.00 a.m. on 30 March
Ordinary Shares disabled in CREST	7.00 a.m. on 31 March
Reclassification of the Ordinary Shares (and commence dealings in Reclassified Shares)	8.00 a.m. on 3 April
Latest time and date for receipt of Forms of Proxy from Shareholders for Second General Meeting	11.00 a.m. on 4 April
Calculation Date	5.00 p.m. on 4 April
Suspension of listing of Reclassified Shares and Company's Register closes	7.30 a.m. on 5 April
Second General Meeting	11.00 a.m. on 6 April
Effective Date and Transfer Agreements executed and implemented	6 April
Announcement of the Cash Pool Cap, results of Elections, the AUKT FAV per Share and the ADIGT FAV per Share	6 April
ADIGT New Ordinary Shares admitted to trading	10 April
CREST accounts credited with ADIGT New Ordinary Shares	10 April
Certificates despatched in respect of ADIGT New Ordinary Shares during or as soon as practicable after	w/c 18 April
Confirmation of holdings provided to Savings Scheme Participants	w/c 18 April
Cheques despatched to Shareholders who elect for the Cash Option, and for this cash to be paid out, in accordance with their entitlements and CREST accounts credited with cash	w/c 18 April
Cancellation of listing of Reclassified Shares	w/c 18 April

The times and dates set out in the expected timetable of events above and mentioned throughout this document may be adjusted by the Company, in which event details of the new times and dates will be notified, as requested, to the UK Listing Authority, the London Stock Exchange and, where appropriate, Shareholders

All references to time in this announcement are to UK time.

Enquiries:

William Hemmings / Gary Jones

Aberdeen Fund Managers Limited

Tel: [phone]

William Simmonds

J.P. Morgan Cazenove

Tel: [phone]