Annual Financial Report

abrdn UK Smaller Cos. Growth Trust

25 August 2023

abrdn UK Smaller Companies Growth Trust plc

Annual Financial Report for the year ended 30 June 2023

Legal Entity Identifier (LEI): 213800UUKA68SHSJBE37

Investment Objective

To achieve long-term capital growth by investment in UK-quoted smaller companies

Reference Index

The Company's reference index is the Numis Smaller Companies plus AIM (ex investment companies) Index.

Website

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

Performance Highlights and Financial Calendar

Net asset total return^AB		Share price total return^AB
-7.4%		-6.8%
2022	-27.3%	2022	-34.3%

Total dividends per share		Discount to net asset value^AB
11.00p		14.3%
2022	8.10p	2022	14.6%

Revenue return per share		Ongoing charges ratio^ABC
12.44p		0.95%
2022	9.07p	2022	0.82%
^A Considered to be an Alternative Performance Measure.
^B A Key Performance Indicator ("KPI").
^C Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.

Financial Highlights

	30 June 2023	30 June 2022	% change
Capital return
Total assets	£451.5m	£538.6m	(16.2%)
Equity shareholders' funds	£426.6m	£498.6m	(14.4%)
Market capitalisation^A	£365.7m	£425.9m	(14.1%)
Net asset value per share	482.95p	530.37p	(8.9%)
Share price	414.00p	453.00p	(8.6%)
Discount to NAV^B	14.3%	14.6%
Net gearing^B	2.5%	5.1%
Reference index^C	5,199.92	5,520.20	(5.8%)
Dividends and earnings
Revenue return per share^D	12.44p	9.07p	37.2%
Total dividends per share^E	11.00p	8.10p	35.8%
Operating costs
Ongoing charges ratio^BF	0.95%	0.82%
^A Represents the number of Ordinary shares in issue in the Company multiplied by the Company's share price.
^B Considered to be an Alternative Performance Measure.
^C Numis Smaller Companies plus AIM (ex investment companies) Index.
^D Measures the revenue earnings for the year divided by the weighted average number of Ordinary shares in issue (see Statement of Comprehensive Income).
^E The figures for dividend per share reflect the years in which they were earned (see note 8).
^F Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.

For further information, please contact:

Stephanie Hocking

Evan Bruce-Gardyne

abrdn Fund Managers Limited

0131 372 2200

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

Chairman's Statement

Performance

I am disappointed to be reporting to shareholders that in the year just ended, the Company has extended its period of underperformance against its benchmark on both a net asset value ("NAV") and share price basis. We are very aware that the effect of this underperformance, over one, three and five years, is that anyone who made their initial investment in the Company in the last five years will most likely have seen a reduction in the value of their investment. This is clearly an uncomfortable position for shareholders, and also for those of us who are responsible for the portfolio and the Company.

For the year ended 30 June 2023, the Company's NAV total return, calculated on the basis that all dividends received are reinvested in additional shares, was -7.4%. The share price total return, calculated on the same basis, was -6.8%. By contrast, the total return of the Company's reference index, the Numis Smaller Companies plus AIM (ex investment companies) Index (the "reference index"), was -2.8%.

The Board and the Manager have discussed the investment strategy at length over the past couple of years but this year, in addition, your Board has spent a lot of time considering the root causes of the underperformance in order to be confident that the Company's investment thesis remains intact. It also carried out a detailed review to assess whether the investment process itself is being robustly implemented.

As a consequence of these reviews, the Board is able to support the Manager's view that the drivers of current underperformance are primarily a confluence of external events. These conditions reflect the weak UK economy, rising inflation and the sequential increases in interest rates we are experiencing as well as the political turbulence. These have created a difficult macro environment for investing in small companies generally, but particularly for the Manager's investment style, which focuses on Quality, Growth and Momentum factors - and we believe does so to a greater extent than any of the peer group companies in the sector. Whereas this favours the performance of the Company in growth oriented markets, it creates very challenging conditions in the market conditions we have seen, which have resulted in periods of rotation and a continual de-rating of the highly rated growth companies which typify our portfolio.

Detailed commentary on markets and performance for the year is contained in the Investment Manager's Review.

Earnings and Dividends

The revenue return per share ("EPS") for the year ended 30 June 2023 was 12.44p (2022: 9.07p). The increase of 37.2% builds on the 41% increase in 2022 and has come from both an increase in the ordinary dividends received, special dividends of £942,000 (7.2% of investment income), and a material increase in interest income, as for the first time since 2008 cash balances are delivering a return. Included in the EPS is the enhancement to earnings of 0.34p per share (2.8%) as a result of share buy backs undertaken during the year.

The Board is pleased to announce that this significant increase in EPS is flowing through to a substantial increase in dividends for shareholders and it is declaring a final dividend of 8.00p per share. Together with the interim dividend of 3.00p per share already paid, the total distribution for the financial year will be 11.00p per share, representing a 35.8% increase on the 8.10p per share paid last year. This still permits a proportion of earnings to be transferred to revenue reserves which will help your Company to withstand any future downturn such as we witnessed in 2020/21 or, indeed, simply manage any reduction in dividend receipts in future as income receipts from smaller companies are generally more variable than those of larger companies.

Following the payment of the final dividend, an amount of approximately 2.0p per share will be transferred to revenue reserves.

Subject to approval by shareholders at the Annual General Meeting ("AGM"), the final dividend will be paid on 30 November 2023 to shareholders on the register on 3 November 2023, with an associated ex-dividend date of 2 November 2023.

Management Fee and Company Secretarial Fee

The Board continually reviews the management fee structure and, during the year, considered that the existing structure of fees paid to the Manager made the Company insufficiently competitive relative to its closest peers. Accordingly, the Board has negotiated a lower fee structure with the Manager. With effect from 1 July 2023 fees will be 0.75% per annum (previously 0.85%) on the first £175 million (previously £250 million) of net assets, 0.65% per annum (unchanged) on net assets between this amount and £550 million (unchanged), and 0.55% per annum (unchanged) on net assets above £550 million (unchanged). In addition, from 1 January 2024 the Manager will no longer charge for the provision of company secretarial services, saving the Company a further £75,000 (+ VAT) per annum. On a pro-forma basis, based on the NAV at 30 June 2023, the change would represent a saving in a full year of around £415,000, or approximately 12% of management fee costs. The Board considers that this makes the fee structure more competitive when compared to the other similar investment trusts in the sector.

Ongoing Charges

The ongoing charges ratio ("OCR") for the year ended 30 June 2023 was 0.95% (2022: 0.82%). As I highlighted last year, we expected that the OCR would increase this year with a fall in the NAV. In addition, the promotional fee, which is set annually, was based on a higher NAV. We expect that the OCR in the coming year will be lower, partly because of the reduction to the fees referred to above and partly because the promotional fee will be lower. There will be a further diminution of cost to come following the Manager's recent decision to discontinue its Share Plan with effect from the end of the year, as your Company currently contributes to the marketing and administration of this Plan which accounts for some 7% of our shareholder base.

Discount Control and Share Buy Backs

At the year end the discount of the share price to the cum income NAV was 14.3% (2022: 14.6%).

Over the year, the Company bought back almost 5.7 million shares, equating to 6.0% of its issued share capital, at a total cost of £25.8 million and a weighted average price of 449.7p per share. The weighted average discount at which the shares were repurchased was 12.8%. The Board calculates that this has added 4.0p per share to the NAV for remaining shareholders.

The Company has been more active in buying back shares in the last 12 months than in any previous year since it last undertook a tender offer in 2015, buying back shares on over 180 days last year. The increased activity has been caused by the level of the discount, which has been wider than the 8% target that the Board is committed to in the long term in normal market conditions.

Given the backdrop has continued to be unfavourable for the UK smaller companies sector as a whole, evidenced by outflows in the open ended sector, it is to be expected that we would see the discount widen as it has across most of our peer group. Whilst the Board takes sector levels into account when implementing its discount control mechanism, it remains committed to its long term target of 8% and will continue to be active in the market when it believes it to be in the best interests of shareholders.

Full details of the Board's discount control policy can be found in the Overview of Strategy below.

Gearing

The Board has given the Investment Manager discretion to vary the level of gearing between 5% net cash and 25% net gearing (at the time of drawdown). On 1 November 2022 the Company renewed its loan facility with the Royal Bank of Scotland International, giving it access to a £40 million revolving credit facility ("RCF"), £25 million of which was drawn down at the year end. The gross level of borrowings was offset by cash and money market funds of £14.4 million resulting in net gearing at 30 June 2023 of 2.5% (2022: 5.1%).

The Board

After seven years as a Director, Caroline Ramsay has informed the Board that she does not intend to stand for re-election at the Company's AGM in November. Consequently, the Board undertook a search to find a replacement and appointed Manju Malhotra, who joined the Board on 1 May 2023. Manju is a Chartered Accountant and it is intended that she will assume the role of Chair of Audit Committee at the completion of the AGM. On behalf of the Board, I would like to thank Caroline for her contribution over the last few years and we wish her well for the future, and to welcome Manju to the Board. Manju will stand for election at the AGM. This period has also seen the completion in May of the one year term of the Company's first Board Apprentice, Jessica Norell Neeson. We thank Jessica for her pertinent contributions to our discussions and wish her well in the next stage of her career path.

Annual General Meeting

The Company's AGM will be held at 12 noon on Thursday 23 November 2023 at Wallacespace Spitalfields, 15 Artillery Lane, London E1 7HA. The meeting will include a presentation from the Investment Manager and will be followed by a buffet lunch. This is a good opportunity for shareholders to meet the Board and Manager and we would encourage you to attend.

Shareholders will be able to submit questions in advance of the AGM at the following email address: abrdnuksmallercompaniesgrowthtrust@abrdn.com. Should you be unable to attend the AGM, the Investment Manager's presentation will be made available on the Company's website shortly after the meeting. The results of the AGM will also be published on the website.

In the meantime, the Board strongly encourages all shareholders to exercise their votes in respect of the AGM in advance of the meeting, and to appoint the Chairman of the meeting as their proxy, by completing the enclosed form of proxy form, or letter of direction for those who hold shares through the abrdn Investment Trust savings plans. This will ensure that your votes are registered.

Outlook

The economic challenges that existed during the year seem set to continue through the current financial year. Although starting to fall, inflation remains high and interest rates have increased since the year end, with further increases expected. This will likely prove again to be a difficult backdrop for investing in smaller UK companies.

The Board considers the Investment Manager's process to be tried and tested and it has yielded good results over the past two decades albeit interspersed with periods of underperformance at times of market turbulence such as this. Predicting when these challenging market conditions will change is very difficult and we must acknowledge the possibility that they may continue for longer than they have in the past two decades. We must accept that much of this period was characterised by unprecedented low interest rates and loose monetary conditions which is no longer the case.

Notwithstanding this uncertainty, company quality and growth factors should ultimately prove themselves in such an environment, through resilience and earnings delivery. Share price valuations of companies with these characteristics remain very attractive in historic terms, and the Investment Manager believes that this presents a significant opportunity to investors. The Investment Manager has seen positive signs across the portfolio, with a strong reporting season and earnings upgrades for some of our core positions, even though significant economic challenges remain. If continued, over time this should lead to an improvement in investor sentiment to UK equities and the small and mid-cap sector in particular. In summary, the Board continues to believe that there are opportunities for your Company to achieve superior returns over the economic cycle.

Liz Airey
Chairman
24 August 2023

Overview of Strategy

Business

The Company is an investment trust with a premium listing on the London Stock Exchange.

Investment Objective

The Company's objective is to achieve long-term capital growth by investment in UK-quoted smaller companies.

Investment Policy

The Company intends to achieve its investment objective by investing in a diversified portfolio consisting mainly of UK-quoted smaller companies. The portfolio will normally comprise between 50-60 holdings representing the Investment Manager's highest conviction investment ideas. In order to reduce risk in the Company without compromising flexibility, no holding within the portfolio should exceed 5% of total assets at the time of acquisition.

The Company may use derivatives for portfolio hedging purposes (i.e. only for the purpose of reducing, transferring or eliminating the investment risks in its investments in order to protect the Company's portfolio).

Within the Company's Articles of Association, the maximum level of gearing is 100% of net assets. The Directors have set parameters of between 5% net cash and 25% net gearing (at the time of drawdown) for the level of gearing that can be employed in normal market conditions. The Directors have delegated responsibility to the Investment Manager for the operation of the gearing level within the above parameters.

Board Investment Limits

The Directors have set additional guidelines in order to reduce the risk borne by the portfolio:

- Companies with a market capitalisation of below £50 million should not represent more than 5% of total assets.

- Companies involved in "Blue Sky" products should not represent more than 5% of total assets.

- No more than 50% of the portfolio should be invested in companies that are constituents of the FTSE AIM All-Share Index.

Investment Process

The Investment Manager's investment process combines asset allocation, stock selection, portfolio construction, risk management, and dealing. The investment process has evolved out of the Investment Manager's 'Focus on Change' philosophy and is led by Quality, Growth and Momentum. The Investment Manager's stock selection led investment process involves compiling a shortlist of potential investments using a proprietary screening tool known as "The Matrix" which reflects Quality, Growth and Momentum based factor analysis. The final portfolio is the result of intensive research and includes face to face meetings with senior management of these potential investments. This disciplined process has been employed for many years and has delivered strong long term performance.

Reference Index

The Company's reference index is the Numis Smaller Companies plus AIM (ex investment companies) Index.

Delivering the Investment Objective

The Directors are responsible for determining the Company's investment objective and investment policy. Day-to-day management of the Company's assets has been delegated, via the Alternative Investment Fund Manager (the "AIFM"), to the Investment Manager.

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 assesses the performance of the Company against the range of KPIs shown below over a variety of timeframes, but has particular focus on the long-term, which the Board considers to be at least five years.

KPI	Description
Net asset value ("NAV") total return performance	The Board measures the Company's NAV total return performance against the total return of the reference index (the Numis Smaller Companies plus AIM (ex investment companies) Index) and its peer group of investment trusts.
Share price total return performance	The Board measures the Company's share price total return performance against the total return of the reference index and its peer group of investment trusts.
Discount/premium to NAV	The Board compares the discount or premium of the Ordinary share price to the NAV per share to the discount of the peer group and also to the threshold of the Company's discount target on a rolling 12 month basis.
Ongoing charges	The Board monitors the Company's ongoing charges ratio against prior years and other similar sized companies in the peer group. The Chairman's Statement contains details of changes to the management fee arrangements since the end of the year.

Principal and Emerging Risks and Uncertainties

The Board carries out a regular review of the risk environment in which the Company operates, changes to the environment and individual risks. The Board also considers emerging risks which might affect the Company. During the year, the most significant risks were, political instability, inflation and increasing interest rates and the resultant volatility that this has created in global stock markets. In addition, the conflict in Ukraine has continued to create geo-political uncertainty which has further increased market risk and volatility.

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 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.

The principal risks and uncertainties faced by the Company are reviewed by the Audit Committee in the form of a risk matrix and the Committee also gives consideration to the emerging risks facing the Company.

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 terms of its appetite for risk, the Board has identified what it considers to be the key risks to which the Company is exposed and seeks to take a proportionate approach to the control of these risks. In particular, by considering the likelihood and impact of a specific risk, if the potential exposure is rated as Critical or Significant, the Board ensures that significant mitigation is in place to reduce the likelihood of occurrence whilst recognising that this may not be possible in all cases.

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.

Risk		Mitigating Action
Strategy - the Company's objectives or the investment trust sector as a whole become unattractive to investors, leading to a fall in demand for the Company's shares.		Through regular updates from the Manager, the Board monitors the discount/ premium at which the Company's shares trade relative to the NAV. It also holds an annual strategy meeting and receives feedback from the Company's Stockbroker and shareholders and updates from the Manager's investor relations team at Board meetings.
Investment performance - the appointment or continuing appointment of an investment manager with inadequate resources, skills or experience, the investment style or process being out of favour, or the adoption of inappropriate strategies in pursuit of the Company's objectives, could result in poor investment performance, a loss of value for shareholders and a widening discount.		The Board meets the Manager on a regular basis and keeps investment performance under close review. Representatives of the Investment Manager attend all Board meetings and a detailed formal appraisal of the Manager is carried out by the Management Engagement Committee on an annual basis. The Board sets and monitors the investment restrictions and guidelines and receives regular reports which include performance reporting on the implementation of the investment policy, the investment process, ESG matters, risk management and application of the investment guidelines.
Key person risk - a change in the key personnel involved in the investment management of the portfolio could impact on future investment performance and lead to loss of investor confidence.		The Board discusses key person risk and succession planning with the Manager and Investment Manager on a regular basis. The Investment Manager employs a standardised investment process for the management of the portfolio. The well-resourced smaller companies team has grown in size over a number of years. These factors mitigate against the impact of the departure of any one member of the investment team.
Share price - failure to manage the discount effectively or an inappropriate marketing strategy could lead to a fall in the share price relative to the NAV per share.		The Company operates a discount control mechanism and aims to maintain a discount level of less than 8% to the cum-income NAV under normal market conditions. Details of the discount control mechanism are contained in the Overview of Strategy. The Directors undertake a programme of inviting major shareholders to discuss issues of governance or strategy with the Chairman or Senior Independent Director. In addition, the Company participates in the Manager's investment trust promotional programme where the Manager has an annual programme of meetings with institutional shareholders and reports back to the Board on these meetings.
Financial instruments - insufficient oversight or controls over financial risks, including market price risk, liquidity risk and credit risk could result in losses to the Company.		As stated above, the Board sets investment guidelines and restrictions which are reviewed regularly and the Manager reports on compliance with them at Board meetings. Further details of the Company's financial instruments and risk management are included in note 16 to the financial statements.
Financial obligations - inadequate controls over financial record keeping and forecasting, the setting of an inappropriate gearing strategy or the breaching of loan covenants could result in the Company being unable to meet its financial obligations, losses to the Company and impact its ability to continue trading as a going concern.		At each Board meeting, the Board reviews management accounts and receives a report from the Administrator, detailing any breaches during the period under review. The Board sets gearing limits and monitors the level of gearing and compliance with the main financial covenants at Board meetings. The Audit Committee meets representatives from the Manager's Compliance and Internal Audit teams on at least an annual basis and discusses any findings and recommendations relevant to the Company.
Regulatory - failure to comply with relevant laws and regulations could result in fines, loss of reputation and potential loss of investment trust status.		The Board receives updates on relevant changes in regulation from the Manager, industry bodies and external advisers and the Board and Audit Committee monitor compliance with regulations by review of checklists and internal control reports from the Manager. Directors keep up to date in a variety of ways, including attendance at training courses and seminars.
Operational - the Company is dependent on third parties for the provision of all systems and services (in particular those of the Manager and the Depositary) and any control failures and gaps in their systems and services could result in a loss or damage to the Company.		The Audit Committee reviews reports from the Manager on its internal controls and risk management (including an annual ISAE Report) and considers assurances from all its other significant service providers on at least an annual basis, including on matters relating to business continuity and cyber security. The Audit Committee meets representatives from the Manager's Compliance and Internal Audit teams on at least an annual basis and discusses any findings and recommendations relevant to the Company. Written agreements are in place with all third party service providers. The Manager monitors closely the control environments and quality of services provided by third parties, including those of the Depositary, through service level agreements, regular meetings and key performance indicators, and provides periodic updates to the Board on this work. A formal appraisal of the Company's main third party service providers is carried out by the Management Engagement Committee on an annual basis.
Geopolitical - the effects of geopolitical instability or change could have an adverse impact on stock markets and the value of the Company's investment portfolio.		Current geopolitical risks include the actions taken by governments in relation to climate change, the conflict in Ukraine and the impact of increased inflation and interest rates. The Investment Manager's focus on quality companies, the diversified nature of the portfolio and a managed level of gearing all serve to provide a degree of protection in times of market volatility.

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 Manager on behalf of a number of investment trusts under its management. The Company also supports the Manager's investor relations programme which involves regional roadshows, 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 Edison Investment Research Limited. A copy of the latest research note is available from the Company's website.

The cost to the Company of participating in these programmes is matched by the Manager through the provision of the necessary resources to carry out the marketing and promotional activities.

Employees and Human Rights

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 human rights.

Modern Slavery Act

Due to the nature of its business, being a company that does not offer goods and services to customers, the Board considers that the Company 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 supports the Investment Manager's approach to ESG considerations which are fully embedded into the investment process.

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. abrdn plc is a tier 1 signatory of 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.

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.

Task Force for Climate-Related financial Disclosures ("TCFD")

Under Listing Rule 15.4.29(R), the Company, as a closed ended investment company, is exempt from complying with the Task Force on Climate-related Financial Disclosures ("TCFD").

Whilst TCFD is currently not applicable to the Company, the Manager has produced a product level report on the Company in accordance with the FCA's rules and guidance regarding the disclosure of climate-related financial information consistent with TCFD Recommendations and Recommended Disclosures. These disclosures are intended to help meet the information needs of market participants, including institutional clients and consumers of financial products, in relation to the climate-related impact and risks of the Manager's TCFD in-scope business. The product level report on the Company is available on the Manager's website at: invtrusts.co.uk.

Discount Control Policy

The Board operates a discount control mechanism which targets a maximum discount of the share price to the cum-income net asset value of 8% under normal market conditions. In pursuit of this objective, the Board closely monitors the level of the discount and buys back shares in the market when it believes it is in the best interests of shareholders as a whole to do so. At each Annual General Meeting, the Board seeks shareholder approval to buy back up to 14.99% of the Company's share capital. Share buy-backs will only be made where the Board believes it to be in the best interests of shareholders as a whole and the making and timing of share buy-backs will be at the discretion of the Board.

The Board considers that, given the backdrop has continued to be unfavourable for the UK smaller companies sector as a whole, evidenced by outflows in the open ended sector, it is to be expected that the Company's discount would widen as it has across most of the peer group. Whilst the Board takes sector levels into account when implementing its discount control mechanism, it remains committed to its long term target of 8% and will continue to be active in the market when it believes it to be in the best interests of shareholders.

The Company has a tender offer mechanism in place and the Board intends to continue to seek shareholder approval at each Annual General Meeting to enable it to carry out tender offers on a discretionary basis in circumstances where the Board believes that share buy-backs are not sufficient to maintain the discount at an appropriate level, although it expects that buy-backs should be the primary mechanism for managing the discount.

Viability Statement

The Board considers that the Company, which does not have a fixed life, is a long-term investment vehicle and, for the purposes of this statement, has decided that five years is an appropriate period over which to consider its viability. The Board considers that this period reflects a balance between looking out over a long-term horizon and the inherent uncertainties of looking out further than
five years.

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

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, together with the emerging risks identified by the Board.

- The Company is invested in listed securities that are readily-realisable in normal market conditions and there is a spread of investments held.

- The Company is closed ended in nature and therefore it is not required to sell investments when shareholders wish to sell their shares.

- The Company's long-term performance record.

- The Company's level of gearing. The Company had net gearing of 2.5% as at 30 June 2023. The Company has a £40 million unsecured loan facility agreement with The Royal Bank of Scotland International Limited which expires on 1 November 2025. The Board has set overall limits for borrowing and reviews regularly the Company's level of gearing, cash flow projections and compliance with banking covenants. The Board has also performed stress testing and liquidity analysis. In the event that the facility is not refinanced, there is considered to be sufficient portfolio liquidity to enable borrowings to be repaid.

- The Company has cash and money market funds which at 30 June 2023 amounted to £14.4 million. These balances allow the Company to meet liabilities as they fall due.

- The level of ongoing charges (the Chairman's Statement contains details of changes to the management fee arrangements since the end of the year).

- There are no capital commitments currently foreseen that would alter the Board's view.

- The robustness of the operations of the Company's third party service suppliers.

The Directors have also reviewed the revenue and ongoing expenses forecasts for the coming year and considered the Company's Statement of Financial Position as at 30 June 2023 which shows net current liabilities of £11.8 million at that date, and do not consider this to be a concern due to the liquidity of the portfolio which would enable the Company to meet any short term liabilities if required.

In assessing the Company's future viability, the Board has assumed that shareholders will wish to continue to have exposure to the Company's activities in the form of a closed ended entity and the Company will continue to have access to sufficient capital.

In making its assessment, the Board is also aware that there are other matters that could have an impact on the Company's prospects or viability in the future, including the conflict in Ukraine, economic shocks or significant stock market volatility caused by other factors, and changes in regulation or investor sentiment.

Future Strategy

The Board intends to maintain the strategic direction set out in the Strategic Report for the year ending 30 June 2024 as it believes that this is in the best interests of shareholders.

On behalf of the Board
Liz Airey
Chairman
24 August 2023

Promoting the Success of the Company

Introduction

Section 172 (1) of the Companies Act 2006 (the "Act") requires each Director to act in the way he/she considers, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole.

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 that provision of the Act (the "Section 172 Statement"). This statement provides 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, among other things, the likely long-term consequences of decisions, the need to foster relationships with all stakeholders and the impact of the Company's operations on the environment.

The Purpose of the Company and Role of 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 end of the year, comprised six 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 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 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 (and Investment Manager), service providers, investee companies, debt providers and, more broadly, the environment and community at large.

How the Board Engages with Stakeholders

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

Stakeholder	How We Engage
Shareholders	Shareholders are key stakeholders and the Board places great importance on communication with them. The Board welcomes all shareholders' views and aims to act fairly to all shareholders. The Manager and Company's Stockbroker regularly meet with current and prospective shareholders to discuss performance and shareholder feedback is discussed by the Directors at Board meetings. In addition, Directors meet shareholders at the Annual General Meeting and the Chairman offers to meet with the Company's larger shareholders to discuss their views. The Company subscribes to the Manager's investor relations programme in order to maintain communication channels with the Company's shareholder base. Regular updates are provided to shareholders through the Annual Report, Half Yearly Report, monthly factsheets, Company announcements, including daily net asset value announcements, and the Company's website. The Company's Annual General Meeting provides a forum, both formal and informal, for shareholders to meet and discuss issues with the Directors and Manager. The Board encourages as many shareholders as possible to attend the Company's Annual General Meeting and to provide feedback on the Company.
Manager (and Investment Manager)	The Investment Manager's Review details the key investment decisions taken during the year. The Investment Manager has continued to manage the portfolio and other assets in accordance with the mandate agreed with the Company, with oversight provided by the Board. The Board regularly reviews the Company's performance against its investment objective and the Board undertakes an annual strategy review meeting to ensure that the Company is positioned well for the future delivery of its objective for its stakeholders. The Board receives presentations from the Investment Manager at every Board meeting to help it to exercise effective oversight of the Investment Manager and the Company's strategy. The Board, through the Management Engagement Committee, formally reviews the performance of the Manager at least annually.
Service Providers	The Board seeks to maintain constructive relationships with the Company's service providers either directly or through the Manager with regular communications and meetings. The Management Engagement Committee conducts an annual review of the performance, terms and conditions of the Company's main service providers to ensure they are performing in line with Board expectations, carrying out their responsibilities and providing value for money.
Investee Companies	Responsibility for monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager. The 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. Through engagement and exercising voting rights, the Investment Manager actively works with companies to improve corporate standards, transparency and accountability. The Board monitors investments made and divested and questions the rationale for investment and voting decisions made.
Debt Providers	On behalf of the Company, the Manager maintains a positive working relationship with The Royal Bank of Scotland International Limited, the provider of the Company's loan facility, and provides regular updates on business activity and compliance with its loan covenants.
Environment and Community	The Board and Manager are committed to investing in a responsible manner and the Investment Manager embeds Environmental, Social and Governance ("ESG") considerations into its research and analysis as part of the investment decision-making process.

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 significant Board decision, the Directors were particularly mindful of stakeholder considerations as part of the following decisions made during the year ended 30 June 2023. Each of these decisions was made after taking into account the short and long-term benefits for stakeholders.

Portfolio and Investment Performance

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 and is reviewed at every Board meeting.

As explained in more detail in the Chairman's Statement, the Board and Manager have discussed the investment strategy at length over the past couple of years but during the year, in addition, the Board spent time considering the root causes of the Company's underperformance in order to be confident that the investment thesis remained intact. It also carried out a detailed review to assess whether the investment process itself was being robustly implemented.

As a consequence of these reviews, the Board was able to support the Investment Manager's view that the drivers of current underperformance are primarily a confluence of external events which have created a difficult macro environment for investing in small companies generally, but particularly for the Investment Manager's investment style, which focuses on Quality, Growth and Momentum factors - and the Board believes does so to a greater extent than any of its peer group companies in the sector. Whereas this favours the performance of the Company in growth oriented markets, it creates very challenging conditions in the market conditions seen recently, which have resulted in periods of rotation and a continual de-rating of the highly rated growth companies which typify the portfolio.

During the year the Management Engagement Committee decided that the continuing appointment of the Manager is in the best interests of shareholders.

Management Fee

As explained in the Chairman Statement, during the year, the Board considered that the existing structure of fees paid to the Manager made the Company insufficiently competitive relative to its closest peers. Accordingly, the Board negotiated a lower fee structure with the Manager which the Board considers is more competitive when compared to the other similar investment trusts in the sector.

Dividends

The Board is recommending payment of a final dividend for the year of 8.00p per Ordinary share. Following payment of the final dividend, total dividends for the year will amount to 11.00p per Ordinary share, an increase of 35.8% compared to the previous year. Although the Company has a capital growth objective, the Board recognises the importance of dividends to shareholders.

Share Buy Backs

In accordance with the discount control policy included in the Overview of Strategy, during the year the Company bought back 5,682,136 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 has widened in normal market conditions. It is the view of the Board that this policy is in the interest of all shareholders.

Renewal of Bank Loan

On 1 November 2022 the Company renewed its loan facility with the Royal Bank of Scotland International, giving it access to a £40 million revolving credit facility ("RCF"), £25 million of which was drawn down at the year end. The gross level of borrowings was offset by cash and money market funds of £14.6 million resulting in net gearing at 30 June 2023 of 2.5% (2022: 5.1%).

The Board continues to believe that gearing is beneficial to long term net asset value returns and is one of the benefits of the closed ended investment trust structure.

Consumer Duty

During the year, the FCA's Consumer Duty Regulations came into effect, introducing new rules for FCA regulated firms which manufacture or distribute products and services to retail customers. The Consumer Duty rules do not apply to the Company but do apply to the Manager,

The Board has reviewed the methodology employed by the Manager to assess value of the Company under the Consumer Duty regulations and will review the Manager's assessment of value an ongoing basis.

Board Succession

As explained in the Directors' Report, after seven years as a Director, Caroline Ramsay has informed the Board that she does not intend to stand for re-election at the Company's Annual General Meeting in November. Consequently, following a formal recruitment process, the Board decided to appoint Ms Manju Malhotra as an independent Director on 1 May 2023. New Board appointments seek to achieve a good balance of skills, experience, gender and ethnicity.

The Board believes that shareholders' interests are best served by ensuring a smooth and orderly refreshment of the Board which serves to provide continuity and maintain the Board's open and collegiate style.

On behalf of the Board
Liz Airey
Chairman
24 August 2023

Performance

Performance (total return)

	1 year return	3 years return	5 years return	10 years return
	%	%	%	%
Net asset value^AB	-7.4	-4.4	-6.1	+98.9
Share price^B	-6.8	-10.1	-10.4	+72.9
Reference Index	-2.8	+19.9	-0.7	+72.4
Peer Group weighted average (NAV)	+1.0	+24.5	+3.3	+107.3
Peer Group weighted average (share price)	+1.4	+20.1	-0.4	+113.3
^A Cum-income NAV with debt at fair value.
^B Considered to be an Alternative Performance Measure.
Source: Morningstar

Ten Year Financial Record

Year to 30 June	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
Per Ordinary share (p)
Net revenue return	5.05	6.76	6.76	6.42	7.24	8.80	6.74	6.43	9.07	12.44
Ordinary dividends paid/proposed	4.50	5.80	6.60	6.70	7.00	7.70	7.70	7.70	8.10	11.00
Net asset value^A	298.92	336.89	345.43	456.60	552.93	539.54	527.73	737.97	530.37	482.95
Share price	281.25	300.00	316.00	431.00	500.00	491.50	482.00	698.00	453.00	414.00
Discount(%)^A	5.9	10.9	8.5	5.6	9.6	8.9	8.7	5.4	14.6	14.3
Ongoing charges ratio (%)^B	1.19	1.19	1.13	1.08	1.04	0.90	0.91	0.88	0.82	0.95
Gearing ratio (%)^C	(4.6)	4.1	3.6	1.7	3.6	1.5	(0.3)	5.7	5.1	2.5
Shareholders' funds (£m)^D	219	243	241	324	408	543	528	728	499	427
Revenue reserves (£m)^E	4.34	5.83	6.50	6.26	8.30	10.87	8.80	7.53	8.81	12.47
^A Calculated with debt at par value and diluted for the effect of Convertible Unsecured Loan Stock conversion from 01 July 2013 until 30 June 2017. From 30 June 2018, net asset value is calculated with debt at par value.
^B Calculated as an average of shareholders' funds throughout the year and in accordance with updated AIC guidance issued in October 2020, to include the Company's share of costs of holdings in investment companies on a look-through basis.
^C Net gearing ratio calculated as debt less cash invested in AAA-rated money market funds and short-term deposits divided by net assets at the year end.
^D Increase in 2018 included the effect of the merger with Dunedin Smaller Companies Investment Trust PLC.
^E Revenue reserves are reported prior to paying the final dividend for the year.

Investment Manager's Review

The net asset value ("NAV") total return for the Company for the year ended 30 June 2023 was -7.4%, while the share price total return was -6.8%. By comparison, the UK smaller companies sector as represented by the Numis Smaller Companies plus AIM (ex investment companies) Index (the "reference index") delivered a total return of -2.8%.

Equity Markets

During the year under review, markets were volatile and top down driven, with the dominating narrative one of persistent inflation and higher interest rates. Against this backdrop, bottom-up company fundamentals have come second. Whilst the portfolio holdings have been delivering well fundamentally, that has often not been reflected in share prices.

The UK stock market, as represented by the FTSE All-Share Index, gained a small amount of ground over the period, with a total return of 7.9%. The FTSE 100 Index outperformed the FTSE 250 Index (excluding investment companies), the latter of which generated a total return of only 1.9%. Investors have remained cautious around the UK economic picture, which has challenged the more domestically focused small and mid-cap areas of the market.

The period was dominated by high inflation, rising interest rates and fears of a sustained economic downturn. Inflation drivers included the war in Ukraine as well as unsettled supply chains post Covid. Political uncertainty in the UK did little to reduce share-price volatility, with Boris Johnson's resignation as Prime Minister in July and the tax-cutting strategy unveiled by his successor Liz Truss in September adding to market turbulence. Inflation reached 10.1% in July, and the Bank of England ("BoE") warned that price rises could accelerate in the autumn as a result of higher energy costs. The BoE continued to tighten monetary policy by raising interest rates to combat inflation. Through late 2022, data showed successive falls in output in the UK manufacturing sector, while retail spending weakened, and we saw a sharp rise in mortgage rates.

In the aftermath of the disastrous mini-Budget presented by new prime minister Liz Truss and her chancellor Kwasi Kwarteng at the end of September, Truss was forced to sack Kwarteng, reverse her tax-cutting policies and finally resign, to be replaced by Rishi Sunak. These developments were welcomed by markets.

UK small and mid-cap equities enjoyed a positive final quarter of calendar year 2022 as hopes rose that inflation had peaked and central banks would soon slow the pace of monetary-policy tightening. However, there remained significant difficulties and recession risk for the UK economy. The mid-cap FTSE 250 Index rose by 10.6% in the final quarter of 2022, reversing some of the heavy losses seen earlier in the year, whilst the FTSE Small Cap Index returned 8.9%. Officials said rates would continue to increase until inflation was significantly closer to the 2% long-term target, regardless of the short-term economic impact. Late 2022 also saw many industries battling with supply chain challenges, a result of Covid shutdowns combining with increasing re-opening demand. This provided many challenges for companies and was a contributor to the inflationary pressures. As we turned into 2023, many of the supply shortages and logistics challenges had eased - one less headache for companies to try to navigate.

The turn of the year saw the strongest surprises coming through in consumer-exposed companies; consumer spending proving more resilient than expected. The fear of a tough two year recession outlined by the BoE appeared behind us for now. Hopes rose that the pace of interest rate rises would start to slow, while indicators suggested the economy would avoid falling into recession. Disappointingly, inflation remaining stubbornly high. March saw the collapse of Silicon Valley Bank and a loss of confidence in Credit Suisse sparked fears about the resilience of the global financial system. Trading conditions in a number of sectors remained challenging. Mortgage lending declined to its lowest level since 2016 in February, while in March house prices recorded their steepest falls since 2009, a sharp reminder of the broad global challenges.

However, with UK inflation remaining high and above other major geographies, and interest rates continuing to increase, UK share prices lagged major markets in Europe and North America. The big question globally, but particularly in the UK, with GDP numbers proving more resilient than many thought, is whether we get a recession or not.

Performance

Overall through the year, the net asset value ("NAV") fell by 7.4% on a total return basis, underperforming the reference index total return of -2.8%.

We had hoped for a more stable backdrop for the period, yet the dominating market narrative has been one of UK inflation that requires the BoE to increase interest rates. Through the period, policymakers still expected inflation to be benign and central banks to increase rates slowly. This, however, proved to be too complacent as the UK suffered from high persistent inflation and this changed the trajectory of interest rates. Inflation injects uncertainty into stock markets, affecting investor confidence. Value stocks typically have strong current cash flows which are more likely to grow slowly or diminish over time, while growth stocks are likely to represent fast growing companies that have stronger cash flows in the future. When valuing companies' share prices using the discounted cash flow method in times of rising interest rates, growth stocks are hit harder by this effect than value stocks, This has placed our Quality, Growth and Momentum process out of favour.

Our quality focus has ensured that we have invested in companies which have had supportive earnings and resilience. These companies have also demonstrated pricing power with the ability to protect margins. The portfolio has not been entirely immune from macro shocks, but we have seen the overall resilience and growth delivering robust dividend payments.

The final quarter of 2022 saw UK markets rebound sharply, and the portfolio outperformed the reference index. That rally come earlier than many would have expected, given the recession outlook. We believe this highlighted the attractive valuations those growth businesses are trading on, combined with the resilient earnings growth they continue to provide.

Early 2023 saw market relief as consumers appeared resilient in the face of the cost of living squeeze. This drove the market to focus less on quality, and cheaper rated and more cyclical companies performed well, proving a more difficult start to the calendar year for the Company. As we moved through the remainder of the financial year, macro top down influences continued to drive the direction of the markets, however we have felt more comfortable with the degree of rationalism in share price moves, and the focus towards company fundamentals. Whilst the market remains wary of companies which are trading at high valuations relative to their history, we have seen overall less of a value bias to the market in recent months, and we are seeing more importance placed back on factors such as earnings revisions.

The five leading positive contributors to relative performance during the year were as follows:

- 4imprint 198bps (shares +106%) delivered strong results through the year exceeding expectations on many occasions, and also providing strong dividend growth and a special dividend. Whilst benefitting from increased face to face interactions at events driving promotional product usage, self-help growth has been enabled through spend on marketing in a highly fragmented market, capturing market share and new repeat customers.

- Games Workshop 135bps (shares +60%) has delivered strong growth despite consumer spending challenges globally. Its continued investment in new product innovation and community engagement is paying off, resulting in dividend increases and strong returns for shareholders again this year. The shares were also supported by the announcement of Amazon taking a license for Warhammer for TV production.

- Diploma 99bps (shares +33%) traded well through the year, proving itself as a quality industrial company. To complement organic growth, it has also completed attractive bolt on acquisitions, such as the TIE deal which was partly funded through an equity raise.

- Kainos 95bps (shares + 11%) has successfully navigated the macroeconomic environment this year, delivering consistent growth and pricing power to offset wage inflation. Its customer base is sticky, and digitisation spend remains a priority for corporates. With the departure of long term respected CEO Brendan Mooney, it has also demonstrated strong succession planning.

- discoverIE 88bps (shares + 27%) has proved another quality industrial business, trading strongly through the year. It has proactively chosen exposures to regulatory and structurally growing areas, and with products being designed into its customers' solutions, this provides stickiness of revenue and resultant visibility of earnings. In addition, it has complemented organic growth through bolt on acquisitions.

The five worst contributors to relative performance during the year were as follows:

- Focusrite -130bp (shares -57%) the shares have struggled this year, partly as a normalisation of Covid spending has impacted demand for the company's products. It navigated supply chain issues early in the year and continued to invest in new product solutions to drive demand.

- Hilton Food -111bps (shares -38%) the shares suffered from a short term inability to pass on all input cost inflation in the fish division of the business. This was successfully navigated within a few months, and in the second half of the period the company traded strongly and also announced interesting new customer wins.

- Future -106bps (shares -60%) the shares suffered from a lower advertising spend environment, as well as concerns on consumer spend softening. The CEO also announced her intention to leave the company, which created more market uncertainty over the outlook for the business.

- Mortgage Advice Bureau -99bps (shares -33%) was a casualty of the Truss mini budget, driving interest rates up and causing activity on housing and mortgages to fall sharply. Whilst activity levels and its shares recovered in early 2023, they are still below previous levels, and more recent mortgage rate increases will be challenging in the short term. Over the medium term this remains a very strong business, taking market share and with many levers for growth.

- Marshalls -85bps (shares -46%) has suffered from reduced activity in residential refurbishment and improvement work, as well as lower new build housing activity. The commercial and infrastructure side of the business has remained more resilient, and the management team has taken cost and restructuring action to support the business against the macro-economic challenges currently being faced.

Dealing and Activity

Portfolio turnover was around 15%, which represents an average holding period of almost seven years and is not out of line with previous periods. Over the year, we added eight new positions, and exited eleven holdings. There were no IPO participations this period, in a quiet year in the markets for IPO activity.

We initiated positions in some holdings which have been held historically in the portfolio. Ricardo has transformed its business, now positioned as a leader in environmental and engineering consultancy; working with governments, agencies and corporates to implement sustainability agendas and strategies. Paragon Banking is a specialist lender, with a focus on buy-to-let markets in the UK. The business has demonstrated strong credit quality through the years, and with a strong retail funding model and capital support, it continues to take market share as a specialist, particularly in the professional landlord arena. Smart Metering Systems has two key divisions; household smart meters which provide long term visible and inflation linked revenue streams, along with the new exposure to battery storage in grid networks - an attractive return and growth exposure for the business. FDM Group is a specialist at recruiting, training and deploying IT and business professionals, operating globally. Craneware is a technology specialist operating in the US healthcare market, focused on financial and operational optimisation for hospitals. Coats is a global leader in thread production, with exposure to apparel, footwear and specialty markets. One key growth area for its business is its leading position in sustainable thread, a product increasingly in demand as industries move towards more sustainable production. Alpha Group (previously called Alpha FX) is another business which has expanded into interesting adjacent markets; now half fintech, half consultancy. Whilst its FX (foreign exchange) risk management business for corporates has gone from strength to strength, it has also expanded into banking solutions for alternative asset managers, and the corporate services and fund administration companies that support them. Spirent is a leading provider of automated testing and assurance solutions for networks, security and positioning.

Key tops up in the period included the position in Volution (leading supplier of ventilation products, with global exposure), CVS (vet practices across the UK), and Serica Energy (North Sea gas and oil producer). We also added to 4imprint (US promotional products), Games Workshop (hobby business with Warhammer IP), YouGov (data services business for market research), Gamma Communications (telecommunication and services provider for businesses), Midwich (audio visual value added reseller), Treatt (natural flavours and fragrances), and Tatton Asset Management (a leading provider to the UK's IFA community, including through strong growth in its MPS (managed portfolio services) offering).

Key reductions to positions were in companies across a range of sectors. We trimmed the position in Kainos where the valuation of the business left demanding earnings upgrades required, and the environment has got tougher in some areas such as the NHS. Watches of Switzerland showed resilient demand and order books, but some weakness in its jewellery exposure, and we were conscious that the market was looking to derate this business given consumer concern. We also reduced the holding in Alpha Financial Markets but remain very positive on the outlook and growth of this business. GB Group was challenged by earnings downgrades from the normalisation in cryptocurrency markets. Telecom Plus is a resilient revenue stream business, but its valuation had increased considerably prior to the period, and some market headwinds were increasing. We controlled the position size in Diploma, which continued to deliver strong results, but whose market capitalisation is now quite large. Real Estate was a sector where we trimmed holdings in Safestore and Sirius Real Estate, with the macro environment more challenging, particularly with higher interest rates.

We exited a number of positions over the period, where we no longer felt a high level of conviction in the investment cases. Watkin Jones suffered from the mini budget crisis, which highlighted the lumpiness of the business and the potential macro driven risks. Hotel Chocolat struggled as consumer weakness in the UK, combined with continued Covid disruption in its new market of Japan, meant the revenue weakness drove earnings downgrades, all at the same time as capacity expansion across the manufacturing base. That consumer weakness was a concern across a few of the exits; Moonpig where we felt it made the likelihood of increasing the gift attach rate to orders harder to progress, Gear4Music which had benefitted a lot from the shift to ecommerce during Covid, which was then normalising, Inspecs where we had started to see discretionary spend cause weakness in the demand for glasses, and Jet2 where the cost-of-living crisis presented challenges to the security of demand and the ability to pass on inflationary cost pressures. Molten Ventures struggled with its share price falling, reflecting the concern of investors that the pricing of private assets falling given market conditions wasn't being reflected in the listed market. In the case of Gooch and Housego, supply chain and inflationary pressures were challenging, as well as the need to invest in the business, driving earnings downgrades. With Big Yellow we felt the environment for the business was more challenging, combined with the pressures from higher interest rates. Alliance Pharma's shares were challenged by Covid-related Chinese issues, as well as a historic investigation into the CEO. Lastly, we exited the holding in Intermediate Capital, a company which has done very well for the portfolio over the years but is really now a large company, where the macro environment presented some challenges.

Discount

As at 30 June 2023, the cum-income discount to NAV stood at 14.3%. The simple average discount for the close peers as a whole was 13.6%. Whilst we have been disappointed with the steeper discount, it has not been out of line with the sector. The discount is more or less unchanged from where it was this time last year. The width of the discount is indicative of the issue where UK domestic companies are out of favour with investors as the Company has been active in buying back shares throughout the period.

Gearing

The level of gearing (net of cash) at 30 June 2023 was 2.5%. Gearing was reduced in late 2022, repaying £15 million of the £40 million previously drawn down under the loan facility. We remain positive on the medium to long-term potential of the asset class and would consider increasing gearing at an appropriate point dependent on macro-economic conditions. We have continued to hold cash in the portfolio due to market uncertainty and to ensure we can participate in market opportunities and are not liquidity constrained.

Revenue Account

Dividend income generated by the portfolio increased by 18.5% over the year. At the same time, the increase in base rates has had a knock-on effect on the interest income generated on cash balances held by the company. After 10 years of virtually nil returns on cash, we received £526,000 in interest income during the year.

The dividend outlook of the Company, seen through its income generation from the underlying holdings, has remained strong. We were pleased with the resilience seen through the challenging Covid period, and the income generation from companies has continued to strengthen. The earnings resilience and growth being delivered by the companies in the portfolio is being reflected in the dividend growth they are providing. Despite tricky macro-economic conditions, which often temper the wording in company outlook statements, the strong dividend payments from the portfolio companies have been a real sign of the underlying confidence of management teams. The ability to deliver these dividend returns to shareholders has been supported by balance sheet strength.

There are currently eight holdings in the portfolio which we don't expect to be dividend payers in the near future, currently re-investing back into their businesses to drive growth; Auction Technology, Big Technologies, Ergomed, LBG Media, Marlowe, Motorpoint, Team17 and Watches of Switzerland. We have seen special dividends from three holdings this year; Bytes Technology, Hollywood Bowl and 4imprint, which in aggregate amounted to £942,000 or 7.2% of investment income.

Outlook

Stock markets continue to be dominated by macro conditions, predominantly the pathway of inflation and interest rates, globally. The UK appears to be showing stickier inflation than many other key markets. Whilst energy prices have stepped back, we are seeing areas such as food inflation in the UK remain at high levels, and wage inflation and a strong labour market continue to support consumer spending. Without a recession, there remains the challenge of how inflation gets controlled; interest rates having already been increased significantly, but often taking some time to have an impact. UK valuations have derated significantly and are at attractive levels relative to other regions, providing an opportunity for investors to look at the value inherent in the UK market. If UK inflation reduces to a lower level, comparable to the Eurozone and the US, this could drive UK markets to recover and refocus on company fundamentals. Falling inflation could be that catalyst for our style to perform better and cause flows to shift into the UK market.

We'd also remind investors of the geographic exposures of the portfolio companies' revenues. At the time of writing, 51% of revenues are generated in the UK, with 49% overseas. This is not too far away from the exposure within the reference index. Many of the companies in the portfolio, as has been true through time and a result also of our investment process, have strong international growth exposure. Some are global leaders in what they do. Whilst overseas exposure is a positive factor, given healthier economic outlooks in some geographies, and diversification benefits, we are mindful of recent Sterling strength which may cause some currency headwinds for overseas exposures.

In a recession, or low economic growth environment, we believe the market will look towards resilience, reliability, visible revenue streams and strong balance sheets. We've seen these characteristics fundamentally demonstrated by the portfolio companies over this period, clear also through the dividend strength delivered. Where economic growth becomes scarcer, companies which continue to generate strong growth will be rarer assets. Our ability to identify companies which can deliver sustained earnings growth in that environment should be rewarded, and we believe even the last 18 months of challenging market times has shown evidence of our judgement on the fundamental performance of the investee companies.

In a period of more positivity in markets, small and mid-cap stocks tend to lead, and the outlook for the asset class should be attractive. Small and mid-caps in the UK have lagged large companies in the market moves since the start of 2022.

We continue to believe there are opportunities for businesses which deliver well on earnings expectations, to outperform, with many currently trading on undemanding valuations. The valuations currently being paid for growth companies in UK small mid-cap markets remain significantly below historic levels, whereas in other regions the market is now paying a 10 year median valuation for growth businesses again. We therefore believe there is a re-rating opportunity.

Since our appointment as Investment Manager in 2003, including the current downturn, there have been falls in the market of over 40% on three occasions. Markets anticipate improvements, and indeed turning points in the past have always been when the outlook is bleakest. In the UK small and mid-caps sector, the turn of the calendar year looks to have seen the direction of earnings revisions change positively. This isn't out of line with previous market rotations where, on average, markets start to recover a few months before the turn in earnings. We take this as a positive indicator of market direction, although the risks of recession still remain given the macro-economic challenges.

The Company's discount to NAV is at a level not seen since 2009, with both the UK Small Cap sector being out of favour with investors, as well as disappointing underperformance by the Company this year, particularly driven by our style of investment not being favoured in a period where Value has been in focus.

Smaller company markets have higher levels of risk and volatility, which in part reflects the potential for higher returns in the long run. Thus, Smaller Companies as an asset class should be viewed as a long-term multi-year investment to achieve these potential strong returns that have historically been available. Market timing is challenging, particularly in the small cap area, and often it is "time in" rather than "timing" which is critical.

As mentioned in last year's Annual Report, but sadly still an important factor, UK markets really need to see inflation come under control and the shape of any potential imminent recession. The UK is already pricing in a lot of negativity; therein lies the longer term opportunity, particularly when coupled with the Company's current discount level.

Whilst we constantly challenge short-term influences and how macroeconomic conditions impact factors driving the market, we remain confident that our Quality, Growth and Momentum investment process generates strong returns from smaller companies in the long-term. Our process has been seasoned by five economic cycles.

Abby Glennie and Amanda Yeaman
abrdn
24 August 2023

Investment Portfolio

As at 30 June 2023
		Valuation	Total	Valuation
		2023	portfolio	2022
Company	Sector	£'000	%	£'000
4imprint	Media	18,408	4.2	8,336
Bytes Technology	Software and Computer Services	15,071	3.5	12,934
discoverIE	Technology Hardware and Equipment	15,023	3.4	11,662
Games Workshop	Leisure Goods	14,771	3.4	7,770
JTC	Investment Banking and Brokerage Services	14,562	3.3	12,196
Alpha Financial Markets	Industrial Support Services	14,542	3.3	20,033
Diploma	Industrial Support Services	13,709	3.1	13,064
Hill & Smith	Industrial Metals and Mining	13,317	3.0	10,841
CVS	Consumer Services	13,071	3.0	8,715
Ergomed	Pharmaceuticals and Biotechnology	12,859	2.9	13,189
Top ten investments		145,333	33.1
Cranswick	Food Producers	12,482	2.8	14,181
Gamma Communications	Telecommunications Service Providers	12,015	2.7	11,110
Hilton Food	Food Producers	11,518	2.6	18,858
Telecom Plus	Telecommunications Service Providers	11,247	2.6	20,999
Big Technologies	Software and Computer Services	11,053	2.5	8,701
Morgan Sindall	Construction and Materials	10,980	2.5	10,896
Kainos	Software and Computer Services	9,623	2.2	21,199
Hollywood Bowl	Travel and Leisure	9,550	2.2	7,923
Coats	General Industrials	9,036	2.1	-
GlobalData	Media	8,998	2.1	9,593
Top twenty investments		251,835	57.4
Next 15 Communications	Media	8,657	2.0	12,477
Paragon Banking	Investment Banking and Brokerage Services	8,500	1.9	-
Safestore	Real Estate Investment Trusts	8,430	1.9	21,795
Midwich	Industrial Support Services	8,420	1.9	10,012
Auction Technology	Software and Computer Services	8,278	1.9	10,204
Smart Metering Systems	Industrial Support Services	8,046	1.8	-
Treatt	Chemicals	7,966	1.8	8,921
Mortgage Advice Bureau	Investment Banking and Brokerage Services	7,803	1.8	-
Impax Asset Management	Investment Banking and Brokerage Services	6,831	1.6	8,451
YouGov	Media	6,602	1.5	2,265
Top thirty investments		331,368	75.5
Volution	Construction and Materials	6,524	1.5	2,458
Sirius Real Estate	Real Estate Investment and Services	6,384	1.4	11,855
XP Power	Electronic and Electrical Equipment	6,107	1.4	13,121
Watches of Switzerland	Personal Goods	6,071	1.4	12,018
Serica Energy	Oil, Gas and Coal	5,951	1.4	3,483
Robert Walters	Industrial Support Services	5,943	1.4	8,363
Team 17	Leisure Goods	5,771	1.3	7,264
AJ Bell	Investment Banking and Brokerage Services	5,577	1.3	4,663
Marshalls	Construction and Materials	5,495	1.3	12,567
Mattioli Woods	Investment Banking and Brokerage Services	5,331	1.2	6,118
Top forty investments		390,522	89.1
Craneware	Health Care Providers	4,510	1.0	-
Henry Boot	Real Estate Investment and Services	4,471	1.0	7,942
Marlowe	Industrial Support Services	4,376	1.0	5,861
Future	Media	4,239	1.0	13,377
Focusrite	Leisure Goods	4,187	0.9	14,143
Tatton Asset Management	Investment Banking and Brokerage Services	4,000	0.9	2,555
Alpha Group	Industrial Support Services	3,799	0.9	-
Ricardo	Construction and Materials	3,566	0.8	-
FDM Group	Software and Computer Services	3,401	0.8	-
Liontrust Asset Management	Investment Banking and Brokerage Services	3,391	0.8	5,769
Top fifty investments		430,462	98.2
LBG Media	Media	3,064	0.7	3,451
GB Group	Software and Computer Services	2,328	0.5	8,570
Spirent	Technology Hardware and Equipment	1,499	0.4	-
Motorpoint	Retailers	1,055	0.2	3,640
Total portfolio		438,408	100.0
All investments are equity investments.

Sector Distribution of Investments

As at 30 June 2023
	Portfolio weighting
	2023	2022
	%	%
Basic Materials	4.8	3.8
Chemicals	1.8	1.7
Industrial Metals and Mining	3.0	2.1
Consumer Discretionary	23.9	24.7
Consumer Services	3.0	1.7
Household Goods and Home Construction	-	0.5
Leisure Goods	5.6	5.8
Media	11.5	9.5
Personal Goods	1.4	3.0
Retailers	0.2	1.6
Travel and Leisure	2.2	2.6
Consumer Staples	5.4	7.3
Food Producers	5.4	7.3
Energy	1.4	0.7
Oil, Gas and Coal	1.4	0.7
Financials	12.8	12.0
Finance and Credit Services	-	2.6
Investment Banking and Brokerage Services	12.8	9.4
Health Care	3.9	2.9
Health Care Providers	1.0	-
Pharmaceuticals and Biotechnology	2.9	2.9
Industrials	23.0	18.4
Construction and Materials	6.1	5.0
Electronic and Electrical Equipment	1.4	2.5
General Industrials	2.1	-
Industrial Support Services	13.4	10.9
Real Estate	4.3	9.5
Real Estate Investment and Services	2.4	3.8
Real Estate Investment Trusts	1.9	5.7
Technology	15.2	14.6
Software and Computer Services	11.4	11.7
Technology Hardware and Equipment	3.8	2.9
Telecommunications	5.3	6.1
Telecommunications Service Providers	5.3	6.1
Total	100.0	100.0

Directors' Report (extract)

The Directors present their report and the audited financial statements of the Company for the year ended 30 June 2023.

Results and Dividends

The financial statements for the year ended 30 June 2023 are contained below. An interim dividend of 3.00p per Ordinary share was paid on 14 April 2023 and the Directors recommend a final dividend of.8.00p per Ordinary share, payable on 30 November 2023 to shareholders on the register on 3 November 2023. The ex-dividend date is 2 November 2023.

Principal Activity and Status

The Company is registered as a public limited company in Scotland under company number SC145455, is an investment company within the meaning of Section 833 of the Companies Act 2006 and carries on business as an investment trust.

The Company has applied for and has been accepted as an investment trust under Sections 1158 and 1159 of the Corporation Tax Act 2010 and Part 2 Chapter 1 of Statutory Instrument 2011/2999. This approval relates to accounting periods commencing on or after 1 July 2012. The Directors are of the opinion that the Company has conducted its affairs so as to be able to retain such approval.

The Company intends to manage its affairs so that its Ordinary shares continue to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account.

Capital Structure and Voting Rights

The Company's issued share capital at 30 June 2023 consisted of 88,329,911 (2022: 94,012,047) Ordinary shares of 25 pence each and there were 15,834,511 (2022: 10,152,375) Ordinary shares held in treasury, representing 17.9% of the issued share capital as at that date (excluding treasury shares).

During the year, 5,682,136 Ordinary shares were bought back into treasury.

Since the year end, the Company has bought back a further 1,995,572 Ordinary shares into treasury. Accordingly, as at the date of this Report, the Company's issued share capital consisted of 86,334,339 Ordinary shares of 25 pence each and 17,830,083 Ordinary shares held in treasury.

Each ordinary shareholder is entitled to one vote on a show of hands and, on a poll, to one vote for every Ordinary share held.

Management Agreement

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

During the year, the management fee was calculated quarterly in arrears as 0.85% per annum applying to the first £250 million of the Company's net assets, 0.65% per annum applying to net assets above this threshold until £550 million, and 0.55% applying to net assets above this threshold. In addition, the Manager received a secretarial and administration fee of £75,000 plus VAT.

The Manager also receives a separate fee for the provision of promotional activities to the Company. This fee amounted to £301,000 plus VAT for the year (2022: £246,000 plus VAT).

Further details of the fees payable to the Manager are shown in notes 4 and 5 to the financial statements and the Chairman's Statement contains details of changes to the management fee arrangements since the end of the year.

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.

Directors

Manju Malhotra was appointed as an independent non-executive Director of the Company on 1 May 2023. Liz Airey is the Chairman and Tim Scholefield is the Senior Independent Director.

Manju Malhotra will stand for election at the Annual General Meeting on 23 November 2023. Other than Caroline Ramsay, all of the other Directors will retire and, being eligible, will offer themselves for re-election at the Annual General Meeting. As explained in the Chairman's Statement, Caroline Ramsay will retire as a Director following the conclusion of the Annual General Meeting.

The Directors attended scheduled Board and Committee meetings during the year ended 30 June 2023 as follows (with their eligibility to attend the relevant meetings
in brackets):

	Board Meetings	Audit Committee Meetings	Management Engagement Committee Meetings	Nomination Committee Meetings
Liz Airey	5 (5)	- (-)^A	1 (1)	3 (3)
Ashton Bradbury	5 (5)	2 (2)	1 (1)	3 (3)
Alexa Henderson	5 (5)	2 (2)	1 (1)	3 (3)
Manju Malhotra	1 (1)	- (-)	1 (1)	1 (1)
Caroline Ramsay	5 (5)	2 (2)	1 (1)	3 (3)
Tim Scholefield	5 (5)	2 (2)	1 (1)	3 (3)

^A Liz Airey is not a member of the Audit Committee but attends the meetings by invitation

The Board meets more frequently when business needs require. During the year ended 30 June 2023 this included a Board meeting to approve the appointment of a new Director. In addition, there were two Board Committee meetings to approve the annual and half yearly financial statements. All Directors attended the Annual General Meeting held on 20 October 2022.

The Board believes that all the Directors seeking re-election remain independent of the Manager and free from any relationship which could materially interfere with the exercise of their judgement on issues of strategy, performance, resources and standards of conduct. The Board believes that each Director has the requisite high level and range of business, investment and financial experience which enables the Board to provide clear and effective leadership and proper governance of the Company. 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. In addition, all Directors have demonstrated that they have sufficient time to fulfil their directorial roles with the Company. The Board therefore recommends the re-election of each of the Directors at the Annual General Meeting.

External Agencies

The Board has contractually delegated to external agencies, including the Manager and other service providers, certain services including: the management of the investment portfolio, the day-to-day accounting and company secretarial requirements, the depositary services (which include cash monitoring, the custody and safeguarding of the Company's financial instruments and monitoring the Company's compliance with investment limits and leverage requirements) and the share registration services. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered in so far as they relate to the affairs of the Company. In addition, ad hoc reports and information are supplied to the Board as requested.

Board Diversity

The Board recognises the importance of having a range of skilled and experienced individuals with the right knowledge represented on the Board in order to allow it to fulfil its obligations. The Board also recognises the benefits 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.

Board Gender as at 30 June 2023

	Number of Board members	Percentage of the Board	Number of senior positions on the Board (note 3)	Number in executive management	Percentage of executive management
Men	2	33%	1	n/a	n/a
Women	4	67% (note 1)	3
Not specified/prefer not to say	-	-	-

Board Ethnic Background as at 30 June 2023

	Number of Board members	Percentage of the Board	Number of senior positions on the Board (note 3)	Number in executive management	Percentage of executive management
White British or other White (including minority-white groups)	5	83%	4	n/a	n/a
Asian/Asian British	1 (note 2)	17%	-
Not specified/prefer not to say	-	-	-

Notes:

1. Meets target of at least 40% as set out in LR 9.8.6R (9)(a)(i)

2. Meets target of at least 1 as set out in LR 9.8.6R (9)(a)(iii)

3. The Company considers that the role of Chairman, Senior Independent Director ("SID") who is also Chairman of the Management Engagement Committee, and the chairmen of the Audit Committee and Nomination Committee are senior positions.

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.

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 or her appointment to the Board. However, this may be extended in certain circumstances or to facilitate 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 Nomination Committee, 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.

Management of Conflicts of Interest

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

No Director has a service contract with the Company although all Directors are issued with letters of appointment. Other than the deeds of indemnity referred to above, 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.

Directors' and Officers' Liability Insurance

The Company's Articles of Association provide for each of the Directors to be indemnified out of the assets of the Company against any liabilities incurred by them as a Director of the Company in defending proceedings, or in connection with any application to the Court in which relief is granted. In addition, the Company has entered into separate deeds of indemnity with each of the Directors, reflecting the scope of the indemnity in the Articles. Directors' and Officers' liability insurance cover has been maintained throughout the financial year at the expense of the Company.

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code as published in July 2018 (the "UK Code"), which is available on the Financial Reporting Council's (the "FRC") website: frc.org.uk

The Board has also 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 Code, as well as setting out additional provisions on issues that are of specific relevance to the Company. 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 companies.

The Board confirms that, during the year, the Company complied with the principles and provisions of the AIC Code and the relevant provisions of the UK Code, except as set out below.

The UK Code includes provisions relating to:

- interaction with the workforce (provisions 2, 5 and 6);

- the role and responsibility of the chief executive (provisions 9 and 14);

- the need for an internal audit function (provision 25);

- previous experience of the chairman of a remuneration committee (provision 32); and

- executive directors' remuneration (provisions 33 and 36 to 41).

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

The 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. Full details of the Company's compliance with the AIC Code of Corporate Governance can be found on its website.

Matters Reserved for the Board

The Board sets the Company's objectives and ensures that its obligations to its shareholders are met. It has formally adopted a schedule of matters which are required to be brought to it for decision, thus ensuring that it maintains full and effective control over appropriate strategic, financial, operational and compliance issues.

These matters include:

- the maintenance of clear investment objectives and risk management policies;

- the monitoring of the business activities of the Company ranging from analysis of investment performance through to review of quarterly management accounts;

- monitoring requirements such as approval of the Half-Yearly Report and Annual Report and financial statements and approval and recommendation of any dividends;

- setting the range of gearing in which the Manager may operate;

- major changes relating to the Company's structure including share buy-backs and share issuance;

- Board appointments and removals and the related terms;

- authorisation of Directors' conflicts or possible conflicts of interest;

- terms of reference and membership of Board Committees;

- appointment and removal of the Manager and the terms and conditions of the Management Agreement relating thereto; and

- London Stock Exchange/Financial Conduct Authority - responsibility for approval of all circulars, listing particulars and other releases concerning matters decided by the Board.

Full and timely information is provided to the Board to enable it to function effectively and to allow the Directors to discharge their responsibilities.

Substantial Interests

Information provided to the Company by major shareholders pursuant to the FCA's Disclosure, Guidance and Transparency Rules are 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 30 June 2023.

Shareholder	Number of Ordinary shares	% held
Hargreaves Lansdown	9,589,569	10.8
Interactive Investor	8,791,381	9.9
1607 Capital Partners	6,915,877	7.8
RBC Brewin Dolphin	6,820,513	7.7
abrdn Retail Plans	6,383,480	7.2
AJ Bell	4,239,158	4.8
Rathbones	3,621,425	4.1
City of London Investment Management	3,173,607	3.5
WM Thomson	3,088,233	3.5

The Company has not been notified of any changes to the above holdings since the end of the year.

Going Concern

The Company's assets consist mainly of equity shares in companies listed on recognised stock exchanges and are considered by the Board to be realisable within a short timescale under normal market conditions. The Board has set overall limits for borrowing and reviews regularly the Company's level of gearing, cash flow projections and compliance with banking covenants. The Board has also performed stress testing and liquidity analysis.

As at 30 June 2023, the Company had a £40 million unsecured revolving credit facility with The Royal Bank of Scotland International Limited which expires on 1 November 2025.

The Directors are mindful of the Principal Risks and Uncertainties disclosed in the Strategic Report and they believe that the Company has adequate financial resources to continue in operational existence for a period of not less than 12 months from the date of approval of this Report. They have arrived at this conclusion having confirmed that the Company's diversified portfolio of realisable securities is sufficiently liquid and could be used to meet short-term funding requirements were they to arise. The Directors have also reviewed the revenue and ongoing expenses forecasts for the coming year and considered the Company's Statement of Financial Position as at 30 June 2023 which shows net current liabilities of £11.8 million at that date, and do not consider this to be a concern due to the liquidity of the portfolio which would enable the Company to meet any short term liabilities if required.

Taking all of this into account, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

Accountability and Audit

The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

Independent Auditor

Shareholders approved the re-appointment of KPMG LLP as the Company's Independent Auditor at the AGM on 20 October 2022 and resolutions to approve its re-appointment for the year to 30 June 2024 and to authorise the Directors to determine its remuneration will be proposed at the Annual General Meeting.

Financial Instruments

The financial risk management objectives and policies arising from financial instruments and the exposure of the Company to risk are disclosed in note 16 to the financial statements.

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 and the Manager's Customer Services Department (see Contact Addresses).

abrdn Holdings Limited has been appointed Company Secretary to the Company. Whilst abrdn Holdings Limited is a wholly owned subsidiary of abrdn plc, there is a clear separation of roles between the Manager and Company Secretary with different board compositions and different reporting lines in place. The Board notes that, in accordance with Market Abuse Regulations, procedures are in place to control the dissemination of information within the abrdn plc group of companies when necessary. Where correspondence addressed to the Board is received there is full disclosure to the Board. This is kept confidential if the subject matter of the correspondence requires confidentiality.

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, and report back to the Board on these meetings.

The Company's Annual General Meeting provides a forum for communication primarily with private shareholders and is attended by the Board. The Investment Manager makes a presentation at the meeting and all shareholders have the opportunity to put questions to both the Board and the Manager at the meeting. The Board also hosts a regular 'Meet the Manager' session at which the Investment Manager and members of the Board are present and to which all shareholders are invited, last held in May 2022.

The notice of the Annual General Meeting is 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.

Additional Information

Where not provided elsewhere in the Directors' Report, the following provides the additional information required to be disclosed by Part 15 of the Companies Act 2006.

There are no restrictions on the transfer of, or voting rights attaching to, Ordinary shares in the Company other than certain restrictions which may from time to time be imposed by law (for example, the Market Abuse Regulation). The Company is not aware of any agreements between shareholders that may result in a transfer of securities and/or voting rights.

The Company's Articles of Association may only be amended by a special resolution passed at a general meeting of shareholders.

The Company is not aware of any significant agreements to which it is a party that take effect, alter or terminate upon a change of control of the Company following a takeover. Other than the management agreement with the Manager, the Company is not aware of any contractual or other agreements which are essential to its business which could reasonably be expected to be disclosed in the Directors' Report.

Annual General Meeting

The Notice of the Annual General Meeting ("AGM") will be held at 12 noon on Thursday, 23 November 2023.

By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
24 August 2023

Statement of Directors' Responsibilities in Respect of the Annual Report and the Financial Statements

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. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 'The Financial Reporting Standard Applicable in the UK and Republic of Ireland' and applicable law.

Under company law the Directors must not approve the financial statements unless they are satisfied that they 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 and then apply them consistently;

- make judgments and estimates that are reasonable, relevant and reliable;

- state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

- prepare the financial statements on the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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.

Responsibility Statement of the Directors in Respect of the Annual Financial Report

The Directors confirm that to the best of their 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;

- 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; and

- the Annual Report taken as a whole, is fair, balanced and understandable and it provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board
Liz Airey
Chairman
24 August 2023

Statement of Comprehensive Income

		Year ended 30 June 2023			Year ended 30 June 2022
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Net losses on investments held at fair value	10	-	(46,435)	(46,435)	-	(196,773)	(196,773)
Income	3	13,649	-	13,649	11,123	-	11,123
Investment management fee	4	(848)	(2,542)	(3,390)	(1,190)	(3,569)	(4,759)
Other administrative expenses	5	(1,115)	-	(1,115)	(889)	-	(889)
Net return before finance costs and taxation		11,686	(48,977)	(37,291)	9,044	(200,342)	(191,298)

Finance costs	6	(315)	(945)	(1,260)	(278)	(833)	(1,111)
Return before taxation		11,371	(49,922)	(38,551)	8,766	(201,175)	(192,409)

Taxation	7	-	-	-	-	-	-
Return after taxation		11,371	(49,922)	(38,551)	8,766	(201,175)	(192,409)

Return per Ordinary share (pence)	9	12.44	(54.63)	(42.19)	9.07	(208.10)	(199.03)

The total column of this statement represents the profit and loss account of the Company. The 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the Financial Statements.

Statement of Financial Position

		As at	As at
		30 June 2023	30 June 2022
	Notes	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss	10	438,408	524,137

Current assets
Debtors	11	1,637	2,413
Investments in AAA-rated money market funds		14,129	14,414
Cash and short term deposits		294	582
		16,060	17,409

Current liabilities
Creditors: other amounts falling due within one year	12	(2,943)	(2,947)
Bank loan	12	(24,938)	(39,988)
		(27,881)	(42,935)
Net current liabilities		(11,821)	(25,526)
Total assets less current liabilities		426,587	498,611

Net assets		426,587	498,611

Capital and reserves
Called-up share capital	13	26,041	26,041
Share premium account		170,146	170,146
Capital reserve	14	217,927	293,616
Revenue reserve		12,473	8,808
Equity shareholders' funds		426,587	498,611

Net asset value per Ordinary share (pence)	15	482.95	530.37

The financial statements were approved by the Board of Directors on 24 August 2023 and were signed on its behalf by:
Liz Airey
Chairman
The accompanying notes are an integral part of the Financial Statements.

Statement of Changes in Equity

For the year ended 30 June 2023
			Share
		Share	premium	Capital	Revenue
		capital	account	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2022		26,041	170,146	293,616	8,808	498,611
Return after taxation		-	-	(49,922)	11,371	(38,551)
Buyback of Ordinary shares into Treasury (see note 13)		-	-	(25,767)	-	(25,767)
Dividends paid (see note 8)		-	-	-	(7,706)	(7,706)
Balance at 30 June 2023		26,041	170,146	217,927	12,473	426,587


For the year ended 30 June 2022
		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2021	26,041	170,146	20,132	504,395	7,532	728,246
Return after taxation	-	-	-	(201,175)	8,766	(192,409)
Buyback of Ordinary shares into Treasury (see note 13)	-	-	(20,132)	(9,604)	-	(29,736)
Dividends paid (see note 8)	-	-	-	-	(7,490)	(7,490)
Balance at 30 June 2022	26,041	170,146	-	293,616	8,808	498,611

The capital reserve at 30 June 2023 is split between realised of £169,058,000 and unrealised of £48,869,000 (30 June 2022 - realised £198,874,000 and unrealised £94,742,000).
The Company's reserves available to be distributed by way of dividends or buybacks which includes the revenue reserve and the realised element of the capital reserve amount to £181,531,000 (30 June 2022 - £207,682,000).
The accompanying notes are an integral part of the financial statements.

Statement of Cash Flows

	Year ended	Year ended
	30 June 2023	30 June 2022
	£'000	£'000
Operating activities
Net return before taxation	(38,551)	(192,409)
Adjustment for:
Losses on investments	46,435	196,773
Decrease/(increase) in accrued dividend income	772	(792)
Finance costs	1,260	1,111
Decrease/(increase) in other debtors	3	(2)
(Decrease)/increase in other creditors	(304)	920
Net cash inflow from operating activities	9,615	5,601

Investing activities
Purchases of investments	(83,777)	(94,258)
Sales of investments	122,718	144,236
Purchases of AAA-rated money market funds	(91,974)	(137,040)
Sales of AAA-rated money market funds	92,259	145,262
Net cash inflow from investing activities	39,226	58,200

Financing activities
Bank and loan interest paid	(1,193)	(1,088)
Repurchase of Ordinary shares into Treasury	(25,230)	(29,736)
Repayment of loan	(15,000)	(25,000)
Equity dividends paid	(7,706)	(7,490)
Net cash outflow from financing activities	(49,129)	(63,314)
(Decrease)/increase in cash	(288)	487

Analysis of changes in cash during the year
Opening balance	582	95
(Decrease)/increase in cash as above	(288)	487
Closing balance	294	582

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

Notes to the Financial Statements

For the year ended 30 June 2023

1.	Principal activity
	The Company is a closed-end investment company, registered in Scotland No SC145455, with its Ordinary shares being listed on the London Stock Exchange.

2.	Accounting policies
	a)	Basis of accounting and going concern. The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in July 2022. They have also been prepared on the assumption that approval as an investment trust will continue to be granted.
		The Company's assets consist mainly of equity shares in companies listed on recognised stock exchanges and are considered by the Board to be realisable within a short timescale under normal market conditions. The Board has set overall limits for borrowing and reviews regularly the Company's level of gearing, cash flow projections and compliance with banking covenants. The Board has also performed stress testing and liquidity analysis.
		As at 30 June 2023, the Company had a debt with The Royal Bank of Scotland International Limited. This consists of a five year revolving credit facility of £40 million of which £25 million is being utilised. The Board has reviewed its options and a range of proposals and is expecting to refinance the facility when it expires. However, in the event that the facility is not refinanced, there is considered to be sufficient portfolio liquidity to enable borrowings to be repaid.
		The Directors are mindful of the Principal Risks and Uncertainties disclosed in the Strategic Report and they believe that the Company has adequate financial resources to continue its operational existence for a period of not less than 12 months from the date of approval of this Report. They have arrived at this conclusion having confirmed that the Company's diversified portfolio of realisable securities is sufficiently liquid and could be used to meet short-term funding requirements were they to arise. The Directors have also reviewed the revenue and ongoing expenses forecasts for the coming year and considered the Company's Statement of Financial Position as at 30 June 2023 which shows net current liabilities of £11.8 million at that date. Taking all of this into account, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
		The accounting policies applied are unchanged from the prior year and have been applied consistently.
	b)	Investments. Investments have been designated upon initial recognition as fair value through profit or loss in accordance with IAS 39. As permitted by FRS 102, the Company has elected to apply the recognition and measurement provisions of IAS 39 Financial Instruments. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis.
		Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery to be made within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all the FTSE All-Share and the most liquid AIM constituents.
		Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserve.
	c)	AAA-rated money market funds. The AAA money market funds are used by the Company to provide additional short term liquidity. Due to their short term nature, they are recognised in the Financial Statements as a current asset and are included at fair value through profit and loss.
	d)	Income. Income from equity investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to revenue or capital in the Statement of Comprehensive Income, according to the circumstances of the underlying payment. Foreign income is converted at the exchange rate applicable at the time of receipt. Interest receivable on short-term deposits and money market funds is accounted for on an accruals basis.

	e)	Expenses and interest payable. Expenses are accounted for on an accruals basis. Expenses are charged to the capital column of the Statement of Comprehensive Income when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect, the investment management fee and relevant finance costs are allocated 25% to revenue and 75% to the capital columns of the Statement of Comprehensive Income in line with the Board's expectation of returns from the Company's investments over the long term in the form of revenue and capital respectively (see notes 4 and 6).
		Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Statement of Comprehensive Income.
	f)	Dividends payable. Dividends are recognised in the period in which they are paid.
	g)	Nature and purpose of reserves
		Called-up share capital. The Ordinary share capital on the Statement of Financial Position relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, is a transfer made to the capital redemption reserve. This reserve is not distributable.
		Share premium account. The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising Ordinary shares of 25p. This reserve is not distributable.
		Special reserve. The special reserve arose following court approval for the cancellation of the share premium account balance at 24 June 1999 and on 13 October 2009. Court of Session approval was granted for the cancellation of the Company's entire share premium account and capital redemption reserve and subsequent creation of a special distributable capital reserve. The special reserve is used to fund share purchases of its own Ordinary shares by the Company and was fully utilised during the year ended 30 June 2022.
		Capital reserve. Gains or losses on disposal of investments and changes in fair values of investments are transferred to the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. The part of this reserve represented by realised capital gains is available for distribution by way of share buybacks and dividends.
		Revenue reserve. Income and expenses which are recognised in the revenue column of the Statement of Comprehensive Income are transferred to the revenue reserve. The revenue reserve is available for distribution including by way of dividend.

	h)	Taxation. Tax expense represents the sum of tax currently payable and deferred tax. Any tax payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the year end date.
		Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the year end date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the year end date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods.
		Owing to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
	i)	Foreign currency. Non-monetary assets and liabilities denominated in foreign currency carried at fair value through profit or loss are converted into Sterling at the rate of exchange ruling at the year end date. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the Statement of Comprehensive Income.
	j)	Judgements and key sources of estimation uncertainty. Disclosure is required of judgements and estimates made by management in applying the accounting policies that have a significant effect on the Financial Statements. There are no significant estimates or judgements which impact these Financial Statements.
	k)	Cash and cash equivalents. Cash comprises bank balances and cash held by the Company. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
	l)	Bank borrowing. Interest bearing bank loans and overdrafts are recorded initially at fair value, being the proceeds received, net of direct issue costs. They are subsequently measured at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Statement of Comprehensive Income using the straight line method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
	m)	Treasury shares. When the Company purchases its Ordinary shares to be held in treasury, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effect, and is recognised as a deduction from the special reserve. During the year the special reserve was utilised in full with subsequent costs being recognised as a deduction from the capital reserve. When these shares are sold subsequently, the amount received is recognised as an increase in equity, and any resulting surplus on the transaction is transferred to the share premium account and any resulting deficit is transferred from the capital reserve.

3.	Income
		2023	2022
		£'000	£'000
	Income from investments
	UK dividend income	10,706	9,139
	Property income distributions	431	734
	Overseas dividend income	1,043	1,034
	Special dividends	943	166
		13,123	11,073

	Other income
	Interest from AAA-rated money market funds	516	50
	Bank interest	10	-
	Total income	13,649	11,123

4.	Investment management fee
		2023			2022
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fee	848	2,542	3,390	1,190	3,569	4,759

	The balance due to abrdn Fund Managers Limited ("aFML") at the year end in respect of investment management fees was £1,667,000 (2022 - £2,083,000). For further details see the Directors' Report and note 20.

5.	Administrative expenses (inclusive of VAT)
		2023	2022
		£'000	£'000
	Secretarial fees^A	90	90
	Promotional activities^A	362	295
	Directors' fees	154	145
	Auditor's remuneration:
	- fees payable to the Company's Independent Auditor for the audit of the annual accounts (excluding VAT)	60	40
	- VAT on audit fees	12	8
	Registrar's fees	27	27
	Professional fees	89	12
	Custody fees	28	32
	Depositary fees	56	79
	Other expenses	237	161
		1,115	889
	^A The Company has an agreement with aFML for the provision of secretarial services and promotional activities. Secretarial fees payable during the year, inclusive of VAT, were £90,000 (2022 - £90,000) and the amount due to aFML at the year end was £90,000 (2022 - £45,000). Costs relating to promotional activities during the year, inclusive of VAT, were £362,000 (2022 - £295,000) and the amount due to aFML at the year end was £132,000 (2022 - £115,000).

6.	Finance costs
		2023			2022
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Bank loan interest	282	846	1,128	258	774	1,032
	Non-utilisation fees	25	76	101	11	31	42
	Amortisation of loan arrangement expenses	8	23	31	9	28	37
		315	945	1,260	278	833	1,111

7.	Taxation
	(a)	Analysis of charge for year
			2023			2022
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Tax charge	-	-	-	-	-	-

		Given the Company's continued investment trust status and there being no taxable income generated from its operations, no tax has been paid in the year (2022 - same).

	(b)	Provision for deferred taxation. At 30 June 2023, the Company had unutilised management expenses and loan relationship losses of £80,344,000 (2022 - £75,537,000). A deferred tax asset has not been recognised on the unutilised management expenses and loan relationship losses as it is unlikely there will be suitable future taxable profits against which these tax losses could be deducted. Therefore, it is unlikely that the Company will generate future taxable revenue that would enable the existing tax losses to be utilised.
	(c)	Factors affecting the tax charge for the year. The main rate of UK corporation tax increased from 19% to 25% from 1 April 2023. The tax charge for the year is higher (2022 - higher) than the standard rate of UK corporation tax for the period of 20.5% (2022 - 19%). The differences are explained in the following table:
			2023			2022
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Net return before taxation	11,371	(49,922)	(38,551)	8,766	(201,175)	(192,409)

		Corporation tax at an effective rate of 20.50% (2022 - 19%)	2,331	(10,234)	(7,903)	1,666	(38,223)	(36,557)
		Effects of:
		Non-taxable UK dividend income	(2,388)	-	(2,388)	(1,768)	-	(1,768)
		Non-taxable overseas dividend income	(214)	-	(214)	(196)	-	(196)
		Management expenses and loan relationship losses not utilised	271	715	986	298	836	1,134
		Non-taxable losses on investments	-	9,519	9,519	-	37,387	37,387
		Total tax charge	-	-	-	-	-	-

8.	Dividends
		2023	2022
		£'000	£'000
	Amounts recognised as distributions to equity holders in the period:
	2022 final dividend of 5.40p per share (2021 - 5.00p) paid on 28 October 2022	5,000	4,885
	2023 interim dividend of 3.00p per share (2022 - 2.70p) paid on 14 April 2023	2,706	2,605
		7,706	7,490

	The proposed 2023 final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements.
	Set out below are the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Section 1158-1159 of the Corporation Taxes Act 2010 are considered. The net revenue available for distribution by way of dividend for the year is £11,371,000 (2022 - £8,766,000).

		2023	2022
		£'000	£'000
	Interim dividend 2023 of 3.00p per share (2022 - 2.70p) paid on 14 April 2023	2,706	2,605
	Proposed final dividend 2023 of 8.00p per share (2022 - 5.40p) payable on 30 November 2023	6,907	5,000
		9,613	7,605

	The amount payable for the proposed final dividend is based on the Ordinary shares in issue as the date of approval of this Report, 245 August 2023, which satisfies the requirement of Section 1159 of the Corporation Tax Act 2010.

9.	Return per Ordinary share
		2023		2022
		p	£000	p	£000
	Basic
	Revenue return	12.44	11,371	9.07	8,766
	Capital return	(54.63)	(49,922)	(208.10)	(201,175)
	Total return	(42.19)	(38,551)	(199.03)	(192,409)

	Weighted average number of Ordinary shares in issue		91,387,673		96,670,077

10.	Investments held at fair value through profit or loss
		2023	2022
		£'000	£'000
	Opening book cost	429,395	444,749
	Opening investment holdings gains	94,742	325,254
	Opening fair value	524,137	770,003
	Additions at cost	83,423	94,523
	Disposals - proceeds	(122,717)	(143,616)
	Losses on investments	(46,435)	(196,773)
	Closing fair value	438,408	524,137

		2023	2022
		£'000	£'000
	Closing book cost	389,539	429,395
	Closing investment holding gains	48,869	94,742
	Closing fair value	438,408	524,137
	All investments are in equity shares listed on the London Stock Exchange.
	The Company received £122,717,000 (2022 - £143,616,000) from investments sold in the period. The book cost of these investments when they were purchased was £123,279,000 (2022 - £109,878,000 ). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
	Transaction costs. During the year, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within losses on investments in the Statement of Comprehensive Income. The total costs were as follows:

		2023	2022
		£'000	£'000
	Purchases	235	259
	Sales	94	110
		329	369
11.	Debtors
		2023	2022
		£'000	£'000
	Amounts due from brokers	10	11
	Dividends receivable	1,608	2,380
	Other debtors	19	22
		1,637	2,413

12.	Creditors: amounts falling due within one year
		2023	2022
		£'000	£'000
	Amounts payable to brokers	31	385
	Amounts payable in relation to share buybacks	537	-
	Interest payable	225	108
	Investment management fee payable	1,667	2,083
	Sundry creditors	483	371
		2,943	2,947

		2023	2022
	Bank loan	£'000	£'000
	Bank loan	25,000	40,000
	Unamortised loan arrangement expenses	(62)	(12)
		24,938	39,988

	On 1 November 2017 the Company entered into a £45 million unsecured loan facility agreement arranged with The Royal Bank of Scotland International Limited ("RBSI"), which was increased to £65 million effective 10 May 2021. The facilities consisted of a five year fixed-rate term loan facility of £25 million (the "Term Loan") and a five year revolving credit facility of £40 million (the "RCF").
	On 3 October 2022 the £15 million drawn down from the RCF was repaid and on 1 November 2022 the £25 million term loan was repaid from a new RCF of £40 million, provided by RBSI, which expires on 1 November 2025. At 30 June 2023, the Company had drawn down £25 million from the RCF at an interest rate of 5.477% with a maturity date of 2 August 2023. At the date of this Report, the Company had drawn down £25 million at an interest rate of 6.231%.
	The terms of the unsecured loan facility agreement ("the agreement") contain covenants that the Consolidated Net Tangible Assets as defined in the agreement must not be less than £200 million, the percentage of borrowings against the Adjusted Portfolio Value as defined in the agreement shall not exceed 30%, and the portfolio contains a minimum of thirty eligible investments (investments made in accordance with the Company's investment policy). The Company complied with all covenants throughout the year.

13.	Called-up share capital
		2023		2022
		Number	£'000	Number	£'000
	Authorised	150,000,000	37,500	150,000,000	37,500

	Issued and fully paid:
	Ordinary shares of 25p each	88,329,911	22,082	94,012,047	23,503
	Held in treasury:	15,834,511	3,959	10,152,375	2,538
		104,164,422	26,041	104,164,422	26,041

			Ordinary shares	Treasury shares	Total
			Number	Number	Number
	Opening balance		94,012,047	10,152,375	104,164,422
	Share buybacks		(5,682,136)	5,682,136	-
	Closing balance		88,329,911	15,834,511	104,164,422

	During the year the Company repurchased 5,682,136 (2022 - 4,670,519) Ordinary shares to treasury at a cost of £25,767,000 (2022 - £29,736,000)..

14.	Capital reserve
		2023		2022
		£'000		£'000
	Opening balance	293,616		504,395
	Unrealised losses on investment holdings	(45,873)		(230,512)
	(Loss)/gains on realisation of investments at fair value	(562)		33,739
	Management fee charged to capital	(2,542)		(3,569)
	Finance costs charged to capital	(945)		(833)
	Buyback of Ordinary shares into treasury	(25,767)		(9,604)
	Closing balance	217,927		293,616

	The capital reserve includes investment holding gains amounting to £48,869,000 (2022 - gains of £94,742,000) as disclosed in note 10.
15.	Net asset value per share
	Total shareholders' funds have been calculated in accordance with the provisions of applicable accounting standards. The analysis of total shareholders' funds on the face of the Statement of Financial Position reflects the rights, under the Articles of Association, of the Ordinary shareholders on a return of assets.

		2023	2022
	Net assets attributable (£'000)	426,587	498,611
	Number of Ordinary shares in issue at year end^A	88,329,911	94,012,047
	Net asset value per share	482.95p	530.37p

	^A Excluding shares held in treasury.

16.	Financial instruments
	The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company also has the ability to enter into derivative transactions for the purpose of managing currency and market risks arising from the Company's activities. No such transactions took place during the year.
	The main risks the Company faces from its financial instruments are i) market price risk (comprising interest rate risk, currency risk and other price risk), ii) liquidity risk and iii) credit risk. There was no material currency risk to the Company for the period given its investing and financing activities are in the UK.
	The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year.
	i)	Market price risk. The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.
		Interest rate risk
		Interest rate movements may affect:
		- the level of income receivable on cash deposits and money market funds;
		- interest payable on the Company's variable rate borrowings.
		The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
		As at 30 June 2023, the Company had drawn down £25 million (2022 - £40 million) from the £40 million revolving credit facility with The Royal Bank of Scotland International Limited. During the year the £25 million term loan with The Royal Bank of Scotland International Limited was repaid.
		Interest risk profile. The interest rate risk profile of the portfolio of financial assets and liabilities at the year end date was as follows:

			Weighted average	Weighted
			period for which	average	Fixed	Floating
			rate is fixed	interest rate	rate	rate
		As at 30 June 2023	Years	%	£'000	£'000
		Assets
		Investments in AAA-rated money market funds	-	4.92	-	14,129
		Cash deposits	-	3.93	-	294
		Total assets	-	-	-	14,423

		Liabilities
		Bank loan	0.09	5.48	25,000	-
		Total liabilities	-	-	25,000	-

	Weighted average	Weighted
	period for which	average	Fixed	Floating
	rate is fixed	interest rate	rate	rate
As at 30 June 2022	Years	%	£'000	£'000
Assets
Investments in AAA-rated money market funds	-	1.17	-	14,414
Cash deposits	-	-	-	582
Total assets	-	-	-	14,996

Liabilities
Bank loan	0.33	2.35	25,000	-
Bank loan	0.08	2.09	15,000	-
Total liabilities	-	-	40,000	-
The weighted average interest rate is based on the current yield of each asset, weighted by its market value.
The floating rate assets consist of investments in AAA-rated money market funds and cash deposits on call earning interest at prevailing market rates.
All financial liabilities are measured at amortised cost.
Interest rate sensitivity. The sensitivity analyses below have been determined based on the exposure to interest rates at the year end date and with the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's result for the year ended 30 June 2023 and net assets would increase/decrease by £144,000 (2022 - increase/decrease by £150,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances and money market funds.
Other price risk. Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. The allocation of assets and the stock selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are mainly listed on the London Stock Exchange.
Other price risk sensitivity. If market prices at the year end date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary Shareholders for the year ended 30 June 2023 would have increased/decreased by £43,841,000 (2022 - increase/decrease of £52,414,000). This is based on the Company's equity portfolio held at each year end.

ii)	Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
	Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities and AAA-rated money market funds, which can be sold to meet funding commitments if necessary. Subject to compliance with the terms of the revolving credit facility, including relevant covenant compliance, the Company has the ability to make future loan drawdowns during the period until the expiry of the facility on 1 November 2025.The maturity of the Company's existing borrowings is set out in the credit risk profile section of this note.

						Due between
		Expected		Due within		3 months		Due after
		cash flows		3 months		and 1 year		1 year
	As at 30 June 2023	£'000		£'000		£'000		£'000
	Bank loan	28,309		342		1,027		26,940

						Due between
		Expected		Due within		3 months		Due after
		cash flows		3 months		and 1 year		1 year
	As at 30 June 2022	£'000		£'000		£'000		£'000
	Bank loan	40,318		15,170		25,148		-

iii)	Credit risk. This is failure of the counter party to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.
	The risk is not significant, and is managed as follows:
	- investment transactions are carried out with a number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker;
	- the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, both stock and cash reconciliations to the Custodians' records are performed on a daily basis to ensure discrepancies are investigated on a timely basis.
	- cash is held only with reputable banks with high quality external credit enhancements.
	None of the Company's financial assets are secured by collateral or other credit enhancements.

	Credit risk exposure. In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 30 June was as follows:

			2023				2022
			Statement of		Maximum		Statement of	Maximum
			Financial Position		exposure		Financial Position	exposure
	Current assets		£'000		£'000		£'000	£'000
	Debtors		10		10		11	11
	Investments in AAA-rated money markets funds		14,129		14,129		14,414	14,414
	Cash and short term deposits		294		294		582	582
			14,433		14,433		15,007	15,007
	None of the Company's financial assets is past due or impaired.

17.	Analysis of changes in net debt
		At		Non-cash	At
		30 June 2022	Cash flows	movements	30 June 2023
		£'000	£'000	£'000	£'000
	Cash and cash equivalents	582	(288)	-	294
	Investments in AAA-rated money market funds	14,414	(285)	-	14,129
	Debt due in less than one year	(39,988)	15,080	(30)	(24,938)
		(24,992)	14,507	(30)	(10,515)

		At		Non-cash	At
		30 June 2021	Cash flows	movements	30 June 2022
		£'000	£'000	£'000	£'000
	Cash and cash equivalents	95	487	-	582
	Investments in AAA-rated money market funds	22,636	(8,222)	-	14,414
	Debt due in less than one year	(40,000)	25,000	(24,988)	(39,988)
	Debt due after more than one year	(24,951)	-	24,951	-
		(42,220)	17,265	(37)	(24,992)
	A statement reconciling the movement in net funds to the net cash flow has not been presented as there are no differences from the above analysis.

18.	Capital management
	The investment objective of the Company is to achieve long term capital growth by investment in UK quoted smaller companies.
	The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to Shareholders through the optimisation of the debt and equity balance.
	The Company's capital comprises the following:

		2023	2022
		£'000	£'000
	Equity
	Equity share capital	26,041	26,041
	Reserves	400,546	472,570
	Liabilities
	Bank loan	24,938	39,988
		451,525	538,599

	The Company's net gearing comprises the following:

		2023	2022
		£'000	£'000
	Bank loans	(24,938)	(39,988)
	Cash and investments in AAA-rated money market funds	14,423	14,996
	Amounts due from brokers	10	11
	Amounts payable to brokers	(31)	(385)
	Net gearing (borrowings less cash and cash equivalents)	(10,536)	(25,366)
	Net assets	426,587	498,611
	Net gearing (%)	2.5	5.1

	The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:
	- the planned level of gearing which takes account of the Investment Manager's views on the market;
	- the level of equity shares;
	- the extent to which revenue in excess of that which is required to be distributed should be retained.
	The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
	The Company does not have any externally imposed capital requirements.

19.	Fair value hierarchy
	FRS 102 requires an entity to classify fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:
	Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
	Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.
	Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
	All of the Company's investments are in quoted equities (2022 - same) that are actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments (2023 - £438,408,000; 2022 - £524,137,000) have therefore been deemed as Level 1.
	The investment in AAA rated money market funds of £14,129,000 (2022 - £14,414,000 ) is considered to be Level 2 under the fair value hierarchy of FRS 102 due to not trading in an active market.
	The fair value of the £25 million revolving credit facility loan as at the 30 June 2023 is £25,000,000, due to it being short-term in nature, with a par value per Statement of Financial Position of £24,938,000. Under the fair value hierarchy in accordance with FRS 102, these borrowings can be classified at Level 2.

20.	Transactions with the Manager
	The Company has an agreement with abrdn Fund Managers Limited for the provision of management services. The management fee is calculated and payable quarterly in arrears at a rate of 0.85% per annum on the first £250 million of net assets, 0.65% per annum on net assets between £250 million and £550 million and 0.55% on net assets above £550 million.

	The Manager also receives a separate fee for the provision of secretarial services and promotional activities as disclosed in note 5..

21.	Related party transactions
	The Directors of the Company received fees for their services. Further details are provided in the Directors' Remuneration Report which also includes the Directors' shareholdings.

22.	Subsequent events
	Subsequent to the year end, a further 1,995,572 Ordinary shares were repurchased to treasury at a cost of £8,413,000.
	As noted in the Chairman's Statement, with effect from 1 July 2023 the management fee will be calculated and payable quarterly in arrears at a rate of 0.75% per annum on the first £175 million of net assets, 0.65% per annum on net assets between £175 million and £550 million and 0.55% on net assets above £550 million and it has also been agreed that the Manager would not charge the Company for the provision of secretarial services with effect from 1 January 2024.

Alternative Performance Measures

Alternative performance measures ("APMs") are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP.
The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies. Where the calculation of an APM is not detailed within the financial statements, an explanation of the methodology employed is provided below:
Discount
A discount is the percentage by which the market price is lower than the Net Asset Value ("NAV") per share.

	30 June 2023	30 June 2022
Share price	414.00p	453.00p
Net Asset Value per share	482.95p	530.37p
Discount	14.3%	14.6%

Net gearing
Net gearing measures the total borrowings less cash and cash equivalents divided by shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due from and to brokers at the period end as well as cash and short-term deposits.

	30 June 2023	30 June 2022
	£'000	£'000
Total borrowings ^A	(24,938)	(39,988)
Cash and short term deposits	294	582
Investments in AAA-rated money market funds	14,129	14,414
Amounts due from brokers	10	11
Amounts payable to brokers	(31)	(385)
Total cash and money market fund investments^B	14,402	14,622
Net gearing (borrowings less cash and money market fund investments)^C=A+B	(10,536)	(25,366)
Shareholders' funds^D	426,587	498,611
Net gearing^C/D	2.5%	5.1%

Ongoing charges ratio
The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC, which is defined as the total of investment management fees and recurring administrative expenses and expressed as a percentage of the average of published daily net asset values throughout the year.

	30 June 2023	30 June 2022
	£'000	£'000
Investment management fee^A	3,390	4,759
Administrative expenses^B	1,115	889
Less: non-recurring charges^C	(40)	(6)
Ongoing charges	4,465	5,642
Average daily net assets	471,984	696,750
Ongoing charges ratio (excluding look-through costs)	0.95%	0.81%
Look-through costs^D	-	0.01%
Ongoing charges ratio (including look-through costs)	0.95%	0.82%
^A See note 4.
^B See note 5.
^C Comprises professional fees not expected to recur.
^D Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.

The ongoing charges ratio differs from the other ongoing costs figure reported in the Company's Key Information Document calculated in line with the PRIIPs regulations, which includes the ongoing charges ratio and the financing and transaction costs.
Total return
NAV and share price total returns show how the NAV and share price have performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return assumes reinvesting the net dividend paid by the Company back into the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return assumes reinvesting the net dividend back into the share price of the Company on the date on which that dividend goes ex-dividend.

NAV total return
Year ended 30 June 2023	2023	2022
Opening NAV	530.37p	737.97p
Closing NAV	482.95p	530.37p
Decrease in NAV	-47.42p	-207.60p
% Decrease in NAV	-8.9%	-28.1%
Uplift from reinvestment of dividends^A	1.5%	0.8%
NAV total return decrease	-7.4%	-27.3%
^A The uplift from reinvestment of dividends assumes that the dividends of 5.4p in October 2022 and 3.0p in April 2023 (5.0p and 2.7p in 2021/22) paid by the Company were reinvested in the NAV of the Company on the ex-dividend date.

Share price total return
Year ended 30 June 2023	2023	2022
Opening share price	453.00p	698.00p
Closing share price	414.00p	453.00p
Decrease in share price	-39.00p	-245.00p
% Decrease in share price	-8.6%	-35.1%
Uplift from reinvestment of dividends^A	1.8%	0.8%
Share price total return decrease	-6.8%	-34.3%
^A The uplift from reinvestment of dividends assumes that the dividends of 5.4p in October 2022 and 3.0p in April 2023 (5.0p and 2.7p in 2021/22) paid by the Company were reinvested in the shares of the Company on the ex-dividend date.

Additional Notes to the Annual Financial Report

The Annual General Meeting will be held at Wallacespace Spitalfields, 15 Artillery Lane, London E1 7HA on Thursday 23 November 2023 at 12 noon.

If approved at the Annual General Meeting, the final dividend of 8.00p per share will be paid on 30 November 2023 to holders of Ordinary shares on the register at the close of business on 3 November 2023. The relevant ex-dividend date is 2 November 2023.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 30 June 2023 have been agreed with the auditor and are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2022 and 2023 statutory accounts received unqualified reports from the Company's auditor and did not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498(2) or 498(3) of the Companies Act 2006. The financial information for 2022 is derived from the statutory accounts for 2022 which have been delivered to the Registrar of Companies. The 2023 accounts will be filed with the Registrar of Companies in due course.

The Annual Report and Accounts will be posted to shareholders in September 2023. Copies will be available during normal business hours from the Secretary, abrdn Holdings Limited, 1 George Street, Edinburgh EH2 2LL or from the Company's website, www.abrnuksmallercompaniesgrowthtrust.co.uk*.

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

By order of the Board
abrdn Holdings Limited
Company Secretary
24 August 2023

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

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