Annual Financial Report

Abrdn UK Smaller Companies Growth Trust plc

Sep 05 2024 08:00 BSTSource: RNS

RNS Number : 9726C

abrdn UK Smaller Cos. Growth Trust

05 September 2024

abrdn UK Smaller Companies Growth Trust plc

Annual Financial Report for the year ended 30 June 2024

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 Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index.

Website

www.abrdnuksmallercompaniesgrowthtrust.co.uk

Performance Highlights and Financial Calendar

Net asset total return^AB		Share price total return^AB
+18.1%		+21.0%
2023	-7.4%	2023	-6.8%

Total dividends per share		Discount to net asset value^AB
12.00p		12.5%
2023	11.00p	2023	14.3%

Revenue return per share		Ongoing charges ratio^ABC
13.12p		0.92%
2023	12.44p	2023	0.95%
^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 Calendar

Annual General Meeting (Edinburgh)	21 November 2024
Payment of final dividend for year ending 30 June 2024	29 November 2024
Half year end	31 December 2024
Expected announcement of results for the six months ending 31 December 2024	February 2025
Payment of interim dividend for year ending 30 June 2025	April 2025
Financial year end	30 June 2025
Expected announcement of results for year ending 30 June 2025	September 2025

Financial Highlights

	30 June 2024	30 June 2023	% change
Capital return
Total assets	£453.1m	£451.5m	0.3%
Equity shareholders' funds	£413.1m	£426.6m	(3.2%)
Market capitalisation^A	£361.3m	£365.7m	(1.2%)
Net asset value per share	556.19p	482.95p	15.2%
Share price	486.50p	414.00p	17.5%
Discount to NAV^B	12.5%	14.3%
Net gearing^B	5.8%	2.5%
Reference index^C	5,534.18	5,199.92	6.4%
Dividends and earnings
Revenue return per share^D	13.12p	12.44p	5.5%
Total dividends per share^E	12.00p	11.00p	9.1%
Operating costs
Ongoing charges ratio^BF	0.92%	0.95%
^A Represents the number of Ordinary shares in issue in the Company multiplied by the Company's share price.
^B Considered to be an Alternative Performance Measure.
^C Deutsche 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:

Ben Heatley

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

Dear Shareholders

After two years of reporting underperformance, it is with pleasure that I can report that the past year saw a decisive return to outperformance, such that at our June year end your Company had outperformed the reference index and the wider peer group in both NAV and share price terms over the year, albeit it is still behind on a longer term view. I set out some detail on this below.

Performance

For the year ended 30 June 2024, the Company's net asset value ("NAV") total return, calculated on the basis that all dividends received are reinvested in additional shares, was 18.1% (2023: -7.4%). The share price total return, calculated on the same basis, was 21.0% (2023: -6.8%). In addition to the absolute returns generated, both the NAV and the share price outperformed the total return of the Company's reference index, the Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index (the "reference index"), of 10.0%.

Below is an update of the graph which we included in last year's Annual Report. This shows the NAV total return of the Company and the total return of the reference index over the five years to 30 June 2024. Periods in grey indicate when the NAV was generally outperforming the index. While the graph shows that over the five year period the Company is behind the reference index, it shows that the weak performance took place in 2022 and the first nine months of 2023, and reversed sharply after that, narrowing the gap by the end of the period. The poor performance in 2022 and the first part of 2023 will continue to act as a drag on the five year performance record, but the last nine months of the year have shown the investment process recovering traction and positive contributions to relative performance from both stock selection and sector allocation.

Last year I reported on the work that the Board had done to further understand the root causes of the underperformance in 2022, and the conclusion we reached that this was largely attributable to external factors which were challenging for the Manager's investment style. It is pleasing to report that, not only have conditions become more favourable, but also that the portfolio has outperformed.

Earnings and Dividends

The revenue return per share ("EPS") for the year ended 30 June 2024 was 13.12 pence (2023: 12.44 pence). The rate of increase of 5.5% has settled down to more reasonable and sustainable levels, following two years where increases have averaged over 39% per annum. This is in large part down to the recovery in the prospects of the underlying companies, but there has also been a contribution from the effect of share buy backs enhancing the EPS and the NAV per share. Included in the EPS is the enhancement to earnings of 1.21 pence per share (9.7%) as a result of share buy backs undertaken during the year. Recurring income is increasingly the predominant source of dividends, with only 2.5% of total revenue (excluding capital dividends) coming from special dividends. This can be compared to the position 10 years ago when around 20% of the revenue generated was classified as special.

The Board is declaring a final dividend for the financial year of 8.3 pence per share, which will take the full year dividend to 12.0 pence per share, an increase of 9.1% on the full year dividend paid in 2023. This will permit around 2.2 pence per share to be transferred to revenue reserves to provide against any future shortfalls in income generated. Subject to approval by shareholders at the Annual General Meeting, the final dividend will be paid on 29 November 2024 to shareholders on the register on 1 November 2024, with an associated ex-dividend date of 31 October 2024.

Ongoing Charges

The ongoing charges ratio ("OCR") for the year ended 30 June 2024 was 0.92% (2023: 0.95%). During the year, the Company benefited from renegotiated management fee terms that came into effect on 1 July 2023, including the removal of the company secretarial fee with effect from 1 January 2024 and a lower fee for the provision of promotional activities by the Manager.

Discount Control and Share Buy Backs

At the year end the discount of the share price to the NAV was 12.5% (2023: 14.3%).

Over the year, the Board bought back 14.1 million shares, equating to 15.9% of the Company's issued share capital, at a total cost of £60.5 million and a weighted average price of 427.66 pence per share. The weighted average discount at which the shares were repurchased was 13.1%. The Board calculates that this has added 10.7 pence per share to the NAV for remaining shareholders.

The Board has remained committed to its discount target of 8% or lower and will continue to be active in the market when it believes it to be in the best interests of shareholders. It is, however, slightly frustrated that the sustained improvement in performance throughout the year, outstripping its reference index and many of its close peers, is not being reflected in the share price performance relative to the NAV.

The pace of buy backs meant that the Board convened a General Meeting on 3 June 2024 at which shareholders granted authority for the Company to buy back a further 14.99% of the issued share capital. The renewed authority will lapse at the Annual General Meeting, at which time the Board will seek a renewed authority.

Full details of the Board's discount control policy can be found in the Strategic Report. It should be noted that the Board has implemented its discount control policy against an industry backdrop of widening discounts generally and it will continue to keep the nature of the policy and its level under review.

Since the end of the financial year, the discount of the share price to the NAV has continued to trade between 11% and 13% while the Company's performance continues to outperform the reference index and most of its close peers. The Board continues to stand behind the share price and the Company has bought back 543,624 shares since the year end at an average discount of 12.0%. The rate of buy backs has diminished, but this is largely driven by the lower volumes traded over the summer months.

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). The Company has a £40 million revolving credit facility which matures in November 2025. At the start of the year the Company had drawn down £25 million of the facility and, as the Investment Manager became more confident about the outlook for the UK generally and smaller companies in particular, it drew the remaining £15 million of the facility in March. At the year end, the gross level of borrowings was offset by cash and investments in money market funds of £15.9 million resulting in net gearing of 5.8% (2023: 2.5%).

FRC Review of Annual Report

The Board was informed in February 2024 that the Financial Reporting Council (the "FRC") had undertaken a review of the 2023 Annual Report and Accounts in accordance with Part 2 of the FRC Corporate Reporting Review Operating Procedures. It is the FRC's usual practice to carry out such reviews on the annual reports of a selection of companies each year. The FRC advised the Board that the review did not give rise to any questions or queries.

Appointment of New Auditor

As explained in more detail in the Audit Committee's Report, during the year the Board, led by the Audit Committee, undertook an audit tender process and, following consideration of the tenders received, the Board decided to appoint Johnston Carmichael LLP as the Company's Auditor for the year ending 30 June 2025. KPMG LLP will therefore not be seeking re-appointment as Auditor at the Annual General Meeting and have issued a statutory statement pursuant to Section 519 of the Companies Act 2006 which is included separately with the Annual Report. A resolution to appoint Johnston Carmichael LLP as the Company's Auditor will be proposed at the Annual General Meeting.

Annual General Meeting

The Company's Annual General Meeting ("AGM") will take place at 12 noon on Thursday 21 November 2024 at abrdn's office at 1 George Street, Edinburgh EH2 2LL. The meeting will include a presentation from the Investment Manager and will be followed by 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: uksmallercompaniesgrowth@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 Company's website.

At the meeting, rather than asking shareholders to vote on the resolutions by a show of hands, as we have done in previous years, voting will be conducted by a poll. This practice has increasingly been adopted by public companies and we consider that it is now best practice in corporate governance.

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. This will ensure that your votes are registered.

Outlook

This time last year, I wrote about concerns surrounding high rates of inflation and the level of interest rates. Roll forward 12 months and we have seen inflation fall and market conditions for UK smaller companies improve. Rachel Reeves, the Chancellor of the Exchequer, sees growth as UK's national mission, however investors are still unsure of the actions likely from Sir Keir Starmer's government following the landslide victory in July. Markets wait to see how conflicting positions on budgetary possibilities and growth agendas are reconciled and whether cutting costs or promoting growth will take precedence.

At the same time, the forthcoming US Presidential elections have been shaken up by the decision of President Biden not to stand and to back the campaign of his Vice President, Kamala Harris. While we should end 2024 with better visibility as to the political direction of travel, given that over half the world's population will not have to visit the ballot box for a number of years, the same cannot be said about the geopolitical landscape, with the continuing war in Ukraine and the threat of an escalating conflict in Gaza and the Middle East. The UK, in a global context, looks reassuringly well positioned, given economic data, employment rates, manageable inflation levels, and levers on interest rates to use.

The future is by its very nature uncertain, but the Board has been pleased by the manner in which the Investment Manager has managed the portfolio and navigated the challenges in the last 12 months. The focus remains on the resilience of the companies in which the portfolio is invested and the experience and flexibility of the management teams to adapt their companies to the changes to the economic environment that are occurring. At the same time, the Investment Manager continues to see opportunities within the universe of UK smaller companies - there remains significant catching up to do with respect to where smaller company valuations sit relative to their long-term average and to large caps. As a consequence, despite areas of uncertainty remaining as always, there remains cause for optimism in the sector generally and the Company specifically.

Liz Airey
Chairman
4 September 2024

Overview of Strategy

Business

The Company is an investment trust and its Ordinary shares are listed 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 Deutsche 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 Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index) and its peer group of investment trusts. The figures for this year and for the past three, five and ten years are shown in the table below.
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. The figures for this year and for the past three, five and ten years are shown in the table below.
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. A summary of the discount for the past ten years is included in the table below. The average discount for the year as a whole was 12.9%.
Ongoing charges	The Board monitors the Company's ongoing charges ratio against prior years and other similar sized companies in the peer group. A summary of the ongoing charges ratio ("OCR") for the past ten years is included in the table below. The OCR for the year ended 30 June 2024 was 0.92% (2023: 0.95%).

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 inflation and high interest rates and the resultant volatility that this has created in global stock markets. In addition, the continuing conflicts in Ukraine and the Middle East have 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, or the Company becomes uncompetitive (including its size and costs), 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 (further information included in "Share price" below) . 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 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 Strategic Report. 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 in the internal controls 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. Written agreements are in place with all third party service providers. 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. 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 conflicts in Ukraine and the Middle East and the actions taken by governments in relation to climate change. They also include the impact of inflation and higher interest rates, and the potential impact on investors of tax changes in the UK. 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.
Geopolitical risk is heightened due principally to the increased market risk caused by the continuing conflicts in Ukraine and the Middle East and also the potential impact on investors of tax changes in the UK. The risk ratings for the other headings are not considered to have changed since the previous year.

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.

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. Further details can be obtained on the Manager's website.

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

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 would face discount pressure in common with most of the peer group. Whilst the Board takes into account the wider investment trust sector discount levels 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 across a diversified range of sectors.

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

- The level of share buy backs undertaken by the Company.

- The Company's long-term performance record as shown below.

- The Company's level of gearing. The Company had net gearing of 5.8% as at 30 June 2024. 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 2024 amounted to £15.9 million. These balances allow the Company to meet liabilities as they fall due.

- The level of ongoing charges.

- 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 2024 which shows net current liabilities of £23.6 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 conflicts in Ukraine and the Middle East, 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 2025 as it believes that this is in the best interests of shareholders.

On behalf of the Board
Liz Airey
Chairman
4 September 2024

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

The Board's philosophy is that the Company should operate in a transparent culture where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike. The Board reviews the culture and manner in which the Manager and Investment Manager operate at its 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. Directors meet shareholders at the Annual General Meeting and the Chairman offers to meet with the Company's larger shareholders to discuss their views. In addition, during the year the Board held an online shareholder presentation at which shareholders had the opportunity to ask questions of the Chairman and Investment Manager. 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 shareholders 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 (and Investment 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 Investment Manager are committed to investing in a responsible manner and the Investment Manager considers Environmental, Social and Governance ("ESG") factors 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 2024. 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.

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

Management Fee

During the previous 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. The new fee structure became effective on 1 July 2023 and is set out in detail in the Directors' Report. .

Dividends

The Board is recommending payment of a final dividend for the year of 8.3p per Ordinary share. Following payment of the final dividend, total dividends for the year will amount to 12.0p per Ordinary share, an increase of 9.1% 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, during the year the Company bought back 14.1 million Ordinary shares to be held in treasury, providing an 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.

Shareholder Engagement

During the year, the Board met shareholders at the AGM. The AGM was held in London in 2023 and will be held in Edinburgh this year.

To encourage and promote stronger interaction and engagement with the Company's shareholders, the Board also held an interactive online shareholder presentation in May. At the presentation, shareholders received updates from the Chairman and Investment Manager and there was the opportunity for an interactive question and answer session.

The Board considers that it is very important to maintain an ongoing dialogue with shareholders to properly understand their views and to communicate the actions of the Board.

Consumer Duty

During the previous 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.

During the year, the Board continued to review the methodology employed by the Manager to assess value of the Company under the Consumer Duty regulations and will formally review the Manager's assessment of value on an ongoing basis.

On behalf of the Board
Liz Airey
Chairman
4 September 2024

Performance

Performance (total return)

	1 year return	3 years return	5 years return	10 years return
	%	%	%	%
Net asset value^AB	+18.1	-20.5	+12.3	+118.2
Share price^B	+21.0	-26.0	+8.6	+105.9
Reference Index^C	+10.0	-13.5	+17.6	+57.6
Peer Group weighted average (NAV)	+16.8	-8.8	+27.4	+94.8
Peer Group weighted average (share price)	+19.0	-13.1	+25.9	+104.8
^A Cum-income NAV with debt at fair value.
^B Considered to be an Alternative Performance Measure.
^C Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index.
Source: Morningstar

Ten Year Financial Record

Year to 30 June	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
Per Ordinary share (p)
Net revenue return	6.76	6.76	6.42	7.24	8.80	6.74	6.43	9.07	12.44	13.12
Ordinary dividends paid/proposed	5.80	6.60	6.70	7.00	7.70	7.70	7.70	8.10	11.00	12.00
Net asset value^A	336.89	345.43	456.60	552.93	539.54	527.73	737.97	530.37	482.95	556.19
Share price	300.00	316.00	431.00	500.00	491.50	482.00	698.00	453.00	414.00	486.50
Discount(%)^A	10.9	8.5	5.6	9.6	8.9	8.7	5.4	14.6	14.3	12.5
Ongoing charges ratio (%)^B	1.19	1.13	1.08	1.04	0.90	0.91	0.88	0.82	0.95	0.92
Gearing ratio (%)^C	4.1	3.6	1.7	3.6	1.5	(0.34)	5.7	5.1	2.5	5.8
Shareholders' funds (£m)^D	243	241	324	408	543	528	728	499	427	413
Revenue reserves (£m)^E	5.83	6.50	6.26	8.30	10.87	8.80	7.53	8.81	12.47	13.53
^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 of the Company for the year ended 30 June 2024 was 18.1%, while the share price total return was 21.0%. By comparison, the UK smaller companies sector as represented by the Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index (the "reference index") delivered a total return of 10.0%.

Equity Markets

During the year under review, markets proved healthier after a challenging two years. The top-down pressure of inflation came under control in the UK and other regions although, relative to expectations, it is worth noting that interest rates have remained higher for longer.

The UK stock market, as represented by the FTSE All-Share Index, performed strongly over the period, with a total return of 13.0%. The FTSE 100 Index's total return of 12.8% underperformed the FTSE 250 Index, the latter of which generated a total return of 13.9%. The mid cap universe was therefore the best performing group within the UK, outperforming the reference index. The FTSE AIM Index was the laggard, delivering just a 3.4% return. Investors continued to remain cautious about the UK economic picture, however the GDP data was somewhat reassuring and, relative to other major economies in Europe, the UK held up well.

The only real interruption to the performance of the UK market was during September and October 2023. However, the sharp rebound from the October lows has delivered a fairly smooth positive return pathway since then. UK consumer spending has improved given that inflation has receded from its peak and wage growth remains positive. However, many households continue to have the burden of higher mortgage rates or rental costs. The domestic labour market has remained resilient, with employment levels high, and good job availability across a number of sectors.

The period was dominated by the inflation and interest rate picture, with inflation subsiding steadily over the period, with some visible steps down in areas such as energy prices and food. Along with other major economies such as the US, interest rates in the UK have remained at higher levels for longer than many economists projected.

Geopolitical tensions remained an ongoing theme during the period; the continuation of the war in Ukraine, the heightened conflict in Israel since October, as well as ongoing issues surrounding relations between China and the West. As we move through the second half of 2024, the outlook is impacted by the various major elections globally, with well over half of the world's population expected to be going to the polls during 2024. As always, the US Presidential Election is the highest profile and is only two months away. However, as the voting in some international geographies has already completed, we have seen increased levels of uncertainty and markets have experienced increased volatility in some regions.

Economists and strategists have noticeably turned more positive on both the UK and small and mid cap sectors through the final quarter of the financial year. Attractive valuations have been a key aspect of their investment case, combined with strong resilience in earnings across company reporting. It should not be forgotten that, even in the smaller companies space, around half the revenue of the reference index is generated overseas. With allocations to the UK and to smaller companies having shrunk over the years, particularly from UK pension funds, that series of outflows has stabilised and is showing tentative signs of reversal. With many starting positions at all-time lows, the more positive view on the asset class could help to drive markets higher.

Mergers and Acquisitions ("M&A") have continued to be a strong feature of UK markets, not just in the smaller companies sector. As the period progressed, we saw an increased proportion of the bids being for FTSE 250 and FTSE 100 companies. Initially this started as a dominance of private equity bidders but has broadened out in 2024 to include many bids from corporate buyers. Whilst this has created some headline concerns around shrinkage in the UK market, we are seeing attractive premiums in these bid situations, delivering good returns for shareholders. The average bid premium in UK in the first half of 2024 was 40%. There has been a lot of overseas appetite in deals, representing about 60% in the first six months of 2024. We have also seen an increase in IPO activity, which over time should generate fresh companies in our investable universe.

One final point to highlight is the increasing pressure to introduce changes to stimulate the market, whether it be through stamp duty changes, lower costs of listing, lighter regulation, or more control over asset class allocations. We are confident these voices are now being heard, but we will have to wait and see what is implemented and the time horizon of these policies.

Performance

Overall through the year, the net asset value ("NAV") grew by 18.1% on a total return basis, outperforming the reference index total return of 10.0%.

The more stable backdrop we have been waiting for did materialise this year and the focus of the markets reverted to stock specifics and reporting, rather than being dominated by top-down factors. The consistency of outperformance has been one of the most pleasing aspects for us, as portfolio managers, this year; the Company outperforming the reference index in 9 of the 12 months (only July 2023, Nov 2023 and April 2024 delivering relative underperformance).

The style factors driving markets, such as either growth stocks or value stocks being in favour, has been more settled this period. Value outperformed growth in the first half of the period, but value and growth both delivered similar returns in the market in the second half. We would characterise style factors as a slight headwind to our strategy during the period, but neutralising as we finished the year. Performance has predominantly been driven by stock specifics, companies reporting strong trading and earnings upgrades, with share prices responding appropriately, which is a distinct improvement on the situation over the last couple of years. Attribution and style analysis show that the outperformance has been driven by stock selection, rather than our style of Quality, Growth & Momentum being in favour.

Whilst we saw four successful bids for companies in the portfolio during the year, all at attractive premiums, this has not been the main driver of performance. These companies were Ergomed, Smart Metering Systems, Mattioli Woods, and Spirent. Overall, those four companies contributed 198 bps of relative performance during the year.

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

- Ashtead Technology +153bps (share price performance +104% since purchase) The company was a new addition to the portfolio during the year and has delivered very strong performance. The management team has displayed a strong track record of upgrading earnings, from both organic outperformance and acquisitions since the IPO in late 2021. The business has benefitted from supportive end markets in oil and gas, and the green energy transition driving investment in renewables. Visibility is aided by strong customer backlogs, and we continue to see increased customer propensity to rent. The company generates strong free cash flow which the management team is re-investing into the business, and balance sheet strength provides scope for further M&A.

- Ergomed +102ps (+36%) The shares contributed to performance following the recommended offer from Permira, the European private equity firm, at an attractive all-cash price of £13.50 per share.

- Diploma +98bps (+39%) features in the top 5 contributors again this year, further highlighting its long-term track record. The share price has been driven by ongoing delivery of the growth strategy, with acquisitions that position Diploma behind structurally growing end markets, deepening penetration of its regions, and extending product ranges.

- Cranswick +85bps (+37%) has a long track record for delivering growth, evidenced by its 34-year unbroken dividend growth history. Over time, the company has broadened its core protein focus, created new consumer categories and developed an exemplary reputation with customers. The long-term success is underpinned by the company's focus on achieving "carcase value maximisation", requiring a constant understanding of consumer trends and customer needs, and an ability to invest to provide capacity and maintain its industry-leading position in efficiency.

- Hilton Food Group +85bps (+44%) has redeemed itself after being a bottom 5 contributor last year. Hilton is very much back on track of consistency of delivering, and its market position reaffirmed by the work it did with customers after the inflationary challenges in 2022. Over the past year, its organic execution has been strong, and the shares have been buoyed by the announcement of new customer wins, including Walmart in Canada.

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

- CVS Group -130bp (-49%) The share price was hit badly by the Competition Markets Authority ("CMA") announcement of a review into the veterinary industry- focusing on price, consumer visibility and branding. We expect the outcomes to be manageable for CVS and have retained the position. Whilst CVS's Australian business is progressing well and UK trading has been resilient, the CMA review places a near term cap on the share price.

- Big Technologies -115bps (-44%) Performance has been lacklustre, with a lack of big wins and one contract loss, impacting sentiment. Underlying growth and new contract wins should help offset that, but nearer term the business is in a no growth scenario. We continue to have a holding.

- XP Power -75bps (-25%) Despite management's confidence that the business could trade out of a high net debt position, XP Power then issued a profit warning. Having had a series of disappointments, our confidence in the management team diminished. The balance sheet was strained and an equity issue looked necessary. Together with earnings downgrades, the proposition deteriorated and we exited the position.

- Team17 -72bps (-24%) The gaming industry has had a challenging period. While demand dynamics remain attractive, industry-wide unreleased content backlogs, inflation in intellectual property and content costs and competition for gaming hours have led to pressure across the sector. With a change in management and a longer than expected continuation of a challenging environment, we exited the position.

- discoverIE -72bps (-20%) The shares suffered during the period from ongoing cyclical weakness impacting forecasts. Management has worked hard to protect margins, through a combination of pricing resilience, tight cost control and margin accretive M&A, but the end market weakness has weighed on the shares, and there has been less opportunity to acquire businesses given the higher interest rate environment. We continue to hold the shares, but have reduced our exposure.

Dealing and Activity

Portfolio turnover was around 28%, which is higher than has been the case in recent years. This is reflective of where we are in the cycle and changing fortunes of companies. Over the year, we added 13 new positions, and exited 18 holdings. We took part in one IPO, Raspberry Pi.

Raspberry Pi makes single board computers and has sold 60 million units in just over a decade. It is a founder-run business, having been created as part of the Raspberry Pi Foundation (its largest shareholder prior to listing) which focused on driving the interest of Science, Technology Engineering and Maths ("STEM") subjects to children. Its products are used not just by the educational and enthusiast markets, but across industrial applications where they are embedded in products, such as for operating lifts or for automating manufacturing lines in factories. The company has significant intellectual property ("IP") which helps create barriers to entry, as well as being able to deliver attractive margins whilst keeping prices low. We believe this will be a unique listed asset within the UK market.

Ashtead Technology is a subsea equipment rental business within oil and gas and renewables markets globally, whilst Hunting is an oil services business also with global exposures. XPS Pensions, a pensions advisory, administrative and actuarial business, has been a strong performer and is now one of the top holdings in the portfolio. Premier Foods (branded food products) has vastly improved in recent years and becoming unshackled from its pension liabilities is investing in proposition and brand. Johnson Service is a textile rental business, emerging from Covid in a strong market position. Cairn Homes, the Irish housebuilder, is operating in healthier markets and with government support for the industry and its business. Clarkson is a global leading shipbroker, whilst Boku is a global mobile payment solutions business with blue chip customers. Renew Holdings is a provider of essential engineering services for critical infrastructure, and Volex is a manufacturing specialist for power products. Jet2 (the only company that had previously been held in the portfolio) is the package holiday business, which also sells flights only, which has emerged from Covid with a strong balance sheet, investing for growth, and with loyal repeat customers. Lastly, Chemring is a market leader in countermeasures, sensory and logistics for defence, as well as having a strong cyber business, Roke.

Of the 18 holdings exited over the period, four were companies which were subject to takeover activity; Spirent (testing and solution for networks), Mattioli Woods (financial services with focus on wealth management), Smart Metering Systems (residential utilities metering services, and grid battery storage), and finally Ergomed (clinical research). Elsewhere, many of our exits were characterised by businesses which were experiencing cyclical slowdowns and the recovery had become protracted and with limited visibility. These included FDM (specialist people resource), Impax (sustainable investment), Marshalls (landscaping products), Focusrite (hardware for content production), GB Group (identity verification and fraud detection), Team 17 (video games), Kainos (digitisation programs), Henry Boot (land and property development), Future (specialist media platform), Motorpoint (second hand car sales), Safestore (self-storage), Serica (oil and gas production), XP Power (electronics components for power products) and Watches of Switzerland (premium watches and jewellery).

Notable top ups during the year include Tatton Asset Management which has grown assets significantly, and Alpha Group (previously called Alpha FX) where its expansion into alternative banking solutions has been executed well. We also topped up AJ Bell which has been showing strong trading and growth, Volution which has proved resilient through volatile end markets, Diploma which has shown consistent organic and acquisitive growth, and lastly Paragon Banking where we believe credit quality and market position will deliver growth through tougher macro periods.

We have reduced exposure to some companies where they have experienced tougher periods of trading, all of which are yet to fully recover but are investment cases we continue to support. These include Robert Walters (global recruitment specialist), Treatt (flavourings for beverages), Big Technologies (electronic monitoring), Marlowe (business support services) and Auction Technology (platform for auction markets).

Gearing

The level of gearing (net of cash) at 30 June 2024 was 5.8% (2023: 2.5%). Given our improving outlook, we increased the gearing during the year and are now fully drawn on the £40 million loan facility. We continue to hold cash in the portfolio to ensure we can participate in market opportunities and are not liquidity constrained.

Revenue Account

Dividend income generated by the portfolio (excluding capital receipts) decreased by 9.8% over the year, with the main impact being the effect on the portfolio of share buy backs undertaken during the year - dividend income stated on a pence per share basis was marginally higher than last year. Interest rates remaining high also meant that the Company received £887,000 in interest income during the year.

The dividend outlook for the Company, seen through its income generation from the underlying holdings, has remained strong. Both the resilience of earnings, aided by business models and by solid trading, as well as the growth being exhibited, has helped drive the Revenue Account strength. The ability of companies to provide dividend returns to shareholders has been supported by balance sheet strength, a focus of our investment process. Meanwhile, we also see dividend strength as a reassurance of the confidence of underlying management teams.

While we consider it a good discipline for an investee company to have a policy of paying a dividend to shareholders on a regular basis, it is not a prerequisite for us to invest. There are currently four holdings in the portfolio which we do not expect to be dividend payers in the near future, currently re-investing back into their businesses to drive growth; Auction Technology, Big Technologies, Marlowe and Boku.

There were two revenue special dividends received during the year; Bytes Technology and Hollywood Bowl, which in aggregate amounted to £315,000 or 2.7% of investment income. This is down on the 7.2% that special dividends represented in 2023 because companies are more confident in the outlooks and keen to invest either organically or through bolt on acquisitions.

Outlook

We wrote last year about the overhang of the market waiting for a recession which didn't really materialise. Since the market turn in October 2023, UK stock markets have been buoyant and consistent in delivery. We believe a driver of that turn was the awareness of how cheaply valued UK equities were; relative to international peers, their own history, and their earnings prospects. These points still remain true as we go through the second half of 2024 and should continue to support rising markets. This is further evidenced by the frequency and premium level of bids for UK listed assets. The level of premiums that companies are being bid for is evidence of the value inherent in these markets, and the return of a more positive sentiment towards UK equities that we expect to continue. There will always be examples where shareholders feel the premium should be higher or they would have rather continued to be invested for the long term, but overall it is helping to drive awareness of the returns potential. To combat this market shrinkage we have also seen the IPO market open up again, with the Raspberry Pi listing (in which we took part) being heavily oversubscribed by investors. It has been encouraging to see such a high quality unique asset choosing to list in its home market.

What other catalysts lie ahead for UK markets? The domestic economic data has continued to turn more positive, both across business and consumer aspects. We expect to see interest rates come down, and history would suggest this to be positive, not just for absolute market levels, but in particular for small cap relative to large cap. The number of elections, particularly the US Presidential Election, might act as a short-term market overhang, but outcome dependent this could also drive markets further onwards once the results are known. In the UK, the new Labour government has made a point of highlighting its awareness of the need to stimulate the economy. However, it is too early to predict whether the government or any regulatory body can successfully enact meaningful changes that will actually stimulate UK markets, something we would very much support and have been active in sharing views on.

Our screening tool, The Matrix, continues to perform well and identifies companies it believes are displaying Quality, Growth and Momentum dynamics. The Matrix will continue to be valuable as we move through economic cycles and by interacting daily with The Matrix, we believe we can keep our research up to date. The market is continuing to evidence that earnings momentum, seen through upgrades to expectations, is a strong driver of share price performance. There has been more of a flight to quality this year, which aligns with our investment process, but in particular the market is looking to avoid poor quality exposures. Quality characteristics have helped companies thrive in the inflationary environment, protecting margins and investing consistently even through quieter periods, all helping to capture market shares. Our investment process has been running for over 25 years in UK smaller companies and is seasoned through five economic cycles. This gives us confidence to be able to adapt the portfolio to the prevailing economic and market conditions. As highlighted earlier, value as a factor is still performing well in the UK small cap market, and The Matrix helps us evaluate where those exposures lie; many quality growth companies show value characteristics given market conditions in recent years.

Markets tend to anticipate improvements, and turning points in the past have been when the outlook is often close to being at its most pessimistic. The first half of the period was in that category; inflation was persisting, interest rates remained high, and the consumer squeeze was ongoing. A combination of that environment easing and improving, as well as the market looking towards the future, has helped to drive this turn in markets. Smaller companies will always be an asset class with relatively high volatility, but we believe the current time is an attractive entry point for new capital, where investors are able to take a longer-term investment horizon.

Despite strong absolute and relative performance during this reporting period, the Company's discount to NAV remains stubbornly wide. UK smaller companies is not alone as an asset class in experiencing this. Whilst we have seen a growing interest in the asset class in recent months, we feel the inflow of money has yet to be seen. This can be evidenced through open ended funds flow data which remains lacklustre. Discounts are narrowed by demand, so we would hope this can be seen during the current 2024/25 financial year given the brighter outlook.

Abby Glennie and Amanda Yeaman
abrdn
4 September 2024

Investment Portfolio

As at 30 June 2024
		Valuation	Total	Valuation
		2024	portfolio	2023
Company	Sector	£'000	%	£'000
Diploma	Industrial Support Services	17,512	4.0	13,709
Hill & Smith	Industrial Metals and Mining	17,190	3.9	13,317
JTC	Investment Banking and Brokerage Services	17,057	3.9	14,562
XPS Pensions	Investment Banking and Brokerage Services	16,383	3.8	-
Cranswick	Food Producers	15,887	3.6	12,482
Hilton Food	Food Producers	15,191	3.5	11,518
Morgan Sindall	Construction and Materials	15,099	3.5	10,980
Ashtead Technology	Oil, Gas and Coal	15,008	3.4	-
4imprint	Media	14,692	3.4	18,408
Paragon Banking	Finance and Credit Services	14,351	3.3	8,500
Top ten investments		158,370	36.3
Bytes Technology	Software and Computer Services	13,211	3.0	15,071
Alpha Financial Markets	Industrial Support Services	12,419	2.8	14,542
Gamma Communications	Telecommunications Service Providers	11,531	2.6	12,015
AJ Bell	Investment Banking and Brokerage Services	11,361	2.6	5,577
Hollywood Bowl	Travel and Leisure	11,242	2.6	9,550
Volution	Construction and Materials	10,924	2.5	6,524
Sirius Real Estate	Real Estate Investment Trusts	10,837	2.5	6,384
GlobalData	Media	10,286	2.4	8,998
Mortgage Advice Bureau	Finance and Credit Services	10,192	2.3	7,803
Jet2	Travel and Leisure	10,091	2.3	-
Top twenty investments		270,464	61.9
Games Workshop	Leisure Goods	9,265	2.1	14,771
Tatton Asset Management	Investment Banking and Brokerage Services	9,232	2.1	4,000
Hunting	Oil, Gas and Coal	8,691	2.0	-
Coats	General Industrials	8,487	1.9	9,036
Alpha Group	Investment Banking and Brokerage Services	8,076	1.9	3,799
Johnson Service	Industrial Support Services	7,986	1.8	-
discoverIE	Electronic and Electrical Equipment	7,791	1.8	15,023
Craneware	Health Care Providers	7,466	1.7	4,510
Premier Foods	Food Producers	6,982	1.6	-
Cairn Homes	Household Goods and Home Construction	6,819	1.6	-
Top thirty investments		351,259	80.4
Telecom Plus	Telecommunications Service Providers	6,724	1.5	11,247
Next 15	Media	6,424	1.5	8,657
CVS	Consumer Services	6,391	1.5	13,071
Chemring	Aerospace and Defense	6,145	1.4	-
Midwich	Industrial Support Services	5,665	1.3	8,420
Boku	Industrial Support Services	5,200	1.2	-
Volex	Electronic and Electrical Equipment	4,988	1.1	-
Clarkson	Industrial Transportation	4,872	1.1	-
Liontrust Asset Management	Investment Banking and Brokerage Services	4,849	1.1	3,391
Auction Technology	Software and Computer Services	4,775	1.1	8,278
Top forty investments		407,292	93.2
Big Technologies	Software and Computer Services	4,245	1.0	11,053
Marlowe	Industrial Support Services	4,091	0.9	4,376
Treatt	Chemicals	3,749	0.9	7,966
Raspberry Pi	Technology Hardware and Equipment	3,610	0.8	-
Ricardo	Construction and Materials	3,399	0.8	3,566
LBG Media	Media	3,350	0.8	3,064
Robert Walters	Industrial Support Services	3,079	0.7	5,943
YouGov	Media	2,653	0.6	6,602
Renew Holdings	Construction and Materials	1,221	0.3	-
Total portfolio		436,689	100.0
All investments are equity investments.

Sector Distribution of Investments

As at 30 June 2024
	Portfolio weighting
	2024	2023
	%	%
Basic Materials	4.8	4.8
Chemicals	0.9	1.8
Industrial Metals and Mining	3.9	3.0
Consumer Discretionary	18.8	23.9
Consumer Services	1.5	3.0
Household Goods and Home Construction	1.6	-
Leisure Goods	2.1	5.6
Media	8.7	11.5
Personal Goods	-	1.4
Retailers	-	0.2
Travel and Leisure	4.9	2.2
Consumer Staples	8.7	5.4
Food Producers	8.7	5.4
Energy	5.4	1.4
Oil, Gas and Coal	5.4	1.4
Financials	21.0	12.8
Finance and Credit Services	5.6	-
Investment Banking and Brokerage Services	15.4	12.8
Health Care	1.7	3.9
Health Care Providers	1.7	1.0
Pharmaceuticals and Biotechnology	-	2.9
Industrials	27.1	23.0
Aerospace and Defense	1.4	-
Construction and Materials	7.1	6.1
Electronic and Electrical Equipment	2.9	1.4
General Industrials	1.9	2.1
Industrial Support Services	12.7	13.4
Industrial Transportation	1.1	-
Real Estate	2.5	4.3
Real Estate Investment and Services	-	2.4
Real Estate Investment Trusts	2.5	1.9
Technology	5.9	15.2
Software and Computer Services	5.1	11.4
Technology Hardware and Equipment	0.8	3.8
Telecommunications	4.1	5.3
Telecommunications Service Providers	4.1	5.3
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 2024.

Results and Dividends

The financial statements for the year ended 30 June 2024 are contained below. An interim dividend of 3.70p per Ordinary share was paid on 12 April 2024 and the Directors recommend a final dividend of 8.3p per Ordinary share, payable on 29 November 2024 to shareholders on the register on 1 November 2024. The ex-dividend date is 31 October 2024.

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 2024 consisted of 74,270,535 (2023: 88,329,911) Ordinary shares of 25 pence each and there were 29,893,887 (2023: 15,834,511) Ordinary shares held in treasury.

During the year, 14,059,376 Ordinary shares were bought back into treasury.

Since the year end, the Company has bought back a further 543,624 Ordinary shares into treasury. Accordingly, as at the date of this Report, the Company's issued share capital consisted of 73,726,911 Ordinary shares of 25 pence each and 30,437,511 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.

With effect from 1 July 2023, the management fee is calculated quarterly in arrears at a rate of 0.75% per annum on the first £175 million of the Company's net assets, 0.65% per annum on net assets above this threshold until £550 million, and 0.55% on net assets above this threshold.

In addition, until 31 December 2023, the Manager received a secretarial and administration fee of £75,000 plus VAT. From 1 January 2024, the Manager was no longer entitled to a secretarial and administration fee.

The Manager also receives a separate fee for the provision of promotional activities to the Company. This fee amounted to £207,500 plus VAT for the year (2023: £301,000 plus VAT).

Further details of the fees payable to the Manager are shown in notes 4 and 5 to the financial statements.

The management agreement is terminable on not less than six months' notice. In the event of termination by the Company on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period.

Directors

At the year end, there were five independent non-executive Directors. Liz Airey is the Chairman and Tim Scholefield is the Senior Independent Director. Caroline Ramsay retired as a Director on 23 November 2023.

All of the Directors will retire and, being eligible, will offer themselves for re-election at the Annual General Meeting.

The Directors attended scheduled Board and Committee meetings during the year ended 30 June 2024 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	4 (4)	- (-)^A	1 (1)	1 (1)
Ashton Bradbury	4 (4)	2 (2)	1 (1)	1 (1)
Alexa Henderson	4 (4)	2 (2)	1 (1)	1 (1)
Manju Malhotra	4 (4)	2 (2)	1 (1)	1 (1)
Caroline Ramsay^B	2 (2)	1 (1)	- (-)	- (-)
Tim Scholefield	4 (4)	2 (2)	1 (1)	1 (1)

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

^B Retired as a Director on 23 November 2023

The Board meets more frequently when business needs require. During the year ended 30 June 2024 this included a Board meeting to approve share buy backs and two Board Committee meetings to approve the annual and half yearly financial statements.

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 2024

	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	40%	2	n/a	n/a
Women	3	60% (note 1)	3
Not specified/prefer not to say	-	-	-

Board Ethnic Background as at 30 June 2024

	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)	4	80%	4	n/a	n/a
Asian/Asian British	1 (note 2)	20%	1
Not specified/prefer not to say	-	-	-

Notes:

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

2. Meets target that at least one Director is from a minority ethnic background as set out in LR 6.6.6R (9)(a)(iii)

3. The Company considers that the role of Chairman, Senior Independent Director ("SID"), and the chairmen of the Audit Committee, Management Engagement 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 in the Directors' Remuneration Report, 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.

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 2024.

Shareholder	Number of Ordinary shares	% held
Interactive Investor	12,166,176	16.4
Hargreaves Lansdown	8,654,658	11.6
1607 Capital Partners	6,393,397	8.6
RBC Brewin Dolphin	5,931,888	8.0
AJ Bell	3,977,428	5.4
Rathbones	2,758,626	3.7
Charles Stanley	2,284,704	3.1

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 2024, 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, as well as share buy back commitments. 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 2024 which shows net current liabilities of £23.6 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

As explained in the Audit Committee's Report, following a tender process conducted during the year, the Board decided to appoint Johnston Carmichael LLP as the Company's Independent Auditor, in place of KPMG LLP, for the audit of the financial statements for the year ending 30 June 2025. The Board will therefore propose resolutions at the Annual General Meeting to appoint Johnston Carmichael LLP as Independent Auditor for the ensuing year and to authorise the Directors to determine its remuneration.

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 from the Manager and Company Secretary (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. In addition, 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 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 rules governing the appointment of Directors are set out in the Directors' Remuneration Report. 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, further details of which are set out above, 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 Annual General Meeting ("AGM") will be held at 12 noon on Thursday, 21 November 2024.

By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
4 September 2024

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 prudent;

- 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

- use 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
4 September 2024

Statement of Comprehensive Income

		Year ended 30 June 2024			Year ended 30 June 2023
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Net gains/(losses) on investments held at fair value	10	-	48,116	48,116	-	(46,435)	(46,435)
Income	3	12,727	1,474	14,201	13,649	-	13,649
Investment management fee	4	(704)	(2,113)	(2,817)	(848)	(2,542)	(3,390)
Other administrative expenses	5	(876)	-	(876)	(1,115)	-	(1,115)
Net return before finance costs and taxation		11,147	47,477	58,624	11,686	(48,977)	(37,291)

Finance costs	6	(557)	(1,533)	(2,090)	(315)	(945)	(1,260)
Return before taxation		10,590	45,944	56,534	11,371	(49,922)	(38,551)

Taxation	7	-	-	-	-	-	-
Return after taxation		10,590	45,944	56,534	11,371	(49,922)	(38,551)

Return per Ordinary share (pence)	9	13.12	56.90	70.02	12.44	(54.63)	(42.19)

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 2024	30 June 2023
	Notes	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss	10	436,689	438,408

Current assets
Debtors	11	2,541	1,637
Investments in AAA-rated money market funds		15,627	14,129
Cash and short term deposits		293	294
		18,461	16,060

Current liabilities
Creditors: other amounts falling due within one year	12	(2,097)	(2,943)
Bank loan	12	(39,964)	(24,938)
		(42,061)	(27,881)
Net current liabilities		(23,600)	(11,821)
Total assets less current liabilities		413,089	426,587

Net assets		413,089	426,587

Capital and reserves
Called-up share capital	13	26,041	26,041
Share premium account		170,146	170,146
Capital reserve	14	203,375	217,927
Revenue reserve		13,527	12,473
Equity shareholders' funds		413,089	426,587

Net asset value per Ordinary share (pence)	15	556.19	482.95

The financial statements were approved by the Board of Directors on 4 September 2024 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 2024
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2023	26,041	170,146	217,927	12,473	426,587
Return after taxation	-	-	45,944	10,590	56,534
Buyback of Ordinary shares into Treasury (see note 13)	-	-	(60,496)	-	(60,496)
Dividends paid (see note 8)	-	-	-	(9,536)	(9,536)
Balance at 30 June 2024	26,041	170,146	203,375	13,527	413,089


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

The capital reserve at 30 June 2024 is split between realised of £110,364,000 and unrealised of £93,011,000 (30 June 2023 - realised £169,058,000 and unrealised £48,869,000).
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 £123,891,000 (30 June 2023 - £181,531,000).
The accompanying notes are an integral part of the financial statements.

Statement of Cash Flows

	Year ended	Year ended
	30 June 2024	30 June 2023
	£'000	£'000
Operating activities
Net return before taxation	56,534	(38,551)
Adjustment for:
(Gains)/losses on investments	(48,116)	46,435
(Increase)/decrease in accrued dividend income	(912)	772
Finance costs	2,090	1,260
(Increase)/decrease in other debtors	(2)	3
Decrease in other creditors	(1,063)	(304)
Net cash inflow from operating activities	8,531	9,615

Investing activities
Purchases of investments	(116,814)	(83,777)
Sales of investments	166,628	122,718
Purchases of AAA-rated money market funds	(120,148)	(91,974)
Sales of AAA-rated money market funds	118,650	92,259
Net cash inflow from investing activities	48,316	39,226

Financing activities
Bank and loan interest paid	(1,862)	(1,193)
Repurchase of Ordinary shares into Treasury	(60,450)	(25,230)
Repayment of loan	-	(15,000)
Drawdown of loan	15,000	-
Equity dividends paid	(9,536)	(7,706)
Net cash outflow from financing activities	(56,848)	(49,129)
Decrease in cash	(1)	(288)

Analysis of changes in cash during the year
Opening balance	294	582
Decrease in cash as above	(1)	(288)
Closing balance	293	294

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

Notes to the Financial Statements

For the year ended 30 June 2024

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 2024, the Company had fully drawn down from 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 on pages 14 to 16 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 2024 which shows net current liabilities of £23.6 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.
		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 under the effective interest method.

	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.
		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 under the effective interest 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 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
		2024	2023
		£'000	£'000
	Income from investments
	UK dividend income	10,363	10,706
	Property income distributions	274	431
	Overseas dividend income	888	1,043
	Special dividends	315	943
	Special dividends - capital	1,474	-
		13,314	13,123

	Other income
	Interest from AAA-rated money market funds	873	516
	Bank interest	14	10
	Total income	14,201	13,649

4.	Investment management fee
		2024			2023
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fee	704	2,113	2,817	848	2,542	3,390

	The balance due to abrdn Fund Managers Limited ("aFML") at the year end in respect of investment management fees was £715,000 (2023 - £1,667,000). For further details see the Directors' Report on page 49 and note 20 on page 95.

5.	Administrative expenses (inclusive of VAT)
		2024	2023
		£'000	£'000
	Secretarial fees^A	45	90
	Promotional activities^A	249	362
	Directors' fees	169	154
	Auditor's remuneration:
	- fees payable to the Company's Independent Auditor for the audit of the annual accounts (excluding VAT)	71	60
	- VAT on audit fees	12	12
	Registrar's fees	29	27
	Professional fees	48	89
	Custody fees	29	28
	Depositary fees	49	56
	Other expenses	175	237
		876	1,115
	^A During the year the Company had an agreement with aFML for the provision of secretarial services and promotional activities. It was agreed between the Company and the Manager that payments under this agreement in relation to secretarial fees would cease with effect from 1 January 2024. Secretarial fees payable during the year, inclusive of VAT, were £45,000 (2023 - £90,000) and the amount due to aFML at the year end was £nil (2023 - £90,000). Costs relating to promotional activities during the year, inclusive of VAT, were £249,000 (2023 - £362,000) and the amount due to aFML at the year end was £119,000 (2023 - £132,000).

6.	Finance costs
		2024			2023
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Bank loan interest	535	1,466	2,001	282	846	1,128
	Non-utilisation fees	15	47	62	25	76	101
	Amortisation of loan arrangement expenses	7	20	27	8	23	31
		557	1,533	2,090	315	945	1,260

7.	Taxation
	(a)	Analysis of charge for year
			2024			2023
			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 (2023 - same).

	(b)	Provision for deferred taxation. At 30 June 2024, the Company had unutilised management expenses and loan relationship losses of £84,965,000 (2023 - £80,344,000). 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 tax charge for the year is lower (2023 - higher) than the standard rate of UK corporation tax for the period of 25% (2023 - 20.5%). The differences are explained in the following table:
			2024			2023
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Net return before taxation	10,590	45,944	56,534	11,371	(49,922)	(38,551)

		Corporation tax at an effective rate of 25% (2023 - 20.5%)	2,648	11,486	14,134	2,331	(10,234)	(7,903)
		Effects of:
		Non-taxable UK dividend income	(2,806)	(368)	(3,174)	(2,388)	-	(2,388)
		Non-taxable overseas dividend income	(86)	-	(86)	(214)	-	(214)
		Management expenses and loan relationship losses not utilised	244	911	1,155	271	715	986
		Non-taxable (gains)/losses on investments	-	(12,029)	(12,029)	-	9,519	9,519
		Total tax charge	-	-	-	-	-	-

8.	Dividends
		2024	2023
		£'000	£'000
	Amounts recognised as distributions to equity holders in the period:
	2023 final dividend of 8.00p per share (2022 - 5.40p) paid on 30 November 2023	6,711	5,000
	2024 interim dividend of 3.70p per share (2023 - 3.00p) paid on 12 April 2024	2,825	2,706
		9,536	7,706

	The proposed 2024 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 £10,590,000 (2023 - £11,371,000).

		2024	2023
		£'000	£'000
	Interim dividend 2024 of 3.70p per share (2023 - 3.00p) paid on 12 April 2024	2,825	2,706
	Proposed final dividend 2024 of 8.30p per share (2023 - 8.00p) payable on 29 November 2024	6,119	6,907
		8,944	9,613

	The amount payable for the proposed final dividend is based on the Ordinary shares in issue as the date of approval of this Report, 4 September 2024, which satisfies the requirement of Section 1159 of the Corporation Tax Act 2010.

9.	Return per Ordinary share
		2024		2023
		p	£000	p	£000
	Basic
	Revenue return	13.12	10,590	12.44	11,371
	Capital return	56.90	45,944	(54.63)	(49,922)
	Total return	70.02	56,534	(42.19)	(38,551)

	Weighted average number of Ordinary shares in issue		80,738,502		91,387,673

10.	Investments held at fair value through profit or loss
		2024	2023
		£'000	£'000
	Opening book cost	389,539	429,395
	Opening investment holdings gains	48,869	94,742
	Opening fair value	438,408	524,137
	Additions at cost	116,783	83,423
	Disposals - proceeds	(166,618)	(122,717)
	Gains/(losses)	48,116	(46,435)
	Closing fair value	436,689	438,408

		2024	2023
		£'000	£'000
	Closing book cost	343,678	389,539
	Closing investment holding gains	93,011	48,869
	Closing fair value	436,689	438,408
	All investments are in equity shares listed on the London Stock Exchange.
	The Company received £168,618,000 (2023 - £122,717,000) from investments sold in the period. The book cost of these investments when they were purchased was £162,644,000 (2023 - £123,279,000 ). 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 net gains/(losses) on investments held at fair value in the Statement of Comprehensive Income. The total costs were as follows:

		2024	2023
		£'000	£'000
	Purchases	314	235
	Sales	44	94
		358	329

11.	Debtors
		2024	2023
		£'000	£'000
	Amounts due from brokers	-	10
	Dividends receivable	2,520	1,608
	Other debtors	21	19
		2,541	1,637

12.	Creditors: amounts falling due within one year
		2024	2023
		£'000	£'000
	Amounts payable to brokers	-	31
	Amounts payable in relation to share buybacks	583	537
	Interest payable	427	225
	Investment management fee payable	715	1,667
	Sundry creditors	372	483
		2,097	2,943

		2024	2023
	Bank loan	£'000	£'000
	Bank loan	40,000	25,000
	Unamortised loan arrangement expenses	(36)	(62)
		39,964	24,938

	On 2 November 2022, the Company entered into a three year revolving credit facility of £40 million (the "RCF") with The Royal Bank of Scotland International Limited, which will expire on 1 November 2025. The RCF has a further uncommitted accordion provision allowing the Company to request and increase, subject to lender's approval, of up to an additional £25 million. At 30 June 2024, £40 million was drawn down under the RCF at an interest rate of 6.50%.
	The RCF is shown in the Statement of Financial Position net of unamortised expenses of £36,000 (30 June 2023 - Term Loan - £62,000).
	The terms of the RCF 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
		2024				2023
		Number		£'000		Number		£'000
	Authorised	150,000,000		37,500		150,000,000		37,500

	Issued and fully paid:
	Ordinary shares of 25p each	74,270,535		18,568		88,329,911		22,082
	Held in treasury:	29,893,887		7,473		15,834,511		3,959
		104,164,422		26,041		104,164,422		26,041

			Ordinary shares		Treasury shares		Total
			Number		Number		Number
	Opening balance		88,329,911		15,834,511		104,164,422
	Share buybacks		(14,059,376)		14,059,376		-
	Closing balance		74,270,535		29,893,887		104,164,422

	During the year the Company repurchased 14,059,376 (2023 - 5,682,136) Ordinary shares to treasury at a cost of £60,496,000 (2023 - £25,767,000).

14.	Capital reserve
		2024	2023
		£'000	£'000
	Opening balance	217,927	293,616
	Unrealised gains/(losses) on investment holdings	44,142	(45,873)
	Gains/(loss) on realisation of investments at fair value	3,974	(562)
	UK dividend income - capital	1,474	-
	Management fee charged to capital	(2,113)	(2,542)
	Finance costs charged to capital	(1,533)	(945)
	Buyback of Ordinary shares into treasury	(60,496)	(25,767)
	Closing balance	203,375	217,927

	The capital reserve includes investment holding gains amounting to £93,011,000 (2023 - gains of £48,869,000) as disclosed in note 10 on page 86.

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.

		2024	2023
	Net assets attributable (£'000)	413,089	426,587
	Number of Ordinary shares in issue at year end^A	74,270,535	88,329,911
	Net asset value per share	556.19p	482.95p
	^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 2024, the Company had drawn down £40 million (2023 - £25 million) from the £40 million revolving credit facility with The Royal Bank of Scotland International Limited.
		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 2024	Years		%	£'000		£'000
		Assets
		Investments in AAA-rated money market funds	-		5.33	-		15,627
		Cash deposits	-		3.70	-		293
		Total assets	-		-	-		15,920

		Liabilities
		Bank loan	0.09		6.49	40,000		-
		Total liabilities	-		-	40,000		-
			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	-

		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 2024 and net assets would increase/decrease by £159,000 (2023 - increase/decrease by £144,000). 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, as detailed on pages 32 to 34, 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 2024 would have increased/decreased by £43,669,000 (2023 - increase/decrease of £43,841,000). 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 2024	£'000		£'000		£'000		£'000
	Bank loan	40,235		40,235		-		-


						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	25,124		25,124		-		-

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:

			2024				2023
			Statement of		Maximum		Statement of		Maximum
			Financial Position		exposure		Financial Position		exposure
	Current assets		£'000		£'000		£'000		£'000
	Debtors		-		-		10		10
	Investments in AAA-rated money markets funds		15,627		15,627		14,129		14,129
	Cash and short term deposits		293		293		294		294
			15,920		15,920		14,433		14,433
	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 2023	Cash flows	movements	30 June 2024
		£'000	£'000	£'000	£'000
	Cash and cash equivalents	294	(1)	-	293
	Investments in AAA-rated money market funds	14,129	1,498	-	15,627
	Debt due in less than one year	(24,938)	(15,000)	(26)	(39,964)
		(10,515)	(13,503)	(26)	(24,044)


		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)
	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:

		2024	2023
		£'000	£'000
	Equity
	Equity share capital	26,041	26,041
	Reserves	387,048	400,546
	Liabilities
	Bank loan	39,964	24,938
		453,053	451,525

	The Company's net gearing comprises the following:

		2024	2023
		£'000	£'000
	Bank loans	(39,964)	(24,938)
	Cash and investments in AAA-rated money market funds	15,920	14,423
	Amounts due from brokers	-	10
	Amounts payable to brokers	-	(31)
	Net gearing (borrowings less cash and money market fund investments)	(24,044)	(10,536)
	Net assets	413,089	426,587
	Net gearing (%)	5.8	2.5

	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 (2023 - 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 (2024 - £436,689,000; 2023 - £438,408,000) have therefore been deemed as Level 1.
	The investment in AAA rated money market funds of £15,627,000 (2023 - £14,129,000 ) 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 £40 million revolving credit facility loan as at the 30 June 2024 is £40,000,000, due to it being short-term in nature, with a par value per Statement of Financial Position of £39,964,000. 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 0.75% 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.
	The Company also has an agreement with aFML for the provision of secretarial services and promotional activities. It was agreed between the Company and the Manager that payments under this agreement for secretarial services would cease with effect from 1 January 2024.

21.	Related party transactions
	The Directors of the Company received fees for their services. Further details are provided in the Directors' Remuneration Report on page 61. The Directors' shareholdings are detailed on page 62.

22.	Subsequent events
	Subsequent to the year end, a further 543,624 Ordinary shares were repurchased to treasury at a cost of £2,783,000.

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 2024	30 June 2023
Share price	486.50p	414.00p
Net Asset Value per share	556.19p	482.95p
Discount	12.5%	14.3%

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 2024	30 June 2023
	£'000	£'000
Total borrowings ^A	(39,964)	(24,938)
Cash and short term deposits	293	294
Investments in AAA-rated money market funds	15,627	14,129
Amounts due from brokers	-	10
Amounts payable to brokers	-	(31)
Total cash and money market fund investments^B	15,920	14,402
Net gearing (borrowings less cash and money market fund investments)^C=A+B	(24,044)	(10,536)
Shareholders' funds^D	413,089	426,587
Net gearing^C/D	5.8%	2.5%

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 2024	30 June 2023
	£'000	£'000
Investment management fee^A	2,817	3,390
Administrative expenses^B	876	1,115
Less: non-recurring charges^C	(5)	(40)
Ongoing charges	3,688	4,465
Average daily net assets	402,438	471,984
Ongoing charges ratio (excluding look-through costs)	0.92%	0.95%
Look-through costs^D	-	-
Ongoing charges ratio (including look-through costs)	0.92%	0.95%
^A See note 4 on page 82.
^B See note 5 on page 83.
^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 2024	2024	2023
Opening NAV	482.95p	530.37p
Closing NAV	556.19p	482.95p
Increase/(decrease) in NAV	73.24p	-47.42p
% Increase/(decrease) in NAV	15.2%	-8.9%
Uplift from reinvestment of dividends^A	2.9%	1.5%
NAV total return increase/(decrease)	18.1%	-7.4%
^A The uplift from reinvestment of dividends assumes that the dividends of 8.0p in November 2023 and 3.7p in April 2024 (5.4p and 3.0p in 2022/23) 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 2024	2024	2023
Opening share price	414.00p	453.00p
Closing share price	486.50p	414.00p
Increase/decrease in share price	72.50p	-39.00p
% Increase/(decrease) in share price	17.5%	-8.6%
Uplift from reinvestment of dividends^A	3.5%	1.8%
Share price total return increase/(decrease)	21.0%	-6.8%
^A The uplift from reinvestment of dividends assumes that the dividends of 8.0p in November 2023 and 3.7p in April 2024 (5.4p and 3.0p in 2022/23) 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 12 noon on Thursday 21 November 2024 at 1 George Street, Edinburgh EH2 2LL.

If approved at the Annual General Meeting, the final dividend of 8.3p per share will be paid on 29 November 2024 to holders of Ordinary shares on the register at the close of business on 1 November 2024. The relevant ex-dividend date is 31 October 2024.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 30 June 2024 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 2023 and 2024 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 2023 is derived from the statutory accounts for 2023 which have been delivered to the Registrar of Companies. The 2024 accounts will be filed with the Registrar of Companies in due course.

The Annual Report and Accounts will be posted to shareholders in September 2024. 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
4 September 2024

* 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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