ASCI.L Regulatory News (ASCI)

ABERDEEN SMALLER COMPANIES INCOME TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020

STRATEGIC REPORT

1. FINANCIAL HIGHLIGHTS

2. CHAIRMAN'S STATEMENT

Performance

In what has been an extremely challenging year, your Company has delivered solid performance against its benchmark, the Numis Smaller Companies ex Investment Trusts index, with the Company's NAV returning -4.1% versus a benchmark return of -4.3%. Share price performance was slightly behind the benchmark with a return of -5.1% over the year.

The Company's 3 and 5 year NAV performance against the benchmark remains strong, returning +10.1% and +58.3% respectively, versus composite benchmark returns of -2.9% and +26.3%.

This is the first full year in which the Company's performance has been measured against its new benchmark, which came into effect on 1 January 2020, changing from the FTSE Small Cap (excl. investment trusts) index to the Numis Smaller Companies (excl investment trusts) index. Performance over 3 and 5 year periods is measured against a composite of both indices.

Dividend

The Company's revenue return over the period has decreased for the year ending 31 December 2020 to 5.60p (2019: 9.98p). This reflects the impact of widespread dividend cuts and cancellations seen across the equity market: more details on this can be found in the Manager's report.

However, as the Board considers the generation of income for our Shareholders to be a key purpose of the Company, and with the use of its revenue reserves, which have been built up in recent years, the Company has kept the dividend at similar levels to 2019 with the total dividend for the year being 8.24p (2019: 8.25p). With the year-end share price at 313p, this gives a dividend yield of 2.6%. Over 3 and 5 years, the dividend has increased by 16.9% and 23.9% respectively compared to rises in CPI of 4.6% and 9.8%.

The revenue reserve account, which will represent 11.2p per share following payment of the fourth interim dividend, continues to provide the Company with some flexibility in future years, should we encounter further challenges to income.

Ongoing Charges

The Company's ongoing charges continue to be an area of focus for the Board. The Company's ongoing charges figure was 1.35% to the end of December 2020, compared to 1.40% to the end of December 2019.

Discount

The Company's discount before the start of the pandemic had narrowed quite significantly, and we did see the Company's share price move to a small premium momentarily. Market volatility, however, increased substantially during the course of March 2020 which saw a widening of the discount to 28%. The discount has made a considerable recovery, in what has been a very unsettled year, and finished the year at 10.3% (2019: 8.3%).

Investee Company Stewardship

The Manager has continued to engage with the Company's investee companies on a virtual basis during the year, and the Board is pleased to report that the Manager has seen enhanced levels of engagement despite this new way of working. The Manager's report below provides some examples and further details.

Gearing/Debt

The Company continues to utilise part of its £10 million credit facility, £5 million of which is fixed rate and £5 million is floating rate. At the year end £7 million of the facility was being utilised. The facility has staggered maturity terms for its fixed and floating rate elements, with the floating rate facility being drawn to 2021 and the fixed rate facility to 2023.

As the Company's floating rate facility expires in April this year, the Company will be seeking terms for its renewal during the course of the first quarter of 2021.

The Company's net gearing position as at 31 December 2020 was 7.0%, compared to 7.5% at the end of 2019.

Board Composition

The Board continually reviews its composition and considers its succession and refreshment policies. The succession plan has taken longer than anticipated due to the restrictions put in place as a result of the Covid-19 pandemic. The Board is currently undergoing a search for two new Board appointments during the course of 2021 in anticipation of the retirement of Barry Rose later in 2021 and myself at the AGM in 2022. Barry Rose has kindly agreed to remain on the Board until the recruitment process is complete.

Environmental, Social and Corporate Governance ("ESG")

The Board monitors the Manager's activities to ensure that appropriate and robust ESG principles are being followed. As part of its investment management process, the Manager embeds ESG considerations into its research and analysis of investee companies. Further details of the Manager's ESG engagement can be found on pages 17 to 19 of the published 2020 Annual Report.

ESG continues to be an important area of focus and we were pleased to see a dedicated ESG analyst join ASI's Smaller Companies Team last year.

Manager

In November 2020, the Board announced that Amanda Yeaman would be joining Abby Glennie as co-Manager of the Company's portfolio. Amanda has been supporting Abby in the management of the Company for some time and we were delighted to welcome her as co-Manager more formally. Together, they continue to manage the portfolio in alignment with their Quality Growth Momentum process with an income bias. Amanda's biography can be found on page 85 of the of the published 2020 Annual Report.

Annual General Meeting

The Company's Annual General Meeting has been scheduled for Wednesday 28 April at 9.00 am to be held at the offices of Aberdeen Standard Investments, 1 Bread Street, London. As you will be aware, attendance at last year's AGM was restricted to the minimum requirements in order to adhere to Government guidelines in place at that time.

As at the date of this report, restrictions on gatherings and social distancing measures are in place and, given the ongoing uncertainty and visibility on the level of Government guidelines at the end of April, the Board has reluctantly decided to proceed with this year's AGM by limiting attendance again to the minimum quorum requirements. In the unlikely event of the situation changing, the Company will update shareholders through an announcement to the London Stock Exchange and on the Company's website and we therefore encourage shareholders to check for such updates.

The Board strongly advises that no shareholders should attend the AGM in person and instead exercise their votes in respect of the meeting in advance, by completing and returning their proxy forms. This will ensure that their votes are registered. Shareholders are also invited to address any questions to the company secretary via email to aberdeen.smaller@aberdeenstandard.com.

The Board is aware that many shareholders welcome the views of the Manager and perhaps particularly this year, given the uncertainties that lie ahead for the UK economy and markets. Accordingly a presentation from the Manager, which would have normally have been delivered at the AGM, will be made available for shareholders on the Company's website.

Amendment to the Articles of Association

Shareholders will note that one of the resolutions being proposed at this AGM is an amendment to the Company's Articles of Association to allow for virtual/hybrid meetings to be held and conducted in a manner that allows those not present to attend, speak and vote at meetings by electronic methods.

While the Board does not intend to hold meetings in this way going forward, it will allow the Company to utilise this option, where a physical meeting would not be in the best interests of shareholder safety. It is important to note that this new provision does not prevent the Company from holding physical meetings, which is its preferred option.

Outlook

Markets continue to be uncertain. Your Manager has steered the Company through these turbulent times well and will continue to follow its investment process, which has proved resilient through various economic cycles. Despite political and economic uncertainty, the investment process and focus on stock selection continues to guide the Manager towards a portfolio of quality growth businesses, which can prove resilient in a variety of environments.

Robert Lister,

Chairman

10 March 2021

3. OVERVIEW OF STRATEGY

Business Model

The business of the Company is that of an investment company which conducts its affairs in order to qualify as an investment trust for UK capital gains tax purposes.

The Company aims to attract long term private and institutional investors looking to benefit from the income and capital growth prospects of UK smaller companies. The Directors do not envisage any change in this activity in the foreseeable future.

Investment Objective and Purpose

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

Investment Policy

The Company invests in equities, corporate bonds and preference shares. The primary aim of the Company is to invest in the equity shares of smaller companies listed on a regulated UK stock market in order to gain growth in dividends and capital. The Company employs gearing with the primary intention of enhancing income and to a lesser extent, long-term total returns. The majority of the additional funds raised by gearing is invested in investment grade corporate bonds and preference shares.

Gearing

The level of gearing varies with opportunities in the market and the Board adopts a prudent approach to the use of gearing. The total level of gearing will not exceed 25% of the Company's net assets, at the time it is instigated, and within that gearing limit, the equity portfolio gearing will not exceed 10%, at the time it is instigated.

Risk diversification

The investment risk within the portfolio is managed through a diversified portfolio of equities, corporate bonds and preference shares. The Company does not invest in securities that are unquoted at the time of investment. A maximum of 5% of the Company's total assets can be invested in the securities of one company at the time of purchase. Although the Company is not permitted to invest more than 15% of its total assets in other listed investment companies (including investment trusts), the Board currently does not intend to invest in other listed investment companies.

Benchmark index

Numis Smaller Companies excluding Investment Trusts (total return) -effective from 1 January 2020; FTSE Small Cap Index (excluding Investment Trusts) (total return) - up to 31 December 2019.

Management

The Board has appointed Aberdeen Standard Fund Managers Limited ("ASFML" or "the Manager") to act as the alternative investment fund manager ("AIFM"). The Company's portfolio is managed on a day-to-day basis by Aberdeen Asset Managers Limited ("AAML" or "the Investment Manager") by way of a delegation agreement in place between ASFML and AAML. AAML and ASFML are both wholly owned subsidiaries of Standard Life Aberdeen plc.

Delivering the Investment Policy

Equity Investment Process

The equity investment process is active and bottom-up, based on a disciplined evaluation of companies through company meetings with the Investment Manager. Stock selection is the major source of added value, concentrating on quality, growth and momentum characteristics.

Great emphasis is placed on understanding a company's business and understanding how it should be valued. New investments are not made without the Investment Manager having first met management of the investee company and undertaken further analysis to outline the underlying investment merits. Top-down investment factors are secondary in the equity portfolio construction, with diversification and formal controls guiding stock and sector weights.

Fixed Income Investment Process

The fixed income investment process is an active investment style which identifies value between individual securities. This is achieved by combining bottom-up security selection with a top-down investment approach. Investments in corporate bonds and preference shares are also managed by investment guidelines drawn up by the Board in conjunction with the Investment Manager which include:

- No holding in a single fixed interest security to exceed 5% of the total bond issue of the investee company; and

- Maximum acquisition cost of an investment grade bond is £1 million and of a non-investment grade bond is £500,000.

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determining the progress of the Company in pursuing its investment policy. The main KPIs identified by the Board in relation to the Company which are considered at each Board meeting are as follows:

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its business model, financial position, future performance, solvency or liquidity and prospects. The Board has in place a robust process to identify, assess and monitor the principal risks and uncertainties facing the Company and to identify and evaluate newly emerging risks. A summary of the principal risks together with their mitigating action is set out below.

The Board has adopted a risk matrix which identifies the key risks for the Company and covers strategy, investment management, operations, shareholders, regulatory and financial obligations and third party service providers. This risk matrix is reviewed formally every six months but risks, including emerging risks, are, if appropriate, discussed by the Board at, or between, formal Board quarterly meetings.

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

Promoting the Success of the Company

The Board is required to report on how it has discharged its duties and responsibilities under section 172 of the Companies Act 2006 (the "s172 Statement"). Under section 172, the Directors have a duty to promote the success of the Company for the benefit of its members as a whole, taking into account the likely long term consequences of decisions, the need to foster relationships with the Company's stakeholders and the impact of the Company's operations on the environment.

The Company consists of four Directors and has no employees or customers in the traditional sense. Without a variety of external stakeholders, the Company can neither exist nor flourish. Our shareholders own us and the Company's Manager, ASFML, provides investment management services. A number of other stakeholders support us by providing regulatory and other services, including secretarial, administration, depositary, custodial, banking and audit services. For example, BNP Paribas is our Depository and EY is our auditor.

Our relationship with each is different. We meet the Manager on a quarterly basis but might meet our investors, both institutional and retail, only once a year. We often need to balance the interests of different stakeholders, for example, in agreeing their fees.

The Board's principal concern has been, and continues to be, the interests of the Company's shareholders and potential investors. The Manager undertakes an annual programme of meetings with the largest shareholders and reports back to the Board on issues raised at these meetings. In normal circumstances, the Board encourage all shareholders to attend and participate in the Company's AGM and can contact the Directors via the Company Secretary. Shareholders and investors can obtain up-to-date information on the Company through its website and the Manager's information services and have direct access to the Company through the Manager's customer services team or the Company Secretary. As the normal format of the 2020 AGM was not able to take place due to the Covid-19 restrictions in place, a number of presentations and podcasts by the Manager were made available on the Company's website for shareholders to access.

The Board believes that one of the key strategies of the Company, for its long-term stability and sustainability, is to develop share ownership among the growing retail and self-directed investors. Approximately 49% of the shares are currently held by such investors. In order to raise and maintain awareness of the Company, the Board participates in the promotional programme run by the Manager on behalf of a number of investment trusts under its management. The purpose of the programme is both to communicate effectively with existing shareholders and to reach more new shareholders, thus improving liquidity and enhancing the value and rating of the Company's shares. Regular reports are provided to the Board on promotional activities as well as analysis of the shareholder register.

As the Company has no employees, the culture of the Company is embodied in the Board of Directors. In seeking to deliver the Company's investment objective for shareholders, our values are trust and fairness while challenging constructively, and in a respectful way, our advisers and other stakeholders.

The Board undertakes a robust evaluation of the Manager, including investment performance and responsible ownership, to ensure that the Company's objective of providing sustainable income and capital growth for its investors is met. The portfolio activities undertaken by the Manager on behalf of the Company can be found in the Manager's Review and details of the Board's relationship with the Manager and other third party providers, including oversight, is provided in the Statement of Corporate Governance.

Key decisions and actions during the year to 31 December 2020, which required the Directors to have greater focus on stakeholders included:

Success of the Continuation Vote

The Board, Manager and broker engaged with the key shareholders on the continuation vote which was successfully passed at the AGM in June 2020, with 99.7% of votes in favour.

Dividends paid to shareholders

2020 was a period of great uncertainty, when many quoted companies either cut or cancelled their dividends which impacted the level of the Company's income and the net revenue available for distribution as dividends. The Board recognises the importance of dividends to shareholders. Over recent years, the Company had built up a significant level of revenue reserves and the Board agreed it would be more valuable for shareholders to utilise these reserves to support the Company's dividend policy this year and to alleviate the decline of dividend income elsewhere. Accordingly, after reviewing the Company's revenue forecasts and the general investment outlook with the Manager, the Board declared four quarterly dividends totally 8.24p, which was largely in line with the 2019 dividend level of 8.25p.

Management of the portfolio

As in previous years, the Board focused on the performance of the Manager in achieving the Company's investment objective within an appropriate risk framework. Following the emergence of the Covid-19 crisis in early 2020, there was increased interaction between the Board and the Manager to consider the impact on the Company (including portfolio activity, risks and opportunities, gearing and revenue forecasts) to ensure that the Company had sufficient resilience in its portfolio and operational structure to meet the challenged circumstances, which has proved to be the case.

Directorate

The Board's succession plan to recruit a new Director in 2020 was delayed, due to the logistical difficulty of meeting candidates in person and also the importance of maintaining Board stability during a most challenging period. Accordingly, and subject to shareholder support, the Board intends to continue with its succession plan and appoint two new Directors before the end of the 2021 financial year.

Third party service providers

Following a review by the Management Engagement committee, the Board was satisfied with the performance of the Manager and its key service providers. Despite the many challenges arising from the Covid-19 pandemic, the Company continued to receive 'BAU' service with minimal disruption.

The Board is supportive of the Manager's philosophy that Environmental, Social and Governance (ESG) factors are fundamental components for responsible investing. ESG considerations are embedded in the investment process undertaken by the Manager and the Manager dedicates a significant amount of time and resource on focusing on the ESG characteristics of the companies in which they invest. Further details of how the Manager have sought to address ESG matters across the portfolio are disclosed in the Statement of Corporate Governance.

The Manager is also 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.

The Company is a long term investor and the Board has in place the necessary procedures and processes to continue to deliver the Company's investment proposition and to promote the long term success of the Company for the benefit of its shareholders and stakeholders.

Duration

The Company does not have a fixed life. However, the Company's articles of association require that an ordinary resolution is proposed at every fifth Annual General Meeting to allow the Company to continue as an investment trust for a further five year period. The Company's continuation vote held in 2020 was supported by shareholders and the next continuation vote is scheduled for 2025.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the appropriate knowledge represented on the Board in order to allow the Board to fulfil its obligations. Each Director brings different skills and experience to the Board. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Board members. At 31 December 2020, the Board consisted of three males and one female.

Employee, Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated the day-to-day management and administrative functions to Aberdeen Standard Fund Managers Limited. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined in the Statement of Corporate Governance.

Modern Slavery Act

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

The Company qualifies as a "low energy user" under the Streamlined Energy and Carbon Reporting Requirements (SECR), and that its energy and carbon information is not disclosed for that reason.

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board formally considers risks and strategy at least annually. The Board considers the Company, with no fixed life, to be a long term investment vehicle, but for the purposes of this viability statement has decided that a period of three years is an appropriate period over which to report. 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 three years.

In assessing the viability of the Company over the review period the Directors have focused upon the following factors:

- The principal risks detailed in the Strategic Report above and the steps taken to mitigate these risks. In particular, the Board has considered the operational ability of the Company to continue in the current environment, which has been impacted by the global Covid-19 pandemic, and the ability of the key third-party suppliers to continue to provide essential services to the Company. Third party services have continued to be provided effectively;

- The investment objective in the current environment remains attractive. A resolution for the continuation of the Company was passed at the AGM in June 2020 showing ongoing support for the Company's mandate. The Company has continued to deliver sustained dividend growth as well as good capital growth over the longer term;

- The outlook for the Company and its portfolio detailed in the Chairman's Statement and the Investment Manager's Review;

- The Company is invested in readily realisable listed securities;

- The level of revenue surplus generated by the Company over a number of years and its ability to achieve its dividend objective;

- The level of gearing is closely monitored. Covenants are actively monitored and there is adequate headroom in place. The Company has the ability to renew its gearing or repay its borrowings through proceeds from sales of investments. Initial discussions with banks have commenced with a view to renewing the facility;

- The impact of stress testing on the portfolio, including the effects of any substantial future falls in investment values.

When considering the risk of under-performance, the Board reviewed the impact of stress testing on the portfolio, including the effects of any substantial future falls in investment values. The Board also considered that matters such as significant economic or stock market volatility, a substantial reduction in the liquidity of the portfolio, or changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future and the period over which the performance of the Trust is monitored. The results of the stress tests have given the Board comfort over the viability of the Company.

Accordingly, taking into account all of these factors, the Company's current position and the potential impact of its principal risks and uncertainties, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report.

Robert Lister,

Chairman

10 March 2021

4. INVESTMENT MANAGER'S REVIEW

Overview

2020 saw a resilient period of performance from the Trust in this highly unusual year. We continued to use the Matrix, our in-house stock screening tool, as a core part of our investment process. The longer term factors in the Matrix, as well as the quality aspects, enhanced our ability to identify growth businesses which with their many levers for growth, strong product and service propositions, international angles and barriers to entry, exhibited the ability to grow even in tough market environments. In many cases the strong got stronger and gained market share. We did not panic out of names, or aggressively turnover the portfolio, but remained committed to our long term focus on quality growth businesses, confident that companies with strong balance sheets and management teams would ride out the uncertain periods.

This investment process of Quality Growth Momentum with an income support performed well over a volatile 2020, outperforming our benchmark.

Dividends have been the collateral damage in this crisis. Dividends from UK plcs fell by 44% to £61.9bn for 2020, the lowest annual total since 2011, and the first time since 2015 that distributions have not grown year-on-year according to Link Group dividend monitor. Dividends in our benchmark, the Numis Smaller Companies Index ex investment trusts, fell by 52%. Given this backdrop, we were particularly pleased to see the strength of dividend income across the portfolio that we did throughout the year.

Driven by Covid-19 and lockdowns, many companies withdrew guidance and most UK companies in all sectors regardless of current trading who normally paid dividends looked to conserve cash by cancelling or delaying pay outs. Dividend cuts were also frequently a prelude to issuing additional equity as part of a bigger refinancing exercise. In the aftermath of the financial crisis, just two fifths of companies cut or cancelled pay outs. This time the majority cancelled immediately and a smaller proportion reduced the pay-out. Not surprisingly discretionary special dividends had disappeared. This is obviously an issue for any income focused portfolio.

As we got more visibility towards the end of Q2, when companies began to re-instate guidance, it became clearer which companies were more resilient. We were fortunate that the quality dynamic of our investment process meant that we have exposure to a strong contingent of companies who continued to pay dividends throughout the pandemic or reinstate them upon board approval. Some names in the portfolio increased the dividend.

Link Group dividend monitor further cautions that it could take until 2026 for UK dividends to return to their 2019 level. We expect the Company to do better than this with a faster recovery to the previous year's income levels. In addition, given the strong revenue reserves of the Company, we are therefore pleased that in a tough environment for income, we have been able to pay a dividend to shareholders at broadly the same level as the previous year and feel well positioned to provide a supportive income stream for our shareholders.

2020 has been the catalyst for ESG trends to gain critical mass. ESG is embedded in our process, through our fundamental ESG research, our engagement with management teams, and our use of external ESG data. Strong ESG credentials are a core part of our Quality analysis, and our lower risk approach to investing in smaller companies. When making ESG considerations we are looking at both the risks and the opportunities those factors provide. We've been pleased with how our investee companies have striven to protect the morale and mental health of their workforce, with online support to keep people engaged, training and development resources, and helping their colleagues be ready and able to return to work. The sense of employee loyalty generated has been impressive, which bodes well for cultural strength and staff longevity. This is the behaviour of management teams incentivised for the long term.

Performance

In the half year to the end of June 2020 the Company's portfolio returned -15.1% versus the benchmark return of -25.0% which was a pleasing performance across two very different quarters. Through the period, and particularly in March where the harshest market impacts were felt, the Company held up very well on a relative basis. For the second half of the year we gave up some of the performance gained in the earlier period, as our style was out of favour given the value rally late in the year. The portfolio's return for the year was -2.4% compared to a benchmark return of -4.3%, an outperformance of +1.9%.

The Company's Net Asset Value (NAV) total return for the financial year was -4.1%. Long term performance also remains very favourable over 3 and 5 year time periods, with 3 year NAV growth of +10.1% versus the benchmark of -2.9%, and 5 year NAV growth of 58.3% versus the benchmark of +26.3%.

Having paid a broadly flat dividend for the year, we are pleased to report a dividend yield of 2.63%; higher than our benchmark which yielded 1.58%.

The UK market, and even more so at the small end, contains a wide and diverse range of companies. Through our bottom up stock selection focus we identify businesses which have Quality, Growth and Momentum characteristics, with an income balance. We do not look to take macroeconomic calls or time the cycle, but focus on identifying businesses which we believe have the levers and ability to grow in a sustainable manner, despite external distractions the economy might experience. In difficult market environments and times when economic growth slows, quality is a characteristic we believe comes into even more focus. Quality businesses, with healthy balance sheets, management teams with a strong pedigree, good corporate governance and strong competitive positions, have the ability to be resilient through more difficult periods, and even improve their positioning when peers may be struggling. We look to identify businesses which have many angles to their growth opportunities, giving them a greater ability to continue growth, whether it be through areas like complementary products and services, new geographies, or investment funded by the strength of their quality balance sheets.

Equity Portfolio

Stock selection was a significant contributor to the outperformance of the Trust over 2020. We made no significant style changes throughout the pandemic, nor did we turnover the portfolio. We continued to follow our process. It was pleasing to see that the contributors in Q1 remained so for the financial year reflecting our process to select quality names that can grow in all environments. We did not gain outperformance by owning names that were deemed simply to be lockdown winners, rather because we have exposure to high quality names in all sectors who could prove resilience and growth, and who we had held prior to Covid-19 for their fundamental attractions to our investment process. Many companies across the portfolio generated earnings for the year higher than initially expected by the market. These earnings upgrades were well rewarded with share price performance.

Games Workshop has been a consistent positive contributor to performance throughout the year, trading well despite Covid-19 disruption. The business has shown strong growth in recent years as the adoption of its table top gaming hobby has been enhanced through innovation and development, whilst social media has improved customer recruitment. The hobby is now fairly mature in the UK, but is in development stage in many other parts of the world where Games Workshop are experiencing strong growth.

The vertically integrated business is rich with IP and exclusive product. Management have made many operational improvements in recent years, sharpening price points and innovating with new high quality products. An increased marketing drive, together with better customer interactions through social media, has resonated with existing customers, attracted new ones and reactivated lapsed ones.

Following the government announcement of full lockdown restrictions, all stores, factories and workshops were closed. Trading short term was impacted, but management made the necessary changes in their warehouses to meet social distancing requirements and began to make trades sales across Europe and America. Online orders restarted in May, with stores following depending on local government guidelines. Although the business effectively stopped trading for a period the appetite for at home entertainment accelerated in lockdown and management were successful in driving their online presence and hobby engagement to drive the number of active users. Product marketing has become far slicker and more compulsive, both in terms of the product itself and the marketing. Management innovated with virtual vouchers to offer attractive discounts and to explore new areas of the product range, and flexed delivery options. Games Workshop issued a number of stronger than expected updates during the year, partly reflecting pent up demand but also from the strong product line up in the period and a greater proportion of sales through trade and online. Upon reopening operations around May, the business momentum returned to the strong pathway seen pre-Covid, and even strengthened. There was also news of a further licencing agreement, with Frontier Developments for a real time strategy game based on Warhammer Age of Sigmar. The shares again reacted well, as this further demonstrated the broadening of IP monetisation, with license revenue streams being very high margin. Supported by the strong trading performance, the Board has declared dividends similar in quantum from prior years, but the timing of payments was slightly different.

We are confident that the quality of the business and the top line growth opportunity will continue to support upgrades, with product innovation, international growth and license deals all improving. We expect the business to continue to deliver robust earnings growth in coming years which in turn will drive dividend growth.

XP Power (XPP) is a manufacturer and supplier of power converters to the Industrial, Semiconductor, Technology and Healthcare markets. Their core AC-DC product converts alternating current from the mains to direct current, this is required for virtually all electrical equipment. The market had worried XPP would see a sharp fall in revenue and profits given the supply chain disruptions and potential facility closures. There was some conciliation in April when XPP released a strong trading update demonstrating they were more resilient than the market feared, as demand for their products remained robust. Given the critical nature of some of their customer's products, they were able to continue to manufacture throughout the crisis, and did so operationally well despite some supply chain uncertainties. The healthcare division saw unprecedented demand and the recovery in semiconductor continued. Following others in the sector, XP cautioned on the outlook at this stage and withdrew the final dividend. We had more good news at the interims in August showing sales growth was sustained and order momentum strong, allowing them to end the period with a record order book. The dividend was reinstated at this stage reflecting management confidence. We saw another upgrade in October confirming that they were capitalising on a much larger opportunity as the strength of order wins continued. The cash performance continued to impress with net debt reducing. This balance sheet strength, along with the availability of liquidity, underpinned the proposed Q3 dividend. The strong trading performance illustrates the benefit of diversity of end markets and the mitigation of the cyclicality of individual end markets. It was also announced that long-standing CEO Duncan Penny will retire and will be succeeded by current CFO Gavin Griggs. We see the change as evolutionary, and do not foresee any major change to the strategy, which is serving the group well.

We saw a strong contribution from Liontrust Asset Management. This year they have delivered extremely strong flows, supported by fund performance over the long term. Liontrust is demonstrating that they are taking share from peers that lack the focus, brand, and investment performance they demonstrate. Fund investors do want active management and are willing to pay for it where they believe value is being added. Liontrust has an expanded range of funds which appeal to investors and is delivering the benefits of consistently applied investment processes with strong monthly flows. During the second half of the year we had an update from the company showing extremely resilient inflows despite the expected Covid-19 AUM hit from markets. The net inflows achieved in an extremely difficult quarter show the resilience of the business and the quality of the product offering, brand and distribution. The Sustainable Investments and Economic Advantage teams saw high levels of net inflows and investment performance remains top quartile for a majority of their funds over 1, 3 and 5 years. The shares reacted positively to the continued momentum in flows and the payment of the dividend, as well as the acquisition of Architas, a multi manager business which further diversifies Liontrust and expands their addressable market.

Hollywood Bowl detracted from performance in the period. This business had traded consistently well before the pandemic thanks to their strategy of constantly investing in the customer proposition. However, bowling was included in the category of 'close proximity' venues which lead to protracted periods of closure. The business remained profitable in FY20, managing costs down, preserving cash and bolstering its balance sheet with a capital raise, which we supported. Demand has proved resilient in the short periods in which they were allowed to open and the business adaptable, remaining profitable even under restrictive trading conditions. Importantly, its strategy remains intact with innovation, refurbishment and expansion expected to drive top line and margin growth. Through investment in PuttStars, a mini golf experience, they have also broadened their addressable market, and given the confidence gained during the short trading periods this year they are rolling out more sites. While the shares rallied towards the end of the year upon news of the vaccine, sentiment worsened upon the news of lockdown 2, in early November.

Cineworld was a detractor from performance given the weak news flow around cinema attendance numbers particularly in the US early in 2020. We'd already been reducing this position in 2019, and were concerned that lower revenue growth would slow the de-levering of the balance sheet and therefore exited the holding early in 2020 on quality and growth concerns.

James Fisher is a leading provider of specialised services to the marine, renewable energy, oil and gas and other high assurance industries. The group has compounded high levels of growth over long periods of time, but over their FY19 the business was impacted by some challenges in its largest division, Marine Support, and by Covid-19. Initially the market believed the business to be later cycle so less correlated with the oil price and so more resilient and early in the year management felt confident to pay a dividend. Then upon re-instating guidance the full impact of Covid-19 and the related fall in oil prices and oil industry profitability impacted both the non-carbon and carbon fuel parts of the business. Subsequently, because of concerns that the balance sheet might be stretched, the shares didn't recover with the oil price. The business is broad and rarely do all cylinders fire simultaneously, but its industry leading position in a number of structural growth markets is likely to keep the growth engine running for many years. We see upside potential to forecasts from a steeper recovery in the oil price and oil industry profitability than assumed, causing demand to normalise in the Marine Support division and continue its improvement in the Offshore Oil division. We also believe the new CEO will reinvigorate the business, both through the focus on top line growth as well as ensuring the cost base is efficient.

Portfolio activity

We added new holdings in Target Healthcare, Primary Health Properties, Safestore, Greggs, Halfords, Bytes, Tatton, Gateley, Dunelm, Polar Capital, Impax Asset Management, RWS, Severfield and Stock Spirits.

We exited Cineworld, Burford Capital, Hiscox, Fuller Smith and Turner, Hansteen , Big Yellow, Paypoint, Abcam, Savills and Greggs.

The turnover of the portfolio in 2020 was approximately 27%, broadly in line with 2019 levels. We are long term investors, looking at investment cases on a 3 to 5 year time horizon in general which is in alignment with a 25% turnover. The resource of the small cap team has been enhanced over the last 18 months which has helped to create strong new idea generation, and we have been pleased to have been able to add many new holdings to the portfolio. Whilst Covid-19 created a lot of volatility, we felt very comfortable with the shape of the portfolio and did not have to overly trade the fund to ride through the uncertainty of 2020; our Quality aspects of the portfolio as well as companies more in charge of their own destiny through growth levers, was key to our portfolio resilience.

Stock Spirits Stock Spirits is one of the largest manufacturers and distributors of spirits and liqueurs in Central and Eastern Europe, specialising in vodka, bitters, rum and brandy. It is market leader in the Czech Republic and number two in Poland. The business has the number one or two position in two of the three countries it operates in and has been a beneficiary of changing competitive dynamics and the business should benefit from a favourable pricing environment in a progressively duopolistic market.

In 2018 they made significant changes to the board and senior management and refocused the core strategy on generating growth through value rather than volume. This involved focusing on new product development to move the current portfolio to a more premium offering, both organically and through M&A. The business is adopting digital tools to be closer to their consumer's tastes and trends. The group's performance throughout the pandemic highlights the resilience of the model. On the back of very strong cash conversion and low leverage of 0.3x, the board recommended both a final dividend and a special dividend.

Severfield is the UK's market leading structural steel company, the home of world class engineering and design excellence. With a unique product and services offering, they are leaders in their space. Severfield's strong market position and breadth of end market coverage has been a key element of their resilience this year, with exposure to a number of end markets driving diversification benefits.  The management team has successfully managed the group through a series of challenges. The market position is strong, as is the order book and pipeline of opportunities, with many long projects driving revenue visibility. The group has good cash flow characteristics and a strong balance sheet to support their ability to invest, and there is a sector-leading 4.3% dividend yield.

RWS are a specialist services provider with a focus on expert translation in areas such as Life Sciences, IP services (patents), and Localisation (big tech names). Over a number of years they've delivered strong earnings growth, and the diversification of the business gained through investment and acquisitions helps reduce the cyclicality. The Chairman has been instrumental in the development of RWS over the last 17 years. They recently acquired SDL, a UK listed translation business with strong machine translation tools, which they can embed across the business. RWS is an attractive growth business, but did see some disruption impact from Covid-19 decision making and lower activity. They also have a good track record of margin improvement, with good cost control. There are also strong cost synergies to come from the SDL deal, as technology is embedded across the group, and RWS improve the underlying SDL margin. The strong earnings growth we expect from RWS will be supportive of good dividend growth. They maintained the dividend through the Covid-19 period as opposed to increased it but due to their Sept year end the first dividend they had to pay was the interim in June as opposed to many other businesses who withdrew their final dividend in April.

Impax Asset Management is a specialist asset manager with a long track record of excellent performance in the ESG and sustainability space. The management team, headed by the founder of the business, built a platform that is of institutional quality both in terms of process and scalability. Flows have been very strong and they will distribute more cash with scale. The long track record of investing in the ESG space brings strong credibility in the market, and continues to attract clients to their funds. The dividend policy is to pay out 55-80% of earnings and they paid dividends throughout the year given their excellent fund performance and AUM growth.

Target Healthcare REIT, is a property company, focused on the care home industry. They own the assets, but they are not operators so have no operating risk themselves. The market fundamentals are robust with an ageing population and care burden. 55% of their occupancy is private pay, and 45% public pay. The dividend is fully covered with a 6.5% dividend yield and we expect growth of low single digit percentage. Target properties were well advanced in the vaccination programme; by mid January, the vaccination coverage was 86% of homes, with the remaining 14% expected to commence by the end of the month. This is excellent news for residents, operators and Target; visibility on easing of visitation helping support underlying occupancy. Target operators did a very strong job of ensuring infection rates were low within the homes, peaking at just 3.2%. Whilst Target do not operate the homes, it is important that the operators are maintaining high standards and also operating in a profitable manner. During the year they supported operators as a landlord, easing working capital requirements by helping to source PPE, as well as moving some operators to monthly payment plans. The pandemic has magnified the risks of low quality care home assets where infections have spread widely. This puts Target assets in a strong competitive position in the market. Rent collection has been largely unaffected this year. The dividend remained paid, and will be fully covered in FY22, with likely dividend growth low single digit per year. 94% of leases in the portfolio are RPI linked, with the majority having caps and collars on average of 2-4%, which also provides downside protection in a low inflation environment. Having extended the maturity and size of their debt facilities, this allows the business to acquire further high quality assets, in this structurally growing care home market.

Primary Health Properties (PHP) invests in modern facilities that enable the delivery of primary care, easing the burden of national health requirements on hospitals. The NHS has made this approach central to its policy creating a stable operating environment with steady demand and growing interest from both occupiers and investors. PHP's income focus is underpinned by a strong covenant, with the UK government (NHS) indirectly funding 90% of rental income. PHP has demonstrated resilient rent collection. The income stream is one of most defensive in property, 90% rent backed by the government, with average lease length of 13 years. PHP has increased its dividend every year since its 1996 IPO and has a progressive dividend policy. The balance sheet remains strong, and it has a 4% div yield. In December, PHP announced its intention to internalise its management structure through the acquisition of Nexus, its external advisor. We are supportive of this, with a view the business will be in a stronger position with in-house management, securing the strong management team and aligning them with shareholders. The cost saving of doing so also drove earnings upgrades as well as a 5% increase in the dividend forecasts. Since IPO in 1996, PHP has increased its dividend in every year and generated a total shareholder return of 14% pa. The transaction also brought direct development opportunities into the portfolio which should further enhance returns going forward. Covid-19 has increased pressure on the NHS to provide more care outside of hospitals and in the primary arena, which is a positive for the investment case. It has also highlighted the degree of obsolete older GP surgery stock, to which PHP do not have exposure.

Tatton Asset Management is a founder run Discretionary Fund Management business and is an independent challenger low cost model with very good investment performance. The offer addresses the market and regulator's concerns about fee levels and transparency, through its simple and competitive fee structure. With a capital light model, and clear opportunity to grow revenues we believe the 19% forecast earnings growth rate is likely to be driven further upwards giving confidence in the forecast growing dividend. We were pleased to see Tatton continue to pay dividends this year.

We added a new position in Gateley, the law firm. Recognising that the traditional broad base partner profit share models don't function effectively, Gateley was the first law firm to IPO and convert to a salary structure in 2015. The business is well diversified in service line and location. We like the quality characteristics of this capital light, high ROCE business with a track record of delivery. Gateley delivered a resilient first half in the face of Covid-19 disruption aided by the group's breadth and diversification across cyclical and counter-cyclical legal and consultancy services. Upon addition to the portfolio the expected dividend yield was 4% with a policy to pay out 70% of earnings. Cash generation remains strong and the board intends to reinstate dividends once the FY21E outcome is known, being one of the names who stepped back from dividends in 2020 due to the uncertain environment.

Dunelm is a UK market leader in homewares, with a strong and improving brand. The new management team has driven enhancement, with the well invested digital platform driving active customers and increasing the group's addressable market. As shopping habits shift, Dunelm is accelerating its market share gains, growing margins and increasing cash returns to shareholders. The business continues to take share of a buoyant homewares market both in store and online. Its strong digital proposition led to a strong performance this year, despite the challenges of instore retailing given Covid-19 restrictions. Margin progress helped deliver strong growth in profits and cash, giving management the confidence to repay furlough benefits, allowing them to re instate dividends and we believe there is the potential to pay a special dividend next year.

Polar Capital is well positioned as a manager of specialist and thematic funds, which we believe plays well to the industry direction of travel which should be supportive of long term earnings growth. The dividend is secure, given the strength of the balance sheet, the dividend being well covered by earnings and a precedent for maintaining the dividend historically. Polar provides a 5% yield, with longer term dividend growth potential. While we understand that part and parcel of being a specialist manager means there will be periods of strong flows and periods of weaker flows, we believe the business is capable of sustaining the improving net flows over the long term given their breadth of product and long term track record of the portfolios. The addition of new funds helps to diversify the business, reducing those risks.

We added a new position in Halfords a business we believe is undergoing positive change which should improve both the quality and the growth of the business going forwards. Halfords is the UK's leading retailer of motoring, cycling and leisure products and services and has brand strength. Investment over the past few years has focused on stabilising margins, investing for growth, investing in the online platform. We have been impressed with the current CEO and CFO. In particular there is much tighter control on financials, the supply chain, and on the future returns potential. The business under a new management team are investing in areas which should position them in a stronger competitive position, and capture structural growth. We believe the cash generation and strong balance sheet allows them strong dividend payer in future, whilst still being able to invest in the business.

We participated in the IPO of Bytes . Bytes is a value added reseller in the UK technology market, selling to both public and private enterprises. Bytes have a strong track record of sales and profit growth, as well as cash generation. They traded well through the uncertain environment of Covid. They have a net cash balance sheet, and will have a well-founded ability to pay dividends. They expect to pay out 40-50% of adjusted net income as dividends. Forecasts are for high single digit profit growth over the next few years and we believe these forecasts can be upgraded over time.

We started a new position in Greggs at the beginning of the year having gained confidence in the momentum in like for like sales growth, as the excellent management team re-engineered the offer and re invigorated the brand. The Coronavirus crisis has been a real challenge for Greggs given the impact on footfall in many locations, and we expect it will take some years to rebuild to pre-Covid-19 earnings. While we have confidence in the ability of the management to rebuild and realign the business in the coming years, the depleted balance sheet makes the holding hard to retain in an income focused portfolio where we have uncertainty about when and to what extent dividends will return, so we exited the holding towards the end of the year as viewed the investment case as having changed.

We switched our exposure within self-storage out of Big Yellow, into Safestore. Whilst on the face of it the businesses are very similar, we were more optimistic about the earnings outlook for Safestore, with a more geographically diverse exposure within the UK and also France. Safestore management are also more likely to do acquisitions, which we would expect to be earnings accretive. Safestore continued to pay dividends, and the dividend increased by 6% over the previous year.

We exited the small residual in Robert Walters, with a view that lower economic growth globally would be a challenging environment for recruitment firms.  We also exited the small residual holding in Cineworld, with potential closures looking increasingly likely due to the impact of Covid-19 with sites having already limited capacity. Cash generation was becoming increasingly challenged, making the balance sheet looks tougher, and the dividend less likely to be paid.

We have exited the holding in Burford. Following the short report by Muddy Waters, we were pleased with many of the actions taken by management; however, given the black box nature of the business we felt it was challenging for the company to provide evidence to put all the concerns to bed. Given our lower risk investment process, and this being a low contributor to income, the holding was exited.

We exited Paypoint, the retail consumer services business exposed to small retail locations, following the release of a "statement of objections' from Ofgem, alleging that the company breached competition law since the business held a dominant position in the market for over-the-counter payment services for prepayment energy customers. While at this stage of the investigation, Ofgem's findings are provisional and are without conclusion, there was potential for a fine and the removal of exclusive contracts. While the size of the fine is unknown and unlikely not to be crippling, the uncertainty will be a drag on the shares. Furthermore, we also had concerns around the momentum in the parcel business, working from home meaning fewer people will have the need to direct parcels to their shops. We had governance concerns around the appointment of Chairman as CEO, after the former CEO stepped down due to ill health.

We also exited the holding in Hiscox, where there had been a tough environment for large loss events, and the company was screening poorly on the Matrix. We also exited the small holdings in Fuller Smith and Turner, Savills and Hansteen (having been bid for) and Abcam on less conviction in potential for increased dividends going forward.

Fixed Income portfolio

The modest exposure to fixed income was previously focused on investment grade issuers in the UK utilities sector which is typically a safe haven. The focus is on generating income and avoiding significant capital volatility with this component. That being said, volatility in the first quarter led to some positions being added to the Company's portfolio. Holdings were added in Heathrow Airport, Close Brothers and HSBC with some attractive yields on offer. Heathrow, the UK's largest airport, is understandably suffering some challenging conditions and operating well below capacity. It does, however, have a strong liquidity position and relatively low leverage. The HSBC senior holding company bonds were purchased at a spread of 211 basis points above similar maturity government bonds and are now over 100 basis points tighter, reflecting the improving market. The very short dated Close Brothers bonds were added at a yield to maturity of over 2.2% and redeem in the second quarter of 2021.

Fixed income markets no longer offer yields that are extremely attractive. It is likely that, in the current challenging environment, some volatility will emerge and given that, we would expect to once again take advantage. Policy rates will remain at low levels for some time, underpinning these markets.

Outlook

Not surprisingly, the biggest recovery in earnings next year is expected to come from the most depressed sectors. There are also grounds for believing that the value rally has a little further to run, looking at where some of these sectors' share prices sit relative to pre Covid-19. We would have concerns, however, that the earnings for many of these businesses could take a number of years to recover to those levels, and potentially structural changes mean in some cases the business position has changed forever. Our process focuses on stock selection through fundamental research, identifying resilient businesses led by strong management teams, with many levers for growth; this positions us well to identify businesses who can deliver earnings growth and earnings upgrades. In times of uncertainty, where we expect some businesses in the market will face challenges and disappoint, we think shares will be rewarded for strong earnings profiles. Historically value rallies have been short lived, and in times of much uncertainty, we would hope this is once again the case.

With regard to Brexit, we believe that the UK-EU Trade Agreement has removed many tail risks, and has improved investor sentiment towards UK markets. The portfolio has limited exposure to companies which rely on importing/exporting across the channel, and more recent news has been encouraging on a reduction in rejection rates at ports which helps relieve concern on supply chain delays. Retail does have some supply chain risks, but our recent engagement with companies would suggest current challenges are driven by global activities rather than Brexit. The impact on workforce from the EU is still to be seen; however this is another area the portfolio has limited exposure to. Sectors which are more heavily at risk from disruption are likely to be Healthcare driven by workforces, and Autos with the dominant players in Europe. The portfolio is not exposed to either of these sectors. Target Healthcare is not an operator in care homes, and we think there is less risk given its property owner position. Another sector which could be impacted by labour shortages is food production, but our holding in Hilton Food is globally diverse, and has a high level of automation which limits the people requirement. Overall we have limited concerns about negative impacts from Brexit across the portfolio.

With the removal of Brexit and those tail risks, we have seen M&A activity and IPO activity return to high levels in UK markets as well as increased levels of inflows to UK equities.

We remain cautiously optimistic about smaller companies which tend to lead a market recovery.

However, there are a number of risks to the prevailing investor optimism and earnings outlook . Returning to normal will take time given the challenges in rolling out a mass vaccination programme. We may also see more spikes in infections or mutations that could potentially trigger more lockdowns. Therefore we feel many risks around the economy driven by Covid-19 remain in place. We expect unemployment levels to rise underlying, though the numbers on furlough somewhat muddy the water on true current rates. Many businesses will adapt operationally, some sectors will not recover to pre Covid-19 levels, and companies have taken this opportunity to ensure operational efficiency; all these aspects could lead to job cuts. Moreover, the scale of economic scarring is only likely to become apparent in 2021. Given that the economic crisis is a direct result of government action to combat the virus, monetary and fiscal stimulus will be in place, it seems, for as long as necessary.

The pandemic has made income generation in the form of dividends more difficult. We continue to follow our process and look for stocks that have a long-term track record of reliable dividend growth, and have been pleased with the improvement in dividends being paid through the second half of 2020.

Our experience from this year is that our quality, growth, momentum process has served us well. For the majority of our holdings the crisis was not as bad as the worst expectations given the speed with which companies were able to adapt to changing circumstances, with much of the portfolio exposure in very resilient sectors. We were pleased with the underlying operational performance of the portfolio companies, and their ability and willingness to pay dividends.

Aberdeen Asset Managers Limited*

10 March 2021

*on behalf of Aberdeen Standard Fund Managers Limited.

Both companies are subsidiaries of Standard Life Aberdeen plc

5. RESULTS AND PERFORMANCE

DIVIDENDS

PORTFOLIO

INVESTMENT PORTFOLIO - EQUITY INVESTMENTS

INVESTMENT PORTFOLIO - OTHER INVESTMENTS

GOING CONCERN

The Directors believe that it is appropriate to continue to adopt the going concern basis in the preparation of the financial statements.

The Company's assets consist substantially of securities in companies listed on recognised stock exchanges and in normal circumstances are realisable within a short timescale.

The Company's assets comprise mainly readily realisable securities which can be sold to meet funding commitments if necessary.

The Board has set gearing limits and regularly reviews actual exposures, cash flow projections and compliance with banking covenants. The Company has a £10 million credit facility comprised of a fixed rate £5 million loan which expires in 2023 and a revolver £5 million loan which expires in 2021. A replacement option for the revolver element of the facility is currently being sought or should the Board decide not to renew this facility, any outstanding borrowing would be repaid through the proceeds of investments sales as required. £2 million of the revolver loan was drawn down at the date of this report.

The Company undertakes a continuation vote every five years. The last continuation vote was passed at the AGM held in June 2020 with 99.7% of votes in favour.

The Board has considered the impact of Covid-19 and believes that this will have a limited financial impact on the Company's operational resources and existence. Given that the Company's portfolio comprises primarily "Level One" assets (listed on a recognisable exchange and realisable within a short timescale), and the Company's relatively low level of gearing, the Company has the ability to raise sufficient funds so as to remain within its debt covenants and pay expenses.

Taking the above factors into consideration, the Board has a reasonable expectation that the Company has adequate financial resources to continue in operational existence for a period until 31 December 2022 and, accordingly, continues to adopt the going concern basis in preparing the financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Accounting Standards ('IASs') in conformity with the Companies Act 2006.

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 judgements and estimates that are reasonable and prudent;

- state whether they have been prepared in accordance with International Accounting Standards ('IASs') in conformity with the Companies Act 2006; and

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

The Directors are responsible for keeping 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 the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

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

We confirm that to the best of our knowledge:

- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole; and

- the Strategic Report includes 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 they face.

- We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

For and on behalf of Aberdeen Smaller Companies Income Trust PLC

Robert Lister,

Chairman 

10 March 2021

FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME (AUDITED)

BALANCE SHEET (AUDITED)

STATEMENT OF CHANGES IN EQUITY (AUDITED)

CASH FLOW STATEMENT (AUDITED)

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020