European Smaller Co. - Final Results

JANUS HENDERSON FUND MANAGEMENT UK LIMITED

THE EUROPEAN SMALLER COMPANIES TRUST PLC

Legal Entity Identifier: 213800N1B1HCQG2W4V90

THE EUROPEAN SMALLER COMPANIES TRUST PLC

Financial results for the year ended 30 June 2025

This announcement contains regulated information

The European Smaller Companies Trust PLC announces its financial results for the year ended 30 June 2025.

PERFORMANCE HIGHLIGHTS

§ Net asset value¹ per share total return rose by 14.5%

§ Share price total return⁴ was 21.9%

§ NAV and share price outperformance of the benchmark index over 1, 3, 5, and 10 years

§ Increased total dividend per share for the year of 4.90p (2024: 4.80p)

§ Successful completion of combination with European Assets Trust PLC

Investment Objective

The Company seeks capital growth by investing in smaller and medium sized companies which are quoted, domiciled, listed or have operations in Europe (ex UK).

Chairman's Statement

When I wrote to you in February, I certainly did not anticipate that the second half of this financial year would be equally as eventful as the first. In this instance though, I was very pleased to be proved wrong when we announced the combination with European Assets Trust PLC ('EAT') on 23 June 2025.

This transaction completed on 15 October 2025 and I would like to take this opportunity to extend a warm welcome to these new shareholders.

Following completion, the Company has net assets of £811.9m, once again making it the largest constituent of the AIC European Smaller Companies sector. With size comes the benefit of improved liquidity in the secondary market and we have further negotiated a reduction in the management fee meaning all shareholders should benefit from a reduced ongoing charge in the fullness of time. Our investment manager is also making a cost contribution to the combination so that our shareholders are largely insulated from the costs associated with the transaction.

CT Savings Plans participants

A number of former EAT shareholders hold their new ESCT shares in a saving scheme managed by Columbia Threadneedle, known as the CT Savings Plans. CT Savings Plans participants will have until 14 January 2026 to transfer their new ESCT shares to their own platform otherwise the shares will automatically be sold by the scheme administrator.

I encourage all CT Savings Plans participants to transfer their new ESCT shares well before the deadline of 14 January 2026.

Performance

The net asset value total return for the year ended 30 June 2025 was 14.5%, marginally ahead of the benchmark at 14.0%. The net asset value total return for the three years to this date was 49.4% against the benchmark of 38.0% and over five years, 92.8% compared to the benchmark of 56.0%. This once again demonstrates the long-term strength of our fund management team's balanced and valuation aware approach. The Fund Manager and his team provide a more detailed review of their stock selections in their report.

The share price total return for the year to 30 June 2025 was 21.9%.

Discount management

The Company maintains a mid-single digit discount target and the discount at the year end was 5.8%. This was comfortably within the 12-month daily average discount for the sector of 8.3%.

Succession planning

At the forthcoming annual general meeting, Simona Heidempergher will be retiring as a director. My Board colleagues and I thank her very much for her contribution to our discussions throughout her tenure. Her background in private equity and presence on the Continent has provided valuable insight to our deliberations.

As part of our ongoing succession planning, we appointed Nadia Meier-Kirner as a director on 28 April 2025. Nadia is based in Germany and has extensive experience in the European mid-to-small cap investment area.

The combination with EAT also means that we are welcoming two directors from that trust to our Board. Stuart Paterson and Kate Cornish-Bowden joined the Board following completion of the combination. Details on their experience and background can be found in the directors' biography section of this annual report.

Shareholders will have the opportunity to meet Nadia, Stuart and Kate when they stand for election at the annual general meeting later this year.

New dividend policy

Following completion of the combination with EAT, we introduced our new dividend policy of paying quarterly dividends in respect of each financial year, targeting a total of at least 5.0% of the net asset value per share at the end of the preceding financial year. The Company's investment focus will remain capital growth, with the dividend paid from income, capital returns and reserves.

We anticipate paying three interim dividends for the year ending 30 June 2026, with the first being paid in February 2026, followed by payments in May and August.

Under the new approach, a resolution to approve the dividend policy will be put to a shareholder vote at the forthcoming annual general meeting, and each subsequent annual general meeting, providing shareholders with the opportunity to formally indicate to the Board their views on the dividend policy.

Second interim dividend

To ensure our existing shareholders received their second dividend in respect of the financial year just ended, the Board declared a further interim dividend in the amount of 3.45p per ordinary share which was paid to shareholders on 8 October 2025.

This brought the total dividend for the year ended 30 June 2025 to 4.90p per share, representing a 2.1% increase on the prior year.

Tender offer

In my communication to shareholders in February I referred to our ongoing discussions with Saba Capital Management, L.P. ('Saba') following the two requisitions which they lodged with the Company. The first requisition was very disruptive and resulted in a financial cost to the Company, and we believed that convening a general meeting in response to the second requisition would not be in the best interests of all shareholders.

In order to protect the interests of those shareholders wishing to continue their investment in the Company, the Board concluded that it would find a solution that would allow shareholders who wished to exit their position in the Company the opportunity to do so. This resulted in the 42.5% tender offer which concluded on 26 June 2025.

I am pleased to report that Saba's holding in the Company's shares was successfully reduced to an insignificant level following the tender offer and we now look forward to being able to focus on our primary objective of delivering returns to shareholders.

Annual General Meeting

The 35th Annual General Meeting of the Company will be held at 12.30 pm on Monday, 24 November 2025 at the offices of our investment manager at 201 Bishopsgate, London, EC2M 3AE.

This event provides shareholders with the opportunity to meet their directors and the fund management team in person, as well as to raise any questions or concerns they may have regarding the running of the Company.

The Fund Manager will give his usual presentation on the year under review and the outlook for the year ahead.

We encourage all shareholders to attend if they can or join us online if they are unable to be with us in person.

Continuation vote

Every third year, shareholders have the opportunity to vote on whether they wish to continue the life of the Company. Such a resolution will be proposed at the forthcoming annual general meeting.

The Company's performance track record speaks for itself and we believe the strategy of investing in European smaller companies continues to represent an attractive opportunity for both long-term capital growth and dividend income. This objective is particularly well suited to benefit from the investment trust structure.

The Board encourages all shareholders to support the resolution by voting in favour, as we intend to do in respect of our own holdings.

Outlook

The 2020s have been an eventful decade so far and it has resulted in a number of challenges for Europe, many of which still remain. War in Ukraine and combative Trumpian foreign and economic policy are the most pressing, with poor policy choices in the UK and France also creating challenges. However, inflation has been tamed and interest rates have begun to come down and may have further to go. German fiscal policy will soon be expansionary for the first time since the Eurozone crisis and despite better performance in 2025, the European smaller companies asset class remains attractively valued. There are a number of small companies for your managers to take advantage of that are quietly driving progress in important areas such as defence and technology. There is much to be optimistic about.

Many things have happened since I took on the Chairmanship last year and I would like to thank our shareholders for their support throughout this transformational year. It is satisfying to see how well the Company has managed the numerous challenges while maintaining excellent performance, and emerging in good shape to continue generating market-leading shareholder returns.

James Williams

Chairman

20 October 2025

FUND MANAGER'S REPORT

Equity markets were buoyant in the second half of our financial year, during which we delivered a strong relative performance. This enabled us to close the year with a NAV increase of 14.5%, slightly ahead of the benchmark, following a disappointing first half.

The year unfolded in two distinct halves: the first weighed down by political discord that dampened economic momentum, and the second marked by a resurgence of optimism across the European economy. Unexpected early elections in the UK, snap legislative elections in France following the poor showing of President Macron's party in the European elections, mounting uncertainty around the US presidential race, and the eventual collapse of Germany's traffic-light coalition (SPD, FDP and Greens) all contributed to a climate of hesitation. Globally, companies delayed key decisions, awaiting greater political clarity.

In the UK, a decisive Labour landslide brought stability, in contrast to France, where no party emerged with a clear mandate - though a fragile, and unsustainable, equilibrium has since taken hold, with none of the major blocs eager to trigger another election. The pivotal moment came from Germany, where Chancellor Merz forged a new Grand Coalition between the CDU/CSU and SPD. In a bold move, he scrapped the long-standing 'Debt Brake' unlocking long-overdue investment in infrastructure. Spurred by pressure from US Vice-President Vance and the enduring criticism from President Trump over Europe's defence spending, Merz recognised the need for Europe to bolster its own security in an increasingly volatile world. This shift has ignited a renaissance in European equity markets, further fuelled by erratic economic policymaking from the new US administration. A weakening US dollar and growing scepticism around American exceptionalism have prompted investors to re-evaluate the compelling opportunities within European markets.

After the stock market's recent obsession with 'The Magnificent Seven' (Alphabet (Google), Amazon, Apple, Microsoft, Meta (Facebook), Nvidia and Tesla) it was welcome to see interest in Europe. The concentration in global equity markets in the US and, in particular, the 'Mega Cap Tech stocks' remains a feature; the volatility of these companies has led to a miserable period for investors and there is enormous scope for the market to broaden from here, benefiting our area of European smaller companies. As we sit here today, there is good economic growth in Southern Europe, a nascent recovery in Northern Europe and the prospect of fiscal stimulus in core Europe to help drive growth across the continent. Inflation has been tame; interest rates are coming down and energy costs have normalised somewhat. Many of the headwinds for the continent are becoming tailwinds.

Zooming in on the contributors to performance in the portfolio adds detail to that macro picture with our positions in Germany, infrastructure, defence and financials being the principal boosters. German listed speciality chemical producer Alzchem was the largest contributor. The company has some superb niches that it dominates in chemicals such as creatine and nitroguanidine. Creatine is a chemical compound, naturally produced in the body, that supplies energy to muscles. Synthetic creatine is a dietary supplement of which Alzchem is the only western producer. Historically it was taken by bodybuilders to aid training in the gym, but it is increasingly being taken by those at risk of suffering from sarcopenia and osteoporosis, as well as being recommended for those taking GLP-1 weight loss drugs who often suffer muscle wastage during treatment. Nitroguanidine is a propellant that goes into car air bags and is a key ingredient in NATO ammunition. The labels 'Germany' and 'defence' whilst combined with the company pushing through the €1billion market cap threshold that is a minimum cut off for many investors, has given the stock a big multiple rerating, and there is plenty more to go for.

Infrastructure has also been a key theme. Swiss listed producer of power transformers, R&S Group, has been another big contributor to performance. Transformers are used to shift electricity between alternating current ('AC') and direct current ('DC'). The electricity grid is run on AC as it is easier to transmit over long distance, but most electronic devices require DC to work. Transformers switch the current from AC to DC and manage the voltage. The electricity grids in Europe were largely built in the two decades after the Second World War and are now in need of replacing and upgrading to cope with the demands imposed on them by the Green Transition. R&S Group is wonderfully placed to take advantage of this multi-year upgrade requirement.

Sentiment towards financials has seen a huge shift over the last few years. The sector was wildly out of fashion following the Global Financial and Eurozone crises. However, since the inflation shock following excessive fiscal and monetary stimulus during the pandemic, we have seen an interest rate cycle and, a sector characterised by low return on equity, has seen a revival. The portfolio has benefited from positions in southern European banks such as Greek listed Alpha Bank and Optima Bank; Portuguese listed Banco Comercial Portugues; and Italian listed Credito Emiliano. The biggest contributor from the sector has been Dutch listed Van Lanschot Kempen which has done an excellent job of transforming itself from a poorly run restructuring case, to the pre-eminent wealth manager in the BENELUX.

The Portfolio

Amid volatile markets and fraught geo-politics, we endeavour to remain true to our investment strategy of investing across the corporate lifecycle with a balance of early-stage growth stocks, high return on capital growth compounders at sensible prices, undervalued cash generative mature companies and self-help turnaround stocks. We are philosophically committed to reconciling the price we pay for shares to the underlying fundamental cash generative capacity of the company we use your capital to invest in. Our intention is that the portfolio should be balanced, and whilst we have valuation discipline and are 'valuation aware', we are most certainly not running a value fund. We endeavour to ensure that stock selection, rather than macro-economic factors, is what drives performance, and we believe that company management matters. The fund management team spend a great deal of time meeting and assessing management teams to evaluate if they understand where their companies fit in the corporate lifecycle and how to add value to the businesses they are responsible for running. When we deploy your capital, we want management teams to be thinking about the capital allocation and distribution strategies of the company in the context of the price the stock market puts upon their equity. One such company management team is at IG Group, where the management team has used the ferocious cash generation of the company to pursue substantial share buybacks that have helped the stock be one of the Company's top contributors. We don't normally invest in UK listed companies, but used the flexibility offered by the Board to take advantage of this outstanding management team.

Performance Attribution

Contributions from French listed Exosens, a producer of vision technology solutions primarily for the defence industry, plus German pump manufacturer KSB, benefited performance in the period.

Under normal circumstances, we shy away from stocks exposed to drug discovery, however, we have made an exception for German listed Eckert & Ziegler, a rare manufacturer of radioactive components and isotope products for medical, scientific and measurement purposes. Radiopharmaceuticals is a rapidly growing market that, due to regulatory barriers, has a limited number of suppliers. Eckert & Ziegler are uniquely positioned as a vertically integrated supplier to the pharmaceutical industry that wants to deliver drugs that target specific cancerous areas of the body, rather than radiate an entire person as part of cancer treatment. As a result, the company has been winning an increasing number of supply agreements for specific isotopes and the shares have done well.

Nuclear exposure in the portfolio is not limited to the pharmaceutical industry. Another strong contributor to performance has been German listed pump manufacturer, KSB, that supplies pumps to a variety of industries with demand for high performance equipment, with the nuclear industry being a big part of that demand. Not many people will have heard of KSB, but their reactor coolant pumps are helping supply zero carbon energy to much of the world and this is yet another example of a hidden European champion.

The portfolio has been burdened by some poor active and passive decision making in the year as well. Among the big detractors have been Danish listed ferry operator, DFDS, that has tarnished its reputation as a savvy allocator of capital with a misguided expansion into Turkey that has seen good money follow bad as they have had to buy out a customer or risk losing volume to an aggressive new entrant. We are advocating for value realisation from hidden assets on the balance sheet. US listed, but French domiciled, advertising platform company Criteo has had a weak year, with a couple of large contract losses, the retirement of an admired CEO and worries about the structural shift from internet search to Artificial Intelligence ('AI') apps weighing on the share price. We maintain faith that the company is well place to thrive in the AI era and are persevering with the shares. German listed semiconductor equipment manufacturer, SUESS MicroTec, was a star performer last year but has been punished this year as concerns about the duration of the AI capex cycle have unsettled markets. We see SUESS MicroTec as a multi-year margin expansion story that the market has yet to fully understand and continue to hold our position. Another 2024 winner that has fallen on harder times is Dutch listed geological data provider, Fugro, that has seen its business hurt by the new US administration's hostility to offshore wind. Among the passive decisions that detracted from performance has been the strength of: Austrian lender BAWAG, Swiss heating, ventilation and air conditioning equipment provider Belimo, German defence equipment producer Hendsoldt and Italian bank Banca Monte del Paschi de Siena. We weren't invested in any of these stocks, and they had such barnstorming performance that they collectively accounted for a headwind compared to the benchmark in excess of 2.0%. It is rare that our failures are so heavily weighted to investments that we didn't take, but reflect some of the relative decisions we took, especially with regards to investing in banks and defence names.

Geographical and sector distribution

Stock selection rather than geographical and sector exposure is the fundamental core of our investment process, though we are careful to monitor how we are positioned as part of our risk management approach. We have never viewed the benchmark as an input to our process and we are content to diverge widely from it. Our valuation discipline typically leads us away from the more expensive markets and sectors in Europe and as a result we find ourselves underweight to Switzerland and Sweden. Conversely, we are overweight to Germany and the Netherlands where multiples are lower.

Similarly, we are underweight to the sectors where we struggle to find value such as health care, utilities and real estate. We are overweight to the industrials sector, as valuations are very cheap and have scope for strong performance as economies begin to grow again, as well as being overweight to technology where we continue to see strong structural growth trends.

Other purchases

Over the course of the year, we opened a number of new positions in Spain, one of the bright spots in the European economy in recent times. New investments include travel technology company, HBX Group, that matches travellers with hotel beds. The breadth of the hotel and travel agency partners for the company is a network that is almost impossible to economically replicate and after a shaky market debut caused by a poorly executed Initial Public Offering ('IPO'), the stock has begun to perform. We also opened positions in information technology company Indra Sistemas which has substantial debt exposure, leading eye surgery provider Clinica Baviera, sausage casing producer Viscofan and leading Spanish housebuilder Neinor Homes.

The IPO market showed tentative signs of life and we participated in two further new issues in the period that were better handled than HBX Group. Swedish near prime lender, Enity, got off to a strong start, as did German electric power grid connector producer Pfisterer.

Other German names that we opened positions in included semiconductor equipment manufacturer Aixtron; ophthalmology equipment producer Carl Zeiss Meditec; engineering services provider Bilfinger; and HomeToGo

the DACH region's answer to AirBNB.

Other disposals

We exited our position in UK listed, but Dutch domiciled, waste management service provider Renewi which was the subject of a successful bid. We closed our position in French listed glass bottler, Verallia, that was the subject of a tender offer which risked impacting liquidity negatively. We took profit from our positions in German defence gear-box manufacturer, Renk, and Dutch listed manufacturer of military vision goggles, Theon. We sold our positions in German listed automotive supplier, Stabilus, upon concerns of negative operating momentum and a stretched balance sheet and Italian motorbike and moped producer, Piaggio, on concerns around operating momentum, a risk to the dividend and management refusal to unlock value in the business. We also disposed of our positions in underperforming French semiconductor material business, SOITEC, and UK listed/Irish domiciled distributor to the hospitality industry and owner of Magners Cider, C&C Group.

Currency

The Company is denominated in sterling, while investing in largely euro-denominated assets. We do not hedge this currency exposure.

Outlook

The surge of optimism that has manifested around European equity markets since the start of 2025 has been welcome, as has the mild narrowing of the extraordinarily large discount at which European small cap was trading compared to European large cap and US equity. A number of the headwinds of recent years such as the supply chain shock, the energy price shock, the resurrection of the inflation zombie and an interest rate cycle have either abated or have become positive tailwinds. The release of the German 'Debt Brake' can provide a fiscal stimulus that can help sustain the European economy for a few years, as might any simplification of regulation which the EU can muster. These notes of optimism need to be balanced with the risk of stagnating trade as the tariff policies of President Trump bite and the seeming failure for a resolution of the war in Ukraine, to lower tensions. In many respects, the resilience of the global and European economies in the face of all that has happened is quite remarkable. After the initial bounce in our markets, we are now at a point where operational improvement and earnings momentum are required to drive the rerating of the market. Hopefully politicians and regulators can get out of the way of the market and allow some growth to thrive.

Notwithstanding the requirement for some momentum, our market remains good value compared to other equity markets and there are a wide variety of exciting investment opportunities available to us. The European small cap market has a broad range of undiscovered champions that are on the forefront of much new technology, provide key cogs in the wheels of the global economy and offer structural growth. There are a large number of companies with enormous potential to become great again under the right management. We continue to hunt for mispriced opportunities across the corporate lifecycle, whilst remaining 'valuation aware'. We are confident that we can find lucrative investment opportunities for our shareholders.

Ollie Beckett, Rory Stokes and Julia Scheufler

20 October 2025

Principal and emerging risks

Investing, by its nature, carries inherent risk. The Board, with the assistance of the investment manager, carries out a robust assessment of the principal and emerging risks and uncertainties facing the Company which could threaten the business model and future performance, solvency and liquidity of the portfolio. A matrix of these risks, along with the steps taken to mitigate them, is maintained and kept under regular review. The mitigating measures include a schedule of investment limits and restrictions within which the fund management team must operate.

Alongside the principal risks, the Board considers emerging risks, which are defined as potential trends, sudden events or changing risks which are characterised by a high degree of uncertainty in terms of the probability of them happening and the possible effects on the Company. Should an emerging risk become sufficiently clear, it may be classified as a principal risk. During the year under review, the Board did not identify any emerging risks which were not already encompassed within the existing principal risks. The assessment included consideration of the possibility of severe market disruption.

The principal risks which have been identified and the steps taken to mitigate these are set out below. The Board does not believe these principal risks to have changed over the course of the year.

Investment strategy and objective

The investment objective or policy is not appropriate in the prevailing market or sought by investors, leading to a wide discount and hostile shareholders.

Investment mandate limits established by the Board are inappropriate leading to out-of-scope investments which may negatively impact shareholder value.

Poor investment performance over an extended period leading to shareholders voting to wind up the Company. This may be the result of:

·      External factors such as geopolitical instability, including financial shock, pandemic, climate change, changes in the regulatory environment, etc.

·      internal factors such as poor stock selection, poor management of gearing, loss of key members of the fund management team, etc.

Mitigating measures: The investment manager periodically reviews the investment objective and policy in line with best practice and taking account of investor appetites. The Board receives regular updates on professional and retail investor activity from the investment manager, and reports from the corporate broker, both of whom remain in contact with professional investors throughout the year, to inform themselves of investor sentiment and how the Company is perceived in the market. From time to time, research may be undertaken by a third-party consultant to specifically ascertain the views of retail investors. The level of discount and share register are reviewed by the Board at each meeting.

The Board reviews compliance with the investment limits at each meeting.

The Fund Manager maintains a diverse portfolio (sector, country, corporate life cycle) with buy/sell disciplines and employs suitable quantitative and qualitative metrics, which incorporates environmental, social and governance ('ESG') considerations, for assessing stocks for inclusion in the portfolio. The Board reviews the Key Performance Indicators ('KPIs'), portfolio composition and levels of gearing at each meeting. The Board furthermore maintains an understanding of the fund management team's investment process and considers the potential for climate change to impact the value of the portfolio, alongside other factors which may have a similar effect.

Operational

Failure of, disruption to or inadequate service levels provided by principal third-party service providers leading to loss of shareholder value or reputational damage. 

Inadequate cyber security arrangements at the Company's third-party service providers leading to data being compromised or lost, and shareholder value impacted.

Mitigating measures: The Board engages reputable third-party service providers and formally evaluates their performance, and terms of engagement, at least annually.

The Audit Committee receives annual reporting from the Chief Information Security Officer at the investment manager and assesses the internal controls over information technology at the Company's third-party service providers as part of their ongoing assurance reporting.

Legal and regulatory

Loss of investment trust status, breach of the Companies Act 2006, UK Listing Rules, Prospectus and/or Disclosure Guidance and Transparency Rules or the Alternative Fund Managers Directive and/or legal action brought against the Company and/or directors and/or the investment manager leading to a decrease in shareholder value and reputational damage.

Mitigating measures: The Board reviews the investment limits at each meeting which include compliance with provisions set out in the Corporation Tax Act 2010.

The investment manager provides investment, company secretarial, administration and accounting services through qualified professionals to ensure the Company's legal and regulatory obligations are fulfilled.

The Audit Committee assesses the effectiveness of internal controls in place at the Company's third-party service providers through review of their ISAE 3402 reports.

Financial

Market, liquidity and/or credit risk, inappropriate valuation of assets or poor capital management leading to a loss of shareholder value.

Mitigating measures: The Board determines the investment limits and monitors compliance with these at each meeting. The directors review the portfolio liquidity at each meeting and periodically consider the appropriateness of hedging the portfolio against currency risk.

The Board reviews the revenue statement, balance sheet and portfolio valuation at each meeting.  Holdings in the portfolio are valued in line with accounting policies.

Investment transactions are carried out by a large number of approved brokers whose credit standard is periodically reviewed and limits are set on the amount that may be due from any one broker, cash is only held with the custodian or reputable banks.

The Board monitors the broad structure of the Company's capital including the need to buy back or allot ordinary shares and the extent to which revenue in excess of that which is required to be distributed, should be retained.

Going concern and viability

In keeping with provisions of the Code of Corporate Governance issued by the Association of Investment Companies (the 'AIC Code'), the Board has assessed the prospects of the Company for a period of at least twelve months from the date of this report, being 20 October 2026 (our assessment of going concern) and also over the longer period of three years (our assessment of viability).

We consider the Company's viability over a three-year period as we believe this is a reasonable timeframe reflecting the longer term investment horizon for the portfolio, but acknowledges the inherent shorter term uncertainties in equity markets.

As part of the assessment, we have considered the Company's financial position, as well as its ability to liquidate the portfolio and meet expenses as they fall due. The following aspects formed part of our assessment:

·      the closed-end nature of the Company which does not need to account for redemptions;

·      an assessment of the principal and emerging risks, as well as the uncertainties facing the Company,

·      including the potential impact of climate change on the value of investee companies;

·      the diverse nature of the portfolio and its anticipated liquidity in normal and stressed market conditions;

·      the level of the Company's revenue reserves and the size of the bank overdraft facility; and

·      the expenses incurred by the Company, which are predictable and modest in comparison with the assets and the fact that there are no capital commitments currently foreseen which would alter that position.

Also of relevance in contemplating the duration of the Company, is the three-year cycle for its continuation vote.

Shareholders were last asked at the annual general meeting in 2022 if they wished the Company to continue in operation. The resolution was passed with the overwhelming support of 84.4% shareholders who voted. The next continuation vote will be put to shareholders at the forthcoming annual general meeting on 24 November 2025. Based on the voting record since 2000 for such resolutions and the recent tender offer which facilitated an exit for all shareholders not wishing to continue their investment in the Company, the Board is confident that shareholders will continue to support the Company. In the event this is not the case, the directors are required under the articles to put forward proposals for the liquidation or reconstruction of the Company.

As well as considering the principal risks and financial position of the Company, along with the continuation vote, the Board has made the following assumptions:

·      investors will continue to wish to have exposure to investing in European small cap companies;

·      investors will continue to invest in closed-end funds;

·      the Company's performance will continue to be satisfactory; and

·      the Company will continue to have access to adequate capital when required.

Based on the results of the assessment, we have concluded that:

·      the Company has adequate resources to meet its liabilities for a period of at least twelve months from the date of this report, being 20 October 2026, meaning it is therefore appropriate to prepare these financial statements on a going concern basis; and

·      we have a reasonable expectation that the Company will be able to continue operations over the coming three-year period, as well as meeting its expenses and liabilities for that period.

Related party transactions

The Company's transactions with related parties in the year were with the directors and the investment manager.

There have been no material transactions between the Company and its directors during the year. The only amounts paid to them were in respect of remuneration and expenses for which there were no outstanding amounts payable at the year-end.

In relation to the provision of services by the investment manager, other than fees payable by the Company in the ordinary course of business and the provision of marketing activities, there have been no material transactions affecting the financial position of the Company during the year under review. More details on transactions with the investment manager, including amounts outstanding at the year end, are given in the Annual Report.

During the year, Saba Capital Management, L.P. ('Saba') held 29.0% of the Company's issued share capital. Saba participated in the tender offer, entering into agreements with the Company regarding the tender of their shares and a standstill agreement. The entire in-specie transaction detailed in Note 9 below related to their holding.

Directors' responsibility statements

Each of the directors in office at the date of this report confirms that, to the best of their knowledge:

·      the financial statements prepared in accordance with UK Adopted International Accounting Standards give a true and fair view of the assets, liabilities, financial position and profit and loss of the issuer and the undertakings included in the financial statements 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 it faces.

For and on behalf of the Board

Daniel Burgess

Chairman of the Audit Committee

20 October 2025