River and Mercantile UK Micro Cap Investment Company Limited

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED 30 SEPTEMBER 2023

THE COMPANY AT A GLANCE

Purpose

River and Mercantile UK Micro Cap Investment Company Limited (the “Company”) is a closed-ended investment

company. Its purpose is to deliver high and sustainable returns to investors by delivering the investment objective

detailed below.

Investment objective

The Company aims to achieve long term capital growth from investment in a diversiﬁed portfolio of UK micro-cap

companies, typically comprising companies with a free ﬂoat market capitalisation of less than £100 million at the

time of purchase.

Investment strategy and policy

The Company’s investment strategy is to take advantage of the illiquidity risk premium inherent in UK micro-cap

companies and exploit fully the underlying investment opportunities in that area of the market to deliver high and

sustainable returns to Shareholders, in the form of capital gains.

It is expected that the majority of the Company’s investible universe will comprise companies whose securities are

admitted to trading on the Alternative Investment Market of the London Stock Exchange. While it is intended that

the Company will be fully invested in normal market conditions, the Company may hold cash or similar instruments.

About the Alternative Investment Fund Manager (“AIFM”)

The AIFM of the Company is Carne Global AIFM Solutions (C.I.) Limited (“Carne” or the AIFM) who is authorised

and regulated by the Jersey Financial Services Commission. The AIFM provides an oversight and risk management

function but delegates portfolio management to River and Mercantile Asset Management LLP. The AIFM is

independent and has no legal ownership connection with the River and Mercantile Asset Management LLP.

About River and Mercantile Asset Management LLP (the “Portfolio Manager”)

The Portfolio Manager is an active equity manager, specialising in UK and global equity strategies since its launch in

2006. Since 2014, it has been part of River and Mercantile Group Limited (formerly River and Mercantile Group PLC)

(the “Group”). The Group was acquired by AssetCo PLC on 15 June 2022. The Portfolio Manager is authorised and

regulated by the Financial Conduct Authority.

George Ensor, the appointed fund manager, has been responsible for the Company’s portfolio since February 2018.

Please refer to page 14 for George’s biography.

Capital redemptions and dividend policy

The Company is committed to achieving long term capital growth and, where possible, returning such growth to

Shareholders throughout the life of the Company. Furthermore, the Board believes that a Net Asset Value (“NAV”)

in the region of £100 million will best position the Company to maximise returns from a portfolio of micro-cap

companies. Accordingly, the Directors operate a Capital Redemption Mechanism under which a portion of the

Company’s share capital is redeemed compulsorily to return the NAV back to around £100 million in order to:

•

enable the Company to exploit fully the underlying investment opportunity and to deliver high and sustainable

returns to Shareholders, principally in the form of capital gains;

•

enable portfolio holdings to have a meaningful impact on the Company’s performance, which might otherwise

be marginal within the context of a larger fund; and

•

ensure that the Company can continually take advantage of the illiquidity risk premium inherent in micro-cap

companies.

The Company does not expect to pay dividends.

Management of your Company

The Board of the Company comprises a majority of independent non-executive Directors with extensive knowledge

of investment matters, the regulatory and legal framework within which the Company operates, as well as the

various roles played by investment companies in Shareholders’ portfolios. The Board provides oversight of the

Company’s activities and ensures that the appropriate ﬁnancial resources and controls are in place to deliver the

investment strategy and manage the risks associated with such activities. The Board actively supervises both the

AIFM and the Portfolio Manager in the performance of their respective functions.

CONTENTS

Strategic Report

- Financial Highlights and Performance Summary

- Chairman’s Statement

- Portfolio Manager’s Report

- Investment Portfolio

- Principal Risks and Uncertainties

- Section 172 Statement and Principal Decisions

- Executive Summary

Board Members

Directors’ Report

Board and Committees

AIFMD Report

Report of the Audit Committee

Directors’ Statement of Responsibilities

Directors’ Remuneration Report

Independent Auditor’s Report

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Shareholders’ Equity

Statement of Cash Flows

Notes to the Financial Statements

Useful Information for Shareholders

Company Information

STRATEGIC REPORT

FINANCIAL HIGHLIGHTS AND PERFORMANCE SUMMARY

Key Performance Indicators

Performance for the year ended 30 September 2023

In the year ended 30 September 2023, the NAV total return of the Company outperformed the Numis Smaller

Companies plus Alternative Investment Market (“AIM”) (excluding Investment Companies) Index (the “Comparative

Index”) index by 0.54%, delivering a NAV total return of 3.81%, compared to 3.27% posted by the Comparative

Index.

NAV and Share price

As at

30 September

2023

As at

30 September

2022

NAV per Ordinary Share

£1.7714

£1.7063

Ordinary Share price (bid price)

£1.4200

£1.3600

Share price discount to NAV

(19.84)%

(20.29)%

Period highs and lows

Year ended

30 September

2023

High

Year ended

30 September

2023

Low

Year ended

30 September

2022

High

Year ended

30 September

2022

Low

NAV per Ordinary Share

£1.9226

£1.6836

£3.2830

£1.7063

Ordinary Share price (bid price)

£1.5900

£1.3200

£2.9000

£1.3600

Performance since inception

NAV total return

from inception (net of all fees) was 6.94% on an annualised basis, outperforming the Comparative

Index total return

of 4.44%. Refer to the chart below showing the NAV total return versus the Comparative Index from

inception:

Capital redemptions

Since inception to 30 September 2023, the Company has exercised its Capital Redemption Mechanism on ﬁve

separate occasions, as detailed below, redeeming a total of 34,609,615 Ordinary Shares and returning a total of

£76,924,351 to Shareholders.

Redemption Date

Redemption price per

Ordinary Share

Number of Ordinary

Shares Redeemed

Amount returned to

Shareholders

9 June 2017

£1.7217

8,712,240

£14,999,864

1 December 2017

£1.9124

7,843,469

£14,999,850

27 July 2018

£2.1659

5,506,817

£11,927,215

29 January 2021

£2.5335

5,921,631

£15,002,452

7 May 2021

£3.0179

6,625,458

£19,994,970

Please refer to note 12 for full details of the Company’s redemption mechanism, including the conditions required

for the Company to be able to operate the Capital redemption mechanism.

Ongoing charges

The ongoing charges reﬂect those expenses which are likely to recur in the foreseeable future and which relate to the

operation of the Company. The ongoing charges are calculated in accordance with the Association of Investment

Companies (“AIC”) methodology and are based on actual costs incurred in the year which are likely to recur in the

foreseeable future. The ongoing charges for the year ended 30 September 2023 were 1.71% (30 September 2022:

1.39%), reﬂecting the decrease in the average NAV of the Company compared to the prior year.

Dividend history

In accordance with the Company’s stated policy, no dividend was declared or paid during the year.

For further detail on Key Performance Indicators, refer to pages 23 to 24 and the Useful Information for Shareholders

section on pages 73 to 74.

1 – The NAV per Ordinary Share is the value of all the Company’s assets, less any liabilities it has, divided by the total number of Ordinary Shares.

2 – Source: Bloomberg.

3 – As the Company’s Ordinary Shares are traded on the London Stock Exchange's Main Market, the share price may be higher or lower than the

NAV. The Company’s discount / premium to NAV is the difference between the Ordinary Share price (bid price) and the NAV per Ordinary Share

on the same day. This comparison is expressed as a percentage.

4 – The NAV total return measures how the NAV per Ordinary Share has performed on an annualised basis from the initial issuance of Ordinary

Shares to 30 September 2023, taking into account capital returns. The Board monitors the Company NAV total return against the Numis Smaller

Companies plus Alternative Investment Market (“AIM”) (excluding Investment Companies Index).

5 – Source: Numis Securities Limited.

6 – Excludes the cost of each redemption; amounting to a total of £33,008 across all redemptions.

CHAIRMAN’S STATEMENT

Nine years have ﬂown bye……..

After serving as Chairman of the Company since IPO in 2014, I am now retiring in line with the UK Corporate

Governance Code. This sets, as a guideline, nine years for a non-executive director to serve on the board of a

quoted company. I am now passing on my baton to John Blowers who I know to be a very worthy successor.

The Company is unique in two major ways. It is the only listed company to specialise in holding micro cap stocks

and a commitment to return excess capital through a unique capital return mechanism which caps the size of the

fund. This, in effect, acts to harvest capital at peaks in the market to return to shareholders. As an initial investor in

the Company myself I have enjoyed a handsome total return in line with many other investors. I am indeed proud of

the fact that your Company has returned more cash to investors than it raised.

Your Board is obviously concerned about the Company’s prevailing discount to NAV. However, this is universally

recognised as being part of a wider issue for the investment trust industry with discounts in the round standing at

their widest level since 2008.

The last time there was a discount anywhere near the current average across the sector was in 2008 when the

average discount reached -16.4%. In the subsequent 3 years the average investment trust returned 22%. Such

high returns were also enjoyed following other recent troughs (2003 and 2016) when returns were 34% and 9%

respectively over the following 3 years. The key point here is that on each of these occasions the discounts have

arisen at times when equities were cheap (on a Price/Earnings basis) and buyers were thin on the ground. This is

very similar to today’s circumstances

Furthermore, in the past when the tide has turned on discounts for listed investment trusts, the big winners have

been those focused on UK companies, and smaller ﬁrms in particular. Thus, UK small cap trusts rose 97% in the 3

years after 2008, according to analysts at Kepler. Similarly, every time the Numis Smaller Companies Index has had

a negative year, it has enjoyed positive returns over the subsequent 3 years, also noting that past performance is

not entirely indicative of future results

A very positive signal for the small company sector was the recently announced “Mansion House Compact” between

HM Government and nine large UK fund managers who undertook to put 5% of the assets in their clients’ pension

fund assets into unlisted equities by 2030. Importantly for us, for this purpose AIM listed stocks are included in the

deﬁnition of unlisted equities. This move could certainly act to boost the market for smaller companies.

In summary, with UK equities in general, and UK investment trusts in particular, looking unloved, this looks to be an

opportune time to buy rather than sell. The Board is very conscious that a Continuation Vote is due in 2024. As a

Board we continue to believe that longer term the small cap market will return to favour. Also, we absolutely believe

that whatever the market might think, this is not the time to be selling given prevailing market valuations and the

discount to NAV. On a personal note, it is certainly not my intention to sell any of my shares in the Company after I

step down as Chairman.

I am delighted to welcome Ted Holmes to the Board in September 2023. He brings with him a wealth of investment

experience. Ted’s appointment is part of the Board’s succession planning that ensures the Company complies with

the highest standards of corporate governance.

Andrew Chapman

Chairman

5 December 2023

Stocks Are on Sale in the UK – If You Know Where to Look.11 September 2023. Source: Bloomberg.

PORTFOLIO MANAGER’S REPORT

Executive Summary

•

UK economic performance better than feared – real GDP growth and productivity upgraded, inﬂation peaked

and re-coupling with global trends, interest rates likely peaked. Business investment accelerating.

•

UK Small Cap relative valuations cheaper than Global Financial Crisis low. Sentiment remains extremely

depressed.

•

Twelve-month performance +0.54% ahead of the Comparative Index.

•

Three new Growth positions: hVIVO, a contract research organisation specialising in human challenge trials;

Netcall, a digital transformation software business, and Diaceutics, a precision-medicine data business.

•

Two new Recovery positions: IG Design, a supplier of celebration products, and Inspecs, an eyewear

manufacturer and distributor.

Market Backdrop

Given the long list of challenges that investors faced a year ago, it seems remarkable (to me at least) that UK smaller

companies

have fallen below the market low point of October 2022 in October 2023. As a reminder – we had been

warned, by The Bank of England, to expect the longest recession since records began, with unemployment forecast

to double. Gas prices were forecast to exceed 500p per therm – they peaked at 375p. Most would probably agree

that there is currently less political uncertainty, and the upcoming General Election is being fought by party leaders

that lean towards the centre. We are yet to see either the earnings downgrades implied by the valuation of much of

the market or the feared pickup in unemployment or collapse in house prices.

UK Small Cap equities are mispriced. Yes, with gilts and treasuries yielding 5% there is an alternative but, on a

price-to-earnings ratio of less than 10x, equities are yielding far more – double! – and their earnings are very likely

to grow over the medium term.

The chart below is both insightful and useful given the historical context – interest rates in the UK have ranged from

0.1% in 2021 to a peak of 17% in 1980. It shows the realised annual return on a rolling 10-year basis achieved from

investing in UK Smaller Companies

which is relevant because historically, as we show later, we have delivered

strong absolute and relative returns when UK Smaller Companies returns are positive.

The data shows that an investment in UK smaller companies’ equity historically delivers attractive real returns when

owned on a sensible time horizon (and not sold in a panic at the market lows). Whilst the chart shows nominal

returns, RPI averaged 5.3% over the full time series and 3.8% since 1983, prior to which there was a 23-year

period of high inﬂation (12.3% average). It is noteworthy that the January 1975 low for realised returns from smaller

companies came just ahead of the August 1975 high for inﬂation (26.9% YoY!)

, while the peak came 10 years later.

In other words, peaking inﬂation heralded a golden decade for UK smaller company equity returns.

As measured by our Comparative Index, the Numis Smaller Companies ex Investment Trusts plus AIM.

Data is for Numis Smaller Companies Index (NSCI), Source: Numis.

All RPI data – Source ONS, Bloomberg.

Source: Numis, Data to 30 June 2023.

To use the data in another way and to show the scale of the opportunity when realised returns mean revert – the

move from the low point for trailing returns in March 2009 to the most recent high point in September 2021 was

a gain of more than 500%, doubling the performance of the wider UK market. Whilst this might at ﬁrst appear a

generous comparison given the exceptional nature of the Financial Crisis, absolute valuations are close to GFC

levels, but small cap valuations relative to the all-share are substantially cheaper today.

We have – along with others – been making the case for UK equities for some time. The pushbacks are often the

same: the UK has a growth issue (productivity) and/or the UK has its own unique inﬂation issues above and beyond

those being experienced in other economies (with the ﬁnger usually being pointed at Brexit). We have seen some

interesting developments on these challenges over the last few months.

First, the Ofﬁce of National Statistics released a substantial upgrade to UK GDP. Ofﬁcial data previously showed the

UK as the only major economy to have not exceeded its pre-Covid real GDP. But, following a 2% upgrade to GDP,

not only is real GDP almost 2% ahead of where it was at the end of 2019, but we have also delivered higher real

growth than both France and Germany. Business investment – a key aspect of productivity – has also improved,

aided by recent (relative) political stability and is close to the pre-Brexit trend (below LHS), supported by strong

corporate balance sheets (below RHS).

Source: Berenberg, “The rocky road back to more normal times.” October 2023. Includes Berenberg forecasts.

Second, having declined more slowly than expected from February to May, the rate of inﬂation has come in below

expectations for the last three months to September 2023. Energy drove a further 2.1% decline in October 2023,

which is likely to see UK CPI re-couple with European data. A long-term study of UK inﬂation by Panmure Gordon

showed that the difference in inﬂation between the UK and the G20 average over the last 25 years has been zero.

Panmure Economics: UK Inﬂation. An extortionate privilege? 5 May 2023. Source: Panmure Gordon.

Source: Berenberg, “The rocky road back to more normal times.” October 2023. Includes Berenberg forecasts.

Performance

The NAV at the end of September was 177.1p, a gain of 3.8% from the NAV per share of 170.6p at the end of

September 2022. The Comparative Index returned a gain of 3.3%, leaving relative performance for the year at

+0.5%.

Comments follow for each position that impacted relative performance by at least one percentage point:

Kooth

(+3.1 percentage points contribution to portfolio relative return) announced the details of its new contract – a

$188m, four-year contract to provide mental health services to six million young people in California. The contract

is transformational and is likely to lead to both further opportunities in the US – the pilot trial with the state of

Pennsylvania is ongoing – and higher margins as the business scales up. The 168% gain in the shares is a result of

the starting valuation being extremely depressed plus the progress made in the US. The shares remain attractively

valued albeit we do recognise that the next few months carry a higher level of execution risk.

Ten Lifestyle

(+1.7) is a business that partners with banks and provides services – restaurant, travel and live events

concierge – directly to their high value clients to improve retention. The business is therefore geared to both a

recovery in travel and leisure but also to the proﬁtability of banks. Ten Lifestyle have an excellent track record of

retaining contracts meaning that both new contracts and the upsizing of existing contracts have driven strong

revenue and EBITDA growth. The market has begun to recognise this potential, driving a re-rating in the period, but

the company remains attractively valued.

Instem

(+1.7) received a recommended cash offer at a 41% premium from Archimed, a specialist healthcare private

equity investor, which sees an opportunity to accelerate the company’s growth strategy. If the acquisition does

complete at the recommended price of 833p then we will realise a return of 83% on our average cost.

Supreme

(+1.5) delivered trading ahead of expectations driven by exceptional growth in its own vaping business

and its new disposable vaping distribution business. We are cognisant of the risks facing disposable vapes given

environmental and underage vaping concerns. In the event of a ban on disposables, we don’t think the earnings

impact would be as severe as the share price is currently discounting as it is likely that a high proportion of disposable

vapers migrate to pod vaping systems which offer better value for money. Post year end, Supreme announced a

series of detailed measures to proactively mitigate the growing rise of underage vaping (e.g., plain packaging,

discontinue bright coloured disposables, age-appropriate ﬂavours only, increase due-diligence on retailer age

veriﬁcation protocols) and reduce the environmental impact of disposable vapes (e.g., introduce vape disposal bins

in stores).

Litigation Capital Management

(+1.4) is another holding that has delivered excellent ﬁnancial results. The company

has delivered a record period of litigation case realisations and the returns realised from funding cases remains

extremely attractive. This progress not only provides further support to the company’s underwriting process, but the

signiﬁcant cash collected reduces the reliance on debt – the company had a net cash balance sheet at the end of

June – that supports the ongoing growth of the business.

Quarterly averages, yoy change in %. Sources: BLS, ONS Eurostat, Berenberg

SigmaRoc

(+1.2) rallied 43% over the period as the business continued to demonstrate the resilience of its

proﬁtability, driven by diversiﬁed end market exposure and its decentralised operating model which enables tight

control of costs and continued productivity gains. We are pleased to see progress with the company’s ongoing

trial of carbon capture technology, which is a key step in its ambition to be net zero by 2030, reinforcing our S2

rating (see later for explanation). Given the shares started from a trough earnings multiple of 5.5x – following 2022’s

de-rating on energy costs and macro concerns – positive trading and additional bolt-on deals mean the company

trades on only 7x PER today, which we believe represents excellent value. We expect resilient infrastructure markets,

improving margins and further self-help initiatives to drive earnings momentum from here.

Keystone Law

(+1.1) also delivered excellent results, upgrading full year expectations and announcing a further

special dividend. Including expectations for the current year, the company will have returned close to 100p in

dividends since its 2017 IPO at 160p. Keystone Law has delivered an exceptional rate of organic proﬁt growth

(c.26%) since IPO and returned substantial cash to shareholders.

Allergy Therapeutics

(-4.8) was a high conviction position (4.9% of NAV at the end of September 2022) in a

specialty pharmaceutical company focused on research and development of allergy treatments which we exited

at a substantial loss. We believed that the group’s vaccine technology, which offers convenience with far fewer

injections than the market average underpinning increased patient adherence, was the foundation of the group’s

well established commercial position in Europe where it had demonstrated a strong track-record of consistent

organic growth. We expected the cash cow core European business coupled with a strong, debt free, balance sheet

to support R&D investment in a rich pipeline of both near market and early-stage opportunities offering signiﬁcant

upside optionality.

Despite a debt and equity fundraise in September 2022 (to fund pipeline asset growth opportunities) backed by two

major shareholders, the company developed a signiﬁcant additional funding requirement as a result of voluntarily

pausing manufacturing during its peak production period in October and November prior to the start of the pollen

season. The rationale for the voluntary pause in manufacturing was to upgrade quality control processes ahead of

an expected regulatory inspection (which never occurred) following an earlier advisory notice. This had a material

impact on the group’s proﬁtability and cash ﬂow generation resulting in the company cancelling its revolving

credit facility. Subsequently, the company announced a secured loan facility and equity ﬁnancing with two major

shareholders. The loan facility funds the company’s short-term cash needs whilst the major shareholders obtain

the necessary clearances from foreign direct investment authorities to subscribe for shares through the proposed

equity ﬁnancing at 1p per share, a material discount to the share price at the start of the period (30 Sept 2022, 8.7p).

Given the onerous ﬁnancial terms of the debt facility, Allergy expects to use the proceeds of the equity raise to pay

off the debt facility. We exited our position ahead of the equity raise which resulted in a mandatory offer being made

for the company at 1p per share. We are disappointed by the unfortunate sequence of events that enabled the two

major shareholders to purchase the business at a deeply discounted valuation which we do not think reﬂects the

long-term earnings potential of the business.

We expect

LendInvest

(-1.7), a prop-tech mortgage origination company, is close to trough proﬁtability following

its recent proﬁt warning. Proﬁtability has been impacted by depressed loan originations, particularly for higher value

development loans. Future proﬁtability should be supported by a reduction in operating costs and an eventual

recovery in market demand. The current market capitalisation

of c.£50m is just three times the proﬁt before tax that

the company delivered in the twelve months to March 2023. We will look for a more benign backdrop before we

consider re-building our position.

Mind Gym

(-1.6) reported weaker than expected revenue growth, attributable to softer customer budgets, particularly

within the technology sector and low efﬁcacy of Mind Gym’s sales force at a time when the group is reinvesting for

long-term growth (speciﬁcally shifting from a predominantly coaching based business to a balanced coaching and

software business). This has had a material impact on earnings expectations and increased the group’s ﬁnancial

risk.

As of October 2023

Our position in

Revolution Bars

(-1.5) was initiated on the belief that proﬁts would recover towards pre-covid levels

which would likely generate a signiﬁcant return to equity investors. With an ambition to diversify away from late night

drinking, the company acquired a leasehold pubs business. The valuation paid was reasonable, but the acquisition

was largely debt funded and not only has the cost of debt materially increased but the core bars business has

performed poorly. Investors are once again focusing on the leverage and the equity value has been signiﬁcantly

de-rated.

IOG

(-1.5) is a North Sea gas production business that we acquired with a view to beneﬁt from both high natural

gas prices and production ramping up as various investment programs were completed. A combination of the

ﬁscal changes – which are highly penal to debt-funded companies – and disappointing operational performance

undermined our investment case and we exited the position.

SDX Energy

(-1.1) is a (predominantly) gas exploration and production business with assets in Egypt and Morocco.

US Dollar transfers have been restricted by the Central Bank of Egypt and the company has been unable to expatriate

proﬁts from Egypt. The company announced that they have signed terms for the disposal of the Egyptian business

which will enable them to invest into developing the Moroccan assets. Recent news ﬂow from the Moroccan

business has been positive and it is clear that there is strong industrial demand for SDX’s gas.

MaxCyte

(-1.1) has seen partners rationalise spending given the challenging funding backdrop in the life sciences

industry, driving revenue downgrades. Following a signiﬁcant derating, the company trades on a depressed multiple

of sales with 70% of the market capitalisation in cash.

Long term performance review

The table overleaf shows the annual NAV performance for each ﬁnancial year since the Company’s IPO in December

2014

. The last row of the table shows our performance relative to our Comparative Index on the same basis while

the four middle rows provide context for the investment backdrop in that period.

For example, for the 10-month period to the end of September 2015, we deliver absolute NAV growth of 13% and

we outperformed our Comparative Index by 5%. There was a growth style bias

in the market, UK interest rates were

unchanged and Smaller Companies

outperformed.

The intention of the data is to illustrate that the Company has delivered strong absolute and relative performance in

a range of macro environments. We would highlight the following:

•

Positive relative performance in seven out of nine ﬁnancial periods.

•

Total return after all fees of 80.8%, an annualised return of 6.9%.

•

Outperformance of 35%, delivering annualised outperformance of 3.4%.

•

We have delivered positive returns in years with both Growth and Value style leadership and rising and falling

interest rates.

•

Unsurprisingly, positive absolute and relative performance has been most correlated with a positive smaller

companies’ premium. The smaller companies’ premium was -10.0% for the most recent period. Outperforming

our Comparative Index (albeit by a small amount) of typically much larger companies in this environment is

a strong result.

Period to September 2015 is from IPO on 2 December 2014 and is therefore approximate a 10 month not 12-month period.

Measured as a composite of MSCI UK Value vs. MSCI UK Growth and Numis Small Cap Ex-Investment Trusts plus AIM vs AIM All Share.

Measured as Numis Smaller Companies Ex-Investment Trusts plus AIM vs UK All Share. Double signal means equal or greater than 10%.

Sustainability

We have previously explained our approach to integrating sustainability analysis into our fundamental research

process which we believe improves our risk adjusted returns. It is important that shareholders understand that

this is our primary motivation. We believe that businesses that are managed with the interest of all stakeholders in

mind will compound higher returns for shareholders over the medium term.

At the end of the year, 22% of the portfolio was invested in S1 rated companies with 71% in S2 rated companies

and 7% invested across four S3 rated companies. We do not have any investments that are rated in our lowest

category, S4. Sustainability ratings for any new investments are included in the section on activity further below.

The sole rating change in the period was the upgrade of

City Pub Company

from an S3 to an S2. We had assigned

an S3 rating given a lack of disclosure around environmental targets including net zero, independence of the board

and diversity. Following successful engagement with the company, we have seen progress on each of these points

leading to an upgrade in the rating. We have also engaged with two of our other S3 rated holdings – Argentex and

Serabi Gold – for which we hope to see progress over the next twelve months.

Activity

Five new positions were initiated in the period:

Inspecs

is a vertically integrated designer, manufacturer and distributor of frames for glasses with a combination of

owned and licensed mid-market brands. Importantly, for an industry that has been largely offshored, the business

is able to offer its customers unrivalled supply chain transparency and product quality. Short-term destocking in the

group's core European market in the ﬁnal quarter of 2022, a currency headwind and a poorly executed manufacturing

site move has temporarily depressed proﬁtability but does not preclude margin recovery to a more normalised

level. We think recovered margins and returns should be sustainable because the group’s key customers (e.g.

Specsavers) are making strong margins with a signiﬁcant mark-up and customers value supply-chain transparency

and logistics performance, not just price. Interim results conﬁrmed the recovery thesis is intact with evidence of

strong sequential improvement in proﬁt and operating margin and the company is on track to achieve its guidance

for full-year break-even proﬁtability. Inspecs trades on less than 7x recovered earnings on our estimates. We have

rated the business S2,

meaning that we do not see sustainability trends as either a material risk or opportunity for the company. The supply

chain transparency is a key aspect of the success the company has historically had. The company targets 100%

recycled packaging by the end of 2025 and a new investment in its ﬁrst high volume European plant should reduce

the environmental impact for customers.

Netcall

is a software company offering digital transformation solutions that enable business and government

automation by improving both customer and employee experience with unrivalled ease of use. Customer led

innovation is the foundation of the group’s sustainable competitive advantage and strong growth potential. When

we initiated the position, we thought expectations were conservative with risk to the upside, however a renegotiated

large customer contract, with lower annual value but longer duration is a temporary headwind to sales growth

momentum. We do not think it is indicative of a potentially wider customer trend to renegotiate contract values

down, but rather a speciﬁc issue at a large customer where management change catalysed a supplier review

process following a period of overspend. A step-change in investment for growth ampliﬁes the headwind at the

earnings level, but we are reassured by the company’s measured, customer and KPI led approach to investment

which has previously generated strong returns. We look for evidence of a re-acceleration in annual recurring revenue

growth and re-investment paying back to build our position further.

We rate Netcall S2, which means we do not see sustainability trends as either a material opportunity or risk for the

company, given its focus on innovation which is key to maintaining product differentiation and sustaining high growth.

The group’s R&D spend is a healthy 13.5% of sales and its products help customers achieve their sustainability

goals through digitalisation that can support a lower carbon footprint (e.g., helping the NHS and local government

move away from paper-intensive services).

We initiated a position in

hVIVO

, a specialist outsourced provider of human challenge trials for testing infectious

and respiratory disease treatments. Growth in this relatively nascent market – in which hVIVO has a dominant

position – has been catalysed by changing ethical attitudes and greater regulatory recognition post COVID. The

increasing quantity and size of trials is driving revenue growth with improving utilisation. hVIVO is attractively valued

with earnings momentum supported by a growing order book and increased capacity as it relocates to a new larger

facility.

Human challenge trials help hVIVO’s pharma and biotech customers bring vital medical products to market faster

and more cost-effectively resulting in better patient and societal outcomes. hVIVO’s key IP is in the manufacture of

challenge agents, where it is the only company whose data on model efﬁcacy has been approved by regulators.

hVIVO upholds high ethical standards and, importantly, compensation for volunteers is both regulated and in line

with minimum wage. As a result, hVIVO is currently ranked S2 – we do not see sustainability trends as a material

positive or negative factor – with the potential to transition to S1 – material beneﬁciary of sustainability trends – as

the company develops its own sustainability strategy.

Diaceutics

is a diagnostics commercialisation platform for precision medicine. Through the provision of real-

world anonymised patient data and analytics, it helps big pharma companies to undertake more targeted drug

development and better commercialise drugs once approved. We expect the transition of drug pipelines towards

more personalised medicine – particularly in oncology where Diaceutics has strong coverage – to drive signiﬁcant

market growth, as companies allocate an increasing proportion of budgets to diagnostics as part of their go-to-

market strategy. Despite having a ﬁrst mover advantage in a complex and fragmented market, with Growth Potential

supported by recent contract wins with blue chip customers, Diaceutics trades at a material discount to its main

listed peers. We believe the current valuation underappreciates the ongoing transition towards a higher quality

subscription-based model.

We have rated Diaceutics as an S1 which means we see sustainability trends as an opportunity for the company.

Its data products have strong social drivers as they facilitate better targeting of cancer drugs, improving patient

outcomes and the efﬁciency of clinical trials and drug launches. Regulatory support for precision medicine is a

key driver of market growth. Robust data governance practices are also an important barrier to entry, given the

sensitivities around handling patient data, underpinning Diaceutics’ high market share and success with top 20

pharmaceutical clients.

IG Design Group

is the leading supplier of celebration products – wrapping paper and Christmas crackers – to

some of the large retailers (Walmart, Tesco, Sainsbury’s, Amazon). The business is clearly seasonal and has an

extended design and order cycle with prices set in January for product to be delivered in August and cash being

collected the following January. Margins, which have typically been around 7%, were reduced to breakeven as trans

ocean freight costs doubled from 4% to 8% of revenue and other costs (local freight, people, and raw materials)

increased. Importantly, margins have already started to recover – they delivered a margin of 1.9% for the twelve

months to March 2023 – as the company has been able to secure price increases. We purchased the shares on a

cheap valuation of less than 4x recovered earnings (assuming margins return to 5.5%). Alternatively put, despite

issuing no equity – and we believe there will be no need for additional equity – the shares trade at less than 20% of

their all-time high, creating a compelling Recovery investment case.

We have rated the company with an S3 rating, which means sustainability trends could present a material risk to

value creation, given just over half (53%) of their products are single use with just under half (46%) of those products

being recyclable. We do believe the company is well placed to continue to drive category innovation and in doing

so further reduce the environmental impact of their products.

Portfolio Positioning

We are looking to build a portfolio of companies that have a clear opportunity to create shareholder value in one of

three phases of the company lifecycle – Growth, Quality and Recovery. We continue to have a bias towards Growth

which represented 46% of the portfolio at the period end, compared to 27% in Quality and 27% in Recovery which

now includes Asset Backed recovery alongside margin recovery investment cases.

Since 30 September 2022, we have added 7 percentage points (“% ppts”) to Recovery at the expense of both

Growth, down 6% ppts, and Quality, down 1% ppt.

Given our exposure to Growth, and indeed earlier stage growth where proﬁtability is depressed through a high

reinvestment rate, the portfolio valuation is higher than the Comparative Index on some traditional valuation metrics

(book to price, earnings yield and EV/Sales) and in-line on others (cash ﬂow yield and EV/EBITDA multiples) meaning

we are essentially value neutral but with a strong bias to companies that have historically grown faster than the

market. The portfolio-weighted average growth in sales and earnings over the last three years has been 20% and

41% respectively, whilst the equivalent data for the Comparative Index is 13% and 19%.

On 1-year forward consensus forecasts, just 2 of our 41 positions are forecast to be loss making at EBITDA. One –

Maxcyte – has c.70% of its market cap in cash so funding is not a concern and the other – Smoove – announced

a bid post period end from PEXA, a listed Australian business. The two positions represented less than 2% of our

NAV at the end of September. One further position, MindGym (1.8% of NAV at the end of the period), reduced

expectations post the period end and is expected to be breakeven at EBITDA for the current ﬁnancial year.

We have always been cautious of leverage. Approximately 70% of the portfolio is net cash and of the remaining

30%, half have strong tangible asset backing to support leverage. For example, SigmaRoc has signiﬁcant mineral

reserves, Capital has a ﬂeet of almost 100 drilling rigs, City Pub has freehold property, Shanta has proven gold

reserves whilst Diversiﬁed Energy has its gas reserves.

Outlook – Buy now while stocks last

I think most people agree that there is a mismatch between valuation and fundamentals for UK small caps. Clients

and potential clients are either already invested or are waiting for ‘that’ catalyst. A study from JP Morgan

showed

the impact of timing the market using market returns for the 20 years to the end of 2019. The annualised return

of 6.1% was reduced – by almost two thirds – to an annualised return of just 2.4% by missing out on the best 10

days. Realised returns were zero if one missed the best 20 days. The point is a simple one – the odds today appear

stacked in our favour to make excellent returns over the next ﬁve years. There might be a catalyst, but it won’t be

clear that ‘it’ is the catalyst until after the event. The opportunity may get better – if it does, we will continue to rotate

the portfolio from less cyclical Quality investments into either more cyclical companies or Recovery investments.

The mismatch between valuations and fundamentals – which is evident in our current discount to NAV – has been

driven by outﬂows from open ended funds and a market wide aversion to illiquidity. UK Small Cap funds have seen

outﬂows every month since September 2021 and UK Smaller Companies (as measured by our Comparative Index)

have underperformed the wider market by 37% since September 2021. We cannot see a previous period of outﬂows

that extends longer than the current one and the last time there was a similar level of relative underperformance was

in 1989-1991 (-39%).

UK smaller companies are unloved and undervalued, in both absolute terms and relative to the wider market, on

extremely attractive, once-in-a-cycle levels. We cannot call the bottom but putting capital to work today on a three

to ﬁve-year view should be very rewarding.

George Ensor

Fund Manager

River & Mercantile Asset Management LLP

Fund Manager Biography

George graduated from Bristol University with an Upper Second-Class degree in Chemistry in 2008 before joining

Smith & Williamson Investment Management as a graduate trainee where he worked for ﬁve years as an analyst and

Private Client Investment Manager.

George joined River and Mercantile Asset Management LLP in March 2014 as a UK equity analyst and is currently

Fund Manager of the ES R&M UK Listed Smaller Companies Fund and the R&M UK Micro Cap Investment Company

Limited. George is a CFA charter holder.

Impact of being out of the market | J.P. Morgan Asset Management (jpmorgan.com)

INVESTMENT PORTFOLIO

Investment Portfolio as at 30 September 2023

The Investment Portfolio below details the Company’s holdings as at 30 September 2023, exclusive of cash and

cash equivalents (portfolio weightings are based on mid-prices).

Source: River and Mercantile Asset Management LLP

Name

Description

Weight

Instem

Health Care

6.1%

Keystone Law

Industrials

5.7%

ActiveOps

Information Technology

4.9%

Kooth

Health Care

4.8%

Litigation Capital Mgmt

Financials

4.6%

Sigmaroc

Materials

4.6%

DF Capital

Financials

4.5%

Capital Limited

Materials

3.9%

Supreme

Consumer Discretionary

3.8%

Renold

Industrials

3.5%

Ten Lifestyle

Industrials

3.4%

Shanta Gold

Materials

3.1%

Venture Life

Consumer Staples

2.9%

Cake Box Holdings

Consumer Staples

2.7%

GetBusy

Information Technology

2.7%

Aquis Exchange

Financials

2.7%

The City Pub Group

Consumer Discretionary

2.6%

Diaceutics

Health Care

2.6%

1Spatial

Information Technology

2.5%

Manolete Partners

Financials

2.4%

HVIVO

Health Care

2.0%

Inspecs

Health Care

1.9%

Alpha Group Int'l

Financials

1.8%

Diversiﬁed Energy

Energy

1.8%

Mind Gym

Industrials

1.8%

Boku

Information Technology

1.7%

Netcall

Information Technology

1.7%

IG Design Group

Consumer Discretionary

1.1%

Flowtech Fluidpower

Industrials

1.0%

Science In Sport

Consumer Staples

1.0%

Argentex

Financials

1.0%

LendInvest

Financials

1.0%

CMO Group

Consumer Discretionary

0.9%

Virgin Wines UK

Consumer Staples

0.9%

MaxCyte

Health Care

0.9%

Serabi Gold

Materials

0.9%

Strip Tinning

Information Technology

0.7%

Smoove

Information Technology

0.7%

Brand Architekts Group

Consumer Staples

0.7%

Revolution Bars Group

Consumer Discretionary

0.7%

SDX Energy

Energy

0.6%

Statement of Principal Risks and Uncertainties

The table shows the post mitigation principal risks and uncertainties facing the Company and explains how we

mitigate them. Information on our risk management framework can be found on pages 40 to 41.

Investment (Macroeconomic factors)

Risk proﬁle:

Unchanged

Probability

medium

Impact

moderate

Mitigation

The Company is exposed to market

factors. The unrealised performance

can be affected by the sentiment

the

market,

supply/demand

of asset types, expectations on

unemployment, and Gross Domestic

Product growth.

High interest rates, an inﬂationary

macroeconomic environment and the

threat of global recession may drive

down growth stocks especially, which

would adversely affect the underlying

value of the Company’s investment

portfolio, leading to an adverse

impact on the Company’s NAV.

The Company is closed ended and

has no leverage. It is well set up to

ride out any short-term dislocations

in pricing without being forced to

liquidate investments at technically

distressed prices.

The skill and expertise of the Portfolio

Manager allows the Fund to be

positioned effectively in the event of

macro events which impact the value

of the Fund assets.

Investment (Macroeconomic factors)

Liquidity

Share price discount

Reliance on the portfolio manager

Cyber security

Sustainable investment

Geopolitical

Rare

Low

Medium

High

Not signiﬁcant

Low

Moderate

Major

Impact

Probability

Principal risk

Emerging risk

Movement from last year

Liquidity

Risk proﬁle:

Unchanged

Probability

medium

Impact

moderate

Mitigation

The Company invests in a diversiﬁed

portfolio of UK micro cap companies,

typically comprising companies with

a free ﬂoat market capitalisation of

less than £100 million at the time

of purchase. The relatively small

market capitalisation of micro cap

companies can make the market

in their shares illiquid. As a result of

lower liquidity, prices of micro cap

companies tend to stick at one level,

but can be at risk of sudden jumps in

price when momentum of sentiment

is strong enough and certain pools

of investors are forced to liquidate.

As a consequence, the Company

may not necessarily be able to realise

its investments within a reasonable

period.

Both the liquidity and valuation issues

highlighted above may be totally out

of sync with the underlying investee

company fundamentals. There can

therefore be no guarantee that any

realisation of an investment will be on

a basis which necessarily reﬂects the

valuation of that investment.

Risks

within

the

portfolio

are

monitored by the AIFM, which holds

monthly

AIFM

Risk

Committee

meetings with the Portfolio Manager.

Portfolio liquidity forms a key part

of these monthly discussions. The

AIFM provides an update of the

Risk Committee meetings to the

Board and the risks are discussed

accordingly. The Portfolio Manager

also undertakes ongoing reviews of

the underlying investee companies

particularly those whose businesses

are impacted by the current macro

environment.

Share price discount

Risk proﬁle:

Increasing

Probability

high

Impact

low

Mitigation

The price of the Company’s shares

may trade at a discount or premium

relative to the underlying NAV of the

Ordinary Shares.

There is a risk that shareholders

become dissatisﬁed with a continuing

discount to NAV and seek further

action.

The

Directors

note

that,

environment

where

investment

companies are trading at a discount,

there has been a growing trend

towards activism.

The Board monitors the Company’s

share price discount or premium to the

published NAV and regularly consults

with the Company’s brokers regarding

share trading volumes, signiﬁcant

buyers and sellers, and comparative

data

from

the

Company’s

peer

group. In order to further manage the

discount, the Board has developed a

marketing plan to broaden interest in

the company’s Ordinary shares.

Since its inception the Company has

operated the Redemption Mechanism

to return capital to investors which

the Board

understands Shareholders are still

supportive of.

Further, the Board considers that

in the current environment, selling

portfolio investments at depressed

values in order to raise funds to buy

back the Company’s own shares is

not in the best interests of investors

and that the Redemption Mechanism

remains the best tool to manage the

discount in the longer term.

Reliance on the portfolio manager

Risk proﬁle:

Unchanged

Probability

high

Impact

low

Mitigation

The Company is dependent on the

expertise of a small team led by

George Ensor to evaluate investment

opportunities and to implement the

Company’s investment objective and

investment policy.

The Portfolio Manager has experienced

investment professionals ready and

available to step in if required in the

short term, should the lead manager be

unavailable, and would hire a full time

experienced and proven replacement

lead manager, if necessary.

The Board and the AIFM continue to

monitor and review the service and

performance of the Portfolio Manager.

Cyber security

Risk proﬁle:

Increasing

Probability

low/medium

Impact

moderate

Mitigation

The incidence of cyber related events

and attacks heightens the risk of

inappropriate access to data leading

to loss of sensitive information which

may have a material adverse effect

on the Company’s ﬁnancial condition,

reputation and investor conﬁdence.

The Company’s service providers

maintain

cyber

security

policies.

These are reviewed by the AIFM as

part of its oversight responsibilities

and reported to the Board, including

any breaches of information security.

Service providers perform regular

testing of their cyber security controls

to ensure that they remain robust.

Sustainable investment

Risk proﬁle:

Unchanged

Probability

low

Impact

moderate

Mitigation

Investors

are

placing

increased

emphasis on ESG, including climate

change, and the Board sees any

failure by the Portfolio Manager to

identify future potential

The

Board

believes

that

the

adoption by the Portfolio Manager

comprehensive

sustainable

investment policy, in combination

with the development of regular

Emerging risks

Risk

Description

Geopolitical

Along with other investment companies, the Company faces an increased and emerging

risk from the impact of global political unrest and rising geopolitical tension from the latest

conﬂict in the Middle East and the ongoing Ukraine conﬂict, which potentially impacts the

Company’s investment portfolio and the general sentiment towards capital markets.

issues within the underlying portfolio

in this area as a key risk which

may lead to the Company’s shares

becoming less attractive to investors.

A failure to adopt a sustainable

approach to environmental and social

matters, or a failure of governance

is likely to adversely impact the

Company’s performance.

reporting to the Board, allows the

Company to mitigate this risk.

The Board has developed a strategy

to engage with service providers

across ESG matters more generally.

The Company is a closed-ended

investment entity and so its own direct

environmental and social impact is

minimal. The Company does not

exclude any types of business from

its universe of potential investments.

However, the Portfolio Manager does

deploy an ESG lens on all potential

investments and adopts a rigorous

corporate ESG policy. The Company,

in common with most investment

companies, relies substantially on

outsourced providers, including the

Portfolio Manager. The Board believes

therefore its focus should be centered

around governance, ensuring that

appropriate ESG policies and a

sustainable investing approach is

followed as well as monitoring and

measuring the Company’s service

providers’ future progress towards

ESG objectives. The Company also

wants to ensure it has a positive

impact, for example minimising its

carbon footprint. Both the Company

and its service providers are evolving

their approach.

See pages 24 to 26 for “Our Overall

Strategy and Approach to ESG”.

SECTION 172 STATEMENT AND PRINCIPAL DECISIONS

The Board acknowledges its duty to comply with section 172 of the UK Companies Act 2006 to act in a way that

promotes the success of the Company for the beneﬁt of its members as a whole, having regard to (amongst other

things):

consequences of any decision in the long-term;

the interests of the Company’s employees;

need to foster business relationships with suppliers, customers and others;

impact on community and environment;

maintaining reputation; and

act fairly between members of the Company.

The Board recognises its role in promoting the Company’s purpose of delivering on the investment strategy and in

promoting its core values of openness, challenge and respect in its interactions with all stakeholders.

Information on how the Board has engaged with its stakeholders and promoted the success of the Company in

regard to the above, is outlined below. The Company has no employees.

Stakeholder

How the Board engages

Shareholders

The Company would not exist without the capital of its Shareholders and its

ongoing success is dependent on their continued support. The Board therefore

ensures that multiple lines of communication with Shareholders are actively

promoted. The Annual General Meeting (“AGM”) ensures a forum in which

the views of all Shareholders are sought by the Board through the resolutions

proposed and it is also an opportunity for Shareholders to question the

members of the Board face to face.

In addition, the Board requires Singer Capital Markets Advisory LLP as

the Company’s corporate broker (the “Corporate Broker”) to maintain

communication with major Shareholders and report back to the Board at

quarterly meetings on the tenor and substance of such communication. Since

the Company’s inception, the Board has encouraged both the Corporate

Broker and the Portfolio Manager to meet directly with Shareholders both for

the purposes of communicating the Company’s strategy and performance as

well as to listen to the views of Shareholders. These views are reported back to

the Board at their regular meetings.

The Board engaged Camarco (Capital Market Communications Ltd) as the

Company’s public relations adviser to broaden the reach of the Company’s

shareholder engagement to include more retail investors. Effective 13 June

2023, the Board terminated the engagement with Camarco. Subsequently, the

Board developed a multi-channel marketing strategy alongside the Broker and

the Portfolio Manager to target retail, adviser and institutional investors with a

series of messages suitable across all points on the investment cycle. Such

marketing should help improve demand, liquidity and discount management

at an affordable cost to the Company. Furthermore, the Chairman and other

Directors are available to meet with major Shareholders where such meetings

would be welcomed.

Given the upcoming rotation of the Chair of the Company, along with the

Continuation Vote there has been further engagement with the Shareholders

that the Corporate Broker has coordinated.

The Company provides regular information updates to Shareholders, including

the daily NAV announcement to the markets and monthly portfolio updates.

Service providers

All key service providers report to the Board at every quarterly Board meeting,

with representatives of the service providers present to answer questions from

Directors. In accordance with the Company’s culture of openness, challenge

and respect, the Chairman actively encourages feedback from the Company’s

service providers as appropriate to their ﬁeld of expertise. The Board, through

its Management Engagement Committee, also seeks to ensure that the terms of

engagement are commercially equitable for each service provider. The success

of the Company is encouraged by forming stable partnerships with successful

and motivated advisers.

The wider community and the

environment

The Board has developed a strategy to embed a responsible and realistic

approach to ESG related issues into its engagements with stakeholders,

including how it delivers value to Shareholders. The Board continues to discuss

with the Portfolio Manager how a responsible sustainable investment approach

integrates with the Company’s overall investment philosophy and objective

which is described in greater detail in the Portfolio Manager’s Report. The

Board engages with all its service provider stakeholders, on an annual basis, to

assess its impact on society and the environment.

Principal decisions

The table below sets out principal decisions taken by the Board during the year which have the greatest impact

on the Company’s long-term success. The Board considers the factors outlined under section 172 and the wider

interests of stakeholders as a whole in all decisions it takes on behalf of the Company.

Principal decision

Stakeholder interests

Discount management

The Board regularly monitors the level of the discount of the share price to

NAV per Ordinary Share, especially in relation to its peer group. However, the

Board continues to believe that the Redemption Mechanism provides the most

effective buyback mechanism in the longer term. Notwithstanding this view,

the Board continues to look for effective ways to improve demand for and

liquidity in the Company’s shares. To that end, the Board has ensured that the

Company had a marketing presence in a number of consumer-facing media,

including Trustnet and The Armchair Trader, with dedicated advertising, video

and podcast content to attract new investors. Given the trend for investment

trusts to be attractive to UK private investors, we are focusing our marketing

and PR efforts at consumers in order to boost liquidity.

Appointment of Robert “Ted”

Holmes Jr as part of the

ongoing refreshment of the

Board

Having considered the current balance of skills and expertise on the Board in

conjunction with the needs of the Company and as part of its Board Succession

Plan, the Directors sought a replacement director for the Board.

After an extensive search Ted Holmes was appointed (see page 30 for his

biography).

EXECUTIVE SUMMARY

This Executive Summary is designed to provide information about the Company’s operation and results for the

year ended 30 September 2023. It should be read in conjunction with the Chairman’s Statement on page 5 and the

Portfolio Manager’s report on pages 6 to 14 which provides a detailed review of investment activities for the year

and an outlook for the future.

Corporate summary

The Company was incorporated in Guernsey on 2 October 2014, with registered number 59106, as a non-cellular

company with liability limited by shares. The Company is registered by the Guernsey Financial Services Commission

(“GFSC”) as a registered closed-ended collective investment scheme pursuant to the Protection of Investors

(Bailiwick of Guernsey) Law, 2020, as amended, and the Registered Collective Investment Scheme Rules and

Guidance 2021 (“RCIS Rules”).

The Company’s stated capital is denominated in Sterling and each share carries equal voting rights.

The Company’s Ordinary Shares are listed on the Ofﬁcial List as maintained by the FCA and admitted to trading with

a premium listing on the Main Market of the London Stock Exchange.

Signiﬁcant events during the year ended 30 September 2023

Board and Committee changes

On 1 March 2023, Trudi Clark retired from the Board. Upon Trudi Clark’s retirement, John Blowers was appointed

Chair of the Remuneration and Nomination Committee and Chair of the Management Engagement Committee.

On 26 September 2023, it was announced that Ted Holmes had joined the Board as a non-executive Director. It was

also announced that Andrew Chapman would be retiring from the Board at the Company’s AGM to be held on 7

March 2024 and that John Blowers would be taking over the role of Chairman of the Board upon Andrew Chapman’s

retirement.

Economic environment

There are continuing macro-economic headwinds, although the UK base rate has likely peaked, there is no

expectation it will reduce in the near term, inﬂation remains above the UK governments targets and there is a

signiﬁcant increase in the cost of living. All this has led to a lack of investor appetite, particularly for growth stocks

focused on the UK market.

Company investment objective

The Company aims to achieve long term capital growth from investment in a diversiﬁed portfolio of UK micro-cap

companies, typically comprising companies with a free ﬂoat market capitalisation of less than £100 million at the

time of purchase.

Company investment policy

The Company invests in a diversiﬁed portfolio of UK micro-cap companies. It is expected that the majority of the

Company’s investible universe will comprise companies whose securities are admitted to trading on AIM.

While it is intended that the Company will be fully invested in normal market conditions, the Company may hold cash

on deposit or invest on a temporary basis in a range of high quality debt securities and cash equivalent instruments.

There is no restriction on the amount of cash or cash equivalent instruments that the Company may hold and there

may be times when it is appropriate for the Company to have a signiﬁcant cash position instead of being fully or

near fully invested.

The Company is not benchmark-driven in its asset allocation.

Diversiﬁcation

The number of holdings in the portfolio will usually range between 30 and 50. The portfolio is expected to be broadly

diversiﬁed across sectors and, while there are no speciﬁc limits placed on exposure to any sector, the Company will

at all times invest and manage the portfolio in a manner consistent with spreading investment risk.

Investment restrictions

No exposure to any investee company will exceed 10% of NAV at the time of investment.

The Company may from time to time take sizeable positions in portfolio companies. However, in such circumstances,

the Company would not normally intend to hold more than 25% of the capital of a single investee company at the

time of investment.

Although the Company would not normally expect to hold investments in securities that are unquoted, it may do so

from time to time but such investments will be limited in aggregate to 10% of NAV.

The Company may invest in other investment funds, including listed closed-ended investment funds, to gain

investment exposure to UK micro-cap companies but such exposure will be limited, in aggregate, to 10% of NAV

at the time of investment.

Borrowing and gearing policy

The Company does not normally intend to employ gearing but at certain times it may be opportune to do so, for both

investment and working capital purposes. Accordingly, the Company may employ gearing up to a maximum of 20%

of NAV at the time of borrowing. As at 30 September 2023, the Company had no borrowings.

Derivatives

The Company may use derivatives (both long and short) for the purposes of efﬁcient portfolio management only. The

Company will not enter into uncovered short positions.

Further information can be found in the Portfolio Manager’s Report which is incorporated within this Annual Financial

Report on pages 6 to 14 for informational purposes only.

Investment strategy and approach

The Company’s investment strategy is to take advantage of the illiquidity risk premium inherent in UK micro-cap

companies and exploit fully the underlying investment opportunity in the UK micro-cap market to deliver high and

sustainable returns to Shareholders, principally in the form of capital gains in line with the Company investment

objective and policy.

The Company pursues its investment strategy through the appointment of the Carne as AIFM, whereby the AIFM

has been given responsibility, subject to the supervision of the Board, for the management of the Company in

accordance with the Company’s investment objective and policy. In conjunction with the Board, the AIFM has

engaged the Portfolio Manager to manage the portfolio. The Company depends on the diligence, skill, judgement

and business contacts of the Portfolio Manager’s investment professionals, in particular George Ensor, in identifying

investment opportunities which are in line with the investment objective and policy of the Company. The Portfolio

Manager attends all Board meetings at which the investment strategy and performance of the Company are

discussed.

Key Performance Indicators (KPIs)

The Directors meet regularly to review performance and risk against a number of key measures.

Returns and NAV total return

The Board reviews and compares, at each meeting, the performance of the portfolio as well as the NAV, income and

share price of the Company. The Directors regard the Company’s NAV total return as being the overall measure of

value delivered to Shareholders over the long term. Total return reﬂects NAV growth of the Company since inception.

The Board is committed to achieving long term capital growth and, where possible, returning such growth to

Shareholders throughout the life of the Company. Furthermore, the Portfolio Manager has advised the Board that it

believes that a NAV of £100 million (at current market levels although this may change over time) would best position

the Company to take advantage of a portfolio of micro-cap companies and the redemption mechanism is in place

to prevent the NAV signiﬁcantly exceeding this ﬁgure.

NAV total return from inception (net of all fees) was 6.94% on an annualised basis, which outperformed the total

return posted by the Comparative Index of 4.44%. Please refer to the Financial Highlights and Performance Summary

on page 3 for the NAV total return analysis and note 12 for further details regarding the redemption mechanism.

Concentration

The Board reviews the industry and asset diversiﬁcation of the investment portfolio to ensure that holdings are in line

with the investment restrictions and also to monitor the concentration risk of the investment portfolio.

Refer to note 9 for further details regarding investment limits and risk diversiﬁcation policies.

As at 30 September 2023, the Company held 41 (30 September 2022: 41) investment holdings of which none

exceeded 10% of NAV at the time of investment. A portfolio listing is shown on page 15 which demonstrates the

spread of investment risk in accordance with the investment policy.

Our Overall Strategy and Approach to ESG

The Company is a closed-ended investment entity and so its own direct environmental and social impact is minimal.

The Company does not exclude any types of business from its universe of potential investments, however the

Portfolio Manager does deploy an ESG lens on all potential investments and adopts a rigorous corporate ESG

policy (https://riverandmercantile.com/responsible-investment/). The Company, in common with most investment

companies, relies substantially on outsourced providers, including the Portfolio Manager. We believe therefore our

focus should be centered around governance, ensuring that appropriate ESG policies and a sustainable investing

approach is followed as well as monitoring and measuring our service providers progress towards ESG objectives.

However, as a Company we also want to ensure we have a positive impact, for example minimising our own carbon

footprint. We recognise that both the Company and our service providers are evolving their approach.

The table below details the areas which we have focused on in the last year and which we will continue to focus on

in future:

Strategic

Area

What will

we do and

how do we

demonstrate

and measure

our actions?

The Company

Key Service

Providers

The Portfolio Manager

Environment

Climate

Change and

Sustainability

- minimising

carbon

footprint

Our own carbon footprint

is limited but the Board

focused on two areas:

Board Members Travel

Meeting

person

quarterly is obviously

The Management

Engagement

Committee

(“MEC”) in its 2023

annual evaluation

questionnaire

encompassed

The

Portfolio

Manager

outlines their S-PVT internal

scoring for sustainability (see

page 11).

The Board regularly receive

reports on how the portfolio

necessary and desirable

but going forward the

Board will consider

whether:

(a) one quarterly meeting

a year could be held

virtually; and

(b) all “ad hoc” meetings

could be held virtually.

During the year, all ad

hoc meetings were

held virtually, with the

exception of the audit

tender presentations. No

quarterly meetings were

held virtually.

Paperless

Communications with

Stakeholders

During the year, the Board

received deemed consent

from some Shareholders

for paperless

communications.

Fewer printed copies

were circulated to

Shareholders during the

year than in the prior

year. The Board will

continue to encourage

all shareholders to

receive paperless

communications.

speciﬁc questions

about service

providers ESG

policy, plans to

reduce carbon

emissions and

details of a net

zero target date (if

set). The responses

received were

reviewed by the

MEC.

Going forward,

the MEC will ask

for updates on

progress towards

reducing carbon

emissions, this

will be taken into

consideration when

evaluating each

provider.

is split between each

category from the Portfolio

Manager.

The Board maintains a

dialogue with the Portfolio

Manager on the portfolio

and we express a particular

interest on how they

are engaging with those

investments rated as S4

and S3 under the Portfolio

Manager’s classiﬁcation.

The Portfolio Manager

is our principal service

provider and during the year

reported to the Board on its

ESG activities. The Board

received this presentation on

26 September 2023. We will

continue to review its annual

report and progress to

ensure that our own overall

ESG objective and ambitions

are being met.

Social

Community

and

Employee

Engagement

and

Supporting

Ethical

Employment

Practices

The Company itself does

not have any employees.

The MEC in its

questionnaire

requests written

assurances that

each service

provider has

policies which

protect the rights

of employees and

has policies and

procedures in place

which prohibit

discrimination and

encourage diversity.

The social and employment

impact of portfolio companies is

an integral part of the Portfolio

Manager S-PVT scoring for

sustainability. Where low ratings

relate speciﬁcally to this area the

Board will maintain a dialogue

with the Portfolio Manager on

why such holdings remain in the

portfolio.

Governance

Ensuring we

have a strong

corporate

governance

structure

which

ensures

adherence

to the AIC

Code.

Diversity of the Board

The Board has in previous

annual reports published

its succession plans

which will continue. The

Company is supportive of

diversity in all forms based

on sex, ethnicity, social

background and skill sets.

It is also committed to 40%

female representation and

a senior role being held by

a woman be that the Chair

of the Board or the Chair

of the Audit Committee.

The Board is small and

decided not to appoint

a senior independent

director. The Company

will, in its recruitment of

new directors as part

of its succession plan,

take into consideration

the upcoming proposals

from the AIC on diversity

but in such a small board

the Company considers

the diversity of skill sets

and experience to be of

the utmost importance

and of greatest value to

Shareholders.

Governance

With no direct employees

itself, the Company is

committed to continue

its oversight of service

providers to ensure that

they have appropriate

ESG policies which align

with the Company’s own

strategy

The MEC through

questionnaires

or on-site visits

ensures that

service providers

have a strong

governance

structure.

The governance of portfolio

companies is an integral

part of the Portfolio

Manager’s S-PVT scoring

for sustainability. Where low

ratings relate speciﬁcally

to this area the Board will

maintain a dialogue with the

Portfolio Manager on why

such holdings remain in the

portfolio.

The Board will consider

what metrics from our

underlying service

providers on achieving

their ESG goals might

be incorporated into

the Company’s future

ﬁnancial statements,

recognising with our

outsourced model the

true ESG impact of the

Company.

Voting and Engagement

The Directors believe that it is important to monitor and encourage improvement in the management practices of

the companies we invest in for all stakeholders whilst not compromising our objective of achieving strong ﬁnancial

returns. The best way to create wealth for our Shareholders is to invest in companies that are well managed and

optimise returns to shareholders. The Board delegates responsibility for this objective to the Portfolio Manager and

has approved the Portfolio Manager’s approach to Voting and Engagement, details of which can be found at https://

riverandmercantile.com/responsible-investment/voting-and-engagement/.

Future strategy

The Board continues to believe that the investment strategy and policies adopted are appropriate for and are

capable of meeting the Company’s purpose and investment objective.

The overall strategy remains unchanged and it is the Board’s assessment that the AIFM and Portfolio Manager’s

resources are appropriate to properly manage the Company’s investment portfolio in the current and anticipated

investment environment.

Please refer to the Portfolio Manager’s Report on pages 6 to 14 for details regarding performance to date of the

investment portfolio and the main trends and factors likely to affect those investments.

Going concern

Under the AIC Code, the Directors are required to satisfy themselves that it is reasonable to assume that the

Company is a going concern and to identify any material uncertainties to the Company’s ability to continue as a

going concern for at least 12 months from the date of approving the ﬁnancial statements.

The next Continuation Resolution will be tabled at the AGM in 2024. The Company’s Corporate Broker is in regular

contact with a range of Shareholders and has advised the Board that in their opinion Shareholders would support

the Continuation Resolution. The Board notes the Continuation Resolution has not yet been voted on and represents

a material uncertainty at the time of signing this Annual Financial Report but is conﬁdent that the resolution will be

passed by Shareholders. The Board is satisﬁed that, at the time of approving the ﬁnancial statements, no other

material uncertainties exist that may cast signiﬁcant doubt concerning the Company’s ability to continue for the

foreseeable future, being 12 months after approval of the ﬁnancial statements. In addition, the Company’s holdings

of cash and cash equivalents, the liquidity of investments and the income deriving from those investments, means

the Company has adequate ﬁnancial resources to meet its liabilities as they fall due. Therefore, the Board consider

it appropriate to adopt the going concern basis in preparing the ﬁnancial statements.

In making this assessment and acknowledging the current economic environment, the Board has considered that

the Company has no borrowings. The Board also considered the continuing impact of the current macro-economic

environment on the Company, which it believes has a minimal risk at this stage on the going concern of the Company

and are therefore conﬁdent that it remains appropriate to adopt the going concern basis. The Board has further

considered the macro-economic environment on the long-term viability of the Company, which has been detailed

in the statement below.

Viability statement

The Board carries out an annual assessment of the Company’s current position and principal risks and uncertainties

combined with an assessment of the prospects of the Company to state that they have a reasonable expectation

that the Company will be able to continue in operation over the period of their assessment.

The Company has no ﬁxed life. The Directors shall propose one or more ordinary resolutions at every ﬁfth AGM

that the Company continues as a closed-ended investment company (the “Continuation Resolution”). The last

Continuation Resolution was proposed at the AGM on 27 February 2019 and was passed by the Company’s

Shareholders. The next Continuation Resolution will be proposed at the AGM in 2024.

The Company is intended to be a long-term investment vehicle, however, having considered the inherent limitations

of estimating the impact of future political and macro-economic conditions on the Company, the Directors have

decided to assess the viability of the Company over a period of ﬁve years, assuming the Continuation Resolution is

passed at the AGM in 2024.

The Company’s prospects are driven by its business model and strategy. As explained on page 1, the Company’s

aim is to achieve long term capital growth from investment in a diversiﬁed portfolio of UK micro-cap companies,

typically comprising companies with a free ﬂoat market capitalisation of less than £100 million at the time of

purchase. The Board, advised by the Portfolio Manager, believes that the impact on micro-cap companies when the

general economy returns to economic growth is particularly high and therefore based on a ﬁve-year time horizon,

the Board would expect rising valuation metrics and enhanced returns. The Board acknowledges that due to the

global economic situation, the value of the Company’s investments are depressed, but draws attention to the fact

that the Company has no gearing and has appropriate cash levels to meet expenditure. The Company’s investments

are held on a recognised stock exchange and the portfolio is well diversiﬁed.

The Board is mindful of the current political and economic environment and continues to monitor its impact on the

Company. In this context, the Board’s central case is that the prospects for economic activity in the UK will remain

such that the investment objective, policy and strategy of the Company will be viable for the foreseeable future

through a period of at least ﬁve years from the balance sheet date.

In making this judgement, the Board has assessed that the main risks to the long-term viability of the investment

strategy of the Company are key global and market uncertainties driven by factors external to the Company, which

in turn can impact on the liquidity and NAV of the investment portfolio, and therefore risk the viability of the Company

itself. A simulation has been designed to estimate the impact of these uncertainties on the NAV of the Company at

times of stress based on historical performance data of the Company’s Comparative Index, using techniques similar

to the sensitivity analysis performed in note 9 – ﬁnancial risk management.

Taking account of the Company’s current position and principal risks, the Board has a reasonable expectation

that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of

assessment. The Company’s Corporate Broker is in regular contact with a range of Shareholders and has advised

the Board that in their opinion Shareholders would support the Continuation Resolution. Based on the ﬁnancial

position of the Company and Shareholder feedback, the Directors expect the next Continuation Resolution at the

AGM in 2024 to be passed.

In the event that a Continuation Resolution is not passed, the Directors shall formulate proposals to be put to

the Shareholders as soon as is practicable, but, in any event, by no later than six months after the Continuation

Resolution is not passed. In such event, the Board would consider a proposal to reorganise or reconstruct the

Company or for the Company to be wound up with the aim of enabling the Shareholders to realise their holdings in

the Company.

The Strategic Report was approved by the Board of Directors on 5 December 2023 and signed on its behalf by:

Andrew Chapman

Chairman

Charlotte Denton

Audit Committee Chair

BOARD MEMBERS

All Directors are non-executive.

CHAIRMAN

Andrew Chapman, (Independent). Appointed 2 October 2014.

Over his career, Andrew has gained experience investing in every major asset class. After beginning

as a UK equity fund manager, Andrew was subsequently appointed as the Deputy Investment

Manager for the British Aerospace Pension Fund. In 1991, he took the position of Investment

Manager at United Assurance plc, where Andrew was responsible for asset allocation and leading

a team of in-house fund managers. Andrew later became a director at Teather & Greenwood

Investment Management Limited, before joining Hewitt Associates as a Senior Consultant. Between

1994 and 2003, Andrew served as a non-executive director of the Hambros Smaller Asian Companies Investment

Trust plc (which subsequently became The Asian Technology Trust plc).

In 2003, Andrew was appointed as the ﬁrst in-house Pension Investment Manager for the John Lewis Partnership

Pension Fund, with responsibility for the overall investment strategy as well as the appointment and performance

of 27 external fund managers across all asset classes. He retired from that role in 2012. Thereafter Andrew has

developed a plural portfolio of roles, initially serving as the CIO (part-time) for The Health Foundation. His current

portfolio includes membership of the following advisory committees: the endowment fund for Homerton College

(Cambridge University); Coller Capital Partners; and the Property Charities Fund. Andrew is also a non-executive

director of Steadfast International Limited, Steadfast Long Capital Limited, GT ERISA Fund, and GT Offshore Fund.

Key Relevant Skills

•

45 years investment experience, with an emphasis on equity markets.

•

Extensive experience in selecting and managing external fund managers.

•

A current member of several fund boards.

•

Strong background in governance and risk management.

DIRECTORS

John Blowers, (Independent) – Appointed 1 August 2022

John has been instrumental in the digital revolution in ﬁnancial services for 34 years, with a series

of key achievements. He was involved with the UK’s ﬁrst digital fund platform at Interactive Investor

and went on to design, build and run several digital investment offerings for AMP, UBS and latterly

for FE fundinfo.

His skills revolve around strategic proposition development and has a successful track record

in sales & marketing roles in the investment industry. Over the years, he has held a range of CEO, MD and senior

management roles in both multi-national and start-up businesses and is well-known in the UK investment and

ﬁnancial media community.

He is now managing director of ﬁnancial information company Stockomendation Limited, which operates three

websites including Investegate.co.uk.

Key Relevant Skills

•

Marketing

•

Retail Distribution

•

Product Design

Charlotte Denton, (Independent) – Chair of the Audit Committee. Appointed 1 September

2022.

Charlotte is a Fellow of the Institute of Chartered Accountants in England and Wales and holds a

degree in politics from Durham University. She is also a member of the Society of Trust and Estate

Practitioners, a Chartered Director and a fellow of the Institute of Directors. During Charlotte’s

executive career she worked in various locations through roles in diverse organisations, including

KPMG, Rothschild, Northern Trust, a property development startup and a privately held ﬁnancial

services group. She has served on boards for nearly twenty years and is currently a Non-Executive Director of

various entities including the GP boards of Private Equity groups Cinven and Hitec, the voting company for Pershing

Square Holdings and the Investment Manager for NextEnergy. She is also the Audit Chair for the listed Investment

Company Starwood European Real Estate. Charlotte is a resident of Guernsey.

Key Relevant skills

•

Investment Oversight

•

Finance

•

Governance

Mark Hodgson. Appointed 2 October 2014.

Mark Hodgson is a Channel Islands fund director based in Jersey, with considerable experience in

the funds industry. He has a broad fund expertise covering a wide range of differing asset classes,

including real estate, infrastructure, credit and private equity.

Mark joined Carne in April 2014 and is Head of the Channel Islands Fund business. He has over 25

years of ﬁnancial services experience, with an extensive banking background. Mark spent over 20

years with HSBC Global Bank where he gained in depth knowledge of credit, ﬁnancial markets and complex Real

Estate structures. Prior to moving to Jersey, Mark was Regional Director for HSBC Invoice Finance (UK) running

their receivables ﬁnance business.

Mark moved to Jersey in 2006 to Head up HSBC’s Commercial Centre having full operational responsibility for credit

and lending within the jurisdiction. Mark moved to Capita Fiduciary Group in 2008 as Managing Director of Capita

Financial Administrators (Jersey) Limited (regulated role) to run this business and act as Non Executive Director on

a number of fund boards.

Mark acts as a Non-Executive Director on a number of high-proﬁle fund boards based in Jersey, Guernsey and

Luxembourg including: Kennedy Wilson Investment Management Limited, Aviva Jersey Investors Jersey Unit Trust

Management Ltd and LaSalle Investment Management (Jersey) ltd, together with HSBC Private Markets. Collectively

Mark has over 20 years of board experience.

Mark is also a member of the Institute of Directors.

Key Relevant skills

•

28 years ﬁnancial services experience, 20 years of being the member of various boards

•

Extensive fund risk management experience across multiple asset classes

•

A strong background in board governance

Ted Holmes. Appointed 26 September 2023

Ted is currently on the board of the City of London Investment Trust and a Director for Blue Ocean

Investment Partners.

Ted had a twenty-year career at UBS Asset Management. During that time, he worked as a managing

director in both the Chicago ofﬁce (previously Brinson Partners) and London ofﬁce (previously

Phillips and Drew) in a variety of positions, from analyst to European Head of Equities.

Prior to UBS, he worked for Ernst & Young where he earned his Certiﬁed Public Accountant license. He has an MBA

from the University of Chicago Booth School of Business and is a qualiﬁed Chartered Financial Analyst.

Key Relevant skills

•

27 years of experience in investment management (Chartered Financial Analyst)

•

Investment Oversight

•

Investment Trust Oversight and Governance

•

Qualiﬁed accountant, Certiﬁed Public Accountant (US CPA)

DIRECTORS’ REPORT

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

results for the year are set out in these accounts.

Dividend Policy

Details of the Company’s capital redemptions and dividend policy are shown on page 1. The Company does not

expect to pay dividends and no dividends have been declared or paid during the year (30 September 2022: none).

Share Capital

As at 30 September 2023, the Company had 33,897,954 (30 September 2022: 33,897,954) Ordinary Shares in issue.

Borrowing limits

The Directors may, if they feel it is in the best interests of the Company, borrow funds up to a maximum of 20% of

NAV at the time of borrowing. No borrowing facility is currently in place.

Acquisition of own shares

To assist the Company in addressing any imbalance between the supply of and demand for Ordinary Shares and

thereby assist in controlling the discount to NAV at which the Ordinary Shares may be trading, on 2 March 2022 the

Company renewed general authority to purchase in the market up to 14.99% of the Ordinary Shares in issue as at

1 March 2023. This authority expires on the date of the 2024 AGM. The Company did not purchase any shares in

the market during the year.

The Directors will seek a renewal of this authority from Shareholders at the Company’s AGM on 7 March 2024.

Directors’ shareholdings

The Directors who held ofﬁce at the year end and their interests in the Ordinary Shares of the Company as at 30

September 2023 were as follows:

Director

Ordinary Shares held

John Blowers

5,653

Andrew Chapman

15,009

Charlotte Denton

15,350

Mark Hodgson

7,721

Ted Holmes

12,970

For further details on Ordinary Shares held by Directors refer to note 6.

Shareholders’ interests

As at 30 September 2023, the following Shareholders had an interest in the Company’s issued share capital of more

than 5%.

Percentage of total voting rights (%)

West Yorkshire PF

9.81

River and Mercantile Asset Management LLP

9.26

Hargreaves Lansdown Asset Management

8.73

Investec Wealth & Investment Ltd

7.43

Evelyn Partners Investment Management LLP

7.39

CG Asset Management

5.88

Interactive Investor Services Ltd

5.38

These are investment platforms and do not control the voting rights.

Between 1 October 2023 and 5 December 2023, the Company received no additional notiﬁcations.

Audit Tender

The Company underwent a full and robust audit tender process between March and September 2023, the result

of which saw Grant Thornton Limited being awarded the mandate to provide comprehensive audit and associated

services commencing with the review of the Half Yearly Financial Report for the period ending 31 March 2024.

The appointment of Grant Thornton Limited as Auditors to the Company, along with a resolution to authorise the

Directors to determine their remuneration, will be proposed at the forthcoming AGM.

Matters Reserved for the Board

The Directors have adopted a set of reserved powers, which establish the key purpose of the Board and detail its

major duties. These duties cover the following areas of responsibility:

•

statutory obligations and public disclosure;

•

approval of the investment policy;

•

strategic matters and ﬁnancial reporting;

•

Board composition and accountability to Shareholders;

•

risk assessment and management, including reporting, compliance, monitoring, governance and control;

•

responsible for ﬁnancial statements; and

•

other matters having material effects on the Company.

These reserved powers of the Board have been adopted by the Directors to demonstrate clearly the importance

with which the Board takes its ﬁduciary responsibilities and as an ongoing means of measuring and monitoring the

effectiveness of its actions.

The Portfolio Manager has the delegated power to make investment decisions on behalf of the Company within the

framework of the investment objective and investment policy. The Board exerts oversight of the decisions of the

Portfolio Manager both through the AIFM and by direct reporting at quarterly Board meetings. The Portfolio Manager

provides written reports to the Board and a representative of the Portfolio Manager is present at every quarterly

Board meeting to present the report and answer questions from the Board. In addition, the AIFM provides regular

risk reporting on the Company’s investment portfolio and the Portfolio Manager at each quarterly Board meeting.

Voting policy on portfolio investments

The Portfolio Manager, in the absence of explicit instructions from the Board, is empowered to exercise discretion

in the use of the Company’s voting rights. All shareholdings are voted at all Company meetings where practicable in

accordance with corporate governance policies, which seek to maximise shareholder value by constructive use of

votes at company meetings and by endeavouring to use the Company’s inﬂuence as an investor with a principled

approach to corporate governance.

Disclosures required under LR 9.8.4R

The Financial Conduct Authority’s Listing Rule 9.8.4R requires that the Company includes certain information relating

to arrangements made between a controlling shareholder and the Company, waivers of Directors’ fees, and long-term

incentive schemes in force. The Directors conﬁrm that there are no disclosures to be made in this regard.

Events after the Reporting Date

On 5 October 2023, Ted Holmes purchased a further 10,000 Ordinary Shares in the Company, thereby increasing

the number of Ordinary Shares held to 22,970.

Disclosure of Information to the Auditor

Each of the Directors who were members of the Board at the time of approving this Report conﬁrms that:

•

to the best of their knowledge and belief, there is no information relevant to the preparation of their report of

which the Auditor was unaware; and

•

they have taken all steps a Director might reasonably be expected to have taken to be aware of relevant audit

information and to establish that the Auditor was aware of that information.

Fair, balanced and understandable

In assessing the overall fairness, balance and understandability of the Annual Financial Report the Board has

performed a comprehensive review to ensure consistency and overall balance.

Corporate Governance Statement

Introduction

The Company has a premium listing on the London Stock Exchange and is therefore required to report on how

the principles of the UK Corporate Governance Code (the “UK Code”) have been applied. Being an investment

company, a number of the provisions of the UK Code are not applicable as the Company has no executive Directors

or internal operations.

The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed

by the Financial Reporting Council and the GFSC, provides more relevant information to stakeholders. The AIC

Code is available on the AIC website www.theaic.co.uk. It includes an explanation of how the AIC Code adapts the

principles and provisions set out in the UK Code to make them relevant to investment companies.

The Company has complied with all the principles and provisions of the AIC Code during the year ended 30

September 2023, with the exception to appoint a senior independent director. It was decided not to appoint a senior

independent director given the small size of the Board and because all Directors have different qualities and areas of

expertise on which they lead. Any concerns can be conveyed to the Chairman, or another Director if Shareholders

do not wish to raise concerns with the Chairman.

Set out below is where stakeholders can ﬁnd further information within the Annual Financial Report about how the

Company has complied with the various Principles and Provisions of the AIC Code.

Page

1. Board Leadership and Purpose

Purpose

Strategy

Values and culture

Shareholder and Stakeholder Engagement

20 - 21

2. Division of Responsibilities

Director Independence

Board meetings

36 - 37

Relationship with the Portfolio Manager

Management Engagement Committee

3. Composition, Succession and Evaluation

Remuneration and Nomination Committee

Director re-election

Board evaluation

4. Audit, Risk and Internal Control

Audit Committee

Emerging and principal risks

16 - 19

Risk management and internal control systems

40 - 41

Going concern statement

Viability statement

27 - 28

5. Remuneration

Directors’ Remuneration Report

44 - 45

The Directors’ Report was approved by the Board of Directors on 5 December 2023 and signed on its behalf by:

Andrew Chapman

Chairman

BOARD AND COMMITTEES

Values and Culture

Since its inception the Board of Directors of the Company has upheld the values on which it was founded. The

Directors recognise the purpose of the Company to deliver high and sustainable returns to Shareholders. Delivery of

the investment objective has been achieved throughout its history through both investment capability and long held

values of diversiﬁcation, innovation, adaptation and integrity.

These values are underpinned by the culture the Board demonstrates in the way in which the Directors interact

with each other and with the Company's service providers. In particular, openness, challenge and respect are

encouraged as key to developing and implementing the strategies that will deliver the Company's objective.

The Board

Andrew Chapman and Mark Hodgson were appointed as Directors on 2 October 2014. John Blowers, Charlotte

Denton and Ted Holmes were appointed as Directors on 1 August 2022, 1 September 2022 and 26 September 2023

respectively.

As at 30 September 2023, the Directors are:

•

Andrew Chapman (Independent non-executive Chairman).

•

John Blowers (Independent non-executive Director, Chair of the Remuneration and Nomination Committee

and Management Engagement Committee).

•

Charlotte Denton (Independent non-executive Director, Chair of the Audit Committee).

•

Mark Hodgson (Non-executive Director).

•

Ted Holmes (Independent non-executive Director).

The Board is chaired by Andrew Chapman, who is independent of the AIFM and the Portfolio Manager and has been

since the time of his appointment. The Chairman is responsible for the leadership of the Board and for ensuring its

effectiveness in fulﬁlling its role.

The Chairman and all Directors are considered independent of the Portfolio Manager. Mark Hodgson, who

is independent of the Portfolio Manager, is the Managing Director of the AIFM and is therefore not regarded as

independent.

The opinion of the other Directors is that Mark Hodgson provides considerable and complementary expertise to the

Board, particularly in the area of risk management, in which the AIFM has a signiﬁcant presence.

The Board reviews the independence of all Directors annually.

Directors have agreed letters of appointment with the Company. No Director has a service contract with the Company

and Directors’ appointments may be terminated at any time by one month’s written notice with no compensation

payable at termination upon leaving ofﬁce for whatever reason.

Directors’ re-election

As required by the AIC Code, all Directors stand for re-election by Shareholders annually, the next occasion being

at the AGM to be held on 7 March 2024.

Please refer to pages 29 and 30 for biographies of each Director which demonstrates their professional knowledge

and breadth of investment, accounting, banking and professional experience. The Board considers that there is a

balance of skills and experience within the Board and each of the Directors contributes effectively.

Board diversity

The Board is currently made up of one female Director and four male Directors. The Board has due regard for the

beneﬁts of experience and diversity in its membership, including gender, and strives to achieve the right balance of

individuals who have the knowledge and skillset to maximise Shareholder return while mitigating the risk exposure

of the Company.

The below tables set out the Board’s current composition. The below text compares this against the targets

prescribed by Listing Rule 9.8.6R (9)(a).

Number of Board

Members

Percentage of the

Board

Number of Senior Positions

on the board (CEO, CFO,

SID and Chair)*

Men

80%

Women

20%

Number of Board

Members

Percentage of the

Board

Number of Senior Positions

on the board (CEO, CFO,

SID and Chair)*

White British or other White

(including minority-white groups)

100%

*The Company does not have executive management and considers the Chair of the Board or the Chair of the Audit

Committee to be senior roles.

It is noted that at present 20% of the individuals on the Board are women, which is below the target of 40%

prescribed by Listing Rule 9.8.6R (9)(a). The role of Chair of the Audit Committee, being a senior position, is held by

a woman. At present, none of the Board members are from minority ethnic backgrounds, which is below the target

of one, prescribed by Listing Rule 9.8.6R (9)(a).

During the year, the Board appointed Ted Holmes as a Director. The Board noted the diversity requirements,

but in such a small Board, the Company considers the diversity of skill sets and experience to be of the utmost

importance. After reviewing a number of different applicants, it was decided that Ted Holmes had the best skill set

to complement the Board.

The Board are mindful of these requirements and alongside knowledge and expertise, they will be considered when

the Board next recruits.

Tenure policy

The Board has adopted a policy on the tenure of its independent Directors that aligns with the AIC Code of Corporate

Governance and none of the four independent Directors, including the Chairman of the Board, will serve for more than

nine years. The Board has thus adopted a staged succession plan that maintains a balance between the strength

added through continuity and experience as well as the beneﬁts of new members bringing fresh perspectives. The

Board will continue to assess annually each Board members independence.

The Board considers that boards of investment companies are more likely to beneﬁt from a long association with a

company in that they will experience a number of investment cycles.

Committees

The Board has established three committees, the Audit Committee, the Management Engagement Committee and

the Remuneration and Nomination Committee.

All the independent Directors, namely Andrew Chapman, John Blowers, Charlotte Denton and Ted Holmes (appointed

26 September 2023) have been appointed to all Committees.

Each committee operates within clearly deﬁned terms of reference and duties. The terms of reference for each

Committee have been approved by the Board and are available in full on the Company’s website, https://

riverandmercantile.com/funds/rm-uk-micro-cap-investment-company.

Audit Committee

The Audit Committee membership comprises all of the Directors with the exception of Mark Hodgson and is chaired

by Charlotte Denton. The Chairman of the Board is a member of the Audit Committee. His membership of the Audit

Committee is considered appropriate given his extensive knowledge of the ﬁnancial services industry and the size

of the Board.

The report on the role and activities of this Committee and its relationship with the external auditors is set out in the

Report of the Audit Committee on page 40.

Management Engagement Committee

John Blowers is the Chair of the Management Engagement Committee.

The Management Engagement Committee carries out its review of the Company’s advisers through consideration

of a number of objective and subjective criteria and through a review of the terms and conditions of the advisers’

appointments with the aim of evaluating performance, identifying any weaknesses and ensuring value for money

for the Company’s Shareholders.

In September 2023, the Management Engagement Committee formally reviewed the performance of the Portfolio

Manager and other key service providers to the Company. During this review, no material weaknesses were identiﬁed.

The next review will be held in September 2024 before the approval of the Annual Financial Report. Overall, the

Management Engagement Committee conﬁrmed its satisfaction with the services and advice received.

Remuneration and Nomination Committee

John Blowers is the Chair of the Remuneration and Nomination Committee.

Board and Committee evaluation

The Remuneration and Nomination Committee performs an annual internal evaluation of the Board, its Committees

and each Director, this was last undertaken in September 2023.

The Chair and Members of the Committee reviewed and discussed investment matters, strategy, Shareholder value,

governance, and the process and style of Board meetings. In addition, the Committee reviewed the performance of

the Chairman in his role and evaluated all the Directors’ personal contributions. It was concluded that all Directors

had a good understanding of the investments and markets and felt well prepared and able to participate fully at

Board meetings. It was agreed that Board meetings were effective and all relevant topics were fully discussed, with

the Board having a good range of skills and competency. The Directors conﬁrmed that they have devoted sufﬁcient

time, as considered necessary, to the matters of the Company.

Succession plan

The Board’s succession plan seeks to ensure that no independent non-executive Director serves on the Board for

longer than nine years and that the Board is well balanced and refreshed from time to time by the appointment of

new directors with the skills and experience necessary to replace those lost by Directors’ retirements and to meet

future requirements.

The Remuneration and Nomination Committee is committed to ensuring that any vacancies arising are ﬁlled by the

most qualiﬁed candidates who have complementary skills or who possess the skills and experience which ﬁll any

gaps in the Board’s knowledge or experience.

In accordance with the succession plan, the Remuneration and Nomination Committee engaged the board member

hiring specialist, Nurole Ltd, to identify a suitably qualiﬁed and experienced director to join the Board. This process

led to the appointment of Ted Holmes on 26 September 2023.

On 26 September 2023, the Board announced the retirement of Andrew Chapman as a director and Chairman of

the Board at the forthcoming AGM on 7 March 2024. John Blowers would be taking over the role of Chairman of the

Board upon Andrew Chapman’s retirement.

Board meetings

The Board meets regularly throughout the year and a representative of the AIFM and the Portfolio Manager is in

attendance at all times when the Board meets to review the performance of the Company’s investments.

The Portfolio Manager and AIFM together with the Company Secretary ensure that all Directors receive, in a timely

manner, all relevant management, regulatory and ﬁnancial information relating to the Company and its portfolio

of investments. The Chairman encourages open debate to foster a supportive and co-operative approach for all

participants.

The Board applies its primary focus on the following:

investment performance, ensuring that investment objectives and strategy of the Company are met;

ensuring investment holdings are in line with the Company’s investment restrictions;

review and monitoring ﬁnancial risk management, operating cash ﬂows and budgets of the Company; and

review and monitoring of the key risks to which the Company is exposed as set out in the Strategic Report.

At each relevant meeting the Board undertakes reviews of key investment and ﬁnancial data, transactions and

performance comparisons, share price and NAV performance, marketing and Shareholder communication strategies,

peer group information and industry issues.

The Board considers the Company’s investment objectives, their continuing relevance and whether the investment

policy continues to meet those Company’s investment objectives. The Board believes that the overall strategy of

the Company remains appropriate.

Attendance at scheduled meetings of the Board and its committees.

Board

Audit

Committee

Management

Engagement

Committee

Remuneration

and Nomination

Committee

Number of meetings during the year

ended 30 September 2023

John Blowers

Andrew Chapman

4/5

Trudi Clark

2/2

1/1

Charlotte Denton

Mark Hodgson

n/a

Ted Holmes

1/1

Trudi Clark retired at the AGM on 1 March 2023.

Ted Holmes was appointed on 26 September 2023.

In addition to these meetings, there were 4 ad-hoc board meetings during the period.

Service providers

The AIFM has delegated portfolio management of the Company’s investment portfolio to the Portfolio Manager. The

Board actively and continuously supervises both the AIFM and the Portfolio Manager in the performance of their

respective functions.

The Company has appointed BNP Paribas S.A., Guernsey Branch (the “Administrator”) to provide administration,

custodian and company secretarial services.

Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost

of services offered, including the control systems in operation in so far as they relate to the affairs of the Company.

The Board receives and considers reports regularly from both the Portfolio Manager and the AIFM, with ad hoc

reports and information supplied to the Board as required. The Portfolio Manager complies with the Company

investment limits and risk diversiﬁcation policies and has systems in place to monitor cash ﬂow and the liquidity

risk of the Company. The AIFM, Portfolio Manager and the Administrator also ensure that all Directors receive, in a

timely manner, all relevant management, regulatory and ﬁnancial information. Representatives of the AIFM, Portfolio

Manager and Administrator attend each Board meeting as required, enabling the Directors to probe further on

matters of concern.

The Directors have access to the advice and service of the corporate Company Secretary through its appointed

representative who is responsible to the Board for ensuring that Board procedures are followed and that applicable

rules and regulations are complied with. The Board, the AIFM, Portfolio Manager and the Administrator operate in

a supportive, co-operative and open environment and the Board will actively and continuously supervise both the

AIFM, Portfolio Manager and Administrator in the performance of their respective functions.

Performance of the Portfolio Manager

The Board reviews on an ongoing basis the performance of the Portfolio Manager and considers whether the

investment strategy adopted is likely to achieve the Company’s investment objective.

Having formally appraised the performance, investment strategy and resources of the Portfolio Manager, the

Board has unanimously agreed that the interests of the Shareholders as a whole are best served by the continuing

appointment of the Portfolio Manager on the terms agreed.

The Board believes that the portfolio management fees are competitive with other investment companies with similar

investment mandates. The key terms of the Investment Management agreement and the portfolio management fee

charged by the Portfolio Manager are set out in note 4.

Shareholder communications

The main method of communication with Shareholders is through the Half-Yearly and Annual Financial Report which

aims to give Shareholders a clear and transparent understanding of the Company’s objectives, strategy and results.

This information is supplemented by the publication of the daily NAVs of the Company’s Ordinary Shares on the

London Stock Exchange via a Regulatory Information Service.

The Company’s website, https://riverandmercantile.com/funds/rm-uk-micro-cap-investment-company, is regularly

updated with monthly factsheets and provides further information about the Company, including the Company’s

ﬁnancial reports and announcements. The maintenance and integrity of the Company’s website is the responsibility

of the Directors, which has been delegated to the Portfolio Manager; the work carried out by the auditors does not

involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that

may have occurred to the ﬁnancial statements since they were initially presented on the website. Legislation in

Guernsey governing the preparation and dissemination of ﬁnancial statements may differ from legislation in other

jurisdictions.

Information published on the internet is accessible in many countries with different legal requirements relating to

the preparation and dissemination of ﬁnancial statements and users of the Company’s website are responsible for

informing themselves of how the requirements in their own countries may differ from those of Guernsey.

The Board believes that the AGM provides an appropriate forum for investors to communicate with the Board and

encourages participation. The AGM will be attended by members of the Board. There is an opportunity for individual

Shareholders to question the Directors at the AGM. The Directors welcome the views of all Shareholders and place

considerable importance upon them.

In addition to the AGM and the monthly publication of factsheets, the Board requires its Corporate Broker to

maintain regular contact with Shareholders, to co-ordinate and facilitate meetings between Shareholders and the

Portfolio Manager and to report back to the Board the views of investors expressed at those meetings. During the

year, the Corporate Broker also contacted Shareholders in regard to the Continuation Vote to be held at the AGM in

2024. The Chairman is always willing to meet with Shareholders to discuss any questions or issues they might have

about the Company.

The Board have additionally committed to uprating the information on the Company by contracting with Trustnet, one

of the UK’s premier fund data companies, serving the private investor and professional adviser markets. The live share

price and discount information is provided, plus ratings, historic performance data and fund manager proﬁles.

This information can be found here: https://www.trustnet.com/factsheets/T/KZFC/river-and-mercantile-uk-micro-

cap-red-ord-npv.

Other communications

All substantive communications regarding any major corporate issues are discussed by the Board taking into

account representations from the AIFM, Portfolio Manager, PricewaterhouseCoopers CI LLP (the “Auditor”), legal

advisers, Corporate Brokers and the Company Secretary.

AIFMD REPORT

Alternative Investment Fund Manager Directive (“AIFMD”)

The Company (which is a non-EU AIF for the purposes of the AIFM Directive and related regimes in EEA member

states) has appointed the AIFM. The AIFM is authorised by the Jersey Financial Services Commission to act as an

AIFM on behalf of alternative investment funds (“AIFs”) in accordance with the Financial Services (Jersey) Law 1998.

The Company is registered with the GFSC, being the Company’s competent regulatory authority, as a non-EU

Alternative Investment Fund (“AIF”), and the AIFM has registered with the UK Financial Conduct Authority, under

their relevant national private placement regime.

The AIFM has delegated portfolio management of the Company’s investment portfolio to the Portfolio Manager and

the Board actively and continuously supervises both the AIFM and the Portfolio Manager in the performance of their

respective functions.

As the Company and the AIFM are non-EU domiciled, no depositary has been appointed in line with AIFMD.

However, BNP Paribas S.A., Guernsey Branch has been appointed to act as custodian.

The current risk proﬁle of the Company and the risk management systems employed by the AIFM to manage

those risks

Information relating to the current risk proﬁle of the Company and the risk management systems employed by the

AIFM to manage those risks, as required under paragraph 4(c) of Article 23 of the AIFMD, is set out in note 9 –

Financial Risk Management. Please refer to pages 16 to 19 for the Board’s assessment of the principal risks and

uncertainties facing the Company.

Leverage

The Company may employ gearing up to a maximum of 20% of NAV at the time of borrowing. The actual level of

gearing at 30 September 2023 was nil% (30 September 2022: nil%).

Material changes to information

Article 23 of AIFMD requires certain information to be made available to investors before they invest and requires

material changes to this information to be disclosed in the annual report. There have been no material changes to

the information requiring disclosure.

AIFM remuneration

The total fee paid to the AIFM by the Company for the year ended 30 September 2023 is disclosed in note 5.

The AIFM is not subject to the provisions of Article 13 of the AIFMD, which require the AIFM to adopt remuneration

policies and practices in line with the principles detailed in Annex II of the Directive. However, in accordance with

Article 22 of the AIFM Directive and Article 107 of the AIFM Regulations, the AIFM must make certain disclosures in

respect of the remuneration paid to its staff.

The AIFM has identiﬁed six staff as falling within the scope of the disclosure requirements (the “Identiﬁed Staff”).

These Identiﬁed Staff are senior management, named as designated persons of the AIFM’s managerial functions

and members of the Board of Directors, risk and investment committee of the AIFM. All Identiﬁed Staff of the AIFM

are employees of the Carne Group and as such receive no separate remuneration for their role within the AIFM.

Instead, they are remunerated as employees of other Carne Group companies, with a combination of ﬁxed and

variable discretionary remuneration, where the latter is assessed on the basis of their overall individual contribution

in their role, with reference to both ﬁnancial and non-ﬁnancial criteria and not directly linked to the performance

of the staff of speciﬁc business units or targets reached. The total remuneration of the Identiﬁed Staff for the year

ended 31 March 2023 was £238,250 and the AIFM has determined that on the basis of the NAV of the Company,

relative to the total assets under management, the portion of this ﬁgure attributable to the Company is £5,782. There

was no variable component to this remuneration and none of the AIFM’s Identiﬁed Staff is able to materially impact

the risk proﬁle of the Company. The AIFM manages other AIFs and has no staff other than the Identiﬁed Staff.

REPORT OF THE AUDIT COMMITTEE

The Board has appointed an Audit Committee which operates within clearly deﬁned Terms of Reference, which are

available on the Company’s website.

The Audit Committee includes all of the Directors with the exception of Mark Hodgson, who attends at the invitation

of the Audit Committee but does not actively participate in the meetings. Charlotte Denton is the Chair of the Audit

Committee; she is independent of the AIFM and Portfolio Manager as are all the other Directors that comprise the

committee. All of the Audit Committee’s members have recent and relevant ﬁnancial and industry experience and

the Chair of the Audit Committee is a Chartered Accountant. The Audit Committee as a whole has competence

relevant to the sector in which the Company operates. Biographical information pertaining to the members of the

Audit Committee can be found in the section of this Annual Financial Report entitled, “Board Members” on pages

29 and 30.

Role of the Committee

The Audit Committee assists the Board in carrying out its responsibilities in relation to ﬁnancial reporting requirements,

risk management and the assessment of internal ﬁnancial and operating controls. It also manages the Company’s

relationship with the external Auditor.

The Audit Committee’s main functions are:

to review and monitor the integrity, fairness and balance of the ﬁnancial statements of the Company including

its Half-Yearly Report and Annual Financial Report to Shareholders and any formal announcements regarding

its ﬁnancial performance, together with any signiﬁcant ﬁnancial reporting issues and areas of judgement

contained within them;

to advise the Board on whether the Annual Financial Report, taken as a whole, is fair, balanced and

understandable and provides the information necessary for Shareholders to assess the Company’s

performance, position, business model and strategy;

to review the adequacy and effectiveness of the Company’s ﬁnancial reporting and internal control policies

and procedures with respect to the Company’s record keeping, asset management and operations for the

identiﬁcation, assessment and reporting of risks;

to consider and make recommendations to the Board, to be put to Shareholders for approval at the AGM,

in relation to the appointment, re-appointment and removal and the provisions of non-audit services of the

external Auditor and to negotiate their remuneration and terms of engagement on audit and non-audit work;

to meet regularly with the external Auditor in order to review their proposed audit program and remit of work

and the subsequent Audit Report and to assess the effectiveness of the audit process; any issues arising

from the audit with respect to accounting or internal controls systems and the level of fees paid in respect

of audit and non-audit work; and

to annually assess the external Auditor’s independence, objectivity, effectiveness, resources and expertise.

Internal controls and risk management systems

The Board is responsible for ensuring that suitable systems of risk management and internal control are implemented,

including systems that include ﬁnancial controls to address ﬁnancial risks, by the third-party service providers and

keeping these systems under review to ensure their continuing adequacy.

The Directors have reviewed the BNP Paribas ISAE 3402 report (on the description of controls placed in operation,

their design and operating effectiveness for the period from 1 April 2022 to 31 March 2023) on Fund Administration

and the corresponding Bridging Letter up to 30 September 2023, and are pleased to note that no signiﬁcant issues

were identiﬁed.

In accordance with the FRC’s Internal Control: Guidance on Risk Management, Internal Control and Related Financial

and Business Reporting, and the FRC’s Guidance on Audit Committees, the Board conﬁrms that there is an on-going

process for identifying, evaluating and managing the signiﬁcant internal control risks faced by the Company.

As the Company does not have any employees it does not have a “whistle blowing” policy in place, however the

Board has reviewed the whistleblowing procedures of the Portfolio Manager with no issues noted. The Company

delegates its main administrative functions to third-party providers who report on their policies and procedures to

the Board.

The Board believes that as the Company delegates its day-to-day administrative operations to third-parties (which

are monitored by the Board), it does not require an internal audit function.

The Audit Committee met on two occasions in the year under review and the members’ attendance record can be

found on page 37 of this Annual Report.

Signiﬁcant risks in relation to the ﬁnancial statements

The Audit Committee views the valuation of the Company’s investments as a signiﬁcant risk.

There is a risk that the AIM listed investments are not valued appropriately in accordance with the requirements set

out in IFRS 13 due to the nature of the AIM market and the listed stocks not being highly liquid, or heavily traded.

The Audit Committee reviews the regular reports from the Portfolio Manager and Administrator regarding the

valuation of the investments and the Board reviews the NAV of the Company, together with the value and trading

volumes of investments on a regular basis. The Committee also considered the implications of the latest conﬂict

in the Middle East, the ongoing Ukraine conﬂict and the current political and economic environment, on both the

valuation and liquidity of the investment portfolio and concluded that it remained appropriate to estimate the fair

value of the Company’s ﬁnancial assets based on quoted prices (refer to note 2.3(c) for further details).

In addition to the above, the AIFM holds monthly risk committee meetings, where the Company’s risk measurement

framework is discussed, including market risk, credit risk, counterparty risk, operational risk and liquidity risk, in

reference to the investment portfolio and the Company performance thereof. The AIFM provides regular updates

and risk meeting minutes to the Board and is also asked to attend Audit Committee meetings by the Chair of the

Audit Committee to assist the Audit Committee in evaluating the appropriateness and robustness of the valuation

methodology applied to the investment portfolio.

External audit process

The Auditor was reappointed on 1 March 2023. The Audit Committee has direct access to the Company’s external

auditor and provides a forum through which the external auditor reports to the Board. Representatives of the Auditor

attend meetings of the Audit Committee at least twice each year.

The Audit Committee met with the Auditor prior to the commencement of the audit and agreed an audit plan that

would adopt a risk based approach. The Audit Committee and the Auditor agreed that audit procedures would be

performed over the title to and the existence of the Company’s investments and the procedures in place at the

Administrator and the Portfolio Manager in respect of the valuation of the Company’s investment portfolio would be

understood and evaluated.

Upon completion of the audit, the Audit Committee discussed with the Auditor the effectiveness of the audit and

considered the Auditor’s independence from the Company since their appointment and throughout the audit

process.The signiﬁcant risks regarding both fraud risk - management override of controls and valuation of the

investment portfolio, were tracked through the period and the Audit Committee challenged the work performed

by the Auditor to test management override of controls and in addition the audit work undertaken in respect of

valuations of investments held.

The Audit Committee was satisﬁed that during the audit of the Annual Financial Report for the year ended 30

September 2023, there had been appropriate focus and challenge on the signiﬁcant and other key areas of audit

risk and the Committee assessed the quality of the audit process to be good.

During the year ended 30 September 2023, in addition to the audit services in respect to the audit of the Company’s

Annual Financial Report, the Auditor provided non-audit services in respect of the review of the Company’s Half-

Year Report for the period ended 31 March 2023. No other non-audit services were provided during the year ended

30 September 2023.

To safeguard the objectivity and independence of the external Auditor from becoming compromised, the Committee

has a formal policy governing the engagement of the external Auditor to provide non-audit services. The external

Auditor and the Directors have agreed that all non-audit services require the pre-approval of the Audit Committee

prior to commencing any work. Fees for non-audit services will be tabled annually so that the Audit Committee can

consider the impact on the Auditor’s objectivity.

The fees for the audit services were: £64,550 for the audit for the year ended 30 September 2023 and the fees for

non-audit services were £23,000 for the review of the Company’s Half-Yearly Report for the period ended 31 March

2023. The Audit Committee has discussed the report provided by the Auditor and the Audit Committee is satisﬁed

as to the independence of the Auditor.

The Committee has reviewed the Auditor’s independence policies and procedures and considers that they are ﬁt

for purpose.

Appointment and independence

The Audit Committee considers the reappointment of the Auditor, including the rotation of the audit engagement

leader, and assesses their independence on an annual basis. The external Auditor is required to rotate the engagement

leader responsible for the Company’s audit every ﬁve years. Evgeniya Litvintseva took over as engagement leader

during the year ended 30 September 2022 and this is the second year she has overseen the audit of the Company.

The Committee reviews the objectivity and effectiveness of the audit process on an annual basis and considers

whether the Company should put the audit engagement out to tender.

Having completed a full and robust audit tender process during the year, the Committee provided the Board with its

recommendation that Grant Thornton Limited be appointed as the external auditor for the year ending 30 September

2024. A resolution proposing the appointment of Grant Thornton Limited as the external auditor will be put to

Shareholders at the 2024 AGM.

This Report of the Audit Committee was approved by the Board of Directors on 5 December 2023 and signed on

its behalf by:

Charlotte Denton

Audit Committee Chair

DIRECTORS’ STATEMENT OF RESPONSIBILITIES

The Directors are responsible for preparing ﬁnancial statements in accordance with The Companies (Guernsey) Law,

2008, as amended (“Companies Law”) and International Financial Reporting Standards (“IFRS”).

Companies Law requires the Directors to prepare ﬁnancial statements for each ﬁnancial year which give a true and

fair view of the state of affairs of the Company and of the proﬁt or loss for the year.

In preparing those ﬁnancial statements, the Directors are required to:

•

select suitable accounting policies and apply them consistently;

•

make judgements and estimates that are reasonable and prudent;

•

state whether applicable accounting standards have been followed, subject to any material departures

disclosed and explained in the ﬁnancial statements;

•

assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to

going concern; and

•

use the going concern basis of accounting unless they either intend to liquidate the Company or to cease

operations or have no realistic alternative but to do so.

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at

any time the ﬁnancial position of the Company and to enable them to ensure that the ﬁnancial statements comply

with Companies Law. The Directors are also responsible for safeguarding the assets of the Company and hence for

taking reasonable steps for the prevention and detection of fraud and other irregularities.

So far as the Directors are aware, there is no relevant audit information of which the Auditor is unaware, having taken

all the steps they ought to have taken to make themselves aware of any relevant audit information and to establish

that the Auditor is aware of that information.

In accordance with DTR 4.1.12, the Directors conﬁrm to the best of their knowledge that:

•

the ﬁnancial statements, which have been prepared in accordance with IFRS, give a true and fair view of the

assets, liabilities, ﬁnancial position and proﬁt of the Company; 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.

The Annual Financial Report and ﬁnancial statements, taken as a whole, are fair, balanced and understandable

and provide the information necessary for Shareholders to assess the Company's performance, position, business

model and strategy.

Andrew Chapman

Chairman

5 December 2023

Charlotte Denton

Audit Committee Chair

5 December 2023

DIRECTORS’ REMUNERATION REPORT

This report describes how the Board has applied the principles of the AIC Code relating to Directors’ remuneration.

An ordinary resolution to approve the Directors’ remuneration report will be proposed at the AGM on 7 March 2024.

Table of Directors Remuneration

The fees payable to directors are set for each calendar year in accordance with the policy set out below.

Director

Role

Annual Fee to 31

December 2022*

Annual Fee effective

1 January 2023

(approved post year-

end)*

Andrew Chapman

(due to retire 7 March 2024)

Chairman

£43,050

£44,126

Mark Hodgson

Non-executive Director

£27,675

£28,367

Trudi Clark

(retired 1 March 2023)

Non-executive Director

£27,675

£28,367

Charlotte Denton (appointed 1

September 2022)

Chair of the Audit

Committee

£32,800

£33,620

John Blowers

(appointed 1 August 2022)

Non-executive Director

£27,675

£28,367

Ted Holmes

(appointed 26 September 2023)

Non-executive Director

£28,367

* On 12 October 2023, the Board approved an increase in the annual basic Director fees of 2.5% effective from 1 January 2023.

No other remuneration or compensation was paid or is payable by the Company during the year to any of the

Directors and there has been no change to the Company’s remuneration policy as detailed below during the course

of the year.

No Director is entitled to receive any remuneration which is performance related.

Remuneration policy

The determination of the Directors’ fees is a matter for the Remuneration and Nomination Committee. The

Remuneration and Nomination Committee considers the remuneration policy annually to ensure that it remains

appropriately positioned. Members of this Committee will review the fees paid to the boards of Directors of similar

companies.

The Company’s policy is for the Directors to be remunerated in the form of fees, payable quarterly in arrears. No

Director has any entitlement to a pension, and the Company has not awarded any share options or long-term

performance incentives to any of the Directors.

Directors are authorised to claim reasonable expenses from the Company in relation to the performance of their

duties.

The Company’s policy is that the fees payable to the Directors should reﬂect the time spent by the Board on the

Company’s affairs and the responsibilities borne by the Directors and should be sufﬁcient to enable high calibre

candidates to be recruited. The policy is for the Chairman of the Board and Chair of the Audit Committee to be

paid a higher fee than the other Directors in recognition of their more onerous roles and more time spent. The

Remuneration and Nomination Committee may recommend the amendments to the level of remuneration paid

within the limits of the Company’s Articles of Incorporation.

In 2020, the Remuneration Committee recommended that Directors remuneration be increased annually by a

percentage equal to the Retail Prices Index, subject to a maximum annual increase of 2.5%. On 12 October 2023,

the Board approved an increase in the annual basic Director fees of 2.5% effective from 1 January 2023.

The Company’s Articles of Incorporation limits the aggregate fees payable to the Board of Directors to a total of

£165,000 per annum. The Company did not breach this limit for the year ended 30 September 2023.

Advisers to the Remuneration and Nomination Committee

The Board has not sought the advice or services by any outside person, at this time, in respect of its consideration

of the Directors’ remuneration, although the Board reviews Directors’ compensation in line with market trends.

Ensuring Directors fees remain in line with the market is important during this period of Board refreshment to ensure

that the Company continues to attract the most talented individuals.

John Blowers

Remuneration and Nomination Committee Chair

5 December 2023

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RIVER AND MERCANTILE UK MICRO CAP

INVESTMENT COMPANY LIMITED

Report on the audit of the ﬁnancial statements

Our opinion

In our opinion, the ﬁnancial statements give a true and fair view of the ﬁnancial position of River and Mercantile UK

Micro Cap Investment Company Limited (the “company”) as at 30 September 2023, and of its ﬁnancial performance

and its cash ﬂows for the year then ended in accordance with International Financial Reporting Standards and have

been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

What we have audited

The company’s ﬁnancial statements comprise:

•

the statement of ﬁnancial position as at 30 September 2023;

•

the statement of comprehensive income for the year then ended;

•

the statement of changes in shareholders’ equity for the year then ended;

•

the statement of cash ﬂows for the year then ended; and

•

the notes to the ﬁnancial statements, which include signiﬁcant accounting policies and other explanatory

information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under

those standards are further described in the

Auditor’s responsibilities for the audit of the ﬁnancial statements

section

of our report.

We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our opinion.

Independence

We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the

ﬁnancial statements of the company, as required by the Crown Dependencies’ Audit Rules and Guidance. We have

fulﬁlled our other ethical responsibilities in accordance with these requirements.

Material uncertainty related to going concern

We draw attention to note 2.1 to the ﬁnancial statements which indicates that the company is due to hold a

continuation vote at its Annual General Meeting in March 2024.This event or condition indicates that a material

uncertainty exists that may cast signiﬁcant doubt on the company’s ability to continue as a going concern. Our

opinion is not modiﬁed in respect of this matter.

Our audit approach

Overview

Audit scope

•

The Company is a closed-ended investment company, incorporated in Guernsey, whose ordinary shares

are admitted to trading with a premium listing on the Main Market of the London Stock Exchange.

•

We conducted our audit of the ﬁnancial statements in Guernsey, using information provided by BNP

Paribas S.A. Guernsey branch (the “Administrator”), River and Mercantile Asset Management LLP (the

“Portfolio Manager”) and Carne Global AIFM Solutions (C.I.) Limited (the “Alternative Investment Fund

Manager”) all to whom the board of directors has delegated the provision of certain functions.

•

We tailored the scope of our audit taking into account the types of investments within the company, the

accounting processes and controls, and the industry in which the company operates.

Key audit matters

•

Material uncertainty related to going concern.

•

Valuation of Financial Assets designated at fair value through proﬁt or loss (“Investments”).

Materiality

•

Overall materiality: £600k (2022: £578k) based on 1% of net assets.

•

Performance materiality: £450k (2022: £434k).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the

ﬁnancial statements. In particular, we considered where the directors made subjective judgements; for example,

in respect of signiﬁcant accounting estimates that involved making assumptions and considering future events

that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal

controls, including among other matters, consideration of whether there was evidence of bias that represented a

risk of material misstatement due to fraud.

Key audit matters

Key audit matters are those matters that, in the auditor’s professional judgement, were of most signiﬁcance in the

audit of the ﬁnancial statements of the current period and include the most signiﬁcant assessed risks of material

misstatement (whether or not due to fraud) identiﬁed by the auditor, including those which had the greatest effect

on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement

team. These matters, and any comments we make on the results of our procedures thereon, were addressed in

the context of our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon, and we do not

provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related

to going concern section, we have determined the matters described below to be the key audit matters to be

communicated in our report.

This is not a complete list of all risks identiﬁed by our audit.

Key audit matter

How our audit addressed the key audit matter

Valuation of Financial Assets designated

at fair value through proﬁt or loss

(“Investments”)

Investments of £59.6 million (note 8) held

at fair value through proﬁt or loss consist

mainly of equities in companies whose

securities are admitted to trading on the

Alternative Investment Market (“AIM”).

Investments are the main driver of the

company’s performance. There is a risk

that the investments are not valued in

accordance with the requirements of

IFRS 13, which requires investments to

be priced as quoted in an active market.

IFRS 13 deﬁnes an active market as a

market in which transactions for the asset

take place with sufﬁcient frequency and

volume to provide pricing information on

an ongoing basis.

We assessed the accounting policy for the Investments, as set out in note 2.3,

for compliance with IFRS.

We conﬁrmed our understanding and evaluated the internal control environment

in place at the Administrator over the valuation of the investment portfolio and

the production of the net asset value of the company. We also discussed the

asset selection and monitoring process with the Portfolio Manager.

We tested the valuation of the Investments by independently agreeing

100% of the prices used in the valuation to a third-party pricing provider and

recalculated the total valuation as at 30 September 2023.

We independently obtained and analysed each security’s trading volumes for

the 12 months of the ﬁnancial year ended 30 September 2023. We compared

that with the trading volume of the last 12 months ended 30 September

2022. For securities identiﬁed as having low trading volumes, relative to the

company’s holdings, further trading volume analysis post 30 September 2023

was also performed.

We independently obtained the custody conﬁrmation for the Investments and

reconciled to the company’s accounting records, without exception.

We have nothing to report to those charged with governance in respect of the

above procedures.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on

the ﬁnancial statements as a whole, taking into account the structure of the company, the accounting processes

and controls, the industry in which the company operates, and we considered the risk of climate change and the

potential impact thereof on our audit approach.

Materiality

The scope of our audit was inﬂuenced by our application of materiality. We set certain quantitative thresholds for

materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the

nature, timing and extent of our audit procedures on the individual ﬁnancial statement line items and disclosures and

in evaluating the effect of misstatements, both individually and in aggregate on the ﬁnancial statements as a whole.

Based on our professional judgement, we determined materiality for the ﬁnancial statements as a whole as follows:

Overall materiality

£600k (2022: £578k).

How we determined it

1% of net assets

Rationale for benchmark applied

We believe that net assets is the most appropriate

benchmark because this is the key metric of interest

to members of the company. It is also a generally

accepted measure used for companies in this industry.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of

uncorrected and undetected misstatements exceeds overall materiality. Speciﬁcally, we use performance materiality

in determining the scope of our audit and the nature and extent of our testing of account balances, classes of

transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2022:

75%) of overall materiality, amounting to £450k (2022: £434k) for the company’s ﬁnancial statements.

In determining the performance materiality, we considered a number of factors – the history of misstatements, risk

assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the higher

end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit above

£30,000 (2022: £28,900) as well as misstatements below that amount that, in our view, warranted reporting for

qualitative reasons.

Reporting on other information

The other information comprises all the information included in the Annual Financial Report (the “Annual Report”)

but does not include the ﬁnancial statements and our auditor’s report thereon. The directors are responsible for the

other information.

Our opinion on the ﬁnancial statements does not cover the other information and we do not express any form of

assurance conclusion thereon.

In connection with our audit of the ﬁnancial statements, our responsibility is to read the other information and, in

doing so, consider whether the other information is materially inconsistent with the ﬁnancial statements or our

knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have

performed, we conclude that there is a material misstatement of this other information, we are required to report that

fact. We have nothing to report based on these responsibilities.

Responsibilities for the ﬁnancial statements and the audit

Responsibilities of the directors for the ﬁnancial statements

As explained more fully in the Directors’ Statement of Responsibilities, the directors are responsible for the

preparation of the ﬁnancial statements that give a true and fair view in accordance with International Financial

Reporting Standards, the requirements of Guernsey law and for such internal control as the directors determine is

necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due

to fraud or error.

In preparing the ﬁnancial statements, the directors are responsible for assessing the company’s ability to continue

as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis

of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic

alternative but to do so.

Auditor’s responsibilities for the audit of the ﬁnancial statements

Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in aggregate, they could reasonably be expected to inﬂuence the economic

decisions of users taken on the basis of these ﬁnancial statements.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using

data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than

testing complete populations. We will often seek to target particular items for testing based on their size or risk

characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population

from which the sample is selected.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional

scepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the ﬁnancial statements, whether due to fraud or error,

design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufﬁcient

and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting

from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional

omissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of

the company’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates

and related disclosures made by the directors.

•

Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based

on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may

cast signiﬁcant doubt on the company’s ability to continue as a going concern over a period of at least twelve

months from the date of approval of the ﬁnancial statements. If we conclude that a material uncertainty

exists, we are required to draw attention in our auditor’s report to the related disclosures in the ﬁnancial

statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the

audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may

cause the company to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the ﬁnancial statements, including the disclosures,

and whether the ﬁnancial statements represent the underlying transactions and events in a manner that

achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and

timing of the audit and signiﬁcant audit ﬁndings, including any signiﬁcant deﬁciencies in internal control that we

identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other matters that may

reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of

most signiﬁcance in the audit of the ﬁnancial statements of the current period and are therefore the key audit

matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about

the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in

our report because the adverse consequences of doing so would reasonably be expected to outweigh the public

interest beneﬁts of such communication.

Use of this report

This report, including the opinions, has been prepared for and only for the members as a body in accordance with

Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions,

accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into

whose hands it may come save where expressly agreed by our prior consent in writing.

Report on other legal and regulatory requirements

Company Law exception reporting

Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:

•

we have not received all the information and explanations we require for our audit;

•

proper accounting records have not been kept; or

•

the ﬁnancial statements are not in agreement with the accounting records.

We have no exceptions to report arising from this responsibility.

Corporate governance statement

The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability

and that part of the corporate governance statement relating to the company’s compliance with the provisions of

the UK Corporate Governance Code speciﬁed for our review. Our additional responsibilities with respect to the

corporate governance statement as other information are described in the Reporting on other information section

of this report.

The company has reported compliance against the 2019 AIC Code of Corporate Governance (the “Code”) which

has been endorsed by the UK Financial Reporting Council as being consistent with the UK Corporate Governance

Code for the purposes of meeting the company’s obligations, as an investment company, under the Listing Rules

of the FCA.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the

corporate governance statement is materially consistent with the ﬁnancial statements and our knowledge obtained

during the audit, and we have nothing material to add or draw attention to in relation to:

•

The directors’ conﬁrmation that they have carried out a robust assessment of the emerging and principal

risks;

•

The disclosures in the Annual Report that describe those principal risks, what procedures are in place to

identify emerging risks and an explanation of how these are being managed or mitigated;

•

The directors’ statement in the ﬁnancial statements about whether they considered it appropriate to adopt

the going concern basis of accounting in preparing them, and their identiﬁcation of any material uncertainties

to the company’s ability to continue to do so over a period of at least twelve months from the date of approval

of the ﬁnancial statements;

•

The directors’ explanation as to their assessment of the company’s prospects, the period this assessment

covers and why the period is appropriate; and

• The directors’ statement as to whether they have a reasonable expectation that the company will be able to

continue in operation and meet its liabilities as they fall due over the period of its assessment, including any

related disclosures drawing attention to any necessary qualiﬁcations or assumptions.

Our review of the directors’ statement regarding the longer-term viability of the company was substantially less in

scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their

statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering

whether the statement is consistent with the ﬁnancial statements and our knowledge and understanding of the

company and its environment obtained in the course of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following

elements of the corporate governance statement is materially consistent with the ﬁnancial statements and our

knowledge obtained during the audit:

•

The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and

understandable, and provides the information necessary for the members to assess the company’s position,

performance, business model and strategy;

•

The section of the Annual Report that describes the review of effectiveness of risk management and internal

control systems; and

•

The section of the Annual Report describing the work of the Audit Committee.

We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the

company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code

speciﬁed under the Listing Rules for review by the auditors.

Evgeniya Litvintseva

For and on behalf of PricewaterhouseCoopers CI LLP

Chartered Accountants and Recognised Auditor

Guernsey, Channel Islands

5 December 2023

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2023

Year ended

30 September 2023

Year ended

30 September 2022

Notes

Income

Investment income

818,176

847,006

Net gain/(loss) on ﬁnancial assets

designated at fair value through proﬁt

or loss

2,468,544

(54,004,763)

Total income

3,286,720

(53,157,757)

Expenses

Portfolio performance fees recovery

897,281

Portfolio management fees

(458,720)

(630,785)

Operating expenses

(625,709)

(589,580)

Foreign exchange gains

3,157

34,015

Total expenses

(1,081,272)

(289,069)

Proﬁt/(loss) before taxation

2,205,448

(53,446,826)

Taxation

Proﬁt/(loss) after taxation and total

comprehensive income/(loss)

2,205,448

(53,446,826)

Basic and diluted proﬁt/(loss) per

Ordinary Share

0.0651

(1.5767)

The Company has no items of other comprehensive income, and therefore the proﬁt after taxation for the year is also

the total comprehensive income.

All items in the above statement are derived from continuing operations. No operations were acquired or discontinued

during the year.

The notes on pages 56 to 72 form an integral part of these ﬁnancial statements.

30 September

2023

30 September

2022

Notes

Non-current assets

Financial assets designated at fair

value through proﬁt or loss

59,625,665

56,027,223

Current assets

Cash and cash equivalents

415,330

2,289,617

Other receivables and prepayments

260,403

92,681

Total current assets

675,733

2,382,298

Total assets

60,301,398

58,409,521

Current liabilities

Trade payables – securities

purchased awaiting settlement

(52,843)

(433,561)

Other payables and accruals

(203,366)

(136,219)

Total current liabilities

(256,209)

(569,780)

Total liabilities

(256,209)

(569,780)

Net assets

60,045,189

57,839,741

Capital and reserves

Stated capital

Retained earnings

60,045,189

57,839,741

Equity Shareholders’ funds

60,045,189

57,839,741

STATEMENT OF FINANCIAL POSITION

As at 30 September 2023

The ﬁnancial statements on pages 52 to 72 were approved and authorised for issue by the Board of Directors on 5

December 2023 and signed on its behalf by:

Andrew Chapman

Chairman

Charlotte Denton

Audit Committee Chair

The notes on pages 56 to 72 form an integral part of these ﬁnancial statements.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the year ended 30 September 2023

Stated capital

Retained earnings

Total

Opening equity Shareholders’

funds at 1 October 2022

57,839,741

Total comprehensive income for

the year

2,205,448

Closing equity Shareholders’

funds at 30 September 2023

60,045,189

For the year ended 30 September 2022

Stated capital

Retained earnings

Total

Opening equity Shareholders’

funds at 1 October 2021

111,286,567

Total comprehensive loss for the

year

(53,446,826)

Closing equity Shareholders’

funds at 30 September 2022

57,839,741

The notes on pages 56 to 72 form an integral part of these ﬁnancial statements.

Year ended

30 September

2023

Year ended

30 September

2022

Notes

Cash ﬂow from operating activities

Proﬁt/(loss) after taxation and total comprehensive proﬁt/(loss)

2,205,448

(53,446,826)

Adjustments to reconcile proﬁt after taxation to net cash ﬂows:

- Realised loss on ﬁnancial assets designated at fair value

through proﬁt or loss

7,993,136

1,352,009

- Unrealised (gain)/loss on ﬁnancial assets designated at fair

value through proﬁt or loss

(10,461,680)

52,652,754

Purchase of ﬁnancial assets designated at fair value through

proﬁt or loss

(11,959,171)

(18,456,591)

Proceeds from sale of ﬁnancial assets designated at fair value

through proﬁt or loss

10,448,555

10,983,393

Changes in working capital

Increase in other receivables and prepayments

(167,722)

(14,296)

Increase/(decrease) in other payables

67,147

(937,383)

Net cash used in operating activities

(1,874,287)

(

7,866,940)

Net decrease in cash and cash equivalents in the year

(1,874,287

)

(7,866,940)

Cash and cash equivalents at the beginning of the year

2,289,617

10,156,557

Cash and cash equivalents at the end of the year

415,330

2,289,617

- Payables outstanding at 30 September 2023 relating to purchases of ﬁnancial assets designated at fair value through proﬁt or loss amounted to

£52,843 (30 September 2022: £433,561).

The notes on pages 56 to 72 form an integral part of these ﬁnancial statements.

STATEMENT OF CASH

FLOWS

For the year ended 30 September 2023

NOTES TO THE FINANCIAL STATEMENTS

1. General information

The Company was incorporated as a non-cellular company with liability limited by shares in Guernsey under The

Companies (Guernsey) Law, 2008 (the “Companies Law”) on 2 October 2014. It listed its Ordinary Shares on the

Premium Segment of the Ofﬁcial List as maintained by the FCA and was admitted to trading on the Main Market of

the London Stock Exchange on 2 December 2014.

The Company has been registered by the GFSC as a registered closed-ended collective investment scheme

pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 2020, as amended, and the RCIS Rules. The

Company registered number is 59106.

The Company’s registered address is BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey, GY1 1WA.

2. Accounting policies

The principal accounting policies applied in the preparation of these ﬁnancial statements are set out below. These

policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

a) Statement of Compliance

The ﬁnancial statements have been prepared in accordance with the Companies Law and with International

Financial Reporting Standards (“IFRS”) which comprise standards and interpretations approved by the International

Accounting Standards Board (“IASB”), and interpretations issued by the IFRS Interpretations Committee (“IFRIC”)

as approved by the International Accounting Standards Committee (“IASC”) which remain in effect. The ﬁnancial

statements give a true and fair view of the Company’s affairs and comply with the requirements of the Companies

Law.

The ﬁnancial statements have been prepared under a going concern basis. The Company’s Corporate Broker is in

regular contact with a range of Shareholders and has advised the Board that in their opinion Shareholders would

support the Continuation Resolution to be tabled at the AGM in 2024. The Board notes the Continuation Resolution

represents a material uncertainty but is conﬁdent that the resolution will be passed by Shareholders. The Directors

are satisﬁed that, at the time of approving the ﬁnancial statements, no other material uncertainties exist that may cast

signiﬁcant doubt concerning the Company’s ability to continue for the foreseeable future. The Directors consider it

appropriate to adopt the going concern basis in preparing the ﬁnancial statements.

b) Basis of measurement

These ﬁnancial statements have been prepared on a historical cost basis adjusted to take account of the revaluation

of ﬁnancial assets designated at fair value through proﬁt or loss.

c) Functional and presentation currency

The Company’s functional currency is Pound Sterling, which is the currency of the primary economic environment

in which it operates. The Company’s performance is evaluated and its liquidity is managed in Pound Sterling.

Pound Sterling is therefore considered as the currency that most faithfully represents the economic effects of the

underlying transactions, events and conditions. The ﬁnancial statements are presented in Pound Sterling.

d) Critical accounting assumptions, estimates and judgements

The preparation of the ﬁnancial statements in conformity with IFRS, requires the Company to make judgements,

estimates and assumptions that affect items reported in the Statement of Financial Position and Statement of

Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the ﬁnancial statements.

It also requires management to exercise its judgement in the process of applying the Company’s accounting policies.

Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to

the carrying amount of assets or liabilities affected in future periods.

The Directors have used their judgement to determine that the functional currency is Pound Sterling (refer to note

2.1 (c) above) and that all ﬁnancial assets designated at fair value through proﬁt or loss are traded within an active

market (note 2.3(c) below).

The Directors have determined that an active market exists for the Company’s ﬁnancial assets based on the

frequency and volume of transactions of each asset. As all the Company’s ﬁnancial assets are quoted securities

which are traded in active markets as at 30 September 2023, in the opinion of the Directors, the quoted price for the

ﬁnancial assets as at 30 September 2023 is representative of fair value.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. Accounting policies (continued)

2.1 Basis of preparation (continued)

e) New standards, amendments and interpretations

Standards and amendments to existing standards that became effective during the year are detailed below.

Effective for periods beginning on or

after

IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors

- amendments regarding the deﬁnition of accounting estimates.

1 January 2023

Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of

accounting policies.

1 January 2023

The IAS 8 amendments introduce a new deﬁnition for accounting estimates: clarifying that they are monetary

amounts in the ﬁnancial statements that are subject to measurement uncertainty. The amendments also clarify

the relationship between accounting policies and accounting estimates by specifying that a company develops an

accounting estimate to achieve the objective set out by an accounting policy. The deﬁnition of accounting policies

remains unchanged. The Directors do not believe that the application of this amendment will have a material impact

on the Company’s audited ﬁnancial statements.

The amendments to IAS 1 and IFRS Practice Statement 2 are intended to help preparers in deciding which

accounting policies to disclose in their ﬁnancial statements. The Directors do not believe that the application of

these amendments will have a material impact on the Company’s audited ﬁnancial statements.

During the year, a number of other amendments and interpretations became applicable for the current reporting

period, which are not relevant to the Company’s operations.

Standards,

amendments

and

interpretations

issued

but

not

yet

effective

Detailed below are new standards, amendments and interpretations to existing standards that have been issued,

but are not yet effective. They are not relevant to the Company’s operations and have not been early adopted by

the Company:

Effective for periods beginning on

or after

IAS 1 - Classiﬁcation of liabilities as current or non-current.

1 January 2024

The amendments to IAS 1 in relation to classiﬁcation of liabilities as current or non-current clarify how an entity

classiﬁes debt and other ﬁnancial liabilities as current or non-current in particular circumstances. The Directors do

not believe that the application of this amendment will have a material impact on the Company’s audited ﬁnancial

statements.

2.2 Foreign currency translations

Foreign exchange gains and losses resulting from the settlement of transactions in foreign currencies and from the

translation of monetary assets and liabilities at year end exchange rates to Pound Sterling are recognised in the

Statement of Comprehensive Income as foreign exchange gains.

Non-monetary items such as ﬁnancial assets designated at fair value through proﬁt or loss measured at fair value

in a foreign currency, are translated using exchange rates at the Statement of Financial Position date when the fair

value was determined. Effects of exchange rate changes on non-monetary items measured at fair value on a foreign

currency are recorded as part of the fair value gain or loss.

As at 30 September 2023, all ﬁnancial assets designated at fair value through proﬁt or loss are held in Pound Sterling.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. Accounting policies (continued)

2.3 Financial instruments

Financial Assets

a) Classiﬁcation

The Company classiﬁes its investments in equity securities as ﬁnancial assets designated at fair value through proﬁt

or loss as they are held for investment purposes. These ﬁnancial assets are managed, and their performance is

evaluated on a fair value basis in accordance with the Company’s documented investment strategy.

The Company’s policy requires the Portfolio Manager and the Board of Directors to evaluate the information about

these ﬁnancial assets on a fair value basis together with other related ﬁnancial information. Furthermore, these

ﬁnancial assets do not possess contractual cash ﬂows. Financial assets also include cash and cash equivalents as

well as trade receivables and other receivables which are classiﬁed at amortised cost using the effective interest

rate method.

b) Recognition, measurement and derecognition

Purchases and sales of investments are recognised on the trade date – the date on which the Company commits to

purchase or sell the investment. Financial assets designated at fair value through proﬁt or loss are measured initially

at fair value. Transaction costs are expensed as incurred and movements in fair value are recorded in the Statement

of Comprehensive Income. Subsequent to initial recognition, all ﬁnancial assets designated at fair value through

proﬁt or loss are measured at fair value.

Cash and cash equivalents, trade receivables, other receivables and prepayments are classiﬁed at amortised cost.

These ﬁnancial assets are initially recognised at fair value plus transaction costs and subsequently measured at

amortised cost.

Financial assets are derecognised when the rights to receive cash ﬂows from the investments have expired or the

Company has transferred substantially all risks and rewards of ownership.

c) Fair value estimation

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

As at 30 September 2023, the Company held investments in a diversiﬁed portfolio of UK micro-cap companies,

typically comprising companies with a free ﬂoat market capitalisation of less than £100 million at the time of purchase,

whose securities are admitted to trading on AIM or the main market of the London Stock Exchange. Investments are

valued at fair value, which are quoted bid prices for investments traded in active markets.

d) Valuation process

The Directors are in ongoing communications with the Portfolio Manager and hold meetings on a timely basis to

discuss performance of the investment portfolio and the valuation methodology and in addition review monthly

investment performance reports.

The Directors analyse the investment portfolio in terms of both investment mix and fair value hierarchy and consider

the impact of general credit conditions and/or events that occur in the global corporate environments which may

impact the economic conditions in the UK and ultimately on the valuation of the investment portfolio.

Financial liabilities

a) Classiﬁcation

Securities purchased awaiting settlement represent payables for investments that have been contracted for but

not yet settled or delivered on 30 September 2023. Financial liabilities include amounts due to brokers and other

payables which are held at amortised cost using the effective interest rate method.

b) Recognition, measurement and derecognition

Financial liabilities are recognised initially at fair value, net of transaction costs incurred and are subsequently carried

at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation

speciﬁed in the contract is discharged, cancelled or expires.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. Accounting policies (continued)

2.4 Investment income

Dividends receivable on equity shares are recognised as revenue for the period on an ex-dividend basis and net

of withholding taxes, as the withholding taxes are deducted at source and are not a tax on proﬁts. Interest income

and expenses are recognised in the Statement of Comprehensive Income using the effective interest rate method.

2.5 Expenses

Expenses are recognised on an accruals basis and are recognised in the Statement of Comprehensive Income.

2.6 Cash and cash equivalents

Cash includes cash at bank. Cash equivalents are short term, highly liquid investments with original maturities of

three months or less that are readily convertible to known amounts of cash and are subject to an insigniﬁcant risk

of changes in value.

2.7 Trade receivables and trade payables

Trade receivables and payables represent securities sold and securities purchased, respectively, that have been

contracted for but not yet settled or delivered on the Statement of Financial Position date.

These amounts are recognised initially at fair value and subsequently measured at amortised cost. At each period

end, the Company measures the loss allowance on trade receivables at an amount equal to the lifetime expected

credit losses if the credit risk has increased signiﬁcantly since initial recognition. If, the credit risk has not increased

signiﬁcantly since initial recognition, the Company will measure the loss allowance at an amount equal to 12-month

expected credit losses.

Signiﬁcant ﬁnancial difﬁculties of the broker, probability that the broker will enter bankruptcy or ﬁnancial reorganisation

and default in payments are all considered indicators that a loss allowance may be required. A signiﬁcant increase in

credit risk is deﬁned by the Directors as any contractual payment which is more than 30 days past due.

2.8 Segmental reporting

The Directors view the operations of the Company as one operating segment, being investment in UK micro-

cap companies. All signiﬁcant operating decisions are based upon analysis of the Company’s investments as one

segment. The ﬁnancial results from this segment are equivalent to the ﬁnancial results of the Company as a whole,

which are evaluated regularly by the chief operating decision-maker (the Board with insight from the Portfolio

Manager).

2.9 Contingent liabilities and provisions

A contingent liability is a possible obligation depending on whether some uncertain future event occurs; or a present

obligation but payment is not probable or the amount cannot be measured reliably. A provision is recognised when:

the Company has a present legal or constructive obligation as a result of past events;

it is probable that an outﬂow of resources will be required to settle the obligation; and

the amount has been reliably estimated.

2.10 Taxation

The Company has applied for and been granted exemption from liability to income tax in Guernsey under the

Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 as amended by the Director of Income Tax in Guernsey

for the current period. Exemption must be applied for annually and will be granted, subject to the payment of an

annual fee, which is currently ﬁxed at £1,200 per applicant, provided the Company qualiﬁes under the applicable

legislation for exemption.

It is the intention of the Directors to conduct the affairs of the Company so as to ensure that it continues to qualify

for exempt company status for the purposes of Guernsey taxation.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. Accounting policies (continued)

2.11 Stated capital

Ordinary Shares are classiﬁed as equity in accordance with IAS 32 – “Financial Instruments: Presentation” as

these instruments include no contractual obligation to deliver cash and the Company is not obligated to apply the

redemption mechanism.

Costs directly attributable to the issue of new Ordinary Shares and redemption of existing Ordinary Shares are

shown in equity as a deduction from the proceeds.

Please refer to note 12 for details regarding the redemption mechanism of Ordinary Shares.

2.12 Capital risk management

The Board deﬁnes capital as ﬁnancial resources available to the Company. The Company’s capital as at 30 September

2023 comprises its retained earnings at a total of £60,045,189 (30 September 2022: £57,839,741).

The Company’s objectives when managing capital are to:

safeguard the Company’s ability to continue as a going concern;

provide returns for Shareholders; and

maintain an optimal capital structure to minimise the cost of capital.

The Board monitors the capital adequacy of the Company on an on-going basis and all three of the Company’s

objectives regarding capital management have been met. The Company has no imposed capital requirements.

3. Investment income

Year ended

30 September

2023

Year ended

30 September

2022

Dividend income

780,431

836,749

Bank interest

37,745

10,257

Total investment income

818,176

847,006

Net of withholding taxes of £74,111 (30 September 2022: £66,616).

4. Portfolio management and performance fees

On 3 November 2014, the Company signed an Investment Management Agreement (the “IMA”) with the AIFM

and the Portfolio Manager, whereby the AIFM delegated to the Portfolio Manager overall responsibility for the

discretionary management of the Company assets in accordance with the Company’s investment objective and

policy.

The AIFM or the Portfolio Manager may voluntarily terminate the IMA by providing six months’ notice in writing. The

AIFM’s power to terminate the appointment of the Portfolio Manager under the IMA may only be exercised under

the direction of the Board and the AIFM has agreed to comply with the instructions of the Board as regards to any

proposed termination of the Portfolio Manager’s appointment.

Under the IMA, the Portfolio Manager is entitled to receive a base fee and performance fee. The Portfolio Manager

base fee is payable monthly in arrears at a rate of one-twelfth of 0.75% of NAV. During the year ended 30 September

2023, the Company incurred management fees expense of £458,720 (30 September 2022: £630,785).

A performance fee equal to 15% of the amount by which the Company’s NAV outperforms the total return on the

Comparative Index over a performance period will be payable to the Portfolio Manager upon a redemption.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4. Portfolio management and performance fees (continued)

The performance period is the period between two redemptions, being the ﬁrst business day after the calculation

date, (referable to the earlier redemption (opening date)), and the end day of the calculation date (referable to the

later redemption (closing date)). The ﬁrst opening date was the date of admission and in circumstances in which

a performance fee may be payable upon termination of this Agreement, the ﬁnal closing date shall be the date in

which the agreement is terminated. The calculation date is the date determined by the Board for the calculation of

the price to be paid on any particular exercise of the redemption mechanism.

The performance fee is only paid when the Company implements the redemption mechanism as detailed in note 12.

During the year ended 30 September 2023, no performance fees were accrued or paid by the Company (30

September 2022: recovery of £897,281). Refer to the Financial Highlights and Performance Summary for details of

the Company’s previous redemptions on page 4.

5. Operating expenses

Year ended

30 September

2023

Year ended

30 September

2022

Administration fees

134,565

129,545

Directors’ fees

144,687

134,199

AIFM fees

58,000

Audit fees

64,550

57,000

Non-audit fees

23,000

21,500

Transaction fees

17,988

23,121

Broker fees

40,000

39,889

Custody fees

13,418

16,588

Registrar fees

27,882

21,056

Legal and professional fees

6,218

11,275

Sundry expenses

95,401

77,407

Total operating expenses

625,709

589,580

Non-audit fees

Non-audit fees incurred during the years ended 30 September 2023 and 30 September 2022 related to interim

review services.

AIFM fee

On 21 October 2014, the Company signed an AIFM agreement, which was subsequently amended on 1 September

2020. The AIFM is entitled to an annual ﬁxed fee of £58,000 per annum payable quarterly in arrears.

The AIFM agreement can be terminated by either the Company or the AIFM by giving the other not less than ninety

days’ written notice or on immediate notice on the occurrence of certain “cause” events.

Custody fee

On 21 October 2014, the Company signed a Global Custody Agreement with the AIFM and the Administrator,

whereby the Company appointed the Administrator to carry out custodian services. In its role as custodian, the

Administrator is entitled to a fee payable by the Company on a transaction by transaction and ad-valorem fee basis.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5. Operating expenses (continued)

Registrar fee

The Company’s registrar is Computershare Investor Services (Guernsey) Limited. The registrar is entitled to an

annual maintenance fee plus disbursements.

Administration fee

On 21 October 2014, the Company signed an agreement with the Administrator to provide administrative, compliance

oversight and company secretarial services to the Company. The Administrator is entitled to a minimum annual ﬁxed

fee paid monthly in arrears. Ad hoc other administration services are chargeable on a time cost basis. In addition,

the Company will reimburse the Administrator for any out of pocket expenses.

Broker fee

Singer Capital Markets Advisory LLP (“Singer”) provide corporate stockbroker and ﬁnancial adviser services to the

Company, as the Company’s sole broker. Singer is entitled to a fee payable by the Company of £40,000 per annum

payable quarterly in advance.

6. Directors’ fees and interests

Directors’ fees are listed in the Directors’ Remuneration Report on page 44.

No pension contributions were payable in respect of the Directors. Directors’ fees were increased post year end,

refer to note 16 for further details.

The Directors held the following number of Ordinary Shares in the Company:

Director

Ordinary Shares held

30 September 2023

30 September 2022

Andrew Chapman

15,009

Trudi Clark

n/a

8,353

Mark Hodgson

7,721

Charlotte Denton

15,350

John Blowers

5,653

1,772

Ted Holmes

12,970

n/a

Trudi Clark retired as a Director on 1 March 2023.

Ted Holmes was appointed as a Director on 26 September 2023.

7. Other receivables

30 September

2023

30 September

2022

Dividend receivable

252,144

78,450

Prepayments

8,234

7,348

Interest and other receivable

6,883

Total other receivables

260,403

92,681

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Other receivables (continued)

The Directors believe that these balances are fully recoverable and therefore have not recognised any loss allowance

on 12-month expected credit losses.

8. Financial assets designated at fair value through proﬁt or loss

The Company has invested in a portfolio of UK micro-cap companies in line with its investment strategy. These

investments are comprised of companies whose securities are admitted to trading on the AIM, with a free ﬂoat

market capitalisation of less than £100 million at the time of purchase.

Fair value hierarchy

IFRS 13 ‘Fair Value Measurement’ requires an analysis of investments valued at fair value based on the reliability and

signiﬁcance of information used to measure their fair value.

The Company categorises its ﬁnancial assets according to the following fair value hierarchy detailed in IFRS 13 that

reﬂects the signiﬁcance of the inputs used in determining their fair values:

Level 1:

Quoted market price (unadjusted) in an active market for an identical instrument.

Level 2:

Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived

from prices). This category includes instruments valued using: quoted market prices in active markets for similar

instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or

other valuation techniques where all signiﬁcant inputs are directly or indirectly observable from market data.

Level 3

: Valuation techniques using signiﬁcant unobservable inputs. This category includes all instruments where

the valuation technique includes inputs not based on observable data and the unobservable variable inputs have a

signiﬁcant effect on the instrument's valuation. This category includes instruments that are valued based on quoted

prices for similar instruments where signiﬁcant unobservable adjustments or assumptions are required to reﬂect

differences between the instruments.

30 September 2023

Level 1

Level 2

Level 3

Total

Financial assets

Financial assets designated at

fair value through proﬁt or loss

59,625,665

30 September 2022

Level 1

Level 2

Level 3

Total

Financial assets

Financial assets designated at

fair value through proﬁt or loss

56,027,223

Financial assets designated at fair value through proﬁt or loss reconciliation

The table on the following page shows a reconciliation of all movements in the fair value of ﬁnancial assets categorised

within Level 1 to 3 between the beginning and the end of the reporting period.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

30 September 2023

Level 1

Level 2

Level 3

Total

Opening valuation

56,027,223

Purchases during the year

11,578,453

Sales - proceeds during the year

(10,448,555)

Realised

loss

ﬁnancial

assets designated at fair value

through proﬁt or loss

(7,993,136)

Unrealised gain on ﬁnancial

assets designated at fair value

through proﬁt or loss

10,461,680

Closing valuation

59,625,665

Total net gain on ﬁnancial

assets for the year ended 30

September 2023

2,468,544

During the year ended 30 September 2023, there were no reclassiﬁcations between levels of the fair value hierarchy.

30 September 2022

Level 1

Level 2

Level 3

Total

Opening valuation

102,125,227

Purchases during the year

18,890,152

Sales - proceeds during the year

(10,983,393)

Realised

loss

ﬁnancial

assets designated at fair value

through proﬁt or loss

(1,352,009)

Unrealised loss on ﬁnancial

assets designated at fair value

through proﬁt or loss

(52,652,754)

Closing valuation

56,027,223

Total net loss on ﬁnancial

assets for the year ended 30

September 2022

(54,004,763)

During the year ended 30 September 2022, there were no reclassiﬁcations between levels of the fair value hierarchy.

Please refer to note 2.3 for valuation methodology of ﬁnancial assets designated at fair value through proﬁt or loss.

8. Financial assets designated at fair value through proﬁt or loss (continued)

Financial assets designated at fair value through proﬁt or loss reconciliation(continued)

Realised loss on ﬁnancial assets designated at fair value through proﬁt or loss is made up of £2,586,526 gain and £(10,579,662) loss.

Unrealised gain on ﬁnancial assets designated at fair value through proﬁt or loss is made up of £16,414,946 gain and £(5,953,266) loss.

Realised loss on ﬁnancial assets designated at fair value through proﬁt or loss is made up of £3,109,290 gain and £(4,461,299) loss.

Unrealised loss on ﬁnancial assets designated at fair value through proﬁt or loss is made up of £1,738,932 gain and £(54,391,686) loss.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

8. Financial assets designated at fair value through proﬁt or loss (continued)

Financial assets designated at fair value through proﬁt or loss reconciliation (continued)

During the year ended 30 September 2022, there were no reclassiﬁcations between levels of the fair value hierarchy.

Please refer to note 2.3 for valuation methodology of ﬁnancial assets designated at fair value through proﬁt or loss.

As at 30 September 2023 and 30 September 2022, none of the investments held are deemed to be illiquid in nature

and on this basis are not subject to any special arrangements.

9. Financial risk management

The Company’s activities expose it to a variety of ﬁnancial risks; market risk (including price risk, interest rate risk

and foreign currency risk), credit risk and liquidity risk.

9.1 Market risk

a) Price risk

Price risk is the risk that the Company’s performance will be adversely affected by changes in the markets in which

it invests.

As at 30 September 2023, the Company held investments in a diversiﬁed portfolio of UK micro-cap companies,

comprising companies with a free ﬂoat market capitalisation of less than £100 million at the time of purchase. The

relatively small market capitalisation of micro-cap companies can make the market in their shares illiquid. Therefore

prices of UK micro-cap companies are often more volatile than prices of larger capitalisation stocks, and even small

cap companies.

While the Company does not include any speciﬁc limits placed on exposures to any industry sector, the Company

does have investment limits and risk diversiﬁcation policies in place to mitigate market and concentration risk.

Investments limits in place include:

•

the number of holdings in the investment portfolio will usually range from 30 to 50.

•

no exposure in any investee company will exceed 10% of NAV at the time of the investment.

However, any signiﬁcant event which affects a speciﬁc industry sector in which the investment portfolio has a

signiﬁcant holding could materially and adversely affect the performance of the Company. To mitigate market risk,

the Board and Portfolio Manager actively monitor market prices throughout the ﬁnancial period and meet regularly

in order to consider investment strategy.

Please refer below for sensitivity analysis on the impact on the Statement of Comprehensive Income and NAV of the

Company, if the fair value of the investments designated at fair value through proﬁt or loss at the year end increased

or decreased by 25% (30 September 2022: 25%):

30 September 2023

Increase by 25%

Decrease by 25%

Financial assets

Financial assets designated at fair value through

proﬁt or loss

59,625,665

14,906,416

(14,906,416)

30 September 2022

Increase by 25%

Decrease by 25%

Financial assets

Financial assets designated at fair value through

proﬁt or loss

56,027,223

14,006,806

(14,006,806)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9. Financial risk management (continued)

9.1 Market risk (continued)

a) Price risk (continued)

The Directors consider a 25% (30 September 2022: 25%) movement to be reasonable given their assessment of

the volatility of the AIM market during the year ended 30 September 2023. The above calculations are based on the

investment valuation at the Statement of Financial Position date and are not representative of the period as a whole

and may not be reﬂective of future market conditions.

The Investment Manager’s S-PVT scoring for sustainability is used to rate all the Company’s investments from S1

to S4. Investments categorised S1 and S2 have solid sustainability characteristics, investments categorised S3

require sustainability improvement and investments categorised S4 would represent a sustainability barrier to value

creation. The ESG risk for the Company is currently evaluated to be minimal from a ﬁnancial materiality perspective.

As at 30 September 2023, investments categorised S1 represent 22.3%, S2 represent 70.8% and S3 represent

6.9%, of the Company’s NAV. The Company does not hold any investments in the S4 category. Further details on

the S-PVT scoring for sustainability can be found in the Portfolio Managers Report.

b) Interest rate risk

Interest rate risk is the risk that the fair value of ﬁnancial instruments and related income from cash and cash

equivalents will ﬂuctuate due to changes in market interest rates. The majority of the Company’s interest rate

exposure arises on the level of income receivable on cash deposits. Financial assets designated at fair value through

proﬁt or loss are equity investments and therefore the valuation of these investments and income receivable is not

directly exposed to interest rate risk.

The Company has not had any borrowings during the year (30 September 2022: £nil). The table below details the

Company’s exposure to interest rate risks:

30 September 2023

Interest bearing

(*)

Non-interest

bearing

Total

Assets

Financial assets designated at fair value through

proﬁt or loss

59,625,665

Cash and cash equivalents

415,350

415,330

Other receivables (excluding prepayments)

252,169

Total assets

415,330

59,877,834

60,293,164

Liabilities

Trade payables – securities purchased awaiting

settlement

(52,843)

Other payables

(203,366)

Total liabilities

(256,209)

Total interest sensitivity gap

415,330

59,621,625

60,036,955

* - ﬂoating rate and due within 1 month

30 September 2022

Interest bearing

(*)

Non-interest

bearing

Total

Assets

Financial assets designated at fair value through

proﬁt or loss

56,027,223

Cash and cash equivalents

2,289,617

Other receivables (excluding prepayments)

85,333

Total assets

2,289,617

56,112,556

58,402,173

Liabilities

Trade payables – securities purchased awaiting

settlement

(433,561)

Other payables

(136,219)

Total liabilities

(569,780)

Total interest sensitivity gap

2,289,617

55,542,776

57,832,393

* - ﬂoating rate and due within 1 month

Interest rate sensitivity analysis

If interest rates had changed by 100 basis points (“BP”) (30 September 2022: 100 BP), considered to be a reasonable

illustration based on observation of current market conditions, with all other variables remaining constant, the effect

on the net proﬁt for the year would be as detailed below:

30 September

2023

30 September

2022

Increase of 100 BP

(30 September 2022: 100 BP)

4,153

22,896

Decrease of 100 BP

(30 September 2022: 100 BP)

(4,153)

(22,896)

c) Foreign currency risk

Foreign currency risk is the risk that the values of the Company’s assets and liabilities are adversely affected by

changes in the values of foreign currencies by reference to the Company’s functional currency, being Pound Sterling.

The Company has not been exposed to any material foreign currency risk during the year.

During the years ended 30 September 2023 and 30 September 2022, all transactions were in Pound Sterling, with

the exception of several dividend income and cash transactions which were in USD. Although the Company does

not pursue a policy of hedging such currencies back to Pound Sterling, it may do so from time to time, depending

on market conditions. During the years ended 30 September 2023 and 30 September 2022 the Company did not

enter into currency purchase spot contracts to mitigate the foreign currency exposure.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9. Financial risk management (continued)

9.1 Market risk (continued)

b) Interest rate risk (continued)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9. Financial risk management (continued)

9.1 Market risk (continued)

c) Foreign currency risk (continued)

As at 30 September 2023, USD cash in the sum of $230,412 (30 September 2022: $37,346) was held and income

receivable was $37,050 (30 September 2022: $52,000). Any reasonable change in foreign exchange rates will have

an immaterial impact and therefore no sensitivity analysis has been provided.

9.2 Credit risk

Credit risk is the risk that a counterparty to a ﬁnancial instrument will fail to discharge an obligation or commitment

that it has entered into with the Company. The Board of Directors has in place monitoring procedures in respect of

counterparty risk which is reviewed on an ongoing basis.

The Company’s credit risk is attributable to its cash and cash equivalents, trade receivables – securities sold awaiting

settlement and other receivables.

The Company’s ﬁnancial assets exposed to credit risk amounted to the following:

30 September

2023

30 September

2022

Cash and cash equivalents

415,330

2,289,617

Other receivables (excluding prepayments)

252,169

85,333

Total assets

667,499

2,374,950

All cash is placed with BNP Paribas S.A., Guernsey Branch. BNP Paribas S.A. is publicly traded with a credit rating

of A+ (30 September 2022: A+) from Standard & Poor’s.

Credit risk of cash and custodian is mitigated by the Company’s policy to only undertake signiﬁcant transactions

with leading commercial counterparties.

All transactions in listed securities are settled for upon delivery using approved brokers. The risk of default is

considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is

made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to

meet its obligation.

The ﬁnancial assets designated at fair value through proﬁt or loss are held by BNP Paribas S.A., Guernsey Branch,

the Company’s custodian, in a segregated account. In the event of bankruptcy or insolvency of the Administrator, in

its role as the Company’s custodian, the Company’s rights with respect to the securities held by the custodian may

be delayed or limited. The Company did not participate in stock lending during the year.

The Company measures credit risk and expected credit losses using probability of default, exposure at default and

loss given default. Management considers both historical analysis and forward looking information in determining

any expected credit loss. At 30 September 2023 and 30 September 2022, management consider the probability of

default to be close to zero as the counterparties have a strong capacity to meet their contractual obligations in the

near term. As a result, no loss allowance has been recognised based on 12-month expected credit losses as any

such impairment would be wholly insigniﬁcant to the Company.

9.3 Liquidity risk

Liquidity risk is the risk that the Company will encounter difﬁculties in realising assets or otherwise raising funds to

meet ﬁnancial commitments as and when these fall due for payment. Liquidity risk is monitored on an ongoing basis

by the Board of Directors and Portfolio Manager to ensure that the Company maintains sufﬁcient working capital

in cash or near cash form to be able to meet the Company’s ongoing requirements to pay accounts payable and

accrued expenses.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9. Financial risk management (continued)

9.3 Liquidity risk (continued)

In addition, the Company’s liquidity management policy involves projecting cash ﬂows and considering the level of

liquid assets necessary to ensure the Company remains a going concern. The Company’s investments all comprise

of investments in companies whose securities are admitted to trading on AIM. The Company would expect to be

able to liquidate a sufﬁcient number of investments within 7 days or less in the event cash was required to cover

expenses.

The tables below show the residual contractual maturity of the ﬁnancial liabilities:

Maturity analysis of ﬁnancial liabilities

30 September 2023

Less than

3 months

3 to 12

months

More than 1

yea

Total

Financial liabilities

Trade payables – securities purchased

awaiting settlement

(52,843)

Other payables and accruals

(203,366)

Total undiscounted ﬁnancial liabilities

(256,209)

(

256,209)

30 September 2022

Less than

3 months

3 to 12

months

More than 1

yea

Total

Financial liabilities

Trade payables – securities purchased

awaiting settlement

(433,561)

Other payables and accruals

(136,219)

Total undiscounted ﬁnancial liabilities

(569,780)

In accordance with Article 23(4) (a) and (b) of AIFMD Directive, the AIFM has assessed that the ﬁnancial assets

designated at fair value through proﬁt or loss held by the Company are not deemed to be illiquid in nature, and as

such, are not subject to any special liquidity arrangements and that the AIF has no new arrangements in place for

managing liquidity.

11. Contingent liabilities and commitments

As at 30 September 2023, the Company had no contingent liabilities or commitments (30 September 2022: nil).

12. Stated capital and share premium

Authorised

The authorised share capital of the Company is represented by an unlimited number of redeemable Ordinary Shares

at no par value.

Allotted, called up and fully-paid

30 September 2023

30 September 2022

Number of

Ordinary Shares

Stated

capital

Number of

Ordinary Shares

Stated

capital

Balance as the start of the year

33,897,954

Balance as the end of the year

33,897,954

Each holder of Ordinary Shares is entitled to attend and vote at all general meetings that are held by the Company.

Each holder is also entitled to receive payment of a dividend should the Company declare such a dividend payment.

Any dividends payable by the Company will be distributed to the holders of the Company’s Ordinary Shares, and

on the winding-up of the Company or other return of capital (other than by way of a repurchase or redemption of

shares in accordance with the provisions of the Articles and the Companies Law), the Company’s surplus assets,

after payment of all creditors, will be distributed among the holders of the Company’s Ordinary Shares.

The Board anticipates that returns to Shareholders will be made through the Company’s redemption mechanism

and therefore does not expect that the Company will pay any dividends.

No dividends have been declared or paid during the year (30 September 2022: nil).

Issuance of Ordinary Shares

No Ordinary Shares were issued during the year ended 30 September 2023 (30 September 2022: nil Ordinary Shares

issued).

Redemption mechanism

As the Company has been established as a closed-ended collective investment scheme, there is no right or

entitlement attaching to the Ordinary Shares that allows them to be redeemed or repurchased by the Company at

the option of the Shareholder.

10. Other payables and accruals

30 September

2023

30 September

2022

Portfolio management fees

35,802

35,677

Audit fees

64,550

57,000

AIFM fees

30,352

Non-audit fees

23,000

Directors’ fees

32,369

31,109

Administration fees

10,000

Registrar fees

967

1,000

Custody fees

676

708

Sundry expenses

5,650

725

Total other payables and accruals

203,366

136,219

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

12. Stated capital and share premium (continued)

Redemption mechanism (continued)

The redemption mechanism allows the Board to redeem any number of shares at the prevailing NAV per share at the

calculation date, (being the date determined by the Board for the calculation of the price to be paid on any particular

exercise of the redemption mechanism), less the cost of redemption. This right will only be exercised in speciﬁc

circumstances and for the purpose of returning capital growth.

Accordingly, assuming that the NAV exceeds £100 million, the Directors intend to operate the redemption mechanism

to return the NAV back to around £100 million in order to:

•

enable the Company to exploit fully the underlying investment opportunity and to deliver high and sustainable

returns to Shareholders, principally in the form of capital gains;

•

enable portfolio holdings to have a meaningful impact on the Company’s performance, which might otherwise

be marginal within the context of a larger fund; and

•

ensure that the Company can continually take advantage of the illiquidity risk premium inherent in micro-cap

companies.

The Directors are not obliged to operate the redemption mechanism and will not do so if:

•

calculation and publication of the NAV has been suspended; or

•

the Directors are unable to make the solvency statement required by Guernsey law; or

•

other circumstances exist that the Board believes make the operation of the redemption mechanism

undesirable or impracticable.

Redemptions will, subject to compliance with all applicable law and regulation, be carried out pro rata to a

Shareholder’s holding of Ordinary Shares, but all redemptions will normally be subject to a de minimis value to be

returned of approximately £10 million (before costs). The Company will not redeem fractions of shares.

Redemptions will be recognised against the reserves of the Company. The share premium reserve is and has

historically been used to recognise the Company’s share redemptions. Any redemptions over and above this reserve

will be recognised against retained earnings.

The price at which any Ordinary Shares are redeemed under the redemption mechanism will be calculated by

reference to unaudited NAV calculations. To the extent that any redemption takes place at a time when the Ordinary

Shares are trading at a signiﬁcant premium to the prevailing unaudited NAV, Shareholders may receive an amount

in respect of their redeemed Ordinary Shares that is materially below the market value of those shares prior to

redemption.

In order to facilitate any redemptions, the Company may be required to dispose of assets within the investment

portfolio. There is no certainty of the price that can be achieved on such sales and any sale price could be materially

different from the carrying value of those assets. Consequently, the value received in respect of redeemed Ordinary

Shares may be adversely affected where the Company is not able to realise assets at their carrying values. In

addition, during any period when the Company is undertaking investment portfolio realisations, it may hold the sale

proceeds (which could, in aggregate, be a material amount) in cash, which could impact the Company’s returns,

until the redemption is implemented and the cash is distributed to Shareholders.

Investors should note that the redemption mechanism has a speciﬁc and limited purpose, and no expectation or

reliance should be placed on the redemption mechanism being operated on any one or more occasions or as to

the proportion of Ordinary Shares that may be redeemed or as to the price at which they will be redeemed. The

redemption mechanism may also lead to a more concentrated and less liquid portfolio, which may adversely affect

the Company’s performance and value.

In the absence of the availability of the redemption mechanism, Shareholders wishing to realise their investment in the

Company will be required to dispose of their shares on the stock market. Accordingly, Shareholders’ ability to realise their

investment at any particular price and/or time may be dependent on the existence of a liquid market in the shares.

13. Basic and diluted proﬁt/(loss) per Ordinary Share

Year ended

30 September 2023

Year ended

30 September 2022

Total comprehensive income/(loss) for the year

2,205,448

(53,446,826)

Weighted average number of Ordinary Shares during the year

33,897,954

Basic and diluted earnings per Ordinary Share

0.0651

(1.5767)

14. NAV per Ordinary share

30 September 2023

30 September 2022

NAV

60,045,189

57,839,741

Number of Ordinary Shares at year end

33,897,954

NAV per Ordinary Share

1.7714

1.7063

15. Related party disclosure

The AIFM

The AIFM is a related party and is entitled to an annual ﬁxed fee as disclosed in note 5. Mark Hodgson is the

Managing Director of the AIFM.

The Portfolio Manager

The Portfolio Manager is a related party and is entitled to management and performance fees as disclosed in note 4.

The Portfolio Manager and George Ensor held the following voting rights in the Company:

30 September 2023

30 September 2022

Portfolio Manager

3,140,230

3,100,230

George Ensor

90,194

60,041

The Directors

The Directors are entitled to remuneration for their services and also hold Ordinary Shares in the Company as

disclosed in note 6.

All transactions between these related parties and the Company were conducted on terms equivalent to those

prevailing in an arm’s length transaction.

16. Material events after the Statement of Financial Position date

There were no events which occurred subsequent to the year end until the date of approval of the annual ﬁnancial

statements, which would have a material impact on the annual ﬁnancial statements of the Company as at 30

September 2023.

On 12 October 2023, the Board approved an increase in the annual basic Director fees of 2.5% effective from 1

January 2023.

17. Controlling party

In the Directors’ opinion, the Company has no ultimate controlling party.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

USEFUL INFORMATION FOR SHAREHOLDERS

Alternative performance measures disclosure

In accordance with the European Securities and Markets Authority Guidelines on Alternative Performance Measures

("APMs") the Board has considered what APMs are included in the Annual Financial Report and ﬁnancial statements

which require further clariﬁcation. APMs are deﬁned as a ﬁnancial measure of historical or future ﬁnancial performance,

ﬁnancial position, or cash ﬂows, other than a ﬁnancial measure deﬁned or speciﬁed in the applicable ﬁnancial

reporting framework. The Audit Committee reviewed the overall presentation of APMs, which remains consistent

with the prior year. The Ordinary Share price discount performance metric has been presented for the ﬁnancial

year and comparative period. The Audit Committee is satisﬁed that no APMs were given undue prominence in the

Company's Annual Financial Report and ﬁnancial statements. APMs included in the ﬁnancial statements, which are

unaudited and outside the scope of IFRS, are deemed to be as follows:

Performance since inception

The NAV total return measures how the NAV per Ordinary Share has performed over a period of time, taking into

account of capital returns. The Company quotes NAV total return as a percentage change from the beginning of

the ﬁnancial year or initial issuance of Ordinary Shares to 30 September 2023. The Company has not declared a

dividend since inception.

The Board monitors the Company NAV total return against the Numis Smaller Companies plus Alternative Investment

Market (“AIM”) (excluding Investment Companies) Index.

Refer to page 3 for NAV total return vs Index total return analysis.

NAV to market price discount / premium

The NAV per share is the value of all the Company’s assets, less any payables it has, divided by the total number of

Ordinary Shares. However, because the Company’s Ordinary Shares are traded on the London Stock Exchange's

Main Market, the share price may be higher or lower than the NAV. The difference is known as a discount or premium.

The Company’s discount / premium to NAV is calculated by expressing the difference between the Ordinary Share

price (bid price)

and the NAV per share on the same day compared to the NAV per share on the same day.

At 30 September 2023, the Company's Ordinary Shares traded at £1.4200 (30 September 2022: £1.3600), reﬂecting

a discount of 19.84% (30 September 2022: discount of 20.29%) to the NAV per Ordinary Share of £1.7714 (30

September 2022: £1.7063).

Ongoing charges

The ongoing charges ratio for the year ended 30 September 2023 was 1.71% (30 September 2022: 1.39%). The

AIC’s methodology for calculating an ongoing charges ﬁgure is based on annualised ongoing charges of £1,051,439

(30 September 2022: £1,197,244) divided by average NAV in the period of £61,456,997 (30 September 2022:

£86,321,192).

Calculating

ongoing

charges

The ongoing charges are based on actual costs incurred in the year excluding any non-recurring fees in accordance

with the AIC methodology. Expense items have been excluded in the calculation of the ongoing charges ﬁgure when

they are not deemed to meet the following AIC deﬁnition:

“Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future, whether charged

to capital or revenue, and which relate to the operation of the investment company as a collective fund, excluding

the costs of acquisition/disposal of investments, ﬁnancing charges and gains/losses arising on investments. Ongoing

charges are based on costs incurred in the year as being the best estimate of future costs.”

- Source: Bloomberg

USEFUL INFORMATION FOR SHAREHOLDERS (CONTINUED)

Ongoing charges (continued)

Please refer below for ongoing charges reconciliation for the years ended 30 September 2023 and 30 September

2022:

30 September

2023

30 September

2023

Total expenses for the year:

1,081,270

289,069

Expenses excluded from the calculation of ongoing charges ﬁgures,

in accordance with AIC’s methodology:

Portfolio Performance fees recovery

897,281

Sundry expenses (Director recruitment fees)

(15,000)

Transaction fees

(17,988)

(23,121)

Foreign exchange gains

3,157

34,015

Total ongoing charges for the year

1,051,439

1,197,244

Calculating an average NAV

The AIC’s methodology for calculating average NAV for the purposes of the ongoing charges ﬁgure is to use the

average of NAV at each NAV calculation date. On this basis the average NAV ﬁgure has been calculated using the

daily NAVs over the years ended 30 September 2023 and 30 September 2022.