Annual Financial Report

RNS Number : 1377Y

North Atlantic Smlr Co Inv Tst PLC

10 May 2021

 

North Atlantic Smaller Companies Investment Trust plc

Annual Report for the year ended 31 January 2021

The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 31 January 2021, but has been extracted from the statutory financial statements for the year ended 31 January 2021 which were approved by the Board of Directors on 10 May 2021 and will be delivered to the Registrar of Companies in due course. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006. The statutory accounts for the year ended 31 January 2020 have been delivered to the Registrar of Companies and received an Independent Auditor's report which was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006. The annual financial report will be posted to shareholders later this month. Copies of the Annual Report will then be available on the Company's website  www.nascit.co.uk   and from the Company Secretary.

 

objective of the company and financial highlights

The objective of the Company is to provide capital appreciation through investment in a portfolio of smaller companies principally based in countries bordering the North Atlantic Ocean.

	31 January 2021	% change	31 January 2020	31 January 2019	31 January 2018	31 January 2017
return
Return for the year (£'000)	130,078	31.6%	98,852	35,418	70,817	32,038
Basic return per 5p Ordinary Share:*
- Revenue	3.76	(90.9%)	41.24	40.58	35.62	8.97
- Capital	916.57	40.4%	652.92	205.57	455.29	212.95
Final Dividend per 5p Ordinary Share (declared)	nil		30.0p	30.0p	nil	nil
assets
Net assets (£'000)	742,230	19.6%	620,723	531,425	499,423	428,606
Net asset value ("NAV") per 5p Ordinary Share:**
Basic	5,292p	20.7%	4,384p	3,710p	3,462p	2,971p
Diluted	5,292p	20.7%	4,384p	3,708p	3,458p	2,968p
Basic adjusted†	5,355p	18.9%	4,505p	3,776p	3,529p	3,036p
Diluted adjusted†	5,355p	18.9%	4,505p	3,774p	3,525p	3,033p
Mid-market price of the 5p Ordinary Shares	3,850.0p	13.2%	3,400p	2,910p	2,870p	2,455p
discount to diluted net asset value	27.2%		22.4%	21.5%	17.0%	17.3%
discount to diluted adjusted net asset value	28.1%		24.5%	22.9%	18.6%	19.1%
indices and exchange rates at 31 January
Standard & Poor's 500 Composite Index	3,714.2	15.2%	3,225.5	2,704.1	2,823.8	2,278.9
Russell 2000 Index	2,073.6	28.5%	1,614.1	1,499.4	1,575.0	1,352.3
US Dollar/Sterling exchange rate	1.37295	4.1%	1.31830	1.31505	1.4221	1.2581
Standard & Poor's 500 Composite Index - Sterling adjusted	2,709.5	10.9%	2,442.5	2,062.8	1,989.9	1,811.7
Russell 2000 - Sterling adjusted	1,512.7	23.8%	1,222.2	1,143.8	1,109.9	1,075.1

* Please refer to note 7 for details on how the basic return per 5p Ordinary Share is calculated.

** Please refer to note 7 for details on how the net asset value per 5p Ordinary Share is calculated.

† Adjusted to reflect Oryx International Growth Fund Limited ("Oryx") under the equity method of accounting, which is how the Company previously accounted for its share of Oryx, prior to the adoption of IFRS 10. This is useful to the shareholder as it shows the NAV based on valuing Oryx at NAV. See note 7.
 

chairman's statement

It is pleasing to report that despite a tumultuous year resulting from the COVID pandemic the net asset value ("NAV") per share rose during the year to 31 January 2021 by 20.7% as compared to a rise in the sterling adjusted S&P Composite of 10.9%.

While the capital return of the Company was £130 million (2020: £93 million), the revenue account showed a return after tax of £531,000 (2020: £5,872,000). The decline in revenue can be directly attributed to the cessation in dividends in some of our major investments as a consequence of the COVID crisis as well as a reduction in loan note interest following the repayment of the SourceBio loan. The Directors do not therefore recommend a dividend in respect of the year to end January 2021 (2020 30p).

During the year, 135,482 shares were purchased for cancellation at a significant discount to NAV. This benefits all long-term shareholders by creating an immediate uplift for the NAV. At the forthcoming AGM shareholders will once again be asked to support a whitewash proposal allowing the company to continue to repurchase shares without requiring our Chief Executive and persons and companies presumed to be acting in concert with him to make a mandatory offer under Rule 9 of The Takeover Code for the Company. This proposal and the background surrounding it are outlined in a separate circular being sent to shareholders. The passing of the resolution to support this proposal assists the liquidity of those shareholders wishing to sell while enabling the company to add value to the ongoing NAV by buying back its own shares. Last year the AGM approved the whitewash with opposing votes of 32.57% of votes cast (the largest shareholder being disqualified from voting). We continue to engage with those voting against the resolution but have found little interest in any meaningful discourse.  Most of the votes cast against the whitewash resolution appear to have been determined by the ESG (Environmental, Social and Governance) departments of certain large nominees and custodians. Their decisions, apparently made on general principle, are not in my opinion in the interests of our shareholders and I would appeal to beneficial shareholders to ensure that their votes are cast in favour of Resolution 16.

Many of our businesses suffered to some extent with some being shut down entirely for long periods of time. On the other hand, our exposure to life science companies more than offset this which resulted in a further year of progress. Brexit has now come and gone and to date we have seen little or no impact on our investments.

The outlook for the economy is for further volatility over the coming year with weakness in the first half followed by a strong recovery over the balance of the year as the vaccines finally (and hopefully) contain the pandemic.

Equity markets have, in my opinion, already priced a recovery in corporate profits into current valuations, which do not appear for the most part to be particularly cheap. The core driver of equity markets is therefore the continuing provision of liquidity by central banks, with the only cloud coming perhaps from significant fiscal stimulus combining with an increase in money velocity to prompt some reversal of the deluge of monetary easing measures.

I am pleased to say that the Company continues to have substantial cash balances and the majority of our investments have no debt and healthy cash reserves. Although it is unlikely the Company's NAV will perform as well in the year end to 31 January 2022, I am hopeful we can continue to see further progress in the current year.

Peregrine Moncreiffe

Chairman

10 May 2021
 

investment manager's report

quoted portfolio UK

The year was very much a game of two halves. Substantial losses in the period to 31 July 2020, followed by a substantial recovery through to 31 January 2021. The Company was badly impacted through its exposure to leisure related stocks and in particular the fall in Ten Entertainment and Stobart Group resulted in a net loss to the Company of approximately £30 million, as key parts of their business were forced to close.

Fortunately, this was more than offset by the relatively high weighting in Life Sciences with Ergomed (prior to sale), EKF, Renalytix and Verici DX all performing notably well and collectively adding nearly £90 million to the NAV. Augean and Polar Capital rose modestly but the gain was offset by a fall in MJ Gleeson.

Smaller holdings such as AssetCo, Sureserve and Signature Aviation performed well and other holdings such as Frenkel Topping, Bigblu Broadband, Tribal and Benchmark made modest progress.

Finally, it is pleasing to note that both Oryx International ("Oryx"), our largest holding, and Odyssean Investment Trust, outperformed their benchmarks, in Oryx's case by a significant amount.

quoted portfolio USA

The portfolio remains relatively modest and had no major impact on the net asset value of the Company.

unquoted portfolio UK

Source Bioscience (previously Sherwood Holdings) went public during the period and with accrued interest is estimated to have added in total approximately £9 million to the net asset value. Hamsard was also written up but the impact was offset by the need to write down Specialist Components due to weak orders resulting from the COVID Pandemic. Viking was also written up modestly with further gains expected in the current year as the business hopefully enters a liquidity event.

Finally, it was necessary to write down Jaguar Holdings Group an inflight catering business as demands for its services collapsed due to COVID impact on the airline industry.

unquoted portfolio USA

The standout performer of the year was the IPO of Telos in the fourth quarter. In January 2021, the ordinary shares were valued at little over £1 million. With sales following the IPO of over £20 million and with the balance of the publicly listed shares worth over £5 million the investment made an outstanding contribution to the Company's performance in the year to 31 January 2021.

Performance Chemicals suffered due to the weak oil price but remained EBITDA profitable. Coventbridge and Utitec made modest progress again impeded by COVID issues. We do however expect liquidity events from both the investments in the current financial year which will boost both cash reserves and the net asset value.

liquidity

Cash and US treasury bills started the year at £82 million and fell initially as opportunity was taken to invest in companies where we believed there had been an overreaction in the share price compared to the intrinsic value of the business. Most recently however, the IPO of Source, the partial sale of Assetco, the partial sale of Signature following multiple ongoing bids and the sale of most of the Telos position has resulted in cash and US treasury bills at the end of January 2021 nearing £89 million. This is expected to increase still further as the balance of the Telos and Signature Aviation positions are realised.

Your Managers are constantly reviewing potential investment opportunities but markets have had a major recovery and in our opinion are running ahead of fundamentals even assuming a full vaccine roll out over the course of the coming year.

Christopher Mills

Chief Executive & Investment Manager

10 May 2021
 

strategic report - sector analysis of investments at fair value

as at 31 January

equities, convertible securities & loan stocks as a % of total portfolio valuation	Europe 31 January 2021 %	United States 31 January 2021 %	United Kingdom 31 January 2021 %	Total 31 January 2021 %	Total 31 January 2020 %
Financial Services*	-	-	24.8	24.8	30.7
Pharmaceuticals and Health Care	-	0.4	15.5	15.9	12.5
Industrial Goods & Services	1.2	2.6	8.2	12.0	14.6
Technology & Software	-	1.1	10.0	11.1	4.4
Consumer Products and Services	-	-	8.8	8.8	-
Banks	-	0.9	7.4	8.3	9.5
Travel & Leisure	-	-	3.8	3.8	11.9
Energy	-	-	2.6	2.6	1.3
Oil & Gas	-	1.9	-	1.9	2.4
Telecommunications	-	-	1.3	1.3	1.0
Education Services	-	-	1.2	1.2	-
Insurance	-	-	0.5	0.5	1.0
Real Estate	-	-	0.1	0.1	0.2
	1.2	6.9	84.2	92.3	89.4
treasury bills	-	7.7	-	7.7	10.6
total at 31 January 2021	1.2	14.6	84.2	100.0
total at 31 January 2020	1.1	18.7	80.2		100.0

* Includes Investment Trusts.

 

strategic report - twenty largest investments

as at 31 January

equities (including convertibles, loan stocks and related financing)		At fair value £'000
Oryx International Growth Fund Limited *	UK Listed	104,321
EKF Diagnostics Holdings plc	UK Quoted on AIM	67,130
Renalytix AI plc	UK Quoted on AIM	56,534
Polar Capital Holdings plc	UK Quoted on AIM	41,860
Augean plc	UK Quoted on AIM	36,900
MJ Gleeson Group plc	UK Listed	36,000
Harwood Private Equity IV LP	UK Unquoted	34,656
Ten Entertainment Group plc	UK Listed	20,500
Hargreaves Services Plc	UK Quoted on AIM	18,833
Odyssean Investment Trust Plc	UK Listed	17,420
ten largest investments		434,154
Esken Limited *	UK Listed	15,750
Performance Chemicals Company	US Unquoted	13,233
Verici DX	UK Quoted on AIM	12,529
Sureserve Group plc	UK Quoted on AIM	12,322
Benchmark Holdings plc	UK Quoted on AIM	11,600
Signature Aviation plc	UK Listed	11,303
Frenkel Topping Group Plc	UK Quoted on AIM	10,845
Coventbridge Group	US Unquoted	10,133
Redcentric plc	UK Quoted on AIM	9,834
Bigblu Broadband Plc	UK Quoted on AIM	9,574
twenty largest investments		551,277
Aggregate of other investments at fair value		106,982
		658,259
US Treasury Bills		54,615
total		712,874

* incorporated in Guernsey.

All investments are valued at fair value.

 

strategic report

The Directors present the strategic report of the Company for the year ended 31 January 2021.

principal activity

The Company carries on business as an investment trust and its principal activity is portfolio investment.

objective

The Company's objective is to provide capital appreciation to its shareholders through investing in a portfolio of smaller companies which are based primarily in countries bordering the North Atlantic Ocean.

strategy

In order to achieve the Company's investment objective, the Manager uses a stock specific approach in managing the Company's portfolio, selecting investments that he believes will increase in value over a period of time, whether that be due to issues in the management of the businesses which he believes can be improved by shareholder engagement and involvement or simply due to the fact that the stock is undervalued and he can see potential for improvement in value over the long term. The Company may invest in both quoted and unquoted companies. At present, the investments in the portfolio are principally in companies which are located either in the United Kingdom or the United States of America. Typically the investment portfolio will comprise between 40 and 50 securities.

investment policy

While pursuing the Company's objective, the Manager must adhere to the following:

1.  the maximum investment limit is 15% of the Company's investments in any one company at the time of the investment;

2.  gearing is limited to a maximum of 30% of net assets;

3.  the Company may invest on both sides of the Atlantic, with the weighting varying from time to time;

4.  the Company may invest in unquoted securities as and when opportunities arise and again the weighting will vary from time to time.

investment restrictions

The Company has not adopted any specific investment restrictions, and the Company's investments may be highly concentrated. However, the Manager has put in place internal limitations to control risk and to manage diversification with the aim of allowing it to operate within parameters that it believes are wide enough for it to generate target returns but which are suitable to prevent undue risk.

investment approach

The Company invests in a diversified range of companies, both quoted and unquoted, on both sides of the Atlantic in accordance with its objective and investment policy.

Christopher Mills, the Company's Chief Executive and Investment Manager, is responsible for the construction of the portfolio and details of the principal investments are set out in the Annual Report. The top twenty largest investments by current valuation are listed above.

When analysing a potential investment, the Manager will employ a number of valuation techniques depending on their relevance to the particular investment. A key consideration when deciding on a potential investment would be the sustainability and growth of long term cash flow. The Manager will consider the balance of quoted and unquoted securities in the portfolio when deciding whether to invest in an unquoted stock as he is aware that the level of risk in unquoted securities may be considered higher.

In respect of the unquoted portfolio, regular contact is maintained with the management of prospective and existing investments and rigorous financial and business analysis of these companies is undertaken. It is recognised that different types of business perform better than others depending on economic cycles and market conditions and this is taken into consideration when the Manager selects investments and is therefore reflected within the range of investments in the portfolio. The Company attempts to minimise its risk by investing in a diversified spread of investments whether that spread be geographical, industry type or quoted or unquoted companies.

best execution

The Company as the operator of a closed-ended investment trust has considered the rules on best execution as noted in the Financial Services Markets Act 2000 and COBS 11.2 of the FCA Handbook. The Company has determined that the rules on performing best execution do not apply to the Company when, acting in the capacity of operator of an internally managed AIF (regulated collective investment scheme), it purchases or sells units in that AIF/scheme.

borrowing and leverage

The Company does not intend to incur borrowings as part of its investment strategy.

However, in the event that it did employ leverage for working capital purposes, any such borrowings incurred will not remain outstanding for more than 60 calendar days. In each such case, leverage may be obtained on an unsecured or secured/collateralised basis. The Company is not otherwise expected to engage in borrowing or make use of leverage.

The Company's borrowing and leveraging capacity is limited to an amount equal to: 30% of the net asset value of the Company when calculated in accordance with the "commitment" method set out in the AIFMD Rules.

The calculation and disclosure of such maximum leverage limits is required in order to satisfy the requirements of the AIFMD Rules. However, the Investment Manager expects the typical leverage levels to be lower than the maximum levels stated above, and generally not to exceed 10% of the Company's net asset value. The Investment Manager will inform investors to the extent such leverage limits are exceeded in accordance with the AIFMD Rules.

The Company does not currently grant any guarantee under any leveraging arrangement. The grant of any such guarantee would be disclosed to investors in accordance with the AIFMD Rules. Save as set out herein, there are no restrictions on the Company's use of leverage, by borrowing or otherwise, other than those which may be imposed by applicable law, rule or regulation.

changes to the investment policy, Investment restrictions and investment approach

Changes to the investment policy, investment restrictions and investment approach of the Company as set out above may be made by the Directors. Changes believed by the Directors to be material will be notified to investors in advance of the change taking effect.

financial instruments

The financial instruments employed by the Company primarily comprise equity and loan stock investments, although it does hold cash and liquid instruments. Further details of the Company's risk management objectives and policies relating to the use of financial instruments can be found in note 14 to the financial statements.

delegated activities

The Company being internally managed has not delegated the provision of portfolio management and risk management functions but does rely on third party services providers to provide ancillary services to support the activities of the company.  As a result, the Company will continue to act as an internally managed AIFM of the Company for the purposes of the FCA Rules in accordance with the Investment Management Agreement.

appointment of depositary

The Company has appointed Bank of New York Mellon (BNYM) as depositary for the quoted securities deposited for safekeeping with BNYM or with any third party appointed by BNYM and to hold cash in accordance with the terms of its agreement.

any conflicts of interest that may arise from such delegations

From time to time conflicts may arise between the Depositary and the delegates, for example where an appointed delegate is an affiliated group company which receives remuneration for another custodial service it provides to the Company. In the event of any potential conflict of interest which may arise during the normal course of business, the Depositary will have regard to the applicable laws.

performance

At 31 January 2021, the diluted NAV per share was 5,292p (2020: 4,384p), an increase of 20.7% during the year, compared to an increase of 15.2% during the year in the Standard & Poor's 500 Composite Index (Sterling adjusted).

Net assets attributable to equity holders at 31 January 2021 amounted to £742,230,000 compared with £620,723,000 at 31 January 2020.

The ongoing charges relating to the Company are 1.2% (2020: 1.1%), based on total expenses, excluding finance charges and non-recurring items for the year and average monthly net assets.

results and dividends

The total net return after taxation for the financial year ended 31 January 2021 amounted to £130,078,000 (2020: £98,852,000). The Board does not propose to pay a final dividend (2020: 30p).

key performance indicators

The Directors regard the following as the main key indicators pertaining to the Company's performance:

(i) Net asset value per Ordinary Share: the chart in the Strategic Report in the Annual Report illustrates the movement in the fully diluted net asset value per Ordinary Share over the past five years:

(ii) Share price return: the chart in the Strategic Report in the Annual Report illustrates the movement in the share price per Ordinary Share over the past five years:

(iii) Performance against benchmark

The performance of the Company's share price is measured against the Standard & Poor's 500 Composite Index (Sterling adjusted), the Company's benchmark. A graph comparing performance can be found in the Directors' Remuneration Report in the Annual Report.

principal risks and uncertainties

The Board has carried out a robust assessment of the emerging and principal risks facing the Company including those that would threaten the Company's business model, future performance, solvency of liquidity and reputation.

The key risks faced by the Company are set out below. The Board regularly reviews these and agrees policies for managing these risks.

· Impact of COVID and Brexit: While COVID had an initial negative impact on the value of certain investments which were in the entertainment and travel infrastructure sectors, the positive performance of our life science investments has more than made up for any shortfall. Our portfolio continues to show resilience and our strong cash position gives us considerable protection from downside risks relating to both COVID and Brexit.

· Performance risk: the Board is responsible for deciding the investment strategy in order to fulfil the Company's objectives and for monitoring the performance of the Manager. An inappropriate investment strategy may result in under-performance against the companies in the peer group or against the benchmark indices. The Board manages this risk by ensuring that the investments are appropriately diverse and by receiving reports from the Manager at every board meeting explaining his investment decisions and the composition and performance of the portfolio.

· Market risk: this category of risk includes currency risk, market price risk and interest rate risk. The fair value or future cash flows of a financial investment held by the Company may fluctuate because of changes in market prices. Also, the valuations of the investments in the portfolio may be subject to fluctuation due to exchange rates or general market prices. The Manager monitors these fluctuations and the markets on a daily basis; the performance of the investment portfolio against its benchmarks is also closely monitored by the Manager. The afore-mentioned graph in the Directors' Remuneration Report illustrates the Company's performance against its benchmarks over the last ten years.

· Investments in unquoted stocks, by their nature, involve a higher degree of risk than investments in the listed market. The valuation of unquoted investments can include a significant element of estimation based on professional assumptions that is not always supported by prices from current market transactions. Recognised valuation techniques are used and recent arms' length transactions in the same or similar entities may be taken into account. Clearly the valuation of such investments is therefore a key uncertainty but the Board manages this risk by regularly reviewing the valuation principles applied by the Manager to ensure that they comply with the Company's accounting policies and with fair value principles. Harwood Capital LLP, a firm which is ultimately owned by Christopher Mills, the Company's Manager, and which provides services such as dealings, administration and compliance to the Company, operates a Valuations and Pricing Committee which meets regularly throughout the year to review and agree the valuations of the investments in the portfolio for onward submission to the Board.

· Discount volatility: Subject to shareholder support for Resolution 14, the Company's share buy-back programme should have the effect of limiting the extent of the discount to net asset value at which the Company's shares trade. The Company repurchased 135,482 (2020: 165,620) Ordinary Shares for cancellation during the year.

· Regulatory risk: any breach of a number of regulations applicable to the Company, the UKLA's Listing Rules, the FCA compliance regime and the Companies Act could lead to a number of detrimental effects on the Company as well as reputational damage. The Audit Committee monitors compliance with these regulations in close alliance with the Manager and Secretary.

· Custodial and Banking risk: there is a risk that the custodians and banks used by the Company to hold assets and cash balances could fail and the Company's assets may not be returned. Associated with this is the additional risk of fraud or theft by employees of those third parties. The Board exercises monitoring through the Manager and Harwood Capital LLP over the financial position of its custodial banks.

· Credit risk/Counterparty risk: the Company holds preference shares in some investee companies and provides other forms of debt or loan guarantees where deemed necessary. There is a risk of those counterparties being unable to meet their obligations. The financial position and performance of those investee companies are continually monitored by the Manager and actions are taken to protect the Company's investment if needed.

professional negligence

The Company covers professional liability risks set out in Article 9(7) of Directive 2011/61/EU on Alternative Investment Fund Managers (the "Directive) and article 12 and 13 of the AIFMD level 2 regulation (professional liability risks) by holding professional indemnity insurance and maintaining an amount of own funds to meet the PII capital requirement under the Directive; and comply with the qualitative requirements addressing professional liability risks.

section 172 statement

Under Section 172 of the Companies Act 2006, directors are required to promote the success of the Company for the benefit of the stakeholders. In accordance with the requirements of the Companies (Miscellaneous Reporting) Regulations, 2018, the Company has to detail how this duty has been performed with regard to the matters set out in Section 172 (1) (a) to (f).

· The directors have to consider the likely consequences of their decisions in the long term taking into account the interests of the various different stakeholders of the Company.

· A company's stakeholders are normally considered to comprise of its shareholders, employees, customers and suppliers as well as the wider community in which the company operates. As the Company is an internally managed investment company it does not have any employees as its activities are outsourced. Its customers are its shareholders and details of those owning more than 3% of the Company's shares are shown in the Report of the Directors. The Company's relations with its shareholders are detailed in the Annua Report.

· The main stakeholders are therefore the Company's shareholders and a small number of key third party suppliers, principally the Investment Manager, together with the company secretary, accountants, brokers, depositary, bankers and auditors, to whom the day to day functions are delegated.

· The Board works closely with the Investment Manager to promote the long-term success of the Company as effectively and responsibly as possible and he in turn interacts directly with the investee companies. Details of the investment policy and investment approach can be found on above.

· The Company has a limited impact on the environment and has no greenhouse gas emissions to report as indicated in the Report of the Directors. Its impact on social, community and human rights issues are detailed below, and a statement on the Modern Slavery Act is given below.

· To summarise, the directors are fully aware of their duty under Section 172 in all their deliberations, and decisions taken always take into account the interests of the key stakeholders.

viability statement

In accordance with the UK Corporate Governance Code the Board has considered the longer term prospects for the Company. The Directors have reviewed the Company over the next three years to May 2024, which is generally a reasonable investment horizon for many investment trust shareholders. This assessment took into account the Company's current position as well as its continuing investment strategy. Additional factors under review included the principal risks inherent in its management and portfolio structure, contractual arrangements and cost base.

The Directors have noted the following elements as part of its evaluation:

· the Company invests in a combination of listed and unquoted companies, most of which have positive EBITDA and/or net tangible asset values which support their valuations;

· the Company holds more than 10% of its portfolio in cash and US Treasury Bills which are readily realisable and intends to continue to hold liquidity comfortably in excess of any contingent liabilities, including any requirements to fund any future drawdowns resulting from private equity or put option commitments;

· the Company's expenses are relatively stable, except for the Investment Manager's fee which is positively correlated with the Company's net asset value and relative performance, giving comfort that the Company could easily cover costs in the event of a substantial decline in net asset value; and

· the Company has considered the effect of COVID and does not believe it impacts its viability.

The Directors have also assessed the Company's principal risks and uncertainties and believe that appropriate measures are in place to minimise the likelihood of their potential to impact the viability of the Company. These measures include:

· the Manager's reports on compliance with the investment objective;

· the Manager's control of counterparty and custodial risk;

· the Board's monitoring of gearing (if any), compliance with specific investment guidelines and liquidity risk; and

· monitoring the share price's discount to net asset value and the stability of the shareholder base.

Based on the results of this analysis, the Directors have concluded that there is a reasonable expectation that the Company can continue in operation and meet its liabilities as they fall due during the period to May 2024.

future prospects

The Directors are hopeful that some of the Company's investments will see corporate activity over the coming year so that the Company's net asset value should outperform its benchmark.

social, community and human rights issues

As an investment trust with no employees the Company has no direct social or community responsibilities or impact on the environment. The Company, however, takes into account the impact of environmental, social and governance factors when selecting and managing its investments within the context of its obligation to manage investments in the financial interests of its shareholders.

modern slavery act

As an investment vehicle the Company does not provide goods or services in the normal course of business. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015.

AIFMD

The Company is authorised under the AIFMD as a Small Registered UK Alternative Investment Fund Manager under regulation 10(1) of the Alternative Investment Fund Managers Regulations 2013 (SI 2013/1773). Small registered UK AIFMs are not authorised persons as a result of their registration as small registered UK AIFMs and are not included on the Financial Services Register in relation to this business. However, small registered UK AIFMs are not prevented from carrying on regulated activities as a result of their registration and therefore may be included on the Financial Services Register in relation to other business. For AIFMD purpose the Company is internally managed with Christopher Mills making the investment decisions in his capacity as Chief Executive. As the Company has passed the tipping point it is now seeking approval as a full-scope UK AIFM of an internally managed AIF. The Company has received a minded to authorise communication from the FCA subject to appointing the Depositary which has been confirmed to the FCA. It is envisaged that the Company will be authorised as a full-scope AIFM by the end of the third quarter 2021.

periodic and regular disclosure

1.  The following information is available to investors in the annual report:

(i)  the percentage of the Company's assets that are subject to special arrangements arising from their illiquid nature;

(ii)  any material changes to the arrangements for managing the liquidity of the Company;

(iii)  the current risk profile of the Company and the risk management systems employed by the Company to manage those risks;

(iv)  the total amount of leverage employed by the Company if applicable; and

(v)  details of the Company's policy towards best execution.

2.  Any changes to the following information will be provided by the Company to investors without undue delay (and may be provided by email) in accordance with the AIFMD Rules:

(i)  the maximum level of leverage which the Company may employ on behalf of the Company;

(ii)  the grant of or any changes to any right of re-use of collateral or any changes to any guarantee granted under any leveraging arrangement; and

(iii)  activation of liquidity management tools.

By Order of the Board

Derringtons Limited

Company Secretary

10 May 2021
 

report of the directors

for the year ended 31 January

The Directors present their report to shareholders and the financial statements for the year ended 31 January 2021. Certain information that is required to be disclosed in this report has been provided in other sections of this Annual Report and accordingly, these are incorporated into this report by reference.

taxation status

In the opinion of the Directors, the Company has conducted its affairs during the period under review, and subsequently, so as to maintain its status as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Company made a successful application under Regulation 5 of the Investment Trust (Approved Company) (Tax) Regulations 2011 for investment trust status to apply to all accounting periods starting on or after 1 February 2013 subject to the Company continuing to meet the eligibility conditions contained in Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements outlined in Chapter 3 of Part 2 of the Regulations.

share capital

The Company's issued share capital consisted of 14,024,518 Ordinary Shares of 5p nominal value each on 31 January 2021. Since the year end, 24,518 Ordinary Shares have been repurchased for cancellation. All shares hold equal rights with no restrictions and no shares carry special rights with regard to the control of the Company. There are no special rights attached to the shares in the event that the Company is wound up.

During the year, the Company purchased 135,482 (2020: 165,620) Ordinary Shares for £4.3m (2020: £5.0m) for cancellation to improve net asset value per Share. This comprised 1.0% (2020: 1.2%) of the issued share capital.

share valuations

On 31 January 2021, the middle market quotation and the diluted net asset value per 5p Ordinary Share were 3,850p and 5,292p respectively. The comparable figures at 31 January 2020 were 3,400p and 4,384p respectively. There were no outstanding options for the year ended 2021 or 2020 meaning there was no dilutive effect on the net asset value at either of these dates.

substantial shareholders

As at 31 January 2021, and at the date of this report, the following interests in the Ordinary Shares of the Company which exceed 3% of the issued share capital had been notified to the Company:

	Number of Ordinary Shares	% of issued share capital
Christopher Mills	3,766,000	26.85
CG Asset Management	941,738	6.71
Butterfield Bank Group	759,082	5.41
Rathbone Brothers plc	707,570	5.05
1607 Capital Partners	584,500	4.17
Peregrine Moncreiffe	440,589	3.14

directors

The biographical details for Directors currently in office are shown in the Annual Report.

The Company's Articles of Association require that Directors should submit themselves for election at the first Annual General Meeting following their appointment and thereafter for re-election at least every three years. However, the Company is adopting the requirements of the UK Corporate Governance Code in relation to the annual re-election of directors. Therefore, in accordance with provision 18 of the UK Corporate Governance Code all of the Directors will retire at the Annual General Meeting and being eligible, offer themselves up for re-election.

directors' interests

The interests of the Directors as notified to the Company, including those of their connected persons, in the Ordinary Shares of the Company as at 31 January 2021 and 31 January 2020 were as follows:

	31 January 2021 5p Ordinary Shares	31 January 2020 5p Ordinary Shares
Peregrine Moncreiffe	440,589	438,140
Christopher Mills	3,766,000	3,766,000
Christopher Mills (non-beneficial)	355,740	355,740
Lord Howard of Rising	5,000	5,000
G Walter Loewenbaum	15,000	15,000
Sir Charles Wake	5,270	1,800

There have been no changes to the above interests between 31 January 2021 and the date of this report.

Details of Directors' remuneration are described in the Directors' Remuneration Report in the Annual Report.

Save as disclosed in the Report of the Directors in the Annual Report or in notes 3 and 15 to the financial statements, no Director was party to or had any interest in any contract or arrangement with the Company at any time during the year.

significant agreements

The Company is required to disclose details of any agreement that it considers to be essential to the business and the two agreements detailed below are considered by the Board to be significant.

Pursuant to the Sub Advisory, Administration and Transmission Services Agreement dated 15 June 2016, Harwood Capital LLP provides administration services to the Company. The Sub Advisory, Administration and Transmission Services Agreement continues unless thereafter terminated by either party on not less than twelve months' notice in writing or may be terminated forthwith as a result of a material breach of the agreement or the insolvency of either party. No compensation is payable on termination of the Agreement.

Pursuant to the Secondment Services Agreement between the Company, GFS and Christopher Mills and the Sub Advisory, Administration and Transmission Services Agreement between the Company and Harwood Capital LLP, Christopher Mills is responsible for the day-to-day investment decisions. The Secondment Services Agreement continues until terminated by the Company or GFS on not less than twelve months' notice.

The Board reviews the activities of the Manager. The Chief Executive carries out day-to-day investment decisions for and on behalf of the Company. As part of this review, the Board is satisfied that the continuing appointment of the Manager, on the terms agreed, is in the best interests of shareholders. Christopher Mills has been Chief Executive of the Company since 1984 and the Board consider it is in the best interest of the Company for this arrangement to continue.

As part of this review, the Board has given consideration to the experience, skills and commitment of the Chief Executive in addition to the personnel, services and resources provided by Harwood Capital LLP. The Company's performance over the last year is described in the Chairman's Statement above.

related party transactions

Christopher Mills makes day-to-day investment decisions for the Company in his capacity as its Chief Executive and this position is distinct from his position as Chief Investment Officer of Harwood Capital LLP. Christopher Mills is a director of Growth Financial Services Limited ("GFS"). GFS is a wholly-owned subsidiary of Harwood Capital Management Limited, which is the holding company of the Harwood group of companies and is, in turn, 100% owned by Christopher Mills. Harwood Capital Management Limited is also a Designated Member of Harwood Capital LLP.

Details of the related party transactions and fees payable are disclosed in note 15 and in the Directors' Remuneration Report in the Annual Report. The Investment Management Fees are disclosed in note 3 of the financial statements. Any Performance Fee payable to GFS is disclosed in the Directors' Remuneration Report in the Annual Report and note 3 of the financial statements.

With the exception of the matters referred to above, during the year no Director was materially interested in any contract of significance (as defined by the UK Listing Authority Listing Rules) entered into by the Company.

institutional investors - use of voting rights

The Chief Executive, in the absence of explicit instruction from the Board, is empowered to exercise discretion in the use of the Company's voting rights in respect of investments and to then report to the Board, where appropriate, regarding decisions taken. The Board have considered whether it is appropriate to adopt a new voting policy and an investment policy with regard to social, ethical and environmental issues and concluded that it is not appropriate to change the existing arrangements.

donations

The Company does not make any political or charitable donations.

creditors' payment policy

It is the Company's policy to settle investment transactions according to the settlement periods operating for the relevant markets. For other creditors, it is the Company's policy to pay amounts due to them as and when they become due. All supplier invoices received by 31 January 2021 had been paid (31 January 2020 - all supplier invoices paid).

greenhouse gas emissions

The Company has no physical assets, operations, premises or employees of its own. Consequently it consumed less than 40,000 kWh of energy during the year so has no greenhouse gas emissions to report.

auditors

Resolutions to re-appoint RSM UK Audit LLP as the Company's auditors and to authorise the Board to determine their remuneration will be proposed at the forthcoming Annual General Meeting.

In the case of each of the persons who are directors at the time the report is approved so far as each director is aware, there is no relevant audit information of which the Company's auditor is unaware, and he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

going concern

The Company's assets largely comprise readily realisable securities which can be sold to meet funding commitments if necessary and it also has sufficient cash reserves so the Directors have a reasonable expectation that the Company has adequate resources to continue in operation for the foreseeable future. They have, therefore, adopted the going concern basis in preparing these financial statements.

additional disclosures

The following further information is disclosed in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008:

· the Company's capital structure and voting rights are summarised earlier in this report and note 11;

· details of the substantial shareholders in the Company are listed earlier in this report;

· the rules concerning the appointment and replacement of directors are contained in the Company's Articles of Association and are discussed earlier in this report;

· amendment of the Company's Articles of Association and powers to issue on a pre-emptive basis or buy back the Company's shares requires a special resolution to be passed by the shareholders; and

· there are: no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; no agreements which the Company is party to that might affect its control following a takeover bid; no agreements between the Company and its Directors concerning compensation for loss of office; and no qualifying third party indemnities in place.

By Order of the Board

Derringtons Limited

Company Secretary

Registered Office:

6 Stratton Street

Mayfair

London

W1J 8LD

Registered No: 1091347

10 May 2021

 

statement of directors' responsibilities in respect of the annual report and the financial statements

for the year ended 31 January

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

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

The financial statements are required by law and International Accounting Standards to present fairly the financial position and performance of the company. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for that period. In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable, relevant and reliable;

· state whether they have been prepared in accordance with International Accounting Standards in conformity with the requirement of the Companies Act 2006;

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

· use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

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

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

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

responsibility statement of the directors in respect of the annual financial report

Each of the directors, whose names and functions are listed in the Annual Report confirm that to the best of each person's knowledge:

· the financial statements, prepared in accordance with International Accounting Standards in conformity with the requirement of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole; and

· the Strategic Report and the Report of the Directors includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that they face.

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

For and on behalf of the Board

Peregrine Moncreiffe

Chairman

10 May 2021

 

statement of comprehensive income

for the year ended 31 January

			2021			2020
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Income	2	7,889	-	7,889	12,345	-	12,345
Net gains on investments at fair value	8	-	133,879	133,879	-	93,536	93,536
Currency exchange (losses)/gains	8	-	(563)	(563)	-	153	153
total income		7,889	133,316	141,205	12,345	93,689	106,034
Expenses
Investment management fee	3	(6,380)	(3,769)	(10,149)	(5,410)	(709)	(6,119)
Other expenses	4	(963)	-	(963)	(1,063)	-	(1,063)
return before taxation		546	129,547	130,093	5,872	92,980	98,852
Taxation	6	(15)	-	(15)	-	-	-
return for the year		531	129,547	130,078	5,872	92,980	98,852
basic and diluted earnings per ordinary share	7	3.76	916.57	920.33	41.24	652.92	694.16

The total column of the statement is the Statement of Comprehensive Income of the Company, prepared in accordance with International Accounting Standards in conformity with the requirement of the Companies Act 2006. The supplementary revenue and capital columns are presented in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ("AIC SORP").

All items in the above Statement derive from continuing operations. No operations were acquired or discontinued in the year.

There is no other comprehensive income, and therefore the return for the year is also the comprehensive income.

The notes form part of these financial statements.

 

statement of changes in equity

for the year ended 31 January

	Share capital £'000	Capital redemption reserve £'000		Share premium £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
2021
31 January 2020	708	162		1,301	612,022	6,530	620,723
Total comprehensive income for the year	-	-		-	129,547	531	130,078
Dividend paid	-	-		-	-	(4,230)	(4,230)
Shares purchased for cancellation	(7)	7		-	(4,341)	-	(4,341)
31 January 2021	701	169		1,301	737,228	2,831	742,230
	Share capital £'000	Capital redemption reserve £'000	Share options reserve £'000	Share premium £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
2020
31 January 2019	716	154	24	1,301	524,316	4,914	531,425
Total comprehensive income for the year	-	-	-	-	92,980	5,872	98,852
Dividend paid	-	-	-	-	-	(4,256)	(4,256)
Shares purchased for cancellation	(8)	8	-	-	(5,022)	-	(5,022)
Share options discharge	-	-	(24)	-	(252)	-	(276)
31 January 2020	708	162	-	1,301	612,022	6,530	620,723

The notes form part of these financial statements.

 

balance sheet

as at 31 January

	Notes	31 January 2021 £'000	31 January 2020 £'000
non current assets
Investments at fair value through profit or loss	8	712,874	601,168
		712,874	601,168
current assets
Trade and other receivables	9	3,211	3,736
Cash and cash equivalents		33,918	17,805
		37,129	21,541
total assets		750,003	622,709
current liabilities
Trade and other payables	10	(7,773)	(1,986)
total liabilities		(7,773)	(1,986)
total assets less current liabilities		742,230	620,723
net assets		742,230	620,723
represented by:
Share capital	11	701	708
Capital redemption reserve		169	162
Share premium account		1,301	1,301
Capital reserve		737,228	612,022
Revenue reserve		2,831	6,530
total equity attributable to equity holders of the company		742,230	620,723
net asset value per ordinary share:
Basic and Diluted	7	5,292p	4,384p

The notes part of these financial statements.

These financial statements were approved and authorised for issue by the Board of Directors on 10 May 2021 and signed on its behalf by:

Peregrine Moncreiffe, Chairman

Company Registered Number: 1091347

 

cash flow statement

for the year ended 31 January

	Notes	2021  '000	2020  '000
cash flows from operating activities
Investment income received		6,202	9,631
Deposit interest received		4	18
Investment Manager's fees paid		(7,082)	(7,168)
Share based payment - discharge of options		-	(276)
Transfer from subsidiary		104	-
Other cash payments		(923)	(1,225)
cash (expended)/generated from operations	12	(1,695)	980
Taxation paid		(15)	-
net cash (outflow)/inflow from operating activities		(1,710)	980
cash flows from investing activities
Purchases of investments		(265,471)	(290,621)
Sales of investments		292,209	286,006
net cash inflow/(outflow) from investing activities		26,738	(4,615)
cash flows from financing activities
Dividend paid		(4,230)	(4,256)
Repurchase of Ordinary Shares for cancellation		(4,159)	(5,022)
net cash outflow from financing activities		(8,389)	(9,278)
increase/(decrease) in cash and cash equivalents for the year		16,639	(12,913)
cash and cash equivalents at the start of the year		17,805	30,669
Revaluation of foreign currency balances		(526)	49
cash and cash equivalents at the end of the year	13	33,918	17,805

The notes form part of these financial statements.

 

notes to the financial statements

1 accounting policies

NASCIT is a listed public company incorporated and registered in England and Wales. The registered office of the Company is 6 Stratton Street, Mayfair, London W1J 8LD. The principal activity of the Company is that of an investment trust company within the meaning of sections 1158/1159 of the Corporation Tax Act 2010 and its investment approach is detailed in the Strategic Report.

a) basis of preparation

The financial statements of the Company have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. The annual financial statements have also been prepared in accordance with the AIC SORP for the financial statements of investment trust companies and venture capital trusts.

The functional currency of the Company is Pounds Sterling because this is the currency of the primary economic environment in which the Company operates. The financial statements are also presented in Pounds Sterling rounded to the nearest thousand, except where otherwise indicated.

b) going concern

The financial statements have been prepared on a going concern basis and on the basis that approval as an investment trust company will continue to be met.

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for a period of at least 12 months from the date when these financial statements were approved.

In making this assessment, the Directors have considered in particular the likely economic effects and the effects on the Company's operations of the current COVID pandemic.

The longer-term economic effects of the pandemic are very difficult to predict but in considering preparing the accounts on a going concern basis the Directors noted the Company holds a portfolio of liquid investments whose value is a multiple of liabilities. The Directors are of the view that the Company can meet its obligations as and when they fall due. The cash and US treasury bills available enables the Company to meet any funding requirements and finance future additional investments. The Company is a closed-end fund, where assets are not required to be liquidated to meet day-to-day redemptions. 

c) segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company invests in small companies principally based in countries bordering the North Atlantic Ocean.

d) accounting developments

In the current year, the Company has applied a number of amendments to IFRS, issued by the IASB mandatorily effective for an accounting period that begins on or after 1 January 2020. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements. The adoption of these has not had any material impact on these financial statements.

e) critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts in the Balance Sheet, the Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period if the revision affects both current and future periods.

In order to value the unquoted investments, there are a number of valuation techniques that can be used. Judgement is used to determine the best methodology to obtain the most accurate valuation. Details of valuation techniques used and sensitivities are set out in Note 14.

The Board of Directors has assessed the Company as meeting the definition of an investment entity within IFRS 10 Consolidated Financial Statements requirements. The Company measures the subsidiaries at fair value through profit or loss rather than consolidate the entities. The details are set out in Note 8.

Further to the above there were no accounting estimates or significant judgements in the current period that have had a material impact upon the financial statements.

f) investments

All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value. Quoted investments are valued using either the bid price or the closing price for Stock Exchange Electronic Trading Service - quotes and crosses ('SETSqx'). The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of consideration received and receivable and the cumulative gain or loss that had been accumulated is recognised in profit or loss.

Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques in accordance with the International Private Equity and Venture Capital Valuation (the "IPEV") guidelines. These may include recent arm's length market transactions, the current fair value of another instrument which is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised.

Gains and losses arising from changes in fair value are included in the total return as a capital item. Also included within this heading are transaction costs in relation to the purchase or sale of investments. When a sale or purchase is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date.

All investments for which a fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy levels set out in Note 14.

g) foreign currency translation

Transactions in currencies other than Pounds Sterling are recorded at the rates of exchange prevailing on the date of the transaction. Items that are denominated in foreign currencies are retranslated at the rates prevailing on the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is capital or revenue in nature.

h) cash and cash equivalents

Cash comprises cash in hand, overdrafts and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

For the purpose of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable.

i) other receivables and payables

Trade receivables and trade payables are measured at amortised cost and balances revalued for exchange rate movement.

j) income

Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time-apportioned basis. Dividends from overseas companies are shown gross of any withholding taxes which are disclosed separately in the Statement of Comprehensive Income.

Special dividends are taken to the revenue or capital account depending on their nature. In deciding whether a dividend should be regarded as capital or revenue receipt, the Board reviews all relevant information as to the sources of the dividend on a case-by-case basis.

When the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the cash dividend is recognised in the capital column.

All other income is accounted on a time-apportioned accruals basis and is recognised in the Statement of Comprehensive Income.

k) expenses and finance costs

All expenses are accounted on an accruals basis and are allocated to wholly to revenue with the exception of the Performance Fees which are allocated wholly to capital, as the fee payable by reference to the capital performance of the Company.

Expenses incurred in shares purchased for cancellation are charged to the capital reserve through the Statement of Changes in Equity.

l) taxation

The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or accelerated because of temporary differences between the treatment of certain items for accounting and taxation purposes.

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes at the reporting date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with recommendations of the SORP, the allocation method used to calculate the tax relief expenses charged to capital is the 'marginal' basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.

m) dividends payable to shareholders

Dividends to shareholders are recognised as a liability in the period in which they are paid or approved in general meetings and are taken to the Statement of Changes in Equity. Dividends declared and approved by the Company after the Balance Sheet date have not been recognised as a liability of the Company at the Balance Sheet date.

n) share capital and reserves

Share Capital: Represents the nominal value of equity shares.

Capital Redemption Reserve: The amount by which the share capital has been reduced, equivalent to the nominal value of the Ordinary Shares repurchased for cancellation.

Share Options Reserve: The expense of share based payments. The fair value of Share Options is measured at grant date and spread over the vesting period. The deemed expense is transferred to the Share Options Reserve.

Share Premium: The account represents the accumulated premium paid for shares issued in previous periods above their nominal value less issue expenses.

Capital Reserve: The following items are taken to this reserve:

· realised and unrealised capital and exchange gains and losses on the disposal and revaluation of investments and of foreign currency items;

· performance fee costs;

· Ordinary Shares repurchased for cancellation; and

· exchange differences of a capital nature.

Revenue Reserves: Represents the surplus of accumulated revenue profits being the excess of income derived from holding investments less the costs associated with running the Company. This reserve may be distributed by way of dividends.

2 income

	2021  '000	2020  '000
income from investments
Dividend income	4,070	6,640
Unfranked investment income
- interest	1,914	3,274
- interest reinvested	1,901	2,413
	7,885	12,327
other income
Interest receivable	4	18
	4	18
Total income	7,889	12,345
total income comprises
Dividends	4,070	6,640
Interest	3,819	5,705
	7,889	12,345
income from investments
Listed UK	3,976	6,640
Other listed	94	-
Other unquoted	3,815	5,687
	7,885	12,327

3 investment management fee

(i)  Pursuant to the Secondment Services Agreement, described in the Report of the Directors above and the Directors' Remuneration Report of the Annual Report, GFS provides the services of Christopher Mills as Chief Executive of the Company, who is responsible for day-to-day investment decisions. Christopher Mills is a director of GFS. GFS is entitled to receive part of the investment management and related fees payable to GFS and Harwood Capital LLP as may be agreed between them from time to time.

(ii)  Pursuant to the terms of the Sub Advisory, Administration and Transmission Services Agreement, described in the Report of the Directors, Harwood Capital LLP is entitled to receive a fee (the Annual Fee) in respect of each financial period equal to the difference between (a) 1% of shareholders' Funds (as defined) on 31 January each year and (b) the amount payable to GFS referred to in note 3(i) above. This fee is payable quarterly in advance.

As set out in note 15, no formal arrangements exist to avoid double charging on investments managed or advised by the Chief Executive or Harwood Capital LLP.

(iii)  The Performance Fee, calculated annually to 31 January, is only payable if the investment portfolio, including Oryx at the adjusted price, outperforms the Sterling adjusted Standard & Poors' 500 Composite Index. It is calculated as 10% of the outperformance and paid as a percentage of shareholders' Funds. It is limited to a maximum payment of 0.5% of shareholders' Funds. The Performance Fee arrangements payable to GFS have been in place since 1984 when they were approved by shareholders.

The amounts payable in the year in respect of investment management are as follows:

		2021			2020
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Annual fee payable to Harwood Capital	3,828	-	3,828	3,246	-	3,246
Annual fee payable to GFS	2,552	-	2,552	2,164	-	2,164
Performance fee	-	3,774	3,774	-	654	654
Irrecoverable VAT thereon*	-	30	30	-	55	55
Irrecoverable VAT adjustment in respect of prior years**	-	(35)	(35)	-	-	-
	6,380	3,769	10,149	5,410	709	6,119

At 31 January 2021, £270,000 was payable to Harwood Capital LLP in respect of outstanding management fees (2020: £270,000). At 31 January 2021, there was £501,000 payable to GFS in respect of outstanding performance fees (2020: £654,000) net of VAT.

* 4% irrecoverable VAT (2020: 42%) based on rates per latest VAT return information.

** Adjustment in irrecoverable VAT following completion of VAT return.

4 other expenses

	2021 £'000	2020 £'000
Auditor's remuneration - audit - RSM UK Audit LLP	59	58
Directors' fees (see Directors' Remuneration Report in the Annual Report)	130	130
Administration fee	271	279
Legal and Professional fees	198	192
Registrars fees	36	29
Stock Exchange related fees	33	35
Other expenses	236	340
	963	1,063

5 dividends paid

	2021 £'000	2020 £'000
Final dividend for the year ended 31 January 2020 of 30p per share (2019: 30p)	4,230	4,256
	4,230	4,256

The Directors do not recommend the payment of a dividend in respect of the year ended 31 January 2021.

6 taxation

	2021 Total £'000	2020 Total £'000
Withholding tax	15	-
	15	-

The current taxation charge for the year is different from the standard rate of corporation tax in the UK of 19%. The differences are explained below.

	2021 Total £'000	2020  Total £'000
Total return before taxation	130,093	98,852
Theoretical tax at UK Corporation tax rate of 19% (2020: 19%)	24,718	18,782
Effects of:
Non taxable capital return	(25,330)	(17,801)
UK and overseas dividends which are not taxable	(774)	(1,262)
Withholding tax	15	-
Increase in tax losses, disallowable expenses and excess management expenses	1,386	281
actual current tax charge	15	-

Factors that may affect future tax charges:

As at 31 January 2021, the Company has tax losses of £69,275,000 (2020: £62,732,000) that are available to offset future taxable revenue, comprising excess management expenses of £60,280,000 and a non-trade loan relationship deficit of £8,995,000 (2020: excess management expenses of £53,737,000 and a non-trade loan relationship deficit of £8,995,000). A deferred tax asset has not been recognised in respect of those losses as the Company is not expected to generate taxable income in the future in excess of the deductible expenses of future periods and, accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of those losses.

The Company is exempt from corporation tax on capital gains provided it maintains its status as an investment trust under Chapter 4 of Part 24 of the Corporation Tax Act 2010. Due to the Company's intention to continue to meet the conditions required to maintain its investment trust status, it has not provided for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

7 return per ordinary share and net asset value per ordinary share

a) return per ordinary share:

	Revenue			Capital			Total
	Net return  '000	Ordinary Shares	Per Share pence	Net return £'000	Ordinary Shares	Per Share  pence	Net return £'000	Ordinary Shares	Per Share  pence
2021
Basic and diluted return per Share	531	14,133,859	3.76	129,547	14,133,859	916.57	130,078	14,133,859	920.33

	Revenue			Capital			Total
	Net return  '000	Ordinary Shares	Per Share pence	Net return £'000	Ordinary Shares	Per Share  pence	Net return £'000	Ordinary Shares	Per Share  pence
2020
Basic and diluted return per Share	5,872	14,240,620	41.24	92,980	14,240,620	652.92	98,852	14,240,620	694.16

Return per Ordinary Share has been calculated using the weighted average number of Ordinary Shares in issue during the year.

b) net asset value per ordinary share:

The net asset value per Ordinary Share calculated in accordance with the Articles of Association is as follows:

2021	Net assets £'000	Number of Ordinary Shares	Net asset value per Share
Ordinary Shares - Basic and diluted	742,230	14,024,518	5,292p
Ordinary Shares* - Basic and diluted	751,077	14,024,518	5,355p

2020	Net assets £'000	Number of Ordinary Shares	Net asset value per Share
Ordinary Shares - Basic and diluted	620,723	14,160,000	4,384p
Ordinary Shares* - Basic and diluted	637,974	14,160,000	4,505p

* Adjusted for Oryx using equity accounting.

The Company has also reported an adjusted net asset value per share, in accordance with its previous method of valuing its investment in Oryx. The Company has chosen to report this net asset value per share to show the difference if equity accounting was used. Equity accounting permits the use of net asset value pricing for listed assets, which in the case of Oryx, is higher than its fair value.

The values of Oryx, as at each year end, are as follows:

	2021 £'000	2020 £'000
Oryx at Fair value (traded price) using IFRS 10	104,321	72,251
Oryx value using Equity Accounting	113,168	89,502
Increase in net assets using Equity Accounting	8,847	17,251

8 investments at fair value through profit or loss

a) investments at fair value through profit or loss

	2021 £'000	2020 £'000
Quoted at fair value:
United Kingdom	532,711	400,401
Overseas	19,868	19,930
Total quoted investments	552,579	420,331
Treasury bills	54,615	63,841
Unquoted and loan stock	105,680	116,996
investments at fair value through profit or loss	712,874	601,168

2021	Listed equities £'000	AIM quoted £'000	Unlisted equities £'000	Loan stocks £'000	Treasury Bills £'000	Total £'000
analysis of investment portfolio movements
Opening bookcost as at 1 February 2020	101,533	107,375	48,581	42,812	65,252	365,553
Investment holding gains/(losses)	125,650	85,773	25,711	(108)	(1,411)	235,615
opening fair value as at 1 February 2020	227,183	193,148	74,292	42,704	63,841	601,168
Movements in year:
Purchases at cost	20,953	48,482	11,740	1,918	186,027	269,120
Sales - proceeds	(39,333)	(31,278)	(4,696)	(21,445)	(194,541)	(291,293)
- realised gains/(losses) on sales	25,595	13,213	44	-	(1,885)	36,967
Investment holding (losses)/gains	(3,165)	97,781	726	397	1,173	96,912
closing fair value as at 31 January 2021	231,233	321,346	82,106	23,574	54,615	712,874
Closing bookcost as at 31 January 2021	108,748	137,792	55,669	23,285	54,853	380,347
Investment holding gains/(losses)	122,485	183,554	26,437	289	(238)	332,527
	231,233	321,346	82,106	23,574	54,615	712,874

2020	Listed equities £'000	AIM quoted £'000	Unlisted equities £'000	Loan stocks £'000	Treasury Bills £'000	Total £'000
analysis of investment portfolio movements
Opening bookcost as at 1 February 2019	75,357	104,344	42,670	44,728	92,899	359,998
Investment holding gains/(losses)	99,462	18,309	24,659	274	(2,006)	140,698
opening fair value as at 1 February 2019	174,819	122,653	67,329	45,002	90,893	500,696
Movements in year:
Purchases at cost	34,991	18,973	8,957	9,665	203,140	275,726
Sales - proceeds	(20,579)	(4,392)	(1,468)	(11,193)	(231,158)	(268,790)
- realised gains/(losses) on sales	11,764	(11,550)	(1,578)	(388)	371	(1,381)
Investment holding gains/(losses)	26,188	67,464	1,052	(382)	595	94,917
closing fair value as at 31 January 2020	227,183	193,148	74,292	42,704	63,841	601,168
Closing bookcost as at 31 January 2020	101,533	107,375	48,581	42,812	65,252	365,553
Investment holding gains/(losses)	125,650	85,773	25,711	(108)	(1,411)	235,615
	227,183	193,148	74,292	42,704	63,841	601,168

	2021 £'000	2020 £'000
analysis of capital gains and losses
Gains/(losses) on sales	36,967	(1,381)
Unrealised gains	96,912	94,917
gains on investments at fair value	133,879	93,536

	2021 £'000	2020 £'000
Exchange (losses)/gains on capital items	(37)	104
Exchange (losses)/gains on currency	(526)	49
exchange (losses)/gains	(563)	153

	2021 £'000	2020 £'000
portfolio analysis
Equity shares	629,292	490,333
Preference securities	5,393	4,290
Loan stocks	23,574	42,704
Treasury Bills	54,615	63,841
	712,874	601,168

b) subsidiary undertakings

At 31 January 2021 the Company has the following Subsidiaries which were active during the year:

Subsidiary	Principal activity	Equity held	Country of registration
Consolidated Venture Finance Limited	Investment entity	100%	England and Wales
Hampton Investment Properties Limited	Property investment	79.65%	England and Wales
Oryx International Growth Fund Limited	Investment company	52.47%	Guernsey
Performance Chemical Company	Oil field service company	53.12%	United States of America

assessment as an investment entity

Entities that meet the definition of an investment entity within IFRS 10 Consolidated Financial Statements, are required to measure their subsidiaries at fair value through profit or loss rather than consolidate the entities. The criteria which define an investment entity are as follows:

· an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

· an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

· an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Board have concluded that the Company continues to meet the characteristics of an investment entity in that it has more than one investment, it has ownership interests in the form of equity and similar interests, it has more than one investor and its investors are not related parties other than those disclosed in note 15.

c) significant holdings

At the year-end, the Company held 20% or over of the aggregate nominal value of voting equity of the following companies:

Company and address of principal business	Country of incorporation and registration	Year end	Capital and reserves £'000	Revenue reserves for the last financial year £'000	Company holding 31 January 2021 %	Company holding 31 January 2020 %
Consolidated Venture Finance 6 Stratton Street, Mayfair, London, W1J 8LD	England and Wales	31 January 2020	(730)	15	100.00	100.00
EKF Diagnostics Holdings Plc Avon House, 19 Stanwell Road, Penarth, Cardiff, CF64 2EZ	England and Wales	31 December 2020	78,200	15,395	21.54	21.58
Frenkel Topping Group Plc Frenkel House 15 Carolina Way, Salford, Manchester, United Kingdom, M50 2ZY	England and Wales	31 December 2020	25,148	1,197	22.30	19.99
Hampton Investment Properties 6 Stratton Street, Mayfair, London, W1J 8LD	England and Wales	31 December 2019	12,211	(176)	79.65	70.81
Hargreaves Services Plc West Terrace, Esh Winning, Durham, Durham, DH7 9PT	England and Wales	31 May 2020	130,055	3,701	20.91	7.74
Harwood Private Capital UK L.P. 6 Stratton Street, Mayfair, London, W1J 8LD	England and Wales	31 March 2021 (first year end)	-	-	28.57	-
Harwood Private Equity Fund IV 6 Stratton Street, Mayfair, London, W1J 8LD	England and Wales	31 December 2020	125,674	2,743	26.28	26.28
Harwood Private Equity Fund V 6 Stratton Street, Mayfair, London, W1J 8LD	England and Wales	31 December 2020	31,200	1,045	25.00	25.00
Oryx International Growth Fund Limited BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey GY1 1WA	Guernsey	31 March 2020	124,872	(8,453)	52.47	51.95
Performance Chemical Company 9105 W Interstate 20 Midland, TX 79706	United States of America	30 September 2020	$13,424	$591	53.12	53.12
Trident Private Equity Fund III LP 6 Stratton Street, Mayfair, London, W1J 8LD	England and Wales	31 December 2020	15,120	(346)	38.76	38.76

All the investments detailed above have not been consolidated into the financial statements due to the Company meeting the definition of an investment entity under IFRS 10 and therefore these investments are included at fair value through profit and loss.

At the year end, the Company held over 3% of the shares in the following listed companies which were considered to be material:

	%
Oryx International Growth Fund Limited	52.47
Frenkel Topping Group Plc	22.30
EKF Diagnostics Holdings Plc	21.54
Hargreaves Services Plc	20.91
AssetCo Plc	19.13
Augean Plc	17.15
Bigblu Broadband Plc	15.54
Odyssean Investment Trust Plc	15.23
TEN Entertainment Group Plc	14.63
Sureserve Group Plc	12.66
MJ Gleeson Plc	8.58
Renalytix AI Plc	8.53
Circassia Group Plc	7.80
Verici DX Limited	7.31
Esken Limited	7.20
Polar Capital Holdings Plc	6.59
SourceBio International plc	5.39
Redcentric Plc	5.25
Tribal Group Plc	4.50

d) investments in US treasury bills

At 31 January 2021, the Company held US Treasury Bills with a market value of £54,615,000 (2020: £63,841,000).

e) transaction costs

During the year, the Company incurred total transaction costs of £176,000 (2020: £183,000) comprising £87,000 (2020: £114,000) and £89,000 (2020: £69,000) on purchases and sales of investments respectively. These amounts are included in gains on investments as disclosed in the Statement of Comprehensive Income.

f) commitment

At 31 January 2021 NASCIT had undrawn capital commitments to invest £32 million (2020: £40 million) in Harwood Private Equity V LP and £18.7 million (2020: £nil) in Harwood Private Capital U.K. LP.

9 trade and other receivables

	2021 £'000	2020 £'000
Amounts due from brokers	169	1,085
Amounts owed by Subsidiary	-	90
Accrued income	623	825
Other debtors	1,528	808
Recoverable withholding tax	891	928
	3,211	3,736

10 trade and other payables

	2021 £'000	2020  '000
Investment Manager's fees	319	270
Performance fees (incl. VAT)	4,529	784
Amounts due to brokers for share buybacks	182	-
Amounts due to brokers for trades	2,519	771
Other creditors and accruals	224	161
	7,773	1,986

11 share capital

	2021 Number	2021 £'000	2020 Number	2020 £'000
allotted, called up and fully paid:
Ordinary Shares of 5p:
Balance at beginning of year	14,160,000	708	14,325,620	716
Cancellation of shares	(135,482)	(7)	(165,620)	(8)
Balance at end of year	14,024,518	701	14,160,000	708

Since 31 January 2021, 24,518 Ordinary Shares have been purchased by the Company for cancellation. As at the date of approval of this report, the Company's issued share capital consists of 14,000,000 Ordinary Shares of 5p nominal value each.

12 reconciliation of total return before taxation to cash generated from operations

	2021 £'000	2020 £'000
Total return before taxation	130,093	98,852
Gains on investments	(133,316)	(93,689)
Dividends and interest reinvested	(1,901)	(2,413)
Share based payment - discharge of options	-	(276)
Transfer from subsidiary	104	-
Increase in debtors and accrued income	(518)	(133)
Increase/(decrease) in creditors and accruals	3,843	(1,361)
Cash (expended)/generated from operations	(1,695)	980

13 analysis of net cash and net debt

net cash	At 1 February 2020 £'000	Cash flow £'000	Exchange movement £'000	At 31 January 2021 £'000
Cash and cash equivalents	17,805	16,638	(525)	33,918

14 financial instruments and capital disclosures

The Company's financial risk management objectives, policies and strategy can be found in the Strategic Report in the Annual Report.

The Company's financial instruments comprise its investment portfolio, cash balances, loan stock and trade receivables and trade payables that arise directly from its operations.

The main risks arising from the Company's financial instruments are:

(i)  market price risk, including currency risk, interest rate risk and other price risk;

(ii)  liquidity risk; and

(iii)  credit risk

The Board and Manager consider and review the risks inherent in managing the Company's assets which are detailed below.

(i) market price risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises currency risk, interest rate risk and other price risk. The Board of Directors reviews and agrees policies for managing these risks through detail and continuing analysis. The Manager assesses the exposure to market risk when making each investment decision and monitor the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

currency risk

The Company's total return and net assets can be materially affected by currency translation movements as a significant proportion of the Company's assets are denominated in currencies other than Sterling, which is the Company's functional currency. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. The Manager seeks, when deemed appropriate, to manage exposure to currency movements on borrowings by using forward foreign currency contracts as a hedge against potential foreign currency movements. At 31 January 2021, the Company had no open forward currency contracts (2020: none).

The revenue account is subject to currency fluctuation arising on overseas income. The Company does not hedge this currency risk.

Foreign currency exposure by currency of denomination:

	31 January 2021			31 January 2020
	Overseas investments £'000	Net monetary assets £'000	Total currency exposure £'000	Overseas investments £'000	Net monetary assets £'000	Total currency exposure £'000
US Dollar	106,484	5,079	111,563	118,468	1,946	120,414
Euro	8,504	-	8,504	6,725	-	6,725
	114,988	5,079	120,067	125,193	1,946	127,139

Sensitivity analysis is based on the Company's monetary foreign currency financial instruments held at each balance sheet date. If Sterling had moved by 10% against all currencies, with all other variables constant, net assets would have moved by the amounts shown below. The analysis is shown on the same basis for 2020.

	31 January 2021		31 January 2020
	10% weakening £'000	10% strengthening £'000	10% weakening £'000	10% strengthening £'000
US Dollar	12,396	(10,142)	13,379	(10,947)
Euro	945	(773)	747	(611)
	13,341	(10,915)	14,126	(11,558)

In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the currency risk management process used to meet the Company's objectives.

interest rate risk

Interest rate movements may affect;

· the fair value of the investments in fixed interest rate securities (including unquoted loans); or

· the level of income receivable on cash deposits;

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions.

The Board reviews on a regular basis the values of the fixed interest rate securities and the unquoted loans to companies in which private equity investment is made.

Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit.

other price risk

Other price risks (i.e. changes in market prices other than those arising from currency risk or interest rate risk) may affect the value of the quoted and unquoted investments.

The Company's exposure to price risk comprises mainly movements in the value of the Company's investments. It should be noted that the prices of options tend to be more volatile than the prices of the underlying securities. As at the year-end, the spread of the Company's investment portfolio analysed by sector was as set out earlier in the Annual Report.

The Board of Directors manages the market price risks inherent in the investment portfolios by ensuring full and timely access to relevant investment information from the Manager. The Board meets regularly and at each meeting reviews investment performance. The Board monitors the Manager's compliance with the Company's objectives and is directly responsible for investment strategy and asset allocation.

The Company's exposure to other changes in market prices at 31 January 2021 on its quoted and unquoted investments and options on investments was as follows:

	2021 £'000	2020 £'000
Financial assets at fair value through profit or loss
- Non current investments at fair value through profit or loss	712,874	601,168

As mentioned in the accounting policies note, the Private equity investments have been valued following the IPEV Valuation Guidelines. The valuation incorporates all relevant factors that market participants would consider in setting a price.

Methods applied include cost of investment, price of recent investments, net assets and earnings multiples. Any valuations in local currency are converted into sterling at the prevailing exchange rate on the valuation date.

Although the Manager believes that the estimates of fair values are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair values.

Subsequent adjustments in price are determined by the Manager's Valuation and Pricing Committee.

The table below shows how the most significant unquoted investments have been valued as at 31 January 2021.

	Method of fair value valuation	2021 fair value GBP £'000		2020 fair value GBP £'000
Harwood Private Equity Fund IV	Net Assets	34,656		37,524
Performance Chemical Holdings Common Stock US$	Valuation Multiple	9,916		10,327
Performance Chemical Holdings Series A Preferred Stock US$	Cost	3,317		3,454
Coventbridge Group Limited USD 9% loan	Cost	10,133		10,051
Pelsis Holding/Hamsard 3468 Ltd A2 Loan Notes Euro €1	Cost plus accrued interest	5,083		4,016
Pelsis Holding/Hamsard 3468 Ltd A1 Loan Notes Euro €1	Cost plus accrued interest	3,388		2,677
Pelsis Holding/Hamsard 3468 Ltd A4 Ordinary Euro €1	Valuation multiple	33		32
Harwood Private Equity Fund V	Net Assets	7,944		-
Trident Private Equity Fund LP 3 Including Rebate	Net Assets	5,874		6,418
Viking Investments LP	Net Assets	5,734		4,852
Utitec Holdings Inc US$ - Loan Stock 12.5%	Cost	3,642		3,793
Spring Investment LP (Duke Street) GBP	Net Assets	3,500		3,500
Antler Holdco Limited	Fair Value	3,117		-
Antler Holdco Discount Notes GBP	Cost	17		-
Jaguar Holdings Limited Preference Shares - USD	Cost	2,076		2,162
Jaguar Holdings Limited Ordinary Shares - USD	Valuation Multiple	947		1,630
WEP II SIMCO Co-Investment US$	Net Assets	1,602		1,517
Specialist Components Ltd GBP 5% Loan Notes	Valuation Multiple	1,311		2,622
Specialist Components Ltd APC Technology Ord £1	Valuation Multiple	-		118
Harwood Private Capital UK L.P.	Cost	1,300		-
Trellus Health Limited A Ordinary Shares £	Valuation Multiple	980		-
Hampton Investment Properties Ltd New	Adjusted Net Assets	742		995
Sherwood Holdings Limited 12.5% PIK Loan Notes	Cost	-		19,544
Telos Corporation Common Stock	Valuation multiple	-		1,315
		105,312		116,547
Other investments		368		449
		105,680		116,996

the valuation techniques applied are based on the following assumptions:

Unquoted investments are usually valued by reference to the valuation multiples of similar listed companies or from transactions of similar businesses. Where appropriate discounts are then applied to those comparable multiples to reflect difference in size and liquidity. These enterprise values are then adjusted for net debt to arrive at an equity valuation. Where companies are in compliance with the loan note terms these loans are generally held at par plus accrued interest (where applicable) unless the enterprise value suggests that the debt cannot be recovered.

Further detail on the valuation of significant investments, are detailed below:

Trident Private Equity Fund III LP (TPE3), Harwood Private Equity IV LP (HPE4) and Harwood Private Equity V LP (HPE5)

Held at net asset value, derived from the audited financial statements of the Funds as at 31 December 2020, as the underlying investments within TPE3, HPE4 and HPE5 are valued on a fair value basis. The Directors believe that the movement between the Funds' measurement dates and the reporting dates are not material. As the funds have no debts, a change of 10% in the underlying assets would have a 10% impact on the Funds' carrying value.

Performance Chemical Company - Ordinary Shares and Preferred Shares

The enterprise value is calculated based on an EBITDA multiple of 9.9x. A reduction in the multiple by a factor of 1x would reduce the carrying value of the total investment by US$1.5 million, or -8%. An increase in the multiple by a factor of 1x would increase the value of the total investment by US$1.5 million, or 8%. The preference shares are held at cost.

Coventbridge Group - Loan

The loan is held at par plus accrued interest. The enterprise value is calculated using an EBITDA multiple of 13x. Neither a reduction nor an increase in the multiple by a factor of 1x would impact the carry value of the loan.

Hamsard 3468 Limited - Ordinary Shares and Loan notes

The ordinary shares are valued using an EBITDA multiple of 10.2x to calculate an enterprise value. The loan notes are held at par plus accrued interest. A reduction in the multiple by a factor of 1x would reduce the carrying value of the total investment by EUR1.4 million or 15%. An increase in the multiple by a factor of 1x would increase the value of the total investment by EUR1.6 million or 17%.

The following table illustrates the sensitivity of the profit after taxation and net assets to an increase or decrease of 10% in the fair values of the Company's investments. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the Company's equities and equity exposure through options at each Balance Sheet date, with all other variables held constant.

	2021		2020
	Increase in fair value £'000	Decrease in fair value £'000	Increase in fair value  '000	Decrease in fair value £'000
Increase/(decrease) in net assets	71,287	(71,287)	60,117	(60,117)

(ii) liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

The Company invests in equities and other investments that are readily realisable. It also invests in unquoted securities, which are less readily marketable than equities. These investments are monitored by the Board on regular basis.

As at 31 January 2021, the majority of the Company's cash is held in short-term Treasury Bills, which are highly liquid. As a consequence, the Company could access in excess of £55 million based on the year end exchange rates, within one week.

As the Company is a closed-end company, assets do not need to be liquidated to meet redemptions and sufficient liquidity is maintained to meet obligations as they fall due.

(iii) credit risk

Other than its investment in US Treasury Bills, the Company does not have any significant exposure to credit risk arising from any one individual party. Credit risk is spread across a number of counterparties, each having an immaterial effect on the Company's cash flows, should a default happen. The Company assesses the credit worthiness of its debtors from time to time to ensure they are neither past due or impaired.

The maximum exposure of the financial assets to credit risk at the Balance Sheet date was as follows:

	2021 £'000	2020 £'000
financial assets neither past due or impaired
Fixed income securities	23,574	42,704
Preference shares	2,162	4,290
Treasury Bills	54,615	63,841
Accrued income and other debtors	3,211	3,736
Cash and cash equivalents	33,918	17,805
	117,480	132,376

The maximum credit exposure of financial assets represents the carrying amount.

There are no financial assets that are past due or impaired.

commitments giving rise to credit risk

There are no commitments giving rise to credit risk as at 31 January 2021.

fair value of financial assets

The Company measures fair values using the fair value hierarchy that reflects the significance of the inputs used in making the measurements of the relevant assets as follows:

· Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

· Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs). See note 1e) for details on how the value of level 3 investments are calculated.

The Company's main unobservable inputs are earnings multiples, recent transactions and net asset basis. The market value would be sensitive to movements in these unobservable inputs. Movements in these inputs, individually or in aggregate could have a significant effect on the market value. The effect of such a change or a reasonable possible alternative would be difficult to quantify as such data is not available.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The Company considers observable data from investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the Balance Sheet date, without adjustment for transaction costs necessary to realise the asset.

The table below sets out fair value measurements of financial assets in accordance with the IFRS 13 fair value hierarchy system:

financial assets at fair value through profit or loss

At 31 January 2021
	Total £'000	Level 1  '000	Level 2 £'000	Level 3 £'000
Equity investments	634,685	552,579	-	82,106
Fixed interest investments	78,189	54,615	-	23,574
total	712,874	607,194	-	105,680

At 31 January 2020
	Total £'000	Level 1  '000	Level 2 £'000	Level 3 £'000
Equity investments	494,623	420,331	-	74,292
Fixed interest investments	106,545	63,841	-	42,704
total	601,168	484,172	-	116,996

A reconciliation of fair value measurements in Level 3 is set out below.

level 3 financial assets at fair value through profit or loss

At 31 January 2021
	Total £'000	Equity investments £'000	Fixed interest investments £'000
Opening fair value	116,996	74,292	42,704
Purchases	13,658	11,740	1,918
Sales	(26,141)	(4,696)	(21,445)
Total gains/(losses) included in gains on investments
in the Statement of Comprehensive Income:
- on assets sold	44	44	-
- on assets held at the end of the year	1,123	726	397
closing fair value	105,680	82,106	23,574

capital management policies and procedures

The Company's capital management objectives are:

· to ensure that the Company will be able to continue as a going concern; and

· to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The policy is that gearing should not exceed 30% of net assets.

The Company's capital at 31 January comprises:

	2021 £'000	2020 £'000
debt	-	-
equity
Equity share capital	701	708
Retained earnings and other reserves	741,529	620,015
	742,230	620,723
debt as a % of net assets	0.0%	0.0%

The Board, with the assistance of the Manager monitor and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:

· the planned level of gearing, which takes account of the Manager's views on the market;

· the need to buy back equity Shares for cancellation, which takes account of the difference between the net asset value per share and the Share price (i.e. the level of share price discount or premium);

· the need for new issues of equity Shares; and

· the extent to which revenue in excess of that which is required to be distributed should be retained.

capital requirement

The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.

15 related party transactions

Harwood Capital LLP is regarded as a related party of the Company due to Christopher Mills, the Company's Chief Executive and Investment Manager being a member of Harwood Capital LLP until 9 June 2015 and the ultimate beneficial owner. Harwood Capital LLP acts as Investment Manager or Investment Adviser of the following companies in which the Company has an investment and from which companies it receives fees or other incentives for its services:

	Services	2021 £'000	2020 £'000
Oryx International Growth Fund Limited	Investment Advisory	2,289	1,843
Trident Private Equity III LP	Investment Advisory	146	147
Harwood Private Equity IV LP	Investment Advisory	2,446	3,052
Harwood Private Equity V LP	Investment Advisory	2,111	-

The amounts payable to the Manager are disclosed in note 3. The relationships between the Company, its Directors and the Manager are disclosed in the Report of the Directors in the Annual Report.

Christopher Mills is Chief Executive Officer and indirectly a member of Harwood Capital LLP. He is also a director of Oryx. GFS is a wholly-owned subsidiary of Harwood Capital Management Limited, which is the holding company of the Harwood group of companies and is, in turn, 100% owned by Christopher Mills. Harwood Capital Management Limited is also a Designated Member of Harwood Capital LLP, the Administrator of the Company.

Fees from Odyssean Investment Trust Plc and Harwood Private Capital UK LP go to Odyssean Capital LLP (OCLLP) and Harwood Private Capital LLP (HPCLLP) respectively. Both OCLLP and HPCLLP are 50:50 JVs between Harwood Capital Management Ltd and Stuart Widdowson, for OCLLP, and Haseeb Aziz, for HPCLLP.

transfer of assets from subsidiary

During the year to 31 January 2021, the Company received a transfer of cash and assets from its subsidiary company, Consolidated Venture Finance, amounting to £104,000 (2020: nil).

disclosure of interests

Christopher Mills is also a director of the following companies in which the Company has an investment or may have had in the year and/or from which he may receive fees or hold shares: AssetCo plc, Augean plc, Bigblu Broadband plc, Coventbridge Group Limited, EKF Diagnostics Holdings Plc, Frenkel Topping Group plc, Hampton Investment Properties Limited, Jaguar Holdings Limited, M J Gleeson Group plc, Oryx, Pelsis/Hamsard, Renalytix Al Plc, SourceBio International plc, Sunlink Health Systems Inc, SureServe Group plc, Ten Entertainment Group Plc and Utitec Holdings Inc. Employees of the Manager may hold options over shares in investee companies. A total of £435,000 (2020: £411,000) in directors fees was received by Christopher Mills during the year under review.

No formal arrangements exist to avoid double charging on investments held by the Company which are also managed or advised by Christopher Mills (Chief Executive) and/or Harwood Capital LLP. Members and certain private clients of Harwood Capital LLP, and its associates (excluding Christopher Mills and his family) hold 83,924 shares in the Company (2020: 83,924).

Members, employees, institutional clients and private clients of Harwood Capital LLP may co-invest in the same investments as the Company.

From time to time Directors may co-invest in the same investments as the Company.

 

END

 

 

FR SFAFISEFSEII