North Atlantic Smaller Companies Investment Trust plc
Annual Report
for the year ended 31 January 2023
contents
Company Registered Number: 1091347
Front Cover: ‘ The Battle of Vigo Bay, 12 October 1702’ (Ludolf Backhuysen)
© National Maritime Museum, Greenwich, London, Caird Collection
objective of the company and financial highlights 1
strategic report 2-22
corporate summary 2
directors 3
chairman’s statement 4
investment manager’s report 6
sector analysis of investments at fair value 8
twenty largest investments 9
unquoted investments profile 10
report of the directors 23
statement of directors’ responsibilities in respect
of the annual report and financial statements 27
corporate governance 29
directors’ remuneration report 35
independent auditor’s report 41
statement of comprehensive income 48
statement of changes in equity 49
balance sheet 50
cash flow statement 51
notes to the financial statements 52
directors and advisers 78
shareholder information 79
1
north atlantic smaller companies investment trust plc
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
2023 % change
31 January
2022
31 January
2021
31 January
2020
31 January
2019
return
Return for the year (£’000) (91,038) (240.3%) 64,906 130,078 98,852 35,418
Basic and Diluted return per 5p Ordinary Share:*
– Revenue 32.65 228.5% 9.94 3.76 41.24 40.58
– Capital (699.41) (253.3%) 456.30 916.57 652.92 205.57
Dividend per 5p Ordinary Share (declared) 22.0p nil nil 30.0p 30.0p
assets
Net assets (£’000) 693,356 (12.2%) 789,466 742,230 620,723 531,425
Net asset value (“NAV”) per 5p Ordinary Share:**
Basic 5,097p (11.8%) 5,779p 5,292p 4,384p 3,710p
Diluted 5,097p (11.8%) 5,779p 5,292p 4,384p 3,708p
Basic adjusted† 5,236p (10.6%) 5,856p 5,355p 4,505p 3,776p
Diluted adjusted† 5,236p (10.6%) 5,856p 5,355p 4,505p 3,774p
Mid-market price of the 5p Ordinary Shares 3,900p (9.9%) 4,330p 3,850p 3,400p 2,910p
discount to diluted net asset value
23.5% 25.1% 27.2% 22.4% 21.5%
discount to diluted adjusted net asset value
25.5% 26.1% 28.1% 24.5% 22.9%
indices and exchange rates at 31 January
Standard & Poor’s 500 Composite Index 4,076.6 (9.7%) 4,515.6 3,714.2 3,225.5 2,704.1
Russell 2000 Index 1,931.9 (4.8%) 2,028.5 2,073.6 1,614.1 1,499.4
US Dollar/Sterling exchange rate 1.23065 (8.3%) 1.34180 1.37295 1.31830 1.31505
Standard & Poor’s 500 Composite Index – Sterling
adjusted 3,307.3 (1.6%) 3,360.5 2,709.5 2,442.5 2,062.8
Russell 2000 – Sterling adjusted 1,567.4 3.8% 1,509.6 1,512.7 1,222.2 1,143.8
* 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.
north atlantic smaller companies investment trust plc
2
introduction North Atlantic Smaller Companies Investment Trust plc (“NASCIT”) is an investment trust, the
shares of which are listed on the London Stock Exchange.
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. The
Company invests in both listed and unquoted companies.
company’s business The Company is an investment company within the meaning of Section 833 of the Companies Act
2006 and its business is that of an investment trust.
risk Investment in small companies is generally perceived to carry a greater risk than investment in large
companies. This is reasonable when comparing individual companies, but is much less so when
comparing the volatility of returns from a diversified portfolio of companies. The Board believe that
the Company’s portfolio is diversified although considerably less liquid than a portfolio of large-cap
listed equities.
The Company has the ability to utilise gearing in the form of term loan facilities, although no
facility currently exists. Gearing has the effect of accentuating market falls and gains.
The Company outsources all of its main operational activities to recognised third party providers.
AIFMD The Company is authorised and regulated by the Financial Conduct Authority. The Company has
been a full scope internally managed AIF with effect from 1 October 2021 under the Alternative
Investment Fund Managers Regulations 2013. For further information see page 21.
company secretary The Company Secretary is Kin Company Secretarial Limited, Hyde Park House, 5 Manfred Road,
London SW15 2RS.
website www.nascit.co.uk
objective and
investment strategy
strategic report – corporate summary
3
north atlantic smaller companies investment trust plc
strategic report – directors
Sir Charles Wake ¹ Non-Executive Chairman. Appointed 27 June 2018 and became Chairman on
25 February 2022. Started as a management trainee with Whitbread’s in 1972 and left in 1980. Since
then he has been a director of various companies including sheet metal engineers, motor retailers,
off-licences, pubs, bonded warehouses, farming and healthcare. He was chairman of St Andrew’s
Healthcare from 2004-2014 having been on the board since 1991.
Christopher H B Mills Chief Executive and Investment Manager. Appointed January 1984. He is
Chief Investment Officer of Harwood Capital LLP. In addition, he is a non-executive director of
numerous UK companies which are either now or have in the past five years been publicly quoted,
further details of which are included in note 15 of the financial statements.
The Lord Howard of Rising ¹²³ Non-Executive Director. Appointed November 2015. He is a
member of the House of Lords and a District Councillor for the Borough Council of Kings Lynn &
West Norfolk, as well as being a landowner and farmer. He was formerly a director of The Keep
Trust and Fortress Trust.
G Walter Loewenbaum (USA) ¹²³ Non-Executive Director. Appointed on 31 October 2017. As an
investment banker and private equity investor, Mr Loewenbaum has worked with multiple
companies in a variety of different industries at different phases of organisational development,
ranging from startup to publicly traded. He brings a depth of knowledge in serving as chairman for
public and private companies, building stockholder value and capital market considerations.
Peregrine D E M Moncreiffe Non-Executive Director. Appointed November 2008 (having
previously been a Director of the Company from 1993-2006) and served as Chairman from June 2009
until 25 February 2022. He has over the years worked in London, New York and the Far East, with
Credit Suisse First Boston, Lehman Brothers and Buchanan Partners. In April 2021 he was appointed
as non-executive Chairman of Arix Bioscience plc.
Professor Fiona Gilbert ¹²³ Non-Executive Director. Appointed 6 September 2022. She is Professor
of Radiology and Head of the Department at the University of Cambridge. Professor Gilbert leads a
team of researchers in various fields of radiology assessing new imaging technologies and has over
250 scientific publications and over £20M in research income. She works in the NHS as an honorary
consultant with expertise in musculoskeletal and breast imaging. She holds non-executive positions
on several boards in private companies.
¹ Independent
² Member of the Audit Committee
³ Member of the Remuneration Committee
north atlantic smaller companies investment trust plc
4
strategic report – chairman’s statement
During the year under review, the net asset value of the Company fell by 11.8% due to weak markets
in general and in particular the performance of smaller UK listed businesses which comprise the
majority of the Company’s listed portfolio.
The revenue account for the year showed a surplus post taxation of £4,458,000 (2022: £1,384,000)
and an interim dividend of 22p was declared in respect for the year ended January 2023 (2022: nil).
Your directors are not proposing a final dividend.
During the year 58,932 shares (2022: 363,518) 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.
Although 31.15% (excluding the largest shareholder who is disqualified from voting) of the
shareholders voted against this resolution at the last Annual General Meeting, the Board will
continue to give shareholders the opportunity to vote on this resolution as long as it believes that
themajority of shareholders who are able to vote will continue to support the resolution at
forthcomingAGMs.
The current year has seen a total reversal of economic thinking which has presided over the past
twenty years. The war in Ukraine, record employment and levels of inflation not seen for several
decades have resulted in central governments across OECD nations significantly raising interest
rates to choke off economic activity to contain inflationary pressures. Although many commodity
prices are now normalising, the scarcity of labour has meant that there is a real risk of wage based
inflation becoming imbedded despite the fact that growth in economic activity has fallen to virtually
nothing at best. In my view interest rates will go higher and stay higher than many equity investors
currently anticipate. Minimal economic growth and rising labour costs will squeeze corporate profit
margins and higher interest rates obviously have negative implications for equity markets. Indeed, in
the US, if energy companies are excluded, corporate profits for the fourth quarter were some 16%
below earlier expectations.
It is my view that this trend will continue into 2023 and therefore the Company will continue to
pursue a cautious approach to equity markets. We are, however, mindful of the fact that markets will
begin to recover in anticipation of an economic rebound.
5
north atlantic smaller companies investment trust plc
strategic report – chairman’s statement
Your directors are frustrated by the ongoing discount to net asset value that the Company trades on
despite the fact that it is significantly lower than many other funds which have large holdings in
private equity and other large holdings of illiquid stocks. Our share buyback programme will
hopefully reduce this discount over time but this comes at the expense of making our own shares
more illiquid which in turn adversely impacts the discount. Your directors also believe it is
important to continue to make new investments and, where appropriate, continue to support
existing ones as we are firmly of the belief that this will add more value than buying back shares
over the longer term. Nevertheless, at Mr Mills’ retirement, which is not an issue for the foreseeable
future, he has requested that the Board prioritises share buy backs over new investments until such
time as the shares trade at a very modest discount to net asset value.
Finally, I would like to welcome Fiona Gilbert to the Board. Fiona’s background is in the life science
industry and we believe her advice will be invaluable as we continue to invest in this industry over
the coming years.
Sir Charles Wake Chairman
12 May 2023
north atlantic smaller companies investment trust plc
6
quoted portfolio UK It was fortunate that we entered the year with substantial cash balances, most of which were held in
US dollars. It is also encouraging that despite very difficult market conditions, the new investments
made during the twelve month period when taken as a whole, were profitable.
The overall investment environment was, however, one of the hardest the Company has encountered
for many years. By way of example, Ten Entertainment came in with record earnings materially in
excess of profits at the start of the year but the stock was basically flat over the twelve month period.
It is a similar story with Sureserve, Niox and Redcentric. Other stocks which also achieved record
profits such as Hargreaves Services and Frenkel Topping actually fell 10%.
Needless to say, companies which saw tougher trading conditions such as Polar Capital (weak
technology stocks), Gleeson (higher interest rates and a weaker housing environment) and EKF
(COVID revenues dissipated) fell by approximately 15%, 45% and 40% respectively. We remain
confident that all these companies, which have no net debt, are good businesses and will see their
share prices recover over the course of the current year.
The most difficult part of the portfolio has been our exposure to emerging life sciences where
markets both in the United States and the United Kingdom collapsed. In particular the decline in
the value of Renalytix impacted the net asset value by circa £1.50 per share. The company is,
however, hopeful that it will achieve FDA approval for its proprietary diagnostic test for end-stage
renal disease early in the current year, which should support a material recovery in the share price
from the current depressed valuation.
Finally, it is encouraging to note that both Oryx International Growth Fund Limited and Odyssean
Investment Trust plc beat their benchmarks.
quoted portfolio USA The US portfolio currently has only one holding, Mountain Commerce. The bank performed well
during the period reporting record profits and dividends. The share price measured in sterling was
very marginally down during the twelve month period.
unquoted portfolio UK Both Specialist Components and Spring benefitted from a recovery in economic activity resulting in
a significant growth in pre-tax profits during 2022. The current year has also started well and we
believe there is further upside to current valuations over the course of the current year.
Our principal exposure to private equity is through our holdings in Harwood Private Equity IV and
Harwood Private Equity V. Several of the investments in these funds are now in a sale process. In
every case we expect the sale to be at a premium to our current holding cost and should realisation
prices meet our current expectations, it will result in an uplift in the net asset value and a material
return of cash to the Trust.
Finally, Source Bioscience was once again taken private just before year end. The company is one of
the leading independent providers of pathology services and we are confident that it can create
substantial value for shareholders over the next five years.
strategic report – investment manager’s report
7
north atlantic smaller companies investment trust plc
unquoted portfolio USA The portfolio primarily consists of mezzanine loans at attractive interest rates to support the
Company’s equity positions. Two of these investments have now started exit negotiations so will add
to our cash balances over the course of the current year.
Our two principal direct investments, Performance Chemicals and Jaguar, also performed well and
both are expected to see further progress over the next twelve months. Once again we would hope
to exit both these investments at a premium to the current valuation over the medium term.
liquidity Cash and US treasury bills started the year at £147 million and ended the year at £109 million.
Your managers continue to review potential investment opportunities but are adopting a cautious
approach given market headwinds of rising interest and inflation rates so that it is unlikely
monetary policy will become more accommodating any time soon.
Christopher Mills Chief Executive & Investment Manager
12 May 2023
strategic report – investment manager’s report
north atlantic smaller companies investment trust plc
8
strategic report – sector analysis of investments at fair value
as at 31 January
equities, convertible securities & loan stocks
as a % of total portfolio valuation
United
States
31 January
2023
%
United
Kingdom
31 January
2023
%
Total
31 January
2023
%
Total
31 January
2022
%
Financial Services* – 28.5 28.5 27.1
Industrial Goods & Commercial Services 4.9 14.0 18.9 18.3
Phamaceuticals and Health Care – 13.0 13.0 20.9
Banks 1.3 11.2 12.5 10.9
Transport, Travel & Leisure – 4.3 4.3 4.7
Insurance – 2.1 2.1 0.5
Technology & Software – 1.7 1.7 1.9
Real Estate – 1.6 1.6 0.6
Telecommunications – 0.7 0.7 0.8
Energy – 0.6 0.6 1.2
Consumer Products and Services – 0.1 0.1 2.0
Oil & Gas
1.3 – 1.3 1.2
7.5 7 7.8 85.3 90.1
treasury bills 14.7 – 14.7 9.9
total at 31 January 2023 22.2 7 7.8 100.0
total at 31 January 2022 16.0 84.0 100.0
* Includes Investment Trusts.
9
north atlantic smaller companies investment trust plc
equities (including convertibles,
loan stocks and related financing)
At fair value
£’000
Oryx International Growth Fund Limited* UK Quoted 91,819
Harwood Private Equity V LP UK Unquoted 45,342
EKF Diagnostics Holdings plc UK Quoted 39,408
Polar Capital Holdings Plc UK Quoted 36,260
Hargreaves Services Plc UK Quoted 29,150
Odyssean Investment Trust Plc UK Quoted 28,800
Ten Entertainment Group plc UK Quoted 28,800
Frenkel Topping Group Plc UK Quoted 26,980
Harwood Private Equity IV LP UK Unquoted 23,139
MJ Gleeson Group plc UK Quoted
22,165
ten largest investments 371,863
Sureserve Group plc UK Quoted 17,800
Niox Group plc UK Quoted 14,625
SMT Corporation US Unquoted 14,017
TP ICAP Group plc UK Quoted 13,422
AssetCo plc UK Quoted 12,210
CoventBridge Group US Unquoted 10,767
Redcentric plc UK Quoted 10,120
SourceBio International UK Unquoted 9,200
Mountain Commerce Bancorp plc UK Quoted 8,778
Performance Chemicals US Unquoted
8,633
twenty largest investments 491,435
Aggregate of other investments at fair value
93,643
585,078
US Treasury Bills
100,413
total 685,491
* incorporated in Guernsey.
All investments are valued at fair value.
strategic report – twenty largest investments
as at 31 January
north atlantic smaller companies investment trust plc
10
strategic report – unquoted investments profile
as at 31 January
2023
At fair value
£’000
Harwood Private Equity V LP (UK) Cost: £28,700,000 45,342
Harwood Private Equity V LP (HPE5) was established in 2020 with
committed capital of £160 million. The fund has made ten investments
to date in the property services, medical packaging, pet food, data
centre, green energy, gardening products, electronic components and
healthcare industries. The fund successfully exited its investment in
Amito for nearly three times the cost in February 2022. The Trust’s
commitment to the fund is £40 million with £6 million left undrawn.
Harwood Private Equity IV LP (UK) Cost: £10,135,000 23,139
Harwood Private Equity IV LP (HPE4) was established in June 2015
with committed capital of £152.5 million. The Company made a £40
million commitment to HPE4, which is now fully drawn. HPE4 invests
primarily in small and lower mid-market companies. During the year,
there was a partial redemption of the preference shares in Jaguar
Holdings Limited. HPE4 is looking to exit its four remaining
investments.
SMT Corporation – 11% Loan Notes (US) Cost: £15,044,000 14,017
SMT is a value-added supplier of high-reliability, obsolete and hard to
find defence, aerospace, and high-end critical electronic components
that it locates, tests, certifies, and distributes. The company benefits
from the increasing awareness of counterfeit and cloned components in
the US military supply chain, geopolitical tensions, and the scarcity of
counterfeit testing capacity. The transaction was completed in
September 2022 and performance is ahead of expectations. The loss
reflects the weakness of the dollar since the investment was made.
Carried forward 82,498
11
north atlantic smaller companies investment trust plc
strategic report – unquoted investments profile
as at 31 January
2023
At fair value
£’000
Brought Forward 82,498
CoventBridge Group – 9% Loan Notes (US) Cost: £9,674,000 10,767
CoventBridge is a provider of insurance claims, healthcare network and
government reimbursement integrity services. Its clients include global
insurance carriers, third party administrators, healthcare networks and
government agencies. The company achieved record profits in 2022 and
the outlook for the current year is encouraging.
SourceBio International plc Cost: £10,844,000 9,200
The company delisted during the period as the major shareholders
concluded that there was little benefit of the company incurring the
significant expense of being a public company. 2022 saw the unwinding
of COVID profitability and the need to write off excess COVID related
assets. The current year has started well and the outlook for the
company’s core businesses is promising.
Performance Chemicals Company (US) Cost: £230,000 8,633
The company provides chemicals to assist oil and gas production and
fracking predominantly in the Permian Basin in West Texas. The
company had a good year in 2021/22 and the outlook for the current year
is encouraging. We continue to expect an exit in the next twelve months.
Harwood Private Capital UK LP (UK) Cost: £4,857,000 4,857
The fund was established in 2020 with committed capital of £70.0
million. It is intended that all new sterling debt-type investments are
made through the fund which is targeting an IRR in excess of 12%. The
fund has made three investments in the warehouse management
systems, employee benefits and gardening products sectors. NASCIT’s
commitment to the fund is £20.0 million, of which £15.1 million
isundrawn.
Carried forward 115,955
north atlantic smaller companies investment trust plc
12
strategic report – unquoted investments profile
as at 31January
2023
At fair value
£’000
Brought Forward 115,955
Spring Investments LP (UK) Cost: £4,391,000 4,391
The company is a specialty manufacturer of pharmaceuticals for the
NHS. The company has completely recovered from COVID led
problems and as a consequence the investment was revalued to cost in
2022. The company is in the process of divesting a loss making
manufacturing facility whilst the core business is experiencing record
results and is very substantially ahead of budget. Should this trend
continue it would be reasonable to expect a further uplift in valuation
over the course of the financial year.
3BL Media Limited – 12.5% Loan Notes (US) Cost: £4,063,000 4,063
3BL is a cloud-based digital marketing software-as-a-service (SaaS)
platform dedicated to corporate social responsibility (CSR)
communications. It provides targeted multi-channel media content
distribution for global corporate and other major international
organisations in their adoption of environmental, social and governance
(ESG) best practices.
Jaguar Holdings Ltd (US) Cost: £2,183,000 3,436
The company provides food services to major US airlines through a
patent protected process mainly at the Los Angeles hub. Principal clients
include United Continental, Jet Blue and Federal Express. The company
had a good year in 2022 and the outlook for 2023 is encouraging as the
United contract has been extended and the Federal Express relationship
has benefited from a new contract at an additional airport.
Specialist Components Limited (UK) Cost: £2,740,000 2,740
Specialist Components Limited, the acquirer of the previously listed
APC Technology Group, is a trusted supplier of reliable, high quality
and technologically advanced components and products. The company
has a range of clients in the public and private sectors, within aerospace,
space, defence, industrial, real estate, financial, logistics and healthcare
sectors. The company’s performance has continued to improve over the
course of the past year and exit options are now being considered.
Carried forward 130,585
13
north atlantic smaller companies investment trust plc
strategic report – unquoted investments profile
as at 31January
2023
At fair value
£’000
Brought Forward 130,585
WEP Superior Industrial Maintenance Co (US) Cost: £1,485,000 1,625
The company is a provider of industrial coatings and lining
applications, inspection and maintenance services and lead and asbestos
abatement. It has made significant investment in the management team
across the business. The company is performing in line with
expectations but it is unlikely that the investment will achieve a
valuation on sale materially above the current value.
Trident Private Equity III LP (UK) Cost: £nil 1,621
The only investment in the fund was Utitec, which has now been exited.
The remaining value is in two escrow agreements which should be
realised over the next three years.
Hampton Investment Properties (UK) Cost: £2,509,000 742
The company continues with its programme of liquidation. Heads of
Terms have been signed for the disposal of the company’s final property,
subject to planning permission. The basis of valuation is anticipated to
be a modest discount to realisable value. On successful completion the
company will be liquidated. We had hoped planning would have been
granted in 2022 but it has slipped back and is now likely for mid 2023.
Carried forward 134,573
Other unquoted investments at fair value 411
Total value of unquoted investments at fair value* 134,984
* Includes unquoted loan notes in these companies with a total value of £31,469,000
north atlantic smaller companies investment trust plc
14
strategic report
The Directors present the strategic report of the Company for the year ended 31 January 2023.
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
aportfolio 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
totime;
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
unduerisk.
15
north atlantic smaller companies investment trust plc
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 on pages 6 and 7.
The top twenty largest investments by current valuation are listed on page 9.
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.
strategic report
north atlantic smaller companies investment trust plc
16
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 on pages 68 to 76.
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.
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.
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
whichmay arise during the normal course of business, the Depositary will have regard to the
applicable laws.
performance At 31 January 2023, the diluted NAV per share was 5,097p (2022: 5,779p), a decrease of 11.8% during
the year, compared to a decrease of 1.6% during the year in the Standard & Poor’s 500 Composite
Index (Sterling adjusted).
Net assets attributable to equity holders at 31 January 2023 amounted to £693,356,000 compared with
£789,466,000 at 31 January 2022.
The ongoing charges relating to the Company are 1.4% (2022: 1.0%), 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 2023 amounted to
(£91,038,000) (2022: £64,906,000). The Board has declared an interim dividend of 22p per ordinary
share (2022: nil).
changes to the investment
policy, investment restrictions
and investment approach
any conflicts of interest that
may arise from such
delegations
strategic report
17
north atlantic smaller companies investment trust plc
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 following chart illustrates the movement in the fully
diluted net asset value per Ordinary Share over the past five years:
net asset value in pence
(ii) Share price return: the following chart illustrates the movement in the share price per Ordinary
Share over the past five years:
share price return in pence
(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 on page 40.
2,000
6,000
5,500
5,000
4,000
3,000
3,500
2,500
20232022202120202019
4,500
5,097
3,708
4,384
5,292
5,779
NASCIT NAV
5,000
3,000
4,000
4,500
3,500
2,000
2,500
NASCIT Share Price
1,500
1,000
2023202220212019
2020
3,900
3,400
2,910
4,330
3,850
strategic report
north atlantic smaller companies investment trust plc
18
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.
• 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 of all future cash flows of a financial investment held by the Company may
fluctuate. 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 on page 40 of
the Directors’ Remuneration Report illustrates the Company’s performance against its
benchmarks over the last ten years.
• Investments in unquoted stocks, by their nature may 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 arm's 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 Management Limited, a firm which is ultimately owned by Christopher Mills, the
Company’s Manager, and which provides services through the group such as dealing,
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 theBoard.
• 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.
principal risks and
uncertainties
strategic report
19
north atlantic smaller companies investment trust plc
• 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 on page 23. The Company’s relations with its
shareholders are detailed on page 32.
• 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
aredelegated.
• 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
pages 14 to 16.
strategic report
north atlantic smaller companies investment trust plc
20
• The Company has a limited impact on the environment and has no greenhouse gas emissions to
report as indicated on page 25. Its impact on social, community and human rights issues are
detailed on page 21, and a statement on the Modern Slavery Act is given on page 21.
• The Directors take care to ensure that the Company maintains a reputation for high standards
of business conduct.
• The Directors ensure that the Company always acts fairly between members of the Company.
• To summarise, the Directors are fully aware of their duty under Section 172 in all their
deliberations, and decisions made 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 five years to
May 2028, 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 £100m 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; and
• 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.
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 2028.
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.
strategic report
21
north atlantic smaller companies investment trust plc
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 The Company is committed to the highest standards of ethical, moral and legal business conduct
and we expect those that we do business with to uphold the same values. As an investment vehicle
the Company does not provide goods or services in the normal course of business. We have adopted
an ethical approach to investing which prohibits modern slavery in our business and supply chains,
and are committed to implementing systems and controls aimed at ensuring that modern slavery is
recognised and eradicated.
AIFMD The Company is authorised and regulated by the Financial Conduct Authority. The Company has
been a full scope internally managed AIF with effect from 1 October 2021 under the Alternative
Investment Fund Managers Regulations 2013.
For AIFMD purposes the Company is internally managed with Christopher Mills making the
investment decisions in his capacity as Chief Executive. The Company must not perform any
activities other than the internal management of the AIF in accordance with Annex I of
theDirective:
1 Investment management functions which an AIFM shall at least perform when managing an AIF:
(a) portfolio management;
(b) risk management.
2 Other functions that an AIFM may additionally perform in the course of the collective
management of an AIF:
(a) Administration:
(i) legal and fund management accounting services;
(ii) customer inquiries;
(iii) valuation and pricing, including tax returns;
(iv) regulatory compliance monitoring;
(v) maintenance of unit-/shareholder register;
(vi) distribution of income;
(vii) unit/shares issues and redemptions;
(viii) contract settlements, including certificate dispatch;
(ix) record keeping;
(b) Marketing;
(c) Activities related to the assets of AIFs, namely services necessary to meet the fiduciary duties
of the AIFM, facilities management, real estate administration activities, advice to
undertakings on capital structure, industrial strategy and related matters, advice and services
relating to mergers and the purchase of undertakings and other services connected to the
management of the AIF and the companies and other assets in which it has invested.
social, community and
human rights issues
ANNEX I
strategic report
north atlantic smaller companies investment trust plc
22
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
Kin Company Secretarial Limited
Company Secretary
12 May 2023
strategic report
23
north atlantic smaller companies investment trust plc
report of the directors
for the year ended 31January
The Directors present their report to shareholders and the financial statements for the year ended
31 January 2023. 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 byreference.
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
theRegulations.
share capital The Company’s issued share capital consisted of 13,602,068 Ordinary Shares of 5p nominal value
each on 31 January 2023. Since the year end, 64,159 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 58,932 (2022: 363,518) Ordinary Shares for £2.1m (2022:
£17.7m) for cancellation to improve net asset value per Share. This comprised 0.4% (2022: 2.8%) of
the issued share capital.
share valuations On 31 January 2023, the middle market quotation and the diluted net asset value per 5p Ordinary
Share were 3,900p and 5,097p respectively. The comparable figures at 31 January 2022 were 4,330p
and 5,779p respectively. There were no outstanding options for the year ended 2023 or 2022 meaning
there was no dilutive effect on the net asset value at either of these dates.
substantial shareholders As at 31 January 2023, 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 3,849,924 28.30
CG Asset Management Limited 941,738 6.92
Butterfield Bank Group 680,682 5.00
Rathbone Brothers Plc 551,944 4.06
Interactive Investor Trading 483,141 3.55
Hargreaves Lansdown PLC 459,853 3.38
Peregrine Moncreiffe 440,589 3.24
north atlantic smaller companies investment trust plc
24
report of the directors
for the year ended 31January
directors The biographical details for Directors currently in office are shown on page 3.
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 2023 and 31 January 2022 were
asfollows:
31 January 2023
5p Ordinary Shares
31 January 2022
5p Ordinary Shares*
Sir Charles Wake 8,170 8,170
Christopher Mills 3,849,924 3,766,000
Christopher Mills (non-beneficial) 355,740 355,740
Lord Howard of Rising 5,000 5,000
Professor Fiona Gilbert – _
G Walter Loewenbaum 15,000 15,000
Peregrine Moncreiffe 440,589 440,589
* or date of appointment if later.
Since 31 January 2023 and the date of thisreport, Fiona Gilbert has purchased 739 shares.
Details of Directors’ remuneration are described in the Directors’ Remuneration Report on pages 35
to 40.
Save as disclosed on page 35 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
27 February 2023, North Atlantic Investment Services Limited provides administration services to
the Company which were previously provided by Harwood Capital LLP under a similar agreement.
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, Growth Financial Services
Limited (“GFS”) and Christopher Mills and the Sub Advisory, Administration and Transmission
Services Agreement between the Company and North Atlantic Investment Services Limited,
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.
25
north atlantic smaller companies investment trust plc
report of the directors
for the year ended 31January
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. ChristopherMills 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
on page 4.
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 on pages 76 and 77
and in the Directors’ Remuneration Report on pages 35 to 40. The Investment Management Fees are
disclosed in note 3 on page 57. Any Performance Fee payable to GFS is disclosed in the Directors’
Remuneration Report on pages 35 to 40 and note 3 of the financial statements on page 57.
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.
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 has 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 in the year had been paid
by 31 January 2023 (31 January 2022 – all supplier invoices paid).
greenhouse gas emissions The Company has no physical assets, operations, premises or employees of its own. Consequently
itconsumed less than 40,000 kWh of energy during the year so has no greenhouse gas emissions
toreport.
corporate governance The Corporate Governance Statement on pages 29 to 34 forms part of this report.
institutional investors –
use of voting rights
north atlantic smaller companies investment trust plc
26
report of the directors
for the year ended 31January
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 they have taken all the steps that they ought to have taken as a director in order to make
themself aware of any relevant audit information and to establish that the Company's auditor is
aware of thatinformation.
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
financialstatements.
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 on page 23 and note 11;
• details of the substantial shareholders in the Company are listed on page 23;
• the rules concerning the appointment and replacement of directors are contained in the
Company’s Articles of Association and are discussed on page 29;
• amendment of the Company’s Articles of Association and powers to issue on a pre-emptive basis
or buy back the Company’s shares require 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
Kin Company Secretarial Limited
Company Secretary
Registered Office:
Hyde Park House
5 Manfred Road
London
SW15 2RS
Registered No: 1091347
12 May 2023
27
north atlantic smaller companies investment trust plc
statement of directors’ responsibilities in respect of the annual report and the financial statements
for the year ended 31January
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. The
Directors elected under company law and are required under the Listing Rules of the Financial
Conduct Authority to prepare the financial statements in accordance with UK-adopted International
Accounting Standards.
The financial statements are required by law and UK-adopted 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 and prudent;
• state whether they have been prepared in accordance with UK-adopted International
Accounting Standards;
• 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 and the
Directors’ Remuneration Report comply with the Companies Act 2006. They are responsible for
such internal control as they determine isnecessary 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.
north atlantic smaller companies investment trust plc
28
Each of the directors, whose names and functions are listed in the strategic report on page 3 confirm
that to the best of each person’s knowledge:
• the financial statements, prepared in accordance with UK-adopted International Accounting
Standards, give a true and fair view of the assets, liabilities, financial position and profit 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, are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
For and on behalf of the Board
Sir Charles Wake
Chairman
12 May 2023
responsibility statement of
the directors in respect of
the annual financial report
statement of directors’ responsibilities in respect of the annual report and the financial statements
for the year ended 31January
29
north atlantic smaller companies investment trust plc
corporate governance
The Company’s policy is to achieve best practice in its standards of business integrity in all of its
activities. This includes a commitment to follow the highest standards of corporate governance
wherever possible. This section of the Annual Report describes how the Company has complied
with the applicable provisions of the UK Corporate Governance Code published by the Financial
Reporting Council (“FRC”) in July 2018 (the “Code”) and is available from the FRC website
(www.frc.org.uk). The Board considers that it has complied with the provisions of the Code
throughout the year with few exceptions: these are detailed on pages 33 and 34.
directors Brief biographical details of the Directors in office are set out on page 3. The Board consists of six
Directors, four of whom are considered independent non-executive Directors for the purposes of
the Code, to include the Chairman – Sir Charles Wake, Fiona Gilbert, Lord Howard of Rising and
G Walter Loewenbaum, who are each free of any relationship that could materially interfere with the
exercise of their independent judgment on issues concerning strategy, performance and standards of
conduct. Peregrine Moncreiffe (the former Chairman) also serves as a Non-Executive Director on
the Board as does Christopher Mills who is the Chief Executive Officer. The Board considers that it
has the appropriate balance of skills, experience, ages and length of service in the circumstances and
values highly the experience of those Directors who have served on the Board for a longer period.
Fiona Gilbert was appointed as the Company’s Senior Independent Director on 4 January 2023.
Following the appointment of Fiona Gilbert, the Board comprises 5 male Directors and 1 female
Director.
The Board acts as the Nomination Committee and meets as and when necessary and to discharge its
role in nominating a new Director to the Board and succession planning.
The Board is made up of individual members who have a wide range of qualifications and expertise
to bring to any debate. The Board normally meets four times a year and at other times as necessary.
The terms and condition of their appointment, including the expected time commitment, are
available for inspection at the Registered Office of the Company during normal business hours and
will also be available for at least fifteen minutes prior to and during the Annual General Meeting.
The contract for Christopher Mills’ services as a Director is with GFS.
The Chairman and other members of the Board recommend that all of the Directors be re-elected.
The Chairman has confirmed that all Directors have been subject to performance evaluation and
following that evaluation, the Chairman confirms that their performance continues to be effective
and that they continue to demonstrate commitment to their role and in his view responsibly fulfil
their functions. The performance evaluation programme took the form of a questionnaire circulated
to and completed by all Directors. The Chairman then discussed the results with the Board and the
individual Directors and any requests for further training or action were complied with. The
non-executive Directors evaluated the performance of the Chairman and can confirm that they were
satisfied with his performance and with his leadership of the Board.
statement of compliance
with the uk corporate
governance code
north atlantic smaller companies investment trust plc
30
corporate governance
board meetings The Board conducts its affairs in accordance with its schedule of matters for consideration which is
agreed once annually by the whole Board. The Chief Executive carries out day-to-day activities
pursuant to the terms of the management arrangements in place. These day-to-day activities relate
to the management of the Company’s investment portfolio on a discretionary basis within guidelines
that have been set by the Board. These guidelines include, amongst other things, maximum
exposure to any one investment and total exposure to unquoted investments. The management of
the investment portfolio also includes the monitoring of the performance and activities of the
investee companies in the portfolio and detailed research into any prospective investment. In
addition to scheduled Board Meetings, the Board may carry out certain urgent matters not requiring
debate by way of delegation to a Committee of the Board or by resolution in writing of all Directors.
Total number
in year
4 Board
Meetings
Total number
in year
2 Audit
Committees
Total number
in year
1 Remuneration
Committee
Peregrine Moncreiffe 4 N/A N/A
Christopher Mills 4 N/A N/A
Lord Howard of Rising 4 2 1
G Walter Loewenbaum 4 2 1
Sir Charles Wake 4 N/A 1
In addition, there have been a number of meetings of Committees of the Board during the year to deal
with matters on an ad hoc basis. Following the appointment of Fiona Gilbert on 6 September 2022,
there were no Board, Audit committee or Remuneration committee meetings before the year end.
remuneration committee The Remuneration Committee is chaired by G Walter Loewenbaum and the other members are
LordHoward of Rising and Fiona Gilbert, who was appointed on 4 January 2023. Sir Charles Wake
resigned from the Remuneration Committee on 4 January 2023. The Remuneration Committee
reviews the remuneration paid to Harwood Capital LLP and GFS pursuant to the Management
Agreements. The remuneration of GFS is disclosed in the Directors’ Remuneration Report on pages
35 to 40 and also in note 3 on page 57.
audit committee The Board is supported by an Audit Committee which is chaired by Lord Howard of Rising and
during the year the other members were G Walter Loewenbaum and Fiona Gilbert, who was
appointed on 4 January 2023. Since his appointment as Chairman on 25 February 2022, Sir Charles
Wake has stood down as a member of this committee. The Audit Committee meets representatives
of Harwood Capital LLP twice a year, who report on the proper conduct of business in accordance
with the regulatory environment in which the Company operates. The Company’s Auditors also
attend the Committee at its request, at least once a year, and report on their findings in relation to
the Company’s statutory audit. The responsibilities of the Audit Committee include monitoring the
integrity of the financial statements including Annual and Half-Yearly reports, reviewing the
effectiveness of the Company’s internal controls and risk management, making recommendations in
relation to the appointment of the auditors and reporting to the Board on all matters within its
duties and responsibilities.
attendance at board
meetings, audit and
remuneration committees
31
north atlantic smaller companies investment trust plc
The Committee monitors the performance of the Auditors on a regular basis (at least annually) and
if satisfied, recommends their re-appointment to the Board. The Audit Committee is authorised to
take such independent professional advice (including legal advice) and to secure the attendance of
any external advisers with relevant expertise as it considers necessary. The Audit Committee is also
responsible for the review of the Annual and Half-Yearly Reports, the nature and scope of the
external audit, its findings and the provision of any non-audit services. The Audit Committee is
satisfied that RSM UK Audit LLP, the Company’s Auditor, is independent and that it has adequate
policies and safeguards in place to ensure that its objectivity and independence is maintained. The
Audit Committee receive each year a report from the Auditor as to any matters the Auditor
considers bear on its independence and which require disclosure to the Company.
RSM UK Audit LLP were appointed as the Company’s auditors in 2020 and carried out their first
audit on the accounts for the year ended 31 January 2020.
There has been no interaction between theCompany and the Financial Reporting Council’s
Corporate Reporting Review team during theperiod.
The Committee’s terms of reference are available from the Company Secretary. The Audit
Committee met twice during the year to review the Half-Yearly and Annual financial statements and
to review reports and hold discussions with the Chief Executive and Harwood Capital LLP. In
carrying out its duties during this review, the Audit Committee has considered inter alia the annual
budget, internal control reports, the risk management framework, the effectiveness of the external
audit process, the independence and objectivity of the External Auditor, the Audit Plan, Audit
Reports and Corporate Governance Report including the Code. The Board is satisfied that all of the
Committee’s members have recent and relevant commercial and financial knowledge and experience
to satisfy the Code, by virtue of their having held various executive and non-executive roles in
investment management and business management.
The Audit Committee met with the Auditor during the year to discuss the audit plan and strategy
for the year and identify the significant issues to be dealt with in the review of the year end results.
The principal issues identified as presenting the greatest risks were the valuation of the unquoted
investments in the portfolio.
Listed investments are valued using stock exchange prices provided by third party financial data
vendors. Unquoted investments are recognised on a fair value basis as set out in the statement of
accounting policies on pages 53 and 54 and are reviewed by Harwood Capital LLP’s Valuations and
Pricing Committee before being approved by the Board and being made available to the Auditor.
These and other matters, identified as posing less of a risk, were considered and discussed with the
Manager and the Auditor as part of the year end process.
Throughout the year the Board has considered, as part of its ongoing Risk Management Review, the
principal risks facing the Company. This has included specifically assessing those risks which would
threaten its business model, future performance, solvency or liquidity.
The Company carries out its activities using the services of third party service providers; it has no
staff of its own.
financial report and
significant issues
corporate governance
north atlantic smaller companies investment trust plc
32
shareholder relations The Company, through its Chief Executive, has regular contact with its Institutional shareholders.
The Board supports the principle that the Annual General Meeting be used to communicate with
private shareholders and encourages them to participate. The Annual General Meeting is attended by
Directors and the Chief Executive. Details of significant votes against a resolution are set out in the
Chairman’s Statement on page 4. The Chairman also wrote to any dissenting investors during the year
as part of an outreach campaign to offer the opportunity for further engagement and to answer any
questions or queries that they may have, especially in relation to the rule 9 waiver (resolution 14 at
the 2022 AGM) and the Directors continue to engage positively with interested parties on this matter.
nominations committee The Board is a small Board and fulfils the function of the Nominations Committee as a whole. The
Nominations Committee assists the Board in discharging its responsibilities relating to the
composition and make-up of the Board and its committees and considers the leadership needs and
succession of the Board when making decisions on new appointments. Following due consideration,
the Committee resolved to appoint Sir Charles Wake as the Company's independent Chairman on
25 February 2022 who would succeed Peregrine Moncreiffe in the role. In making this appointment,
the Committee took into account demands on Directors’ time and any additional Directorships held
to ensure that the appointee could dedicate sufficient time to the role and discharge his duties
effectively. At the time of these discussions, the then Chairman of the Board did not Chair the
discussions so as to remain compliant with Provision 17 of the Code. The committee reviewed the
structure, size and composition of the Board and its committees and made recommendations for
changes to the membership of the committees. The Committee evaluated the balance of skills,
knowledge, experience and diversity of the Board and resolved to appoint Fiona Gilbert as a Director
to the Board on 6 September 2022. The Committee actively participated in the recruitment process,
and contributed to the on-boarding and induction of the newly appointed Non-Executive Director,
assisted by the Company Secretary. The committee also reviewed suitable candidates for the role of
the Senior Independent Director and recommended the appointment of Fiona Gilbert as SID with
her appointment in this role, effective from 4 January 2023.
diversity Due to the size of the Board and the fact that there are no employees, the Company does not have a
diversity policy.
the company secretary The Board has direct access to the advice and services of the Company Secretary, Kin Company
Secretarial Limited, which is responsible for ensuring that the Board and Committee procedures are
followed and that the applicable regulations are complied with. The Company Secretary is also
responsible to the Board for ensuring timely delivery of information and reports.
accountability and audit The statement of going concern is given on page 26 and the Board’s responsibilities with regard to
the financial statements are set out on pages 27 and 28. The Independent Auditor’s Report is on
pages 41 to 47. The principal risks and uncertainties, s172 statement and viability statement are set
out in the Strategic Report on pages 18 to 20.
share capital Shareholders’ attention is drawn to the further information on page 26 which is disclosed in
accordance with the Large and Medium-sized Companies and Groups (Account and Reports)
Regulations 2008 and rule 7.2.6 of the Disclosure and Transparency Rules.
corporate governance
33
north atlantic smaller companies investment trust plc
internal control The Board is responsible for the Company’s system of internal control and for reviewing its
effectiveness. The Board has regularly reviewed the effectiveness of the system of internal control in
place. The Board believes that the key risks identified and implementation of the system to monitor
and manage those risks are appropriate to the Company’s business as an investment trust. The ongoing
risk assessment includes the monitoring of the financial, operational and compliance risks as well as an
evaluation of the scope and quality of the system of internal control adopted by the third party service
providers. The Board regularly reviews the delegated services to ensure their continued competitiveness
and effectiveness. The system is designed to ensure regular communication of the results of monitoring
by the third parties to the Board and the incidence of any significant control failings or weaknesses
that have been identified and the extent to which they have resulted in unforeseen outcomes or
contingences that may have a material impact on the Company’s performance or operations.
This review process was in place throughout the year under review and including the period to the
date of the approval of the Annual Report and there were no problems identified from this review.
The Board believes that, although robust, the Company’s system of internal control is designed to
manage rather than eliminate the risk of failure to achieve business objectives. Any system can
provide only reasonable and not absolute assurance against material misstatement or loss. The
principal features of the internal control systems in respect of financial reporting include segregation
of duties between the processing and approval of investment transactions and the recording of these
transactions in the accounting records as well as the production and review of monthly management
accounts. The annual and interim reports are reviewed and approved by the Board. The Company
does not have an internal audit function as it uses third party service providers and does not employ
any staff, nor does the Board consider it appropriate to do so.
compliance statement Throughout the year ended 31 January 2023 the Company has complied with the Code (apart from
the workforce provisions 2, 5 and 6 which are not applicable as the Company has no employees
other than the Directors), except as follows:
Provision 3 – The Chairman does not seek engagement with shareholders to understand their views
on governance and performance against strategy. However the Chief Executive has regular contact
with major shareholders and if any concerns are raised the Chairman is available to meet them at
their request. Also the directors including the Chairman attend the Annual General Meeting and are
available to communicate with shareholders.
Provision 12 – Sir Charles Wake was appointed as Chairman on 25 February 2022 and succeeded
Peregrine Moncreiffe in the role. At the same time, Sir Charles resigned from his position as Senior
Independent Director as the spirit of the Code encourages the role of the SID and Chairman to be
independent from one another. The Company therefore had no SID in place from the period of
26 February 2022 to 4 January 2023, when it was agreed that Fiona Gilbert was a suitable candidate
to be appointed to the position of Senior Independent Director on 4 January 2023. The Company
are pleased to report that they are now fully compliant with this Provision of the Code.
corporate governance
north atlantic smaller companies investment trust plc
34
Provision 19 – From the beginning of the period under review, from 1 to 25 February 2022, the
Company were non-compliant with provision 19 of the code which relates to the Chairman's tenure,
however the Company are pleased to advise that they addressed this issue with the appointment of
Sir Charles Wake as Chairman on 25 February 2022, and are now fully compliant with Provision 19
of the Code.
Provision 20 – The Company elected not to openly advertise or engage an external search firm for
the appointments of the Chairman and the new Non-Executive Director as the Board decided that
the most appropriate candidate for the Chairman was already on the Board and decided that it
would be more effective to directly approach candidates for the new Non-Executive Director role
which was ultimately filled by Fiona Gilbert.
Provision 21 – There is not a formal annual evaluation of the performance of the Board, its
committees or individual directors. An informal evaluation takes place every two years and the
Chairman monitors the performance of the Board on an ongoing basis.
Provision 41 – As there is only one Executive Director, the scope of the Remuneration Committees
work and related disclosures do not fully comply with the requirements of Provision 41.
By Order of the Board
Kin Company Secretarial Limited
Company Secretary
Registered Office:
Hyde Park House
5 Manfred Road
London
SW15 2RS
Registered No: 1091347
12 May 2023
corporate governance
35
north atlantic smaller companies investment trust plc
directors’ remuneration report
for the year ended 31 January
This Report has been prepared in accordance with the Large and Medium sized Companies and
Groups (Accounts and Reports) Regulations 2008, Schedule 8. The Directors’ Remuneration Report
will be put to an advisory shareholder vote at this year’s annual generalmeeting.
The law requires the Company’s Auditor to audit certain of the disclosures provided and to state
whether, in their opinion, those parts of the report have been properly prepared in accordance with
the Accounting Regulations. Where disclosures have been audited, they are indicated as such. The
Auditor’s opinion is included in their report on pages 41 to 47.
role and composition The Remuneration Committee consists of Lord Howard of Rising, G Walter Loewenbaum and Fiona
Gilbert. Fiona was appointed to the Remuneration Committee on 4 January 2023 and at the same
time Sir Charles Wake resigned from the Committee. Christopher Mills, the Company’s Chief
Executive, does not attend meetings of the Remuneration Committee.
The Remuneration Committee is responsible for determining all aspects of Directors’ remuneration.
No Director participates in discussions on their own remuneration. The Committee takes
independent professional advice where it considers this is appropriate. No such advice has been
received in the year.
The Remuneration Committee will normally meet at least once a year to consider its policy on
Directors’ Remuneration.
31 January 2023
5p Ordinary
Shares
31 January 2022
5p Ordinary
Shares*
Sir Charles Wake 8,170 8,170
Christopher Mills 3,849,924 3,766,000
Christopher Mills (non-beneficial) 355,740 355,740
Lord Howard of Rising 5,000 5,000
Professor Fiona Gilbert
** – –
G Walter Loewenbaum 15,000 15,000
Peregrine Moncreiffe 440,589 440,589
* or date of appointment if later.
** Since the reporting date, Fiona Gilbert purchased 739 shares in the Company on 6 February 2023.
directors’ interests
(audited)
north atlantic smaller companies investment trust plc
36
directors’ remuneration report
for the year ended 31 January
The Company’s Articles of Association were amended by a special resolution passed by shareholders
at the Annual General Meeting on 23 June 2021 which increased the aggregate total of Directors’ fees
that can be paid during the year from £150,000 to £250,000. The Remuneration Committee’s policy,
subject to this overall limit, is to determine the level of Directors’ fees having regard to the level of
fees payable to non-executive directors in other investment trusts, the rate of inflation and the
increasing amount of time that individual Directors must commit to the Company’s affairs. The
Committee is also concerned that the remuneration of the non-executive Directors should reflect
the experience of those Directors and believes that the level of remuneration should be sufficient to
attract and retain non-executive Directors to oversee the Company.
The Directors are entitled to be reimbursed for any reasonable expenses properly incurred by them
in connection with the performance of their duties and attendance at meetings. Non-executive
Directors are not eligible for bonuses, pension benefits, share options or any other incentives or
benefits. There are no agreements between the Company and its Directors concerning
compensation for loss of office.
The Directors’ Remuneration Policy is the same in all material aspects as that implemented by the
Board during the year under review and as summarised in last year’s Directors’ Remuneration
Report. The Board will consider, where raised, shareholders’ views on Directors’ remuneration.
The Company has no employees and therefore has no policy on the remuneration of employees.
The performance graph on page 40 measures the Company’s share price and net asset value
performance against the Sterling adjusted Russell 2000 and the Sterling adjusted Standard & Poor’s
500 Composite Index. An explanation of the Company’s performance is given in the Chairman’s
Statement and the Investment Manager’s Report.
The policy is to review Directors’ fees from time to time, but reviews will not necessarily result in
the level of Directors’ fees changing. Since 1 August 2021, the Directors have been paid at a rate of
£30,000 per annum with the exception of Peregrine Moncreiffe, the former Chairman whose
emoluments amount to £37,500 which reflect his contribution to stakeholder engagement and
supporting Sir Charles Wake in transitioning to his new role as Chairman.
policy on directors’
remuneration
37
north atlantic smaller companies investment trust plc
directors’ remuneration report
for the year ended 31 January
directors’ remuneration table (audited)
2023
Fees &
Salary
£
Change
from 2022
%
Annual
Incentives
£
Change
from 2022
%
Total
£
Executive
Christopher Mills 30,000 9.1 3,200,000 6.5 3,230,000
Non-Executive
Sir Charles Wake 30,000 9.1 – – 30,000
Peregrine Moncreiffe 37,500 11.1 – – 37,500
Lord Howard of Rising 30,000 9.1 – – 30,000
G Walter Loewenbaum 30,000 9.1 – – 30,000
Professor Fiona Gilbert
( appointed
6 September 2022) 12,192 – – – 12,192
169,692 3,200,000 3,369,692
2022
Fees &
Salary
£
Change
from 2021
%
Annual
Incentives
£
Change
from 2021
%
Total
£
Executive
Christopher Mills 27,500 10.0 3,004,000 (52.5) 3,031,500
Non-Executive
Peregrine Moncreiffe 33,750 12.5 – – 33,750
Lord Howard of Rising 27,500 10.0 – – 27,500
G Walter Loewenbaum 27,500 10.0 – – 27,500
Sir Charles Wake 27,500 10.0 – – 27,500
143,750 3,004,000 3,147,750
north atlantic smaller companies investment trust plc
38
chief executive The Chief Executive is responsible for the day-to-day investment decisions. He has no service
contract with the Company; his appointment is pursuant to the Secondment Services Agreement
dated 7 January 1993 between the Company, the Chief Executive and GFS. The Remuneration
Committee has no plans to alter the remuneration structure for the Chief Executive. As stated in
note 15 on pages 76 and 77, the Chief Executive is entitled to retain any fees received from investee
companies in respect of his role as a non-executive director of these entities; such a role is
considered to benefit shareholders as it allows the Chief Executive to monitor the performance of
the investee company more closely than would be possible under other circumstances.
Year ended
31 January 2023
£
Year ended
31 January 2022
£
Director’s fees 30,000 27,500
Investment Management and related fees 3,200,000 3,004,000
Performance fee
– –
Total (excluding irrecoverable VAT)
3,230,000 3,031,500
The total fees of £3,230,000, in respect of Christopher Mills’ services as a Director and Chief
Executive are payable to GFS, as described on page 25. GFS receives, and is contractually entitled to
receive, part of the Annual Fee payable to the GFS and Harwood Capital LLP in respect of the
investment management activities of the Chief Executive pursuant to the Investment Management
Agreements described on page 24 and note 3 on page 57 to the financial statements.
Christopher Mills is a director of GFS. GFS is a wholly owned subsidiary of Harwood Capital
Management Limited, which is in turn wholly owned by Christopher Mills. Christopher Mills is also
the Chief Investment Officer of Harwood Capital LLP.
The Performance Fee is a contractual entitlement pursuant to the Secondment Services Agreement
dated 7 January 1993 as amended and is paid to GFS. Calculation of the Performance Fee includes
Oryx at the adjusted price (using equity accounting methods).
Explanations of the calculation of the Investment Management and Performance fees can be found
in note 3 on page 57 to the financial statements.
No pension or other benefits are paid to the Chief Executive.
remuneration of chief
executive (audited)
directors’ remuneration report
for the year ended 31 January
39
north atlantic smaller companies investment trust plc
directors’ remuneration report
for the year ended 31 January
The fixed element represents the director’s fee of £30,000 per annum.
Included within the ‘On-target’ bar is the investment management fee, £3,200,000 and performance
fee of zero that are payable to GFS and Harwood Capital LLP for the year ended 31 January 2023.
Christopher Mills is deemed to have received these fees due to the fact that he is a director of and
the ultimate beneficial owner of GFS and a Member of Harwood Capital LLP. These amounts are
included in the ‘On Target’ bar as the fees were only payable if performance related hurdles
weremet.
The Directors who served during the years ended 31 January 2023 and 31 January 2022 received the
following emoluments:
Total Fees £
31 January 2023
Total Fees £
31 January 2022
Sir Charles Wake 30,000 27,500
Peregrine Moncreiffe 37,500 33,750
Lord Howard of Rising 30,000 27,500
G Walter Loewenbaum 30,000 27,500
Christopher Mills 3,230,000 3,031,500
Professor Fiona Gilbert
12,192 –
Tota l
3,369,692 3,147,750
No Directors receive any benefits in kind.
The Directors are aware that it is a statutory requirement that this report provides shareholders and
other interested parties with an analysis of Directors’ Remuneration against the remuneration of
employees or the amount of distributions to shareholders. However, the Company has no
employeesand has a long-standing policy of not paying dividends (except to ensure compliance
with Investment Trust rules) so it is not possible to provide any such analysis. The Directors also
donot consider that such a comparison would be a meaningful measure of the Company’s
overallperformance.
0
4,000,000
3,000,000
2,000,000
1,000,000
Fixed only On-target Max
£30,000 £3,200,000 £6,730,000
7,000,000
6,000,000
5,000,000
single total figure of
remuneration for each
director (audited)
north atlantic smaller companies investment trust plc
40
directors’ remuneration report
for the year ended 31 January
service contracts No Director has a service contract. The contract for the Chief Executive’s services and the carrying
on day-to-day investment decisions is with GFS and contained in the Secondment Services
Agreement between GFS and the Company as noted in the paragraph describing the Chief
Executive’s activities.
company’s performance The following graph compares over a ten year period the total shareholder return on the Company’s
Shares with a hypothetical holding of Shares of the same kinds and number as those by reference to
which a broad equity market index is calculated.
Graph showing total shareholder return over 10 years as compared to total shareholder return of a
broad equity market index over the last 10 years. (Source: Financial Data/Datastream)
NASCIT NAV is the diluted NAV at each balance sheet date from 2014 onwards. NAV for 2013 and
earlier years were calculated prior to the adoption of IFRS 10 and includes Oryx under the equity
method of accounting.
The equity market indexes chosen are the Sterling adjusted Russell 2000 and the Sterling adjusted
Standard & Poor’s 500 Composite Index.
voting The Directors’ Remuneration Report for the year ended 31 January 2022 was approved by shareholders
at the Annual General Meeting held on 21 June 2022. The votes cast by proxy were as follows:
Directors’ Remuneration Report
Number of votes Percentage
For 7,358,906 99.45
Against 37,601 0.50
At Chairman’s discretion
3,405 0.05
total votes cast 7,399,912 100.00
Number of votes withheld 3,789
This Report was approved by the Board on 12 May 2023 and signed by:
On behalf of the Board
G Walter Loewenbaum
Remuneration Committee Chairman
12 May 2023
% Growth
50
300
150
200
250
350
100
2023202220212020201920182017201620142013 2015
450
400
0
S&P 500 Composite
Sterling adjusted
NASCIT Share Price
NASCIT NAV
Russell 2000
Sterling adjusted
41
north atlantic smaller companies investment trust plc
opinion We have audited the financial statements of North Atlantic Smaller Companies Investment Trust plc
(the ‘company’) for the year ended 31 January 2023 which comprise the statement of comprehensive
income, statement of changes in equity, balance sheet, cash flow statement and notes to the financial
statements, including significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and UK-adopted International Accounting Standards.
In our opinion the financial statements:
• give a true and fair view of the state of the company’s affairs as at 31 January 2023 and of its loss
for the year then ended;
• have been properly prepared in accordance with UK-adopted International
AccountingStandards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of
the company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public
interest entities and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) we identified, including those which
had the greatest effect on the overall audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Valuation of Unquoted Investments
Key audit matter description As at 31 January 2023, unquoted investments (including
loan stock) were £135m (2022: £90m), which was 19%
(2022: 11%) of the company’s net assets at that date. These
investments are measured at fair value in accordance with
the International Private Equity and Venture Capital
Valuation Guidelines. These valuations involve material
judgements and estimation and is a significant audit risk
and for this reason it is considered to be a key audit matter.
Unquoted investment disclosures are set out in notes 8 and
14 to the financial statements.
independent auditor’s report
to the members of North Atlantic Smaller Companies Investment Trust plc
north atlantic smaller companies investment trust plc
42
independent auditor’s report
to the members of North Atlantic Smaller Companies Investment Trust plc
How the matter was addressed in
theaudit
Our audit procedures included:
• Obtaining an understanding of the company’s unquoted
investments held at the year end, including attendance
at valuation meetings with the investment manager and
reviewing underlying investment agreements and other
relevant documentation.
• Understanding and challenging the key assumptions and
judgements affecting investee company valuations,
including consultation with an expert from our
valuations team and consideration of the
appropriateness of the valuation basis and sensitivities.
• Considering whether events that occurred subsequent to
the period end affect the underlying assumptions of the
valuations at 31 January 2023; and
• Considering of the appropriateness of the disclosures in the
financial statements in respect of unquoted investments.
Key observations We concluded that the carrying value of unquoted
investments is acceptable.
Carrying Value of Quoted Investments
Key audit matter description As at 31 January 2023, quoted investments (including
treasury bills) were £551m (2022: £623m), which was 79%
(2022: 79%) of the company’s net assets at that date. Quoted
investments are one of the key drivers of financial
performance. Whilst this is not considered to be a
significant audit risk, due to the quantum of these
investments, we consider it to be a key audit matter.
Quoted investment disclosures are set out in note 8 to the
financial statements.
How the matter was addressed in
theaudit
Our audit procedures included:
• Agreeing 100% of year end investment holdings
(including treasury bills) to independently received
confirmations from the depositary.
• Checking 100% of the year end valuations to externally
quoted prices.
Key observations We concluded that the carrying value of quoted
investments is acceptable.
43
north atlantic smaller companies investment trust plc
independent auditor’s report
to the members of North Atlantic Smaller Companies Investment Trust plc
our application of materiality When establishing our overall audit strategy, we set certain thresholds which help us to determine
the nature, timing and extent of our audit procedures. When evaluating whether the effects of
misstatements, both individually and on the financial statements as a whole, could reasonably
influence the economic decisions of the users we take into account the qualitative nature and the size
of the misstatements. Based on our professional judgement, we determined materiality as follows:
Overall materiality £6.9m (2022: £7.9m)
Basis for determining overall
materiality
1% of net assets (2022: 1% of net assets)
Rationale for benchmark applied Net asset value per share is one of the company’s key
performance indicators and considered to be one of the
principal considerations for members of the company
when assessing financial performance.
Performance materiality £5.2m (2022: £5.9m)
Basis for determining
performancemateriality
75% of overall materiality (2022: 75%)
Reporting of misstatements to the
Audit Committee
Quantitative misstatements in excess of £346,000 (2022:
£395,000) together with any other misstatements below
that threshold that, in our view, warranted reporting on
qualitative grounds.
The company has been subject to a full scope audit. The company is a single entity, subject to local
statutory audit, and our audit work was designed to address the risks of material misstatements
identified to the level of materiality indicated above.
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of
the directors’ assessment of the company’s ability to continue to adopt the going concern basis of
accounting included:
• reviewing, evaluating and challenging the company’s going concern disclosures in note 1(b) to the
financial statements and the company’s viability statement on page 20 of the annual report; and
• corroborating the cash and treasury bills as at 31 January 2023 and at the date of approval of the
financial statements.
Our key observation in relation to going concern is that the company has sufficient cash and liquid
investments to continue as a going concern for the foreseeable future.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the company’s
ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
an overview of the scope of
our audit
conclusions relating to
going concern
north atlantic smaller companies investment trust plc
44
independent auditor’s report
to the members of North Atlantic Smaller Companies Investment Trust plc
In relation to the entity's reporting on how it has applied the UK Corporate Governance Code, we
have nothing material to add or draw attention to in relation to the Directors’ statement in the
financial statements about whether the Directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
other information The other information comprises the information included in the annual report other than the
financial statements and our auditor’s report thereon. The Directors are responsible for the other
information contained within the annual report. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in
the course of the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
In our opinion, the part of the Directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Report of the Directors for the financial
year for which the financial statements are prepared is consistent with the financial statements;
and
• the Strategic Report and the Report of the Directors have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the company and its environment obtained in
the course of the audit, we have not identified material misstatements in the Strategic Report or the
Report of the Directors.
We have nothing to report in respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the company, or returns adequate for our
audit have not been received from branches not visited by us; or
• the financial statements and the part of the Directors’ remuneration report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
opinions on other matters
prescribed by the
companies act 2006
matters on which we are
required to report by exception
45
north atlantic smaller companies investment trust plc
independent auditor’s report
to the members of North Atlantic Smaller Companies Investment Trust plc
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and
that part of the Corporate Governance Statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Statement specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• Directors’ statement with regards the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on page 26;
• Directors’ explanation as to their assessment of the Company’s prospects, the period this
assessment covers and why this period is appropriate set out on page 20;
• Directors' statement on whether they have a reasonable expectation that the Company will be
able to continue in operation and meets its liabilities set out on page 26;
• Directors’ statement on fair, balanced and understandable set out on page 28;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on page 18;
• Section of the annual report that describes the review of effectiveness of risk management and
internal control systems set out on pages 31 to 33; and,
• Section describing the work of the audit committee set out on pages 30 and 31.
responsibilities of directors As explained more fully in the Directors’ responsibilities statement set out on pages 27 and 28, the
directors are responsible for the preparation of the financial statements and for being satisfied that
they give a true and fair view, and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
corporate governance
statement
auditor’s responsibilities for
the audit of the financial
statements
north atlantic smaller companies investment trust plc
46
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit
are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations
that have a direct effect on the determination of material amounts and disclosures in the financial
statements, to perform audit procedures to help identify instances of non-compliance with other
laws and regulations that may have a material effect on the financial statements, and to respond
appropriately to identified or suspected non-compliance with laws and regulations identified during
the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material
misstatement of the financial statements due to fraud, to obtain sufficient appropriate audit evidence
regarding the assessed risks of material misstatement due to fraud through designing and
implementing appropriate responses and to respond appropriately to fraud or suspected fraud
identified during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with
governance, to ensure that the entity's operations are conducted in accordance with the provisions
of laws and regulations and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including
fraud, the audit engagement team:
• obtained an understanding of the nature of the industry and sector, including the legal and
regulatory framework that the company operates in and how the Company is complying with
the legal and regulatory framework;
• inquired of management, and those charged with governance, about their own identification
and assessment of the risks of irregularities, including any known actual, suspected or alleged
instances of fraud;
• discussed matters about non-compliance with laws and regulations and how fraud might occur
including assessment of how and where the financial statements may be susceptible to fraud,
having obtained an understanding of the effectiveness of the control environment.
The most significant laws and regulations were determined as follows:
Legislation/Regulation
Additional audit procedures performed by the audit
engagement team included:
Companies Act 2006, UK-adopted
International Accounting Standards and
theListing Rules
Review of the financial statement disclosures and
testing to supporting documentation; and completion
of disclosure checklists to identify areas of non-
compliance
the extent to which the audit
was considered capable of
detecting irregularities,
including fraud
independent auditor’s report
to the members of North Atlantic Smaller Companies Investment Trust plc
47
north atlantic smaller companies investment trust plc
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Audit procedures performed by the audit
engagement team:
Management override of controls Testing the appropriateness of journal entries and
other adjustments;
Assessing whether the judgements made in making
accounting estimates (including the valuation of
unquoted investments) are indicative of a potential
bias; and
Evaluating the business rationale of any significant
transactions that are unusual or outside the normal
course of business.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Following the recommendation of the audit committee, we were appointed by the directors on
28 February 2020 to audit the financial statements for the year ended 31 January 2020 and
subsequent financial periods. This is the fourth period of engagement, so the period of total
uninterrupted engagement is four years covering the years ended 31 January 2020 to 2023.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company
and we remain independent of the company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee in accordance with
ISAs (UK).
use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to
the company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for
this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule
(DTR) 4.1.14R, these financial statements will form part of the European Single Electronic Format
(ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of the UK FCA
in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report
provides no assurance over whether the annual financial report has been prepared using the single
electronic format specified in the ESEF RTS.
Richard Coates (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
12 May 2023
other matters which we are
required to address
independent auditor’s report
to the members of North Atlantic Smaller Companies Investment Trust plc
north atlantic smaller companies investment trust plc
48
statement of comprehensive income
for the year ended 31January
Notes
Revenue
£’000
2023
Capital
£’000
Total
£’000
Revenue
£’000
2022
Capital
£’000
Total
£’000
Income 2 14,068 – 14,068 10,899 – 10,899
Net (losses)/gains on investments at fair value 8 – (99,450) (99,450) – 63,623 63,623
Currency exchange gains/(losses) 8
– 3,954 3,954 – (48) (48)
total income 14,068 (95,496) (81,428) 10,899 63,575 74,474
Expenses
Investment management fee 3 (8,000) – (8,000) (7,510) (53) (7,563)
Other expenses 4
(1,560) – (1,560) (1,977) – (1,977)
return before taxation 4,508 (95,496) (90,988) 1,412 63,522 64,934
Taxation 6
(50) – (50) (28) – (28)
return for the year 4,458 (95,496) (91,038) 1,384 63,522 64,906
basic and diluted return per ordinary share 7 32.65 (699.41) (666.76) 9.94 456.30 466.24
The total column of the statement is the Statement of Comprehensive Income of the Company,
prepared in accordance with UK-adopted International Accounting Standards. 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 on pages 52 to 77 form part of these financial statements.
49
north atlantic smaller companies investment trust plc
statement of changes in equity
for the year ended 31January
Share
capital
£’000
Capital
redemption
reserve
£’000
Share
premium
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
2023
31 January 2022 683 187 1,301 783,080 4,215 789,466
Total comprehensive income/(loss) for the year – – – (95,496) 4,458 (91,038)
Shares purchased for cancellation (3) 3 – (2,080) – (2,080)
Dividend
– – – – (2,992) (2,992)
31 January 2023 680 190 1,301 685,504 5,681 693,356
Share
capital
£’000
Capital
redemption
reserve
£’000
Share
premium
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
2022
31 January 2021 701 169 1,301 737,228 2,831 742,230
Total comprehensive income for the year – – – 63,522 1,384 64,906
Shares purchased for cancellation
(18) 18 – (17,670) – (17,670)
31 January 2022 683 187 1,301 783,080 4,215 789,466
The notes on pages 52 to 77 form part of these financial statements.
north atlantic smaller companies investment trust plc
50
Notes
2023
£’000
2022
£’000
non current assets
Investments at fair value through profit or loss 8 685,491 712,424
685,491 712,424
current assets
Trade and other receivables 9 2,553 1,548
Cash and cash equivalents
9,010 76,029
11,563 77,577
total assets 697,054 790,001
current liabilities
Trade and other payables 10 (706) (535)
Dividend payable 5
(2,992) –
total liabilities (3,698) (535)
total assets less current liabilities 693,356 789,466
net assets 693,356 789,466
represented by:
Share capital 11 680 683
Capital redemption reserve 190 187
Share premium account 1,301 1,301
Capital reserve 685,504 783,080
Revenue reserve
5,681 4,215
total equity attributable to equity holders of the company 693,356 789,466
net asset value per ordinary share:
Basic and Diluted 7 5,097p 5,779p
The notes on pages 52 to 77 form part of these financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on
12 May 2023 and signed on its behalf by:
Sir Charles Wake, Chairman
Company Registered Number:
1091347
balance sheet
as at 31January
51
north atlantic smaller companies investment trust plc
cash flow statement
for the year ended 31January
Notes
2023
£’000
2022
£’000
cash flows from operating activities
Investment income received 12,903 11,053
Deposit interest received 152 1
Investment Manager’s and performance fees paid (8,025) (11,342)
Other income – 33
Other cash payments
(1,356) (2,320)
cash received/(expended) from operations 12 3,674 (2,575)
Taxation paid
(50) (28)
net cash inflow/(outflow) from operating activities 3,624 (2,603)
cash flows from investing activities
Purchases of investments (592,922) (412,316)
Sales of investments
520,245 475,022
net cash (outflow)/inflow from investing activities (72,677) 62,706
cash flows from financing activities
Repurchase of Ordinary Shares for cancellation (2,080) (17,852)
net cash outflow from financing activities (2,080) (17,852)
(decrease)/increase in cash and cash equivalents for the year (71,133) 42,251
cash and cash equivalents at the start of the year 76,029 33,918
Revaluation of foreign currency balances
4,114 (140)
cash and cash equivalents at the end of the year 13 9,010 76,029
The notes on pages 52 to 77 form part of these financial statements.
north atlantic smaller companies investment trust plc
52
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
StrategicReport.
a) basis of preparation
The financial statements of the Company have been prepared in accordance with UK-adopted
International Accounting Standards. 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.
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 2022. The adoption
of these has not had any material impact on these financial statements.
53
north atlantic smaller companies investment trust plc
1 accounting policies continued
e) critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in accordance with UK-adopted International Accounting
Standards 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.
Except as set out 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
closing traded price for Stock Exchange Electronic Trading Service (‘SETS’) shares and bid price for
Stock Exchange Electronic Trading Service – quotes and crosses (‘SETSqx’) shares. 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.
notes to the financial statements
north atlantic smaller companies investment trust plc
54
notes to the financial statements
1 accounting policies continued
f) investments continued
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.
55
north atlantic smaller companies investment trust plc
1 accounting policies continued
k) expenses and finance costs
All expenses are accounted on an accruals basis and are allocated 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 declared 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 Premium: The account, is a non-distributable reserve which 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.
notes to the financial statements
north atlantic smaller companies investment trust plc
56
notes to the financial statements
2 income
2023
£’000
2022
£’000
income from investments
Dividend income 9,386 7,520
Interest
4,532 3,346
13,918 10,866
other income
Redemption premium – 12
Underwriting commission – 15
Interest receivable 152 6
Realised losses on income
(2) –
150 33
Total income
14,068 10,899
total income comprises
Dividends 9,386 7,520
Interest 4,684 3,352
Other realised losses (2) –
Redemption premium – 12
Underwriting commission
–
15
14,068 10,899
income from investments
Listed UK 8,524 7,272
Other listed 862 248
Other unquoted
4,532 3,346
13,918 10,866
57
north atlantic smaller companies investment trust plc
notes to the financial statements
3 investment management fee
(i) Pursuant to the Secondment Services Agreement, described in the Report of the Directors on
page 24 and the Directors’ Remuneration Report on page 38, 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 on page 24 of 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 byshareholders.
The amounts payable in the year in respect of investment management are as follows:
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Annual fee payable to Harwood Capital 4,800 – 4,800 4,506 – 4,506
Annual fee payable to GFS 3,200 – 3,200 3,004 – 3,004
Performance fee – – – – – –
Irrecoverable VAT adjustment in respect of prior years*
– – – – 53 53
8,000 – 8,000 7,510 53 7,563
At 31 January 2023, £400,000 was payable to Harwood Capital LLP in respect of outstanding
management fees (2022: £376,000). At 31 January 2023, there was no fee payable to GFS in respect of
outstanding performance fees (2022: £nil).
* Adjustment in irrecoverable VAT following completion of VAT return.
north atlantic smaller companies investment trust plc
58
4 other expenses
2023
£’000
2022
£’000
Auditor’s remuneration – audit – RSM UK Audit LLP 74 65
Directors’ fees (see page 37) 170 144
Administration fee 312 364
Legal and Professional fees 308 842
Registrar’s fees 37 40
Stock Exchange related fees 59 38
Other expenses
600 484
1,560 1,977
5 dividends
2023
£’000
2022
£’000
Dividend for the year ended 31 January 2023 of 22 pence per share (2022: nil) 2,992 –
2,992 –
The Directors have declared an interim dividend totalling £2.9m (2022: nil) from the revenue
reserves, in respect of the year ended 31 January 2023 of 22p per share (2022: nil), payable
24 February 2023 toshareholders of ordinary shares on the Company's register at the close of
business on 27 January2023.
6 taxation
2023
£’000
2022
£’000
Withholding tax 50 28
50 28
notes to the financial statements
59
north atlantic smaller companies investment trust plc
notes to the financial statements
6 taxation continued
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.
2023
£’000
2022
£’000
Total return before taxation (90,988) 64,934
Theoretical tax at UK Corporation tax rate of 19% (2022: 19%) (17,288) 12,337
Effects of:
Non taxable capital return 18,144 (12,079)
UK and overseas dividends which are not taxable (1,728) (1,429)
Withholding tax 50 28
Decrease in tax losses, disallowable expenses and excess management expenses
872 1,171
actual current tax charge 50 28
Factors that may affect future tax charges:
As at 31 January 2023, the Company has tax losses of £80,109,000 (2022: £76,314,000) that are
available to offset future taxable revenue, comprising excess management expenses of £71,114,000
and a non-trade loan relationship deficit of £8,995,000 (2022: excess management expenses of
£67,319,000 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 Group 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 Group 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
ofinvestments.
north atlantic smaller companies investment trust plc
60
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
2023
Basic and diluted
return perShare
4,458 13,653,763 32.65 (95,496) 13,653,763 (699.41) (91,038) 13,653,763 (666.76)
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
2022
Basic and diluted
return perShare
1,384 13,921,018 9.94 63,522 13,921,018 456.30 64,906 13,921,018 466.24
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:
2023
Net assets
£’000
Number of
Ordinary Shares
Net asset
value per Share
Ordinary Shares – Basic and diluted 693,356 13,602,068 5,097p
Ordinary Shares* – Basic and diluted 712,162 13,602,068 5,236p
2022
Net assets
£’000
Number of
Ordinary Shares
Net asset
value per Share
Ordinary Shares – Basic and diluted 789,466 13,661,000 5,779p
Ordinary Shares* – Basic and diluted 800,009 13,661,000 5,856p
* Adjusted for Oryx using equity accounting.
There is no dilutive effect for 31 January 2023 or 31 January 2022.
notes to the financial statements
61
north atlantic smaller companies investment trust plc
notes to the financial statements
7 return per ordinary share and net asset value per ordinary share continued
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 derived 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:
2023
£’000
2022
£’000
Oryx at Fair value (traded price) using IFRS 10 91,819 115,011
Oryx value using Equity Accounting 110,625 125,554
Increase in net assets using Equity Accounting 18,806 10,543
8 investments at fair value through profit or loss
a) investments at fair value through profit or loss
2023
£’000
2022
£’000
Quoted at fair value:
United Kingdom 441,316 536,056
Overseas
8,778 15,952
Total quoted investments 450,094 552,008
Treasury bills at fair value 100,413 70,783
Unlisted and loan stock at fair value
134,984 89,633
investments at fair value through profit or loss 685,491 712,424
north atlantic smaller companies investment trust plc
62
8 investments at fair value through profit or loss continued
a) investments at fair value through profit or loss continued
2023
Quoted
equities
£’000
Unquoted
equities
£’000
Loan
stocks
£’000
Treasury
Bills
£’000
Total
£’000
analysis of investment portfolio movements
Opening bookcost as at 1 February 2022 268,494 44,387 16,167 69,982 399,030
Opening unrealised appreciation
283,514 28,391 688 801 313,394
opening fair value as at 1 February 2022 552,008 72,778 16,855 70,783 712,424
Movements in year:
Transfer (10,894) 10,894 – – –
Purchases at cost 67,268 19,873 20,038 485,743 592,922
Sales – proceeds (37,921) (17,422) (5,010) (460,052) (520,405)
– realised (losses)/gains on sales (1,793) 7,812 209 4,990 11,218
(Decrease)/increase in appreciation on assets held
(118,574) 9,580 (623) (1,051) (110,668)
closing fair value as at 31 January 2023 450,094 103,515 31,469 100,413 685,491
Closing bookcost as at 31 January 2023 285,154 65,544 31,404 100,663 482,765
Closing appreciation/(depreciation)
164,940 37,971 65 (250) 202,726
450,094 103,515 31,469 100,413 685,491
2022
Quoted
equities
£’000
Unquoted
equities
£’000
Loan
stocks
£’000
Treasury
Bills
£’000
Total
£’000
analysis of investment portfolio movements
Opening bookcost as at 1 February 2021 246,540 55,669 23,285 54,853 380,347
Opening unrealised appreciation/(depreciation)
306,039 26,437 289 (238) 332,527
opening fair value as at 1 February 2021 552,579 82,106 23,574 54,615 712,874
Movements in year:
Transfer 157 (157) – – –
Purchases at cost 65,718 11,432 6,139 326,508 409,797
Sales – proceeds (117,304) (31,748) (13,175) (311,643) (473,870)
– realised gains/(losses) on sales 73,383 9,191 (82) 264 82,756
(Decrease)/increase in appreciation on assets held
(22,525) 1,954 399 1,039 (19,133)
closing fair value as at 31 January 2022 552,008 72,778 16,855 70,783 712,424
Closing bookcost as at 31 January 2022 268,494 44,387 16,167 69,982 399,030
Closing appreciation
283,514 28,391 688 801 313,394
552,008 72,778 16,855 70,783 712,424
notes to the financial statements
63
north atlantic smaller companies investment trust plc
notes to the financial statements
8 investments at fair value through profit or loss continued
a) investments at fair value through profit or loss continued
2023
£’000
2022
£’000
analysis of capital gains and losses
Gains on sales 11,218 82,756
Unrealised losses
(110,668) (19,133)
(losses)/gains on investments at fair value (99,450) 63,623
2023
£’000
2022
£’000
Exchange (losses)/gains on capital items (160) 92
Exchange gains/(losses) on currency
4,114 (140)
exchange gains/(losses) 3,954 (48)
2023
£’000
2022
£’000
portfolio analysis
Equity shares 551,757 622,662
Convertible preference securities 1,852 2,124
Fixed interest/Loan note securities 31,469 16,855
Treasury Bills
100,413 70,783
685,491 712,424
north atlantic smaller companies investment trust plc
64
8 investments at fair value through profit or loss continued
b) subsidiary undertakings
At 31 January 2023 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 52.68% 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 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.
notes to the financial statements
65
north atlantic smaller companies investment trust plc
notes to the financial statements
8 investments at fair value through profit or loss continued
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
2023
%
Company
holding
31 January
2022
%
Consolidated Venture Finance
6 Stratton Street, Mayfair, London, W1J 8LD
England and Wales 31 January 2022 (740) – 100.00 100.00
EKF Diagnostics Holdings Plc
Avon House, 19 Stanwell Road, Penarth,
Cardiff, CF64 2EZ
England and Wales 31 December 2022 74,523 (8,861) 21.10 20.82
Frenkel Topping Group Plc
Frenkel House 15 Carolina Way, Salford,
Manchester, United Kingdom, M50 2ZY
England and Wales 31 December 2022 40,094 1,976 29.82 24.30
Hampton Investment Properties
6 Stratton Street, Mayfair, London, W1J 8LD
England and Wales 31 December 2021 12,108 (38) 79.65 79.65
Hargreaves Services Plc
West Terrace, Esh Winning, Durham,
DH7 9PT
England and Wales 31 May 2022 183,136 44,711 20.37 20.37
Harwood Private Capital UK L.P.
6 Stratton Street, Mayfair, London, W1J 8LD
England and Wales 31 March 2022 15,444 741 28.57 28.57
Harwood Private Equity Fund IV
6 Stratton Street, Mayfair, London, W1J 8LD
England and Wales 31 December 2022 89,606 965 26.28 26.28
Harwood Private Equity Fund V
6 Stratton Street, Mayfair, London, W1J 8LD
England and Wales 31 December 2022 167,352 907 25.00 25.00
Oryx International Growth Fund Limited
BNP Paribas House, St Julian's Avenue,
StPeter Port, Guernsey GY1 1WA
Guernsey 31 March 2022 219,409 (10,490) 52.68 52.47
Performance Chemical Company
9105 W Interstate 20 Midland, TX 79706
United States
ofAmerica
30 September 2021 12,250 4,826 53.12 53.12
Trident Private Equity Fund III LP
6 Stratton Street, Mayfair, London, W1J 8LD
England and Wales 31 December 2022 18,977 (155) 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.
north atlantic smaller companies investment trust plc
66
8 investments at fair value through profit or loss continued
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 52.68
Frenkel Topping Group Plc 29.82
EKF Diagnostics Holdings Plc 21.10
Hargreaves Services Plc 20.37
Sportech 17.00
TEN Entertainment Group Plc 14.60
Odyssean Investment Trust Plc 14.38
Bigblu Broadband Plc 13.67
Sureserve Group Plc 12.03
AssetCo Plc 11.95
Verici DX Limited 11.16
Appreciate Group Plc 9.77
MJ Gleeson Plc 9.43
Niox Group Plc 8.94
Renalytix AI Plc 8.93
Maintel Holdings Plc 8.70
Trellus Health 7.43
Polar Capital Holdings Plc 6.95
Circle Property 6.85
Esken Limited 6.52
Palace Capital Plc 6.22
Mountain Comm Bancorp 6.20
Redcentric Plc 4.80
d) investments in US treasury bills
At 31 January 2023, the Company held US Treasury Bills with a market value of £100,413,000
(2022:£70,783,000).
e) transaction costs
During the year, the Company incurred total transaction costs of £198,000 (2022: £196,000)
comprising £168,000 (2022: £151,000) and £30,000 (2022: £45,000) on purchases and sales of
investments respectively. These amounts are included in net (losses)/gains on investments as
disclosed in the Statement of Comprehensive Income.
notes to the financial statements
67
north atlantic smaller companies investment trust plc
notes to the financial statements
8 investments at fair value through profit or loss continued
f) commitment
At 31 January 2023 NASCIT had undrawn capital commitments to invest £6.0 million
(2022:£22.1million) in Harwood Private Equity V LP and £15.1 million (2022: £17.1 million) in
HarwoodPrivate Capital U.K. LP.
9 trade and other receivables
2023
£’000
2022
£’000
Accrued income 1,526 463
Prepayments and other debtors 986 1,085
Recoverable withholding tax
41 –
2,553 1,548
10 trade and other payables
2023
£’000
2022
£’000
Investment Manager’s fees 400 376
Other creditors and accruals
306 159
706 535
11 share capital
2023
Number
2023
£’000
2022
Number
2022
£’000
allotted, called up and fully paid:
Ordinary Shares of 5p:
Balance at beginning of year 13,661,000 683 14,024,518 701
Cancellation of shares
(58,932) (3) (363,518) (18)
Balance at end of year
13,602,068 680 13,661,000 683
Since 31 January 2023, 64,159 Ordinary Shares have been purchased by the Company for cancellation
for total consideration of £2,445,000. As at the date of this report, the Company’s issued share capital
consists of 13,537,909 Ordinary Shares of 5p nominal value each.
north atlantic smaller companies investment trust plc
68
12 reconciliation of total return before taxation to cash received/(expended) from operations
2023
£’000
2022
£’000
Total return before taxation (90,988) 64,934
Losses/(gains) on investments and currency 95,496 (63,575)
(Increase)/decrease in debtors and accrued income (1,005) 603
Increase/(decrease) in creditors and accruals
171 (4,537)
Cash received/(expended) from operations
3,674 (2,575)
13 analysis of net cash
At
1 February
2022
£’000
Cash
flow
£’000
Exchange
movement
£’000
At
31 January
2023
£’000
Cash and cash equivalents 76,029 (71,133) 4,114 9,010
14 financial instruments and risk profile
The Company’s financial risk management objectives, policies and strategy can be found in the
Strategic Report on pages 2 to 22.
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. Investments are
stated at fair value through profit and loss. All other financial assets and all financial liabilities are
stated at amortised cost with the balance sheet values a reasonable approximation to fair value.
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 review and agree 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.
notes to the financial statements
69
north atlantic smaller companies investment trust plc
notes to the financial statements
14 financial instruments and risk profile continued
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 31January 2023, the
Company had no open forward currency contracts (2022: 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 2023 31 January 2022
Overseas
investments
£’000
Net monetary
assets
£’000
Total currency
exposure
£’000
Overseas
investments
£’000
Net monetary
assets
£’000
Total currency
exposure
£’000
US Dollar 152,143 1,131 153,274 114,196 6,488 120,684
152,143 1,131 153,274 114,196 6,488 120,684
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 the US Dollar, with all other
variables constant, net assets would have moved by the amounts shown below. The analysis is shown
on the same basis for 2022.
31 January 2023 31 January 2022
10%
weakening
£’000
10%
strengthening
£’000
10%
weakening
£’000
10%
strengthening
£’000
US Dollar 17,030 (13,934) 13,409 (10,971)
17,030 (13,934) 13,409 (10,971)
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.
north atlantic smaller companies investment trust plc
70
notes to the financial statements
14 financial instruments and risk profile continued
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 on page 8.
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 2023 on its quoted and
unquoted investments and options on investments was as follows:
2023
£’000
2022
£’000
Financial assets at fair value through profit or loss
– Non current investments at fair value through profit or loss
685,491 712,424
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
PricingCommittee.
71
north atlantic smaller companies investment trust plc
14 financial instruments and risk profile continued
other price risk continued
The table below shows how the most significant unquoted investments have been valued as at
31January 2023.
Method of fair
valuevaluation
2023 fair
value GBP
£’000
2022 fair
value GBP
£’000
3BL Media USD 12.5% Loan Notes Cost 4,063 –
Antler Holdco Limited GBP Offer Price – 4,871
Antler Holdco Discount Notes GBP Cost – 21
Coventbridge Group Limited 9% Loan USD Cost 10,767 10,368
Hampton Investment Properties Ltd GBP
Adjusted Net Assets 742 742
Harwood Private Capital UK L.P. GBP Net Assets 4,857 2,857
Harwood Private Equity Fund IV GBP Net Assets 23,139 22,102
Harwood Private Equity Fund V GBP Net Assets 45,342 21,247
Jaguar Holdings Limited Ordinary Shares – USD EBITDA Multiple 1,584 1,341
Jaguar Holdings Limited Preference Shares – USD Cost 1,852 2,124
Performance Chemical Holding Common Stock USD EBITDA Multiple 8,633 7,918
SMT Corporation 11% USD Loan Notes Cost 14,017 –
SourceBio International Ordinary Shares GBP Price of recent investment 9,200 –
Specialist Components Ltd GBP 5% Loan Notes GBP Cost 2,622 2,622
Specialist Components Ltd APC Technology Ord GBP EBITDA Multiple 118 118
Spring Investment LP (Duke Street) GBP Net Assets 4,391 1,750
Trident Private Equity Fund LP3 Including Rebate GBP Net Assets 1,621 5,842
Utitec Holdings Inc – Loan Stock 12.5% USD Cost – 3,842
WEP Fund II SIMCO Co-Investment USD Net Assets
1,625 1,491
134,573 89,256
Other investments
411 377
134,984 89,633
notes to the financial statements
north atlantic smaller companies investment trust plc
72
notes to the financial statements
14 financial instruments and risk profile continued
other price risk continued
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:
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 2022, as the underlying investments within HPE4 and HPE5 are valued on a fair
value basis and adjusted for Fund transactions between 1 January 2023 to 31 January 2023. 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
The enterprise value is calculated based on an EBITDA multiple of 6x. A reduction in the multiple
by a factor of 1x would reduce the carrying value of the total investment by US$1.6 million, or -15%.
An increase in the multiple by a factor of 1x would increase the value of the total investment by
US$1.6 million, or 15%.
SourceBio International – Ordinary Shares
This investment is held at the £1.15 per share price used for the transactions associated with the
acquisition and delisting in December 2022 (price of recent investment). This equates to an
enterprise value calculated based on an EBITDA multiple of 9.6x. A reduction in the multiple by
a factor of 1x would reduce the carrying value of the total investment by £1.02million, or -11%.
An increase in the multiple by a factor of 1x would increase the value of the total investment by
£1.03 million, or 11%.
SMT Corporation 11% USD – Loan Notes
The loan is held at par plus accrued interest. The enterprise value is calculated using an EBITDA
multiple of 8x. Neither a reduction nor an increase in the multiple by a factor of 1x would
impact the carry value of the loan.
Coventbridge Group 9% USD – Loan Notes
The loan is held at par plus accrued interest. The enterprise value is calculated using an EBITDA
multiple of 8.8x. Neither a reduction nor an increase in the multiple by a factor of 1x would
impact the carry value of the loan.
73
north atlantic smaller companies investment trust plc
14 financial instruments and risk profile continued
other price risk continued
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.
2023 2022
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 68,549 (68,549) 71,242 (71,242)
(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 2023, £100,413,000 (2022: £70,783,000) of the Company’s cash is held in short-term
Treasury Bills, which are highly liquid. As a consequence, the Company could access £100 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:
2023
£’000
2022
£’000
financial assets neither past due or impaired
Fixed income securities 31,469 16,855
Preference shares 1,852 2,124
Treasury Bills 100,413 70,783
Accrued income and other debtors 2,553 1,548
Cash and cash equivalents
9,010 76,029
145,297 167,339
notes to the financial statements
north atlantic smaller companies investment trust plc
74
14 financial instruments and risk profile continued
other price risk continued
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 2023.
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 1f) for details on how the value of level 3 investments
arecalculated.
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.
notes to the financial statements
75
north atlantic smaller companies investment trust plc
notes to the financial statements
14 financial instruments and risk profile continued
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 2023
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Equity investments 553,609 450,094 – 103,515
Fixed interest investments
131,882 100,413 – 31,469
total 685,491 550,507 – 134,984
At 31 January 2022
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Equity investments 624,786 552,008 – 72,778
Fixed interest investments
87,638 70,783 – 16,855
total 712,424 622,791 – 89,633
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 2023
Total
£’000
Equity
investments
£’000
Fixed
interest
investments
£’000
Opening fair value 89,633 72,778 16,855
Purchases 39,911 19,873 20,038
Sales (22,432) (17,422) (5,010)
Transfer from level 1 10,894 10,894 –
Total gains/(losses) included in gains on investments
in the Statement of Comprehensive Income:
– on assets sold 8,021 7,812 209
– on assets held at the end of the year
8,957 9,580 (623)
closing fair value 134,984 103,515 31,469
north atlantic smaller companies investment trust plc
76
14 financial instruments and risk profile continued
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 netassets.
The Company’s capital at 31January comprises:
2023
£’000
2022
£’000
debt
– –
equity
Equity share capital 680 683
Retained earnings and other reserves
692,676 788,783
693,356 789,466
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 orpremium);
– 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 beretained.
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, Harwood Private Equity LLP and Harwood Capital Management (Gibraltar)
Ltd are regarded as related parties of the Company due to Christopher Mills, the Company’s Chief
Executive and Investment Manager currently being a Director of Harwood Capital Management
(Gibraltar) Ltd and a Member of Harwood Capital LLP until 9 June 2015, and the ultimate beneficial
owner. Harwood Private Equity LLP replaced Harwood Capital LLP as Investment Manager or
Investment Adviser to the Private Equity Funds on 21 December 2022. Harwood Capital
Management (Gibraltar) Ltd acts as Investment Manager or Investment Adviser to Oryx
International Growth Fund Ltd, and Harwood Private Equity LLP acts as Investment Manager or
Investment Adviser of the Private Equity Funds below, in which the Company has an investment
and from which companies it receives fees or other incentives for its services.
notes to the financial statements
77
north atlantic smaller companies investment trust plc
15 related party transactions continued
The table below discloses fees paid by Oryx and the Private Equity Funds to these related parties.
Services
2023
£'000
2022
£'000
Oryx International Growth Fund Limited Investment Advisory 2,215 3,027
Trident Private Equity III LP Investment Advisory 60 146
Harwood Private Equity IV LP Investment Advisory 1,027 1,485
Harwood Private Equity V LP Investment Advisory 3,200 3,200
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 on pages 23 to 25.
Christopher Mills is Chief Executive Officer and indirectly a member of Harwood Capital LLP and
Harwood Private Equity 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 and Harwood Private Equity LLP, the
past and current Administrators 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.
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, Bigblu Broadband plc, Coventbridge Group Limited, EKF Diagnostics Holdings Plc,
Frenkel Topping Group plc, Jaguar Holdings Limited, M J Gleeson Group plc, Oryx, Renalytix Al Plc,
SourceBioInternationalplc, SureServe Group plc, Ten Entertainment Group Plc, Trellus Healthplc
and Utitec Holdings Inc. Employees of the Manager may hold options over shares in investee
companies. A total of £482,073 (2022: £478,367) 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 51,424 shares in the Company (2022: 83,924).
Members, employees, institutional clients and private clients of Harwood Capital LLP and Harwood
Private Equity 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.
notes to the financial statements
north atlantic smaller companies investment trust plc
78
directors and advisers
Directors
Sir Charles Wake (Chairman)
Christopher Mills (Chief Executive)
Fiona Gilbert
Lord Howard of Rising
G Walter Loewenbaum
Peregrine Moncreiffe
Administrator (up to 26 February 2023)
Harwood Capital LLP
(Authorised and regulated by the Financial Conduct Authority)
6 Stratton Street
Mayfair
London W1J 8LD
Telephone: 020 7640 3200
Administrator (from to 27 February 2023)
North Atlantic Investment Services Limited
(Authorised and regulated by the Financial Conduct Authority)
6 Stratton Street
Mayfair
London W1J 8LD
Telephone: 020 7640 3200
Financial Adviser and Stockbroker
Winterflood Investment Trusts
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
Registered Office
6 Stratton Street
Mayfair
London W1J 8LD
Telephone: 020 7640 3200
Registrars
Link Group
10
th
Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Auditors
RSM UK Audit LLP
25 Farringdon Street,
London EC4A 4AB
Company Secretary
Kin Company Secretarial Limited
Hyde Park House
5 Manfred Road
London SW15 2RS
79
north atlantic smaller companies investment trust plc
financial calendar Announcement of results and Annual Report May
Annual General Meeting June
Half-Yearly results and report September
Half-Yearly report posted September
share price The Company’s share price can be found on:
SEAQ Ordinary Shares: NAS
Trustnet: www.trustnet.ltd.uk
net asset value The latest net asset value of the Company can be found on the Company's website:
www.nascit.co.uk
share dealing Investors wishing to purchase more Ordinary Shares or dispose of all or part of their holding may
do so through a stockbroker. Many banks also offer this service.
The Company’s registrars are Link Group. In the event of any queries regarding your holding of
shares, please contact the registrars on: 0871 664 0300, or by email on enquiries@linkgroup.co.uk
Changes of name or address must be notified to the registrars in writing at:
Link Group
10
th
Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
shareholder information
Front Cover: ‘The Battle of Vigo Bay, 12 October 1702’ (Ludolf Backhuysen)
© National Maritime Museum, Greenwich, London, Caird Collection