Annual Report • Jan 31, 2012
Annual Report
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North Atlantic Smaller Companies Investment Trust plc Annual Report
for the year ended 31 January 2012
| objective of the company and financial highlights | 1 |
|---|---|
| corporate summary | 2 |
| directors | 3 |
| chairman's statement | 4 |
| investment managers' report | 5 |
| sector analysis of investments at fair value | 6 |
| twenty largest investments | 7 |
| unlisted investments profile | 8 |
| group report of the directors | 14 |
| statement of directors' responsibilities in respect of the annual report and financial statements |
22 |
| corporate governance | 23 |
| directors' remuneration report | 28 |
| independent auditor's report | 31 |
| consolidated statement of comprehensive income | 33 |
| consolidated statement of changes in equity | 34 |
| company statement of changes in equity | 35 |
| consolidated and company balance sheets | 36 |
| consolidated cash flow statement | 38 |
| company cash flow statement | 39 |
| notes to the financial statements | 40 |
| directors and advisers | 73 |
| notice of annual general meeting | 74 |
| shareholder information | 78 |
| form of proxy | loose leaf |
Company Registered Number: 1091347
The cover depicts a painting by the artist Thomas Luny (late th century – early th century) entitled "The Battle of the Saints, April ".
© National Maritime Museum, Greenwich, London.
The Company is a member of the Association of Investment Companies.
| Restated* | ||||||
|---|---|---|---|---|---|---|
| 2012 | % change | 2011 | 2010 | 2009 | 2008 | |
| revenue | ||||||
| Gross income (£'000) | 6, 432 | 1 74.8 | 2,341 | 3,525 | 4,285 | 5,208 |
| Net return after tax attributable to Shareholders of | ||||||
| the Parent (£'000) | 1 4 | 1 01.6 | (849) | 443 | 538 | 1,272 |
| Basic return per Ordinary Share – revenue |
0. 10p | 1 01.7 | (5.86)p | 2.99p | 3.64p | 8.86p |
| – capital | ( 79.00)p | (12 7.7) | 284.70p | 289.45p | (372.41)p | (21.05)p |
| assets | ||||||
| Total assets less current liabilities (£'000) | 25 0,49 o | ( 3. 6) | 259, 916 | 219,613 | 178,284 | 238,166 |
| Net asset value per 5p Ordinary Share: | ||||||
| Basic | 1,5 70p | ( 5. 6) | 1,664p | 1,480p | 1,204p | 1,611p |
| Diluted | 1, 395p | ( 4.4) | 1,459p | 1,169p | 944p | 1,209p |
| Mid-market price of the 5p Ordinary Shares | ||||||
| at 31 January | 1,035.0p | (9.7) | 1,146.0p | 814.0p | 618.5p | 1,025.0p |
| discount to diluted net asset value | 2 5.8% | 4. 3 | 21.5% | 30.4% | 34.5% | 15.2% |
| indices and exchange rates at 31 January | ||||||
| Standard & Poor's 500 Composite Index | 1312.4 | 2.0 | 1,286.1 | 1,073.9 | 825.9 | 1,378.6 |
| Russell 2000 Index | 792.8 | 1.5 | 781.3 | 602.0 | 443.5 | 713.3 |
| US Dollar/Sterling exchange rate | 1.5781 | (1.5) | 1.6018 | 1.6024 | 1.4417 | 1.9880 |
| Standard & Poor's 500 Composite – Sterling adjusted | 832.8 | 3.7 | 803.1 | 671.8 | 568.0 | 693.4 |
| Russell 2000 – Sterling adjusted | 503.1 | 3.1 | 487.9 | 376.6 | 305.1 | 358.8 |
| FTSE All-Share Index | 2,932.9 | (3.7) | 3,044.3 | 2,660.5 | 2,078.9 | 3,000.1 |
* The amounts at 31 January 2011 have been restated to reflect the consolidation of the subsidiary undertaking, Hampton Investment Properties Limited (see notes 1(c) and 10).
| introduction | North Atlantic Smaller Companies Investment Trust plc ("NASCIT") is an investment trust whose shares are listed on the London Stock Exchange. |
|---|---|
| objective and investment strategy |
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 unlisted 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. The business of the Company's wholly owned subsidiary, Consolidated Venture Finance Limited, is an investment dealing and holding company and its other subsidiary, Hampton Investment Properties Limited, is a property investment company. |
| 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. Gearing has the effect of accentuating market falls and gains. Details of the Company's debt are shown in Note 12 to the financial statements. |
|
| The Company outsources all of its main operational activities to recognised third party providers. | |
| AIC | The Company is a member of the Association of Investment Companies ("AIC"). |
| joint managers | The Joint Managers are Christopher Mills through Growth Financial Services Limited and Harwood Capital LLP. |
| company secretary | The Company Secretary is Bonita Guntrip ACIS, Ground Floor, Ryder Court, 14 Ryder Street, London SW1Y 6QB. |
| website | www. harwoodcapital.co.uk |
Peregrine D E M Moncreiffe ¹²³ Non-Executive Chairman. Appointed on 17 November 2008 (having previously been a Director of the Company from 1993 – 2006). He has over the years worked in London, New York and the Far East, with Credit Suisse First Boston, Lehman Brothers and Buchanan Partners. He is a non-executive director of NR Nordic & Russia Properties Limited and Asian Citrus Holdings Limited. He was a director of Noventa Limited until 9 July 2009.
Christopher H B Mills Chief Executive and Investment Manager. Appointed August 1984. He is currently a member and Chief Investment Officer of Harwood Capital LLP, the Company's Joint Manager. 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 19 of the financial statements.
Kristian Siem (Norwegian) ¹²³ Non-Executive Director. Appointed April 2001. He is chairman of Siem Industries Inc., an industrial company which includes offshore oil and gas sub-sea construction and services vessels, and marine transportation worldwide. He is also a director of various companies in Norway, Sweden, Portugal and the Cayman Islands.
Charles L A Irby ¹²³ Non-Executive Director and Chairman of the Audit Committee. Appointed December 2002. He is a non-executive director of Great Portland Estates PLC and QBE Insurance Group Limited and was chairman of Aberdeen Asset Management PLC from 1999 to January 2009. He was head of corporate finance of ING Barings from 1992 to 1999 and a managing director from 1995 to 1999. He was also a member of the Panel on Takeovers and Mergers from 1997 to 1998.
Enrique Foster Gittes (USA) ¹²³ Non-Executive Director. Appointed July 1992 and served as the Company's Chairman from July 1998 to June 2009. He is an American lawyer who was president of Hambro America in New York until 1983, responsible for venture capital investment and subsequently chairman of European Home Products PLC until 1988 and a director of Scholl PLC until 1994. He was a founder and a director of Denison International PLC until 1999 and is currently President of Bodega Foster SA, Mendoza, Argentina. He was formerly a non-executive director of J O Hambro Capital Management (Bermuda) Limited and formerly a director of North Atlantic Value (General Partner) Limited (part of the same group as the Joint Manager).
The Company's fully-diluted net asset value fell by 4.4% during the period under review, compared with a modest rise in the Sterling adjusted Standard and Poor's Composite Index. However, this should be seen in the context of declines in many other equity indices during this period including, for example, the FTSE Small Cap which dropped by over 7%.
The revenue account showed a profit after tax of £ 284,000 (2011: £849,000 loss). Consistent with the Company's long-standing policy, the Directors are not recommending the payment of a dividend (2011: Nil).
During the year, the Company repurchased 115,000 Ordinary Shares for cancellation. As these securities were purchased at a substantial discount to net asset value, these purchases had a beneficial impact on the net asset value of the Company, whilst still leaving adequate cash balances to fund a number of prospective investments. The Company will continue to consider the repurchase of Ordinary Shares and Convertible Unsecured Loan Stock at a discount when appropriate.
A commentary on the quoted and unquoted investments can be found in the Investment Managers Report on page 5.
We continue to search for investments that trade at a significant discount to private market value. It is imperative that the underlying businesses are sufficiently strong so as to withstand the anaemic economic growth that we are experiencing in most of Europe.
Although corporate profits have remained resilient, the fear of poor overall economic performance is constraining investors and the prices of financial assets have been supported by various forms of quantitative easing in the US and Europe. The monetisation of government debt cannot be maintained indefinitely without arousing inflationary pressures, particularly if governments seek to fund their deficits through increases in taxation rather than spending cuts.
Given the uncertainty in financial markets and the economic outlook your Directors maintain a cautious approach to valuations, although it is expected that corporate activity will have a positive impact on the value of our holdings and consequently the Company's net asset value over the course of the current year. New investments will be focused on opportunities where there are identifiable catalysts to enhance shareholder value.
I believe that there is potential value in the Company's portfolio, which can be realised to the benefit of our Shareholders over the medium-term.
The Hon. Peregrine Moncreiffe Chairman 23 May 2012
| quoted portfolio | United States Two new investments were made during the year; SeraCare and Interxion, with a modest loss offsetting a modest profit respectively. It is, however, pleasing to report that since the end of the year, SeraCare is up 20% following a takeover bid and Interxion has increased nearly 20% on favourable trading news. |
|---|---|
| United Kingdom The major success of the year was undoubtedly RPC Group, which rose 40% and, to a lesser extent, CVS Group, a recent purchase, which rose 10%. Oryx International Growth Fund also performed well, outperforming its benchmark index by nearly 800 basis points. Sadly, BBA fell 20% on concerns about the United States economy and Nationwide Accident fell by 33% as trading weakened in the face of sluggish UK economic prospects. |
|
| A big disappointment was the Company's investment in Guinness Peat Group, which fell 25%. Guinness Peat Group is in the course of being broken up and we remain confident that not only will the original cost of our investment be recovered, but the Company will in fact make a good profit. |
|
| unquoted portfolio | United Kingdom Although the majority of the portfolio performed well, it was necessary to write down the value of the investment in AssetCo Abu Dhabi by 50%, as a result of financial irregularities. Orthoproducts, in particular, had a good year and is currently in discussions which might result in an offer at a good premium to the current valuation. Forefront, Letchworth and the major investments in Trident Private Equity II and Trident Private Equity III all made good progress during the year, although it was necessary to write down the investment in Indicant, as trading continued to deteriorate in the face of weakness in domestic consumer expenditure. As reported in last year's annual report, although subsequent to 31 January 2011, the holding in Lion/Katsu was sold at a small premium to the valuation. |
| United Kingdom Property The valuation in Hampton Investment Properties was increased modestly, mainly reflecting retained income. Rising rents were offset by rising yield. Merchant Properties also had a modest rise reflecting major rent reviews. The investment in Kiln Lane was sold at valuation, but it was necessary to take a write down in the valuation of the investment in Darby Group which was sold during the year. Taken as a whole, property investment made a modest profit for the Company during the period under review. |
|
| United States One new investment was made during the period, just prior to the close of the financial year; this was in SINAV Limited, the acquiring vehicle for GTL Resources Plc, which was a UK listed holding company for a US based ethanol producer (see page 11). Celsis continued to trade extremely well and Bionostics and Global Options were broadly in line with expectations. Telos also continues to trade well and it is pleasing to note that the company has started to redeem its preference shares. |
|
| Generally the Banks have performed better than last year and are now profitable. It was, however, necessary to write off one small holding, although this was largely offset by the sale of another holding, which had previously been written off. |
|
| conclusion | Although it is likely that markets will remain volatile, there is sufficient value potential in the quoted and unquoted portfolios such that I am optimistic that the current year will see resumed growth in the Company's net asset value. |
| Christopher H B Mills Chief Executive & Investment Manager 23 May 2012 |
| United | United | New | ||||
|---|---|---|---|---|---|---|
| equities, convertible | States | Kingdom | Europe | Zealand | Total | Total |
| securities & loan stocks as a | 31.01.12 | 31.01.12 | 31.01.12 | 31.01.12 | 31.01.12 | 31.01.11 |
| % of total portfolio valuation | % | % | % | % | % | % |
| Investment Companies | – | 20.0 | – | – | 20.0 | 17.6 |
| Manufacturing | 11.0 | – | – | – | 11.0 | 10.9 |
| Real Estate | – | 8.9 | 0.5 | – | 9.4 | 8.3 |
| General Industrials | 1.0 | 6.3 | – | – | 7.3 | 8.4 |
| Health Care, Equipment & Services | 6. 2 | 3.6 | – | – | 9.8 | 8.2 |
| Support Services | 1.6 | 3.0 | – | – | 4.6 | 6.9 |
| Transport | – | 5.6 | – | – | 5.6 | 5.4 |
| General Financials | 5.1 | – | – | – | 5.1 | 5.1 |
| Media | – | – | – | – | – | 4.2 |
| Industrial Engineering | – | 3.1 | – | – | 3.1 | 4.0 |
| Construction & Materials | – | 5.8 | – | – | 5.8 | 3.6 |
| Technology Hardware & Equipment | 5.2 | 1. 3 | – | – | 6. 5 | 2.3 |
| Travel & Leisure | – | 0.8 | – | – | 0.8 | 1.5 |
| Oil & Gas Producers | – | 2. 1 | – | – | 2. 1 | 0.8 |
| Food Producers | – | – | – | – | – | 0.7 |
| General Retailers | – | 3.1 | – | – | 3.1 | 0.1 |
| Financial Services | – | – | – | 5.8 | 5.8 | – |
| 30. 1 | 63. 6 | 0.5 | 5.8 | 100.0 | ||
| treasury bills | – | – | – | – | – | 12.0 |
| total at 31 January 2012 | 30. 1 | 63. 6 | 0.5 | 5.8 | 100.0 | |
| total at 31 January 2011 | 3 6.4 | 6 3.1 | 0.5 | – | 100.0 |
The sector analysis excludes investments held by the subsidiary undertakings, Hampton Investment Properties Limited and Consolidated Venture Finance Limited.
as at 31 January 2012
| equities (including convertibles, | At fair value | |
|---|---|---|
| loan stocks and related financing) | £'000 | |
| Bionostics Holdings Limited | UK Unquoted | 21,721 |
| Oryx International Growth Fund Limited* † | UK Listed | 20,395 |
| Hampton Investment Properties Limited†† | UK Unquoted | 14,748 |
| Trident Private Equity Fund III LP | UK Unquoted | 12,666 |
| RPC Group | UK Listed | 12,536 |
| Guinness Peat Group | NZD Listed | 11,521 |
| Gleeson (MJ) Group | UK Listed | 11,490 |
| BBA Aviation Group | UK Listed | 11,184 |
| Interxion Holdings | USA Listed | 7,905 |
| Orthoproducts Limited | UK Unquoted | 7,101 |
| ten largest investments | 131,267 | |
| CVS Group | UK Unquoted | 6,131 |
| Nationwide Accident Repair Services | UK Quoted on AIM | 5,900 |
| Trident Private Equity Fund II LP | Cayman Islands Unquoted | 5,384 |
| AssetCo Plc | UK Unquoted | 5,250 |
| Nastor Investments Limited | UK Unquoted | 5,149 |
| Celsis AG | Swiss Unquoted | 4,139 |
| Glass America LLC | USA Unquoted | 3,110 |
| Merchant Properties Unit Trust | UK Unquoted | 3,049 |
| S INAV Limited | UK Unquoted | 2,775 |
| Telos Corporation | USA Unquoted | 2,519 |
| twenty largest investments | 174,673 | |
| Aggregate of other investments at fair value | 23,644 | |
| total value of investments and associates of the company | 198,317 |
* incorporated in Guernsey.
† Oryx is accounted for in the Group accounts as an Associate under the equity method of accounting. The valuation shown above is the Group's share of Oryx's net assets.
†† Hampton Investment Properties Limited is accounted for in the Group accounts as a Subsidiary.
All other investments are valued at fair value.
| 2012 | |||
|---|---|---|---|
| At fair value Total assets | |||
| £'000 | % | ||
| Bionostics Holdings Limited (UK) Cost: £11,677,000 | 21,721 | 9.8 | |
| Bionostics is a specialist developer of medical diagnostic products that | |||
| are used to test the accuracy of calibrated blood testing devices. The | |||
| company had a reasonable year in 2011, despite the difficult economic | |||
| environment. Trading in the current year is expected to be in line with | |||
| the budget. | |||
| Since the end of the year, the company has refinanced itself and paid off | |||
| a little over £3m of the Company's original investment. | |||
| Equity held | 47.1% | ||
| Income recognised in the period | £nil | ||
| Financial results per latest audited accounts | |||
| – Turnover | £ 29.0m | ||
| – EBIT | £ 5.8m | ||
| Hampton Investment Properties Limited (UK) Cost: £9,796,000 | 14,748 | 6.6 | |
| Hampton retains its 21 core income producing assets. Income and | |||
| occupancy levels remain robust despite challenging market conditions. | |||
| The focus remains on creating value through active asset management | |||
| and target capital expenditure spend. | |||
| Equity held | 68.1% | ||
| Income recognised in the period | £nil | ||
| Financial results per latest audited accounts | |||
| – Turnover | £3.9m | ||
| – EBIT | £1.2m | ||
| Trident Private Equity Fund III LP (UK) Cost: £10,990,000 | 12,666 | 5. 7 | |
| The Company has made a £25.5 million commitment to TPE III with just over £ 11 million drawn down. TPE III will continue the successful |
|||
| policy achieved by TPE II, investing in small UK-based buyouts. To date four investments have been made. |
|||
| Equity held | 32.7% | ||
| Income recognised in the period | £ 0.1m | ||
| Financial results per latest audited accounts | |||
| – Turnover | n/a | ||
| – EBIT | n/a | ||
| Carried forward | 49,135 | ||
| At fair value Total assets | |||
|---|---|---|---|
| £'000 | |||
| Brought forward | 49,315 | ||
| Celsis AG Cost: £5,813,000 | 9,288 | ||
| Celsis was acquired in September 2009. Celsis is a world leader in the | |||
| rapid detection of pathogens in liquids. Other divisions include | |||
| providing products for pharmaceutical research and testing. The | |||
| company has performed better than expected since acquisition. | |||
| Equity held | 18.60% | ||
| Income recognised in the period | £nil | ||
| Financial results per latest audited accounts | |||
| – Turnover | £31.6m | ||
| – EBIT | £8.6m | ||
| At the end of the period, the company sold its smaller division for a very | |||
| favourable price. This has reduced net debt to less than 1x EBITDA. | |||
| Negotiations are in hand to sell the other pharmaceutical research | |||
| division, which would enable the Company's investment to be recouped, | |||
| whilst retaining the highly profitable rapid detection business. | |||
| Orthoproducts Limited (UK) Cost: £3,387,000 | 7, 101 | ||
| Orthoproducts is the sole shareholder and holding company of | |||
| Orthoplastics Limited, one of the only two companies in the world which | |||
| manufactures premium-grade Ultra High Molecular Weight Polyethylene | |||
| for the orthopaedics industry. The company, which has approximately 48% | |||
| of the world market, had a good year with EBITDA projected to rise by | |||
| over 20%. The company is currently in negotiations, which, if successful, | |||
| will lead to an offer at a significant premium to the current valuation. | |||
| 2012 | |||
|---|---|---|---|
| At fair value Total assets £'000 |
% | ||
| Brought forward | 65, 524 | ||
| Trident Private Equity Fund II LP (Cayman Islands) Cost: £152,000 | 5,384 | 2. 4 | |
| Trident Private Equity Fund II LP ("TPE II") is a £64 million offshore | |||
| private equity limited partnership. The fund's investment objective is to | |||
| generate high absolute returns by investing in a portfolio of unquoted | |||
| investments in small to medium sized companies in the UK. The fund | |||
| concentrates primarily on leveraged buyouts and similar transactions, | |||
| including public-to-private and pre-IPO investments. At 31 January 2012, | |||
| 100% of the Company's commitment had been drawn down and invested | |||
| in fifteen private equity transactions, of which eight have been realised. As | |||
| at 31 January 2012, the Company had received 117% of committed capital | |||
| back in distributions from TPE II . In February 2012 TPE II paid out a | |||
| further £0.3 million to the Company, bringing the proportion of | |||
| committed capital received by the Company to 120%. | |||
| Equity held | 16.3% | ||
| Income recognised in the period | £nil | ||
| Financial results per latest audited accounts | |||
| – Turnover | n/a | ||
| – EBIT | n/a | ||
| * £10m received in distributions since holding this investment has been | |||
| allocated against the original cost. | |||
| Merchant Properties Unit Trust (UK) Cost: £2,717,000 | 3,049 | 1. 4 | |
| Merchant Properties Unit Trust is a portfolio of 36 Travis Perkins trade | |||
| counter units purchased for £39.7m and simultaneously leased back to | |||
| Travis Perkins on 25-year leases with fixed uplifts at 3% p.a., reflecting | |||
| an initial yield of 6%. The shares were written up during the year | |||
| reflecting a recovery in the property market. It is intended that this | |||
| investment will be realised in the near future. | |||
| Carried forward | 7 3,957 | ||
| 2012 | ||
|---|---|---|
| At fair value Total assets | ||
| £'000 | % | |
| Brought forward | 7 3,957 | |
| Glass America LLC (USA) Cost: £2, 686,000 Glass America is a consolidator of automotive glass repair companies in the United States. The company traded reasonably well in 2011 and further progress is expected in the current year. |
3,110 | 1. 4 |
| SINAV Limited Cost: £2,775,000 SINAV Limited was the acquiring vehicle of GTL Resources Plc which produces corn-based ethanol at a 125 million gallon per annum ("mgpa") plant in Rochelle, Illinois. The plant is located close to a large source of corn and close to the Chicago transport hub and is one of the most efficient plants in the US with pricing and yield advantages. Ethanol is used by gasoline blenders to reduce CO2 emissions and increase octane, with demand supported by mandatory minimum requirements. The company has an excellent management team in place. Significant cash generation will be used to amortise debt and several projects aimed at increasing capacity to 130 mgpa and further improving yield efficiency. |
2,7 75 | 1. 3 |
| Telos Corporation (USA) Cost: £1,259,000 Telos is a provider of IT solutions to the US Federal government, the military, the intelligence community and commercial enterprises. The company has continued to perform strongly and has virtually no debt. The company intends to sell itself as and when market conditions improve. |
2,519 | 1. 1 |
| Performance Chemicals Company Cost: £ 3,391,000 The company was set up to consolidate three small businesses providing speciality chemicals to the oil and gas production industry in the USA. Operating profits have been disappointing. New management has, however, restored the business, which is now on track for sales of circa \$13-14m and EBITDA upwards of \$1m. |
2, 121 | 1.0 |
| Carried forward | 84, 482 |
as at 31 January 2012
| At fair value Total assets £'000 Brought forward 84, 482 1,317 Forefront Group Limited (UK) Cost: £1,317,000 Forefront is a specialist civil engineering business focusing primarily on the gas supply industry. The company undertakes gas mains replacement and repair and the laying of new mains and is one of the only three UK companies with the necessary equipment and trained operatives to undertake the inhibition of gas flow whilst 'in situ' gas mains are replaced or repaired. Forefront has a dominant position in eastern Greater London. Performance in 2011 was good and we expect further progress in the current year. The company used surplus cash to buy back shares in the middle of last year and it is expected that it will do so again in the current year. Martley Limited (Jersey) Cost: £4,812,000 995 Martley Limited is a Jersey registered property company, which via its Luxembourg subsidiary companies, owns five properties within a Luxembourg based office park constructed in 2003. The gross lettable area totals approximately 21,500 square metres. The properties are currently fully let to several blue chip tenants. Negotiations are currently underway with the tenants to renew their leases, following which it is hoped that the valuation will recover. Equity held 29.63% Income recognised in the period £nil Financial results per latest audited accounts – Turnover 5.6m – EBIT (£5.1m) Carried forward 86, 794 Other unlisted investments at fair value 1 5,923 Total value of unlisted investments at fair value* 102,717 |
2012 | ||
|---|---|---|---|
| % | |||
| 0. 6 | |||
| 0.4 | |||
* Includes unlisted loan notes in these companies with a total value of £ 2,75 1,000.
| 2012 | ||
|---|---|---|
| At fair value Total assets | ||
| £'000 | % | |
| Nationwide Accident Repair Services PLC Cost: £2,582,000 | 5,900 | 2. 7 |
| Nationwide provides automotive crash repair and accident | ||
| administration services to the UK insurance industry. With a national | ||
| network of accident repair centres located across England, Scotland and | ||
| Wales employing over 2,200 people, it is the largest dedicated provider | ||
| of accident repair services in the UK. The company recently announced | ||
| a major long-term extension of its contract with Royal & Sun Alliance | ||
| and trading results in line with expectations. Recent trading has been | ||
| disappointing although it is expected that profitability will be restored | ||
| following a programme of cost reductions. | ||
| Asset Co Plc Cost: £8,500,000 | 5,250 | 2. 4 |
| Asset Co Plc is an International Fire and Rescue Services business. On | ||
| 9 September 2011, trading in the company's shares was suspended until | ||
| the audited accounts for the period ended 30 September 2011 were | ||
| published. The suspension was lifted on 12 April 2012 following the | ||
| publication of the accounts and trading in the company's shares on | ||
| AIM re-commenced. The company's operations are now focused on the | ||
| profitable Middle Eastern business. | ||
| Essenden PLC Cost: £468,000 | 275 | 0.1 |
| Essenden is the UK's second largest operator of ten pin bowling alleys | ||
| and operates under the Tenpin brand name. Although the business has | ||
| been impacted by the recession in the UK, costs have been cut and the | ||
| operating performance has been in line with market estimates. The | ||
| management team led by Nick Basing is committed to maximising | ||
| shareholder value over the next three years. | ||
| Total value of AIM quoted investments at bid value | 1 1,425 |
for the year ended 31 January 2012
| The Directors present their report to Shareholders (incorporating the Business Review) and the financial statements for the year ended 31 January 2012. Certain information that is required to be disclosed in this Report has been provided in other sections of this Annual Report and accordingly, these are incorporated into this report by reference. |
|
|---|---|
| business review | The business of the Company is that of an investment trust. The business of the Company's wholly owned subsidiary, Consolidated Venture F inance Limited, is investment dealing and holding and the business of the Company's other subsidiary, Hampton Investment Properties Limited, is a property investment company. |
| At 31 January 2012, the diluted net asset value ("NAV") per share was 1, 395p (31 January 2011: 1,459p), a decrease of 4.4% during the year , compared to an increase of 3.7% during the year in the Standard & Poor's 500 Composite Index (Sterling adjusted). |
|
| A review of the performance of the Company's business during the year (as required by section 417 of the Companies Act 2006) is included in the Chairman's Statement and Investment Managers' Report, incorporated into this report by reference. There have been some successes during the year, notably RPC Group and CVS Group and several new investments were made. |
|
| The Board is aware that it is one of the principles of the AIC Code of Corporate Governance (published in October 2010) that a full portfolio listing be made available to Shareholders at least once a year. However, due to the activist nature of the Company's business, the Board has decided that it would not be in Shareholders' interests as a whole to publish the full portfolio. Any Shareholder who wishes to discuss this further should contact Christopher Mills, the Company's Chief Executive and Investment Manager, or the Company Secretary. |
|
| The Company has no employees and accordingly this business review does not contain any information regarding employees. As an investment trust, the Board do not believe that the Company's business has an impact on the environment and has not put into place any policies regarding social and community issues. The Board does not believe that this will change in the near future but, if it were to do so, they would immediately review these matters. |
|
| results and dividends | The total net loss after taxation for the financial year ended 31 January 2012 amounted to £ 10,952,000 (2011 net profit: £40,400, 000). The Board does not propose a final dividend (2011: nil). |
| investment policy | 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. In order to achieve this, the Investment 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 invests on both sides of the Atlantic, with the weighting varying from time to time. |
|
| 4. The Company will invest in unquoted securities as and when opportunities arise. |
|
| investment approach | The Company invests in a diversified range of companies, both quoted and unquoted, on both sides of the Atlantic in accordance with the above 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 8 to 13. The top twenty largest investments are listed on page 7. |
for the year ended 31 January 2012
When analysing a potential investment, the Managers 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 cashflow.
In respect of the unquoted portfolio, regular contact is maintained with the management of prospective and existing investments, as well as rigorous financial and business analysis of these companies. It is recognised that different types of business perform better than others depending on economic cycles and market conditions and this is reflected within the range of investments in the portfolio.
The Company's activities have not changed in the year ended 31 January 2012 and the Directors anticipate that the Company will continue to operate on the same basis during the current financial year.
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 18 to the financial statements on pages 63 to 71.
key performance indicators The Directors regard the following as the key indicators pertaining to the Company's performance:
for the year ended 31 January 2012
| (iii) performance against benchmark The performance of the Company's share price is measured against the Standard & Poor's 500 Composite Index and the Russell 2000 Index, the Company's benchmarks. A graph comparing performance can be found in the Directors' Remuneration Report on page 30. |
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|---|---|---|---|
| future prospects | The Directors believe that the year ending 31 January 2013 will see progress, especially from the unquoted portfolio which continues to offer the potential for further significant appreciation. |
||
| taxation status | In the opinion of the Directors, the Company has conducted its affairs so as to be able to seek approved investment trust status from Her Majesty's Revenue & Customs under Sections 1158-1159 of the Corporation Tax Act 2010 for the accounting year ended 31 January 2012. The Company is a member of the Association of Investment Companies. Pursuant to arrangements between The Association of Investment Companies and Her Majesty's Revenue & Customs, who have agreed that written approval of investment trust status can be granted within the Corporation Tax Self Assessment Regime, written approval for all accounting years to 31 January 2011 has been granted. The Board is aware of the new investment trust tax regime that came into force on 1 January 2012. It is the expectation of the Board that the Company will be compliant with the requirements of the new regime and retain its investment trust status. This regime will apply to the Company for the accounting period ended 31 January 2013. |
||
| share capital | The Company's issued share capital consists of 14,113,553 Ordinary Shares of 5p nominal value each. 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, 115,000 Ordinary Shares were purchased for cancellation. |
||
| In addition, the Company has 1,799,499 units of Convertible Unsecured Loan Stock ("CULS") 2013 of 5p nominal value in issue. Holders of CULS have the right to convert their stock into shares once a year and the Conversion Notice will be sent to the relevant holders with these Report & Accounts. There are no voting rights attached to the CULS. In the event of winding up, the holders of CULS may be entitled to repayment of the principal amount of the stock together with any accrued interest. Full details are provided in the Trust Deed dated 26 November 1993. |
|||
| During the year, on 4 July 2011, 171,301 CULS units were converted into Ordinary shares of 5p each at the rate of one 5p Ordinary share for every unit of 5p. No CULS were purchased for cancellation during the year. |
|||
| share valuations | On 31 January 2012, the middle market quotation and the diluted net asset value per 5p Ordinary Share were 1,035.0p and 1, 395.0p respectively. The comparable figures at 31 January 2011 were 1,146.0p and 1,459.0p respectively. |
||
| substantial shareholders | As at 31 January 2012, the following interests in the Ordinary Shares of the Company which exceed 3% of the issued share capital ha d been notified to the Company: |
||
| Number of Ordinary Shares |
% of issued share capital |
||
| C H B Mills CG Asset Management Limited Henderson Global Investors Limited Findlay Park US Smaller Companies Fund Plc |
3,438,447 1,208,627 758,324 595,000 |
24.36 8.56 5.37 4.22 |
|
| Legal & General Group Plc | 581,816 | 4.12 | |
| J O Hambro Investment Management Limited | 443,567 | 3.14 | |
| Since 31 January 2012, Mr C H B Mills has acquired a further 10,552 Ordinary Shares of the |
Company as notified to the stock exchange, taking his total holding to 3,448,999 Ordinary Shares.
for the year ended 31 January 2012
| directors | The biographical details for Directors currently in office are shown on page 3. Mr O R Grace resigned as a director on 30 December 2011. The Board has decided not to seek a replacement for Mr Grace as it is felt that the size of the Board is still appropriate to the size of the Company. However, it will keep this matter under review. |
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|---|---|---|---|---|---|---|---|---|---|
| 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 B.7.1. 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. |
|||||||||
| The Chairman and other members of the Board recommend that the Directors retiring be re-elected. The Chairman has confirmed that all Directors retiring have been subject to performance evaluation and as part of this evaluation the Chairman confirms that they continue to demonstrate commitment to their role and in his view continue to responsibly fulfil their functions. The rest of the Board have evaluated the performance of the Chairman and have confirmed that they are satisfied that his performance remains effective and that he has demonstrated commitment to his role and they therefore recommend his re-election at the forthcoming Annual General Meeting. The Chairman has confirmed that he has no other significant commitments that would impact on his role as Chairman of the Company. |
|||||||||
| directors' interests | The interests of the Directors as notified to the Company (beneficial unless otherwise stated) in the Ordinary Shares and Convertible Unsecured Loan Stock ("CULS") 2013 of the Company as at 31 January 2012 and 31 January 2011 were as follows: |
||||||||
| 31 January 2012 | 31 January 2011 | ||||||||
| 5p Ordinary | Units of | 5p Ordinary | Units of | ||||||
| Shares | CULS | Shares | CULS | ||||||
| P D E M Moncreiffe* | 303,130 | 90,000 | 303,130 | 90,000 | |||||
| C H B Mills** | 3,238,447 | – | 3,198,447 | – | |||||
| C H B Mills (non-beneficial) | 200,000 | – | 200,000 | – | |||||
| K Siem*** | – | – | – | – | |||||
| C L A Irby | 25,000 | – | 25,000 | – | |||||
| O R Grace | – | – | 280,429 | 321,135 | |||||
| E F Gittes | 100,000 | – | – | – | |||||
| 3 February 2012. | * P D E M Moncreiffe's wife is a beneficiary of a trust which purchased 6,500 units of CULS on | ||||||||
| ** C H B Mills has acquired a further 10,552 Ordinary Shares since 31 January 2012 as notified to the stock exchange on 2 May 2012 and 15 May 2012. |
|||||||||
| *** Siem Capital International Limited, a company which is indirectly controlled by a trust of which Mr Siem and his family are potential beneficiaries, is ultimately interested in 145,000 Ordinary |
Shares and 2,000 units of CULS (201 1: 145,000 Ordinary Shares and 2,000 units of CULS).
Details of Directors' remuneration and interests in Share Options are described in the Directors' Remuneration Report on pages 28 to 30.
Save as disclosed, there have been no changes to the above interests between 31 January 2012 and the date of this report.
Save as disclosed below or in notes 3 and 19 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.
for the year ended 31 January 2012
| risk profile | During the year, the Board has reviewed the key risks that could affect the Company. The major financial risks associated with the Company are detailed in Note 18 to the Financial Statements. Other risks that could affect the Company include: |
|---|---|
| (i) Market risk: the performance of the investment portfolio against its benchmarks, the Standard & Poor's 500 Composite Index and the Russell 2000 Index is closely monitored by the Board; |
|
| (ii) Discount volatility: the Company's shares historically trade at a discount to its underlying net asset value. The Company has a share buyback programme in place to try to narrow this discount as far as possible and whereby any shares that it repurchases are cancelled; |
|
| (iii) Regulatory risk: any breach of a number of regulations applicable to the Company, the UKLA's Listing Rules 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 Joint Managers ; |
|
| (iv) 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 o r theft by employees of those third parties. The Board exercises monitoring through the Manager over the financial position of its custodial banks ; |
|
| (v) 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 conterparties being unable to meet their obligations. The financial position and performance of these investee companies are continually monitored by the Manager and actions are taken to protect the Company's investment if needed. |
|
| See the summary on page 2 of this Annual Report for an oversight of the risk in investing in small companies. |
|
| significant agreements | The Company is required to disclose details of any agreements that it considers to be essential to the business. Pursuant to the Management, Administration and Custody Agreement dated 7 January 1993, as amended by the Amendment and Restatement Agreement on 19 March 2002 novated in November 2003 to Harwood Capital LLP (previously North Atlantic Value LLP), the Joint Manager provides management and administration services to the Company. This is considered by the Board to be a significant agreement. |
| The Management, Administration and Custody Agreement continues unless thereafter terminated by either party on not less than four 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. The Board reviews the activities of both the Joint Manager and the Chief Executive. 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 Joint Manager, on the terms agreed, is in the best interests of Shareholders. Mr Mills has been Chief Executive of the Company since 1984 and the Board consider it is in the best interest of the Company for this arrangement to continue. |
|
| As part of this review, the Board has given consideration to the experience, skills and commitment of the Chief Executive in addition to the personnel, services and resources provided by the Joint Manager. The Company's performance over the last year is described in the Chairman's Statement |
on page 4. The Board considers that the arrangements between the Chief Executive and the Joint
Manager continue to work well.
for the year ended 31 January 2012
| related party transactions | Mr Mills, the Chief Executive, is Chief Investment Officer and a member of Harwood Capital LLP, Joint Manager to the Company. Mr 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 the Joint Manager. Mr Mills is a director and the sole shareholder of Growth Financial Services Limited ("GFS"). |
|---|---|
| Pursuant to the Secondment Services Agreement between the Company, GFS and Mr Mills and the Management, Administration and Custody Agreement between the Company and Harwood Capital LLP, Mr Mills is responsible for the day-to-day investment decisions in conjunction with the Joint Manager, Harwood Capital LLP. The Secondment Services Agreement continues until terminated by the Company or GFS on not less than twelve months' notice. Details of the related party transactions and fees payable are disclosed in note 19 on pages 71 and 72 and in the Directors' Remuneration Report on pages 28 to 30. The Investment Management Fees are disclosed in note 3 on page 47. The Performance Fee payable to GFS is disclosed in the Directors' Remuneration Report on pages 28 to 30 and note 3 of the financial statements on page 47. |
|
| Siem Kapital AS, an indirect wholly owned subsidiary of Siem Industries Inc, of which Mr Siem is Chairman, joined Harwood Capital LLP in a joint venture agreement to establish SINAV Limited specifically for the purpose of acquiring GTL Resources Plc during the year. SINAV Limited continues to be jointly held by Harwood Capital LLP (on behalf of the Company and other funds managed by Harwood Capital LLP) and Siem Kapital AS. |
|
| With the exception of the matters referred to above, during the year no Director was materially interested in any contract of significance (as defined by the UK Listing Authority Listing Rules) entered into by the Company. |
|
| institutional investors – use of voting rights |
The Chief Executive and the Joint Manager, in the absence of explicit instruction from the Board, are empowered to exercise discretion in the use of the Company's voting rights in respect of investments and to then report to the Board, where appropriate, regarding decisions taken. The Board have considered whether it was appropriate to adopt a voting policy and an investment policy with regard to social, ethical and environmental issues and concluded that it was not appropriate to change the existing arrangements. |
| donations | The Company does not make any political or charitable donations. |
| post balance sheet events | There have been no significant events since the balance sheet date. |
| creditors' payment policy | It is the Company's policy to settle investment transactions according to the settlement periods operating for the relevant markets. For other creditors, it is the Company's policy to pay amounts due to them as and when they become due. All supplier invoices received by 31 January 2012 had been paid (31 January 2011 – all supplier invoices paid). |
| soft commission | The Joint Manager receives indirect benefits for certain investment services in the form of soft commission as a result of an agreement with a broker. The value of services supplied may depend upon a minimum threshold of commissions or a percentage of such commissions arising on dealings in securities for all clients including the Company. The practice of best execution is not compromised by this arrangement. |
for the year ended 31 January 2012
| auditors | A resolution to reappoint KPMG Audit Plc as the Company's auditors and to authorise the Board to determine their remuneration will be proposed at the forthcoming Annual General Meeting. |
|---|---|
| going concern | The Company's assets comprise readily realisable securities which can be sold to meet funding commitments if necessary and it also has sufficient cash reserves so the Directors have a reasonable expectation that the Company has adequate resources to continue in operation for the foreseeable future. They have, therefore, adopted the going concern basis in preparing these financial statements. |
| additional disclosures | The following further information is disclosed in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008: |
| • The Company's capital structure and voting rights are summarised on page 16 and note 15; |
|
| • Details of the substantial shareholders in the Company are listed on page 16; |
|
| • The rules concerning the appointment and replacement of directors are contained in the Company's Articles of Association and are discussed on page 17; |
|
| • Amendment of the Company's Articles of Association and powers to issue on a pre-emptive basis or buy back the Company's shares requires a special resolution to be passed by the Shareholders; |
|
| • 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. |
|
| explanatory notes for the special business at the annual general meeting |
The following resolutions (if passed) would allow the Board to issue Shares without first offering them to existing Shareholders. Although the Directors have no current intention of exercising either of the authorities (if renewed) to allot Shares or disapply pre-emption rights, they reserve the right to allot Shares at any time. |
| Resolution 9 – Ordinary Resolution - Renewal of Directors' authority to allot Shares The authority given to the Directors at the last Annual General Meeting to allot Shares expires at the conclusion of this year's meeting. Resolution 9 will renew the authority to allot Shares of the Company on similar terms. If Resolution 9 is passed the Directors will have the authority to allot Shares up to the aggregate nominal amount of £235,225 representing one third of the current issued share capital. This authority will expire at the next Annual General Meeting of the Company or, if earlier, 15 months after the passing of this resolution. |
|
| Resolution 10 – Special Resolution - Renewal of Directors' authority for the disapplication of pre-emption rights The authority given to Directors to disapply pre-emption rights expires at the Annual General Meeting. Resolution 10 will renew the disapplication of pre-emption rights thereby authorising the Directors to allot equity securities for cash up to a maximum aggregate renewal amount of £35,283 representing 705,677 Ordinary Shares of 5p each, being equivalent to 5% of the current issued share capital, without first offering such securities to existing Shareholders. |
for the year ended 31 January 2012
The authority given to Directors to purchase the Company's Ordinary Shares in the market expires at the forthcoming Annual General Meeting. Resolution 11 seeks the authority of Shareholders to purchase a maximum of 1,411,355 Ordinary Shares representing 10% of the current issued share capital. The Directors intend to exercise this authority only when, in the light of market conditions prevailing at the time and taking into account investment opportunities, appropriate gearing levels and the overall financial position, they believe that the effect of such purchases will be to increase the underlying value per Ordinary Share having regard to the interests of Shareholders generally. Shares will not be bought at a price of less than 5 pence each being the nominal value of each share nor more than 5% above the average middle market quotation of the shares over the preceding five business days nor will they be purchased during periods when the Company would be prohibited from making such purchases. Purchases will be made within guidelines set by the Board and using available reserves. Ordinary Shares purchased will be cancelled and the number of shares in issue reduced accordingly.
The authority given to Directors at last year's Annual General Meeting to call general meetings (other than an Annual General Meeting) on 14 days' notice will expire at the forthcoming Annual General Meeting. Resolution 12 seeks renewal of such approval. The approval will be effective until the Company's next Annual General Meeting, when it is intended that a similar resolution will be proposed. The Company will also need to meet the requirements for electronic voting under the Directive before it can call a general meeting on 14 days' notice. The s horter notice period will only be used where the flexibility would be helpful given the business of the meeting and where the Board believe it to be to the advantage of Shareholders as a whole.
The above resolutions are contained in the Notice of Annual General Meeting on pages 74 and 75.
The Board considers that resolutions 9 to 12 are likely to promote the success of the Company and are in the best interests of the Company and its Shareholders as a whole. The Directors therefore unanimously recommend that you vote in favour of the resolutions as they intend to do in respect of their own beneficial holdings which amount in aggregate to 3,6 7 7,129 shares representing 2 6.05% of the voting rights of the Company.
By Order of the Board
Company Secretary Registered Office: Ground Floor Ryder Court 14 Ryder Street London SW1Y 6QB
Registered No: 1091347 23 May 2012
for the year ended 31 January 2012
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 Group and the Company and of the profit or loss of the Group for that period.
In preparing those financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the financial statements, Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
In so far as the Directors are aware:
The Directors confirm that the above statements also apply to the year ended 31 January 2011 as the necessary disclosure to this effect was omitted from the annual report for the year ended 31 January 2011 in error.
Each of the current Directors confirms that, to the best of their knowledge:
For and on behalf of the Board The Hon. P D E M Moncreiffe Chairman 23 May 2012
Statement of Compliance with the UK Corporate Governance Code
| 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 June 2010 (the "Code") and available on the FRC's website: www.frc.org.uk. The Board considers that it has complied with the provisions of the Code throughout the year with the exception that a senior independent director ha d not been appointed, (however since the year end, the Board have elected Mr Irby to be the Senior Independent Director) non-executive Directors are not appointed for a specific term and certain Directors have served on the Board for more than nine years. However all Directors have been subject to performance evaluation and review during the year and are now subject to annual election. |
|
|---|---|
| Additionally, the Company is a member of the Association of Investment Companies ("AIC") and seeks to comply with the recommendations of the AIC's Code of Corporate Governance (the "AIC Code") which was re-issued in October 2010. The AIC Code is available on the AIC's website: www.theaic.co.uk. |
|
| directors | Brief biographical details of the Directors in office are set out on page 3. The Board consists of five Directors, four of whom are non-executive (the Chairman – the Hon. P D E M Moncreiffe, Mr Siem, Mr Irby and Mr Gittes) and considered by the Board to be independent of the Company's Joint Manager for the purposes of the Code despite their length of service. They are all free of any relationship that could materially interfere with the exercise of their independent judgement on issues concerning strategy, performance and standards of conduct . 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. The majority of the Board is therefore considered to be independent. Mr Mills is the Company's Chief Executive and not independent. |
| 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 a small Board and individual members 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. Each non-executive Director has a signed letter of appointment to formalise the terms of their engagement as a non-executive Director. Copies of these letters 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 Mr Mills' services as a Director is with Growth Financial Services Limited. The Articles of Association provide that newly appointed Directors are required to submit themselves for election by Shareholders at the General Meeting following their appointment and for all Directors to be re-elected at least once 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 and accordingly, all of the Directors will retire at the Annual General Meeting and being eligible, offer themselves up for re-election. The Board lays down guidelines within which the Chief Executive and the Joint |
|
Manager implement investment policy and has a Schedule of Matters reserved to it. The Chief Executive and the Joint Manager are responsible for managing the Company and its portfolio of assets on a discretionary basis, subject to the supervision of the Board.
Statement of Compliance with the UK Corporate Governance Code
| board meetings | The Chairman and other members of the Board recommend that the Directors retiring be re-elected. The Chairman has confirmed that all Directors retiring 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 as necessary 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 are happy with his performance and with his leadership of the Board. The Board has a schedule of matters reserved to it and sets down matters which require prior |
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|---|---|---|---|---|---|---|---|
| approval of the Board. The Chief Executive and Joint Manager carry 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 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 investment 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. |
|||||||
| attendance at board meetings, | Total number | Total number | Total number | ||||
| audit and remuneration | in year | in year | in year | ||||
| committees | 4 Board | 2 Audit | 2 Remuneration | ||||
| Meetings | Committees | Committee | |||||
| P D E M Moncreiffe | 4 | 2 | 2 | ||||
| C H B Mills | 4 | N/A | N/A | ||||
| K Siem | 4 | 2 | 2 | ||||
| C L A Irby | 3* | 1* | 2 | ||||
| E F Gittes | 4 | 2 | 2 | ||||
| O R Grace (resigned 30 December 2011) | 4 | 2 | 2 | ||||
| * Mr Irby was unable to attend this meeting due to ill health. |
|||||||
| In addition, there has been a number of meetings of Committees of the Board during the year to deal with matters on an adhoc basis. |
|||||||
| remuneration committee | All of the non-executive Directors comprise the Remuneration Committee. The Remuneration Committee reviews the remuneration paid to Harwood Capital LLP and GFS pursuant to the Management Agreements and the level of Directors' remuneration. The remuneration of GFS is |
disclosed in the Directors' Remuneration Report on pages 28 to 30 and also in note 3 on page 47. The terms of reference of the Remuneration Committee are available from the Company Secretary.
Statement of Compliance with the UK Corporate Governance Code
audit committee The Board is supported by an Audit Committee which is chaired by Mr C L A Irby and comprises all of the non-executive Directors. The Audit Committee meets representatives of the Joint Manager twice a year, who report on the proper conduct of business in accordance with the regulatory environment in which both the Company and the Joint Manager operate. The Company's Auditors also attend the Committee at its request, at least once a year, and comment on their work procedures, the quality and effectiveness of the Company's accounting procedures and their findings in relation to the Company's statutory audit. The responsibilities of the Audit Committee include a review of the risk analysis, effectiveness of the internal control environment, accounting policies and the terms of appointment of the Auditors. 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, their findings and the provision of any non-audit services. The Audit Committee is satisfied that KPMG Audit Plc, the Company's auditor, are independent and that they have adequate policies and safeguards in place to ensure that their objectivity and independence is maintained. The Auditors do provide some non-audit services primarily in the provision of taxation advice but the Committee is satisfied that their objectivity and independence is not impaired by the performance of these non audit services and believes that the appointment of a third party unfamiliar with the Company to carry out non audit services would be of no benefit to Shareholders since they would incur unnecessary additional expense. The Audit Committee receive each year a report from the Auditors as to any matters the Auditors consider bear on their independence and which require disclosure to the Company.
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 Joint Manager. 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 Auditors, the Audit Plan, Audit Reports and Corporate Governance Report including the Code. The Audit Committee has considered the need to take out separate insurance cover for Mr Mills. The Board is satisfied that all of the Committee's members have recent and relevant commercial and financial knowledge and experience to satisfy the provisions of the Code, by virtue of their having held various executive and non-executive roles in investment management and business management. Additionally, Charles Irby (Chairman of the Committee) is a chartered accountant.
The Company carries out its activities using the services of third party service providers; it has no staff of its own.
shareholder relations The Company, through the Chief Executive and Joint Manager, 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 the Directors and the Chief Executive.
The Notice of the Annual General Meeting sets out the business of the meeting and can be found on pages 74 and 75. The special business is also explained more fully in the Explanatory Notes on page s 7 6 and 7 7. Separate resolutions are proposed for each substantive issue.
Statement of Compliance with the UK Corporate Governance Code
| nominations committee | The Board is a small Board and fulfils the function of the Nominations Committee as a whole. The Nominations Committee considers the leadership needs and succession of the Board when making decisions on new appointments. Compatibility with each and every Director is considered a priority. The Board has considered its size during the year, following the resignation of Mr O R Grace, and considers that it is still a suitable size for the size of the Company and does not consider that there are any vacancies. The terms of reference of the Nomination Committee are available from the Company Secretary. |
|---|---|
| the company secretary | The previous Company Secretary, J O Hambro Capital Management Limited ("JOHCM"), was acquired ultimately by BT Investment Management Limited, an Australian fund management company, in October 2011. Following this transaction, Harwood Capital LLP is no longer part of the J O Hambro Capital Management Group. JOHCM resigned as Company Secretary on 1 May 2012. Bonita Guntrip ACIS has assumed the role since that date. The Board has direct access to the advice and services of the Company Secretary who 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 20 and the Board's responsibilities with regard to the financial statements are set out on page 22. The Independent Auditor's Report is on pages 31 and 32. |
| share capital | Shareholders' attention is drawn to the further information on page 20 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. |
| 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 contingencies that may have a material impact on the Group'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. 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 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. |
Statement of Compliance with the UK Corporate Governance Code
Throughout the year ended 31 January 2012, the Company has complied with the Code, except as follows:
A.4.1 – This provision requires a senior independent Director to be appointed. As the Board consists of four non-executive Independent Directors and the Chief Executive, the Board had previously not considered it appropriate to comply with this Code provision, however since the year end, Mr Charles Irby has agreed to take on the role of Senior Independent Director.
B.2.3 – This provision states that non-executive directors should be appointed for specific terms. Non-executive Directors are not appointed for specific terms but in compliance with Code provision D.1.5 their appointment is terminable on one month's notice.
E.1.1 – This provision states that the Chairman should meet regularly with major Shareholders to discuss governance and strategy. This is not strictly complied with insofar as it is the Chief Executive and Joint Manager who has regular contact with major Shareholders. However, any concerns raised by those substantial Shareholders are fed back to the Board and the Chairman is available to meet with major Shareholders at their request. Also, all Directors attend the Annual General Meeting and are available to communicate with Shareholders.
By order of the Board
Bonita Guntrip ACIS Company Secretary Registered Office: Ground Floor Ryder Court 14 Ryder Street London SW1Y 6QB
23 May 2012
for the year ended 31 January 2012
| This Report has been prepared in accordance with the requirements of Company Law and the Listing Rules. An ordinary resolution for the approval of this Report will be put to the Members at the forthcoming Annual General Meeting. |
|
|---|---|
| The law requires your Company's Auditors to audit certain of the disclosures provided. Where disclosures have been audited, they are indicated as such. The Auditors' opinion in included in their report on pages 31 and 32. |
|
| role and composition | The Remuneration Committee consists of the Chairman and the Independent Non Executive Directors. |
| The Remuneration Committee is responsible for determining all aspects of Directors' remuneration. No Director participates in discussions on his own remuneration. The Committee takes independent professional advice where it considers this is appropriate. No such advice has been received in the year. |
|
| The Company's Articles of Association sets out the aggregate total of Director's fees that can be paid during the year to £150,000. The Committee met during the year and agreed that Directors' fees should be increased from £20,000 to £25,000 per annum with effect from 1 July 2011. The Board's policy is that the remuneration of the non-executive Directors should reflect the experience of those Directors, be comparable to that paid by other similar investment trusts and reflect the time spent on the Company's business. It is intended that this policy will continue for the year to 31 January 2013 and subsequent years. Directors do not receive bonuses, share options, pension benefits or any other form of benefit. Therefore the Board believe the level of fees to be fair and justifiable. |
|
| 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 Growth Financial Services Limited. The Remuneration Committee has no plans to alter the remuneration structure for the Chief Executive. As stated in note 19 on pages 71 and 72, 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 tha n would be possible under other circumstances. |
| Chief Executive | Year ended | Year ended |
|---|---|---|
| 31 January 2012 31 January 2011 | ||
| £ | £ | |
| Fees | 2 2,917 | 20,000 |
| Investment Management and related fees | 960,000 | 902,000 |
| Performance Fee | – | 1,17 6,000 |
| Total (excluding irrecoverable VAT) | 982,917 | 2,098,000 |
The total fees of £ 982,917, in respect of Mr Mills' services as a Director and Chief Executive are payable to Growth Financial Services Limited ("GFS"), as described on page 19. GFS receives, and is contractually entitled to receive, part of the Annual Fee payable to the Joint Managers (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 18 and note 3 on page 47 to the financial statements.
for the year ended 31 January 2012
remuneration of directors (audited) continued
Mr Mills is the sole shareholder and director of GFS.
The Performance Fee is a contractual entitlement pursuant to the Secondment Services Agreement dated 7 January 1993 as amended and is paid to GFS.
No pension or other benefits are paid to the Chief Executive.
| Fees paid to non- executive Directors | Year ended | Year ended |
|---|---|---|
| 31 January 2012 31 January 2011 | ||
| £ | £ | |
| P D E M Moncreiffe (Chairman)* | – | – |
| K Siem | 2 2,917 | 20,000 |
| C L A Irby | 2 2,917 | 20,000 |
| E F Gittes | 2 2,917 | 20,000 |
| O R Grace (resigned 30⁄12⁄2011) | 2 0,833 | 20,000 |
* P D E M Moncreiffe is not receiving a fee in respect of his services as the Chairman of the Company.
The above fees for the year ended 31 January 2012 have been pro-rated as the fees were increased to £25,000 per annum with effect from 1 July 2011.
No Directors receive any benefits in kind.
service contracts No Director has a service contract. The contract for the Chief Executive's services and the carrying out of 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.
| No. of | Exercised/ | Grant of | No. of | ||||
|---|---|---|---|---|---|---|---|
| options at | cancelled | options | options at | ||||
| 1 February | Year | during the | during the | 31 January | |||
| 2011 | of grant | Price | year | year | Price | 2012 | |
| C H B Mills | – | 2011 | – | – | 420,000 | 1,467.71p | 420,000 |
The above options were granted for nil consideration to Mr C H B Mills on 14 July 2011 under the 2011 Share Option Scheme which was approved by Shareholders at the Annual General Meeting held on 30 June 2011. The 2011 Executive Share Option Scheme ("the Scheme") is an unapproved scheme. Options will normally be exercisable between three and ten years from the date of grant. Options granted under the Scheme may only be exercisable if the fully diluted net asset value of the Company (ignoring dilution on the exercise of Share Options) has grown at a compound rate of five per cent. per annum over a period of at least three years following the grant of options and has grown by a percentage at least equal to sixty per cent. of the percentage increase in the sterling adjusted Standard & Poor's 500 Composite Index in the three year period between the date of grant and the third anniversary of the date of the grant of Options. At the date of this report there was a further 10,000 options in issue which were granted on 14 July 2011 to an employee of the Joint Manager. The exercise price of those options is also 1,467.71p and the same performance criteria as explained above apply.
The highest and lowest mid-market price of the Company's Ordinary Shares during the year was 1,187.5p and 912.5p respectively. The mid-market price of the Company's Ordinary Shares at 31 January 2012 was 1,035p.
for the year ended 31 January 2012
company's performance The following graph compares over a five 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 5 years as compared to total Shareholder return of a broad equity market index over the last 5 years. (Source: Financial Data/Datastream)
The equity market indices chosen are the Sterling adjusted Russell 2000 and the Sterling adjusted Standard & Poor's 500 Composite Index. After consultation with major Shareholders, 60% of this latter index was selected as the additional equity index-related benchmark to supplement the absolute five per cent. per annum growth rate hurdle for the 20 11 Executive Option Scheme. The FTSE All-Share Index is also included for comparative purposes as the portfolio currently consists of UK incorporated companies as well as US companies.
This Report was approved by the Board on 23 May 2012 and signed by The Hon. P D E M Moncreiffe, Chairman.
On behalf of the Board
The Hon. P D E M Moncreiffe Chairman
to the members of north atlantic smaller companies investment trust plc
| We have audited the financial statements of North Atlantic Smaller Companies Investment Trust plc for the year ended 31 January 2012 set out on pages 33 to 72. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. |
|
|---|---|
| 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 auditors' 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. |
|
| respective responsibilities of directors and auditors |
As explained more fully in the Statement of Directors' Responsibilities set out on page 22, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. |
| scope of the audit of the financial statements |
A description of the scope of an audit of financial statements is provided on the APB's web-site at www.frc.org.uk/apb/scope/UKP. |
| opinion on financial statements |
In our opinion: • the financial statements give a true and fair view of the state of the Group's and of the parent Company's affairs as at 31 January 2012 and of the Group's loss for the year then ended; |
| • the f inancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and |
|
| • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. |
|
| opinion on other matters prescribed by the companies act 2006 |
In our opinion: • the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; |
| • the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements ; and |
|
| • the information given in the Corporate Governance Statement set out on pages 23 to 27 with respect to internal control and risk management systems in relation to the financial reporting processes and about share capital structures is consistent with the financial statements. |
to the members of north atlantic smaller companies investment trust plc
matters on which we are We have nothing to report in respect of the following: required to report Under the Companies Act 2006 we are required to report to you if, in our opinion: by exception • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
Under the Listing Rules we are required to review:
Salim Tharani (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL 23 May 2012
for the year ended 31 January
| 2012 | 2011 | ||||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Income | 2 | 6, 432 | – | 6, 432 | 2,341 | – | 2.341 |
| Net (losses)/gains on investments at fair value | 9 | – | (11,1 58) | (11,1 58) | – | 37,868 | 37,868 |
| Net gains on investment property | 9 | – | 38 | 38 | – | – | – |
| Currency exchange losses | 9 | – | (185) | (185) | – | (19) | (19) |
| total income | 6, 432 | ( 11,305) | ( 4,873) | 2,341 | 37,849 | 40,190 | |
| Expenses | |||||||
| Investment management fee | 3 | (2,398) | (2) | (2,400) | (2,255) | (1,219) | (3,474) |
| Other expenses | 4 | (2,565) | – | (2,565) | (728) | – | (728) |
| Share based remuneration | 5 | (191) | – | (191) | – | – | – |
| Share of net return of associate | 9 | – | 71 | 71 | – | 4,619 | 4,619 |
| return before finance costs | |||||||
| and taxation | 1, 278 | ( 11,236) | ( 9,958) | (642) | 41,249 | 40,607 | |
| Finance costs | 6 | (994) | – | (994) | (207) | – | (207) |
| return before taxation | 284 | ( 11,236) | ( 10,952) | (849) | 41,249 | 40,400 | |
| Taxation | 7 | – | – | – | – | – | – |
| return for the year | 284 | ( 11,236) | ( 10,952) | (849) | 41,249 | 40,400 | |
| return attributable to: | |||||||
| Equity holders of the Company | 1 4 | ( 11,110) | ( 11,096) | (849) | 41,249 | 40,400 | |
| Non-controlling interest | 270 | (126) | 144 | – | – | – | |
| 284 | ( 11,236) | ( 10,952) | (849) | 41,249 | 40,400 | ||
| basic earnings per ordinary share | 8 | 0. 10p | ( 79.00) p | ( 78.90)p | (5.86)p | 284.70p | 278.84p |
| diluted earnings per ordinary share | 8 | 0. 14p | ( 6 9.74)p | ( 69.60)p | (4.90)p | 241.70p | 236.80p |
The Group does not have any income or expense that is not included in the return for the year, and therefore the "return for the year" is also the "Total comprehensive income for the year", as defined in International Accounting Standard 1 (revised).
The total column of the statement is the Statement of Comprehensive Income of the Group. The supplementary revenue and capital columns are presented for information purposes as recommended by the Statement of Recommended Practice issued by the Association of Investment Companies.
All items in the above Statement derive from continuing operations. No operations were acquired or discontinued in the year. Hampton Investment Properties Limited was acquired on 31 January 2011. This acquisition is presented for the first time in these financial statements (see notes 1(c) and 10).
The financial statements have been prepared in accordance with the accounting policies on pages 40 to 46.
for the year ended 31 January
| Restated* | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Share | Capital | Non | ||||||
| group | Share | CULS | options | premium | Capital | redemption | Revenue | controlling | |
| capital | reserve | reserve | account | reserve | reserve | reserve | interest | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| 2012 | |||||||||
| 31 January 2011 | 703 | 15 | 229 | 1,301 | 234,377 | 69 | (2,798) | 7,856 | 24 1,752 |
| Total comprehensive income for | |||||||||
| the year | – | – | – | – | ( 11,110) | – | 14 | 1 44 | ( 10,952) |
| Shares purchased for cancellation | (5) | – | – | – | (1,267) | 5 | – | – | (1,267) |
| Arising on conversion of CULS | 8 | (1) | – | – | – | – | – | – | 7 |
| Share options expenses | – | – | 191 | – | – | – | – | – | 191 |
| Settlement of outstanding share options |
– | – | – | – | (120) | – | – | – | (120) |
| Reduction in non-controlling interest in subsidiary |
– | – | – | – | – | – | – | (1,067) | (1,067) |
| 31 January 2012 | 706 | 14 | 420 | 1,301 | 22 1,880 | 74 | (2,784) | 6,933 | 2 28,544 |
| Share | Share | Capital | Non* | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | CULS | options | premium | Capital | redemption | Revenue | controlling | ||
| capital | reserve | reserve | account | reserve | reserve | reserve | interest | Total | |
| restated* | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| 2011 | |||||||||
| 31 January 2010 | 741 | 27 | 1,348 | 629 | 218,665 | – | (1,949) | – | 219,461 |
| Total comprehensive income for the year |
– | – | – | – | 41,249 | – | (849) | – | 40,400 |
| New issue of ordinary shares | 5 | – | – | 672 | – | – | – | – | 677 |
| Shares purchased for cancellation |
(69) | – | – | – | (13,029) | 69 | – | – | (13,029) |
| Premium paid on repurchase of CULS |
– | (8) | – | – | (9,740) | – | – | – | (9,748) |
| Arising on conversion of CULS | 26 | (4) | – | – | – | – | – | – | 22 |
| Settlement of outstanding share options |
– | – | – | – | (3,887) | – | – | – | (3,887) |
| Transfer between reserves | – | – | (1,119) | – | 1,119 | – | – | – | – |
| Non-controlling interest in subsidiary |
– | – | – | – | – | – | – | 7,856 | 7,856 |
| 31 January 2011 | 703 | 15 | 229 | 1,301 | 234,377 | 69 | (2,798) | 7,856 | 24 1,752 |
* The amounts at 31 January 2011 have been restated to reflect the consolidation of the subsidiary undertaking, Hampton Investment Properties Limited (see notes 1(c) and 10 ).
The financial statements have been prepared in accordance with the accounting policies on pages 40 to 46.
for the year ended 31 January
| Share | Share | Capital | ||||||
|---|---|---|---|---|---|---|---|---|
| company | Share | CULS | options | premium | Capital | redemption | Revenue | |
| capital | reserve | reserve | account | reserve | reserve | reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| 2012 | ||||||||
| 31 January 2011 | 703 | 15 | 229 | 1,301 | 233,999 | 69 | (2,420) | 233,896 |
| Total comprehensive income for | ||||||||
| the year | – | – | – | – | (10,440) | – | (708) | (11,148) |
| Shares purchased for cancellation | (5) | – | – | – | (1,267) | 5 | – | (1,267) |
| Arising on conversion of CULS | 8 | (1) | – | – | – | – | – | 7 |
| Share options expenses | – | – | 191 | – | – | – | – | 191 |
| Settlement of outstanding share options |
– | – | – | – | (120) | – | – | (120) |
| 31 January 2012 | 706 | 14 | 420 | 1,301 | 222,172 | 74 | (3,128) | 221,559 |
| Share | Share | Capital | ||||||
|---|---|---|---|---|---|---|---|---|
| Share | CULS | options | premium | Capital | redemption | Revenue | ||
| capital | reserve | reserve | account | reserve | reserve | reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| 2011 | ||||||||
| 31 January 2010 | 741 | 27 | 1,348 | 629 | 218,287 | – | (1,571) | 219,461 |
| Total comprehensive income for | ||||||||
| the year | – | – | – | – | 41,249 | – | (849) | 40,400 |
| New issue of ordinary shares | 5 | – | – | 672 | – | – | – | 677 |
| Shares purchased for cancellation |
(69) | – | – | – | (13,029) | 69 | – | (13,029) |
| Premium paid on repurchase | ||||||||
| of CULS | – | (8) | – | – | (9,740) | – | – | (9,748) |
| Arising on conversion of CULS | 26 | (4) | – | – | – | – | – | 22 |
| Settlement of outstanding share options |
– | – | – | – | (3,887) | – | – | (3,887) |
| Transfer between reserves | – | – | (1,119) | – | 1,119 | – | – | – |
| 31 January 2011 | 703 | 15 | 229 | 1,301 | 233,999 | 69 | (2,420) | 233,896 |
The financial statements have been prepared in accordance with the accounting policies on pages 40 to 46.
as at 31 January
| Restated* | |||||
|---|---|---|---|---|---|
| Group | Group | Company | Company | ||
| 2012 | 2011 | 2012 | 2011 | ||
| Notes | £'000 | £'000 | £'000 | £'000 | |
| non current assets | |||||
| Investments at fair value through profit or loss | 9 | 163,174 | 174,575 | 198,317 | 207,771 |
| Investment property | 9 | 41,654 | 41,555 | – | – |
| Investments accounted for using the equity method | 9 | 20,395 | 20,324 | – | – |
| Motor vehicles and equipment | 41 | 10 | – | – | |
| 22 5, 264 | 23 6,464 | 198,317 | 207,771 | ||
| current assets | |||||
| Investments held by subsidiary companies for trading | 1,093 | 550 | – | – | |
| Trade and other receivables | 1 1 | 1,83 5 | 3,530 | 2,6 30 | 11,899 |
| Cash and cash equivalents | 22,200 | 30,799 | 20,924 | 21,812 | |
| Other | 1, 170 | 1,170 | – | – | |
| 26, 298 | 36,049 | 23,55 4 | 33,711 | ||
| total assets | 25 1,562 | 27 2,513 | 221,87 1 | 241,482 | |
| current liabilities | |||||
| Bank loans and overdrafts | 1 2 | – | ( 6,284) | – | (5,786) |
| Trade and other payables | 1 3 | (1,072) | (6, 313) | (235) | (1,716) |
| (1,072) | (12,597) | (235) | (7,502) | ||
| total assets less current liabilities | 25 0,490 | 259, 916 | 221,63 6 | 233,980 | |
| non current liabilities | |||||
| CULS | 1 4 | (7 7) | (84) | (7 7) | (84) |
| Bank loans | 12 | (21,869) | (18,080) | – | – |
| (21,94 6) | (18,164) | (7 7) | (84) | ||
| total liabilities | (23,01 8) | (30,761) | (31 2) | (7,586) | |
| net assets | 2 28,544 | 24 1,752 | 221,559 | 233,896 | |
* The amounts at 31 January 2011 have been restated to reflect the consolidation of the subsidiary undertaking, Hampton Investment Properties Limited (see notes 1(c) and 10 ).
The financial statements have been prepared in accordance with the accounting policies on pages 40 to 46.
as at 31 January
| Restated* | |||||
|---|---|---|---|---|---|
| Group | Group | Company | Company | ||
| 2012 | 2011 | 2012 | 2011 | ||
| Notes | £'000 | £'000 | £'000 | £'000 | |
| represented by: | |||||
| Share capital | 1 5 | 706 | 703 | 706 | 703 |
| Equity component of CULS | 14 | 15 | 14 | 15 | |
| Share options reserve | 4 20 | 229 | 4 20 | 229 | |
| Share premium account | 1,301 | 1,301 | 1,301 | 1,301 | |
| Capital reserve | 2 2 1,880 | 234,377 | 2 22,172 | 233,999 | |
| Capital redemption reserve | 74 | 69 | 74 | 69 | |
| Revenue reserve | (2, 784) | (2,798) | (3,128) | (2,420) | |
| total equity attributable to equity holders of the parent | 22 1,611 | 233,896 | 221,559 | 233,896 | |
| Non-controlling interest | 6,933 | 7,856 | – | – | |
| total equity attributable to group | 2 28,544 | 24 1,752 | 221,559 | 233,896 | |
| net asset value per ordinary share: | |||||
| Basic | 8 | 1,5 70p | 1,664p | ||
| Diluted | 8 | 1, 395p | 1,459p |
* The amounts at 31 January 2011 have been restated to reflect the consolidation of the subsidiary undertaking, Hampton Investment Properties Limited (see notes 1(c) and 10).
The financial statements have been prepared in accordance with the accounting policies on pages 40 to 46.
The notes on pages 40 to 72 form part of these financial statements.
These financial statements were approved by the Board of Directors on 23 May 2012 and signed on its behalf by:
The Hon. P D E M Moncreiffe, Chairman
Company Registered Number: 1091347
for the year ended 31 January
| Restated* | |||
|---|---|---|---|
| Notes | 2012 | 2011 | |
| group | £'000 | £'000 | |
| cash flows from operating activities | |||
| Investment income received | 2,653 | 1,788 | |
| Rental income received | 3, 098 | – | |
| Bank deposit interest received | 64 | 58 | |
| Other income | 1,064 | 339 | |
| Sale of investments by dealing Subsidiary | 57 | – | |
| Investment Manager's fees paid | (3,688) | (3,476) | |
| Other cash payments | ( 4,661) | ( 1,855)* | |
| cash expended on operations | 1 6 | (1, 413) | ( 3,146) |
| Bank interest paid | (99 5) | (179) | |
| CULS interest paid | (9) | (10) | |
| Loan renewal expenses | – | (9) | |
| net cash outflow from operating activities | (2, 417) | ( 3,344) | |
| cash flows from investing activities | |||
| Purchases of investments | (8 1,690) | (109,056) | |
| Sales of investments | 79, 330 | 138,648 | |
| Purchases of plant and equipment | (55) | – | |
| Sales of plant and equipment | 29 | – | |
| net cash (outflow)/inflow from investing activities | ( 2,386) | 29,592 | |
| cash flows from financing activities | |||
| Repayment of fixed term borrowings | ( 2 4,538) | – | |
| Increase in fixed term borrowings | 2 1,869 | – | |
| Repurchase of CULS for cancellation | – | (9,795) | |
| Repurchase of ordinary shares for cancellation | (1,26 7) | (13,029) | |
| Issue of new shares | – | 677 | |
| Settlement of outstanding share options | (120) | (3,887)* | |
| Cash from subsidiary undertaking | – | 456* | |
| net cash outflow from financing activities | ( 4,05 6) | (2 5,578) | |
| (decrease)/increase in cash and cash equivalents for the year | (8, 859) | 670 | |
| cash and cash equivalents at the start of the year | 30, 799 | 29,600 | |
| Revaluation of foreign currency balances | 260 | 529 | |
| cash and cash equivalents at the end of the year | 1 7 | 22,200 | 30, 799 |
* The amounts at 31 January 2011 have been restated to reflect the reclassification of the settlement of outstanding share options from operating activities to financing activities and to consolidate the cash of the subsidiary, Hampton Investment Properties Limited.
The financial statements have been prepared in accordance with the accounting policies on pages 40 to 46.
for the year ended 31 January
| Restated* | ||
|---|---|---|
| Note | 201 2 | 2011 |
| company | £'000 | £'000 |
| cash flows from operating activities | ||
| Investment income received | 2,653 | 1,788 |
| Bank deposit interest received | 62 | 58 |
| Other income | 225 | 336 |
| Investment Manager's fees paid | (3,688) | (3,476) |
| Other cash payments | ( 170) | ( 1,852)* |
| cash expendedfrom operations 1 6 |
( 918) | ( 3,146) |
| Bank interest paid | (73) | (179) |
| CULS interest paid | (9) | (10) |
| Loan renewal expenses | – | (9) |
| net cash outflow from operating activities | (1, 000) | ( 3,344) |
| cash flows from investing activities | ||
| Purchases of investments | ( 79,625) | (109,056) |
| Sales of investments | 79,126 | 138,648 |
| net cash (outflow)/inflow from investing activities | ( 499) | 29,592 |
| cash flows from financing activities | ||
| Repayment of fixed term borrowings | (5,960) | – |
| Repurchase of CULS for cancellation | – | (9,795) |
| Repurchase of ordinary shares for cancellation | (1,267) | (13,029) |
| Issue of new shares | – | 677 |
| Settlement of outstanding share options | (120) | (3,887)* |
| Purchase of equity instruments in subsidiary | (1,221) | – |
| Short-term loans net advanced by subsidiary | 8,919 | (8,481) |
| net cash inflow/(outflow) from financing activities | 351 | (3 4,515) |
| decrease in cash and cash equivalents for the year | (1,148) | (8,267) |
| cash and cash equivalents at the start of the year | 21,812 | 29,550 |
| Revaluation of foreign currency balances | 260 | 529 |
| cash and cash equivalents at the end of the year 1 7 |
20,924 | 21,812 |
* The amounts at 31 January 2011 have been restated to reflect the reclassification of the settlement of outstanding share options from operating activities to financing activities.
The financial statements have been prepared in accordance with the accounting policies on pages 40 to 46.
North Atlantic Smaller Companies Investment Trust plc ("NASCIT") is a Company incorporated in Great Britain and registered in England and Wales. The consolidated Annual Report for the Group for the year ended 31 January 2012 comprises the results of the Company and its subsidiaries – Consolidated Venture Finance Limited and Hampton Investment Properties Limited (together referred to as the "Group").
IASB and IFRIC have issued and endorsed the following standards and interpretations, applicable to the Group, which are not yet effective for the year ended 31 January 2012 and have therefore not been applied in preparing these financial statements.
| New/Revised International Financial Reporting Standards | Issued | Effective Date for annual periods beginning on or after |
|
|---|---|---|---|
| IFRS 7 | Financial Instruments: Disclosures — Amendments enhancing disclosures about transfers of financial assets |
October 2010 | 1 July 2011 |
| IFRS 7 | Financial Instruments: Disclosures — Amendments enhancing disclosures about offsetting of financial assets and financial liabilities |
December 2011 | 1 January 2013 ( and interim periods within those periods) |
| IFRS 7 | Financial Instruments: Disclosures — Amendments requiring disclosures about the initial application of IFRS 9 |
December 2011 | 1 January 2015 ( or otherwise when IFRS 9 is first applied) |
| IFRS 9 | Financial Instruments — Classification and measurement of financial assets |
Original issue November 2009 |
1 January 2015 ( mandatory application date amended December 2011) |
| Revised International Accounting Standards | Revised | Effective Date | |
| IAS 1 | Presentation of Financial Statements — Amendments to revise the way other comprehensive income is presented |
June 2011 | 1 July 2012 |
| IAS 32 | Financial Instruments: Presentation — Amendments to application guidance on the offsetting of financial assets and financial liabilities |
December 2011 | 1 January 2014 |
The Directors do not anticipate that the initial adoption of the above standards, amendments and interpretations will have a material impact in future periods.
The Company will only adopt standards at the beginning of its financial year, therefore any standards or interpretations with an effective date after 1 February 2011 will not have been adopted.
The consolidated annual financial statements of the Group and the annual financial statements of the Company have been prepared in conformity with International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Accounting Standards and Standing Interpretation Committee, interpretations approved by the International Accounting Standards Committee that remain in effect and to the extent they have been adopted by the European Union. They have also been prepared in accordance with applicable requirements of England and Wales company law and reflect the following policies which have been adopted and applied consistently. The financial statements have also been prepared in accordance with the Statement of Recommended Practice ("SORP") for investment trust companies, except to any extent where it conflicts with IFRS.
The financial statements are presented in Sterling rounded to the nearest thousand. The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement at fair value of investments and derivatives designated at fair value through profit or loss.
As stated in the Annual Report for the Group for the year ended 31 January 2011, your Board was of the opinion that in the context of an investment company and in view of the envisaged short term nature of control it was misleading and impracticable to consolidate Hampton Investment Properties Limited, Kiln Lane Property Limited and Browallia LLP.
Following discussions with the Financial Reporting Review Panel and in accordance with International Accounting Standards (IAS 27), your Board has reconsidered its opinion. Accordingly the Group financial statements for the year ended 31 January 2011 have been restated to include the financial statements of Hampton Investment Properties Limited (see note 10 for further information). On the grounds of immateriality, the financial statements of Kiln Lane Property Limited and Browallia LLP have not been included in the restated consolidated financial statements.
The Group financial statements consolidate the financial statements of the Company , its wholly owned Subsidiary undertaking, Consolidated Venture Finance Limited and its 68.1% ownership of Hampton Investment Properties Limited, drawn up to 31 January 2012. The Company's 65.4% holding in Performance Chemical Company has not been consolidated on the grounds of immateriality.
Except as shown in (d) below, in accordance with IAS 28 (Investments in Associates), investments where the Company holds, directly or indirectly, more than 20% or more of the voting power of the investee, or otherwise has significant influence, are not accounted for as associates. Instead they are accounted for in the same way as other investments designated as at fair value through profit or loss.
In accordance with the exemptions given by s408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. The amount of the Company's loss for the financial year dealt with in the accounts of the Group is £ 11,148,000 (2011 profit: £40,400,000).
NASCIT is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of Oryx. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over these policies. Oryx has been accounted for as an associate as it is considered to be a long term holding of the Company.
The results and assets and liabilities of Oryx are incorporated in the consolidated accounts using the equity method of accounting. Oryx is carried in the Consolidated Balance Sheet at cost as adjusted by post-acquisition changes in the Group's share of the net assets of Oryx.
The Directors are of the opinion that the Group is engaged in a single segment of business, being investment business. The Group invests in smaller companies principally based in countries bordering the North Atlantic Ocean and in properties within the UK. A geographical analysis of the portfolio is shown on page 6.
All non current investments held by the Group, other than the investment in Oryx, are designated at 'fair value through profit or loss' on initial acquisition. Investments are initially recognised at fair value, being the value of the consideration given.
The Group's business is investing in financial assets and investment properties with a view to profiting from their total return in the form of income and capital growth. Th e portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy and information about the portfolio is provided internally on that basis to the Company's Board of Directors and other key management personnel.
After initial recognition, investments are measured at fair value, with investment holding gains and losses on investments recognised in the Statement of Comprehensive Income and (apart from those on current asset investments) allocated to capital. Gains and losses on disposal are calculated as the difference between sales proceeds and cost.
Investments are included in the Balance Sheet on the following basis:
Securities quoted on recognised stock exchanges are valued at the market bid price and exchange rates ruling at the Balance Sheet date. With the exception of AIM quoted SETS stocks, which are valued using latest trade price, which is equivalent to the fair value.
Unexpired traded put and call options are held in current liabilities as investments held for trading – derivatives and are revalued to the prevailing fair value at the Balance Sheet date.
Treasury Bills are valued at fair value having been adjusted for movements in exchange rates between the dates of purchase and the year-end. Accrued income arising from them is included in debtors.
Unquoted investments are valued in accordance with the International Private Equity and Venture Capital Association ("IPEVCA") guidelines. Their valuation incorporates all factors that market participants would consider in setting a price. The primary valuation techniques employed to value the unquoted investments are earnings multiples, recent transactions and the net asset basis. Valuations in local currency are translated into Sterling at the exchange rate ruling on the Balance Sheet date.
Included within the Statement of Comprehensive Income as at 31 January 2012, is a loss of £ 3,328,000 relative to the movement in the fair value of the unlisted investments valued using valuation techniques.
Investments in property are initially recognised at cost and then valued at fair value based on an independent professional valuation at the reporting date, with changes in fair value recognised in the Consolidated Statement of Comprehensive Income. Disposals of investment property are recognised when contracts for sale have been exchanged and sales have been completed.
Investments held by the Subsidiary undertakings are classified as 'held for trading' and are valued at fair value in accordance with the policies set out in 1(f)(i) and 1(f)(iii) above for quoted and unquoted holdings respectively.
Profits or losses on investments in the Subsidiary undertakings are taken to revenue.
Where put and call option transactions are entered into for investment purposes, the premiums are taken to the Statement of Comprehensive Income and included as capital and the gains or losses arising on the valuations to fair value are recognised in the Statement of Comprehensive Income and included as capital likewise.
Premiums received and gains or losses on revaluation are taken to the Capital Reserve. Where an option transaction is in profit at the year-end, the premium received on any open option is spread over the life of that option.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is tested for impairment annually (as at 31 January) and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the net assets of each subsidiary to which the goodwill relates. Where the net assets of the subsidiary are less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill are not reversed in future periods.
The currency of the primary economic environment in which the Company operates (the "functional currency") is pounds Sterling (Sterling), which is also the presentational currency of the Group. Transactions involving currencies other than Sterling are recorded at the exchange rate ruling on the transaction date. At each Balance Sheet date, monetary items and non-monetary assets and liabilities that are fair valued, which are denominated in foreign currencies, are retranslated at the closing rates of exchange.
Exchange differences arise on settlement of monetary items and from retranslating at the Balance Sheet date:
Exchange differences allocated as capital are included in the transfer to Capital Reserve.
All "regular way" purchases and sales of financial assets are recognised on the "trade date" i.e. the day that the entity commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of the asset within a time frame generally established by regulation or convention in the market place.
Dividends receivable on quoted equity shares are taken into account on the ex-dividend date. Where no ex-dividend date is quoted, they are brought into account when the Group's right to receive payment is established. Other investment income and interest receivable are included in the financial statements on an accruals basis. Dividends received from UK registered companies are accounted for net of imputed tax credits.
All expenses are accounted for on an accruals basis and are allocated wholly to revenue with the exception of Performance Fees which are allocated wholly to capital, as the fee is payable by reference to the capital performance of the Group and transaction costs which are also allocated to capital.
Finance costs: 100% of basic loans, borrowing cost and CULS are charged to revenue.
In accordance with IFRS 2: Share Based Payments, an expense is recognised in the financial statements relating to the value of share options awarded under the 20 11 Executive Share Option Scheme to the Chief Executive and employees of Harwood Capital LLP.
The accounting charge is based on the fair value of each grant, measured at the grant date and is spread over the vesting period. The deemed expense over the vesting period is transferred to the Share Options Reserve.
Cash in hand and at banks and short-term deposits which are held to maturity are carried at cost. Cash and cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Bank overdrafts that are repayable on demand, which form an integral part of the Group's cash management, are included as a component of cash and cash equivalents for the purpose of the Cash Flow Statement.
All bank loans and borrowings are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest bearing loans and borrowings are subsequently measured at amortised cost. Any difference between cost and redemption value has been recognised in the Statement of Comprehensive Income over the period of the borrowings on an effective interest rate basis.
The CULS comprise of an equity element and a debt element, rather than just being treated as debt. The equity element was identified when the CULS were issued and reduces when the CULS are bought back or exercised. A CULS Reserve has been created to recognise the equity component.
Tax on the profit or loss for the year comprises current and deferred tax. Corporation tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in Equity, in which case it is recognised in Equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the Balance Sheet date and any adjustment to tax payable in respect of previous years. The tax effect of different items of expenditure is allocated between revenue and capital on the same basis as the particular item to which it relates, using the Company's marginal method of tax, as applied to those items allocated to revenue, for the accounting period.
Deferred tax is provided, using the liability method, on all temporary differences at the Balance Sheet date between the tax basis of assets and liabilities and their carrying amount for financial reporting purposes. Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the Balance Sheet date.
Share Capital represents the nominal value of equity shares.
Equity component of CULS represents the equity component of convertible unsecured loan stock issued.
Share Options Reserve represents the expense of share based payments. The fair value of Share Options is measured at grant date and spread over the vesting period. The deemed expense is transferred to the Share Options Reserve.
1 accounting policies continued
Share Premium Account represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.
Capital Reserve represents realised and unrealised capital and exchange gains and losses on the disposal and revaluation of investments and of foreign currency items. In addition, performance fee costs are allocated to the Capital Reserve.
Revenue Reserve represents retained profits from the income derived from holding investment assets less the costs associated with running the Company.
| 2012 2011 2012 £'000 £'000 £'000 income from investments UK dividend income 2,643 1,602 2,643 Unfranked investment income – interest (5) 161 (5) – interest reinvested 93 649 93 – underwriting commission 62 – – 2,731 2,474 2,731 other income Interest receivable 152 86 150 Net dealing losses from Subsidiary trading (523) (530) – Net return from Subsidiary 43 – – Rental income 3,104 – – Sundry income 968 311 129 3, 701 (133) 322 Total income 6, 432 2,341 3,053 total income comprises Dividends 2,643 1,602 2,643 Interest 240 896 238 Rental income 3,104 – – Other income* 445 (157) 172 6, 432 2,341 3,053 income from investments Listed UK 2,643 1,664 2,643 Unlisted UK 74 789 74 Other unlisted 14 21 14 2,731 2,474 2,731 |
Group | Group | Company | Company |
|---|---|---|---|---|
| 2011 | ||||
| £'000 | ||||
| 1,602 | ||||
| 161 | ||||
| 649 | ||||
| 62 | ||||
| 2,474 | ||||
| 86 | ||||
| – | ||||
| (530) | ||||
| – | ||||
| 311 | ||||
| (133) | ||||
| 2,341 | ||||
| 1,602 | ||||
| 896 | ||||
| – | ||||
| (157) | ||||
| 2,341 | ||||
| 1,664 | ||||
| 789 | ||||
| 21 | ||||
| 2,474 |
* Includes net dealing losses from Subsidiary trading.
3 investment management fee
As set out in note 19, no formal arrangements exist to avoid double charging on investments managed or advised by Harwood Capital LLP.
The amounts payable in the year in respect of investment management are as follows:
| Group and Company | Group and Company | |||||
|---|---|---|---|---|---|---|
| 2012 | 2011 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Annual fee | 2,398 | – | 2,398 | 2,255 | – | 2,255 |
| Performance Fee | – | – | – | – | 1,176 | 1,176 |
| Irrecoverable VAT thereon | – | 2 | 2 | – | 43 | 43 |
| 2,398 | 2 | 2,400 | 2,255 | 1,219 | 3,474 |
At 31 January 2012, £ 120,000 was payable to the Joint Manager in respect of outstanding management fees (2011: £113,000). At 31 January 2012, £ nil plus VAT was payable to GFS in respect of outstanding performance fees (2011: £1,176,000).
| Group | Group | Company | Company | |
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| £'000 | £'000 | £'000 | £'000 | |
| Auditor's remuneration (see below) | 51 | 54 | 51 | 54 |
| Directors' fees (see page 29)* | 113 | 98 | 113 | 98 |
| Investment management related fee (see note 3) | 125 | 100 | 125 | 100 |
| Activity fees (see note 3) | – | 27 | – | 27 |
| Other expenses | 2, 2 7 6 | 449 | 811 | 449 |
| 2, 565 | 728 | 1, 100 | 728 |
* From 1 July 2011 it was agreed that Director's fees would increase to £25,000 per annum.
| Group | Group | Company | Company | |
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| auditors' remuneration | £'000 | £'000 | £'000 | £'000 |
| Fees payable to the Company's Auditor for the | ||||
| audit of the financial statements: | ||||
| – Current auditor | 47 | 39 | 47 | 39 |
| – Previous auditor | – | 6 | – | 6 |
| Fees payable to the Company's Auditor and its | ||||
| associates for other services: | ||||
| – Previous auditor | – | 1 | – | 1 |
| Other services relating to taxation: | ||||
| – Current auditor | 4 | 4 | 4 | 4 |
| – Previous auditor | – | 4 | – | 4 |
| 51 | 54 | 51 | 54 |
Fees payable to the Company's Auditor, KPMG Audit Plc and its associates for non-audit services to the Company itself are not disclosed in the individual financial statements of the Company because the Company's Group financial statements are required by the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008, SI 2008 No. 489, to disclose such fees on a consolidated basis.
| 2012 | 2011 | |||||
|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Accounting charge for the year | 191 | – | 191 | – | – | – |
| 191 | – | 191 | – | – | – |
A list of the Options in issue are shown below;
| Grant of | ||||||
|---|---|---|---|---|---|---|
| No. of Options | options during | Cancelled during | No. of options | |||
| at 31 January 2012 | Price | the year | the year | Price | grant | at 1 February 2011 |
| – | – | – | 20,000 | 875.60p | 2005 | 20,000 |
| 430,000 | 1,467.71 | 430,000 | – | – | 2011 | – |
Further details of Options are disclosed on page 29 and in note 15 on page 61.
On 14 July 2011 C H B Mills (Mr Mills) was granted 420,000 share options under the NASCIT 2011 Executive Share Option Scheme at an exercise price of 1,467.71p per share. A further 10,000 options were granted to other eligible employees of Harwood Capital LLP. These options are exercisable providing the necessary performance requirements are met between 14 July 2014 and 14 July 2021.
The fair value of the share options is estimated at the grant date using a binomial lattice pricing model.
The assumptions used in calculating the fair value are:
| – Future share price volatility | 25.0% per annum |
|---|---|
| – Future dividend yield | 0.0% per annum |
| – Future risk-free interest rate | 1.2% per annum |
| – Minimum gain threshold | 33.0% per annum |
| – Proportion of options exercised minimum gain achieved | 50.0% per annum |
Based on these assumptions the fair value has been calculated as 22.1% of the 1,097.00p (the closing mid-market price on 13 July 2011) per option giving a total fair value of £1,042,000.
The accounting charge is based on the fair value of each grant, at the grant date and is spread over the vesting period, being 3 years from the date of grant assuming all necessary performance criteria are met. The deemed expense is transferred to the Share options reserve.
The remaining holders of the 20,000, 2005 options waived their rights to future participation. It was agreed that, subject to the proceeds being reinvested in NASCIT shares and those shares being held for a period of not less than two years, an ex gratia payment totalling £120,000 be paid to those eligible employees of Harwood Capital LLP for these options. The estimated fair value of these waived share options was £120,000.
At the date of this report there were 430,000 options granted in 2011 in issue with a n estimated fair value of £ 1.04m.
As previously disclosed in the financial statements for the year ended 31 January 2011, on 15 March 2010 C H B Mills (Mr Mills) exercised 100,000 share options granted in 2000 under the NASCIT 1994 Executive Share Option Scheme at an exercise price of 677.57p per share.
Additionally, further to a review of the NASCIT 2002 Executive Share Option Scheme, a majority of the option holders waived their rights to future participation. As part of the review of the incentive scheme, it was agreed that, subject to the proceeds being reinvested in NASCIT shares and those shares being held for a period of not less than two years, an ex gratia payment totalling £3.9 million be paid to Mr Mills and to those eligible employees of Harwood Capital LLP.
It was not disclosed in the financial statements for the year ended 31 January 2011 that the exercise of 100,000 share options resulted in a gain to Mr Mills of £104,000 based on a mid-market price of 781.50p nor that the estimated fair value of the options settled was £ 3.9 million .
| Group | Group | Company | Company | |
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| £'000 | £'000 | £'000 | £'000 | |
| On bank loans and overdrafts | 985 | 197 | 63 | 197 |
| Interest on CULS | 9 | 10 | 9 | 10 |
| 994 | 207 | 72 | 207 |
The current taxation charge for the year is different from the standard rate of corporation tax in the UK of 28% to 31 March 2011 and 26% from 1 April 2011 . The differences are explained below.
| Group | Group | Company | Company | |
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Total | Total | Total | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Total return on ordinary activities before taxation | ( 10,952) | 40,400 | (11,148) | 40,400 |
| Theoretical tax at UK Corporation tax rate of 26.33% (2011: 28%) | (2, 884) | 11,312 | (2,935) | 11,312 |
| Effects of: | ||||
| Non taxable capital return | 2, 958 | (11,550) | 2,749 | ( 11,550) |
| UK dividends which are not taxable | (696) | (449) | (696) | ( 449) |
| Increase in tax losses, disallowable expenses and offshore | ||||
| income gains | 6 22 | 687 | 882 | 687 |
| Actual current tax charge | – | – | – | – |
Factors that may affect future tax charges:
The Group has tax losses of £ 20, 4 16,000 (2011: £19,794,000) that are available to offset future taxable revenue. A deferred tax asset has not been recognised in respect of those losses which will be recoverable only to the extent that the Group has sufficient future taxable revenue.
Of the Group tax losses shown above, the Parent Company has tax losses of £ 20,676,000 (2011: £19,794,000) that are available to offset future taxable revenue. A deferred tax asset has not been recognised in respect of those losses, which will be recoverable only to the extent that the Company has sufficient future taxable revenue.
The Company carries out its activities as an investment trust and the intention is to continue meeting the conditions required to obtain approval in the foreseeable future. Therefore, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
Consolidated return per Ordinary Share:
| Revenue | Capital | Total | |||||||
|---|---|---|---|---|---|---|---|---|---|
| *Net return | Ordinary Per Share *Net return | Ordinary Per Share *Net return | Ordinary Per Share | ||||||
| £'000 | Shares | pence | £'000 | Shares | pence | £'000 | Shares | pence | |
| 2012 | |||||||||
| Basic return per Share | 1 4 14,062, 899 | 0. 10 | ( 11,110) 14,062, 899 | ( 79.00) | ( 11,096) 14,062, 899 | ( 78.90) | |||
| CULS** | 9 | 1,868,628 | – | 1, 868, 628 | 9 | 1,868, 628 | |||
| Diluted return per Share |
23 | 15,931,527 | 0. 14 | ( 11,110) 15,931,527 | ( 69.74) | ( 11,087) | 15,931,527 | ( 6 9.6 0) | |
| Revenue | Capital | Total | |||||||
| *Net return | Ordinary | Per Share *Net return | Ordinary | Per Share *Net return | Ordinary | Per Share | |||
| £'000 | Shares | pence | £'000 | Shares | pence | £'000 | Shares | pence | |
| 2011 | |||||||||
| Basic return per Share | (849) 14,488,339 | (5.86) | 41,249 14,488,339 | 284.70 | 40,400 | 14,488,339 | 278.84 | ||
| CULS** | 13 | 2,577,905 | – | 2,577,905 | 13 | 2,577,905 |
Diluted return (836) 17,066,244 (4.90) 41,249 17,066,244 241.70 40,413 17,066,244 236.80
Basic return per Ordinary Share has been calculated using the weighted average number of Ordinary Shares in issue during the year.
* Profit for the year.
per Share
** CULS interest cost and excess of the total number of potential shares on CULS conversion over the number that could be issued at the average market price from the conversion proceeds, as calculated in accordance with IAS 33: Earnings per share.
Consolidated net asset value per Ordinary Share:
The consolidated net asset value per Ordinary Share calculated in accordance with the Articles of Association is as follows:
| Net asset value | ||
|---|---|---|
| per Share | ||
| 2012 | 2011 | |
| Ordinary Shares – Basic | 1,5 70p | 1,664p |
| – Diluted | 1, 395p | 1,459p |
The basic net asset value per Ordinary Share is based on net assets of £22 1, 611,000 (2011: £233,896,000) and on 14,113,553 Ordinary Shares (2011: 14,057,252) being the number of Ordinary Shares in issue at the year end.
The diluted net asset value per Ordinary Share is calculated on the assumption that the outstanding 2013 CULS are fully converted at par and that all 430,000 (2011: 20,000) Share Options were exercised at the prevailing exercise prices, giving a total of 16, 343,052 issued Ordinary Shares (2011: 16,048,052).
| Restated* | ||||
|---|---|---|---|---|
| Group | Group | Company | Company | |
| 2012 | 2011 | 2012 | 2011 | |
| £'000 | £'000 | £'000 | £'000 | |
| Quoted at fair value: | ||||
| United Kingdom | 52,768 | 46,360 | 73,163 | 66,684 |
| Overseas | 22,438 | 1,085 | 22,438 | 1,085 |
| Total quoted investments | 75,206 | 47,445 | 95,601 | 67,769 |
| Treasury bills at fair value | – | 24,836 | – | 24,836 |
| Unlisted and loan stock at fair value | 87,968 | 102,294 | 102,716 | 115,166 |
| Investments at fair value through profit or loss | 163,174 | 174,575 | 198,317 | 207,771 |
| Investment property* | 41,654 | 41,555 | – | – |
| Total | 204,828 | 21 6,130 | 198,317 | 207,771 |
* The Company holds the investment property through a subsidiary, Hampton Investment Properties Limited. The restatement has been fully described in note 10.
| Listed | AIM | Unlisted | Loan | Treasury Investment | |||
|---|---|---|---|---|---|---|---|
| equities | quoted | equities | stocks | Bills | propert y | Total | |
| group – 2012 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| analysis of investment portfolio movements | |||||||
| Opening bookcost as at 1 February 2011 | 39,142 | 5,337 | 70,821 | 4,349 | 25,476 | 3 5,235 | 18 0,360 |
| Opening (depreciation)/appreciation on assets held | (3,836) | 6,802 | 28,154 | (1,030) | (640) | 6,320 | 3 5,770 |
| opening valuation as at 1 February 2011 | 35,306 | 12,139 | 98,975* | 3,319 | 24,836 | 41,555* | 21 6,130 |
| Movements in year: | |||||||
| Transfers | – | 6,500 | (6,500) | – | – | – | – |
| Purchases at cost | 43,450 | 5,129 | 8,819 | 801 | 21,351 | 1,244 | 80,794 |
| Sales – proceeds | (14,476) | (5,613) | (13,644) | (445) | (45,846) | (1, 18 3) | (81, 20 7) |
| – realised (losses)/gains on sales | 3,096 | 197 | 1,576 | – | (981) | 133 | 4,021 |
| Increase/(decrease) in appreciation on assets held | (3,59 6) | (6,927) | (4,008) | (92 4) | 640 | (95) | (1 4,910) |
| closing valuation as at 31 January 2012 | 63,7 80 | 11,425 | 85,218 | 2,75 1 | – | 41,654 | 204,828 |
| Closing bookcost as at 31 January 2012 | 71,212 | 11,550 | 61,07 2 | 4,705 | – | 3 5,429 | 18 3,968 |
| Closing (depreciation)/appreciation on assets held | (7,43 2) | (125) | 24,146 | (1,95 4) | – | 6,225 | 20,860 |
| 63,7 80 | 11,425 | 85,218 | 2,75 1 | – | 41,654 | 204,828 |
* The amounts at 1 February 2011 have been restated to reflect the reclassification of investments arising on the acquisition of the controlling stake in Hampton Investment Properties Limited on 31 January 2011 (see notes 1(c) and 10).
| analysis of investment portfolio movements | |||||||
|---|---|---|---|---|---|---|---|
| Opening bookcost as at 1 February 2011 | 49,623 | 5,337 | 79,462 | 4,349 | 25,476 | – | 164,247 |
| Opening appreciation/(depreciation) on assets held | 6,007 | 6,802 | 32,385 | (1,030) | (640) | – | 43,524 |
| opening valuation as at 1 February 2011 | 55,630 | 12,139 | 111,847 | 3,319 | 24,836 | – | 207,771 |
| Movements in year: | |||||||
| Transfers | – | 6,500 | (6,500) | – | – | – | – |
| Purchases at cost | 43,450 | 5,129 | 10,015 | 801 | 21,351 | – | 80,746 |
| Sales – proceeds | (14,476) | (5,613) | (13,644) | (445) | (45,846) | – | (80,024) |
| – realised gains/(losses) on sales | 3,096 | 197 | 1,576 | – | (981) | – | 3,888 |
| ( Decrease)/ increase in appreciation on assets held | (3,52 5) | (6,927) | (3,328) | (92 4) | 640 | – | (14,064) |
| closing valuation as at 31 January 2012 | 84,17 5 | 11,425 | 99,966 | 2,75 1 | – | – | 198,317 |
| Closing bookcost as at 31 January 2012 | 81,693 | 11,550 | 70,909 | 4,705 | – | – | 168,857 |
| Closing appreciation/(depreciation) on assets held | 2,48 2 | (125) | 29,057 | (1,95 4) | – | – | 29,460 |
| 84,17 5 | 11,425 | 99,966 | 2,75 1 | – | – | 198,317 |
| Listed | AIM | Unlisted | Loan | Treasury Investment | |||
|---|---|---|---|---|---|---|---|
| restated | equities | quoted | equities | stocks | Bills | propert y | Total |
| group – 2011 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| analysis of investment portfolio movements | |||||||
| Opening bookcost as at 1 February 2010 | 51,547 | 29,326 | 59,258 | 16,648 | 7,298 | – | 1 64,077 |
| Opening (depreciation)/appreciation on assets held | (15,745) | 12,386 | 20,941 | (2,180) | 191 | – | 1 5,593 |
| opening valuation as at 1 February 2010 | 35,802 | 41,712 | 80,199 | 14,468 | 7,489 | – | 179,670 |
| Movements in year: | |||||||
| Adjustment arising on acquisition of controlling stake | – | – | (12,872) | – | – | 41,555 | 2 8,683 |
| Transfers | (5,015) | (18,451) | 14,150 | 9,316 | – | – | – |
| Purchases at cost | 12,260 | 244 | 9,242 | 2,927 | 84,426 | – | 1 09,099 |
| Sales – proceeds | (17,273) | (34,344) | (1,999) | (18,851) | (66,272) | – | (1 38,739) |
| – realised (losses)/gains on sales | (2,377) | 28,562 | 3,042 | (5,691) | 24 | – | 23,560 |
| Increase/(decrease) in appreciation on assets held | 11,909 | (5,584) | 7,213 | 1,150 | (831) | – | 1 3,857 |
| closing valuation as at 31 January 2011 | 35,306 | 12,139 | 98,975 | 3,319 | 24,836 | 41,555 | 21 6,130 |
| Closing bookcost as at 31 January 2011 | 39,142 | 5,337 | 70,821 | 4,349 | 25,476 | 3 5,235 | 18 0,360 |
| Closing (depreciation)/appreciation on assets held | (3,836) | 6,802 | 28,154 | (1,030) | (640) | 6,320 | 3 5,770 |
| 35,306 | 12,139 | 98,975 | 3,319 | 24,836 | 41,555 | 21 6,130 | |
| company – 2011 | |||||||
| analysis of investment portfolio movements | |||||||
| Opening bookcost as at 1 February 2010 | 62,028 | 29,326 | 59,325 | 16,648 | 7,298 | – | 174,625 |
| Opening (depreciation)/appreciation on assets held | (10,521) | 12,386 | 20,874 | (2,180) | 191 | – | 20,750 |
| opening valuation as at 1 February 2010 | 51,507 | 41,712 | 80,199 | 14,468 | 7,489 | – | 195,375 |
| Movements in year: | |||||||
| Transfers | (5,015) | (18,451) | 14,150 | 9,316 | – | – | – |
| Purchases at cost | 12,260 | 244 | 9,242 | 2,927 | 84,426 | – | 109,099 |
| Sales – proceeds | (17,273) | (34,344) | (1,999) | (18,851) | (66,272) | – | (138,739) |
| – realised (losses)/gains on sales | (2,377) | 28,562 | (1,256) | (5,691) | 24 | – | 19,262 |
| Increase/(decrease) in appreciation on assets held | 16,528 | (5,584) | 11,511 | 1,150 | (831) | – | 22,774 |
| closing valuation as at 31 January 2011 | 55,630 | 12,139 | 111,847 | 3,319 | 24,836 | – | 207,771 |
| Closing bookcost as at 31 January 2011 | 49,623 | 5,337 | 79,462 | 4,349 | 25,476 | – | 164,247 |
| Closing appreciation/(depreciation) on assets held | 6,007 | 6,802 | 32,385 | (1,030) | (640) | – | 43,524 |
| 55,630 | 12,139 | 111,847 | 3,319 | 24,836 | – | 207,771 |
| Group | Group | |
|---|---|---|
| 2012 | 2011 | |
| £'000 | £'000 | |
| analysis of capital gains and losses | ||
| Gains on sales | 3, 888 | 23,560 |
| Unrealised (losses)/gains | (14, 815) | 13,857 |
| Movement in subsidiary | (1 54) | – |
| (11,0 81) | 37,417 | |
| Net premiums on sale of options held for trading | – | (161) |
| Movement in valuation of unexpired put options | – | 612 |
| Losses on loan repayment | (174) | – |
| Movement in valuation of escrow | 97 | – |
| (losses)/gains on investments at fair value | (11,1 58) | 37,868 |
| Realised gains on investment property | 133 | – |
| Unrealised losses on investment property | (95) | – |
| gains on investment property | 38 | – |
| Unrealised gains | 71 | 4,619 |
| gains on equity accounted investments | 71 | 4,619 |
| 2012 | 2011 | |
| £'000 | £'000 | |
| Exchange losses on capital items | (329) | (626) |
| Exchange losses on escrow | ( 116) | – |
| Exchange gains on capital items and currency | 2 60 | 607 |
| exchange losses | (185) | (19) |
| 2012 | 2011 | |
| £'000 | £'000 | |
| portfolio analysis | ||
| Equity shares | 138,22 3 | 120,581 |
| Convertible preference securities | 22,200 | 25,839 |
| Fixed interest securities | 2,75 1 | 3,319 |
| Treasury Bills | – | 24,836 |
| Investment properties | 41,654 | 41,555 |
| 204,828 | 21 6,130 | |
At 31 January 2012 the Company has the following Subsidiar ies:
| % | |||
|---|---|---|---|
| Subsidiary | Principal activity | equity held | Country of registration |
| Consolidated Venture Finance Limited* | Security trading | 100.00% | England and Wales |
| Hampton Investment Properties Limited** | Property investment | 68. 10% | England and Wales |
Th e Subsidiar ies w ere active during the year.
In the Group accounts Oryx is recognised as an Associate and the results of that Company have been accounted for in the Group accounts as an Associate under the equity method of accounting and valued using the Net Asset Value at 31 January 2012 of that Company. Oryx is a separately quoted company and has a financial year end date of 31 March, therefore the statutory accounts are not available to consolidate.
At the date of this report, the Company held 7,106,284 Ordinary shares representing 3 7.24% of the total voting rights in Oryx.
The value of the investment in associate in the Consolidated Balance Sheet using the equity method is as follows:
| 2012 | 2011 | |
|---|---|---|
| £'000 | £'000 | |
| Cost | ||
| Opening share of net assets at 1 February | 20,324 | 15,705 |
| Share of profit for the year | 71 | 4,619 |
| Closing share of net assets at 31 January | 20,395 | 20,324 |
The figures used to value the Group's holding in Oryx have been extracted from the company's 31 January 2012 management accounts .
The following financial information for Oryx has been extracted from its unaudited interim results for the six months ended 30 September 2011, being the latest available results and therefore do not have any bearing on the figures used to value Oryx as at 31 January 2012 and are presented for informational purposes only.
| £'000 | |
|---|---|
| Net assets | 54,176 |
| Income and losses from investments | (898) |
| Net return for the period | (740) |
Oryx is traded on the London Stock Exchange. The value at bid price at 31 January 2012 was £1 4,212,000, based on the holding of 7,106,284 Ordinary shares priced at 2. 00p per share.
9 investments continued
At the year-end, the Group and Company held 20% or over of the aggregate nominal value of voting equity of the following companies, all of which are incorporated and registered in England and Wales, unless stated:
| 31 January | 31 January | ||
|---|---|---|---|
| 2012 | 2011 | ||
| % | % | ||
| Forefront Group Limited | – Ordinary Shares | 23.1 | 23.1 |
| Kiln Lane Property Limited (sold during the year) | – Ordinary Shares | – | 89.0 |
| Martley Limited (Jersey) | – Ordinary Shares | 29.6 | 29.6 |
| Nationwide Accident Repair Services PLC | – Ordinary Shares | 23.2 | 23.2 |
| Bionostics Holdings Limited | – Ordinary Shares | 47.1 | 47.1 |
| Orthoproducts Limited | – Ordinary Shares | 40.0 | 40.0 |
| Oryx International Growth Fund Limited | |||
| (incorporated in Guernsey) | – Ordinary Shares | 36.5 | 34.5 |
| Browallia LLP (liquidated during the year) | – Ordinary Shares | – | 95.0 |
| Performance Chemicals Company* | – Ordinary Shares | 65.4 | 46.1 |
| Trident Private Equity Fund III LP | – Ordinary Shares | 32.7 | 32.0 |
* The Board has chosen not to consolidate this holding. See note 1(c) for further details.
Where US Treasury Bills or investments are required in accordance with United States SEC regulations to be deposited with brokers as cover for option transactions, these may be held to the order of these brokers until the relevant option positions are closed. At 31 January 2012, US Treasury Bills with a market value of £nil were deposited with brokers (2011: £24,836,000).
During the year, the Group incurred total transaction costs of £177,000 (2011: £58,000) comprising £155,000 (2011: £42,000) and £22,000 (2011: £16,000) on purchases and sales of investments respectively. These amounts are included in gains on investments as disclosed in the Consolidated Statement of Comprehensive Income.
| Carrying | |||||
|---|---|---|---|---|---|
| value at | |||||
| 31 January | |||||
| Security Name | Disposal Date | Proceeds | Bookcost | Gain/(loss) | 2011 |
| £'000 | £'000 | £'000 | £'000 | ||
| Augean, Ords (AIM) | February 2011 | 1,090 | 1,867 | (777) | 1,060 |
| Chrysalis PLC | February 2011 | 8,800 | 5,015 | 3,785 | 8,800 |
| Lion Katsu | April 2011 | 1,441 | 418 | 1,023 | 1,400 |
| North American Bank Fund | February 2011 | 1,280 | 3,475 | (2,195) | 1,280 |
As referred to in note 1(c) on page 41 the Company has been in discussion with the Financial Reporting Review Panel relating to the non-consolidation of subsidiaries in the Financial Statements for the year ended 31 January 2011.
The Directors were of the opinion that in the context of an investment company it was misleading and impracticable to consolidate Hampton. However, a reconstruction of Hampton on 31 January 2011 resulted in the Company acquiring a controlling interest. The Directors have, therefore, agreed with the Financial Reporting Review Panel that Hampton should have been consolidated in the Group's financial statements from that date.
Prior to 31 January 2011, the Company held 72% of the Convertible Unsecured Loan Stock ("CULS") in Hampton Trust PLC. However, those CULS were controlled by the Trustees of the Loan Stock and any Steering Committee that was appointed. A new Trustee or Steering Committee member could only be appointed by way of a Special Resolution requiring 75% of the Loan Stock. As the Company only held 72%, it was unable to pass a Special Resolution and therefore control was deemed to be with the Trustees and/or the Steering Committee.
As at 31 January 2011, following a restructuring of the Hampton group of companies and a conversion of the loan stock, the Company's holding has decreased to 6 2.1% of the shares in issue. However, as there are no other preferential voting rights in existence, the Company is deemed to control Hampton Investment Properties Limited, which is the top company of the Hampton group as it now stands, due to its holding being over 50% of the voting rights.
The conversion of debt into equity increased the Company's holding from 6,100,000 to 119,524,490 ordinary shares representing a 62.1% majority holding. Other than the conversion of the CULS, no further consideration was transferred on the acquisition date. Subsequently, on 25 March 2011, Hampton issued an additional 11,573,281 ordinary shares for a net consideration of £1,221,000, increasing the Company's majority holding to 68.1%.
The following table summarises the consideration paid for Hampton and the amounts of the assets acquired and liabilities recognised at the acquisition date, as well as the fair value at the acquisition date of the non-controlling interest in Hampton. This note describes which line items of the comparative balances have been restated.
| 31 January 2011 | |
|---|---|
| £'000 | |
| consideration | |
| Equity instruments (6,100,000 ordi nar y shares of Hampton) | 4,338 |
| CULS conversion | 4,236 |
| Total consideration transferred | 8,574 |
| Fair value of the Company's interest in Hampton held before the business combination | 4,298 |
| 12,872 |
| 31 January 2011 | |
|---|---|
| £'000 | |
| Investment property | 41,555 |
| Motor vehicles and equipment | 10 |
| Work in progress – property under construction | 1,170 |
| Current financial assets | 712 |
| Cash at bank | 456 |
| Current financial liabilities | (4,597) |
| Bank loans | (18,578) |
| Total identifiable net assets | 20,728 |
| Non-controlling interest in Hampton | ( 7,856) |
| 12,872 |
The consolidation of Hampton has no impact on the profit and loss of the Group for the year ended 31 January 2011 as control was assumed on the last day of the financial year.
Had Hampton been consolidated from 1 February 2010 the consolidated statement of comprehensive income for the year ended 31 January 2011 would have included revenue of £ 10,625,000 and total profits of £ 9,646,000.
Included in the consolidated statement of comprehensive income since 31 January 2011, contributed by Hampton, is revenue of £ 3,393,000 and profits of £ 1,005,000.
There was no impact on the net assets of the Group at 31 January 2011 as the Company's investment in Hampton was valued by reference to its net asset value prior to this adjustment.
Both the pre-existing investment in ordinary shares and the CULS were held at fair value and therefore no gain arose on the settlement of the pre-existing holding.
| Restated | ||||
|---|---|---|---|---|
| Group | Group | Company | Company | |
| 2012 | 2011 | 2012 | 2011 | |
| £'000 | £'000 | £'000 | £'000 | |
| Amounts owed by Subsidiary | – | – | 775 | 9,232 |
| Amounts due from brokers | 522 | – | 522 | – |
| Accrued income | 24 | 2 42 | 24 | 242 |
| Other debtors | 1,28 9 | 3,2 88 | 1,30 9 | 2,425 |
| 1,83 5 | 3,530 | 2,6 30 | 11,899 |
| Restated* | |||||
|---|---|---|---|---|---|
| Group | Group | Company | Company | ||
| 2012 | 2011 | 2012 | 2011 | ||
| falling due in less than one year | £'000 | £'000 | £'000 | £'000 | |
| £9 million multi currency loan facility to 31 July 2011 amount drawn** | – | 5,786 | – | 5,786 | |
| Short term loan*** | – | 498 | – | – | |
| – | 6,284 | – | 5,786 |
| Restated* | ||||
|---|---|---|---|---|
| Group | Group | Company | Company | |
| 2012 | 2011 | 2012 | 2011 | |
| amounts falling due in more than one year | £'000 | £'000 | £'000 | £'000 |
| Hampton Investment Property Limited | ||||
| bank loans* * | 21,869 | 18,080 | – | – |
| 21,869 | 18,080 | – | – |
| Restated* | ||||
|---|---|---|---|---|
| Group | Group | Company | Company | |
| 2012 | 2011 | 2012 | 2011 | |
| £'000 | £'000 | £'000 | £'000 | |
| Amounts due to brokers | – | 2 | – | 2 |
| Other creditors and accruals | 1,072 | 6, 311 | 235 | 1,714 |
| 1,072 | 6, 313 | 235 | 1,716 |
* The amounts at 31 January 2011 have been restated to reflect the consolidation of the subsidiary undertaking, Hampton Investment Properties Limited.
| 2012 | 2012 | 2011 | 2011 | |
|---|---|---|---|---|
| No. of units | £'000 | No. of units | £'000 | |
| group and company | ||||
| Balance at beginning of year | 1,970,800 | 84 | 3,587,825 | 152 |
| Converted during the year | (171, 301) | (7) | (507,025) | (21) |
| Bought back in year | – | – | (1,110,000) | (47) |
| Balance at end of year | 1,799,49 9 | 77 | 1,970,800 | 84 |
The CULS include an equity component as well as debt. As explained in note 1.( p), the equity component is shown in the CULS Reserve.
The CULS were issued in units of 5p. The CULS units are redeemable at par on 31 May 2013, unless previously redeemed, purchased by the Company or converted at the option of the holder.
During the year ended 31 January 2012, 171,301 (2011: 507,025) CULS units were converted into Ordinary Shares of 5p each at the rate of one 5p Ordinary Share for every unit of 5p.
No CULS units were purchased for cancellation during the year (2011: 1,110,000).
The remaining CULS units are convertible into Ordinary Shares of 5p each at the rate of one 5p Ordinary Share for every unit of 5p one month after despatch of the audited accounts in each of the years 2012 to 201 3 inclusive. Interest at the rate of 0.5p gross per 5p unit per annum is payable on 31 January each year.
| 2012 | 2012 | 2011 | 2011 | |
|---|---|---|---|---|
| Number | £'000 | Number | £'000 | |
| – issued and fully paid: | ||||
| Ordinary Shares of 5p: | ||||
| Balance at beginning of year | 14,057,252 | 703 | 14,824,227 | 741 |
| Conversion of CULS | 171,301 | 9 | 507,025 | 26 |
| New issue of shares | – | – | 100,000 | 5 |
| Cancellation of shares | (115,000) | (6) | (1,374,000) | (69) |
| Balance at end of year | 14,113,553 | 706 | 14,057,252 | 703 |
During the year, 171,301 (2011: 507,025) CULS units were converted into Ordinary Shares of 5p as detailed in note 14.
Since 31 January 2012, a total of nil Ordinary Shares have been purchased by the Company for cancellation. As at the date of this report, the Company's issued share capital consists of 14,113,553 Ordinary shares of 5p nominal value each.
There are contingent rights to subscribe for Ordinary Shares of 5p each pursuant to:
There are Options under the 2011 Executive Share Option Scheme totalling 430,000 (2011: 20,000 Options under the 2002 Executive Share Option Scheme) remaining, details of which are given on page 29 in the Directors' Remuneration Report. These Options have been granted to investment management employees of the Joint Manager.
cash expendedfrom operations Group Group Company Company 2012 2011 2012 2011 £'000 £'000 £'000 £'000 Total (losses)/gains from ordinary activities before finance costs and taxation ( 9,958) 40,607 (11, 077) 40,607 Losses /(gains) on investments 11,305 (37,849) 10, 439 (42,468) Share of net return of associate ( 71) (4,619) – – Share based remuneration 191 – 191 – Provision for Subsidiary – – (43) 530 Depreciation (5) – – – Dividends and interest reinvested (93) (649) (93) (649) Decrease/(increase) in debtors and accrued income 1, 845 (1,324) 1 ,113 (1,324) Changes relating to investments of dealing Subsidiary 581 530 – – ( Decrease)/increase in creditors and accruals ( 5, 208) 158 (1,448) 158
| At | At | ||
|---|---|---|---|
| 1 February | Cash | Exchange | 31 January |
| 2011 | flow | movement | 2012 |
| £'000 | £'000 | £'000 | £'000 |
| 30, 799 | (8,859) | 260 | 22,200 |
| 21,812 | (1,148) | 260 | 20,924 |
| Restated |
Cash expended from operations (1, 413) ( 3,146) (918) ( 3,146)
| Restated | ||||
|---|---|---|---|---|
| At | At | |||
| net debt | 1 February | Cash | Exchange | 31 January |
| 2011 | flow | movement | 2012 | |
| £'000 | £'000 | £'000 | £'000 | |
| Group | ||||
| Loans falling due in less than one year | 6,284 | ( 6,458) | 174 | – |
| Loans falling due in more than one year | 18,080 | 3,789 | – | 21,869 |
| 2 4,364 | (2, 669) | 174 | 21,869 | |
| Company | ||||
| Loans falling due in less than one year | 5,786 | (5,960) | 174 | – |
During the year, the Board has undertaken a review of the risks facing the Company. An explanation of the Group's financial risk management objectives, policies and strategy can be found in the Group Report of the Directors on pages 14 to 21.
The Group's financial instruments comprise its investment portfolio, cash balances, derivatives contracts, borrowing facilities, loan stock and trade receivables and trade payables that arise directly from its operations. Note 1 (on pages 40 to 46) sets out the accounting policies, including criteria for recognition and the basis for measurement, applied to significant financial instruments (excluding cash at bank and bank loans) which are carried at fair value. Note 1 also includes the basis on which income and expenses arising from financial assets and liabilities are recognised.
To support its investment in unquoted companies, the Group may periodically agree to guarantee all or part of the borrowings of investee companies. Provision is made for any costs that may be incurred when the Directors consider it likely that the guarantee will crystallise.
The main risks arising from the Group's financial instruments are:
The Company Secretary in close co-operation with the Board of Directors and the Joint Managers, co-ordinates the Group's risk management. The policies for managing each of these risks are summarised below and have been applied throughout the year.
The fair value or future cash flows of a financial instrument held by the Group may fluctuate because of changes in market prices. This market risk comprises currency risk, interest rate risk and other price risk. The Board of Directors reviews and agrees policies for managing these risks, which policies have remained substantially unchanged from those applying in the year ended 31 January 2011. The Joint Managers assess 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.
The Group's total return and net assets can be materially affected by currency translation movements as a significant proportion of the Group's assets are denominated in currencies other than Sterling, which is the Group's functional currency. It is not the Group's policy to hedge this risk on a continuing basis but the Group may, from time to time, match specific overseas investment with foreign currency borrowings. The Joint Managers seek, when deemed appropriate, to manage exposure to currency movements on borrowings by using forward foreign currency contracts as a hedge against potential foreign currency movements. At 31 January 2012, the Group had no open forward currency contracts (2011: none).
The revenue account is subject to currency fluctuation arising on overseas income. The Group does not hedge this currency risk.
Foreign currency exposure by currency of denomination:
| group and company | ||||||
|---|---|---|---|---|---|---|
| 31 January 2012 | 31 January 2011 | |||||
| Overseas | Net monetary | Total currency | Overseas | Net monetary | Total currency | |
| investments | assets | exposure | investments | assets | exposure | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| US Dollar | 60,023 | 13,086 | 73,109 | 74,502 | 16,703 | 91,205 |
| New Zealand Dollar | 11,521 | – | 11,521 | – | – | – |
| Euro | 995 | – | 995 | 685 | (5,794) | (5,109) |
| 72,539 | 13,086 | 85,625 | 75,187 | 10,909 | 86,096 |
Sensitivity analysis is based on the Group's monetary foreign currency financial instruments held at each balance sheet date . If Sterling had moved by 10% against all currencies, with all other variables constant, net assets would have moved by the amounts shown below. The analysis is shown on the same basis for 2011.
| 31 January 2012 | 31 January 2011 | ||||
|---|---|---|---|---|---|
| 10% | 10% | 10% | 10% | ||
| weakening | strengthening | weakening | strengthening | ||
| £'000 | £'000 | £'000 | £'000 | ||
| US Dollar | 8,123 | (6,646) | 10,134 | (8,291) | |
| NZ Dollar | 1,280 | (1,047) | – | – | |
| Euro | 111 | (90) | (567) | 464 | |
| 9,514 | (7,78 3) | 9,567 | (7,827) |
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 Group's objectives.
Interest rate movements may affect;
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 and borrowing under the multicurrency loan facility.
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.
The Group finances part of its activities through borrowings at levels approved and monitored by the Board.
Movements in interest rates would not significantly affect net assets attributable to the Group's Shareholders and total profit.
The Company had a multi-currency loan Revolving Credit Facility of up to £9 million which expired on 31 July 2011. All loan drawdowns were repaid in full on maturity. The facility was not renewed.
The subsidiary undertaking, Hampton Investment Properties Limited, ha s a five year term loan with RBS which is secured over its inves tment property. The loan bears interest at the rate of LIBOR plus 2.76% and is repayable on 2 February 2016.
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 Group's exposure to price risk comprises mainly movements in the value of the Group'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 Group's investment portfolio analysed by sector was as set out on page 6.
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 Joint Manager. The Board meets regularly and at each meeting reviews investment performance. The Board monitors the Joint Managers compliance with the Company's objectives and is directly responsible for investment strategy and asset allocation.
When appropriate, derivative contracts are used to hedge against the exposure to price risk.
The Group's exposure to other changes in market prices at 31 January 2012 on its quoted and unquoted investments and options on investments was as follows:
| Restated | ||||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Group | Group | Company | Company | |
| £'000 | £'000 | £'000 | £'000 | |
| Financial assets at fair value through profit or loss | ||||
| – Non current investments at fair value through profit or loss | 1 63,174 | 1 74,575 | 198,317 | 207,771 |
| – Non current investment propert y | 41,6 54 | 41,555 | – | – |
| Financial assets at fair value through profit or loss and held for trading | ||||
| – Current asset investments | 1,093 | 550 | – | – |
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 Group's equities. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the Group's equities and equity exposure through options at each Balance Sheet date, with all other variables held constant.
| 2012 | 2011 | ||||
|---|---|---|---|---|---|
| Increase in | Decrease in | Increase in | Decrease in | ||
| fair value | fair value | fair value | fair value | ||
| £'000 | £'000 | £'000 | £'000 | ||
| Increase/(decrease) in net assets | 2 0,487 | (2 0,487) | 21, 614 | ( 21, 614) | |
This is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities.
The Group invests in equities and other investments that are readily realisable. It invests in property through the subsidiary Hampton Investment Properties Limited. As at 31 January 2012, the Group ha s a five year loan facility with RBS.
The Group 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 Group'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:
| Restated | ||||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Group | Group | Company | Company | |
| £'000 | £'000 | £'000 | £'000 | |
| financial assets neither past due or impaired | ||||
| Fixed income securities | 2,75 1 | 3,319 | 2,75 1 | 3,319 |
| Preference shares | 22,200 | 25,839 | 22,200 | 25,839 |
| Treasury Bills | – | 24,836 | – | 24,836 |
| Accrued income and other debtors | 1,085 | 1,341 | 1,085 | 1,190 |
| Cash and cash equivalents | 22,200 | 30, 799 | 20,924 | 21,812 |
| 48,236 | 8 6,134 | 4 6,960 | 76,996 |
The maximum credit exposure of financial assets represents the carrying amount. There are no financial assets that are past due or impaired.
There are no commitments giving rise to credit risk as at 31 January 2012.
The fair value for each class of financial assets and liabilities of the Group, compared with the corresponding amount in the Balance Sheet was as follows (trade receivables and trade payables, are excluded from the comparison, as their carrying amounts are a reasonable approximation of their fair value).
| Restated | ||||
|---|---|---|---|---|
| 31 January 2012 | 31 January 2011 | |||
| Balance | Balance | |||
| Fair value Sheet value | Fair value Sheet value | |||
| financial assets | £'000 | £'000 | £'000 | £'000 |
| Financial assets at fair value through profit or loss | ||||
| – Non current assets | 163,174 | 163,174 | 174,575 | 174,575 |
| Financial assets at fair value through profit or loss and held for trading | ||||
| – Current asset investments | 1,093 | 1,093 | 550 | 550 |
| Loans and receivables | ||||
| – Cash and cash equivalents | 22,200 | 22,200 | 30, 799 | 30, 799 |
| 186,467 | 186,467 | 205,924 | 205,924 | |
| Restated | ||||
| 31 January 2012 | 31 January 2011 | |||
| Balance | Balance | |||
| Fair value Sheet value | Fair value Sheet value | |||
| financial liabilities | £'000 | £'000 | £'000 | £'000 |
| Other financial liabilities | ||||
| – Multi-currency loan | – | – | ( 6,284) | ( 6,284) |
| – Hampton term loans | (21,869) | (21,869) | (18, 080) | (18, 080) |
| – CULS | (77) | (77) | (84) | (84) |
| ( 21,946) | ( 21,946) | ( 2 4,448) | ( 2 4,448) | |
fair values are derived as follows:
The Company adopted the amendment to IFRS 7, effective 1 January 2009. This requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Quoted prices provided by external pricing services, brokers and vendors are included in Level 1, if they reflect actual and regularly occurring market transactions on an arms length basis.
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 determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the Balance Sheet date, without adjustment for transaction costs necessary to realise the asset.
The table below sets out fair value measurements of financial assets in accordance with the IFRS 7 fair value hierarchy system:
At 31 January 2012
| Total | Level 1 | Level 2 | Level 3 |
|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 |
| 160,42 3 | 75,20 5 | – | 85,218 |
| 2,75 1 | – | – | 2,75 1 |
| 163,174 | 75,20 5 | – | 87,969 |
| Total | Level 1 | Level 2 | Level 3 |
| £'000 | £'000 | £'000 | £'000 |
| 146,420 | 47,445 | – | 98,975 |
| 28,155 | 24,836 | – | 3,319 |
| 174,575 | 72,281 | – | 1 02,294 |
company
At 31 January 2012
| Total | Level 1 | Level 2 | Level 3 | |
|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | |
| Equity investments | 195,56 6 | 95, 600 | – | 99,966 |
| Fixed interest investments | 2,75 1 | – | – | 2,75 1 |
| Total | 198,317 | 95, 600 | – | 102,71 7 |
| At 31 January 2011 | ||||
| Total | Level 1 | Level 2 | Level 3 | |
| £'000 | £'000 | £'000 | £'000 | |
| Equity investments | 179,616 | 67,769 | – | 111,847 |
| Fixed interest investments | 28,155 | 24,836 | – | 3,319 |
| Total | 207,771 | 92,605 | – | 115,166 |
A reconciliation of fair value measurements in Level 3 is set out below.
At 31 January 2012
| Fixed | |||
|---|---|---|---|
| Equity | interest | ||
| Total | investments | investments | |
| £'000 | £'000 | £'000 | |
| Opening Balance | 102,294 | 98,975 | 3,319 |
| Purchases | 9,620 | 8,819 | 801 |
| Sales | ( 14,089) | (13,644) | (445) |
| Transfers from Level 3* | (6,500) | (6,500) | – |
| Total gains or (losses) included in gains on investments | |||
| in the Statement of Comprehensive Income: | |||
| – on assets sold | 1,576 | 1,576 | – |
| – on assets held at the end of the year | ( 4,932) | (4,008) | (92 4) |
| Closing balance | 87,969 | 85,218 | 2,75 1 |
* Transfers from Level 3 relate to holdings that were unlisted in the prior year but became listed (in Level 1) during the year to 31 January 2012.
At 31 January 2012
| Fixed | |||
|---|---|---|---|
| Equity | interest | ||
| Total | investments | investments | |
| £'000 | £'000 | £'000 | |
| Opening Balance | 115,166 | 111,847 | 3,319 |
| Purchases | 10,816 | 10,015 | 801 |
| Sales | (14,089) | (13,644) | (445) |
| Transfers from Level 3* | (6,500) | (6,500) | – |
| Total gains or (losses) included in gains on | |||
| investments in the Statement of | |||
| Comprehensive Income: | |||
| – on assets sold | 1,576 | 1,576 | – |
| – on assets held at the end of the year | ( 4,252) | ( 3,328) | ( 924) |
| Closing balance | 102,717 | 99,966 | 2,751 |
* Transfers from Level 3 relate to holdings that were unlisted in the prior year but became listed (Level 1) during the year to 31 January 2012.
The Company's capital management objectives are:
– to ensure that the Company will be able to continue as a going concern, and
– to maximise the income and capital return to its equity Shareholders through an appropriate
balance of equity capital and debt. The policy is that gearing should not exceed 30% of net assets.
The Company's capital at 31 January comprises:
| 2012 | 2011 | |
|---|---|---|
| £'000 | £'000 | |
| Debt | ||
| Borrowings under the multi-currency loan facility | – | 5,786 |
| CULS | 77 | 84 |
| Equity | ||
| Equity share capital | 706 | 703 |
| Retained earnings and other reserves | 220,85 3 | 233,193 |
| 221,63 6 | 239,766 | |
| Debt as a % of net assets | 0.0% | 2.5% |
The Board, with the assistance of the Joint Managers 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 Joint Managers' views on the market;
– the need to buy back equity Shares for cancellation, which takes account of the difference between
the net asset value per share and the Share price (i.e. the level of share price discount or premium); – the need for new issues of equity Shares; and
– the extent to which revenue in excess of that which is required to be distributed should be retained.
The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
The Joint Manager, Harwood Capital LLP, is regarded as a related party of the Company and acts as Investment Manager or Investment Adviser of the following companies in which the Company has an investment and from which companies the Joint Manager receives fees or other incentives for its services. The amounts payable to the Joint Manager are disclosed in note 3. The relationships between the Company, its Directors and the Joint Managers are disclosed in the Group Report of the Directors on pages 14 to 21.
The relevant companies and the annual fees receivable as derived from the last audited accounts are:
| Services | Fees | |
|---|---|---|
| Oryx International Growth Fund Limited | Investment Advisory | £5 78,000 |
| Trident Private Equity II LP | Investment Advisory | £5 81,000 |
| Trident Private Equity III LP | Investment Advisory | £1,080,000 |
Christopher Mills is Chief Investment Officer and a member of Harwood Capital LLP.
As discussed previously on page 19, Kristian Siem is chairman of Siem Industries Inc. One of Siem Industries Inc's indirect wholly owned subsidiaries, Siem Kapital AS, entered into a joint venture agreement with Harwood Capital LLP to establish SINAV Limited specifically for the purpose of acquiring GTL Resources Plc. The Company has an investment in SINAV Limited.
Christopher Mills, the Chief Executive and Investment Manager is also a director of Oryx International Growth Fund Limited (Oryx).
Harwood Capital LLP is investment manager to Oryx and investment adviser to Trident Private Equity II LP and Trident Private Equity III LP and receives fees from them.
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 options or shares: Sunlink Health Systems Inc, Bionostics Holdings Limited, Hampton Investment Properties, Izodia PLC, Second London American Trust PLC (in members' voluntary liquidation), Oryx International Growth Fund Limited, Glass America, Inc, Progeny, Inc, Global Options, Celsis International Limited and MJ Gleeson PLC. Employees of the Joint Manager may hold options over shares in investee companies. A total of £ 43,000 in directors fees from these companies 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 the Joint Manager. Members and private clients of the Joint Manager and its associates (excluding Christopher Mills and the Chairman) hold 130,393 shares in the Company (2011: 142,493).
Members and employees of the Joint Manager, and institutional and private clients of the Joint Manager, Harwood Capital LLP may co-invest in the same investments as the Company.
The Hon. P D E M Moncreiffe is a director of Crendon Industrial in which the Company has an interest.
From time to time Directors may co-invest in the same investments as the Company.
At 31 January 2012 amounts due from the Consolidated Venture Finance Limited (CVF) were £ 928,000 (2011: £9,232,000). Amounts due from Hampton Investment Properties Limited were £480,000 (2011: £nil).
The Hon. P D E M Moncreiffe (Chairman) C H B Mills (Chief Executive) K Siem C L A Irby E F Gittes
Harwood Capital LLP (Authorised and regulated by the Financial Services Authority) Ground Floor Ryder Court 14 Ryder Street London SW1Y 6QB Telephone: 020 7747 5678
Westhouse Securities Limited One Angel Court London EC2R 7HJ
Bonita Guntrip ACIS Ground Floor Ryder Court 14 Ryder Street London SW1Y 6QB Telephone: 020 7747 5681
Capita Registrars 34 Beckenham Road Beckenham Kent BR3 4TU
KPMG Audit Plc 15 Canada Square London E14 5GL
Allied Irish Bank, p.l.c. St Helen's 1 Undershaft London EC3A 8AB
NOTICE IS GIVEN that the ANNUAL GENERAL MEETING of North Atlantic Smaller Companies Investment Trust PLC will be held on Wednesday 27 June 2012, at midday in the Board Room, Ground Floor, Ryder Court, 14 Ryder Street, London SW1Y 6QB for the following purposes:
To consider the following resolutions of which resolutions 10, 11 and 12 will be proposed as special resolutions:
THAT the Directors be generally and unconditionally authorised to exercise all the powers of the Company to allot relevant securities for the purposes of Section 551 of the Companies Act 2006 ("the Act") up to an aggregate nominal amount of £23 5,225 provided that this authority shall expire at the conclusion of the next Annual General Meeting of the Company after the date of the passing of this resolution, except that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities in pursuance of any such offer or agreement as if the authority conferred by this resolution had not expired and that this authority shall be in substitution for all previous authorities conferred upon the Directors pursuant to Section 551 of the Act but without prejudice to the allotment of any relevant securities already made or to be made pursuant to such authorities.
(ii) the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity securities up to an aggregate nominal amount of £3 5,283; and shall expire at the conclusion of the Annual General Meeting of the Company after the date of the passing of this resolution except that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred by this resolution had not expired.
THAT the Company be and is hereby generally and unconditionally authorised, in accordance with the Company's Articles of Association and section 701 of the Act, to make market purchases (within the meaning of section 693(4) of the Act) of Ordinary Shares of 5p each in the capital of the Company ("Ordinary Shares") on such terms and in such manner as the Directors may from time to time determine provided that:
THAT a general meeting other than an Annual General Meeting may be called on no less than 14 clear days notice.
Dated this 23 day of May 2012
By order of the Board
Bonita Guntrip ACIS Company Secretary
Registered Office: Ground Floor, Ryder Court 14 Ryder Street London SW1Y 6QB Registered No. 1091347
| 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 Com pany's share price can be found on: | |||
| Reuters: | convertible Loan Stock NASp.L | |||
| Bloomberg: | NAS. LN | |||
| SEAQ Ordinary Shares: | NAS | |||
| Trustnet: | www.trustnet.ltd.uk | |||
| net asset value | www. harwoodcapital.co.uk | The latest net asset value of the Company can be found on the Harwood Capital LLP website : | ||
| 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. |
|||
| [email protected] | The Company's registrars are Capita Registrars. In the event of any queries regarding your holding of shares, please contact the registrars on: 087 1 664 0384, or by email on |
|||
| Changes of name or address must be notified to the registrars in writing at: | ||||
| Capita Registrars | ||||
| The Registry | ||||
| 34 Beckenham Road | ||||
| Beckenham | ||||
| Kent BR3 4TU |
notes
north atlantic smaller companies investment trust plc
notes
Cover Image: The Battle of The Saints, 12 April 1782 Thomas Luny, Late 18th c – Early 19th c © National Maritime Museum, Greenwich, London
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