North Atl.smlr Regulatory News (NAS)

North Atlantic Smaller Companies Investment Trust plc ("NASCIT")

Annual Report for the year ended 31 January 2014

NASCIT is pleased to announce its results for the year ended 31 January 2014.

The preliminary financial information, which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Statements of Changes in Equity, the Consolidated Statement of Financial Position and the Consolidated Statement of Cash Flows of the Group together with the related explanatory notes has been prepared on the basis of the accounting policies as set out in the audited financial statements for the year ended 31 January 2014 and International Financial Reporting Standards and Interpretations issued by the International Accounting Standards Board as adopted for use in the EU ("IFRS").

During the year ended 31 January 2014, the Group has adopted IFRS 13. These changes have not resulted in any material changes to the Group's financial statements as previously reported.

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 January 2014 or 2013 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the registrar of companies, and those for 2014 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

HIGHLIGHTS

Chairman's statement

It is particularly pleasing to note thirty years after the appointment of the current manager that the Company has had another very good year with the net asset value reaching a new all-time high. Adjusting for the Convertible Unsecured Loan Stock over the years, the net asset value now represents a gain of approximately 50x over the 30 years. This constitutes an IRR of almost 14%.

Over the last year the fully diluted net asset value rose by 21.5% outperforming the sterling-adjusted Standard and Poors Composite Index which rose 14.8%. The revenue account showed a profit after tax attributable to Shareholders of £45,000 (2013: loss of £494,000). In accordance with the Company's long standing policy, the Directors are not recommending the payment of a dividend (2013: £nil).

During the year, the Company purchased 33,298 ordinary shares for cancellation. Given the Company's strong cash resources, this policy is likely to continue in the current year. Also during the year, all of the remainingunits of Convertible Unsecured Loan Stock 2013 were converted, either by the holders themselves who elected to convert their stock on the final conversion date, 30 April 2013, or by the Trustee of the Stock, the Law Debenture Trust Corporation plc, using its discretionary conversion powers. There are no longer any units of Convertible Unsecured Loan Stock 2013 in issue.

A commentary on the performance of the different parts of the portfolio can be found in the Investment Manager's report.

The rise in the stock markets over the past year can principally be attributed to the continuing easy monetary conditions and the search by investors for yield in a low interest rate environment.

Despite relatively modest profits growth (the S&P saw earnings rise by about 7%), large companies' share prices have risen considerably, while in the technology sector it is hard to rationalise some valuation levels.

Smaller company shares have also performed well as they benefit from the steady recovery in the US and British economies. This, however, makes it increasingly difficultfor the Trust to find new investments at attractive valuations.

Nevertheless the current year has started well and I am hopeful that we shall see a further advance in the net asset value, although it is unlikely to be of the same magnitude as the last two years' outstanding performance.

The Hon. P D E M Moncreiffe Chairman

20 May 2014

Investment managers' report

quoted portfolio

United Kingdom

The outstanding feature in the United Kingdom portfolio was the rise of over 100% in the price of MJGleeson which added approximately £21 million to the net asset value over the twelve month period on the back of dramatically improved profitability and encouraging prospects for the future.

Oryx International growth Fund also had a good year with the net asset value rising by approximately 40%.

The UK portfolio as a whole performed well with good rises in BBA, Mecom, CVS Group, Essenden and Goals Soccer which was purchased over the course of the year.

United States

The US quoted portfolio is now relatively modest with a small holding in Sunlinkwhich had no impact on the fund during the year.

unquoted portfolio

United Kingdom

One new investment was made during the year, being Team Rock, a magazine and radio business which intends to expand its business into social media.

Orthoproducts was sold at a good profit as was Merchant Properties whilst Crendon, which had been valued at nil, was also sold for in excess of £1 million albeit at a loss to original cost. Hampton had asatisfactory year and we are optimistic that progress will be made in the current year as a number of recent transactions appear to be nicely profitable. Against this, it was deemed prudent to write off the investment in Martley.

TPE II was for the most part liquidated during the period and the remainingtwo investments are likely to be sold during the next twelve months,

TPE III completed four new investments and benefitted from the restructuring of Celsis which enabled 100% of the fund's investment to be repaid.

United States

A small new investment was made in B&G, a leading pest control products businessbased in Atlanta, Georgia.

The Company's largest unquoted investment, Bionostics, was successfully sold during the period, realising a profit of £16.8 million for the Company. Celsis was revalued upwards reflecting continuing excellentoperational performance and the successfulsale of a non-core subsidiary. Glass America has been merged with a competitor resultingin significant operating synergies and is likely tobe sold over the next eighteen months. Performance Chemicalsand Sinav Limited were written up during the year, reflecting excellent operating performance.

Finally the Company's holdingsin five small banks are performing well with good increases in profitability across the portfolio.

Christopher H B Mills Chief Executive & Investment Manager

20 May 2014

sector analysis of investments at fair value

as at 31 January

The sector analysis excludes investments held by the subsidiary undertakings, Hampton Investment Properties Limited and Consolidated Venture Finance Limited.

twenty largest investments

as at 31 January

*incorporated in Guernsey.

**incorporated in New Zealand.

†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.

strategic report

The Directors present the strategic report of the Company for the year ended 31 January 2014.

principal activity

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

objective

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

strategy

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

investment policy

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

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

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

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

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

investment approach

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

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

When analysing a potential investment, the Joint 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 cash flow. The Joint Managers will consider the balance of listed and unlisted securities in the portfolio when deciding whether to invest in an unquoted stock as they are aware that the level of risk in unquoted securities may be considered higher.

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

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 riskmanagement objectives and policies relatingto the use of financialinstruments can be found in note17 to the financialstatements.

performance

At 31 January 2014, the diluted net asset value ("NAV") per share was 2,037p (31 January 2013: 1,677p), an increase of 21.5% during the year, compared to an increase of 14.8% during the year in the Standard & Poor's 500 Composite Index (Sterling adjusted). Net assets attributable to equity holders at 31 January 2014 amounted to £326,161,000 compared with £267,743,000 at 31 January 2013.

As reported in the Chairman's Statement above, the Company has had a very good year significantly outperforming its benchmark. Several of the investments in the unquoted portfolio were sold during the year, including Bionostics,which had been the Company's largest unquoted investment and the sale of which generated a very substantial profit for the Company.

results and dividends

The total net return after taxation for the financialyear ended 31 January 2014 amounted to £58,515,000 (2013: £45,512,000). The Board does not propose a final dividend (2013: nil).

key performance indicators

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

(i) Net asset value per ordinary share:

 (ii) Share price return:

(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 (Sterling adjusted), the Company's benchmarks. A graph comparing performance can be found in the Directors' Remuneration Report of the Annual Report.

principal risks and uncertainties

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

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

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

• Investments in unquoted stocks, by their nature, involve a higher degree of risk than investments in the listed market. The valuation of unlisted investments can include a significantelement of estimation based on professional assumptions that is not always supported by prices from current market transactions. Recognised valuation techniques are used and recent arms' length transactions in the same or similar entitiesmay be taken into account. Clearly the valuation of such investments is therefore a key uncertainty but the Board manages this risk by regularly reviewing the valuation principlesapplied by the Joint Managers to ensure that they comply withthe Company's accountingpolicies and with fair value principles. The Joint Managers have also established a Valuations and Pricing Committee which meets regularly throughout the year to review and agree the valuations of the investments in the portfolio for onward submission to the Board. The Company's independent auditors also attend these Committee meetings.

• Discount volatility: the Company's shares historically trade at a discount to its underlying net assetvalue. The Company has a share buyback programme in place to try to narrow this discount as far as possible by cancelling shares that it repurchases. The Company repurchased a total of 33,298 ordinary shares for cancellation during the year.

• Regulatory risk: any breach of a number of regulations applicable to the Company, the UKLA's ListingRules 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.

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

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

future prospects

The Directors are hopeful that the year ending January 2015 will see continued progress and further enhancement in the Company's net asset value although it is unlikely to be of the same magnitude as the performance over the last two years which benefited from the realisation of the Company's largest unlisted investment, Bionostics,at a very substantial profit. However, several of the investments in the portfolio are up for sale or have received offers from interested parties so it is possible that these may be realisedduring the coming year.

social, community and human rights issues

As an investment trust with no employees, property or activities outside investment, the Company has no direct social or community responsibilities and the Board do not believe that the Company's business has an impact on the environment so no policies regarding social and community issues are in place. 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.

The Company has no employees. The Directors of the Company and their biographies are set out in the annual Report. There are currently five Directors of the Company, four of whom are non-executive and they are all male. The Board is wholly supportive of boardroom diversity and when a board vacancy arises, the Nominations Committee will ensure that appointments are made on merit, whilst taking intoconsideration a variety of factors including relevant skills and experience, knowledge, ethnicity and gender.

greenhouse gas emissions

The Company has external Joint Managers and has no physical assets, operations, premises or employees of its own. Consequently it has no greenhouse gas emissions to report. Hampton Investment Properties Limited, a property investment and development company, in which the company has a 68.1% holding, owns a portfolio of commercial properties which it leases out to third party tenants and the Company is required to report on this. It has not been practical to obtain this information as Hampton is not required to collate such information for its own reporting purposes thus the information is not readily available. However the Board has communicated its views on environmental matters to Hampton's management team and requested that they strive to minimise any impact on the environment.

AIFMD

The Alternative Investment Fund Managers Directive comes into effect later this year. The Company will shortly be appointing an AIFM and depository under the requirements of this legislation.

By Order of the Board

Bonita Guntrip ACIS

Company Secretary

W1J 8LD

20 May 2014

Group report of the Directors

for the year ended 31 January

The Directors present their report to Shareholders and the financialstatements for the year ended 31 January 2014. Certain information that is required to be disclosed in this report has been provided in other sections of this Annual Report and accordingly, these are incorporated into this report by reference.

Taxation status

In the opinion ofthe Directors, the Company has conducted its affairs during the period under review, and subsequently, so as to maintain its status as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Company has made a successful application under Regulation 5 of the Investment Trust (Approved Company) (Tax) Regulations 2011 for investment trust status to apply to all accountingperiods starting on or after 1 February 2012 subject to the Company continuing to meet the eligibility conditions containedin Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements outlined in Chapter 3 of Part 2 of the Regulations.

Share capital

The Company's issued share capital consisted of 15,880,736 ordinary shares of5p nominal value each on 31 January 2014. Since the year end, 895,000 Ordinary shares have been repurchased for cancellation meaning that, at the date of this report, the Company had 14,985,736 Ordinary shares in issue. All shares hold equal rights with no restrictions and no shares carry special rights with regard to the control of the Company. There are no special rights attached to the shares in the event that the Company is wound up.

During the year, the Company purchased 33,298 ordinary shares for cancellation. Since the year end, the Company has purchased a further 895,000 Ordinary shares for cancellation. Also during the year, all of the remaining units of Convertible Unsecured Loan Stock 2013 were converted, either by the holders themselves who elected to convert their stock on the final conversion date, 30 April 2013, or by the Trustee of the Stock, the Law Debenture Trust Corporation plc, using its discretionary conversion powers.

There are no longer any units of Convertible Unsecured Loan Stock 2013 in issue.

Share valuations

On 31 January 2014, the middle market quotation and the diluted net asset value per 5p Ordinary Share were 1600.0p and 2037.0p respectively. The comparablefigures at 31 January 2013 were 1,316.0p and 1,677.0p respectively. It should be noted that since the conversion of the outstanding units of Convertible Unsecured Loan Stock 2013, the only dilution on the net asset value is those share options that have been issued to the Chief Investment Officer and certain employees of the Joint Manager.

Substantial shareholders

As at 31 January 2014, the following interests in the Ordinary Shares of the Company which exceed 3% of the issued share capital had been notified to the Company:

Since 31 January 2014, Harwood Holdco Limited, a company owned by Mr C H B Mills has acquired a further 20,500 Ordinary shares of the Company as notified to the London Stock Exchange, taking his total holding to 3,527,349 Ordinary shares.

Directors

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

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