North Atl.smlr Regulatory News (NAS)

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

Annual Financial Report for the year ended 31 January 2012

NASCIT is pleased to announce its audited results for the year ended 31 January 2012

* 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).

Corporate summary

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 is 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

Chairman's statement

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 below.

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

Investment Managers' report

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. 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

Sector analysis of investments at fair value

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 2012

* 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.

Group report of the Directors

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 the 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 Finance 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 OVS 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 top twenty largest investments are set out earlier in this report.

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.

Key performance indicators

The Directors regard the following as the 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, the Company's benchmarks.

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 had been notified to the Company:

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.

Directors

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

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:

* P D E M Moncreiffe's wife is a beneficiary of a trust which purchased 6,500 units of CULS on 3 February 2012.

** 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 (2011: 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 in the Annual Report.

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.

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 of 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.

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. The Board considers that the arrangements between the Chief Executive and the Joint Manager continue to work well.

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 and in the Directors' Remuneration Report. The Investment Management Fees are disclosed in note 3. The Performance Fee payable to GFS is disclosed in the Directors' Remuneration Report and note 3 of the financial statements.

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.

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 in note 15;

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

·; The rules concerning the appointment and replacement of directors are contained in the Company's Articles of Association and are discussed in the Corporate Governance Statement in the Annual Report;

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

·; 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.

Resolution 11 - Special Resolution - Authority to purchase the Company's own Shares

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.

Resolution 12 - Special Resolution - Notice of general meetings

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 shorter 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 in the Annual Report.

Recommendation

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 3,677,129 shares representing 26.05% of the voting rights of the Company.

By Order of the BoardBonita Guntrip ACISCompany SecretaryRegistered Office:

Ground FloorRyder Court14 Ryder StreetLondon SW1Y 6QB

Registered No: 1091347

23 May 2012

Statement of Directors' responsibilities in respect of the Annual Report & Financial Statements 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:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent;

·; state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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:

·; there is no relevant audit information of which the Company's auditors are unaware; and

·; the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the Auditors are aware of that information.

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:

·; the Group financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and

·; the Report of the Directors, incorporating the Chairman's Statement and Investment Manager's Report by reference, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the BoardThe Hon. P D E M MoncreiffeChairman

23 May 2012

Independent Auditor's report

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 . 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, 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 financial 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 in the Annual Report with respect to internal control risk and management systems in relation to the financial reporting processes and about share capital structures is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

·; 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

·; the Parent Company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or

·; certain disclosures of directors' remuneration specified by law are not made; or

·; we have not received all the information and explanations we require for our audit; or

·; A corporate governance statement has not been prepared by the Company.

Under the Listing Rules we are required to review:

·; the Directors' statement in relation to going concern; and

·; the part of the Corporate Governance Statement relating to the Company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and

·; certain elements of the report to Shareholders by the Board on Directors' remuneration.

Salim Tharani (Senior Statutory Auditor)for and on behalf of KPMG Audit Plc, Statutory AuditorChartered Accountants15 Canada SquareLondonE14 5GL

23 May 2012

Consolidated statement of Comprehensive Income

for the year ended 31 January

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 below.

The notes form part of these financial statements.

Consolidated statement of changes in equity

for the year ended 31 January

Restated*

* 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 below.

The notes form part of these financial statements.

Company statement of changes in equity

for the year ended 31 January

The financial statements have been prepared in accordance with the accounting policies below.

The notes form part of these financial statements.

Consolidated and Company balance sheets

as at 31 January

* 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 below.

The notes form part of these financial statements.

Consolidated and Company balance sheets

as at 31 January

* 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 below.

The notes 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, ChairmanCompany Registered Number:

1091347

Consolidated cash flow statement

for the year ended 31 January

* 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 below.

The notes form part of these financial statements.

Company cash flow statement

for the year ended 31 January

* 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 below.

The notes form part of these financial statements.

Notes to the financial statements

for the year ended 31 January

1 accounting policies

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").

new standards and interpretations not yet applied

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.

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.

 (a) basis of preparation/statement of compliance

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.

(b) convention

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.

(c) basis of consolidation

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).

(d) oryx

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.

(e) segmental reporting

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 earlier in this report.

(f) investments

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. The 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:

(i) quoted at market value on a recognised stock exchange

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.

(ii) unlisted at market value

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.

 (iii) unquoted at directors' estimate of fair value

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.

(iv) investment property

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.

(v) current asset investments

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.

(g) options

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.

(h) goodwill

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.

(i) foreign currency

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:

·; investments and other financial instruments measured at fair value through profit or loss; and

·; other monetary items are included in the Statement of Comprehensive Income and allocated as capital if they are of a capital nature, or as revenue if they are of a revenue nature.

Exchange differences allocated as capital are included in the transfer to Capital Reserve.

(j) trade date accounting

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.

(k) income

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.

(l) expenses

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.

(m) share based payments

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 2011 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.

 (n) cash and cash equivalents

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.

(o) bank loans and borrowings

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.

(p) convertible unsecured loan stock (CULS) 2013

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.

(q) taxation

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.

(r) share capital and reserves

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.

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.

2 income

* Includes net dealing losses from Subsidiary trading.

3 investment management fee

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

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

As set out in note 19, no formal arrangements exist to avoid double charging on investments managed or advised by Harwood Capital LLP.

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

(iv) In addition to the management fees disclosed in note 3(ii) above, Harwood Capital LLP is also paid the following:

- an investment management related fee of £125,000 per annum (see note 4). With effect from 1 February 2011, it has been agreed that the activity fee of £225 per transaction will no longer be payable and that in return the investment management related fee will increase to £125,000 per annum. The Joint Manager felt that a fee per transaction meant that it was unattractive to do small trades so this adjustment will remedy that.

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