North Atl.smlr Regulatory News (NAS)

North Atlantic Smaller Companies Investment Trust plc

Annual Report for the year ended 31 January 2016

NASCIT is pleased to announce its results for the year ended 31 January 2016.

The preliminary financial information, which comprises the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Balance Sheets and the Consolidated and Company Statement of Cash Flows 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 2016 and International Financial Reporting Standards and Interpretations issued by the International Accounting Standards Board as adopted for use in the EU ("IFRS").

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 January 2016 or 2015 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 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

* Includes current period revenue.

# The amounts for 31 January 2014 have been restated due to the adoption of IFRS 10. For 31 January 2013, restated NAV figures are shown for comparative purposes.

† Adjusted to reflect Oryx International Growth Fund plc ("Oryx") under the equity method of accounting, which is how the Company previously accounted for its share of Oryx, prior to the adoption of IFRS 10.

chairman's statement

It is with great sadness that we report that our friend and colleague, Charles Irby, passed away last year. Charles was an outstanding Board member and he will be very much missed.

I am pleased to welcome Greville Howard to our Board who brings both investment company and operating experience.

During the period under review, the fully diluted net asset value rose by 21.6% to an all time record of 2,746p per share. This compares with a rise in the sterling adjusted Standard & Poor Composite Index of 2.8%. The FTSE Small Cap Index, to which the Company has greater exposure, fell by 1.3% over the same period.

The revenue account showed a loss after tax attributable to shareholders of £890,000 (2015: £2,182,000). In accordance with the Company's longstanding policy, the Directors do not recommend the payment of a dividend (2015: nil).

During the year under review, the Company purchased 100,000 Ordinary Shares at a cost of £2,195,000 for cancellation. This benefitted all shareholders as the stock was acquired at a favourable discount to the net asset value. In order to continue this policy, shareholders should support Resolution 12 as set out in the Notice of Annual General Meeting.

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

Equity markets are currently experiencing a period of major uncertainty. The decline in the oil price has not only had a deleterious effect on the major energy producers, but their capital expenditure cuts have had a negative effect on overall economic activity worldwide. A similar contraction has been experienced in the mining sector. These resource industries have accounted for more than 12% of global market dividends and other returns of capital in recent years. The current level of aggregate cash returns to equity investors is therefore unlikely to be sustainable, creating downside market risk. The US high yield market is facing considerable disruption with principal repayment risk now threatening a significant number of issues particularly in the resource sector.

The Federal Reserve's ambivalence on interest rates underpins the volatility in equity markets and keeps a lid on share prices. The monetization of debt is not likely to provide a lasting solution to the problems of unserviceable liabilities that triggered the 2007 financial crisis. Any substantial pick-up in real economic demand will drain liquidity from financial assets while economic stagnation will probably generate continued but increasingly ineffectual central bank liquidity injections. In either circumstance equity prices will face headwinds. If it were to happen, Brexit would have little impact on our investments which are not substantially dependent on unfettered access to heavily regulated European markets.

Fortunately, value is now returning to smaller companies and I am optimistic that our Manager will find opportunities arising out of the current situation and will continue to build shareholder value.

Peregrine MoncreiffeChairman

12 May 2016

investment manager's report

quoted portfolio

United Kingdom:

The portfolio benefitted from the excellent performance of MJ Gleeson Group which rose by 64% during the year. Oryx also significantly out performed its target index with the net asset value rising by 26%. Innovation Group, Nationwide Accident Repair Services and Essenden were taken over although the impact was partially offset by the weakness in Goals Soccer Centres following disappointing trading figures. New investments in OMG and Source Bioscience performed well.

United States:

The portfolio had a mixed performance with the IPO and subsequent takeover bid of Avenue Financial and the takeover of Trust Atlantic Financial being partially offset by weakness in Ambac Financial Group following the potential bankruptcy of Puerto Rico.

unquoted portfolio

United Kingdom:

A description of the unquote investments can be found in the Annual Report. There was considerable activity in the portfolio during the period. Industrial Properties repaid approximately £2.5 million of the debt, Hampton Trust is in the process of liquidation. Trident Private Equity II ("TPE II") was liquidated having achieved exceptional performance and Trident Private Equity III ("TPE III") has now returned in excess of the Company's investment. This indicates that this investment will also achieve exceptional returns for the Company.

Team Rock was refinanced during the period supported by third party funding. Finally, Indoor Bowling was taken private since when operating results have been very significantly above business plan.

United States:

The investment in Celsis was sold at a significant premium to the January 2015 valuation following a successful auction of the business. The bank portfolio continues to add value to the Trust and we believe there is further upside potential as the remaining holdings are sold.

No new investments were made in the US during the year.

Liquidity:

The Company ended the year with £131 million held in cash or short term Treasury Bills, most of which was held in US Dollars.

We would expect cash levels to rise further as private equity investments held in TPE III are liquidated and further corporate action in the quoted portfolio adds value to the Company.

The Company is, I believe, well placed to take full opportunity from any downturn in equity values over the next twelve months.

Christopher MillsChief Executive & Investment Manager

12 May 2016

sector analysis of investments at fair value

as at 31 January

twenty largest investments

as at 31 January

* incorporated in Guernsey.

All investments are valued at fair value.

strategic report

The Directors present the strategic report of the Company for the year ended 31 January 2016.

principal activity 

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

objective

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

strategy

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

investment policy

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

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

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

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

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

investment approach

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

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

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

In respect of the unquoted portfolio, regular contact is maintained with the management of prospective and existing investments and rigorous financial and business analysis of these companies is undertaken. It is recognised that different types of business perform better than others depending on economic cycles and market conditions and this is taken into consideration when the Manager selects investments and is therefore reflected within the range of investments in the portfolio. The Company attempts to minimise its risk by investing in a diversified spread of investments whether that spread be geographical, industry type or 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 risk management objectives and policies relating to the use of financial instruments can be found in note 14 to the financial statements.

performance

At 31 January 2016, the diluted NAV per share was 2,746p (2015: 2,259p), an increase of 21.6% during the year, compared to an increase of 2.8% during the year in the Standard & Poor's 500 Composite Index (Sterling adjusted).

The Board feel that a more accurate comparison, given the fact that the current portfolio has limited exposure to quoted US securities, is the fall in the FTSE Small Cap over the year of 1.3%.

Net assets attributable to equity holders at 31 January 2016 amounted to £396,961,000 compared with £328,904,000 at 31 January 2015.

The ongoing charges relating to the Company are 1.1% (2015: 1.2%) based on total expenses, excluding finance costs and non-recurring items for the year and average monthly net assets.

results and dividends

The total net return after taxation for the financial year ended 31 January 2016 amounted to £70,348,000 (2015: £36,040,000). The Board does not propose a final dividend (2015: 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 (Sterling adjusted) 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 Manager. An inappropriate investment strategy may result in under performance against the companies in the peer group or against the benchmark indices. The Board manages this risk by ensuring that the investments are appropriately diverse and by receiving reports from the Manager at every board meeting explaining his investment decisions and the composition and performance of the portfolio.

· Market risk - this category of risk includes currency risk, market price risk and interest rate risk. The fair value or future cash flows of a financial investment held by the Company may fluctuate because of changes in market prices. Also, the valuations of the investments in the portfolio may be subject to fluctuation due to exchange rates or general market prices. The Manager monitors these fluctuations and the markets on a daily basis; the performance of the investment portfolio against its benchmarks is also closely monitored by the Manager. The afore-mentioned graph in the Directors' Remuneration Report illustrates the Company's performance against its benchmarks over the last seven 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 significant element of estimation based on professional assumptions that is not always supported by prices from current market transactions. Recognised valuation techniques are used and recent arms' length transactions in the same or similar entities may be taken into account. Clearly the valuation of such investments is therefore a key uncertainty but the Board manages this risk by regularly reviewing the valuation principles applied by the Manager to ensure that they comply with the Company's accounting policies and with fair value principles. Harwood Capital LLP, a firm which is ultimately owned by Christopher Mills, the Company's Manager, and which provides services such as dealings administration and compliance to the Company, operates a Valuations and Pricing Committee which meets regularly throughout the year to review and agree the valuations of the investments in the portfolio for onward submission to the Board. 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 asset value. 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 100,000 Ordinary Shares for cancellation during the year.

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

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

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

viability statement

The Directors have assessed the viability of the Company over the three years to January 2019, taking account of the Company's position, its investment strategy, and the potential impact of the relevant principal risks and uncertainties detailed above. The Directors considered the potential downside scenarios and assessed the Company's past relative performance during periods of financial crises in making this assessment, taking into account the Company's ability to settle projected liabilities as they fall due. In particular, the Directors took comfort from the concentration of investments currently held in cash and liquid assets. The Company is currently holding a significant part of its investments in liquid Treasury Bills, and positive cash levels are expected to be maintained over the period. Cash balances have remained strong year on year, but could be varied if required by changes in market conditions. Based on this assessment, the Directors are confident that the Company's investment approach and portfolio management policies will ensure that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to January 2019. The Directors determined that a three year period to January 2019 is an appropriate period for which to provide this statement given the Company's long term investment objective, the simplicity of the business model, and the relatively low working capital requirements.

future prospects 

The Directors are hopeful that some of the Company's investments will see corporate activity over the coming year and that the year ending 31 January 2017 will see a further rise in the Company's net asset value.

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 on 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 into consideration a variety of factors including relevant skills and experience, knowledge, ethnicity and gender.

greenhouse gas emissions

The Company has no physical assets, operations, premises or employees of its own. Consequently it has no greenhouse gas emissions to report. Hampton, a property investment and development company, in which the Company has a 71% 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. Also, Hampton is in the process of liquidating its property portfolio. 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 Company is now authorised under the AIFMD as a Small Registered UK Alternative Investment Fund Manager. This means that for AIFMD purposes the Company is internally managed with Christopher Mills making the investment decisions in his capacity as Chief Executive.

By Order of the Board

Derringtons LimitedCompany Secretary

12 May 2016

group report of the directors

for the year ended 31 January

The Directors present their report to Shareholders and the financial statements for the year ended 31 January 2016. Certain information that is required to be disclosed in this report has been provided in other sections of this Annual Report and accordingly, these are incorporated into this report by reference.

taxation status

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

share capital

The Company's issued share capital consisted of 14,442,035 Ordinary Shares of 5p nominal value each on 31 January 2016. Since the year end, 3,515 Ordinary Shares have been repurchased for cancellation. All shares hold equal rights with no restrictions and no shares carry special rights with regard to the control of the Company. There are no special rights attached to the shares in the event that the Company is wound up.

During the year, the Company purchased 100,000 Ordinary Shares for cancellation.

share valuations 

On 31 January 2016, the middle market quotation and the diluted net asset value per 5p Ordinary Share were 2,280p and 2,746p respectively. The comparable figures at 31 January 2015 were 1,845p and 2,259p 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 certain employees of the Joint Manager.

substantial shareholders

As at 31 January 2016, the following interests in the Ordinary Shares of the Company which exceed 3% of the issued share capital had been notified to the Company:

directors

The biographical details for Directors currently in office are shown in the Annual Report. During the year Charles Irby passed away on 15 September 2015 and Lord Howard of Rising was appointed on 26 November 2015.

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 of the Company as at 31 January 2016 and 31 January 2015 were as follows:

* Siem Capital International Limited, a company which is indirectly controlled by a trust of which Kristian Siem and his family are potential beneficiaries, is ultimately interested in 147,000 Ordinary Shares (2015: 147,000 Ordinary Shares).

Save as disclosed, there have been no changes to the above interests between 31 January 2016 and the date of this report.

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

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

significant agreements

The Company is required to disclose details of any 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), Harwood Capital LLP provides 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 the Manager. The Chief Executive carries out day-to-day investment decisions for and on behalf of the Company. As part of this review, the Board is satisfied that the continuing appointment of the Manager, on the terms agreed, is in the best interests of Shareholders. Christopher Mills has been Chief Executive of the Company since 1984 and the Board consider it is in the best interest of the Company for this arrangement to continue.

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

related party transactions

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

Pursuant to the Secondment Services Agreement between the Company, GFS and Christopher Mills and the Management, Administration and Custody Agreement between the Company and Harwood Capital LLP, Christopher Mills is responsible for the day-to-day investment decisions. The Secondment Services Agreement continues until terminated by the Company or GFS on not less than twelve months' notice. Details of the related party transactions and fees payable are disclosed in note 15 and in the Directors' Remuneration Report of the Annual Report. The Investment Management Fees are disclosed in notes 3 and 4 of the Annual Report. Any Performance Fee payable to GFS is disclosed in the Directors' Remuneration Report of the Annual Report and note 3 of the financial statements.

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

institutional investors - use of voting rights

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

donations

The Company does not make any political or charitable donations.

post balance sheet events

There have been no significant events since the balance sheet date other than those highlighted in this annual report.

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 2016 had been paid (31 January 2015 - all supplier invoices paid).

auditors

A resolution to reappoint KPMG LLP 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 11;

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

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

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

· 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 10 - 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 10 will renew the authority to allot Shares of the Company on similar terms. If Resolution 10 is passed the Directors will have the authority to allot Shares up to the aggregate nominal amount of £240,700 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 11 - 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 11 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 £36,105 representing 722,101 Ordinary Shares of 5p each, being equivalent to 5% of the current issued share capital, without first offering such securities to existing Shareholders.

Resolution 12 - 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 12 seeks the authority of Shareholders to purchase a maximum of 1,083,153 Ordinary Shares representing 7.5% 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 13 - 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 13 seeks 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 above resolutions are contained in the Notice of Annual General Meeting in the Annual Report.

recommendation 

The Board considers that resolutions 10 to 13 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 4,129,530 shares representing 28.59% of the voting rights of the Company.

By Order of the Board

Derringtons LimitedCompany SecretaryRegistered Office:6 Stratton StreetMayfairLondonW1J 8LD

Registered No: 109134712 May 2016

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

for the year ended 31 January

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 show and explain the Company's transactions and 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.

The Directors are responsible for ensuring that the Annual Financial Report, taken as a whole, is fair, balanced and understandable.

disclosure of information to auditors

With regard to the preparation of the Annual Report and Financial Statements for the year ended 31 January 2016, the Directors have confirmed to the Auditor that:

· so far as they are aware, there is no relevant audit information of which auditor is unaware; and

· they have taken the steps appropriate as Directors in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

A resolution to reappoint KPMG LLP as auditor of the Company will be proposed at the Annual General Meeting.

statement under the UKLA disclosure and transparency rules

Each of the Directors, whose names and biographies are listed in the Annual Report confirm that, to the best of his knowledge:

· the Group and the company's Financial Statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit/loss of the Group and Company; and

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces; and

· the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company's performance, business model and strategy.

For and on behalf of the BoardPeregrine MoncreiffeChairman12 May 2016

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 ("IAS") 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 ("SORP") issued by the AIC.

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

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

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

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.

These financial statements were approved by the Board of Directors on 12 May 2016 and signed on its behalf by:

Peregrine Moncreiffe, Chairman

Company Registered Number:1091347

consolidated cash flow statement

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.

company cash flow statement

for the year ended 31 January

restated*

* restated to conform with current year presentation

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

1 accounting policies

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 2016 comprises the results of the Company and its subsidiary - CVF (together referred to as the "Group").

During the year, the Company has not adopted any new IFRS's.

Adjustment for Oryx

On adoption of IFRS 10 during the year ended 31 January 2015, the Company changed its method of accounting for its investment in Oryx. It was previously priced using equity accounting to account for the Company's share of Oryx's net assets. It is now valued using fair value, derived from the share price which is materially different to the value derived from equity accounting.

The below table shows the effect on the net assets of the change in method.

* increase in net gains on investments at fair value/increase in value of investments at fair value through profit or loss.

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 2016 and have therefore not been applied in preparing these financial statements.

* not yet endorsed by the EU.

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 2015 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 IFRSs 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 SORP for investment trust companies issued in November 2014, 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

Under IAS 27 (Consolidated and Separate Financial Statements), a subsidiary is defined as an entity which is controlled by another entity. Therefore, the Group financial statements consolidate the financial statements of the Company and its wholly owned Subsidiary undertaking, CVF drawn up to 31 January 2016.

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 profit for the financial year dealt with in the accounts of the Group is £70,348,000 (2015: £35,908,000).

d) 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. A geographical analysis of the portfolio is shown above.

e) investments

All non current investments held by the Group, 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 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 and Treasury Bills 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 SETS stocks, which are valued using latest trade price, which is equivalent to the fair value, being representational of any sale price that the Company would achieve.

(ii) unquoted at directors' estimate of fair value

Unquoted investments are valued in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") 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 2016, is a loss of £17,355,000 relative to the movement in the fair value of the unlisted investments valued using valuation techniques.

(iii) 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 1f)(i) and 1f)(ii) above for quoted and unquoted holdings respectively.

Profits or losses on investments in the Subsidiary undertakings are taken to revenue.

f) foreign currency

The currency of the primary economic environment in which the Company operates (the "functional currency") is pounds 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.

g) 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.

h) 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.

i) expenses

All expenses including finance costs, 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.

j) 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.

k) 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.

l) 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.

m) 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.

n) share capital and reserves

Share Capital represents the nominal value of equity shares.

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.

o) use of estimates and judgements

The preparation of these financial statements in conformity with IFRS requires the Directors to make judgements, estimates and assumptions that affect the application of accounting policies and therefore, the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

These estimates and assumptions are reviewed on an ongoing basis.

In particular, information about significant areas of estimation uncertainty in applying accounting policies that have the most effect on the amounts recognised in the financial statements surround the investments at fair value through profit or loss in note 8.

In order to value the unlisted investments, there are a number of valuation techniques that can be used. Judgement is used to determine the best methodology to obtain the most accurate valuation. These types of valuation technique are mentioned earlier in this note, disclosed as part of the 'other price risk profile' in note 14.

2 income