North Atlantic Smaller Companies Investment Trust plc (the “Company”) Financial Results for the Year Ended 31 January 2025

The Company today announces its financial results for the full year ended 31 January 2025.

Company Registered Number: 1091347

	31 January 2025	% change	31 January 2024	31 January 2023	31 January 2022	31 January 2021
return
Return for the year (£’000)	41,920	1,851.6%	2,148	(91,038)	64,906	130,078
Basic return per 5p Ordinary Share:
– Revenue	112.91	24.9%	90.39	32.65	9.94	3.76
– Capital	201.75	370.8%	(74.49)	(699.41)	456.30	916.57
Dividend per 5p Ordinary Share (declared)	88.0p		68.5p	22.0p	nil	nil
assets
Net assets (£’000)	713,504	3.4%	690,230	693,356	789,466	742,230
Net asset value (“NAV”) per 5p Ordinary Share:
Basic and Diluted	5,397p	5.3%	5,127p	5,097p	5,779p	5,292p
Basic and Diluted adjusted	5,740p	6.5%	5,391p	5,236p	5,856p	5,355p
Mid-market price of the 5p Ordinary Shares	3,750p	1.6%	3,690p	3,900p	4,330p	3,850p
discount to net asset value	30.5%		28.0%	23.5%	25.1%	27.2%
discount to adjusted net asset value	34.7%		31.6%	25.5%	26.1%	28.1%
indices and exchange rates at 31 January
Standard & Poor’s 500 Composite Index	6,040.5	24.7%	4,845.7	4,076.6	5,515.6	3,714.2
Russell 2000 Index	2,287.7	17.5%	1,947.3	1,931.9	2,028.5	2,073.6
US Dollar/Sterling exchange rate	1.24255	(2.4%)	1.27330	1.23065	1.34180	1.37295
Standard & Poor’s 500 Composite Index – Sterling adjusted	4,850.3	27.3%	3,810.1	3,307.3	3,360.5	2,709.5
Russell 2000 – Sterling adjusted	1,836.9	20.0%	1,531.2	1,567.4	1,509.6	1,512.7

strategic report – directors

Sir Charles Wake¹ Non-Executive Chairman. Appointed 27 June 2018 and became Chairman on 25 February 2022. Started as a management trainee with Whitbread’s in 1972 and left in 1980. Since then he has been a director of various companies including sheet metal engineers, motor retailers, off-licences, pubs, bonded warehouses, farming and healthcare. He was chairman of St Andrew’s Healthcare from 2004-2014 having been on the board since 1991.

Christopher H B Mills Chief Executive and Investment Manager. Appointed January 1984. He is Chief Investment Officer of Harwood Capital LLP including its subsidiaries. In addition, he is a non-executive director of numerous UK companies which are either now or have in the past five years been publicly quoted, further details of which are included in note 15 of the financial statements.

The Lord Howard of Rising¹³ Non-Executive Director. Appointed November 2015. He is a member of the House of Lords and a District Councillor for the Borough Council of Kings Lynn & West Norfolk, as well as being a landowner and farmer. He was formerly a director of The Keep Trust and Fortress Trust.

G Walter Loewenbaum (USA)¹²³ Non-Executive Director. Appointed on 31 October 2017. As an investment banker and private equity investor, Mr Loewenbaum has worked with multiple companies in a variety of different industries at different phases of organisational development, ranging from startup to publicly traded. He brings a depth of knowledge in serving as chairman for public and private companies, building stockholder value and capital market considerations.

Peregrine D E M Moncreiffe Non-Executive Director. Appointed November 2008 (having previously been a Director of the Company from 1993-2006) and served as Chairman from June 2009 until 25 February 2022. He has over the years worked in London, New York and East Asia, with Credit Suisse First Boston, Lehman Brothers and Buchanan Partners.

Professor Fiona Gilbert¹²³⁴ Non-Executive Director. Appointed 6 September 2022. She is Professor of Radiology and Head of the Department at the University of Cambridge. Professor Gilbert leads a team of researchers in various fields of radiology assessing new imaging technologies and has over 250 scientific publications and over £20M in research income. She works in the NHS as an honorary consultant with expertise in musculoskeletal and breast imaging. She holds non-executive positions on several private company boards.

Julian Fagge¹²⁴ Non-Executive Director. Appointed 20 June 2023. Mr Fagge has over 25 years’ experience within global blue-chip and FTSE 100 plc environments. He is currently President of Smiths Interconnect, a division of Smiths Group PLC, having formerly held positions within Smiths including President of Flex-Tek, Strategy & M&A Director, and Group Financial Controller. Prior to this, he spent time at Royal Caribbean Cruises and at Procter & Gamble. Mr Fagge is a Chartered Accountant and holds a degree from Edinburgh University.

strategic report – chairman’s statement

During the year under review, the net asset value adjusted for the dividend paid rose by 6.5% which compares unfavourably with the Sterling Adjusted Standard & Poor’s Index but a modest outperformance of appropriate United Kingdom indices where the majority of the trust’s quoted assets are invested.

The revenue account for the period showed a surplus post taxation of £15,042,000 (2024: £12,210,000) and an interim dividend of 88.0p has been declared in respect of the year ending January 2025 (2024: 68.5p). Your directors are not proposing a final dividend.

Your directors are seeking to improve liquidity of shares in the trust and have therefore recommended a 10 for 1 share sub-division which will require shareholder approve at the AGM. Full details of the sub-division will follow when the AGM Notice is released.

During the year, 241,575 shares (2024: 140,493) were acquired at a substantial discount to the net asset value. This policy has continued into the current financial year. This benefits all long term shareholders by creating an immediate uplift in the net asset value per share. At the forthcoming AGM shareholders will once again be asked to support a Rule 9 waiver allowing the company to continue to repurchase shares without requiring our Chief Executive, and persons and companies presumed to be acting in concert with him, to make a mandatory offer under Rule 9 of the Takeover Code for the company. This proposal, and the background surrounding it, are outlined in a separate circular being sent to shareholders (excluding the largest shareholder who is disqualified from voting). Although 19.81% of eligible shareholder proxy votes voted against this resolution at the last Annual General Meeting, the Board will continue to give shareholders the opportunity to vote on this resolution as long as it believes that the majority of shareholders who are able to vote will continue to support the resolution at forthcoming AGM’s.

In my last report, I stated that expected interest rates would remain higher for longer and despite the recent reduction in short term rates, it is increasingly obvious that future reductions will fail to meet consensus expectations of only a few months ago.

Inflation is not falling as fast as Anglo-Saxon governments had hoped whilst the expectations of larger than expected government deficits, combined with the need to refinance historic debt, creates further risk to financial markets.

The fact that this debt is now being refinanced at higher interest rates than was originally expected, as the ten year debt rate has risen to multi year highs (despite falling back modestly recently), creates additional uncertainty. Inevitably higher long term rates impact the value of future cash flows which inevitably creates a headwind to equity valuations.

In the United Kingdom these headwinds are compounded by government policies which pretend to be supportive of growth but are more than likely to achieve exactly the opposite. The Chancellor’s last budget unleashed a massive increase in employment costs to the private sector which, given the almost stagnant economic outlook, will be difficult to pass on. The leisure and retail sectors in particular which, fortunately, the trust has minimal exposure to, are likely to face disruption and bankruptcies.

Against this background it is hardly surprising that domestic equities face a tough economic environment where even a modest profit warning can result in a total collapse in the share price.

Sadly, UK small and midcap equities have further challenges as many fund managers face redemptions as clients reorientate their portfolio to more liquid global equities.

Whilst both the recent Conservative government and now the Labour government pay lip service to supporting the UK equity market, there is to date little substance to this. Indeed, the Labour Party’s recent reduction in tax incentives for AIM listed companies and their cancellation of plans for a British ISA suggests that they are moving in precisely the opposite direction.

Your Board have been discussing these issues with your manager over the past year and have gained comfort from the fact that many of the UK businesses held in the trust secure a substantial proportion of their profits from outside the UK. Others should benefit from the manager’s shareholder activism with Carr’s Group being a recent case in point.

Your directors continue to monitor the ongoing discount to the net asset value that the company trades on. The trust has increased transparency through more frequent announcements covering new investments and disposals, as well as significant developments in portfolio companies that are in the public domain with the expectation this will lead to a better understanding of the trust’s portfolio. Our share buyback programme will hopefully reduce this discount over time but this comes at the expense of making our own shares more illiquid, which in turn adversely impacts the discount.

Your directors also believe it is important to continue to make new investments and, where appropriate, continue to support existing ones as we are firmly of the belief that this will add more value than buying back shares over the longer term. The Board has agreed that at Mr Mills’ retirement it will prioritise share buy-backs over new investments as long as the substantial discount persists.

In conclusion, it is hard to be optimistic about the UK domestic market but I am confident that your Chief Executive understands the headwinds that the trust faces and can continue to grow our asset value over the coming year despite the difficult environment.