Announcement of ONWD
The information contained in this announcement is restricted
and is not for publication, release or distribution in the United
States of America, any member state of the European Economic Area
(other than to professional investors in Belgium, Denmark, the
Republic of Ireland, Luxembourg, the Netherlands, Norway and
Sweden), Canada, Australia, Japan or the Republic of South
Africa.
11 April 2024
Onward Opportunities
Limited
("ONWD" or the
"Company")
Annual
Results
Highlights for the reporting
period to 31 December 2023 include:
· FY23
audited Net Asset Value ("NAV") Total Return of +11.3% to 106.5 per
share over the nine months from Initial Public Offering ("IPO"), 30
March 2023, to 31 December 2023.
· Encouraging first financial year, ahead of target returns in
difficult market conditions, delivering strong investment
performance (NAV growth):
o Outperformed UK AIM All Share total return index by 15.0%;
+11.3% Company NAV increase versus decline of 3.7% for UK AIM All
Share;
o Top decile performance in AIC UK Smaller Companies sector
since inception; and
o Portfolio delivered an aggregate Internal Rate of Return
("IRR") of 22.6% and the invested portfolio as at year-end
generated an unrealised IRR of 40.2%, against a target return of
>15%, stated at the time of IPO.
· In
March 2023, the Company completed its IPO notwithstanding
challenging market conditions. The Company successfully completed a
further capital raise in September 2023, increasing the Company's
capital base by 25% and welcoming new shareholders to the
Company.
Post year end Highlights (1
January 2024 - 31 March 2024)
· Further strong investment performance post year-end;
unaudited Net Asset Value (NAV) Total Return of +2.3% to
109.04p/share in the three months from 1 January 2024 to 31 March
2024 comparing favourably to the UK AIM All Share which fell in the
same period.
· Total NAV return since inception (1-year) of +14.0% to
109.04p per share, outperforming indices, the majority of peers and
target returns.
· In
March 2024, the Company completed its third NAV accretive capital
raise, increasing the Company's capital base by a further 10%
supported by new and existing shareholders to fund a pipeline of
investments identified by the Manager. This meant the company grew
by c.40% through capital raises in its first twelve
months.
Andrew Henton, Chairman,
commented:
"The Board is pleased with the
performance of the Company since inception as measured by NAV
appreciation and capital raised. The Portfolio Manager's
experience within the highly specialised smaller companies sector
has demonstrably been successfully embedded within the ONWD
investment process. We continue to believe that the timing of
the fund's launch was and remains auspicious."
Laurence Hulse, Portfolio Manager,
commented:
"We have done what we said we
would do; demonstrated an ability to raise capital repeatedly
regardless of market conditions, deploy that capital using a
high-touch investment style, and invest profitably delivering
strong absolute returns. The Company made an encouraging start in
the first financial year; delivering a 1-year NAV return of +14.0%
since inception.
An eclectic portfolio of
situations and opportunities has been built by the team to take us
into 2024 and beyond and resultantly the first quarter of FY24 has
started encouragingly for our shareholders."
-ENDS-
For further information, please contact
|
|
Onward Opportunities Limited
Andrew Henton, Chairman
Dowgate Wealth Limited (Portfolio Manager)
Laurence Hulse, Investment
Director
|
Tel: +44 (0)20 3416
9143
hello@dowgate.co.uk
Tel: +44 (0)20 3416
9143
hello@dowgate.co.uk
|
Apex Administration (Guernsey) Limited (Company
Secretary)
Martin Baxter / Harry
Rouillard
|
Tel: +44 (0) 203 5303
150
ool@apexgroup.com
|
Cavendish Capital Markets Limited (Nominated Adviser and
Joint Broker)
Ben Jeynes/Camilla Hume
|
Tel: +44 (0)20 7397
8900
|
Dowgate Capital Limited (Joint Broker)
Russell Cooke / Nicholas
Chambers
|
Tel: +44 (0)20 3903
7715
|
Extracts from the Financial Statements
Highlights for the reporting
period to 31 December 2023 include:
· FY23
audited Net Asset Value ("NAV") Total Return of +11.3% to 106.5 per
share over the nine months from Initial Public Offering ("IPO"), 30
March 2023, to 31 December 2023.
· Encouraging first financial year, ahead of target returns in
difficult market conditions, delivering strong investment
performance (NAV growth):
o Outperformed UK AIM All Share total return index by 15.0%;
+11.3% Company NAV increase versus decline of 3.7% for UK AIM All
Share;
o Top decile performance in AIC UK Smaller Companies sector
since inception; and
o Portfolio delivered an aggregate Internal Rate of Return
("IRR") of 22.6% and the invested portfolio as at year-end
generated an unrealised IRR of 40.2%, against a target return of
>15%, stated at the time of IPO.
· In
March 2023, the Company completed its IPO notwithstanding
challenging market conditions. The Company successfully completed a
further capital raise in September 2023, increasing the Company's
capital base by 25% and welcoming new shareholders to the
Company.
Portfolio Update
· Significant early contributions from both core and nursery
holdings; the top five contributors to unrealised returns were
Angling Direct plc, MPAC Group plc, EKF Diagnostics Holding plc,
Windward Limited and Springfield Properties plc.
· Early IRR performance is indicative of further upside
potential over the medium to long term from the existing portfolio
following an encouraging start to 2024, in addition to potential
returns from the attractive pipeline of investments the manager
continues to target in current markets.
· The
portfolio's income stream, based on current dividends, is expected
to offset the majority of the Company's total expense ratio for
FY24.
· Intense period of investment activity capitalising on the
value opportunity in UK smaller companies; the Company was over 90%
invested by year-end. The top 10 holdings represented 60% of
NAV.
Post year end Highlights (1 January 2024 - 31 March
2024)
· Further strong investment performance post year-end;
unaudited Net Asset Value (NAV) Total Return of +2.3% to
109.04p/share in the three months from 1 January 2024 to 31 March
2024 comparing favourably to the UK AIM All Share which fell in the
same period.
· Total NAV return since inception (1-year) of +14.0% to
109.04p per share, outperforming indices, the majority of peers and
target returns.
· In
March 2024, the Company completed its third NAV accretive capital
raise, increasing the Company's capital base by a further 10%
supported by new and existing shareholders to fund a pipeline of
investments identified by the Manager. This meant the company grew
by c.40% through capital raises in its first twelve
months.
Chair's Statement
Onward Opportunities Limited (the
"Company" or "ONWD") was incorporated on 31 January 2023, and the
shares issued at its IPO were admitted for trading on the
Alternative Investment Market ("AIM") of the London Stock Exchange
("LSE") on 30 March 2023. These accounts have been prepared for the
11 month accounting period covering 31 January 2023 to 31 December
2023.
As at 31 March 2024 (the latest
practicable date prior to the publication of this report) the NAV
per share was 109.04p and the share price 110.0p, representing a
premium to NAV of 0.8% and a NAV performance of +14.0% since
inception.
Objective of the Fund
ONWD was launched to take
advantage of the investment opportunity presented by the valuation
discount placed on smaller companies in the United Kingdom ("UK"),
those with a market capitalisation below £250 million. Despite
offering the potential for higher revenue growth than their larger
peers, smaller companies generally trade on lower earnings
multiples. It is this dichotomy between latent potential and low
valuation which presents the opportunity for an experienced and
research led Portfolio Manager ("Dowgate Wealth Limited") to
identify dynamic, yet undervalued companies and actively to engage
with them in order to realise hidden value for the benefit of
investors.
The Board thus holds the
fundamental belief that the risk premium demanded of many smaller,
listed companies is too high. ONWD is certainly not the first
investment company to espouse the structural opportunity of 'buying
low and selling high' in the context of the smaller companies
market. We also sincerely hope not to be the last, since the
long-term success of the Company necessarily requires higher
capital flows into the segment. I conclude below with some thoughts
on the vagaries of timing, but two data points which give grounds
for optimism about prospects for our Company are evidence of
greater recognition being given to the smaller company sector in
the UK, and the performance of the ONWD portfolio in its short
trading history to date.
The role of SMEs in the UK economy
Small and Medium sized Enterprises
("SMEs") have always been a vital component of the UK economy. They
employ over 60% of the total workforce and are a major source of
job creation, often providing opportunities for young people and
women and thereby promoting diversity and inclusivity in the
workforce. Their inherent ability to adapt and innovate quickly
enables SMEs to disrupt established industries and create new
opportunities for growth. Smaller companies also play an important
role in diversifying the UK's export base as they often specialise
in niche markets and are able to cater to the specific demands of
customers in foreign markets.
Economists and politicians of all
hues recognise the importance of a supportive environment for SMEs
in underpinning sustainable, long term economic growth. The Mansion
House Compact by which UK pension funds have committed to allocate
an additional £25 billion to SMEs (including specifically
AIM-listed companies) by 2025 is thus significant. It is
appropriate that UK savings which are tax advantaged should be
deployed by pension fund managers in a manner that both generates
returns for savers (thus reducing the future burden of an aging
population on the State) but also stimulates the UK economy. It is
also implicit within the Mansion House Compact that the major
pension fund managers in the UK do recognise the opportunity for
long term capital appreciation that is afforded by inter alia investment in AIM
companies, even if they have not yet fully worked out how they can
access that opportunity.
The total market capitalisation of
the AIM market is approximately £53.8 billion made up of 660
constituents; almost any additional investment triggered by the
Mansion House Compact would represent a significant infusion of
share trading volume and liquidity, the lack of which has been a
major contributory factor to low valuations. The AIM market will
likely always be less efficient in terms of quickly capturing price
sensitive information than the main market of the LSE, and will
thus always present opportunities for the ONWD investment strategy.
However, any catalysts for the junior market becoming less
inefficient in the short to medium term is to be welcomed as a
macro positive for ONWD. The Mansion House Compact could be part of
that catalysing process.
Portfolio performance
During the accounting period, the
Company's NAV per share appreciation represents an annualised gain
of 22.6%, a top decile return relative to peers and a strong
outperformance relative to the AIM All Share index. The performance
of the portfolio is described in greater detail within the
Portfolio Manager's report.
Whilst smaller companies present
the opportunity for very significant gains (not least because they
start from a lower base) lack of scale also makes those companies
more vulnerable to various risks including over-trading, client
concentration, key person dependency, lack of access to development
capital (debt and equity) and working capital management. Whilst it
may be a self-evident truth to state that the importance of
selecting the right companies for investment is an essential
requirement for success, it is particularly true in the context of
the ONWD strategy. The scarcity of third-party research means that
the Portfolio Manager's process of investment analysis is more
analogous to that of a private equity investor than it is to that
of a portfolio manager dealing in larger listed stocks. Not least,
the work performed in identifying the likely exit route (sale of a
position) can often involve identifying a trade sale or 'take
private' opportunity, driven by the arbitrage between the low
trading multiple of the publicly traded share versus the higher
earnings multiple of the acquiror. DX Group provided an early
example of the success of this approach; ONWD first acquired shares
at a price of 32p per share and sold into a trade sale that
realised 48.5p per share within 6-months of investing. For so long
as the Price Earnings Ratios ("P/Es") of smaller company stocks
remain so far below those of larger comparables, trade sales will
likely form a major part of the value realisation process for
ONWD.
The Board is pleased with the
performance that has been delivered by the Portfolio Manager.
Whilst ONWD is a new fund, Laurence Hulse does bring with him many
years of successful experience gained within the highly specialised
segment that is smaller companies. The Company has the benefit of a
proprietary investment process that has been developed based on
Laurence's experience. That process has now been tested and
embedded in the live environment. Whilst no investment selection
process can ever guarantee 100% success, the measured pace of
building positions as due diligence is refined has allowed for both
attractive entry prices but also swift and controlled divestment
when new information is distilled which undermines the logic of the
business case.
The return in NAV terms that has
been generated by the Company since inception is testament to the
efficacy and diligence of the Portfolio Manager. Being able to
evidence capability in practice, not just in theory, is an
important achievement and will be used to support further
fund-raising activity over the next twelve months. There is no
shortage of identified opportunities, and the Portfolio Manager is
far from capacity constrained.
ESG
The Portfolio Manager has a
research driven approach to identifying opportunities and selecting
stocks. Analysis and due diligence will always include proactively
seeking to identify hidden externalities that can be expected to
impact on enterprise value once investors become (or are made)
aware of them. Externalities in this context would include business
models predicated on unsustainable production or employment
practices, poor corporate governance or supply chains reliant on
unethical counterparties. ESG practices are thus embedded within
the investment selection process, and form part of the post
investment risk management and stewardship policy. The Portfolio
Manager's policy of engaged investing means that ESG factors could
lead to engagement with the boards of investee companies with the
objective of improving practices that pose sustainability risks in
order to stimulate long-term value creation.
Conclusion
ONWD was the first investment
company to IPO on the LSE since 2021 and the Company also closed a
secondary fund raising later in the year which increased its shares
in issue by c.25%. This was then grown further post period end in
March with a further capital raise, again at a premium to NAV. As
bald statistics, these are impressive achievements for a new fund
launched by a new Portfolio Manager. In absolute terms however, the
small size of the Company is a function of the very opportunity
which it exists to capture.
The relative scarcity of capital
allocation to small and micro-cap listed companies undermines the
valuation of those companies, thereby making the opportunity set
and upside potential for the ONWD strategy compelling.
The Board believes that capital
allocation to smaller listed companies in the UK will increase over
the medium to long term, even if that increase comes from a low
base. The Company will certainly continue to advocate for such an
increase within the professional investor community. The Board will
also oversee adherence to the Portfolio Manager's disciplined
approach with the goal of further developing and building upon the
successful track record to date. In demonstrating its ability to
generate attractive returns over the medium to long term, the Board
believes that the Company will continue to be able to attract new
money and to evidence the achievability of attractive returns from
a carefully selected portfolio of smaller companies. Momentum is a
powerful force in investment markets, and the emerging evidence of
a virtuous circle comprised of mutually reinforcing elements is
cause for optimism. We continue to believe that the timing of
ONWD's launch was and continues to be auspicious.
On behalf of the Board, I thank
all of our investors for their support over the past year, and we
look forward to welcoming many more new investors over the months
and years to come.
Andrew Henton
Chair
10 April 2024
Portfolio Manager's Report
It is a privilege to present
Onward Opportunities Limited's (the
"Company" or "ONWD") maiden set of
financial statements as a public company. The success of the
Company's 2023 AIM IPO in last year's market environment, and the
subsequent early investment returns generated in those conditions
are testament to the Company's potential. Two areas of particular
highlight were the NAV performance ahead of peers, targets and
indices and that we were able to demonstrate our ability to grow
the Company with a 25% equity issue within the first six months of
launch. We have done what we said we would do; demonstrated an
ability to raise capital repeatedly regardless of market
conditions, deploy that capital using a high-touch investment
style, and invest profitably delivering strong absolute
returns.
The Company made an encouraging
start in the first financial year; delivering a NAV return of
+11.3% since inception (30/03/2023), outperforming the UK AIM
All-Share's total return by 15.0%, which fell in the same
period. An eclectic portfolio of situations and opportunities has
been built by the team and this process is described in the
Portfolio Manager's report. The investment portfolio has been
designed to take us into 2024 and beyond and resultantly the first
quarter of FY24 has started encouragingly for our shareholders. The
NAV has grown a further 2.3% to 109.04p/share and a further £1.65m
of new shares were issued to new and existing investors at a
premium to NAV.
Top 10 Holdings Table as at 31 March 2024 (the last
practicable date before publication)
Holding
|
£ Value
|
Portfolio Weighting
%
|
Thesis
Summary
|
Catalysts
|
Total Return
%
|
MPAC Group plc (MPAC LN)
|
£1.89m
|
9.8%
|
Margin recovery, horizontal
expansion
|
New CEO & sales team, pension
buy-out, supply
chain normalisation, Board
evolution
|
+107.4%
|
Angling Direct plc (ANG
LN)
|
£1.5m
|
7.8%
|
Margin recovery, strategic
refocus
|
Strategy review, end market
recovery, uses of cash,
Board evolution
|
+17.3%
|
Springfield Properties plc (SPR
LN)
|
£1.2m
|
6.3%
|
De-leveraging, cycle
recovery
|
Land disposals, social housing
market share growth
|
+30.0%
|
Speedy Hire plc (SDY LN)
|
£1.2m
|
6.3%
|
Organic growth, Cycle
recovery
|
New CEO & strategy, completion
of inventory
audits
|
-17.7%
|
EKF Diagnostics Holdings plc (EKF
LN)
|
£1.3m
|
6.1%
|
Margin recovery, organic growth in
enzyme
market
|
New Exec-chair, New production site
scale up
|
+7.7%
|
React Group plc (REAT LN)
|
£1.2m
|
6.1%
|
Organic growth, bolt-on
M&A
|
Bolt-on M&A, IR initiatives,
uses of cash
|
-3.2%
|
Windward Ltd (WNWD LN)
|
£1.2m
|
6.1%
|
Organic growth,
profitability
|
Contract wins, breakeven, private
sector product
roll outs
|
+44.3%
|
Team17 Group plc (TM17
LN)
|
£1.2m
|
6.1%
|
Margin recovery, strategic
refocus
|
New Chair & CEO, strategy
review
|
+25.0%
|
Transense Technologies plc (TRT
LN)
|
£1.1m
|
5.6%
|
Organic growth
|
Sales pipeline execution, senior
leadership hires,
Board evolution
|
+8.7%
|
RBG Holdings plc (RBG LN)
|
£1.0m
|
5.3%
|
Re-rating, discount to transaction
multiples
|
Cost take-out, property disposals,
divisional disposals, legacy case asset values
|
-28.1%
|
Ten Nursery Holdings
|
£5.2m
|
24.9%
|
|
|
|
Cash at Bank
|
£1.8m
|
9.5%
|
|
|
|
Portfolio Performance
The Company made an encouraging
start in the first financial year; delivering a NAV return of
+11.3% since inception, outperforming the UK AIM All-Share's
total return by 15.0%, which fell in the same period. Perhaps most encouraging
was the investment performance of the fund relative to its peers,
which was top decile.
Performance was consistently
positive through the year and accelerated in-line with capital
deployment as the team identified investment opportunities from the
pipeline and engaged with them.
Total Returns in the 9
months to 31 December 2023
|
FY23 -
Date of inception to 31 December
(9 months to year-end)
|
ONWD NAV Total Return
|
+11.3%
|
ONWD Total Shareholder
Return
|
+2.5%
|
UK AIM All-Share Total Return
Index
|
-3.7%
|
The top 5 contributors to
unrealised returns at 31 December 2023 were Angling Direct, MPAC
Group, EKF Diagnostics, Windward and Springfield
Properties.
The early performance continued
post-period end, with the NAV growing further to 109.04p/share,
+14.0% since inception as shown in the table below for illustrative
purposes:
Total Returns in the twelve months
to 31 March 2024
|
Since
inception date of 30 March 2023 (1-year)
|
ONWD NAV Total Return
|
+14.0%
|
ONWD Total Shareholder
Return
|
+10%
|
UK AIM All-Share Total Return
Index
|
-5.9%
|
Market Commentary
2023 was a different year than
most investors expected. Investors began 2023 fearing inflation and
the consequences of higher, for longer, interest rates. While the
demise of Silicon Valley Bank ("SVB") and the life support given to
other regional banks seemed to justify their fears, the vital signs
of US economic health persisted, and policy rates continued to rise
until August. This drove increasing levels of pain and discounting
in equities, especially at the most economically sensitive smaller
company end of the spectrum, which became particularly pronounced
in the UK around Halloween in October. Perhaps not by coincidence
just a few weeks later, following some Federal Reserve smoke
signals, investors began believing rates had peaked. Bond yields
tumbled, risk assets rose as short positions were closed, and the
bond rush subsided. Financial conditions and liquidity eased, the
dollar weakened, and investors rolled out the red carpet to greet
the improbable soft landing. The 'immaculate disinflation' became
investors' base case scenario.
In the coming year, circa 40% of
the world's population will vote in national elections, including
both its wealthiest and most populous nations. The UK's election,
likely in FY24Q4, will be of little consequence for global
investors, most of whom wrote off the UK as a home for proactive
investment long ago. Having won last year's Most Improved Player
Award for Political Stability, this year, a smooth UK political
transition could be all that is required for both direct and
portfolio investors to tie a bow on the UK as a place to increase
their position sizes. In stock market terms last year, the UK
remained a laggard by global standards.
The S&P 500 was pipped by
Tokyo's Nikkei 225 (+28% to +25%) in the major country indices
stakes. The real story of the year, however, was the continued
power of US Big Tech, with the NASDAQ 100 up over 50%. Within it,
the newly crowned Magnificent Seven AI wonder stocks (the FAANGS
minus Netflix, plus Nvidia, Microsoft and Tesla) were ahead by more
than 100%, and ended the year accounting for nearly 30% of the
market cap of the S&P 500 and 19% of the MSCI Developed World
All Share Index - an index which comprises the largest 12,500
listed-companies across 23 countries. As a result, just seven
stocks now account for almost US$12 trillion of market value (more
than six times the size of the FTSE100), a degree of market
concentration greater than the Dotcom Boom of 25 years ago and the
Nifty Fifty of 50 years ago.
When these previous periods of
excessive market concentration were unwound, the result was the
multiyear outperformance of smaller companies and the value style.
We remain vigilant for early signs that might suggest the coming
years might follow such a pattern.
The UK's AIM 100 index ended the
year down a disappointing 8% but also rallied from its post-COVID
low in October 2023 by 8%. The more value-laden FTSE Smaller
Companies Index, broadly unchanged over 2023, rose by 13% from its
October 2023 low point. These moves have yet to constitute a new
trend. They offer signs of hope that normalised rates will
establish a divergence of equity returns that reward active stock
picking over trend following and indexation, a trend, if
established, that could significantly re-rate the UK small and
mid-markets.
As we enter a year of elections,
the issue of fiscal dominance and bond yields remain essential
drivers of financial market performance. 2023 ended with US and UK
10-year yields broadly unchanged. However, this masked a roller
coaster ride. Capital poured into sovereign debt during the year,
offering the prospect of a real return for the first time in many
years and crowding out investment for other assets. The lesson from
2023 is that bond markets influence equity valuations, but quality
equities can adapt and survive, as we saw in a number of our
investments.
Portfolio Commentary
The Company's first nine full
months of activity which represent the 2023 financial year were one
of hyper-activity for the investment process, as the team sought to
deploy the capital raised at launch (March 2023) and added to
further in September. There was a natural lag effect as a number of
ideas were worked on in parallel and in other cases where the
Investment Committee waited for an identified opportune moment to
invest.
This meant that capital employment
built gradually over the summer before accelerating into Q4 of
FY23Q followed by a small number of deals in 2024. This has
resulted in the fact that at 31 March 2024, the Company was 'fully
invested' ahead of schedule into 10 core investments and 10 nursery
holdings which represented 90% of the portfolio. A summary of the
core investments in the top 10 is provided in detail below. We have
an active and engaged approach to investee companies, and
shareholders can expect us to be working hard to support profitable
outcomes on our investments and some of these workstreams are
shared below.
MPAC Group plc (MPAC LN) - Date of first investment September
2023
MPAC Group plc ("MPAC") is a
designer and assembler of automated robotic packaging lines with a
strong foothold in defensive sectors, and a first-mover advantage
in battery packaging, due to its historic specialism in
'side-loading'. After a difficult 18-months that was worsened by
global supply chain disruption, it is now a business with a clear
plan for earnings growth that we have been able to purchase on an
EV/EBITDA of 2.5x. New CEO Adam Holland (referenced extensively at
JCB & Rolls Royce), has identified levers to recover margins to
10%+, and grow earnings with an expanding sales team and abating
supply chain headwinds of 2022/3. This first stage, we believe, can
more than double the value of the company and we are pleased to
report a very early +100% gain on our investment post period end; a
great example of our screening process identifying emerging change
in a company. There is then a longer-term opportunity in battery
casing that if delivered could add significantly to returns beyond
our base case.
We are actively engaging with the
company on a number of key initiatives including a pension
'buy-out' as it is now in surplus, incentive arrangements for the
new senior leadership team, board composition, M&A strategies
and investor communications. We were delighted to see the company
follow up with a very strong set of FY23 results in
March.
Angling Direct plc (ANG LN) - Date of first investment May
2023
Angling Direct is the UK's leading
retailer of fishing equipment and tackle. This position gives us an
opportunity to provide investors with some early insights to our
investment strategy in action. We believe we have captured dual
optionality on the upside on our investment into Angling Direct,
which creates an attractive asymmetric risk profile for
shareholders' capital, invested between 24 and 30 pence per
share.
This position represents either a
growth or value investment, depending on various strategic
decisions that are taken in the coming months. The business has a
dominant market position in the UK, where it is profitable and cash
generative from a repeat customer base of 'anglers'. These metrics
are expected to improve under new management, and to benefit from
both a UK consumer recovery and growth from additional store
rollout.
More recently, the business has
been attempting to enter the much larger European market to provide
additional earnings growth. Success has been limited so far, with
annual losses that are material in the context of overall group
profits, whereas the UK business generates a profit that is
approximately double the current group number (which factors in
European losses). Our returns thesis is that either the European
strategy starts to bear fruit in the near-term and contributes
profitable growth to the group, or it can be reviewed to remove the
opportunity cost to management and losses from group profits.
Either outcome would be shareholder value creative to our
investment and we would be happy for our initial scepticism about
the European opportunity to be proved wrong during the remainder of
the calendar year. Our analysis suggests either of these outcomes
would add more than 50% to Angling Direct's current
profits.
Fishing is a sport of probability
maximisation, and in that sense shares many similarities with
investment management. Anglers buy tackle to maximise their chances
of catching fish predictably and ONWD shareholders can expect a
similar mindset in our strategic discussions with the company in
order to maximise shareholder returns. Our entry valuation on
Angling Direct was at c.£20 million, a market capitalisation
more-than underpinned by balance sheet assets - c.£14 million net
cash and c.£16 million of inventory. We have in this context noted
with interest, the consolidation of angling retailers in the USA
and Nordic countries in recent years.
Team17 Group plc (TM17 LN) - Date of first investment
December 2023
Team17 is a leading UK 'indie'
video games developer in the UK with a number of well-known titles
within its catalogue. The historic titles have a precedent of sales
and cash generation; a vital characteristic in the notoriously
fast-moving video games sector both to investors and managers of
the business. The business suffered something of an annus
horribilis as the previous management became overly optimistic on
new title opportunities off the back of the pandemic inspired boom
in gaming. In parallel the market became over-saturated as
competitors behaved similarly. This led to what turned out to be a
poor allocation of capital into lower ROI new titles, and the
earnings and shares of the company suffered.
We have invested into a
back-to-basics strategy under the newly appointed chair Frank
Sagnier with a renewed focus on ROI hurdles for new investment, and
cash generation maximisation from the existing franchises. Our
entry valuation of just c.5x a downgraded EBITDA has allowed us to
buy into a deep discount to the intrinsic value of the catalogue
core titles, let alone the company's value, and management retain
optionality over future uses of cash. We have taken comfort from
Frank's strong track record at Codemasters which was ultimately
acquired after a sustained period business development execution
under his leadership.
EKF Diagnostics Holding plc (EKF LN) - Date of first
investment May 2023
EKF shares had languished due to
downgraded earnings, a misjudged acquisition (now disposed of), and
delays in completing a new enzyme production facility. The
departure of the previous CEO and CFO further exacerbated things.
Our recovery thesis is that Julian Baines can remedy these matters,
being the company's highly experienced former CEO who has stepped
back into an Executive Chairman role and it was his confirmed
return that triggered our due diligence and investment into the
company. Primarily, we believe the company can now deliver
significant earnings recovery as the new enzyme fermenters come
online, driving a re-rating in the company's shares and earnings
uplift from 60-70% gross margin sales. The site recently won its
first order.
We also believe the company is a
covetable asset given the attractive business model of the Point of
Care business (razor/razor blade) along with the high margins and
repeatable revenues. EKF has a very strong board, which affords us
the benefit of being able to quietly support tried and tested
shareholders and board members recover value for all.
React Group plc (REAT LN) - Date of first investment May
2023
With React we believe we have
captured a defensive growth opportunity at a value price, and
invested c.6% NAV into the company. It is a business the team have
been researching since September 2022 (pre-launch) and was an early
pipeline priority. Through a mix of specialist cleaning services
for UK corporates, the business has a highly attractive earnings
profile.
The business has three core
divisions:
1. React -
the heritage of the group, reactive specialist cleaning often
needed for emergencies or callouts requiring specialist cleaning
techniques; high margin but less predictable.
2.
LaddersFree - large glass pane and cladding cleaning for UK
corporates, executed through a capital-light membership
model.
3. Fidelis
- contract cleaning focused on public services. The business
operates over 80% of its sales on contracted terms of one to five
years and has been organically growing at 17%+ per annum for the
past four years under a new management team. Sales are highly cash
generative and yield a high contribution margin, whilst CAPEX,
depreciation and amortisation are all insignificant.
Crucially now, as a result of a
mix of organic and acquisitive growth and the upcoming cessation of
deferred consideration payments, the business is beginning to
generate strong profits and free cash flow growth from contribution
margin as it exploits inherent operational gearing. If one were to
look away for a moment - not knowing the company cleans large glass
facades, rolling stock, and prisons - its characteristics mean it
could easily be mistaken for a small, successful software company.
Yet we have been able to acquire shares in React over the past six
months on forward P/E multiples of 6.5x - 8.5x.
Crucially now, as a result of a
mix of organic and acquisitive growth and the upcoming cessation of
deferred consideration payments, the business is beginning to
generate strong profits and free cash flow growth from contribution
margin as it exploits inherent operational gearing. If one were to
look away for a moment - not knowing the company cleans large glass
facades, rolling stock, and prisons - its characteristics mean it
could easily be mistaken for a small, successful software company.
Yet we have been able to acquire shares in React over the past six
months on forward P/E multiples of 6.5x - 8.5x.
Springfield Properties plc (SPR LN) - Date of first
investment July 2023
Springfield Properties is one of
Scotland's largest housebuilders and crucially owns the largest
land bank with planning approval in the country. Over the past
24-months the Scottish government has helpfully self-inflicted a
number of headwinds to the housebuilding market to complement the
well-documented impact of rising interest rates and consumer
pressures on the sector. These include rent-controls, unrealistic
terms of business for social housing construction contracts and
wider political uncertainty. These challenges resulted in
Springfield properties having to materially cut earnings guidance,
which in turn left its balance sheet looking stretched. The shares
followed and the company traded at a nearly 50% discount to NAV (of
which the main asset is the previously mentioned land bank). Whilst
these all created fascinating reasons to create a potential entry
point, it is of course a recovery that we as capital allocators are
interested in.
We have invested with line of
sight on a number of catalysts for value recovery. Firstly, the
regulatory environment is improving; the Scottish government are
ending rent controls which should see the build to rent market
improve for Springfield and social housing contract terms have been
adjusted to reflect inflationary pressures. Springfield is seeing
and winning work in both these areas again. The near-term
likelihood of Scottish independence has also reduced materially
which again provides more certainty for business and
investors.
Most crucially however are the
self-help initiatives we are supporting. The company has removed
£4m from the central cost base - which is material in the context
of a historic EBITDA of around £20m. Secondly, and really to the
core of our thesis, is the disposal of land parcels which transfer
enterprise value to equity value in the form of monetising a
portion of the balance sheet assets to pay down debt. The company
has already announced a number of profitable disposals and we
expect these efforts to continue to progress for the rest of the
calendar year.
As these de-risking catalysts
complete it is not unreasonable to expect Springfield to re-rate
from around 0.6x NAV at the point of investment to nearer 1.2-1.3x
where the sector typically trades through the cycle. From this
point the investment is likely to become a healthy compounder for
the portfolio through the next housebuilding cycle, where Scottish
properties are much more appealingly priced relative to average
earnings than most parts of the UK.
Windward Limited (WNWD) - Date of first investment August
2023
Windward is perhaps the most
exciting business model in the portfolio and has the potential to
be one of the most value-creative investment theses too. The
business harnesses marine traffic data to provide analytical
insights to a growing list of household names and global operators
in two key maritime markets; supply chain logistics and
regulatory/legal compliance. Both these segments and the wider
maritime industry are going through massive upheaval and we believe
Windward is extremely well placed to capitalise on this for
shareholders. Windward delivers these insights through an
attractive subscription model via its Maritime AI TM platform.
Customers include; Interpol, the US military, Glencore, BP, Maersk,
BMW and Transworld. The compelling investment case has been
demonstrated in the recent FY23 results which I would encourage
shareholders to read; they are some of the best trading figures I
have read on AIM in some time.
This model and market backdrop is
allowing the business to produce some very compelling operational
metrics in the context of our sub 1x EV/Sales entry point. The
business is growing at 35% per annum and this is a 99% contracted
revenue base it is building, or adding to each year. The gross
margins associated with this are 79% and can likely accrete above
80% and most crucially we expect the business to reach
profitability this year, leaving its $17m of cash surplus to
requirements and providing optionality. The business' list of
blue-chip customers is rapidly growing, almost doubling to 200 in
the past 12-months as Windward's offering becomes ever more topical
for customers making high-value maritime decisions. We believe this
growth can continue and double turnover over the next 5 years or
more and if this level of execution were to be achieved the
business would trade in line with similar businesses around 5x
sales. This has the potential to provide extremely attractive
investment returns on our 1x current sales investment
point.
Speedy Hire plc (SDY LN) - Date of first investment June
2023
Speedy Hire is a much better-known
small cap stock that we have been tracking, undergoing a similar
strategic and personnel change, designed to improve earnings and
return of capital employed ("ROCE"). A very impressive capital
markets day in May revealed CEO Dan Evans clearly lives and
breathes the industry, having worked his way up the organisation.
He is well-placed to lead the cultural and operational changes
required to get Speedy Hire firing on all cylinders again after a
few difficult years and we have been gradually building our take
through the course of the year. The shares pay a handsome yield,
while the 'Velocity' strategy plays out. We are particularly
attracted to how rental has a tangible role to play in reducing
emissions in the construction sector (which is currently a big
challenge for Speedy's target market), and how this can drive
earnings and perhaps even SDY's multiple.
Transense Technologies plc (TRT LN) - Date of first
investment June 2023
Transense Technologies is a very
different business, but we believe is another example of a small UK
company quietly working up great prospects for growth. It is fair
to say the business has had a checkered history of 'jam tomorrow'
as a listed business, with a series of false dawns leading to cash
consumption, funding requirements and shareholder value
destruction. However, our screens and subsequent due diligence
uncovered that over the past few years, prospects and crucially
profits have tangibly changed and this success is partly obscured
by perceptions from the past.
The business has three core market
leading technologies at various stages of execution and a valuation
of £13m at the point of investment. In 2019 the first of these,
iTrack, became profitable through a 10-year royalty deal with
Bridgestone, that is 100% profit margin and we believe will peak at
around £3m per annum versus £2m currently.
The future cashflows of this deal
underpin the current value of the business. This deal, led by the
now Executive Chairman Nigel Rogers, has been crucial, as it has
provided the group with visible long-term profits that have allowed
tangible development of the groups other two exciting technologies
- Translogik and Surface Acoustic Wave ("SAW") sensors. Translogik
provides tyre wear monitoring equipment to fleet managers and
revenues have more than doubled since 2020 when the new team
started to deploy time and effort into the opportunity using iTrack
profits.
The technology generates a gross
margin in excess of 50% for the group and we expect that under the
recently appointed Director of Business Development, Ryan Maughan,
revenues can at least double again in the next few years, if not
more. Lastly, the patent protected SAW technology, which is the
least progressed, but with the largest potential for earnings
contribution, has started to make headway in some of the highest
barriers to entry markets; US defence and high performance
motorsport. SAW is garnering industry and
investor interest because of its ability to provide more specific
and consistent torque readings in high-intensity and adverse
operating environments. The team are targeting opportunities in the
industrial, electric drivetrain and aerospace sectors and we are
monitoring progress closely following early successes
with
McLaren and GE aviation. We were
delighted to see Stephen Parker join the board in May given his
experience in scaling applied technologies, such as YASA, which was
acquired by Mercedes, where he now sits on a subsidiary
board.
As an applied technology company,
revenues generate an extremely high gross margin, north of 85% and
sales have been accelerating. We have been delighted to see a
number of new hires and recent directors buying alongside those
developments.
RBG Holdings plc 'Rosenblatt Group' (RBG LN) - Date of first
investment September 2023
After a difficult series of
results that we believe mark trough earnings and peak balance sheet
stress, we have over the past six months invested into RBG Holdings
(Rosenblatt Group). RBG is a deep-value opportunity due to the
strategic and operational missteps of the past 24 months under the
previous team, since removed. The shares have collapsed from over
150p to as low as 9p during this period. Progress to unwind
previous strategic and operational errors are now progressing.
Rosenblatt is a professional services group in the UK, including
two of the UK's leading law firms, Rosenblatt and Memery Crystal,
and these 'gems' had been mired with dilutive strategic activity in
litigation funding (now exited) and a poorly timed entry into
corporate finance advisory (now exited).
The remainder business is pure
legal services and in fact a top ten law firm with a history of
sector-leading margins that now looks mispriced on spot and
recovery multiples that are low single-digit EBITDA versus our
target multiple of 7 or 8x. The thesis is primarily one of backing
earnings stability, cost take-out, cash generation to pay down debt
and a material multiple re-rating under the return of the founder
Ian Rosenblatt, who has made a long term contractual commitment to
the business and recently re-invested nearly £1m into the recent
fundraise. There may also be material hidden value in certain
archive cases that RBG historically funded (and is therefore
entitled to a material portion of any settlement, but we ascribe
only hope value to these, which have been prudently fully written
down by the new management team. Having admittedly started
investing one profits warning too early, We are working hard with
the Board to ensure maximum value recovery, with the disposal of
Convex providing a recent example of catalyst execution.
Outlook
The highlights at the start of
this report flagged another strong first quarter for FY24 for the
Company as a number of core holdings' theses started to play-out.
Team17, Windward, Springfield Properties and MPAC all had
particularly strong series of updates that demonstrated the
improving operational activity and strategic changes we had
identified.
These and broad-based positivity
across the nursery holdings drove performance onward and wider
market weakness to generate a positive contribution to the NAV for
the first quarter of the year of an additional +2.3% to
109.04p/share, again significantly outperforming the UK AIM
market.
This early performance and line of
sight on catalysts as well as active engagement opportunities
across the portfolio leave the portfolio well placed to meet its
target returns of 15% IRR for the year. Additional capital raised
in March provides the team with additional firepower to capitalise
on the market opportunity that is a core ingredient of the
company's raison d'etre. We look forward to updating shareholders
on progress at the interims and via our quarterly
factsheets.
Onwards,
Laurence Hulse
Investment Director and
Founder
10 April 2024
Investment Objective and
Policy
Investment objective
The Company was incorporated with
limited liability in Guernsey under The Companies (Guernsey) Law,
2008 (the "Companies Law") on 31 January 2023 as a non-cellular
(closed-ended) company limited by shares. The Company's investment
objective is to generate risk-adjusted absolute returns for
shareholders through investments in UK smaller companies. Returns
are expected to be principally derived from capital growth over a
target three to five-year holding period with an appropriate
diversification of investment risk.
Investment policy
The Company will seek to achieve
its investment objective by investing primarily in equity and
equity-related securities of UK smaller companies that are
predominantly listed or admitted to trading on markets operated by
the London Stock Exchange, and where it is considered that there is
a material potential valuation upside that can be delivered from
catalysing strategic, operational or management
initiatives.
In order to ensure that the
Company is able to maintain its approach of active engagement with
investee companies, and to encourage and support value creation,
the Company will typically target meaningful minority stakes in
investee companies of between 5% and 25% of the issued share
capital.
Whilst the Company has no
limitation on the size of the companies in which it can invest, the
Company typically expects to invest in companies with market
capitalisations of no more than £250 million (with
particular focus on those below £100 million) at
the time of investment. The Company will therefore focus on
investments in the 'micro' smaller companies sector and on
companies admitted to trading on AIM.
Investee companies will typically
have certain of the following characteristics:
· balance sheet asset backing;
· a
competitive advantage and/or strong management track
record;
· attractive cash flow potential;
· visibility of earnings/future earnings
improvement;
· potential for liquidity and/or exit in line with the
Company's targeted hold period;
· scope for an active shareholder to trigger value creation;
and/or
· foreseeable events and catalysts to unlock intrinsic
value.
Investments may be either direct
investments made by the Company, or indirect investments made by
the Company through similar funds or investment vehicles. The
Company may make its investments for cash or for share
consideration. Although investments will not be restricted to
specific sectors, the Company does not expect to pursue or make
investments into companies in the biotechnology sector or in
companies directly involved in extractive industries (such as
mining or oil and gas).
Whilst the Company will initially
seek to take minority stakes in investee companies of between 5%
and 25% and will not typically seek to take majority positions in
investee companies, it will not be restricted from taking a
majority position if considered appropriate by the Portfolio
Manager.
The Company's portfolio is
expected to be relatively concentrated, with a typical investment
being between 2% and 10% of Net Asset Value at the time of
investment. This is expected over time to result in a portfolio of
approximately 10 to 15 high conviction investments and a further 5
to 10 smaller portfolio holdings, in companies operating in a
number of industries and geographic locations.
Whilst the Company will target an
investment holding period of three to five years, actual holding
periods and exit strategies will depend on the underlying
investment, the availability of exit opportunities and the size of
the Company's investment. The Company may therefore dispose of
investments outside of the target timeframe should an appropriate
opportunity arise.
The Company may hold cash in its
portfolio from time to time to maintain investment flexibility.
There is no limit on the amount of cash which may be held by the
Company at any time.
Investment restrictions
The Company will observe the
following investment restrictions:
· the
maximum investment in any single investee company will be no more
than 15% of Net Asset Value at the time of investment;
· no
more than 10% of Gross Asset Value at the time of investment will
be invested in securities listed or quoted on listing venues other
than markets operated by the London Stock Exchange (without the
explicit written consent of the Board);
· no
more than 25% of Gross Asset Value at the time of investment(s)
will be in unquoted securities including, inter alia, in unlisted
shares or other unlisted instruments such as convertible loan notes
issued by quoted companies, rights, options, warrants, bonds and
notes; and
· no
more than 20% in aggregate, of the Gross Asset Value at the time of
investment will be in other listed closed-ended investment
funds.
Corporate Governance Statement
The Company is listed on AIM and
became a member of the Association of Investment Companies (AIC) on
4 April 2023. The Directors recognise the
importance of sound corporate governance and the Directors intend
to observe the requirements of the AIC Code so far as is
practicable.
The Guernsey Financial Services
Commission's ("GFSC") Financial Sector Code of Corporate Governance
(the "Code") applies to the Company. The GFSC has stated in the
Code that companies which report against the UK Corporate
Governance Code, or the AIC Code are deemed to meet the
requirements of the Code and need take no further action.
Accordingly, as the Company will report against the AIC Code, it
will be deemed to meet the requirements of the Code.
The Board has established an Audit
and Risk Committee and a Management Engagement Committee. These
committees undertake specific activities through delegated
authority from the Board. Terms of reference for each committee
have been adopted and will be reviewed on a regular basis by the
Board. The Board as a whole will undertake the functions of
remuneration and nomination committees and as such no separate
remuneration or nomination committee has been
established.
Key Governance Disclosures
Section 172(1) Statement
Through adopting the AIC Code, the
Board acknowledges its duty to apply and demonstrate compliance
with section 172 of the UK Companies Act 2006 and to act in a way
that promotes the success of the Company for the benefit of its
Shareholders as a whole, having regard to (amongst other
things):
a) consequences
of any decision in the long-term;
b) the need to
foster business relationships with suppliers, customers and
others;
c) impact on
community and environment;
d) maintaining
reputation; and
e) acting fairly
as between members of the Company.
The Board considers its duties
under section 172 to be integrated within the Company's culture and
values. The Company's culture is one of respect for the opinions of
stakeholders, with an aim of carrying out its operations in a fair
and sustainable manner that is both instrumental to the Company's
long-term success and upholds the Company's ethical values. The
Board encourages diversity of thought and opinion and would like to
encourage stakeholders to engage freely with the Board of Directors
on matters that are of concern to them. Stakeholders may contact
the Company via the Company's dedicated e-mail address
ool@apexgroup.com
or by post via the Company Secretary on any
matters that they wish to discuss with the Board of
Directors.
The Company does not have a formal
diversity policy. This is a function of the fact that the Company's
remunerated officers are limited to the directors. The composition
and effectiveness of the Board is internally assessed on an annual
basis. The periodic rotation or retirement of directors is a
trigger event which initiates a formal search and selection
process. This prioritises professional experience relevant to the
needs of the Company over other more subjective factors which do
not lend themselves to formal assessment and testing. Whilst the
Company does not therefore have any policy of positive
discrimination in relation to age, gender or race, the Company does
recognise the value that different perspectives and outlooks can
bring to the quality of decision making. Accordingly, whilst
remaining focused on merit-based appointments, the Board encourages
and seeks to identify candidates who can also enhance the diversity
of its composition.
The Board has continued to work
closely with its service providers during 2023 in order to support
the maintenance of high standards of service. As part of its annual
review process, the Management Engagement Committee enquires about
any incidents, breaches or other occurrences within its service
providers that might create a reputational risk or other negative
consequences for the Company. Further details relating to the
service providers can be found within the Directors'
Report.
The Board considers that there is
a very low risk of modern slavery or human trafficking associated
with the Company's activities, given it has no employees, premises,
manufacturing or other physical operations. Its suppliers are
professional services providers, most of whom are regulated and
none of whom operate in jurisdictions that have a poor record on
modern slavery or human trafficking. The Company is an externally
managed investment company, has no employees, and as such is
operationally quite simple.
The Board does not believe that
the Company has any material stakeholders other than those set out
in the following table.
Investors
|
Service providers
|
Community and environment
|
Issues that matter to
them
|
Performance of the
shares
Growth of the Company
Liquidity of the shares
Corporate Governance
|
Reputation of the
Company
Compliance with Law and
Regulation
Remuneration
|
Compliance with Law and Regulation
Impact of the Company and its activities on third
parties
|
Engagement
process
|
Annual General Meeting
Frequent meetings with investors
by brokers and the Portfolio Manager and subsequent reports to the
Board
Quarterly factsheets
Key Information
Document
|
The main service providers engage
with the Board in formal quarterly meetings, giving them direct
input to Board discussions.
Communication between the Board
and service providers also occurs informally on an ongoing basis
during the year.
|
Adherence to principles of
appropriate ESG policies exists at both Company and investment
level. Principles of socially responsible investing form a key part
of the Company's investment strategy.
|
Rationale and example
outcomes
|
The Board have engaged with
shareholders in relation to the Company's business over the course
of the year.
|
The Company relies on service
providers as it has no systems or employees of its own.
The Board seeks to act fairly and
transparently with all service providers, and this includes such
aspects as prompt payment of invoices.
|
The Portfolio Manager works to
ensure that sustainability and ESG factors are carefully considered
and reflected in the Company's investment decisions.
The Board of Directors
travel as infrequently as possible and instead communicate, where
they are able to, by video and conference call.
|
Going Concern Statement
The Going Concern Statement is
made on page 26.
Long-Term Viability Statement
The Long-Term Viability Statement
is made on pages 26 to 27.
Fair, Balanced and Understandable Statement
The annual report and accounts
taken as a whole are considered by the Board to be fair, balanced
and understandable and provide the information necessary for
shareholders to assess the Company's performance, business model
and strategy. Further information on how this conclusion was
reached can be found within the Audit and Risk Committee
Report.
Continuing Appointment of the Portfolio
Manager
Further details relating to the
continuing appointment of the Portfolio Manager and how this is in
the interests of shareholders as a whole can be found within the
Directors' Report.
Assessment of Principal and Emerging Risks
The Board has undertaken a robust
assessment of the Company's principal risks, together with the
procedures that are in place to identify emerging risks. Further
information on this assessment and an explanation on how these
risks are being mitigated and managed can be found on pages 28 to
30.
Review of Risk Management and Internal
Control
The Audit and Risk Committee is
responsible for ensuring that the financial performance of the
Company is properly reported and monitored. The Audit and Risk
Committee reviews the Company's annual and interim accounts, the
accounting policies of the Company and key areas of accounting
judgment, management information statements, financial
announcements, internal control systems, risk management and the
continuing appointment of auditors. It also monitors the whistle blowing policy and procedures over
fraud and bribery of the Administrator.
Due to its size, structure and the
nature of its activities, the Company does not have an internal
audit function. The Audit and Risk Committee will continue to keep
this matter under review.
The Board is ultimately
responsible for the Company's system of internal controls and for
reviewing its effectiveness. The Board has developed a framework
that is designed to manage, rather than to eliminate, the risk of
failure to achieve the Company's business objectives. The framework
involves identifying sources of risk, the potential significance
(financial and operational) of any risk impacts, and the associated
controls in place to identify, pre-empt and mitigate those
potential impacts. This is documented in a Business Risk Assessment
which is considered at least annually by the Board. The framework
is discussed with the Portfolio Manager, and members of the
Management Engagement Committee conduct a detailed meeting with the
Portfolio Manager to review the effectiveness of controls and any
breaches / errors that have occurred since the last inspection
visit. Any such control failures are also recorded on an exceptions
basis and reported at quarterly Board meetings or in real time if
sufficiently significant. No significant failings or weaknesses
have been identified to date. These processes ensure an at least
annual review of the Company's system of internal controls,
including financial, operational, compliance and risk management.
The system can only provide reasonable and not absolute assurance
against material misstatements.
The Board has delegated the
management of the Company's investment portfolio, the provision of
custody services, the administration (including the independent
calculation of the Company's NAV), share registration, corporate
secretarial functions and the production of the half-yearly and
annual independently audited financial reports. The Board retains
accountability for the functions it delegates. Formal contractual
arrangements have been put in place between the Company and the
providers of these services. Compliance reports are provided by the
Company's Compliance Officer at each quarterly Board meeting. The
Board considers that its internal control processes meet current
industry best practice.
Regulatory Compliance
The Company keeps abreast of
regulatory and statutory changes and responds appropriately. The
Board continues to take advice on Alternative Investment Fund
Managers Directive ("AIFMD") from external professional advisers
and to implement necessary measures to ensure compliance with
relevant requirements of the AIFMD Regulations. The AIFM is also a
resource relied upon by the Board in this regard. Although the
majority of the obligations associated with AIFMD are applicable to
the AIFM, the Board is satisfied that the Company as an Alternative
Investment Fund ("AIF") complies fully with its relevant
obligations under the AIFMD and the UK's AIFMD Regulations 2013.
Key Information Documents ("KIDs") have been updated in accordance
with the EU's Packaged Retail and Insurance-based Investment
Products Regulations ("PRIIPs") and the UK's amended version
thereof and are available at
https://onwardopportunities.co.uk/wp-content/uploads/2023/03/Onward-Opportunities-Limited-2023-UK-PRIIP-KID86.pdf.
Board Members
The Board is responsible for the
determination of the Company's investment objective and investing
policy and has overall responsibility for the Company's activities
including the review of investment activity and performance and the
control and supervision of the AIFM, the Portfolio Manager and the
other service providers.
The Directors meet at least four
times a year, and at such other times as may be required. The
Directors (including the Chair) are all independent non-executive
directors. Given the size of the Board it has not been considered
necessary to appoint a senior independent director at this stage in
the Company's lifecycle.
The Board has been assembled to
ensure that the Company has the appropriate breadth of skills and
experience in order to ensure that it can be governed effectively
and comprises the following persons:
Director Biographies
Andrew Henton (Independent Non-Executive
Chair)
Andrew graduated from Oxford
University in 1991 and subsequently qualified as a Chartered
Accountant with PricewaterhouseCoopers in London, specialising as a
corporate tax consultant. He spent eight years working in the City
as a corporate finance advisor with HSBC Investment Bank and as a
principal of the Baring English Growth Fund, a private equity Fund
focussed on mid-market transactions sponsored by ING Barings. In
2002 Andrew was relocated to Guernsey by Close Brothers Group plc
to take responsibility for integrating and reorganising a number of
regulated banking, custody, asset management and fiduciary
administration businesses that the bank had acquired in Jersey,
Guernsey and Isle of Man.
He was Head of Offshore Businesses
for Close until the division he managed was sold in 2011.
Thereafter he chose to remain in Guernsey and to work with a
portfolio of companies as a non-executive director. He has wide
board experience of both regulated and non-regulated businesses
(including listed funds and venture backed companies) in both
executive and non-executive capacities. Andrew is British and
resident in Guernsey.
Susan Norman (Independent Non-Executive
Director)
Susan has over 25 years of
boardroom experience formerly in company secretarial roles and most
recently through non-executive director roles across a wide range
of companies in multiple jurisdictions. Susan is currently a
non-executive director of a number of Terra Firma Capital Partners
Limited's Guernsey-based private equity vehicles. Susan started her
career within the private banking and fund of hedge funds sectors
and now runs her own consultancy business providing company
secretarial, governance and independent directorship services to a
broad range of clients across various jurisdictions. Susan's board
experience covers public and private equity investment companies,
real estate investment companies and impact investment funds,
amongst others.
Susan holds an LLB (Hons) degree
in Scots Law from the University of Strathclyde, is a Fellow of the
Chartered Governance Institute and holds the Institute of
Directors' Diploma in Company Direction.
Henry Freeman (Independent Non-Executive Director, Chair of
Management Engagement Committee)
Henry is an investment
professional with over 25 years of investment decision making and
over 10 years of Board experience. During his executive career as
an investment manager with Lloyds Private Banking/Hill Samuel and
Forsyth Partners, and then an investment banker with Liberum and
Investec Securities, Henry managed institutional and private client
funds, investing across equities, investment trusts and alternative
investments; and advised London-listed investment companies and
funds on strategy, structuring, IPOs and M&A. Henry has also
built technology and investment businesses and sat on UK
parliamentary policy groups and Downing Street roundtables for
fintech and social finance. Henry was a founding member of Innovate
Finance.
In addition to Onward
Opportunities, Henry sits on a number of commercial fund and
investment company boards, as well as the Crown Dependency of
Guernsey's sovereign wealth and pension funds. He is a member of
the Guernsey Investment & Funds Association (GIFA) Executive
Committee and is proud to have established the GIFA Schools
Investment Challenge, encouraging financial literacy and investment
education among young people. Henry holds the Institute of
Directors' Diploma in Company Direction.
Luke Allen (Independent Non-Executive Director, Chair of
Audit and Risk Committee)
Luke is an independent
non-executive director with over 30 years' experience working in
the financial services sector, the majority of which have been
spent in the investment funds industry. Until December 2019 he was
the chief executive and managing director of Man Group plc's
Guernsey office, which serviced an extensive range of hedge funds
and funds of hedge funds. His primary role was to lead Man Group's
operations in Guernsey, chairing the local management company
boards, setting strategy and ensuring effective risk management,
outsourced service provider oversight, and compliance with laws and
regulations. He has well over a decade's experience (in both an
executive and independent non-executive capacity) of working with,
and sitting on the boards of, a wide range of fund and management
company structures across various asset classes and international
jurisdictions.
He is a chartered accountant
(ICAEW) and, prior to running Man Group's Guernsey office, he
headed up their fund financial reporting and liquidations team,
with responsibility for the production of fund financial statements
and for fund terminations across their entire product range. He has
completed the Institute of Directors' Diploma in Company Direction
and is the holder of a personal fiduciary licence issued by the
Guernsey Financial Services Commission.
Public Company Directorships
The following details are of all
other public company directorships and employment held by each
Director and shared directorships of any commercial company held by
two or more Directors:
Andrew Henton
Pershing Square Holdings
Limited
Susan Norman
None to be disclosed
Henry Freeman
None to be disclosed
Luke Allen
Boussard & Gavaudan Holding
Limited
Investec W&I International PCC
Limited
Global Private Equity One
Limited
Director Attendance
During the period ended 31
December 2023, the Board and Committee meetings held and attended
by the Directors were as follows:
|
Quarterly Board
Meeting
|
Audit and Risk Committee
Meeting
|
Management
Engagement
Committee
Meetings
|
Ad-hoc
Meetings
|
Director
|
Attended/
Eligible
|
Attended/
Eligible
|
Attended/
Eligible
|
Attended/
Eligible
|
Andrew Henton
|
2/2
|
1/1
|
0/0
|
3/3
|
Susan Norman
|
2/2
|
1/1
|
0/0
|
3/3
|
Henry Freeman
|
2/2
|
1/1
|
0/0
|
3/3
|
Luke Allen
|
2/2
|
1/1
|
0/0
|
3/3
|
Division of Responsibilities
A schedule of matters reserved for
the Board is maintained by the Company and can be summarised as
follows:
· Strategic Issues
· Financial Items such as approval of the annual and
half-yearly reports and any preliminary announcement of the final
results and the annual report and accounts including the corporate
governance statement
· Legal, Administration and Other Benefits
· Communications with Shareholders
· Board Appointments and Arrangements
· Miscellaneous such as to approve the appointments of
professional advisers for any Group company in addition to the
Company's Auditors
· Monetary Limits and payment approvals.
The Directors have also delegated
certain functions to other parties such as the Portfolio Manager,
the Administrator, the Company Secretary, the Custodian and the
Registrar. In particular, the Portfolio Manager has been granted
discretion over the management of the investments comprising the
Company's portfolio.
The Portfolio Manager reports to
the Board on a regular basis both outside of and during quarterly
board and Committee meetings, where the operating and financial
performance of the portfolio, together with valuations, are
discussed at length between the Board and the Portfolio Manager.
The Directors have responsibility for exercising supervision over
the Portfolio Manager.
Board Committees
The Company has established an
Audit and Risk Committee and a Management Engagement Committee
(together the "Committees"). The Terms of Reference for each
committee are available on the Company's website.
The Board believes that its
established Committees are adequately composed, and that each
member has the necessary skills and experience to discharge their
duties effectively. The relevant Committee and the actions carried
out by each Committee since the previous quarterly board meeting
are reported at each meeting to the Board of Directors by the
respective Committee chair. Each Committee meeting is attended by
the Company Secretary and minutes are kept, as well as a schedule
of the action points arising from each meeting.
The Audit and Risk Committee
comprises all of the Directors and is chaired by Luke Allen who is
considered to have recent and relevant financial experience. The
Audit and Risk Committee meets at least three times a year. There
are likely to be a number of regular attendees at meetings of the
Audit and Risk Committee, including the Company's external
auditors. A full report regarding the Audit and Risk Committee's
activities during the period can be found in the Audit and Risk
Committee Report on pages 36 - 40.
The Management Engagement
Committee comprises all of the Directors and is chaired by Henry
Freeman. The Management Engagement Committee meets at least once a
year or more often, if required. Its principal duties are to
consider and review the management engagement terms on which each
of the AIFM and the Portfolio Manager is engaged. Those terms are
reviewed by the Committee annually, scrutinising and holding to
account the performance of each of the AIFM, the Portfolio Manager
and other service providers prior to the annual results
announcement being released. Details of
the Management Engagement Committee's activities during the period
can be found on page 32.
Investment Committee
Laurence Hulse (Investment Director and
Founder)
Laurence joined Dowgate Wealth in
September 2022 as an Investment Director. Laurence started his
career at Gresham House in 2015, around the time of its inception,
and worked on a number of outperforming equity products as part of
a small team during that time. At the time of his departure from
Gresham House, he had co-managed or deputised on a number of equity
funds; namely Gresham House Strategic plc (now called Rockwood
Strategic plc), Strategic Public Equity Fund LP and Gresham House
Smaller Companies Fund. He was awarded both AAA and AA-ratings by
Citywire during this time and two of these co-managed funds
achieved FE '5-crown' ratings while he was part of the team working
on them. During his tenure, the company grew from a handful of
employees and less than £50m assets to over 200 employees and in
excess of £7.5 billion of assets. Gresham House was bid for by
Searchlight Capital in Q3 2023 for a value of c.£500m, generating a
total return to Gresham House Shareholders since the management
buy-in in December 2014 of over 300%.
Laurence joined Dowgate to pursue
a long-held ambition to build and manage an investment vehicle
tailored for HNWIs and Family Offices focused on special situations
in the UK, which perfectly aligns with the Dowgate ethos. The first
step of this ambition was achieved with the floatation of Onward
Opportunities in March 2023.
As an investor, Laurence strongly
believes in creating value through change; whether that be
strategic, operational or personnel within a business -
particularly in small and micro-cap companies where the impacts of
these changes tend to be most tangible. He prides himself on
working actively with the Boards and Executive teams of investee
companies to drive shareholder value through the investment cycle.
He holds a truly active approach to investment management by
applying private equity techniques to publicly listed companies.
His enthusiasm and drive have allowed him to successfully garner a
track record of outperformance and close industry network
throughout his early career in the City.
Career highlights for Laurence
include when he was nominated for the rising star of investment
companies award in 2021 and the flotation of Onward Opportunities,
the investment vehicle he founded, on the London stock market in
2023. His biggest achievement away from work was climbing Mount
Kilimanjaro for charity at the age of 16. In addition to his duties
as Investment Director, Laurence loves cycling, driving, and
vintage cars.
Tom Teichman (Investment Committee Chair)
Tom started his career at Willis
Faber & Dumas and then William Brandt's Sons & Co.,
becoming head of European merchant banking. Over the next 40 years
he has sat on various credit and investment committees whilst
working at Bankers Trust Company, Credit Suisse, Finanz AG,
Mitsubishi Finance International, Bank of Montréal Nesbitt Thomson,
NewMedia Investors, SPARK Ventures (which he co-founded), The
Garage Soho (which he co-founded) and Gresham House Strategic,
where he worked directly with Laurence Hulse. Tom was personally,
or through investment vehicles he established, a very early-stage
investor in MAID, Argonaut Games, ARC Risc Cores, lastminute.com,
mergermarket.com, System C, Notonthehighstreet.com, made.com,
moshimonsters.com, Kobalt Music Group and IMI Mobile.
He served on the boards of most of
these companies, in some cases as chairman, advising on growth,
funding and exit strategy. Some of these eventually went public or
were acquired by major corporations, including The Financial Times
and Oracle, and/or achieved valuations of over £1
billion.
Tom has a B.Sc. (Econ.) Hons. from
University College, London and was born in Hungary. He has over 30
years' experience in venture capital and banking and has chaired or
been a member of several credit and investment committees including
the Gresham House Strategic Public Equity Investment Committee
where he worked directly with Laurence Hulse from its
inception.
David Poutney (Investment Committee Member)
David is Chief Executive of
Dowgate Capital and Chairman of, Dowgate Wealth, and Dowgate Group.
His early career was in commercial banking and asset finance, after
completing a history degree from Cardiff University in 1974. He
made the transition into stockbroking a few years ahead of the Big
Bang, becoming a number one rated financials analyst for 15 years
at a number of well-known firms including BZW, James Capel and UBS.
He moved into a broader role in corporate broking during the Dotcom
boom of the 1990s and was involved in the flotation of a number of
companies which survived the crash, notably Sports Internet Group
which was taken over by Sky. After joining Numis in 2001 as head of
corporate broking, he was responsible for a number of growth
companies such as Domino's Pizza, Alliance Pharma and Learning
Technologies Group. Overall, he was involved in the flotation of
over 30 companies.
In addition to his positions at
Dowgate Group, David is a non-executive director of AIM-quoted
Franchise Brands plc and Belluscura plc and previously of Be Heard
plc which also quoted on AIM before being sold to a private equity
firm.
Jeremy McKeown (Investment Committee
Member)
After obtaining an economics
degree from Georgia State University, Jeremy began his career as a
trainee investment analyst at the South Yorkshire Pension Fund in
1982. Over the following forty years, Jeremy worked on both the buy
and sell sides of the UK stock market, including with companies
such as Abbey Life, British Gas Pension Fund, Midland Bank,
Charterhouse, Merril Lynch, Investec, Liberum and Royal Bank of
Canada. Jeremy obtained an MBA from the City University Business
School during this time. Jeremy built a reputation for independent
advice to institutional small and mid-cap investors and worked on
many equity capital market transactions. He led award-winning teams
at Charterhouse, Merrill Lynch and Investec. Since 2020 Jeremy has
worked as a consultant for a number of clients, including Dowgate
and Progressive Equity Research. Jeremy is passionate about
understanding the investment landscape from the macroeconomic
backdrop to the entrepreneurs capable of delivering exceptional
returns. He started writing a blog during the pandemic and launched
a podcast series covering investment issues. Jeremy is a
non-executive director at Cranfield University spinout, Loxham
Precision.
Jay Patel (Investment Committee Member)
Jay is the Vice President and
General Manager of Cisco's Webex CPaaS initiative and joined Cisco
when the company he ran, IMIMobile, was acquired for US$730m in
2021. He helped start IMImobile PLC in 2003, as CEO led it to a
successful IPO in 2014 and then delivered its exit to Cisco. Today
Jay is working on combining the IMI platforms with relevant
technologies from Webex to create solutions that help clients
deliver the world's best customer experiences.
Jay is an experienced technology
executive with over 25 years' commercial experience through
operational, investment and advisory roles. He has had a successful
career working with fast growth businesses and has served as both
an executive and non-executive director on the boards of both
private and public companies over the last 20 years.
Previously, Jay was a co-founder
of venture capital firm Spark Ventures PLC (an early stage venture
capital firm), where he led several successful investments,
restructurings and exits in the technology sector across digital
media and publishing, B2B software and B2C eCommerce. Jay has also
worked in corporate finance roles at UBS Warburg and BSkyB and
qualified as a Chartered Accountant with KPMG. He has an MBA from
INSEAD and an Economics degree from London School of
Economics.
Directors' Report
The Directors present their Report
and the Audited Financial Statements of the Company for the period
ended 31 December 2023.
Principal Activities and Business Review
The investment objective of the
Company is to generate long term capital growth through investing
in a portfolio consisting primarily of equity investments in quoted
companies.
The Directors do not envisage any
change in these activities for the foreseeable future. A
description of the activities of the Company in the period under
review is given in the Chair's Statement and the Portfolio
Manager's Report.
Business and Tax Status
The Company has been registered
with the GFSC as a closed-ended investment company under the
Registered Collective Investment Schemes Rules and Guidance, 2021
("the RCIS Rules) and the Protection of Investors (Bailiwick of
Guernsey) Law, 2020 ("POI") Law and was incorporated in Guernsey on
31 January 2023. The Company operates under The Companies
(Guernsey) Law, 2008 (the "Law").
The Company's shares are listed
and traded on AIM.
The Company's management and
administration takes place in Guernsey and the Company has been
granted exemption from income tax within Guernsey by the
Administrator of Income Tax. It is the intention of the Directors
to continue to operate the Company so that each year this
tax-exempt status is maintained.
In respect of the Criminal
Finances Act 2017, which has introduced a new corporate criminal
offence of 'failing to take reasonable steps to prevent the
facilitation of tax evasion', the Board confirms that they are
committed to zero tolerance towards the criminal facilitation of
tax evasion.
Foreign Account Tax Compliance Act
("FATCA")
FATCA requires certain financial
institutions outside the United States ("US") to pass information
about their US customers to the US tax authorities, the Internal
Revenue Service (the "IRS"). A 30% withholding tax is imposed on
the US source income and disposal of assets of any financial
institution within the scope of the legislation that fails to
comply with this requirement.
The Board of the Company has taken
all necessary steps to ensure that the Company is FATCA compliant
and confirms that the Company is registered and has been issued a
Global Intermediary Identification Number ("GIIN") by the IRS. The
Company will use its GIIN to identify that it is FATCA compliant to
all financial counterparties.
Common Reporting Standard
The Common Reporting Standard is a
global standard for the automatic exchange of financial account
information developed by the Organisation for Economic Co-operation
and Development ("OECD"), which has been adopted in Guernsey and
which came into effect in January 2016.
The Company is subject to Guernsey
regulations and guidance on the automatic exchange of tax
information and the Board will therefore take the necessary actions
to ensure that the Company is compliant in
this regard.
Going Concern
The Directors have adopted the
going concern basis in preparing the Audited Financial
Statements.
In assessing the going concern
basis of accounting, the Directors have assessed the guidance
issued by the Financial Reporting Council and considered the
Company's own financial position, recent market volatility, the
on-going impact of the Russian war on Ukraine and the conflict in
the Middle East, energy shortages, inflation, increases in interest
rates, recent bank failures and other uncertainties impacting on
the Company's investments, their financial position and liquidity
requirements.
At period end the Company had a
net asset position of £17,069,000 comprising cash of £407,000,
listed investments amounting to £16,695,000.
The Company generates liquidity by
raising capital and exiting investments. It uses liquidity by
making new and follow-on investments and paying company expenses.
The Directors ensure it has adequate liquidity by regularly
reviewing its financial position and forward-looking liquidity
requirements. In assessing its going concern status, the Directors
have considered the level of operating expenses relative to net
assets, such expenses approximating to 2.53% of net assets as at 31
December 2023.
Long-Term Viability Statement
The principal risks facing the
Company are documented in the Business Risk Assessment and are
described later in this report. The business model and investment
strategy are described and evaluated in the Portfolio Manager's
report. The Board's review of the effectiveness of the Company's
risk management and internal control systems is described in the
Audit Committee's report.
Given the liquid, tradeable nature
of its assets it would take a general failure in the effective and
ongoing operation of financial markets (cessation of market
liquidity) to threaten the Company's solvency. Such a market
failure could prevent investments held by the Company from being
redeemed and thereby leave it potentially unable to meet its
financial obligations as they fall due. Notwithstanding the
uncertainty caused by recent market
volatility, the on-going impact of the Russian war on Ukraine and
the conflict in the Middle East, energy shortages, inflation,
increases in interest rates, recent bank failures and other
uncertainties impacting on the Company's
investments, the fact that the operating
expenses (excluding performance fees) of the Company represent less
than 3.0% of its NAV on an annual basis makes this risk
remote.
The Board has conducted a robust
assessment of the principal and emerging risks and uncertainties
facing the Company and has also assessed its long-term viability.
The ongoing impact of both the Russian war on Ukraine and the
conflict in the Middle East have formed part of this assessment.
The key risk to the Company has been identified as a failure of the
investment decision making process to generate NAV accretion that
is in line with investors' expectations, and which is attractive on
a risk adjusted basis when compared with alternative managed
investment opportunities.
The Company's performance is
measured on a monthly basis via both the NAV of its underlying
investments and its share price. Key data inputs used by the
Portfolio Manager when making investment decisions comprise company
earnings, macro factors and indicators of sentiment. The Company's
performance is compared primarily to peer group funds on a regular
basis, and performance fees payable to the Portfolio Manager are
calculated annually.
The significant majority of
investment positions taken by the Company are in relatively liquid
assets that can be converted to cash readily in the market and a
great effort is made by the Portfolio Manager to minimise drawdowns
and to maintain liquidity. Given that the Company's operating costs
as a percentage of its realisable investment portfolio are low and
that it is a closed-ended fund, the Directors consider there to be
significant liquidity headroom available in all but the most
extreme market failure scenarios.
Despite the emphasis on short-term
performance and resilience described above, not all investment
positions are entered into with the expectation of them being
unwound within twelve months. Moreover, the 'repeatability' of the
investment process is of fundamental importance. The Portfolio
Manager has developed analytical tools and processes that it seeks
to apply on a consistent basis over time when making investment
decisions. In this way it seeks to generate positive risk adjusted
returns using strategies that are sustainable for the medium to
long term. The time frame over which it is necessary to identify
and respond to 'paradigm shifts' in economic markets is long term
in nature. Factors such as government or central bank policies
(e.g. quantitative easing) or external events (including wars and
regional instability) can cause significant changes in investor
sentiment, which can in turn alter market assessments of intrinsic
value and correlations between different asset types. For these
reasons, the Board considers a three-year time horizon to 30 April
2027 as being the appropriate period over which to assess future
prospects and viability.
On the basis of the relevant and
rigorous assessment described above, the Board believes that the
Company will remain viable as a closed-ended investment company for
at least the period ending 30 April 2027.
Results and Dividends
The results attributable to
shareholders for the period are shown in the Statement of
Comprehensive Income on page 45. The
Directors have neither declared nor paid a dividend for the
period.
Directors
The Directors of the Company who
served during the period and to date are set out on pages 19 to
20.
Directors' Interests
The Directors held the following
interests in the share capital of the Company either directly or
beneficially as at
31 December 2023, and as at the
date of signing these Audited Financial Statements:
|
|
Number of
|
|
% Ordinary Shares
in
|
|
|
Ordinary
Shares
|
|
issue as at 31 December 2023
|
|
|
|
|
|
Andrew Henton
|
|
100,000
|
|
0.6239
|
Susan Norman
|
|
20,000
|
|
0.1248
|
Henry Freeman
|
|
15,000
|
|
0.0936
|
Luke Allen
|
|
-
|
|
-
|
Adrian Norman (husband of Susan
Norman)
|
|
4,878
|
|
0.0304
|
Under their terms of appointment,
the Directors' total remuneration (including one-off fees) are as
disclosed below:
The Directors' compensation is
reviewed annually and effective 30 March 2023, each Director is
paid a basic fee of £27,500 per annum by the Company. In addition
to this, the Chair receives an extra £11,500 per annum and the
Audit and Risk Committee Chair receives an extra £3,500 per
annum.
Procedures for Identifying Risks
Principal Risks and Uncertainties
There are several potential risks
and uncertainties which could have a material impact on the
Company's performance and could cause actual results to differ
materially from expected and historical results.
The AIFM has overall
responsibility for risk management and control within the context
of achieving the Company's objectives. The Board agrees the
strategy for the Company, approves the Company's risk appetite and
the AIFM monitors the risk profile of the Company. The AIFM also
maintains a risk management process to identify, monitor and
control risk concentration.
The Board's responsibility for
conducting a robust assessment of the principal and emerging risks
is embedded in the Company's risk map, which helps position the
Company to ensure compliance with the Association of Investment
Companies Code of Corporate Governance (the "AIC Code").
The principal risks that the
Company faces arising from its financial instruments
are:
(i) market risk,
including:
-
Price risk, being the risk that the value of
investments will fluctuate because of changes in market
prices;
-
interest rate risk, being the risk that the
future cash flows of a financial instrument will fluctuate because
of changes in interest rates;
(ii) credit risk, being the risk
that a counterparty to a financial instrument will fail to
discharge an obligation or commitment that it has entered with the
Company.
(iii) liquidity risk, being the
risk that the Company will not be able to meet its liabilities when
they fall due. This may arise should the Company not be able to
sell its investments.
(iv) company failure, being the
risk that companies invested in may fail and result in loss of
capital invested.
To manage such risks the Company
complies with the investment restrictions and diversification
limits provided for in its Admission Document.
The Company invests and manages
its assets with the objective of spreading risk. Further to the
investment restrictions referenced, the Company also seeks to
manage risk by:
· not
incurring debt over 25% of its NAV, calculated at time of drawdown.
The Company will target repayment of such debt within twelve months
of drawdown; and
· not
using derivatives for investment purposes. It is expected that the
Company's assets will be predominantly denominated in Sterling and,
as such, the Company does not intend to engage in hedging
arrangements, although the Company may do so if the Board deems it
appropriate for efficient portfolio management purposes.
Other operational related risks
identified by the Board include the following:
Portfolio concentration
risk
The majority of the Company's
portfolio is expected to be invested in approximately 10 to 15
companies, with a further 5 to 10 smaller portfolio holdings
existing from time to time. As a result, the portfolio carries a
higher degree of stock-specific risk than a more diversified
portfolio.
This is mitigated by position
sizing being relatively evenly spread across the portfolio to
ensure that there isn't a disproportionately high level of exposure
to a small number of assets within the portfolio itself. In
addition, both the AIFM and the Portfolio Manager monitor that the
investment restrictions as set out in its Admission Document are
adhered to at all times.
Key person risk
At present the Company's
investment selection, portfolio management and marketing functions
are heavily reliant upon a single individual employed by the
Portfolio Manager. This individual presents a key person risk as
their departure or inability to continue to provide services to the
Company could be significantly detrimental to its performance. This
risk is countered by the fact that the key individual is
reputationally and financially linked to the success of the
Company, that there are other staff employed by the Portfolio
Manager who could provide cover in the event of any unexpected
absence, that there is a plan to procure additional staff resources
as the Company grows in size and that contractual notice periods
are in place in order to enable the Company sufficient time to find
a replacement Portfolio Manager in the event that this became
necessary.
Share price risk
There is a risk that the Company's
shares trade at a discount to their prevailing Net Asset Value and
that any discount may become embedded if it persists for a
significant length of time, albeit that this is a function of
supply and demand for the Company's shares in the market which
cannot be controlled by the Board. The discount risk is mitigated
by the fact that the Portfolio Manager, AIFM and Brokers review
market conditions on an ongoing basis and will report to the Board
if a persistent discount appears to be materialising. In addition,
consideration has been given to discount management options as set
out in the Company's Admission Document and the Company is
committed to ensuring that secondary market liquidity is maintained
via the issuance of informative investor communications and the
engagement of active Brokers.
Conflicts of interest
The Portfolio Manager and/or
companies with which it is associated may act as advisor in
relation to, or be otherwise involved with, other investment funds
or accounts which presents the risk of a conflict of interest.
There is also a risk that key individuals at the Portfolio Manager
may spend time on other structures rather than on providing
services to the Company. This risk is mitigated by the fact that
the Company has put a formal Conflicts of Interest Policy in place
and that it has access to, and receives regular reporting from, the
Portfolio Manager.
Emerging Risks
Emerging risks, along with all
other risks the directors have identified the Company as being
exposed to, are monitored via the Company's Business Risk
Assessment. During the year, as part of their regular review and
assessment of risk, the Directors have continued to consider the
impact of the emerging risks of climate change, the use of
artificial intelligence, an escalation of the conflict in the
Middle East, the current recessionary environment in the UK and the
forthcoming UK general election on the Company's business model and
viability, but do not consider these to be material risks at this
time. With respect to climate change risk in particular,
the Directors consider that the pricing of the
underlying portfolio of the Company's investments reflects market
participants' views of climate change risk and that there are no
further climate related influences on the NAV of the Company at
this point in time.
ESG and Climate Change Risks and
Considerations
The momentum of ESG adoption in
the asset management industry continued in 2023, as incoming
regulations pushed asset owners to increase their demand for
transparency. This is expected to have the dual benefits of
supporting NAV growth for shareholders, and also (as ESG processes
are further embedded within the wider investment sector) improving
environmental outcomes by companies accessing capital via the
public markets.
Climate change risk has been
considered within the Emerging Risks section above.
Ongoing Charges
The ongoing charges figure for the
period was 3.14%. The ongoing charges represent ongoing annual
expenses of £431,333 divided by total average Net Asset Value for
the period of £13,721,592. The ongoing charges has also been
prepared in accordance with the recommended methodology provided by
the Association of Investment Companies where performance fees of
£28,350 have been excluded and represents the percentage reduction
in shareholder returns as a result of recurring operational
expenses.
Service Providers
Portfolio Management Agreement and Fees
The Portfolio Management Agreement
between the Company, the AIFM, the Portfolio Manager and Laurence
Hulse, pursuant to which the Portfolio Manager has been appointed,
with effect from Admission, to act as the portfolio manager to the
Company and the AIFM, was executed on 23 March 2023.
The initial term of the Portfolio
Management Agreement is three years commencing on Admission (the
"Initial Term"). The Company may terminate the Portfolio Management
Agreement by giving the Portfolio Manager not less than 12 months'
prior written notice such notice not to be served prior to the end
of the Initial Term. The Portfolio Manager may terminate the
Portfolio Management Agreement by giving the Company not less than
12 months' prior written notice such notice not to be served prior
to the end of the Initial Term. The Portfolio Management Agreement
may be terminated with immediate effect on the occurrence of
certain events, including insolvency or material and continuing
breach.
Under the terms of the Portfolio
Management Agreement, the Portfolio Manager is entitled to an
annual management fee, and in certain circumstances the payment of
a Performance Fee, together with reimbursement of all reasonable
costs and expenses incurred by it in the performance of its
duties.
In addition, in the event that the
Key Man ceases to be involved in a material respect with the
Portfolio Manager, the Company shall be entitled to terminate the
Portfolio Management Agreement immediately without penalty by
notice in writing if the Portfolio Manager, within 90 days of being
requested by the Company to do so, is unable to present a proposal
which is reasonably acceptable to the Board to replace the departed
Key Man. The 'Key Man' shall be Laurence Hulse or any person
approved as a replacement Key Man by the Board.
The Company has given an indemnity
in favour of the Portfolio Manager (subject to customary
exceptions) in respect of the Portfolio Manager's potential losses
in carrying on its responsibilities under the Portfolio Management
Agreement.
Laurence Hulse is a party to the
Portfolio Management Agreement to take the benefit of certain
provisions. The Portfolio Management Agreement is governed by the
laws of England and Wales. The Board has reviewed the performance
of the Portfolio Manager since the date of its appointment and is
satisfied that the continued appointment of the Portfolio Manager
on the terms agreed is in the interests of the
shareholders.
Administrator and company secretary
Apex Administration (Guernsey)
Limited (the "Administrator") will be responsible for the day to
day administration and company secretarial functions of the Company
(including but not limited to the maintenance of the Company's
accounting records, the calculation and publication of the Net
Asset Value and the production of the Company's annual and interim
report). Prospective investors should note that it is not possible
for the Administrator to provide any investment advice to
investors.
The Administrator will be
responsible for monitoring regulatory compliance and providing
support to the Board's corporate governance process and its
continuing obligations under UK Market Abuse Regulation (UK
MAR).
The Administrator is a company
incorporated in Guernsey with limited liability on 20 January 2010,
with registered number 51371, and is licensed by the GFSC under the
provisions of the POI Law to conduct certain restricted investment
and administrative activities in relation to collective investment
schemes. The Administrator, for the purposes of the POI Law and the
RCIS Rules, is the 'designated administrator' of the Company. The
Administrator's ultimate holding company is Apex Group
Limited.
Alternative Investment Fund Managers
Directive
The Company has appointed FundRock
Management Company (Guernsey) Limited as the AIFM of the Company,
pursuant to the AIFM Agreement. The AIFM will act at the Company's
alternative investment fund manager for the purposes of the UK AIFM
Regime.
The AIFM has formally delegated
portfolio management functions to the Portfolio Manager as
portfolio manager to the Company and the AIFM. The AIFM retains
risk management functions in relation to the Company and is
responsible for oversight of the portfolio management functions
delegated to the Portfolio Manager.
The AIFM works closely with the
Portfolio Manager in implementing appropriate risk measurement and
management standards and procedures. The AIFM carries out the
on-going oversight functions and supervision of the Portfolio
Manager. The AIFM is legally and operationally independent of the
Company and the Portfolio Manager.
Custodian
The Custodian of the Company is
Butterfield Bank (Guernsey) Limited.
Registrar
Link Market Services (Guernsey)
Limited was appointed as registrar to the Company pursuant to the
Registrar Agreement dated 24 March 2023. In such capacity, the
Registrar is responsible for the transfer and settlement of shares
held in certificated and uncertificated form. The Register may be
inspected at the office of the Registrar.
Corporate Governance Statement
The Corporate Governance Statement
forms part of the Directors' Report.
Board Responsibilities
The Board comprises four
non-executive Directors, who meet at least quarterly to consider
the affairs of the Company in a prescribed and structured manner.
All Directors are considered independent of the Portfolio Manager
for the purposes of the AIC Code. Biographies of the Directors for
the period ended 31 December 2023 appear on pages 19 to 20 which
demonstrate the wide range of skills and experience they bring to
the Board.
The Directors, in the furtherance
of their duties, may take independent professional advice at the
Company's expense, which is in accordance with principle 13 of the
AIC Code. The Directors also have access to the advice and services
of the Company Secretary through its appointed representatives who
are responsible to the Board for ensuring that the Board's
procedures are followed, and that applicable rules and regulations
are complied with.
To enable the Board to function
effectively and allow the Directors to discharge their
responsibilities, full and timely access is given to all relevant
information. Whilst no limit has been imposed on the overall length
of service of the Directors, at each annual general meeting of the
Company, each director shall retire from office and each director
may offer themselves for election or re-election by the
shareholders.
Conflicts of Interest
None of the Directors nor any
persons connected with them had a material interest in any of the
Company's transactions, arrangements or agreements at the date of
this report and none of the Directors has or had any interest in
any transaction which is or was unusual in its nature or conditions
or significant to the business of the Company, and which was
affected by the Company during the reporting period.
At the date of this Report, there
are no outstanding loans or guarantees between the Company and any
Director.
The Audit and Risk Committee
Luke Allen is the Chair of the
Audit and Risk Committee. A full report regarding the Audit and
Risk Committee can be found in the Audit and Risk Committee
Report.
Management Engagement Committee
The Management Engagement
Committee comprises all of the Directors and is chaired by Henry
Freeman. The Management Engagement Committee meets at least once a
year or more often, if required. Its principal duties are to
consider the terms of appointment of the AIFM and the Portfolio
Manager and it reviews these appointments and the terms of the AIFM
Agreement and the Portfolio Management Agreement annually. The
Management Engagement Committee also reviews the terms of
appointment of other key service providers to the Company. Details
of the management and performance fees can be found in note 5. The
Management Engagement Committee did not meet during 2023 as the
appointment of all service providers was subject to detailed
scrutiny by the Board of the Company prior to the commencement of
the Company's activities. The Committee will be reviewing the terms
of appointment of all service providers and will be carrying out an
in-person due diligence visit to the Portfolio Manager and the AIFM
in the second quarter of 2024.
Substantial Shareholdings
On 10 April 2024, the latest
practicable date for disclosure in this Report, the Company's only
shareholders with a holding greater than 5% were Dowgate Capital
Limited (10.7%) and Dowgate Wealth Limited (41.0%)
.
Shareholder Communication
The Company's main method of
communication with Shareholders is through its published Half
Yearly and Annual Reports which aim to provide Shareholders with a
fair, balanced and understandable view of the Company's results and
objectives. This is supplemented by the publication of the
Company's monthly net asset values on its ordinary shares on AIM
and quarterly factsheets.
In line with principle 16 of the
AIC Code, the Portfolio Manager communicates with both the Chair
and shareholders and is available to communicate and meet with
major shareholders. The Company has also appointed Cavendish
Capital Markets Limited to liaise with all major shareholders
together with the Portfolio Manager, all of whom report back to the
Board at quarterly board meetings ensuring that the Board is fully
aware of shareholder sentiment, expectations and analyst views. The
Company's website, which is maintained by the Portfolio Manager, is
regularly updated with news and announcements. Information
published online is accessible in many countries each with
differing legal requirements relating to the preparation and
dissemination of financial information.
Users of the Company's website are
responsible for informing themselves of how the requirements in
their own countries may differ from those of Guernsey.
Relations with Shareholders
All holders of Ordinary Shares in
the Company have the right to receive notice of, attend and vote at
the general meetings of the Company.
At each general meeting of the
Company, the Board and the Portfolio Manager will be available to
discuss issues affecting the Company.
Shareholders are additionally able
to contact the Board, Portfolio Manager and the Chair directly
outside of meetings via the Company's dedicated e-mail address
(ool@apexgroup.com) or by post via the Company Secretary. The
Company has adopted a zero-tolerance policy towards bribery and is
committed to carrying out business fairly, honestly and
openly.
Voting and Stewardship
code
The Portfolio Manager is committed
to the principles of the Financial Reporting Council's UK
Stewardship Code and this also constitutes the disclosure of that
commitment required under the rules of the FCA (Conduct of Business
Rule 2.2.3).
Signed on behalf of the Board
by:
Andrew Henton
Chair
10 April 2024
Statement of Directors'
Responsibilities
The Directors are responsible for
preparing the Report and Audited Financial Statements in accordance
with applicable law and regulations.
Guernsey Companies Law requires
the Directors to prepare Audited Financial Statements for each
financial year. Under that law they are
required to prepare the Audited Financial Statements in accordance
with International Financial Reporting
Standards as adopted by the EU and applicable law.
Under company law the Directors
must not approve the Audited Financial Statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for that year. In
preparing these Audited Financial Statements, the Directors are
required to:
· select suitable accounting policies and then apply them
consistently;
· make
judgements and estimates that are reasonable, relevant and
reliable;
· state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Audited Financial Statements;
· assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
· use
the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations or have no realistic
alternative but to do so.
The Directors are responsible for
keeping proper 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
enable them to ensure that its Audited Financial Statements comply
with the Companies (Guernsey) Law, 2008. They are responsible for
such internal control as they determine is necessary to enable the
preparation of Financial Statements that are free from material
misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them
to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
The Directors are responsible for
the maintenance and integrity of the corporate and financial
information included on the Company's website. Legislation in
Guernsey governing the preparation and dissemination of Financial
Statements may differ from legislation in other
jurisdictions.
Disclosure of information to auditors
The Directors who held office at
the date of approval of this Directors' Report confirm that, so far
as they are aware, there is no relevant audit information of which
the Company's Auditor is unaware; and that each Director has taken
all the steps that they ought to have taken as a director to
make themselves aware of any relevant
audit information and to establish that the Company's Auditor is
aware of that information.
Responsibility statement of the Directors in respect of the
Report
We confirm that to the best of our
knowledge:
· the
Financial Statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
· the
management report (comprising the Chair's Statement, the Portfolio
Manager's Report, and Directors' 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.
We consider the Report and Audited
Financial Statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy.
Signed on behalf of the Board
by:
Andrew Henton
Chair
10 April 2024
Audit and Risk Committee
Report
Role and Responsibility of the Committee
This is the report of the Audit
and Risk Committee (herein the "Committee") which has been prepared
with reference to the AIC Code and describes the work of the
Committee in discharging its responsibilities.
The Committee meets formally at
least three times each year and on an ad hoc basis when required
and reports to the Board. It has formally delegated duties and
responsibilities with written terms of reference which are reviewed
and reapproved at least annually. Those terms of reference are
published on the Company's website at https://onwardopportunities.co.uk/wp-content/uploads/2023/08/Audit-and-Risk-Committee-Terms-of-Reference.pdf
The Committee is mandated by the
Board to investigate any activity within its terms of reference and
to consult externally with legal or other independent professional
advisors, as required, to ensure that the Committee adequately
discharges its duties and responsibilities, which
include:
a) considering
the appointment of the external auditor, its letter of engagement
and the terms thereof, the audit fee, and any questions of
resignation or dismissal of the external auditor;
b) reviewing
from time to time the effectiveness of the audit and the
independence and objectivity of the external auditor;
c) developing
and implementing policy on the engagement of the external auditor
to supply non-audit services where necessary, taking into account
relevant ethical guidance regarding the provision of non-audit
services by the external audit firm; and report to the Board,
identifying any matters in respect of which it considers that
action or improvement is needed and making recommendations as to
the steps to be taken;
d) reviewing the
Company's half-yearly and annual financial reports, not excepting
the full Board's responsibility over the reports, focusing
particularly on:
· Any
changes in accounting policies and practice;
· Major judgmental areas;
· Significant adjustments
arising from the audit;
· The
going concern assumption;
· Compliance with accounting standards (and in particular
accounting standards adopted in the financial year for the first
time);
· Compliance with applicable legal and
regulatory requirements;
· A risk management review; and
· Assessing the effectiveness of
internal controls.
e) discussing
any problems and reservations arising from the final audit, and any
other matters which the auditor may wish to discuss (in the absence
of the Company's agents where necessary);
f)
reviewing the external auditor's Report to the Committee and
determining whether any changes have to be implemented as a
result;
g) reviewing, on
behalf of the Board, the Company's systems of internal controls
(including financial, operational, compliance and risk management)
and making recommendations to the Board;
h) considering
the major findings of internal investigations and management's
response;
i)
reviewing the Company's operating, financial and accounting
policies and practices;
j)
considering any other matters specifically delegated to the
Committee by the Board from time to time;
k) reporting to
the Board on how it performs its duties; and
l)
confirming to the Board as to whether the annual report and audited
Financial Statements taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's performance, business model
and strategy.
The Committee may review any
matter that it considers appropriate not withstanding that it is
not specifically mentioned in the above list of duties.
Composition
The Committee is comprised of all
of the Directors with Luke Allen acting as permanent Chair. The
membership of the Committee and its terms of reference are kept
under review. All members of the Committee have relevant competence
in the sector in which the Company operates in addition to relevant
financial experience as required by the Code.
Only independent non-executive
Directors serve on the Committee and the members do not have any
links with the Company's external auditor. They are also
independent of the management teams of the Portfolio Manager,
administrator and all other service providers. Notwithstanding that
Andrew Henton is Chair of the Board, he was independent upon
appointment, so is a member of, but may not chair, the
Committee.
The Committee meets the external
auditor at least twice a year.
Oversight of Controls and Risk Management
Systems
The Board, via its Management
Engagement Committee, conducts an annual Business Risk Assessment
in conjunction with the Portfolio Manager and the AIFM. The
intention of this exercise is to identify and articulate the
material risks that might affect the Company and its trading
prospects, the likelihood of them occurring and their assessed
impact. As part of this process the explicit controls intended to
mitigate either or both of the risk of occurrence, or the impact of
an occurrence, are also articulated. In this way a residual net
impact assessment is derived.
The Management Engagement
Committee will hold meetings with the Portfolio Manager, the AIFM
and the Administrator on a regular basis, to review and inspect
operations. The Management Engagement Committee will review senior
staff members responsible for the internal control and oversight
functions, and who report as to the proper conduct of the business
in accordance with the regulatory environment in which both the
Company and the Portfolio Manager operate.
The oversight programme will
follow a preplanned agenda involving reviews of, inter alia (i)
changes that have taken place within operations; (ii) IT systems
and controls, including cyber security arrangements; (iii)
regulatory compliance; (iv) investor relations; (v) the valuation
of any unquoted investments; (vi) the risk register, complaints,
errors and breaches logs and business continuity arrangements;
(vii) ESG and responsible investment policies; and (vii) the impact
of external factors such as the Russia / Ukraine conflict and the
conflict in the Middle East. The results of the oversight visits
and questionnaires will be documented and discussed at a meeting of
the Management Engagement Committee.
As part of the oversight
programme, the Portfolio Manager, the AIFM and the Administrator
report formally to the Committee at least annually on their systems
of internal controls. In accordance with the provisions of the
Code, the Committee has conducted a review of those systems of
internal controls and is satisfied that they are sufficient to
withstand the risks to which the Company is subject.
As the Company is a closed-ended
investment company, all of whose Directors are non-executive, and
as all executive functions have been delegated to professional
third party advisors, the Committee does not consider it necessary
for the Company to have its own internal audit function. Whilst no
reliance can be placed on them, reviews conducted on the Portfolio
Manager's operations by independent custodians, and on-site due
diligence visits by prospective investors and their professional
advisers provide a degree of additional third party
comfort.
Whilst the Company does not have
any staff, the Committee considers that the arrangements by which
staff of the Portfolio Manager, the AIFM and the Administrator may,
in confidence, raise concerns about possible improprieties in
matters of financial reporting or other matters are of great
importance. The Committee reviews such arrangements annually and,
as required by the Code, is satisfied that arrangements are in
place for the proportionate and independent investigation of such
matters and for appropriate follow-up action.
Significant Risks in Relation to the Report and Audited
Financial Statements
In discharging its
responsibilities, the Committee has specifically considered the
following significant issues relating to the Financial
Statements:
Valuation of
Investments
The Board reviews portfolio
valuations on a regular basis throughout the year, and at quarterly
meetings with the Portfolio Manager seeks assurance that the
pricing basis is appropriate and in line with relevant accounting
standards. The Company's net asset value is calculated on a monthly
basis by the Administrator.
The impact of the Russia / Ukraine
conflict and the conflict in the Middle East on financial markets
has been significant, reflecting disruption to international supply
chains, the interruption of production generally, higher short and
long-term interest rates, inflationary pressures, delays in
corporate activity and investment, uncertainty about the
availability of financing and increased volatility in the value of
financial instruments. The Committee has considered the particular
circumstances of the Company in light of these issues, in
particular the associated risk exposures and implications for
financial reporting.
As an investment company, the
Company does not have employees, customers or suppliers in a
conventional sense as a trading/operating company does. Reliance is
however placed on service providers, principally the Portfolio
Manager, the AIFM and the Administrator. The Committee has been
kept appraised of business continuity measures enacted by these key
service providers and is receiving updates in relation to any
emergent risks, vulnerabilities and the continued effectiveness of
internal controls. Information flows between the Portfolio Manager
and other advisers have been effective and a key component of
oversight in prevailing conditions. Both the Board and the
Portfolio Manager are maintaining dialogue with shareholders in
order to provide transparency.
Completeness and accuracy of the
disclosures in the Financial Statements
The Committee concluded that all
appropriate and required disclosures have been incorporated in the
Financial Statements and drew comfort from the fact that multiple
layers of oversight exist to achieve this objective. Specifically,
the administrator, Portfolio Manager and external auditor have all
performed their own checks for completeness.
The Committee continues to give
particular attention to the extent of disclosures about the
Company's underlying portfolio. Risk measures, sensitivities and
performance are driven by the make-up of the portfolio and hence
detailed disclosures about it are appropriate to permit a full
understanding of the accounts.
Presentation of Financial
Statements
The Committee considered the
complexity of the Financial Statements in their entirety, and the
descriptive narrative supporting the financial disclosures. It was
recognised that the sophistication of the investment strategy
pursued by the Company does not lend itself to description in
'plain English' and that the use of technical terminology was not
always consistent with the goals of ensuring transparency and
maximising ease of understanding.
On balance the Committee concluded
that the benefits of accurate - but detailed - descriptive
narrative outweighed the possible benefit of simplified summaries.
The nature of the shareholder base (predominantly sophisticated
professional investors) was an important factor in reaching this
conclusion.
Going concern
The Committee reviewed the
assumptions upon which it is assumed that the Company can continue
to operate on a going concern basis as set out in the Directors'
Report. In so doing, it assessed outstanding financial obligations
and calls on the Company's resources, investment performance and
the meeting of shareholders' expectations.
Assessment of the External Audit Process
The Company's auditor was
appointed immediately prior to the launch of the Company in March
2023. The Committee, in conjunction with the Board, is committed to
reviewing this appointment on a regular basis to ensure that the
Company is receiving an optimal level of service. The appointment
of the auditor is reviewed on an annual basis. There are no
contractual obligations which restrict the Company's choice of
auditor and the Board is satisfied that the auditor remains
independent.
The Committee does not award any
non-audit work other than the review of its interim Financial
Statements for the half year ended 30 June. The full Board would
have to approve any other non-audit work. Where non-audit services
are provided by the auditor, these engagements are pre-approved by
the Committee to ensure that the auditor's independence and
objectivity is not breached, and a recommendation is made to the
Board. Whilst interim reviews of financial information are
considered to be a non-audit service, the Committee did not
consider that this role undermined the auditor's independence. No
other non-audit services were provided in 2023.
The Committee considered the
experience and tenure of the audit partner and staff and the nature
and level of services provided. The Committee received confirmation
from the auditor that it had complied with the relevant Guernsey
professional and regulatory requirements on
independence.
The Committee considers the
nature, scope and results of the auditor's work and monitors the
independence of the external auditor. Formal reports are received
from the auditor on an annual basis relating to the extent of their
work. The work of the auditor in respect of any significant audit
issues and consideration of the adequacy of that work is
discussed.
The Chair of the Committee liaises
with the Portfolio Manager and the Administrator to discuss the
extent of audit work completed to ensure all matters of risk are
covered, while the Committee assesses the quality of the draft
Financial Statements prepared by the Administrator.
The Committee has an active
involvement in and oversight of the preparation of both half yearly
and annual Financial Statements. Ultimate responsibility for
reviewing and approving the Report and Audited Financial Statements
remains with the Board.
The table below summarises the
remuneration for services provided to the Company by Grant Thornton
Limited Channel Islands for audit and non-audit services during the
year ended 31 December 2023.
|
31
December
|
|
2023
|
|
£
|
Annual audit fee
|
20,000
|
Interim review
|
16,000
|
|
|
|
36,000
|
Conclusion in respect of the Report and Audited Financial
Statements
The production of the Company's
Report and Audited Financial Statements is a comprehensive process
requiring input from a number of different parties. One of the key
governance requirements is that the Company's Report and Audited
Financial Statements be fair, balanced and understandable. The
Board has requested that the Committee advise on whether it
considers that the Report and Audited Financial Statements fulfils
these requirements.
As a result of the work performed,
the Committee recommended that the Board should conclude that the
Report and Audited Financial Statements for the Year, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
performance, business model and strategy and has reported on these
findings to the Board. The Board's conclusions in this respect are
set out in the Directors' Report above.
Luke Allen
Chair of Audit & Risk
Committee
10 April 2024
Independent Auditor's Report to the Shareholders of Onward
Opportunities Limited
Opinion
We have audited the financial
statements of Onward Opportunities Limited (the "Company") which
comprise the Statement of Comprehensive Income, the Statement of
Financial Position, the Statement of Changes in Equity, and the
Statement of Cash Flows for the period then ended, and Notes to the
financial statements, including a summary of material accounting
policies. The financial statements framework that
has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union (EU).
In our opinion, the
financial statements:
· give
a true and fair view of the state of the Company's affairs as
at 31 December 2023 and of the Company's profit for the period then
ended;
· are
in accordance with IFRSs as adopted by the EU; and
· comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in
accordance with International Standards on Auditing (ISAs) and
applicable law. Our responsibilities under those standards are
further described in the 'Auditor's responsibilities for the audit
of the financial
statements' section of our report. We are
independent of the Company in accordance with the International
Ethics Standards Board for Accountants' International Code of
Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code), together with the ethical
requirements that are relevant to our audit of the
financial statements in
Guernsey, and we have fulfilled our other ethical responsibilities
in accordance with these requirements and the IESBA Code. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those
matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the
current period. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
The key audit matter
|
How the matter was addressed in our audit
|
Existence and Valuation of Quoted Investments - Equity
Instruments £16,695,000
Due to the use of a custodian,
accounting records may not match the custodian's records with
respect to securities held; and
The fair value measurements at the
reporting date may be inaccurate due to the use incorrect
inputs.
The portfolio of investments is
fully comprised of quoted investments which are held by an external
Custodian and valued using publicly available quoted market prices,
in accordance with IFRS 9 Financial Instruments and IFRS 13 Fair
Value Measurement. Whilst the valuation of these investments is not
considered complex, nor does it involve significant judgements and
estimates to be made by management, the market value of investments
is material to the Company, as it represents 98% of the net asset
value as at 31 December 2023 and represents a balance considerably
larger than any other reported balance within the Company's
financial statements. In addition, due to the regular/frequent
trading of investment positions held by the Company, there is a
risk that the reported investment portfolio at the year end, may be
misstated. Due to the financial significance of the investments
held at the year-end, an error or misstatement regarding the
recognition/ inclusion of a single investment could lead to a
material misstatement.
|
In responding to the key audit
matter, we performed the following audit procedures:
·
We obtained an understanding of the processes,
policies, and controls in relation to the valuation of investments
and performed tests of design and implementation of controls
relevant to the valuation of investments.
·
We obtained year end confirmation from the
Custodian confirming the number of shares owned.
·
We reviewed information about the trading history
of the investee companies to determine whether the shares are
traded in an active market to verify the accuracy of the
classification as level 1 instruments.
·
We obtained the quoted prices as at the reporting
date from independent publicly available sources and compared them
to the share prices used by management.
·
We recalculated the valuation per the accounting
records using the quoted share prices obtained from the relevant
stock exchanges and the confirmed number of shares from the
custodian.
Our result
Based on our work, we did not note
any material misstatements relating to the valuation and existence
of investments.
|
Other information in the Annual Report
The Directors are responsible for
the other information. The other information comprises the
information included in the Annual Report and Audited
financial statements but
does not include the financial
statements and our auditor's report
thereon.
Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
In connection with our audit of
the financial
statements, our responsibility is to read
the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements, or our
knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this
regard.
Responsibilities of the directors for the financial
statements
As explained more fully in the
Statement of Directors' Responsibilities set out on page 34 the
Directors are responsible for the preparation of the financial
statements which give a true and fair view in accordance with IFRSs
as adopted by the EU, and for such internal control as the
Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial
statements, the Directors are responsible for assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities of the audit of the financial
statements
Our objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
As part of an audit in accordance
with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
·
Identify and assess the risks of material
misstatement of the financial
statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
·
Obtain an understanding of internal control
relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's
internal control.
·
Evaluate the appropriateness of accounting
policies used and the reasonableness of accounting estimates and
related disclosures made by the Directors.
·
Conclude on the appropriateness of the Directors'
use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on
Company's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in
the financial statements
or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Company to cease to continue as
a going concern.
·
Evaluate the overall presentation, structure and
content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying
transactions and events in a manner that achieves fair
presentation.
We communicate with the directors
regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our
audit.
We also provide the directors with
a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them
all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with
the directors, we determine those matters that were of most
significance in the audit of the financial
statements of the current period and are
therefore the key audit matters. We describe these matters in our
auditor's report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partner on the
audit resulting in this independent auditor's report is Cyril
Swale.
Use of our report
This report is made solely to the
Company's shareholders, as a body, in accordance with section 262
of the Companies (Guernsey) Law, 2008. Our audit work has been
undertaken so that we might state to the Company's shareholders
those matters we are required to state to them in an auditor's
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 shareholders as a body, for our audit
work, for this report, or for the opinions we have
formed.
Matters on which we are required to report by
exception
We have nothing to report in
respect of the following matters in relation to which the Companies
(Guernsey) Law, 2008 requires us to report to you if, in our
opinion:
· proper accounting records have not been kept by the Company;
or
· the
Company's financial statements are not in agreement with the
accounting records; or
· we
have not obtained all the information and explanations, which to
the best of our knowledge and belief, are necessary for the
purposes of our audit.
Grant Thornton Limited
Chartered Accountants
St Peter Port
Guernsey
Date:
Statement of Comprehensive Income
For the period from 31 January
2023 to 31 December 2023
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
31 January 2023
to
|
|
|
|
|
|
|
31 December
2023
|
|
|
Notes
|
|
|
|
|
Revenue
|
Capital
|
Total
|
|
|
|
|
|
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
|
Net gains on investments held at
fair value through profit or
loss
|
9
|
|
|
|
|
-
|
1,843
|
1,843
|
Net
investment gains
|
|
|
|
|
|
-
|
1,843
|
1,843
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
8
|
14
|
22
|
Dividend income
|
|
|
|
|
|
-
|
127
|
127
|
Total income
|
|
|
|
|
|
8
|
141
|
149
|
|
|
|
|
|
|
|
|
|
Portfolio management
and
performance fees
|
5
|
|
|
|
|
(156)
|
(28)
|
(184)
|
Other expenses
|
6
|
|
|
|
|
(275)
|
-
|
(275)
|
|
|
|
|
|
|
|
|
|
Total (loss) / gain and comprehensive (loss) / income for the
period
|
|
|
|
|
|
(423)
|
1,956
|
1,533
|
|
|
|
|
|
|
|
|
|
(Deficit) / earnings per
Ordinary Share (pence)
|
7
|
|
|
|
|
(3.81)
|
17.56
|
13.75
|
|
|
|
|
|
|
|
|
|
The total column of this statement
represents the Statement of Comprehensive Income of the Company
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union ("IFRS").
The supplementary revenue and
capital return columns are prepared under guidance published by the
Association of Investment Companies ("AIC").
All items in the above statement
derive from continuing operations.
The notes on pages 49 to 64 form
an integral part of these Audited Financial Statements.
Statement of Financial Position
As at 31 December 2023
|
|
|
|
|
31
December
|
|
|
|
|
|
2023
|
|
|
|
|
|
£'000
|
|
Notes
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Investments held at fair value
through profit or loss
|
9
|
|
|
|
16,695
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
407
|
Other receivables
|
|
|
|
|
38
|
Unsettled trades
|
10
|
|
|
|
157
|
|
|
|
|
|
602
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
17,297
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Management fee payable
|
5
|
|
|
|
(22)
|
Performance fee payable
|
5
|
|
|
|
(28)
|
Unsettled trades
|
10
|
|
|
|
(132)
|
Other payables
|
|
|
|
|
(46)
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
(228)
|
|
|
|
|
|
|
Net assets
|
|
|
|
|
17,069
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Share capital
|
11
|
|
|
|
15,536
|
Capital reserve
|
|
|
|
|
1,956
|
Revenue reserve
|
|
|
|
|
(423)
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
17,069
|
|
|
|
|
|
|
Net Asset Value per Ordinary Share:
basic and
diluted (pence)
|
12
|
|
|
|
106.50
|
|
|
|
|
|
|
Number of Ordinary Shares in issue
|
11
|
|
|
|
16,027,290
|
Approved by the Board of Directors
and authorised for issue on 10 April 2024 and signed on their
behalf:
_______________________
Director
The notes on pages 49 to 64 form
an integral part of these Audited Financial Statements.
Statement of Changes in Equity
For the period from 31 January
2023 to 31 December 2023
|
|
Share
capital
|
|
Revenue
reserve
|
|
Capital
reserve
|
|
Total
|
|
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
For the period 31 January 2023
|
|
|
|
|
|
|
|
|
to 31 December 2023
|
|
|
|
|
|
|
|
|
At 31 January 2023
|
|
-
|
|
-
|
|
-
|
|
-
|
Share issue (note 11)
|
|
16,109
|
|
-
|
|
-
|
|
16,109
|
Share issue costs (note
11)
|
|
(573)
|
|
-
|
|
-
|
|
(573)
|
Total (loss) / gain and
comprehensive (loss) / income for the period
|
|
-
|
|
(423)
|
|
1,956
|
|
1,533
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
|
15,536
|
|
(423)
|
|
1,956
|
|
17,069
|
|
|
|
|
|
|
|
|
|
The notes on pages 49 to 64 form
an integral part of these Audited Financial Statements.
Statement of Cash Flows
For the period from 31 January
2023 to 31 December 2023
|
|
|
|
Period
from
|
|
|
|
|
31 January
2023
|
|
|
|
|
to 31
December
|
|
|
|
|
2023
|
|
Notes
|
|
|
£'000
|
Cash flows from operating activities
|
|
|
|
|
Other expense payments
|
13
|
|
|
(274)
|
Interest income
|
|
|
|
22
|
Purchase of UK Government Debt
|
9
|
|
|
(15,556)
|
Sale of UK Government Debt
|
9
|
|
|
15,736
|
Purchase of equity
instruments
|
9,
10
|
|
|
(17,543)
|
Sale of equity
instruments
|
9,
10
|
|
|
2,486
|
|
|
|
|
|
Net cash outflow from operating activities
|
|
|
|
(15,129)
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Issue of Ordinary
Shares
|
11
|
|
|
16,109
|
Share issue costs
|
11
|
|
|
(573)
|
|
|
|
|
|
Net cash inflow from financing activities
|
|
|
|
15,536
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
407
|
Cash and cash equivalents at
beginning of period
|
|
|
|
-
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
|
407
|
|
|
|
|
|
Cash and cash equivalents comprise
of the following:
|
|
|
|
|
Cash at bank
|
|
|
|
407
|
|
|
|
|
|
|
|
|
|
407
|
|
|
|
|
|
The notes on pages 49 to 64 form
an integral part of these Audited Financial Statements.
Notes to the Audited Financial Statements
For the period from 31 January
2023 to 31 December 2023
1. Reporting Entity
Onward Opportunities Limited (the
"Company") is registered in Guernsey and was incorporated on 31
January 2023, with registered number 71526. The Company's
registered office is 1 Royal Plaza, Royal Avenue, St Peter Port,
Guernsey, GY1 2HL.
The Company is a Registered
Closed-ended Collective Investment Scheme regulated by the Guernsey
Financial Services Commission ("GFSC"), with reference number
2804577, pursuant to the Protection of Investors (Bailiwick of
Guernsey) Law 2020, as amended and the Registered Collective
Investment Scheme Rules and Guidance, 2021.
The Company's 16,027,290 shares in
issue under ticker ONWD, SEDOL BMZR151 and ISIN GG00BMZR1514 were
admitted to trading on AIM on 31 December 2023. The Company is also
a member of the AIC. The Audited Financial Statements of the
Company are presented for the eleven month period ended 31 December
2023.
The Company and its Alternative
Investment Fund Manager received discretionary portfolio management
services directly from Dowgate Wealth Limited ("DWL") during the
eleven month period ended 31 December 2023. The administration of
the Company is delegated to Apex Administration (Guernsey) Limited
("AAGL") (the "Administrator") (formerly Maitland Administration
(Guernsey) Limited).
2. Material accounting
policies
(a) Basis of accounting
The Audited Financial Statements
have been prepared in compliance with International Financial
Reporting Standards as adopted by the European Union ("IFRS"). The
Audited Financial Statements give a true and fair view and comply
with the Companies (Guernsey) Law, 2008.
Where presentational guidance set
out in the Statement of Recommended Practice ("SORP") for
investment companies issued by the Association of Investment
Companies ("AIC") updated in February 2019 is consistent with the
requirements of IFRS, the Directors have sought to prepare the
Audited Financial Statements on a basis compliant with the
recommendations of the SORP.
(b) Going concern
The Directors have
adopted the going concern basis in preparing the
Audited Financial Statements.
In assessing the going concern
basis of accounting, the Directors have assessed the guidance
issued by the Financial Reporting Council and considered the
Company's own financial position, recent market volatility, the
on-going impact of the Russian war on Ukraine and the conflict in
the Middle East, energy shortages, inflation, increases in interest
rates, recent bank failures and other uncertainties impacting on
the Company's investments, their financial position and liquidity
requirements.
At period end the Company had a
net asset position of £17,069,000 comprising cash of £407,000,
listed investments amounting to £16,695,000.
The Company generates liquidity by
raising capital and exiting investments. It uses liquidity by
making new and follow-on investments and paying company expenses.
The Directors ensure it has adequate liquidity by regularly
reviewing its financial position and forward-looking liquidity
requirements. In assessing its going concern status, the Directors
have considered the level of operating expenses relative to net
assets, such expenses approximating to 2.53% of net assets as at 31
December 2023.
(c) Segmental reporting
The chief operating decision maker
is the Board of Directors. The Directors are of the opinion that
the Company is engaged in a single segment of business with the
primary objective of investing in securities to generate capital
growth for shareholders. Consequently, no business segmental
analysis is provided.
The key measure of performance
used by the Board is the Net Asset Value of the Company (which is
calculated under IFRS). Therefore, no reconciliation is required
between the measure of profit or loss used by the Board and that
contained in these Audited Financial Statements.
(d) Functional and presentational
currency
The Audited Financial Statements
of the Company are presented in the currency of the primary
economic environment in which it operates (its functional
currency). For the purpose of the Audited Financial Statements, the
results and financial position of the Company are expressed in
pound sterling ("£"). All amounts have been rounded to the nearest
thousand, unless otherwise indicated.
(e) Income
Interest income is accounted for
on an accruals basis and recognised in profit or loss in the
Audited Statement of Comprehensive Income. Interest income includes
interest earned on senior notes (UK treasury debts), cash held at
bank on call, on deposit and cash held as cash
equivalents.
(f) Expenses
Expenses are accounted for on an
accruals basis. The Company's portfolio management and
administration fees, finance costs and all other expenses are
charged through the Audited Statement of Comprehensive Income and
are charged to revenue. Performance fee is charged to the capital
column in the Audited Statement of Comprehensive Income.
(g) Dividends to shareholders
Dividends are recognised in the
year in which they are paid.
(h) Taxation
The Company has been granted
exemption from liability to income tax in Guernsey under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 amended by the
Director of Income Tax in Guernsey for the current period.
Exemption is applied and granted annually and is subject to the
payment of a fee which was £1,200 for the period. The fee increased
to £1,600 per annum with effect from 1 January 2024.
(i) Financial instruments
Recognition and derecognition of financial
assets
The Company recognises a financial
asset at its fair value, plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through
profit or loss which are directly attributable to the acquisition
are capitalised.
A financial asset (in whole or in
part) is derecognised either (i) when the Company has transferred
substantially all the risks and rewards of ownership; or (ii) when
it has neither transferred nor retained substantially all the risks
and rewards and when it no longer has control over the assets or a
portion of the asset; or (iii) when the contractual right to
receive cash flow has expired. The derecognised investments are
measured at the weighted average method. Any gain or loss on
derecognition is recognised in the Net gains on investments held at
fair value through profit or loss in the Audited Statement of
Comprehensive Income.
Classification
The Company's financial assets are
classified in the following measurement categories:
· those to be measured at fair value through profit or loss;
and
· those to be measured at amortised cost.
The classification depends on the
entity's business model for managing the financial assets and the
contractual terms of the cash flows.
At initial recognition, the
Company measures a financial asset at its fair value, plus, in the
case of a financial asset not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets
carried at fair value through profit or loss are expensed in profit
or loss.
Subsequent measurement of financial assets
Financial assets held at amortised cost
Assets that are held in order to
collect contractual cash flows give rise to cash flows that are
solely payments of principal and interest are measured at amortised
cost. These assets are subsequently measured at amortised cost
using the effective interest method.
The Company has elected to apply
the simplified approach permitted by IFRS 9 in respect of trade and
other receivables. This approach requires expected lifetime losses
to be recognised from initial recognition of the
receivables.
The Company's financial assets
held at amortised cost include trade and other receivables and cash
and cash equivalents.
Financial assets at fair value through profit or
loss
For investments actively traded in
organised financial markets, fair value will generally be
determined by reference to Stock Exchange quoted market bid prices
at the close of business on the valuation date, without adjustment
for transaction costs necessary to realise the asset.
The Company has adopted a
valuation policy for unquoted securities to provide an objective,
consistent and transparent basis for estimating the fair value of
unquoted equity securities in accordance with IFRS as well as
IPEVC.
The Company considers it impractical to perform an in-depth valuation
analysis for every unquoted investment on a daily basis (whether
internally or with the assistance of an independent third party).
Therefore, it is expected that an in-depth valuation of each
investment will be performed: (i) on an annual basis; and (ii)
where DWL determines that a Triggering Event has occurred.
A "Triggering Event" may include
any of the following:
· a
subsequent round of financing (whether pro rata or otherwise) by
the relevant investee company;
· a
significant or material milestone achieved by the relevant investee
company;
· a
secondary transaction involving the relevant investee company on
which sufficient information is available;
· a
change in the makeup of the management of the relevant investee
company;
· a
material change in the recent financial performance or expected
future financial performance of the relevant investee
company;
· a
material change in the market environment in which the relevant
investee company operates; or
· a
significant movement in market indices or economic
indicators.
Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.
The change in fair value is
recognised in profit or loss and is presented within the "net gains
on investments held at fair value through profit or loss" in the
Audited Statement of Comprehensive Income.
IFRS requires the Company to
measure fair value using the following fair value hierarchy that
reflects the significance of the inputs
used in making the measurements. IFRS establishes a fair value
hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements).
The three levels of fair value
hierarchy under IFRS are as follows:
· Level 1 reflects financial instruments quoted in an active
market.
· Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market
transactions in the same instrument or based on a valuation
technique whose variables include only data from observable
markets.
· Level 3 reflects financial
instruments whose fair value is determined in whole or in part
using a valuation technique based on assumptions that are not
supported by prices from observable market transactions in the same
instrument and not based on available observable market data. For
investments that are recognised in the Audited Financial Statements
on a recurring basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing the
categorisation (based on the lowest significant input) at the date
of the event that caused the transfer.
Impairment of financial
assets
The Company recognises lifetime
expected credit losses (ECL) for other receivables and related
party receivables, as the receivables are from loans with
non-contractual payment terms. The expected credit losses on these
financial assets are estimated using a provision matrix based on
the Company's historical credit loss experience, adjusted for
factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including
time value of money where appropriate.
Equity instruments
An equity instrument is any
contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity instruments
issued by the Company are recognised at the proceeds received, net
of direct issue costs.
Financial liabilities and
equity
Debt and equity instruments are
classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangement.
Financial liabilities, including borrowings, are initially measured
at fair value, net of transaction costs.
Financial liabilities are
subsequently measured at amortised cost using the effective
interest method, with interest expense recognised on an effective
yield basis.
Derecognition of financial
liabilities
The Company derecognises financial
liabilities when, and only when, the Company's obligations are discharged, cancelled or they
expire.
(j) Cash and cash
equivalents
Cash comprises cash and demand
deposits. Cash equivalents, are short-term, highly liquid
investments that are readily convertible to known amounts of cash,
are subject to insignificant risks of changes in value, and are
held for the purpose of meeting short-term cash commitments rather
than for investment or other purposes. Included in cash and cash
equivalents at the period end was cash at bank of
£407,000.
(k) Other
receivables
Other receivables do not carry
interest and are short-term in nature and are accordingly
recognised at amortised cost.
(l) Foreign currency
Transactions and balances
At each Statement of Financial
Position date, monetary assets and liabilities that are denominated
in foreign currencies are translated at the rates prevailing at
that date.
Non-monetary items carried at fair
value that are denominated in foreign currencies are translated at
the rates prevailing at the date fair value is measured.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated. Exchange differences are
recognised in profit or loss in the year in which they arise.
Transactions denominated in foreign currencies are translated into
pound sterling (£) at the rate of exchange ruling at the date of
the transaction.
Foreign exchange gains and losses
arising from translation are included in the Audited Statement of
Comprehensive Income.
Where foreign currency items are
held at fair value, the foreign currency movements are presented as
part of the fair value change.
(m) Capital reserve
Profits achieved by selling
investments and changes in fair value arising upon the revaluation
of investments that remain in the portfolio are all charged to
profit or loss in the capital column of the Audited Statement of
Comprehensive Income and allocated to the capital reserve. The
capital reserve is also used to fund dividend
distributions.
(n) Revenue
reserve
The balance of all items allocated
to the revenue column of the Audited Statement of Comprehensive
Income for the year is transferred to the Company's revenue
reserve.
(o) Investment
entities
In accordance with IFRS 10 an
investment entity is an entity that:
· obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management
services;
· commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital application,
investment income, or both; and
· measures and evaluates the performance of substantially all
of its investments on a fair value basis.
The Directors are satisfied that
the Company meets each of these criteria and hence is an investment
entity in accordance with IFRS 10.
3. Use of estimates and critical
judgements
The preparation of Audited
Financial Statements in accordance with IFRS requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the Audited Financial Statements and the
reported amounts of income and expenses during the period. Actual
results could differ from those estimates and
assumptions.
The estimates and underlying
assumptions are reviewed on an ongoing basis.
Climate Change
In preparing the Company's
Financial Statements the Directors have considered the impact of
climate change risk as a principal risk as set out in the Principal
and Emerging Risks and Uncertainties section of the Directors'
Report and have concluded that it does not have a material impact
on the value of the Company's investments. In line with IFRS,
investments are valued at fair value as disclosed in Note 9. The
Directors consider that the pricing of the underlying portfolio of
the Company's investments reflects market participants' views of
climate change risk and that there are no further climate related
influences on the NAV of the companies in which the Company
invests.
There are no estimates or critical
accounting judgements to note in the current year.
4. New and revised
standards
New standards and interpretations not yet
adopted
Certain new accounting standards, amendments to accounting
standards and interpretations have been published that are not
mandatory for 31 December 2023 reporting periods and have not been
early adopted by the Company.
· Classification if Liabilities as Current or Non-current
(Amendments to IAS 1) that become effective for periods beginning
on or after 1 January 2024;
· The
Effects of Changes in Foreign Exchange Rates (Amendments to IAS 21)
that become effective for periods beginning on or after 1 January
2025; and
· Supplier Finance Arrangement (Amendments to IAS and IFRS 7)
that become effective for periods beginning on or after 1 January
2024.
Standards, amendments and interpretations effective during
the year
There are no standards, amendments to standards or interpretations
that are effective for annual
periods beginning on 31 January 2023 that have a material effect on
the financial statements of the
Company.
5. Portfolio management and
performance fees
|
|
|
31 January
2023
|
|
|
|
to 31
December
|
|
|
|
2023
|
|
|
|
£'000
|
|
|
|
|
Portfolio management
fees
|
|
|
156
|
Portfolio performance
fees
|
|
|
28
|
|
|
|
|
Total portfolio management and performance
fees
|
|
|
184
|
|
|
|
|
The Company procures portfolio
management services directly from DWL, under the Portfolio
Management Agreement.
Management fee
The monthly management fee is
equal to 1.5% of the Net Asset Value is up to and including £50m
and 1% of the Net Asset Value that is above £50 million (the
"Management Fee"). The management fee is calculated and paid
monthly in arrears.
As at 31 December 2023, an amount
of £21,818 was outstanding in respect of management
fees.
Performance fee
For the period ended 31 December
2023, a performance fee may be payable, the sum of which is equal
to 12.5% of the amount by which the Adjusted Net Asset Value at the
end of a Calculation Period exceeds the higher of: (i) the
Performance Hurdle; and (ii) the High Water Mark (the "Performance
Fee"). The calculation period for the current period will be the
period commencing on 30 March 2023 and ending on 31 December 2023
(the "Calculation Period").
As at 31 December 2023, the
Company had exceeded the High Water Mark and Performance Hurdle
therefore an accrual of £28,350 for performance fees has been
reflected within these Audited Financial Statements. The
Performance fee is accrued on an ongoing basis and reflected as
such in the NAV reporting.
6. Other
expenses
|
|
|
31 January 2023
to 31 December
|
|
|
|
2023
|
|
|
|
£'000
|
|
|
|
|
Directors' fees
|
|
|
95
|
Administration fee
|
|
|
61
|
Auditor's remuneration
for:
|
|
|
|
- audit fees
|
|
|
20
|
- non-audit fees
|
|
|
16
|
Custodian fees
|
|
|
10
|
Broker fees
|
|
|
8
|
Registrars' fees
|
|
|
4
|
Listing fees
|
|
|
9
|
Regulatory fees
|
|
|
28
|
Legal and professional
fees:
|
|
|
|
- ongoing operations
|
|
|
12
|
Directors' liability
insurance
|
|
|
3
|
Sundry expenses
|
|
|
9
|
|
|
|
|
Total other expenses
|
|
|
275
|
7. (Deficit) / Earnings per
Ordinary Share
|
|
|
31 December
2023
|
|
|
|
|
|
Net return
|
|
Per share
|
|
|
|
|
|
£'000
|
|
pence
|
|
|
|
|
|
|
|
|
Revenue return
|
|
|
|
|
(423)
|
|
(3.81)
|
Capital return
|
|
|
|
|
1,956
|
|
17.56
|
|
|
|
|
|
|
|
|
At 31 December
|
|
|
|
|
1,533
|
|
13.75
|
|
|
|
|
|
|
|
|
Weighted average number of
Ordinary Shares
|
|
|
|
|
|
|
11,144,294
|
|
|
|
|
|
|
|
|
The return per share is calculated using the
weighted average number of Ordinary Shares.
8. Dividends
The Board has not declared or paid any dividends
during the period.
9. Investments held at fair
value through profit or loss
|
|
UK Government
Debt
|
|
Equity
instruments
|
|
|
31
December
|
|
31
December
|
|
|
2023
|
|
2023
|
|
|
£'000
|
|
£'000
|
|
|
|
|
|
Opening book cost
|
|
-
|
|
-
|
Opening investment holding
unrealised gains
|
|
-
|
|
-
|
|
|
|
|
|
Opening valuation
|
|
-
|
|
-
|
|
|
|
|
|
Movements in the period
|
|
|
|
|
Purchases at cost
|
|
15,556
|
|
17,675
|
Sales - proceeds
|
|
(15,736)
|
|
(2,643)
|
Net gains on investments held at
fair value
|
|
|
|
|
through profit or loss
|
|
180
|
|
1,663
|
|
|
|
|
|
Closing valuation
|
|
-
|
|
16,695
|
|
|
|
|
|
Closing book cost
|
|
-
|
|
15,032
|
Closing investment holding
unrealised gains
|
|
-
|
|
1,663
|
|
|
|
|
|
Closing valuation
|
|
-
|
|
16,695
|
|
|
|
|
|
|
|
Movement in unrealised gains during
the period
|
|
-
|
|
3,259
|
Movement in unrealised losses during
the period
|
|
-
|
|
(1,873)
|
Realised gain on sale of
investments
|
|
180
|
|
277
|
|
|
|
|
|
Net
gain on investments held at fair value through profit or
loss
|
|
180
|
|
1,663
|
Total net gain on investments held
at fair value through
profit or loss
|
|
1,843
|
|
|
|
|
|
|
| |
10. Unsettled trades
At period end, the net amount in
relation to trades that were settled post year end is £24,900. The
table below summarises these trades as at 31 December
2023.
|
|
£'000
|
|
Settlement
date
|
Payable
|
|
|
|
|
Mpac Group plc
|
|
(31)
|
|
3
January 2024
|
Springfield Properties
plc
|
|
(57)
|
|
3
January 2024
|
Transense Technologies
plc
|
|
(10)
|
|
3
January 2024
|
Windward plc
|
|
(34)
|
|
2
January 2024
|
|
|
|
|
|
Total unsettled trades payable
|
|
(132)
|
|
|
Receivable
|
|
|
|
|
Pinewood Technologies plc
|
|
157
|
|
2
January 2024
|
|
|
|
|
|
Total unsettled trades receivable
|
|
157
|
|
|
Net
unsettled trades
|
|
25
|
|
|
|
|
|
|
|
11. Share
capital
|
|
No of
|
|
|
|
|
shares
|
|
£'000
|
Ordinary Shares at no par value
|
|
|
|
|
|
|
|
|
|
Opening balance as at 31 January
2023
|
|
-
|
|
-
|
Issue of shares
|
|
16,027,290
|
|
16,109
|
Issue costs
|
|
-
|
|
(573)
|
|
|
|
|
|
At
31 December 2023
|
|
16,027,290
|
|
15,536
|
|
|
|
|
|
The holders of Ordinary Shares have
the right to receive notice of and attend, speak and vote in
general meetings of the Company. They are also entitled to
participate in any dividends and other distributions of the
Company.
12. Net Asset Value per Ordinary
Share
The Net Asset Value per Ordinary
Share and the Net Asset Value at the period end calculated in
accordance with the Articles of Incorporation were as
follows:
|
|
|
31 December
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV
|
|
NAV
|
|
|
|
|
|
per share
|
|
attributable
|
|
|
|
|
|
pence
|
|
£'000
|
|
|
|
|
|
|
|
|
Ordinary Shares: basic and diluted
|
|
|
|
|
106.50
|
|
17,069
|
|
|
|
|
|
|
|
|
The Net Asset Value per Ordinary
Share is based on 16,027,290 Ordinary Shares, being the number of
Ordinary Shares in issue at the period end.
13. Other expense
payments
|
|
|
31
December
|
|
|
|
2023
|
|
|
|
£'000
|
|
|
|
|
Total gains for the
period
|
|
|
1,533
|
Net gains on investments held at
fair value
|
|
|
|
through profit or loss
|
|
|
(1,843)
|
Interest income
|
|
|
(22)
|
Movement in working capital
|
|
|
|
Increase in other
receivables
|
|
|
(38)
|
Increase in payables
|
|
|
96
|
|
|
|
|
Total other expense payments
|
|
|
(274)
|
|
|
|
|
14. Financial instruments and capital
disclosures
The Company's activities expose it
to a variety of financial risks; market risk (including other price
risk, foreign currency risk and interest rate risk), credit risk
and liquidity risk.
Certain financial assets and
financial liabilities of the Company are carried in the Audited
Statement of Financial Position at their fair value. The fair value
is the amount at which the asset could be sold, or the liability
transferred in a current transaction between market participants,
other than a forced or liquidation sale. For investments actively
traded in organised financial markets, fair value is generally
determined by reference to Stock Exchange quoted market mid prices
and Stock Exchange Electronic Trading Services ("SETS") at last
trade price at the period end date, without adjustment for
transaction costs necessary to realise the asset. Other financial
instruments not carried at fair value are typically short-term in
nature and reprice to the current market rates frequently.
Accordingly, their carrying amount is a reasonable approximation of
fair value. This includes cash and cash equivalents, other
receivables and other payables.
The Company measures fair values
using the following hierarchy that reflects the significance of the
inputs used in making the measurements.
The Company measures fair values
using the following hierarchy that reflects the significance of the
inputs used in making the measurements. Categorisation within the
hierarchy has been determined on the basis of the lowest level
input that is significant to the fair value measurement of the
relevant assets as follows:
Level 1 - Quoted prices
(unadjusted) in active markets for identical assets or
liabilities.
An active market is a market in
which transactions for the asset or liability occur with sufficient
frequency and volume on an ongoing basis such that quoted prices
reflect prices at which an orderly transaction would take place
between market participants at the measurement date. Quoted prices
provided by external pricing services, brokers and vendors are
included in Level 1, if they reflect actual and regularly occurring
market transactions on an arm's-length basis.
Level 2 - Inputs other than quoted
prices included within Level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that
is, derived from prices).
Level 2 inputs include the
following:
· quoted prices for similar (i.e., not identical) assets in
active markets;
· quoted prices for identical or similar assets or liabilities
in markets that are not active. Characteristics of an inactive
market include a significant decline in the volume and level of
trading activity, the available prices vary significantly over time
or among market participants or the prices are not
current;
· inputs other than quoted prices that are observable for the
asset (for example, interest rates and yield curves observable at
commonly quoted intervals); and
· inputs that are derived principally from, or corroborated by,
observable market data by correlation or other means
(market-corroborated inputs).
Level 3 - Inputs for the asset or
liability that are not based on observable market data
(unobservable inputs).
The level in the fair value
hierarchy within which the fair value measurement is categorised in
its entirety is determined on the basis of the lowest level input
that is significant to the fair value measurement in its entirety.
If a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that
measurement is a Level 3 measurement.
Assessing the significance of a
particular input to the fair value measurement in its entirety
requires judgement, considering factors
specific to the asset or liability.
At
31 December 2023
|
Level
1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
|
Equity instruments
|
16,695
|
|
-
|
|
-
|
|
16,695
|
|
|
|
|
|
|
|
|
|
16,695
|
|
-
|
|
-
|
|
16,695
|
The Company only has exposure to level 1 instruments in the
current period.
The following table shows a
reconciliation of the opening balance to the closing balance for
Level 1 fair values:
|
|
|
|
|
|
|
December
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
|
|
£'000
|
|
|
|
|
|
|
|
Level 1
|
|
|
|
|
|
|
|
|
Opening balance
|
|
|
|
|
|
|
-
|
Purchases at cost
|
|
|
|
|
|
|
33,231
|
Sales at cost
|
|
|
|
|
|
|
(18,379)
|
Total gains included in net gains on
investments in the Audited Statement of Comprehensive
Income
|
|
|
|
|
|
|
- on assets sold
|
|
|
|
|
|
|
457
|
- on assets held at period
end
|
|
|
|
|
|
|
1,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,695
|
|
|
|
|
|
|
|
|
Investments are
transferred between
levels at the point of the trigger event.
The main risks that the Company
faces arising from its financial instruments are:
(i) market risk,
including:
- other
price risk, being the risk that the value of investments will
fluctuate as a result of changes in market prices;
-
interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in interest
rates;
(ii) credit risk, being the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company; and
(iii) liquidity risk, being the risk that the Company will not be
able to meet its liabilities when they fall due. This may arise
should the Company not be able to liquidate its
investments.
Market and other price risk
The management of price risk is
part of the portfolio management process and is characteristic of
investing in equity securities. The investment portfolio is managed
with an awareness of the effects of adverse price movements through
detailed and continuing analysis with an objective of maximising
overall returns to shareholders. Although it is the Company's
current policy not to use derivatives, they may be used from time
to time for the purpose of efficient portfolio management and
managing any exposure to assets denominated in currencies other
than pound sterling.
If the investment portfolio
valuation rose or fell by 10% at 31 December 2023, the impact on
the net asset value would have been £1,669,500/-£1,669,500. The
calculations are based on the investment portfolio valuation as at
the Audited Statement of Financial Position date and are not
necessarily representative of the period as a whole.
Interest rate risk
As at 31 December 2023 the
financial assets and financial liabilities exposed to interest rate
risk are as shown below:
|
|
In one
year
|
|
Greater
than
|
|
2023
|
|
|
or less
|
|
one year
|
|
Total
|
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
Cash at bank
|
|
407
|
|
-
|
|
407
|
|
|
|
|
|
|
|
Total
|
|
407
|
|
-
|
|
407
|
Interest risk table
The following tables detail the
Company's remaining contractual maturity for its current financial
assets and liabilities.
|
|
|
|
|
|
|
Over
|
|
|
|
Interest
|
|
Year 1
|
|
Year 1
-
2
|
|
2 years
|
|
Total
|
2023
|
rate %
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash at bank
|
Daily bank rate
|
|
407
|
|
-
|
|
-
|
|
407
|
Unsettled trades
|
Interest free
|
|
157
|
|
-
|
|
-
|
|
157
|
Other receivables
|
Interest free
|
|
38
|
|
-
|
|
-
|
|
38
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
602
|
|
-
|
|
-
|
|
602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over
|
|
|
|
Interest
|
|
Year 1
|
|
Year 1
-
2
|
|
2 years
|
|
Total
|
2023
|
rate %
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
Interest free
|
|
228
|
|
-
|
|
-
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
228
|
|
-
|
|
-
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Credit risk
Credit risk is the risk that a
counterparty to a financial instrument will fail to discharge an
obligation or commitment that it has entered into with the Company.
The Audit and Risk Committee has in place a monitoring procedure in
respect of counterparty risk which is reviewed on an ongoing
basis.
The carrying amounts of financial
assets best represent the maximum credit risk exposure at the
Audited Statement of Financial Position date, and the main exposure
to credit risk is via the Company's Custodian who is responsible
for the safeguarding of the Company's cash balances.
At the reporting date, the
Company's financial assets exposed to credit risk amounted to the
following:
|
|
2023
|
|
|
Total
|
|
|
£'000
|
|
|
|
Cash at bank
|
|
407
|
Unsettled trades
|
|
157
|
Other receivables
|
|
38
|
|
|
|
Total
|
|
602
|
|
|
|
All the assets of the Company
which are traded on a recognised exchange are held on its behalf by
Butterfield Bank (Guernsey) Limited, the Company's Custodian.
Bankruptcy or insolvency of the Custodian may cause the Company's
rights with respect to securities held by the Custodian to be
delayed or limited.
The credit risk on cash is
controlled through the use of counterparties or banks with high
credit ratings, rated B or higher, assigned by international credit
rating agencies. Bankruptcy or insolvency of such financial
institutions may cause the Company's ability to access cash placed
on deposit to be delayed, limited or lost.
Cash of £407,000 was held with
Butterfield Bank (Guernsey) Limited and Alpha FX Group plc at
period end.
The credit rating of Butterfield
Bank (Guernsey) Limited was A2 and Alpha FX Group plc was B at the
period end.
Liquidity risk
Liquidity risk is defined as the
risk that the Company does not have sufficient liquid resources to
meet its obligations as they fall due. In managing the Company's
assets, the Company will seek to ensure that it holds at all times
a portfolio of assets (including cash) to enable the Company to
discharge its payment obligations as they fall due. The Company may
also maintain a short-term overdraft facility that it may utilise
from time to time to manage short-term liquidity.
The Company's liquidity risk is
maintained by the Board in accordance with established policies,
procedures and governance structures in place. Cash flow
forecasting is reviewed by the Board to ensure that it has
sufficient cash to meet obligations as they fall due.
The maturity profile of the
Company's current assets and liabilities is presented in the
following table.
|
|
|
|
Between
|
|
Between
|
|
|
|
|
Up to
|
|
3 and 12
|
|
1 and 5
|
|
Total
|
|
|
3 months
|
|
months
|
|
years
|
|
Total
|
2023
|
|
£
|
|
£
|
|
£
|
|
£
|
Assets
|
|
|
|
|
|
|
|
|
Cash at bank
|
|
407
|
|
-
|
|
-
|
|
407
|
Unsettled trades
|
|
38
|
|
-
|
|
-
|
|
38
|
Other receivables
|
|
157
|
|
-
|
|
-
|
|
157
|
Liabilities
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
(228)
|
|
-
|
|
-
|
|
(228)
|
|
|
|
|
|
|
|
|
|
Total
|
|
374
|
|
-
|
|
-
|
|
374
|
|
|
|
|
|
|
|
|
|
The Board, ensure that a robust
assessment of the principal risks facing the Company has been
undertaken (including those risks that would threaten its business
model, future performance, solvency or liquidity) and provide
advice on the management and mitigation of those risks.
Capital management objectives, policies and
procedures
The structure of the Company's
capital is described in note 11 and details of the Company's
reserves are shown in the Audited Statement of Changes in Equity on
page 47.
The Company's capital management
objectives are:
· to
ensure that it is able to continue as a going concern;
and
· to
generate long-term capital growth through investing in a portfolio
consisting primarily of equity or equity related securities of UK
smaller companies that are predominantly listed or admitted to
trading on markets operated by the London Stock
Exchange.
The Board, with the assistance of
the Portfolio Manager, regularly monitors and reviews the broad
structure of the Company's capital. These reviews
include:
· the
extent to which revenue reserves should be retained or utilised;
and
· ensuring the Company's ability to continue as a going
concern.
15. Related parties
DWL provides portfolio management
services to the Company.
|
|
|
|
|
31 January
2023
|
|
|
|
|
|
to 31
December
|
|
|
|
|
|
2023
|
|
|
|
|
|
£'000
|
|
|
|
|
|
|
Fees charged / (recharged) by DWL:
|
|
|
|
|
|
Management
fees
|
|
|
|
|
|
Total management fee
charged
|
|
|
|
|
156
|
Management fee
outstanding
|
|
|
|
|
22
|
AIFM
recharge
|
|
|
|
|
|
Total AIFM fee
recharged
|
|
|
|
|
(38)
|
AIFM fee recharge
outstanding
|
|
|
|
|
(4)
|
Performance
fees
|
|
|
|
|
|
Total Performance
fees charged
|
|
|
|
|
28
|
Performance fees
outstanding
|
|
|
|
|
28
|
|
|
|
|
|
|
AIFM fee charged by FundRock:
|
|
|
|
|
|
Total AIFM fee charged
|
|
|
|
|
38
|
AIFM fee outstanding
|
|
|
|
|
4
|
|
|
|
|
|
|
Directors' fees:
|
|
|
|
|
|
Total Directors' fees charged
|
|
|
|
|
95
|
Directors' fees
outstanding
|
|
|
|
|
-
|
|
|
|
|
|
|
As at 31 December 2023 the
following Directors have holdings in the Company:
|
|
Number of
|
|
% Ordinary Shares
in
|
|
|
Ordinary
Shares
|
|
issue as at 31 December2023
|
|
|
|
|
|
Andrew Henton
|
|
100,000
|
|
0.6239
|
Susan Norman
|
|
20,000
|
|
0.1248
|
Henry Freeman
|
|
15,000
|
|
0.0936
|
Luke Allen
|
|
-
|
|
-
|
Adrian Norman (husband of Susan
Norman)
|
|
4,878
|
|
0.0304
|
16. Post statement of financial
position events
The Company has raised gross
proceeds of approximately £1.65 million by way of a direct
subscription, by new and existing investors, for 1,513,240 new
ordinary shares at a price of 110 pence per new ordinary
share.
There has not been any other
matter or circumstance occurring subsequent to the end of the
financial period that has significantly affected, or may
significantly affect, the operations of the Company, the results of
those operations, or the state of affairs of the Company in future
financial period.
Corporate Information
Directors
Andrew Henton, Chair
Henry Freeman
Luke Allen
Susan Norman
Registered office
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Portfolio Manager
Dowgate Wealth Limited
("DWL")
15 Fetter Lane
London
EC4A 1BW
AIFM
FundRock Management Company
(Guernsey) Limited
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Nominated Advisor and Joint Broker
Cavendish Capital Markets Limited
(formerly Cenkos Securities plc)
6-8 Tokenhouse Yard
London
EC2R 7AS
Joint Broker
Dowgate Capital Limited
15 Fetter Lane
London
EC4A 1BW
Administrator and Company Secretary
Apex Administration (Guernsey)
Limited
(formerly Maitland Administration
(Guernsey) Limited)
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Registrar
Link Market Services (Guernsey)
Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
GY2 4LH
Guernsey
Custodian
Butterfield Bank (Guernsey)
Limited
P.O. Box 25
Regency Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 3AP
English Legal Adviser to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Guernsey Legal Adviser to the Company
Collas Crill LLP
Glategny Court
PO Box 140
St Peter Port
Guernsey
GY1 4EW
Independent Auditor
Grant Thornton Limited Channel
Islands
St James Place
St James Street
St Peter Port
Guernsey
GY1 2NZ