Northern Inv. Co PLC Annual Financial Report -3-
May 29 2015 - 9:00AM
UK Regulatory
Cawood Scientific 1,196 1,298 5.1
Direct Valeting 97 701 2.7
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Ten largest investments 19,744 23,449 91.6
Lanner Group 891 619 2.4
Crantock Bakery 1,061 - -
North East Property and Investments 142 - -
S&P Coil Products 66 - -
Warmseal Windows (Newcastle) 818 - -
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Total fixed asset investments 22,722 24,068 94.0
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Net current assets 1,543 6.0
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Net assets 25,611 100.0
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BUSINESS RISKS
The board carries out a regular and robust review of the risk
environment in which the company operates. The principal risks and
uncertainties identified by the board which might affect the company's
business model and future performance, and the steps taken with a view
to their mitigation, are as follows:
Investment and liquidity risk: the majority of the company's
investments are in small and medium-sized unquoted companies, which by
their nature entail a higher level of risk and lower liquidity than
investments in large quoted companies. Mitigation: the investment
manager aims to limit the risk attaching to the portfolio as a whole by
close monitoring of individual holdings, including the appointment of
investor directors where appropriate. The board reviews the portfolio,
including the schedule of projected exits, with the investment manager
on a regular basis with a view to ensuring that the orderly realisation
process remains on track.
Portfolio concentration risk: following the adoption of the company's
revised investment policy in July 2011, the portfolio is becoming more
concentrated as investments are realised and cash is returned to
shareholders. This will increase the proportionate impact of changes in
the value of individual investments on the value of the company as a
whole. Mitigation: the directors and manager keep the changing
composition of the portfolio under review and focus closely on those
holdings which represent the largest proportions of total value.
Financial risk: most of the company's investments involve a medium- to
long-term commitment and many are relatively illiquid. Mitigation: the
directors consider that it is inappropriate to finance the company's
activities through borrowing except on an occasional short-term basis.
Accordingly they seek to maintain a proportion of the company's assets
in cash or cash equivalents in order to be in a position to meet
expenditure commitments including any investments which may be made
under the company's revised investment policy. The company has very
little exposure to foreign currency risk and does not enter into
derivative transactions.
Economic risk: events such as economic recession or general
fluctuations in stock markets and interest rates may affect the
valuation of investee companies and their ability to access adequate
financial resources, as well as affecting the company's own share price
and discount to net asset value. Mitigation: the company invests in a
diversified portfolio of investments spanning various industry sectors,
and maintains sufficient cash reserves to be able to provide additional
funding to investee companies should this be necessary.
Credit risk: the company holds a number of financial instruments and
cash deposits and is dependent on the counterparties discharging their
commitment. Mitigation: the directors review the creditworthiness of
the counterparties to these instruments and cash deposits and seek to
ensure there is no undue concentration of credit risk with any one
party.
Internal control risk: the company's assets could be at risk in the
absence of an appropriate internal control regime. Mitigation: the
board regularly reviews the system of internal controls, both financial
and non-financial, operated by the company and the manager. These
include controls designed to ensure that the company's assets are
safeguarded and that proper accounting records are maintained.
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have elected to
prepare the financial statements in accordance with UK Accounting
Standards and applicable law (UK Generally Accepted Accounting
Practice). Under company law the directors must not approve the
financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the company and of the profit or
loss of the company for the year.
In preparing the financial statements, the directors are required to (i)
select suitable accounting policies and then apply them consistently;
(ii) make judgements and estimates that are reasonable and prudent;
(iii) state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in
the financial statements; and (iv) prepare the financial statements on
the going concern basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the company's transactions and
disclose with reasonable accuracy at any time the financial position of
the company and enable them to ensure that its financial statements
comply with the Companies Act 2006. They 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. Under applicable law and regulations, the directors are
also responsible for preparing a directors' report, strategic report,
directors' remuneration report and corporate governance statement that
comply with that law and those regulations.
The company's financial statements are published on the NVM Private
Equity LLP (NVM) website, www.nvm.co.uk. The maintenance and integrity
of this website is the responsibility of NVM and not of the company.
The work carried out by KPMG LLP as independent auditor of the company
does not involve consideration of the maintenance and integrity of the
website and accordingly they accept no responsibility for any changes
that have occurred to the financial statements since they were initially
presented on the website. Visitors to the website should be aware that
legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from legislation in
their jurisdiction.
In relation to the financial statements for the year ended 31 March 2015
each of the directors has confirmed that, to the best of his knowledge,
(i) the financial statements, prepared in accordance with the applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the company; (ii) the
annual report and 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; and (iii) the directors' report and strategic report include
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 the company faces.
The directors of the company at the date of this announcement were Mr N
R A Guy (Chairman), Mr J C Barnsley, Mr P W F Marsden and Mr M P
Nicholls.
OTHER MATTERS
The above summary of results for the year ended 31 March 2015 does not
constitute statutory financial statements within the meaning of Section
435 of the Companies Act 2006 and has not been delivered to the
Registrar of Companies. Statutory financial statements will be filed
with the Registrar of Companies in due course; the independent
auditor's report on those financial statements under Section 495 of the
Companies Act 2006 is unqualified, draws attention to the non-going
concern basis of preparing the accounts by way of emphasis without
qualifying the report and does not contain a statement under Section
498(2) or (3) of the Companies Act 2006.
In July 2011 shareholders approved a change in the investment policy of
the company, with the objective of conducting an orderly realisation of
the assets of the company in a manner that seeks to achieve a balance
between an efficient return of cash to shareholders and maximising the
value of the company's investments. As it is likely that this process
will ultimately lead to the liquidation of the company, the financial
statements have not been prepared on a going concern basis. No
adjustments were necessary to the investment valuations or other assets
and liabilities included in the financial statements as a consequence of
the change in the basis of preparation.
The calculation of the revenue and capital return per share is based on
the return on ordinary activities after tax for the year and on
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