RKW Rockwood Strategic Plc

Rockwood Strategic plc
("RKW" or the "Company")

Full year results for the year ended 31 March 2024

Rockwood Strategic plc (AIM: RKW) is pleased to announce its audited results for the year ended 31 March 2024.

Highlights

-     NAV Total Return performance in the twelve months to 31 March 2024 of 5.1% to 206.04p per share, which compares to a decline in the FTSE AIM All-Share of 8.6% and a rise in the FTSE Small Cap (ex-ITs) of 7.1%.

-     Total Shareholder Return in the twelve months to 31 March 2024 was 15.4%.

-     NAV Total Return performance in the three years to 31 March 2024 of 57.0%, which compares to the FTSE Small Cap (ex-ITs) of -6.8% and the FTSE AIM All-Share of -38.5%. The Total Shareholder Return in this period was 70.1%.

-     Price of shares moved from a discount to NAV of 7.1% during the period to a premium of 1.9%.

-     Significant new investor demand resulted in the issuance of 5,778,630 new shares, increasing the share count by 22.7% and, alongside performance, growing NAV to £64.3m. NAV has now grown 58% in the last two years, building scale.

-     Five new portfolio investments purchased during the period, as funds received from four takeovers and stock issuance were re-deployed.

-     Conducted 10 for 1 stock split during the period.

-     A 0.6p dividend will be proposed to shareholders at the Annual General Meeting on 31 July 2024.

Post Period End

-     NAV Total Return performance since period end to 14 June 2024 of 19.1% to 245.49p per share.

-     Significant positive company developments and share price performance in a range of investments such as RM, Filtronic and Funding Circle.

-     Further issuance of 1,005,796 new shares, increasing NAV to £79m as at 14 June 2024.

-     Fund is the No.1 Small Companies Investment Trust year-to-14 June for NAV Total Return and over 1, 3 and 5 years, as per the Association of Investment Companies.

Noel Lamb, Chairman of Rockwood Strategic plc, commented:

"The portfolio delivered a positive return in difficult markets, and the Board are delighted to have fully utilised our capacity to issue up to 20% of new shares as granted under our 2023 AGM authority, in a period when there have been consistent UK sector fund outflows. We really are building scale at Rockwood to the benefit of all shareholders. Clearly new investors share our confidence that the future for this specialist strategy is positive, the outlook for the portfolio is bright and that the opportunity to meet our target returns in this generally over-looked part of the UK stock market is achievable."

Richard Staveley, Fund Manager, Harwood Capital LLP said:

"Having navigated a challenging UK small companies' market, we are excited about the underlying business turnaround momentum across the portfolio. We expect further profit recovery and valuation re-rating in our investments and a number of positive potential catalysts are yet to emerge. We are thankful for the growing investor support for Rockwood's differentiated strategy and are demonstrating our belief that we can deploy capital into this inefficient, overlooked and undervalued part of the UK market to deliver for shareholders. We are 'active' investors, unburdened by benchmark constraints and 'active' with our investments to unlock, create or realise value for all stakeholders."

The full version of the RKW 2024 Annual Report and Notice of AGM has been published and will shortly be available on the Company's website at www.rockwoodstrategic.co.uk.

References to page numbers throughout this announcement relates to the page numbers within the Annual Report of the Company for the year ended 31 March 2024.

For further information, please contact:

CHAIRMAN'S STATEMENT

I am pleased to report a successful year for Rockwood Strategic plc ("RKW"), achieved against challenging U.K. equity market conditions. Whilst some in our sector are struggling to survive with the recent exodus from our domestic market, RKW has grown Net Asset Value ("NAV") per share, increased assets through new issuance and improved the share price from a discount to a premium to NAV. In short, RKW has been the best performing UK small companies fund according to Association of Investment Companies data for the previous three and five years ended 31 March 2024.

NAV Total Return performance in the twelve months to 31 March 2024 was 5.1%¹ which compares to an increase in the FTSE Small Cap (ex-ITs) of 7.1% and a fall in the AIM All-Share Index of 8.6%. The Total Shareholder Return in this period was 15.4%¹. The differentiated, stock-specific driven approach of the strategy has shown that positive returns are possible despite negative macroeconomic and market conditions or wider geo-political developments. Management fees were charged at a fixed fee of £120,000 per annum whilst the assets were below £60m, yet having recently exceeded this level, due to sustained absolute performance and new issuance, switched to 1.0% per annum under the terms of the Investment Management Agreement. This is competitive with other specialist investment fund mandates. Long term shareholders may recall the previous manager's fee level was 1.5%. The hurdle for a performance fee was not met.

Our Investment Manager has been industrious as evidenced by 6 new holdings, a number of positive outcomes from 'constructive engagement' in existing investments and a plethora of marketing and investor education initiatives. Of the 20 companies in the portfolio, 15 have been initiated since 2022. With a 3-to- 5-year typical investment thesis, the Board anticipates a fruitful period ahead. Shareholder value realisation is expected as operational turnarounds are delivered, strategic initiatives actioned and our investments mature under new or evolved management and boards. It is worth remembering that performance in any short period under review will be primarily due to the individual performances of a handful of our holdings.

The Board shares the view of the manager that the UK small companies market continues to provide a significant investment opportunity, due to the inefficient pricing of poorly researched or misunderstood companies trading at historically low valuations, further depressed by industry outflow driven selling. The Investment Manager is using their long experience and specialist insight to identify a small number of the very best opportunities which, if unrecognised by domestic market participants, will inevitably be on the receiving end of corporate interest; indeed during the year RKW received 4 takeover approaches for its portfolio companies.

Our shareholders voted for the Board's recommendation for a 10 for 1 stock split during the first half of the year, a measure which often improves liquidity. Growing the NAV remains a priority for the Trust. This will open up a wider set of investment opportunities in the targeted part of the UK small cap market where the manager can purchase significant investee company ownership stakes. I am also delighted to report that the shares have been trading at a 1.9% premium to NAV, unwinding last year's closing discount of 7.1%. This has allowed RKW under its authorities to issue £11.5m worth of new shares to new investors satisfying demand. Issuance accelerated during the financial year and the Trust has reached its 20.0% rolling annual limit. This is no mean feat given 34 months of consecutive monthly UK fund outflows at a sector level and the general level of sentiment towards UK equities, illustrated by the almost entire absence of IPOs, during the period. We warmly welcome all our new fellow shareholders, who see the investment opportunity this market and strategy offers.

The Board believes that, until the Company has gained greater scale, it will retain the maximum capital allowable to maximise the compounding of NAV growth. The portfolio has generated good income though, including receiving two special dividends, and RKW will thus return to the dividend list in a modest way with a 0.6p final payment. Our AGM will be held on 31 July 2024 for those that would like to meet the Board members and Investment Manager in person. Finally, I would like to extend, on behalf of all our shareholders, the Board's thanks to Mr Richard Staveley and all the team at Harwood Capital who have delivered so well in the period under review.

Noel Lamb

Chairman

18 June 2024

INVESTMENT MANAGER'S REPORT

Market backdrop

This was yet another challenging period for UK small company investors with material mood swings through the year and rising media coverage about a weakening domestic capital market environment. With a moribund lack of new issues, sustained retail outflows from UK funds, a stagnant (at best) economy and interest rates rising a further 1.0% to 5.25%, the highest for 15 years, it is not surprising sentiment has been weak. CPI inflation started the year at an annual rate of 8.9%. The contrast has been exceptionally strong stock market performances from US household name technology companies; Amazon, Google (Meta), Microsoft and Apple alongside the phenomenon which is Nvidia. These stocks are freely available to purchase now for the average individual investor, 'benchmark chasing' fund manager and 'non-thinking' tracker or ETF fund. It is not difficult to see how a 'broken' UK narrative is leading to shunned domestic investment and the alternative attractions of momentum and Ai. John Templeton's great insight into markets, though, springs to mind: "Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy". How might this statement be applied to the 'Magnificent 7' and UK small cap equities?

What should cheer everyone up? Or maybe, more importantly, what could stop the selling, or, we dare to ask, support the buying of UK equities, particularly small ones? The positive market backdrop factors appear to be as follows: The UK inflation rate has been consistently falling, to lower than half the rate a year ago. It appears on track now for the approximate target Bank of England rate and thus interest rates should start to fall during the next year. Unemployment is near multi-decade lows at 3.9% and consumer confidence in increasing, unsurprisingly when real income growth has turned positive. Market M&A is building as professional external parties, both trade buyers and private equity act on opportunities within the UK market, signalling value. Sceptics will chuckle, but the announcement of the Mansion House reforms, where a number of huge asset managers committed to increased UK investment, including the AIM and the creation of a British ISA, do imply politicians are now conscious that help is needed to stimulate demand for small listed equities. Indeed, without them the country will not end up with medium sized or large ones. These are, modest steps and will take time to impact investor flows, but are a good base to build upon from a policy direction perspective.

The other key aspects of the market backdrop remain a robust US economy, creating headwinds for the timing of a reduction in their interest rates and a weak Chinese economy, where the effects of poor capital investment and lending discipline are unwinding. High profile conflicts in Ukraine and the Middle East have increased 'tail-risks', which when combined with Central Bank buying and anticipation of looser monetary policy, have provided support for Gold. Housing and property markets are weak as they adjust to higher interest rates and tighter credit markets.

Outlook

We have provided a 'market-backdrop' section above, but as we have previously stated, over the medium-term, market factors will not be the primary determinant of Rockwood's returns, it will be stock-specific risk and return. In this regard, we would express strong confidence in the portfolio. This is predicated on three contributing factors:

An understanding of the maturity stage of the portfolio holdings is paramount to the confidence which underpins our view of the future NAV growth opportunity. To simply illustrate, Flowtech Fluidpower's new management team is now fully in place with initiatives to improve returns underway. In 2023 they generated 5.3% operating margins. Management are targeting "mid-teens". At RM, their new strategy and cost savings were unveiled by the new management team, in which they stated their new goal to quintuple 2023 EBITDA. At Trifast the operating margin in the year to March 2024 is expected to be c.5.0%. The company target is 10.0%, re-committed to by the new management team. All three stocks fell in value during the period. We bought more of all three stocks. During the year our proposed candidate for the Board was appointed to RM and Nick Mills of Harwood joined the Board of Trifast. Already, Jamie Brooke of the Rockwood Investment Advisory Group is on the Board of Flowtech Fluidpower. The main virtue required now is patience. Material profit recovery is likely at all of these key holdings above, alongside many others.

Overall, the portfolio holdings are well-financed with strong balance sheets in almost all cases, or are de-leveraging quickly in the remainder. We finished the year with £3.9m of net current assets, 6.1% of NAV. We expect a hasty reversal of negative sentiment when interest rates start falling. Our pipeline of new investments remains busy with due diligence finished on some, where we wait patiently for an optimised entry point and is on-going on others, where we feel no rush to execute until we have sufficient clarity on the 'margin of safety'.

We expect the pickup in trade buyer acquisition activity and public-to-private transactions to accelerate in the coming years for our targeted part of the UK stock market. If the stock market doesn't fairly value or provide growth capital to UK listed small companies then alternative solutions for shareholders will emerge. This dynamic should deliver material, absolute NAV growth for the current portfolio holdings as it did during the year. Whilst a dead IPO market is not 're-populating' the UK market, we expect this to eventually pick up again as broader confidence improves.

We ended with 7 'Core' holdings and 12 'Springboard Opportunities' with the top ten holdings accounting for almost the same as the prior year end at 64.3% of NAV.

Investment Philosophy

We believe that investment returns are generated by purchasing a share for less than the intrinsic worth of the company, (a 'value' philosophy), which is enhanced by identifying companies which can increase their fundamental intrinsic worth over time, thus avoiding 'value traps'. We seek to optimise the IRR by identifying 'catalysts' which will unlock the share's discount to the business's worth or accelerate value creation. For 'core' investments we ourselves may be the 'catalyst' through the provision of capital, insight and personnel through constructive engagement with the Board, management and other stakeholders.

Top 10 Holdings as % of NAV

Top 5 Investment Portfolio Holdings Commentary

RM Plc 9.4% Net Assets ('Core')

Cost: £4.96m, Value as at 31 March 2024, £6.07m, IRR to date 23.4%

The company is an established and leading supplier to the education market. It has three divisions: firstly an educational supplies business which reaches 90.0% of UK Primary schools selling everything from basic supplies to bespoke teaching aids, often encouraged by the curriculum. The second is a leading assessment business which marks exams from the International Baccalaureate to A-levels both in the UK and abroad. The final division provides outsourced technology services to groups of schools. During the year the company's lenders extended their facilities to the company, which is important given elevated debt levels. The new CEO completed a number of senior hires, including a new CFO and we were very pleased to see Christopher Humphries appointed Senior Independent Director. The new strategy has been unveiled which rightly targets improved focus and we believe strongly that RM should move to a single division business, paying off its debt in the process. The business which has a long history of cash generation, now stabilised after the recent collapse in profitability and we expect material profit growth over the coming years, indeed management are targeting 5x the 2023 EBITDA outcome. We believe that the shares have a 'sum-of-the-parts' valuation materially above the current share price and expect the evolved Board and new management team to create and realise considerable shareholder value through a well-managed divisional disposal process and operational turnaround.

Trifast 8.4% Net Assets ('Core')

Cost: £5.64m, Value as at 31 March 2024, £5.38m, IRR to date -4.6%

The company is an international manufacturer (30.0%) and distributor (70.0%) of fasteners (nuts 'n' bolts) and has been established for a number of decades. With 34 locations, of which 7 are high volume manufacturing sites, 15 billion parts are sold per year and over 1200 employees. Sales exceed £240m with a long history of profitability and cash generation. The company has material net assets and is well invested in plant and machinery. However, returns have fallen and Return on Capital Employed ("ROCE") is poor. The operating margin is depressed vs its long history and competitors and a management and Board evolution has now been completed. This included the appointment of Nick Mills from Harwood as a Non-Executive Director ("NED"). A restructuring program to deliver savings is underway and we expect progress from a c.5.0% operating margin to a 10.0% operating margin over the next 2-3 years. 75.0% of sales are customer-specific branded products with an 18-year average tenure of the top ten customers, the largest being <7.5% sales. Net Debt had become elevated not least due to a bulging inventory position of over £100m, which is now unwinding. We can identify a significant multi-year turnaround and recovery opportunity with scope to materially increase cash generation, improve returns and profits leading to a normalisation and expansion of the valuation.

M&C Saatchi 8.1% Net Assets ('Springboard/Opportunity')

Cost: £3.32m, Value as at 31 March 2024, £5.22m, IRR to date 22.8%

The company is one or the world's best known global advertising and communications advice agencies with clients stretching from governments to supra-national organisations (e.g. The World Bank) to the world's leading consumer brands (e.g. Samsung) and social media sites (e.g. TikTok). Following a period of turmoil, the Board and management team have undergone significant change. Under the dynamic new Chair, the business has been making considerable operating savings, disposing of loss-making operations and streamlining the business, including the move to shared services. H2 2023 results demonstrated a turnaround is underway, which as it matures should highlight a growing, high margin, low capital intense, highly cash generative, international business. They also clearly expose the exciting activities the business undertakes in 'Passion' sectors, such as sport, alongside their almost unique 'world issues' non-cyclical division which advises a range of governments and supra-national organisations. The upside to our view of fair value is considerable. Profit progress should be made in 2024 irrespective of the tough end market conditions, however when these inevitably pick-up, the profit recovery potential will be supercharged. The company has almost finished buying out its minority partners, has now put in place a new CEO, CFO, co-Creative Directors and has net cash. The shares still remain below the rejected level of the 2022 takeover offer.

Funding Circle (New Holding) 6.8% Net Assets ('Springboard/Opportunity')

Cost: £3.48m, Value as at 31 March 2024, £4.34m, IRR to date 303.0%

(Note the IRR is unhelpful for evaluation purposes, due to the mathematical extrapolation and annualisation of a strong initial performance, after a very short holding period)

The company has developed a leading UK and US Small and medium ("SME") sized company lending platform matching professional lending demand with SME financing leads where they are poorly served by the mainstream banks. The platform generates income in fees for arranging the loans and servicing them, of which there are c.£3.5bn currently under management. To date 140,000 businesses have successfully borrowed over $16bn, enhancing a huge 'data lake' of over 2bn data points on 29 million businesses, feeding the fast approval process. The impairment record has been in-line with expectations for the type of loan risk, initial expectations that 'peer-to-peer' lending would nourish the platform have not been met and the company has steadily built income from professional capital sources. However, it has been loss-making to date. The company was valued at c.£1.5bn in its 2018 IPO. We have established an investment at a c.£110m market capitalisation, a deep discount to book value as we note the company has £173m of unrestricted cash, £50m of regulatory driven restricted cash, and over £60m of loans, made to facilitate the platform. Since our purchase the company has started evolving the Board, announced a £25m buy-back and that they are in discussions to sell the US business to focus on the UK activities. We are in support of all these initiatives, yet desire some cost-cutting and restructuring to ensure the UK business is stand-alone profitable. Once achieved, the value of this platform, if it can continue to grow, will be very significant.

Filtronic 6.7% Net Assets ('Springboard/ Opportunity')

Cost: £1.53m, Value as at 31 March 2024, £4.29m, IRR to date 257.6%

The company is an independent, world leader in Radio Frequency ("RF") applications and technology. This is the art of converting analogue to digital signals and mastering the various wavelengths on the spectrum to communicate data effectively. The business has been in existence for many years and works with world leading clients in its sectors, historically Telecommunications (5G rollout for instance), Defence (Radar applications for example) and critical communications. The business disposed of a lot of activities a number of years ago and now operates profitably in its niches, but lacks scale. The opportunity for shareholders centres on the opening up of a new, potentially huge market for Filtronic that would transform sales and profitability of the company and create strategic value within the supply chain. The market is 'Space'. The company has started to win important contracts with "the world's leading Low Earth Orbit satellite company" as well as the European Space Agency. The US company SpaceX has been transforming the economics of space travel allowing many more launches and the creation of huge satellite networks, the largest of which is Starlink. Filtronic has been winning contracts to supply components for the ground stations of its customer and is in trials for being within the satellite itself. The company has net cash and potentially a very bright future as other constellation projects mature, existing clients grow and achieves scale.

Portfolio Activity

Purchases

We added materially to our shareholdings in a number of existing investments increasing the number of shares held, the largest are shown in the following table:

Titon 3.6% Net Assets ('Core')

Cost: £2.32m, Value as at 31 March 2024, £2.34m, IRR to date 1.6%

The company has migrated from 'Springboard' to 'Core' as we purchased over 27.0% of the company's equity during the year. A leading UK manufacturer of building ventilation products and supplier of other door and window hardware, the company has had a succession of CEOs, falling profitability and lacked strategic focus in recent years. However, the company is very asset rich with cash on the balance sheet, (too much) stock, a large freehold asset site, and has a growing mechanical ventilation business where competitors deliver attractive levels of profitability. This industry has strong growth prospects and regulatory drivers. Our investment has been made at a substantial discount to book value. We successfully proposed Jamie Brooke, of Rockwood's Investment Advisory Group, replace the longstanding Chairman and we expect significant improvements in focus, strategic clarity, and profitability going forward. A new CEO joins shortly with experience in improving operations and we see scope for material shareholder value creation and realisation.

Argentex 4.8% Net Assets ('Springboard/Opportunity')

Cost: £3.71m, Value as at 31 March 2024, £3.08m, IRR to date -20.6%

This investment has not performed to our thesis over the medium term. Frustratingly, following our initial investment the shares performed strongly as a new management team was put in place to take the business forward after a co-founder/CEO departed. However, the team failed to calibrate cost investment effectively and insufficient growth in their FX services was delivered, only temporarily helped by the volatility around the Liz Truss Prime Ministerial phase and our gains were more than fully reversed. A new Chair has been appointed and a full new team is now being created (CEO, CFO, CTO). We still standby by our original thesis that the business is inherently profitable, lacks capital intensity, has huge growth potential both domestically and overseas and is cash generative, however a reset of leadership and some evolution of strategy is necessary to recover and build shareholder value. We are awaiting these plans from the new team. It is now 2 years from the initial purchase, and thus we desire a ruthless focus on shareholder value in order to meet our target returns over an acceptable time period.

New holdings

The Investment Team have been actively deploying capital during these depressed market conditions to seed returns for shareholders over the medium term.

STV 5.3% NAV, Market capitalisation £109m

The company is the No.1 Scottish commercial broadcaster, recently being re-awarded a further 10 year license, which incorporates its leading digital platform, the 'STV Player'. In recent years the company has expanded its content production capabilities and is the largest regional UK studios business with over 40 'returning' series. As the most popular peak time TV channel in Scotland, STV reaches 3 out of 4 Scottish adults every month (2.9m) and attracts 3x the audience of its nearest commercial competitor. Remaining profitable, the difficult and cyclical advertising spend environment has impacted recent performance yet has scope for meaningful recovery. The digital activities are very high margin and have been consistently growing with millions of registered and active users who can be served better targeted and thus higher value adverts. Debt levels are conservative but the company is saddled with a legacy pension scheme with a large deficit, which is consuming a lot of cashflow to resolve. In time this will stop and we would expect the Board of STV to be accelerating this process if it made sense for shareholders. We believe the low valuation reflects an out of date perception of business mix, as the content business is now larger than linear TV activities and has been recently announcing new production wins with Apple, NBC, the BBC and Netflix implying solid growth prospects and creative reputational momentum.

Restore 4.2% NAV, Market capitalisation £296m

Restore dropped significantly below our maximum market cap for initial purchases of £250m during the period, following a profit warning, resulting in a fantastic investment opportunity in this unique services business. The company manages over 22m boxes of paper records for a wide range of businesses, including 80.0% of the FTSE 100, which is a highly profitable activity generating over 30.0% profit margins. Over the years, complimentary activities have been developed and the company is now UK No.1 in shredding, office technology destruction/recycling, scanning, and office relocations. The long-time CEO has returned to the group after a period of underperformance of the business and we expect renewed vigour, growth and improved profitability to emerge. Despite recovering well since our investment the valuation remains on a deep discount to history and its prodigious cash flows and we expect further significant progress.

Capital Limited 3.2% NAV, Market capitalisation £174m

The company's two key founders remain heavily involved and invested in the business they have successfully created over the last 15 years. The company started out providing drilling services to small African based mining companies and, having developed a reputation of best in class health and safety, service levels and efficiency, has gradually built a diversified client base including a number of world's major mining companies. The rig fleet is now deployed across several continents and is complimented by other services, the most important for our thesis being the 'laboratory services' division which is providing leading edge, environmentally friendly assays and sample testing to its clients. Capital's strong margins, and attractive returns on capital will be enhanced by the strong growth of this division, competitors are valued very highly. Whilst Capital has activities across a number of metals, it still retains a bias to Gold. We expect further growth in its key projects, realisations from its strategic equity stakes in early-stage clients and an eventual realisation of value in the laboratories business. The valuation looks anomalous given the ROCE and growth record, its asset base and prospects.

James Fisher & Sons 4.0% NAV, Market capitalisation £130m

Unlike the other four new holdings above, James Fisher shares have fallen since our initial purchase. We expect a full recovery of our investment, indeed have high confidence in, at least, meeting our target returns over the next 3-5 years. This quality marine, energy and defence group with a very long corporate history had lost focus, capital discipline and stressed the balance sheet. The new management team is already simplifying the group, taking out costs and has released conservative medium-term financial targets, which would result in much higher levels of profitability and returns on capital. We entered this investment with known risk around their high debt levels, but just prior to period end, a large proposed disposal was announced which will radically de-gear the company, allowing the operational recovery to unfold. Within the remaining activities are leading edge specialist diving expertise, growing services to global offshore wind farms, emergent defence products and cash generative shipping related services. We expect considerable valuation upside as the turnaround progresses and risks abate.

Sales

We exited 4 material holdings and received a capital return from Bonhill prior to its de-listing. We await a final modest payment to shareholders. We also received special dividends from Centaur Media and Galliford Try.

City Pub Company - realised IRR 43.4%, gain £1.49m

This represented a very clear 'opportunity' for Rockwood, when we began buying in May 2022. The carefully put together group of over 50, mainly freehold, pubs has been led by the proven industry expert, Clive Watson. The pubs experienced a sustained period of stress due to the COVID-19 impact on leisure activity and then the cost of living squeeze, so trading has been challenging. However, independent assessment of the value of the pubs, despite this context, was much greater than the value placed on the shares by the stock market. This opportunity proved attractive to the highly regarded and (much) older pub group of Youngs & Co. They will benefit from the removal of duplicate central costs, management synergies, improved buying terms and gain a high quality, well located, estate. Their offer at a 46.0% premium was mainly cash and some Young & Co shares, which remained in the portfolio at year-end.

Onthemarket.com - realised IRR 94.0%, gain £928,000

Also on the receiving end of an attractive takeover offer, Onthemarket.com, the UK property portal, was introduced to the portfolio in February 2023. Our thesis centred on the progress the company had made in recent   years, moving into attractive free cash flow generation and with scope for price rises given the huge discount charged relative to the dominant market leader, Rightmove. The low valuation appeared at odds with future potential and the company's strong balance sheet. However, a multi-billion dollar US company with expertise in the sector, has cut short our expected holding period with a cash takeover offer at a 56.0% premium.

Finsbury Food Group - realised IRR 33.4%, gain £554,000

A significant UK manufacturer of cakes and Bread products with particularly high market share in branded 'celebration' cakes such as Birthday cakes branded Disney, Minions, Mary Berry etc. We flagged in last year's annual report that the company's M&A ambitions were "somewhat constrained by a seemingly inappropriately low stock market multiple" and that Private Equity may find the situation attractive. We were therefore not surprised when a takeover offer emerged. Frustratingly, the premium was modest and the valuation placed on the group was below our view of fair value. However, the long-standing management team supported the move off market and other shareholders accepted the offer or sold to arbitrageurs who did and the approach was successful. We did achieve over double our target IRR in this investment and have found lots of opportunity for reinvestment since.

Smoove - realised IRR 2.0%, gain £246,000

A protracted bid process also occurred for our investment in Smoove, originally ULS Technology, during the period. In this instance the bidder was Pexa Group, an Australian listed group. This investment has not met our target returns, primarily, in our view, due to the decision to invest a lot of the cash proceeds received from a divisional disposal in 2022, alongside further P&L investment (losses), into an expensive technology refresh project. Harwood built a larger stake in the business and engaged with the Board to reassess what was best for shareholders. The eventual offer received was at a 69.0% premium, which meant we made a modest positive return on investment, however due to the elongated process and losses racked up by the new management team, our original thesis was not successful in achieving our target returns.

Update on Pressure Technologies Pressure Technologies

Equity:   20.0% of Issued Share capital, 4.8% Net Assets ("Core")

Cost:       £4.26m, Value as at 31 March 2024, £3.1m, IRR to date -8.4%

Loan:      £750,000, IRR to date 25.0%

Warrants: 966,679. Maturity 2028. Exercise price 32p

The company has two divisions; the industry leading Chesterfield Special Cylinders ("CSC") which manufactures and services a range of high-end industries and customers including the Ministry of Defence and the emergent Hydrogen economy. Secondly, the Precision Machined Components division ("PMC"), which manufactures high specification parts primarily for the oil and gas industry. The investment was initiated in early 2019, however cash generation has not been as expected and the company has required a number of external capital injections. During the period, Richard Staveley joined the Board as a NED and subsequently Rockwood arranged a loan to the company at a 14.25% interest rate, with a 3.0% arrangement fee, and some warrants with full security over the company's assets. The loan is 'bridging' in nature as the company has pleasingly agreed to exit the PMC division. If successful, this process should bring in sufficient cash resources to both repay the loan and provide future funding for CSC. The PMC division is benefitting from the improved oil and gas pricing environment resulting in recovering activity levels. We expect a successful sale to result in a focused business which should lead to a fairer valuation of its qualities and potential.

Conclusion

As managers we have invested more of our own personal money in the shares of Rockwood Strategic during the year and have a management contract which rewards success. We see a real opportunity to compound wealth for all shareholders over the long-term and the potential for a revitalised but inefficient stock market full of opportunities to deliver our target returns.

During the year the great Charlie Munger and the legendary behavioural finance pioneer Daniel Kahneman passed away, both have had a significant influence on how your manager has developed Rockwood's approach to successful stock market investing. Charlie would hopefully be pleased with Rockwood's concentrated approach, valuation discipline, and focus on cash generation, whilst Daniel would urge us to keep reminding ourselves of the various biases we will continue to succumb to as active investors. Both advocate the importance of patience, increasingly in short supply we would argue, yet critical for the success of our investments in Rockwood and also for shareholders who want to benefit from this strategy.

Richard Staveley

Statement of Comprehensive Income for the year ended 31 March 2024

^* In accordance with IAS 33 'Earnings per Share', the comparative return per ordinary share figures have been restated using the new number of shares in issue following the ten for one share split. For weighted average purposes, the share split has been treated as happening on the first day of the accounting period. See note 12 for further details.

The total column of the statement is the Statement of Comprehensive Income of the Company prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the United Kingdom. The supplementary revenue and capital columns are presented for information purposes as recommended by the Statement of Recommended Practice ("SORP") issued by the Association of Investment Companies ("AIC").

All items in the above Statement derive from continuing operations. No operations were acquired or discontinued during the period.

Statement of Financial Position for the year ended 31 March 2024

The NAV per share on 31 March 2024 is 206.04p pence (2023: 195.96 pence restated for the sub-division of each ordinary share into 10 new ordinary shares, approved at the AGM held on 12 September 2023 and completed on 11 October 2023).

These Financial Statements were approved and authorised for issue by the Board of Directors on 18 June 2024. Signed on behalf of the Board of Directors.

Statement of Cash Flows for the year ended 31 March 2024

* Excludes share issues not received at 31 March 2024 totalling £156,000.

Statement of Changes in Equity for the year ended 31 March 2024

*  The revenue reserve can be distributed in the form of dividends.

Notes to the Financial Statements

Rockwood Strategic Plc (the Company) is a public company incorporated in the UK and registered in England and Wales (registration number: 03813450).

The Company carries on the business as an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010.

Basis of preparation

Following the Company's approval as an investment trust company on 1 April 2023, the annual Financial Statements of the Company for the year to 31 March 2024 have been prepared in accordance with UK adopted international accounting standards. They will also be prepared in accordance with applicable requirements of England and Wales company law and reflect the following summarised policies which will be adopted and applied consistently. The Financial Statements have also been prepared in accordance with the SORP for investment trust companies issued in July 2022, except to any extent where it conflicts with IFRS.

In order better to reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income.

The functional and presentational currency of the Company is Pounds Sterling and has been determined on the basis of the currency of the Company's share capital and the currency in which dividends and expenses are paid. The Financial Statements are presented to the nearest thousand (£'000).

Going concern

In assessing the Company as a going concern, the Directors have considered the market valuations of the portfolio investments, the current economic outlook and forecasts for Company costs.

The Company is in a net asset position of £64.3 million (March 2023: £49.8 million) and 98.5% of the Company's portfolio of investments consist listed equities which, should the need arise, can be liquidated to settle liabilities. The rest of the Company's portfolio consisted of 1.2% in a loan and 0.3% in other unquoted investments. There are no other contractual obligations other than those already in existence and which are predictable.

At the year end, Pressure Technologies had an outstanding loan of £0.75 million with the Company. The loan is valued at par which is approximate to it fair value and there is no reason to doubt its recoverability as pressure technologies had £13.6 million net assets on its balance sheet as per the annual report dated 30 September 2023 and had first charge over the assets of pressure technologies.

The Company's forecasts and projections, taking into account the current economic environment and other factors, including reasonably possible changes in performance, show that the Company is able to operate within its available working capital and continue to settle all liabilities as they fall due for the foreseeable future. The Company has consistent, predictable ongoing costs and major cash outflows, such as for the payment of dividends, are at the full discretion of the Board.

Therefore, the Directors taking into the consideration the above assessment are satisfied that the Company's ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for a period of at least 12 months from the date when these Financial Statements were approved.

Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business.

Material Accounting Judgements, Estimates and Assumptions

The preparation of Financial Statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reported period. It also requires Management to exercise their judgement in the process of applying the accounting policies. The main area of estimation is in the inputs used in determination of the valuation of the unquoted investments in Note 8. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

Management believes that the underlying assumptions are appropriate and that the Company's Financial Statements are fairly presented.

Investments at fair value through profit or loss

All investments held by the Company are designated as "fair value through profit or loss". As the Company's business is investing in financial assets with a view to profiting from their return in the form of interest, dividends or increase in fair value. Listed equities, unquoted equities and fixed income securities are classified as fair value through profit or loss on initial recognition. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy. Investments are initially recognised at cost, being the fair value of the consideration. Fixed income securities are designated at fair value which is approximation of its par value.

After initial recognition, investments are measured at fair value, with movements in fair value of investments and impairment of investments recognised in the Statement of Comprehensive Income and allocated to the capital column. For quoted equity shares fair value is generally determined by reference to quoted market bid prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks.

IFRS 13 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:

Unquoted investments are valued in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines. Their valuation incorporates all factors that market participants would consider in setting a price. The primary valuation techniques employed to value the unquoted investments are earnings multiples, recent transactions and the net asset basis.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks and other short-term highly liquid investments with original maturity of 3 months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Foreign currency

Transactions in currencies other than Sterling are recorded at the rate of exchange prevailing on the date of the transaction. Items that are denominated in foreign currencies are retranslated at the rates prevailing on Statement of Financial Positions. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue reserve depending on whether the gain or loss is capital or revenue in nature.

Revenue

Dividend income from investments is recognised when the Company's right to receive payment has been established, normally the ex-dividend date. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as income. Any excess in the value of shares received over the amount of cash dividend foregone is recognised as a capital gain in the Statement of Comprehensive Income.

Interest income is recognised in line with coupon terms on a time-apportioned basis. Special dividends are credited to capital or revenue according to their circumstances.

Expenses

All expenses are accounted for on an accruals basis and are allocated wholly to revenue with the exception of Performance Fees which are allocated wholly to capital, as the fee is payable by reference to the capital performance of the Company, and transaction costs which are also allocated to capital.

Taxation

The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or accelerated because of temporary differences between the treatment of certain items for accounting and taxation purposes. The Company has an effective tax rate of 0.0%. The estimated effective tax rate is 0.0% as investment gains are exempt from tax owing to the Company's status as an investment trust and there is expected to be an excess of management expenses over taxable income and thus there is no charge for corporation tax.

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes at the reporting date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with recommendations of the SORP, the allocation method used to calculate the tax relief expenses charged to capital is the 'marginal' basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.

Equity dividends payable

Equity dividends payable are recognised when the shareholders' right to receive payment is established. For interim dividends this is when they are paid and for final dividends this is when they are approved by shareholders.

Share capital and reserves

The share capital represents the nominal value of the Company's ordinary shares. As at 31 March 2024 there were 31,189,090 (31 March 2023 - 25,410,460, restated due to 1 for 10 share issue) Ordinary shares of 5p each in issue. During the year a share sub-division of its existing ordinary shares on a ten for one basis took effect on the 11 October 2023.

The share premium account represents the accumulated premium paid for shares issued above their nominal value less issue expenses. This reserve cannot be distributed.

The capital reserve represents realised and unrealised capital and exchange gains and losses on the disposal and revaluation of investments and of foreign currency items. Realised gains can be distributed, unrealised gains cannot be distributed.

The revenue reserve represents retained profits from the income derived from holding investment assets less the costs associated with running the Company. This reserve can be distributed, if positive.

Adoption of New and Revised Standards New standards, interpretations and amendments adopted from 1 March 2023

There are no new standards impacting the Company that have had a significant effect on the annual financial statements for the year ended 31 March 2024.

Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements)

In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2. The amendments aim to make accounting policy disclosures more informative by replacing the requirement to disclose 'significant accounting policies' with 'material accounting policy information'. The amendments also provide guidance under what circumstance, the accounting policy information is likely to be considered material and therefore requiring disclosure. These amendments have no effect on the measurement or presentation of any items in the financial statements of the Company nor do they affect the disclosure of accounting policies of the Company.

Definition to accounting estimates (Amendments to IAS 8)

The amendment is to help entities to distinguish between accounting policies and accounting estimates. The amendments are effective for annual periods beginning on or after 1 January 2023.

Deferred tax assets and liabilities (Amendments to IAS 12)

Amendment to provide a temporary exception to the requirements regarding deferred tax assets and liabilities. The amendments are effective for annual periods beginning on or after 1 January 2023.

These amendments have no effect on the measurement or presentation of any items in the financial statements of the Company nor do they affect the disclosure of accounting policies of the Company.

Standards issued but not yet effective

There are no standards or amendments not yet effective which are relevant or have a material impact on the Company.

Under the terms of the Investment Management Agreement (7 April 2022) with Harwood Capital LLP, the Company will pay the Investment Manager a performance fee equal to 10.0%. of outperformance over the higher of a 6.0% per annum total return hurdle and the high watermark. The 6.0%. per annum compounds weekly and the performance fee is calculated annually. Provided that the Company's average NAV is at or below £100 million, performance fees in any performance fee period are capped at 3.0%. of the Company's average NAV for the relevant performance fee period. In such instance, performance fees in excess of the 3.0%. cap will not be paid and will instead be deferred into the next performance fee period. If the average NAV exceeds £100 million, the performance fee shall be further limited such that the combined investment management and performance fees shall not exceed 3.0%. of the Company's average NAV. In such instance, performance fees in excess of the cap will not be deferred and will not become payable at any future date.

The performance fee is calculated annually for each performance fee period, which is aligned with the Company's accounting year. It is accounted for on an accrual basis and is recognised in the Statement of Comprehensive Income once a performance fee is triggered during the performance fee period. The Hurdle was not surpassed in the year and therefore there was no performance fee.

Factors affecting the tax charge for the current period

The tax assessed for the year is different than that resulting from applying the standard rate of corporation tax in the UK: 25.0% (2023: 19.0%).

The differences are explained below:

Deferred tax

At 31 March 2024, the Company had losses of £143,306,000 (31 March 2023: £143,142,000) that are potentially available to offset future taxable revenue. A deferred tax asset of £35,827,000 (31 March 2023: £35,786,000), based on the enacted UK corporation tax rate of 25.0% that applied from 1 April 2023, has not been recognised because the Company is not expected to generate sufficient taxable income in future periods that the carried forward tax losses can be utilised against.

Basic earnings per share is calculated by dividing the profit/loss attributable to ordinary shareholders by the weighted average number of Ordinary Shares during the year. Diluted earnings per share is calculated by dividing the profit/loss attributable to shareholders by the adjusted weighted average number of Ordinary Shares in issue.

Year ended 31 March 2024                            Year ended 31 March 2023

As at 31 March 2024, the total number of shares in issue was 31,189,090 (2023: 25,410,460, restated due to 1 for 10 share issue). No shares were bought back by the Company (2023: None). There are no share options outstanding at the end of the year.

*  Restated to reflect the subsequent 10 for 1 share split.

The Company is recommending a dividend of 0.6p to shareholders in respect of the year ended 31 March 2024 (2023: none). No unclaimed historic dividends were reclassified to revenue reserve during the year (2023: £355,855).

*  For the year ended 31 March 2024, there was a transfer from Level 1 to Level 3 of £69,175 Bonhill group due to voluntary liquidation.

The following table analyses investments carried at fair value at the end of the year, by the level in the fair value hierarchy into which the fair value measurement is categorised. The different levels are defined as follows:

I.      level one measurements are at quoted prices (unadjusted) in active markets for identical assets or liabilities;

II.     level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and

III.    level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs).

The fair values of the Company's investments is summarised as follows:

Fair values of financial assets and financial liabilities

Financial assets and liabilities are carried in the Statement of Financial Position at either their fair value (investments), or the Statement of Financial Position amount is a reasonable approximation of the fair value (dividends receivable, accrued income, accruals, and cash at bank).

As at 31 March 2024 and 31 March 2023, all investments, except for the investments in the table below, fall into the category 'Level 1' under IFRS 7 fair value hierarchy.

Valuation policy: Every three months, the Investment Manager within Harwood Capital LLP is asked to revalue the investments that he looks after and submit his valuation recommendation to the Valuation and Pricing ("V&P") Committee. The V&P Committee considers the recommendation made, and approves or adjust the valuation as required.

Level 3 investments have been valued in accordance with the IPEV guidelines. The valuation incorporates all relevant factors that market participants would consider in setting a price.

Methods applied include cost of investment, price of recent investments, net assets and earnings multiples.

Although the Manager believes that the estimates of fair values are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair values.

Subsequent adjustments in price are determined by the Manager's Valuation and Pricing Committee.

Investments in quoted companies (Level 1) have been valued according to the quoted bid price as at 31 March 2024.

At the year-end, the Company held 20.0% of the aggregate nominal value of voting equity of Pressure Technologies, in ordinary share capital. Pressure Technologies is incorporated in the UK and at its year end 30 September 2024 had capital and reserves of £13.6 million and had made a revenue loss of £1.1 million.

At the AGM of the Company held on 12 September 2023, shareholders approved a resolution for a ten for one share split such that each shareholder would receive 10 shares with a nominal value of 5 pence each for every one share held. Expenses associated with the share split amount to £28,000.

The Company's shares are listed on the premium segment of the Main Market on the London Stock Exchange under reference RKW.

In order for the Company's conversion to an Investment Trust to be successful, all of its ordinary share capital needed to be listed as trading on a UK regulated market. The Deferred Shares which were issued as D Shares in October 2009 to incentivise the investment manager at the time were not admitted to trading on AIM and were economically valueless. The entire 2,000,000 Deferred Shares were bought back by the Company for 1 penny in aggregate and thereafter cancelled.

The Company invests in quoted and unquoted companies in accordance with the investment policy. In addition to investments in smaller listed companies in the UK, the Company maintains liquidity balances in the form of cash held for follow-on financing and debtors and creditors that arise directly from its operations. As at 31 March 2024, £59.4 million of the Company's net assets were invested in quoted investments, £0.9 in unquoted investments and £4.7 million in liquid balances (31 March 2023: £39.3 million in quoted investments, £nil in unquoted investments and £11.7 million in liquidity).

In pursuing its investment policy, the Company is exposed to risks that could result in a reduction in the value of net assets and consequently funds available for distribution by way of dividend or for re-investment.

The main risks arising from the Company's financial instruments are due to fluctuations in market prices (market price risk), credit and liquidity risk and cash flow interest rate risk; credit risk and liquidity risk are also discussed below. The Board regularly reviews and agrees policies for managing each of these risks and they are summarised below. These have been in place throughout the current and preceding years.

All financial assets with the exception of investments, which are held at fair value through profit or loss, are categorised as financial assets at amortised cost and all financial liabilities are categorised as amortised cost, amortised cost is a reasonable approximation of its fair value.

a) Market risk

i) Price risk

Market price risk arises from uncertainty about the future valuations of financial instruments held in accordance with the Company's investment objectives. These future valuations are determined by many factors but include the operational and financial performance of the underlying investee companies, as well as market perceptions of the future of the economy and its impact upon the economic environment in which these companies operate. This risk represents the potential loss that the Company might suffer through holding its investment portfolio in the face of market movements, which was a maximum of £59.6 million (2023: £39.3 million).

The investments in fixed interest stocks of unquoted companies that the Company holds are not traded and as such the prices are more uncertain than those of more widely traded securities.

The Board's strategy in managing the market price risk is determined by the requirement to meet the Company's investment objective. Risk is mitigated to a limited extent by the fact that the Company holds investments in several companies. At 31 March 2024, the Company held interests in 20 companies (2023: 18 companies). The Directors monitor compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the investment portfolio on a regular basis.

Market price risk sensitivity

The Board considers that the value of investments in quoted equity instruments is ultimately sensitive to changes in quoted share prices. The value of investments in Pressure Technologies, where the valuation methodology is to estimate the value of the conversion option of the instrument, is similarly linked to quoted share prices. The table below shows the impact on the return and net assets if there were to be a 25.0% (2023: 25.0%) movement in overall share prices.

* Restated for the sub-division of each ordinary share into 10 new ordinary shares.

The impact of a change of 25.0% (2023: 25.0%) has been selected as this is considered reasonable given the current level of volatility, observed both on a historical basis, and market expectations for future movement.

A sensitivity has not been performed for the other unquoted investments held by the Company at 31 March 2024 as they were not deemed to be material. There were none at 31 March 2023. as there is no exposure to market price risk in the valuation methodology applied for these investments. Interest rates are less volatile than market prices; therefore, the Company has deemed it inappropriate to consider a 25.0% upward or downward move in interest rates. Interest rates are determined by monetary policy and have been kept historically low due to quantitative easing and therefore we do not believe that interest rates will be as volatile as share prices.

ii) Currency risk

The Company does not hold any significant assets or liabilities denominated in a currency other than sterling, the functional currency. The transactions in foreign currency for the Company are highly minimal. Therefore, currency risk sensitivity analysis was not performed as the results would not be significantly affected by movements in the value of foreign exchange rates.

iii) Cash flow interest rate risk

As the Company has no borrowings, it only has limited interest rate risk. The impact is on income and operating cash flow and arises from changes in market interest rates. Some of the Company's cash resources are placed in an interest paying current account to take advantage of preferential rates and are subject to interest rate risk to that extent.

b) Credit risk

Credit risk is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Company.

The Company's cash balances at 31 March 2024 and 2023 were held in institutions currently rated A or better by Fitch. Given these ratings, the Company does not expect any counterparty to fail to meet its obligations and therefore, no allowance for impairment is made for bank deposits.

c) Liquidity risk

The Directors consider that there is no significant liquidity risk faced by the Company. The Company maintains sufficient liquidity in cash and liquid investments to pay accounts payable and accrued expenses. All liabilities are current and repayable upon demand.

The Company's objective has been to maximise shareholder value from all assets, which in recent years has been to realise its portfolio at the most advantageous time and reinvest the proceeds to grow shareholder value per share over the long-term.

The capital subscribed to the Company has been managed in accordance with the Company's objectives. The available capital at 31 March 2024 is £64.3 million (31 March 2023: £49.8 million) as shown in the Statement of Financial Position, which includes the Company's share capital and reserves.

The total amount of revenue reserve for the year is £18.566 million (2023: £24.105 million) which is fully distributable and can be utilised for any future dividends.

The Company has no borrowings and there are no externally imposed capital requirements other than the minimum statutory share capital requirements for public limited companies.

The related parties of Rockwood Strategic Plc are its Directors, persons connected with its Directors and its Investment Manager and significant shareholder Harwood Capital LLP (Harwood).

As at 31 March 2024, the following shareholders of the Company that are related to Harwood had the following interests in the issued shares of the Company as follows:

The Directors' remuneration and their interest in the Company are disclosed in the Director's remuneration review in the annual report.

There are no other material related party transactions of which we are aware in the year ended 31 March 2024.

Investment Management Fees:

A monthly management fee of £10,000 (inclusive of VAT, if any) until the Company's NAV equalled £60 million or higher (NAV threshold).

The NAV Threshold was met on 16 February 2024, since then, Harwood has been entitled to a management fee of 1/12th of an amount equal to 1.0% of the Net Asset Value before deduction of that month's Investment Management Fee and before deduction of any accrued Performance Fees.

Performance Fees:

Harwood will also be entitled to a performance fee equal to 10.0% of outperformance over the higher of a 6.0% per annum total return hurdle and the high watermark. The 6.0% per annum compounding weekly and the performance fee will be calculated annually.

Provided that the Company's average NAV is at or below £100 million, performance fees in any performance fee period will be capped at 3.0% of the Company's average NAV for the relevant performance fee period. In such instance, performance fees in excess of the 3.0% cap will not be paid and will instead be deferred into the next performance fee period.

Share issues:

The Company issued for cash 1,005,608 ordinary shares of 5 pence each in April and May 2024 from its block listing facility at an average price of 232.64 pence per share.

Footnotes:

1 - These are considered to be Alternative Performance Measures (APMs) and are available on page 51 of the Annual Report.