18 July 2022

Worsley Investors Limited

(the "Company")

Annual Report for the period ended 31 March 2022

The Company is pleased to announce the release of its annual report and audited consolidated financial statements for the period ended 31 March 2022 (the "Annual Report"). A copy of the Annual Report will be posted to shareholders and will be available to view on the Company's website shortly at: www.worsleyinvestors.com

END

For further information, please contact:

Worsley Associates LLP (Investment Advisor)

Blake Nixon
Tel:       +44 (0) 203 873 2288

Shore Capital (Financial Adviser and Broker)

Robert Finlay / Anita Ghanekar
Tel:       +44 (0) 20 74080 4090

Sanne Fund Services (Guernsey) Limited (Administrator and Secretary)

Chris Bougourd / Katrina Rowe

Tel:       +44 (0) 1481 737600

LEI: 213800AF85VEZMDMF931

Performance Summary

Worsley Associates LLP ("Worsley Associates") was appointed on 31 May 2019 as Investment Advisor (the "Investment Advisor") to Worsley Investors Limited (the "Company"). At an EGM held on 28 June 2019, an ordinary resolution was passed to adopt the new Investment Objective and Policy.  The Investment Objective and Policy are set out below.

These financial statements are made up to the year ended 31 March 2022. The annual results, therefore, cover a twelve-month period up to 31 March 2022 and are not entirely comparable to the previous results, which covered a period of nine months to 31 March 2021.

Past performance is not a guide to future performance.

¹ Mid-market share price (source: Shore Capital and Corporate Limited).

² Loss per share based on the net loss for the year of £0.505 million (nine month period to 31 March 2021: net profit of £1.657 million) and the weighted average number of Ordinary Shares in issue during the year of 33,740,929 (nine month period to 31 March 2021: 33,740,929).

³ On a pro forma basis which includes adjustments to add back any prior NAV reductions from share redemptions. NAV Total Return is a measure showing how the NAV per share has performed over a period of time, taking into account both capital returns and any dividends paid to shareholders.

⁴ A measure showing how the share price has performed over a period of time, taking into account both capital returns and any dividends paid to shareholders.

Source:  Worsley Associates LLP and Shore Capital and Corporate Limited.

Chairman's Statement

After a positive NAV total return of +3.11% in the first half year (i.e. to 30 September 2021), the second half of the year saw that progress more than reversed with our result dipping for the full 12 months to 31 March 2022 to a -3.95% return. 

On a share price basis, shareholder returns were somewhat better, in that the mid-market share price fell by just over 1% in the year from 28.0p to 27.7p per share.  The discount which the share price represents in relation to NAV improved from 32.6% to 30.6% as the decline of the market price of shares was less than the fall in NAV. As at 11 July, the latest practicable date for which independent data was available before going to print, the performance of Worsley Investors Limited shares was ranked 1st and 3rd in the UK smaller companies sector (in each case out of 24 in the sector) over the past 3 and 12 months respectively.

The biggest contributor to this NAV return outcome was a reduction in the independent valuer's appraisal of the Curno cinema value.  Over the full year, this more than outweighed the rest of the Group's profit contribution.  A fuller description of the effects of this valuation downgrade is given in the Investment Adviser's Report ("IAR"), but a very high-level summary is that the valuer has chosen to increase the already very conservative discount rate it applied to the rental stream from Curno and this has more than offset the effect of the significant increase in passing rental. 

I would like to remind shareholders that the rent benefits from an annual upwards-only indexation clause in relation to Italian consumer price inflation.  If this measure of inflation exceeds 5.29% p.a. for the year to 31 December 2022, the contractual base rental for 2023 will exceed €1 million to give a passing rental yield of more than 11.5% on the 31 March 2022 valuation. 

We are in the fortunate position of having no borrowings and consequently no banking covenants within which to operate.  We can therefore be judicious in an orderly sale process to optimise the value of the asset as and when confidence returns to the pool of potential buyers.  We note that the last remaining restrictions on the sale of food and beverages by cinema operators in this region of Italy came to an end on 15 June 2022.  This should improve the in-theatre experience for customers and, as it is generally a major contributor to operator returns in the cinema sector, the profitability for our tenant, UCI.

The second major contributor to the negative NAV returns was the corporate costs of Worsley Investors Limited.  At £530,000, this represented a welcome reduction in the annualised run-rate of just under 10% and was broadly in line with expectations.

We also had a foreign exchange mark-to-market translation loss of £48,000 on the Sterling value of mainly euro-based assets, predominantly Curno.  This was a modest figure over the whole year, although it represented a £161,000 adverse turnaround from the position at the halfway point in the year.

Notwithstanding the impact on equity markets of the Ukrainian conflict, returns on our core equity portfolio held up well with a total annualised return of 1.9% on the capital deployed in the portfolio over the year.  Worsley Associates gives more detail in its IAR.

Strategic Priorities

It remains our key priority to release the capital tied up in the Curno asset for redeployment in our core equity strategy.  In that regard, external events of the past two years have not been helpful.  Firstly, Covid restrictions and secondly, the acceleration of rises in interest rates and medium-term bond yields which, with the general availability of credit are key to the ability of buyers to finance the purchase of property assets, have made this a slower process than we hoped.  The current yield and the inflation protection built into the lease terms mean that the cinema is an increasingly attractive asset in its own right, generating a high and stable return.  It is a truism that sometimes portfolio managers have to sell good investments (such as the cinema) to buy even better ones such as those in our core equity strategy.  While the board cannot control the external factors which determine investment demand for a cinema in northern Italy, we are not forced sellers at the prey of opportunistic buyers and can temper our response to retain the cinema until a disposal can be achieved at a price which properly reflects its medium-term prospects.  In the meantime, we have the prospect of an inflation-hedged return in excess of 10% p.a.

As we compound returns on our core equity strategy over time and have available for additional re-investment the net cash flow from the cinema sub-group, the proportion of our total NAV represented by the cinema can be expected to continue to fall.  As at 31 March 2022, it had declined to 54% of NAV, down from 55% at 30 September 2021 and 58% at 31 March 2021.  Two years ago, at 30 June 2020, Curno represented 66% of NAV.

Our other key priority will be to grow the Company, thereby spreading our largely fixed costs over an enlarged asset base and benefiting from keener rates on tiered fee structures.  Current market circumstances are not likely to be receptive to an immediate raise and so this remains more aspirational in the immediate short term than something on which we have a particular timetable.

Outlook

When I last wrote to you in mid-December, we were looking forward to an economy growing at a brisk pace as it recovered from the COVID-19 lock-downs albeit there was then some uncertainty and concern from the emergence of the then-new "Omicron" variant.  As it has turned out, Omicron was not the disaster which some had feared and by being relatively mild, may arguably have had some benefit in the achievement of so-called "herd immunity" and bringing to a close the public health emergency phase of the pandemic.  We expected interest rates, which had been cut as the pandemic started, to increase again in response to rising activity and prices.  After more than a decade of ultra-low rates in the wake of the Global Financial Crisis of 2008, normalisation was at some point inevitable.  What we did not foresee was the Russian invasion of Ukraine in February.  Although both countries, especially Russia, are geographically large, their proportion of global GDP is relatively small.  In 2019 (the last full year before the Covid pandemic), according to the World bank and IMF, Russia's GDP was ranked at number 12 in the World (smaller than South Korea) and Ukraine, at number 57, was much smaller than New Zealand.  That said, Russia is a significant supplier of energy and minerals and Ukraine of food for both the human and animal population across the world and of fertiliser used in the agricultural industries of many countries.  The supply disruption caused by sanctions and by Russian military action has caused dislocation and sharp price rises in basic elements of our own, apparently domestic, economy.  

The immediate consequence is that interest rates are rising (as we expected) but at a much faster rate than we had anticipated.  Whilst the stock market has weakened in immediate consequence, in due course this should further enrich the opportunity set for a value-based equity strategy such as is our core strategy. 

On behalf of the Board, I would like to thank our Investment Advisor, Worsley Associates LLP, for the encouraging progress they continue to make in developing our portfolio and to thank you, our shareholders, for your continuing support.

W. Scott

Chairman

15 July 2022

Investment Advisor's Report

Investment Advisor

The Investment Advisor, Worsley Associates LLP, is regulated by the FCA and is authorised to provide investment management and advisory services.

In the year under review, the equities portfolio continued to be almost fully invested, and the Investment Advisor has concentrated on its development and fostering investor interest in the Curno cinema, which was impacted operationally by the tail end of the COVID-19 pandemic.

Curno Cinema Complex

The Group's Italian multiplex cinema complex, located in Curno, on the outskirts of Bergamo, is let in its entirety to UCI Italia S.p.A. ("UCI").

The cinema lease documentation remains as amended in June 2020.

The key rental terms of the lease, which has a final termination date of 31 December 2042, are:

Base Rent

1 April 2022 to 31 December 2022 - €949,770 per annum.

From 1 January 2022, at which point it increased by 3.8%, base rental is indexed annually to 100% of the Italian ISTAT Consumer Index on an upwards-only basis. The ISTAT Consumer Index in the six months to 30 June has already risen 5.5%.

Variable Rent

Incremental rent is payable at the rate of €1.50 per ticket sold above a minimum threshold of 350,000 tickets per year up to 450,000 tickets per year, rising in 50,000 ticket stages above this level up to €2.50 per extra ticket.

Tenant Guarantee

The lease benefits from a rental guarantee of an initial €13 million, reducing over 15 years to €4.5 million, given by a U.K. domiciled European holding company for the UCI group, United Cinemas International Acquisitions Limited, which has latest published shareholders' funds of £312.2 million.

Tenant break option

UCI has the right to terminate the lease on 30 June 2035.

Trading

The cinema, having been closed at the beginning of the period because of Lombardy COVID-19 related regulations, reopened on 20 May 2021, and has remained open since. Notwithstanding the wearing of masks being compulsory throughout the period, trading built steadily, bolstered in the third quarter by a strong slate of new movie releases. From 25 December 2021 to 9 March 2022 Italian cinemas were prohibited from selling food and beverages, a significant revenue generator and major profit source. During most of the period COVID-19 passes were mandatory, which also impacted demand, but it is pleasing to note that this restriction was lifted on 30 April 2022 and masks have no longer been required since 15 June.

Rentals have remained current throughout the period.

Valuation

As at 31 March 2022, the Group's independent asset valuer, Knight Frank LLP, fair valued the Curno cinema at €8.7 million (30 September 2021: €9.6 million), and this figure has been adopted in these Financial Statements.

Since the June 2020 lease amendment, the Board's expectation has been that the valuation of the Curno cinema would increase once the enhanced rental began to be generated by the property from 1 March 2021 onwards. The current rental is some 14% higher than the pre amendment level.

In spite of this, the valuer as at 31 March 2022 has chosen to increase the yield at which it capitalised the rental stream from 9.10% to 10.53%, which was had the effect of reducing the valuation by nearly 10%. This extremely conservative approach reflects the significant impact on investor demand of COVID-19 trading restrictions in Italian cinemas.

Following the resumption of regular rental arrangements, we have received enquiries from a number of investors. However, it quickly became apparent that appetite would remain very subdued until the cinema was fully free from all COVID-19 constraints. The Group will retain the Curno cinema until a disposal can be effected at a price which the board believes properly reflects its medium term prospects.

Investment Strategy

The Investment Advisor's strategy allies the taking of holdings in British quoted securities priced at a deep discount to their intrinsic value, as determined by a comprehensive and robust research process. Most of these companies will have smaller to mid-sized equity market capitalisations, which will in general not exceed £600 million. It is intended to secure influential positions in such British quoted securities, with the employment of activism as necessary to drive highly favourable outcomes.

In the first six weeks of 2022, dovish signals from the US Federal Reserve and easing of fears regarding the Omicron COVID-19 variant saw the British stock market drifting upwards, peaking on 10 February. Fourteen days later, sentiment altered very dramatically with the Russian invasion of Eastern Ukraine, and the Ukrainian conflict has joined inflation concerns and the expected impact on monetary policy as the largest influences on the U.K. market.

The fortnight immediately following the invasion saw a sharp downturn in global equity markets, but over the next month these rallied on hopes that economic sanctions and subsequent peace talks would be successful. However, those proved unfruitful and in early April continued high US inflation and signals from the US Federal Reserve that it would tackle that with higher interest rates, allied to weak US retail sales, then sent equities into reverse.

In the first week of May the Bank of England announced a 0.25% increase in the base rate to 1%, the highest level for 13 years, and a warned that a very sharp U.K. slowdown was imminent. Trading for the rest of May was choppy, as mid-month U.K. inflation was revealed to have hit 9%, and since the beginning of June the British market has slewed downwards as concerns regarding runaway inflation have reasserted themselves. Such concerns drove the US Federal Reserve on 15 June to hike US interest rates by 0.75%, the largest increase in 28 years. This was followed the next day by the Bank of England raising U.K. rates a further 0.25%.

The prognosis is for rates in the U.K. and US to continue to be lifted to a level of 3% or more and, in response, the U.K. stock market has retreated, falling 5.9% over the June quarter. Within the Company's target universe of British smaller companies, share prices have fared significantly worse than the market as a whole, being on the slide from almost the beginning of the June quarter and ending it down 10.3%.

The Company's portfolio has remained quite fully invested during the reporting period. This includes a previously undisclosed holding of some 3.7% of Net Assets in Amedeo Air Four Plus Limited ('AA4'). AA4 is a Guernsey company, whose shares are listed on the Specialist Fund Segment of the London Stock Exchange's Main Market. AA4 has a market capitalisation of £109.4 million and owns via its subsidiaries an aircraft fleet of six A380s and two B777-300ERs leased to Emirates Airlines ('Emirates') and four A350-900s leased to Thai Airways ('Thai Air'). As at 30 September 2021, the AA4 group held cash, net of provisions for maintenance, of slightly less than £84 million, which has subsequently been reduced by a £30 million pro rata capital redemption. In addition, unencumbered gross lease payments contracted to be paid to AA4 by Emirates as at 31 March 2022 were some £194 million.  Once Thai Air trading has normalised, there is scope to return by way of capital return the £15 million held by AA4 as a capital buffer, and to increase very substantially the annual dividend of five pence per share, which is presently constrained by the AA4 board's prudent approach to Thai Air's current trading.

The holding in Hurricane Energy plc July 2022 US$ 7.5% bonds, which we disclosed had been purchased in the first half at 63.6% of par, was disposed of shortly after year end at slightly more than 100% of par.

The largest portfolio position continues to be the shareholding of just over 4% in Smiths News plc, England's major distributor of newspapers and magazines. In early May, Smiths News published its 2022 interim results, which disclosed flat profitability with magazine sales recovering well owing to the end of COVID-19 restrictions, reorganisation costs continuing to be relatively modest, and good debt reduction from some significant one-off non-trading receipts. Nevertheless, the shares have underperformed over the past year, with the prospect of significant special dividends now severely diminished by unduly restrictive banking facilities entered into at the end of 2021.

The Northamber plc shareholding was increased modestly in the second half, but that in Shepherd Neame Limited is unchanged since the Interim Report. Preliminary (less than 2% of Net Assets) holdings are also held in 9 other companies. During the second half we exited two positions, crystallising substantial gains over their cost. Other than AA4, one new position was initiated.

As at 30 June 2022 the Company's portfolio, which had a total cost of £3.92 million and a combined market value of some £5.75 million, comprised 13 stocks. The surplus on the portfolio was a little under 50% of cost, and the annualised return on capital invested since the current strategy was adopted remains very acceptable at more than 31%.

Results for the period

Cash revenue from Curno for the period to 31 March 2022 was €923,700 (£790,000) (31 March 2021 nine months: €284,000 (£254,000)). As previously reported, the rental received in the comparative period reflected the five-month holiday granted under the 2020 lease amendment.

General and administrative expenses (including transaction charges) of £530,000 (31 March 2021 nine months: £440,000) were significantly lower than the 2021 run rate, an outturn which was in line with expectations. Accounting and taxation-related expenses at the Italian subsidiary, Multiplex 1 S.r.l. ('Multiplex'), were significantly higher in 2022 because of one-off projects, but Group legal and professional costs were considerably lower. The Company audit fee was broadly similar to 2021's, the fee for a nine-month period being no lower than that required for a full year. As previously foreshadowed, the growth in the value of the portfolio during calendar year 2021 led to an increase in AUM-based costs in the current period.

Transaction charges incurred on equity acquisitions were £4,000 (31 March 2021 nine months: £17,000). The initial buildup of the portfolio in the previous period had incurred much greater charges, reflecting an abnormally elevated level of transactions.

The Group's ongoing operating costs in the current year are expected to be similar to the 2022 level. Prior to the ultimate sale of Curno there remains limited scope for significant reduction in the overall cost base.

The equities portfolio was steady in the third quarter before a downturn in the fourth, culminating for the year as a whole in a small (£0.161 million) net investment mark-to-market reduction (31 March 2021 nine months: £2.082 million gain). Investment Income for the year, predominantly dividends, was £217,000 and net investment gains realised added £46,000. As a result, the total annualised return on capital invested in the portfolio over the year came out at 1.9%.

Taxation is payable on an ongoing basis on Italian income and in Luxembourg. The bulk of the small legacy exposure in Germany was settled in the second half. For the year, an operating tax charge of £51,000 (31 March 2021 nine months: £10,000 operating credit) was incurred. In addition, net VAT, predominantly in Luxembourg, of some £5,000 was paid. The Group took the opportunity in late 2021 to recapitalise Multiplex, and this generated a one-off tax credit of €108,000 (£92,000).

Owing to the inflation linked increase in the Curno rental, operating cash flow (that is prior to allowance for equity income) is now expected to be modestly positive in the current year.

Net Assets at 31 March 2022 were £13.466 million, which compares with the £14.453 million contained in the 30 September 2021 Interim Report. The decrease arose from the combined impact of the loss in the second half of £0.826 million, of which £770,000 (€900,000) related to the reduction in the Euro valuation of the Curno property, and a £161,000 decrease in the pound sterling fair value of Euro-denominated assets, principally the property.

Financial Position

The Group's Statement of Financial Position improved slightly in the period, with £576,000 in cash held at 31 March 2022 and no debt. Augmented by the ample secondary liquidity of the equity portfolio and positive ongoing cash flows, the financial position remains strong.

In due course, the sale of the Curno cinema will provide considerable additional resources for equity investment.

Euro

As at 31 March 2022, some 58% of Total Assets were denominated in Euros, of which the Curno property was some 55% of Total Assets, down from 58% as at 31 March 2021. The pound sterling Euro cross rate moved slightly during the period from 1.175 as at 31 March 2021 to 1.187 as at 31 March 2022. This cross rate will remain a potentially significant influence on the level of Group Net Assets until Curno's disposal.

Outlook

U.K. stock market prices, whilst volatile, finished the first five months of this year at close to their opening level, in part reflecting a view that the economic effects of the COVID-19 pandemic were behind us.

Against that, in the Interim Report we had expressed the view that the economic distortions caused thereby would take some time to dissipate, and that we anticipated the unwinding across the globe of the exceptional quantitative easing during the pandemic would expose areas of business vulnerability.

In the event, the extent of the outbreak of rampant pandemic-fueled inflation became clear in May, spurring a tightening in monetary conditions which was the fastest since the Global Financial Crisis, and more abrupt than we had anticipated. Global equities markets have reflected the unexpected level of tightening, experiencing sharp downturns since.

We have previously commented that COVID-19 has had little direct impact in the period on the Group.

Cinemas in Italy have been reopened for over a year, and our rentals have remained current. Nevertheless, the continued operating restrictions imposed on the cinema by the Lombardy authorities ruled out any prospect of a disposal.  The final restrictions have now been lifted which will be positive for future investor appetite.

The Worsley investment strategy, which is focussed on the medium-term prospects of specific companies, is relatively insensitive to shorter term economic conditions.

We continue to believe that the British stock market is yet fully to discount the impact of extreme inflation on U.K. company earnings and the permanent changes in the structure of certain industries in reaction to the vulnerabilities exposed by the pandemic, and more recently the Ukrainian conflict.

In consequence, we expect the upcoming trading outlooks to be announced by many British companies to be materially worse than market expectations. Whilst the share prices of many have already tumbled, this is likely to result in further falls.

Such downturns inexorably lead to a significant level of stock mispricing, from which strategies such as ours have previously benefitted well.

The equity portfolio is soundly based, and against the above background the Company can look forward to the future with confidence.

Worsley Associates LLP

15 July 2022

Board of Directors

William Scott (Chairman), a Guernsey resident, was appointed to the board of the Company as an independent Director on 28 March 2019. Mr Scott also currently serves as an independent non-executive director of a number of investment companies and funds, of which Axiom European Financial Debt Fund Limited and RTW Venture Fund Limited are listed on the Premium Segment of the LSE. He is also a director of The Flight and Partners Recovery Fund Limited and a number of funds sponsored by Man and Abrdn (formerly Standard Life Aberdeen). From 2003 to 2004, Mr Scott worked as senior vice president with FRM Investment Management Limited, which is now part of Man Group plc. Previously, Mr Scott was a director at Rea Brothers (which became part of the Close Brothers group in 1999) from 1989 to 2002 and assistant investment manager with the London Residuary Body Superannuation Scheme from 1987 to 1989. Mr Scott graduated from the University of Edinburgh in 1982 and is a chartered accountant having qualified with Arthur Young (now Ernst & Young LLP) in 1987. Mr Scott also holds the Securities Institute Diploma and is a chartered fellow of the Chartered Institute for Securities & Investment. He is also a chartered wealth manager.

Robert Burke, a resident of Ireland, was appointed to the board of the Company as an independent Director on 28 March 2019. He also serves as an independent non-executive director of a number of investment companies and investment management companies which are domiciled in Ireland as well as a number of companies engaged in retail activities, aircraft leasing, pharmaceuticals, corporate service provision and group treasury activities. He is a graduate of University College Dublin with degrees of Bachelor of Civil Law (1968) and Master of Laws (1970). He was called to the Irish Bar in 1969 and later undertook training for Chartered Accountancy with Price Waterhouse (now PricewaterhouseCoopers) in London, passing the final examination in 1973. He later was admitted as a Solicitor of the Irish Courts and was a tax partner in the practice of McCann FitzGerald in Dublin from 1981 to 2005 at which point he retired from the partnership to concentrate on directorship roles in which he was involved. He continues to hold a practice certificate as a solicitor and is a member of the Irish Tax Institute.

Blake Nixon was one of the pioneers of activism in the UK and has wide corporate experience in the UK and overseas. Following three years at Jordan Sandman Smythe (now part of Goldman Sachs), a New Zealand stockbroker, Mr Nixon emigrated to Australia, where he spent three years as an investment analyst at Industrial Equity Limited ("IEL"), then Australia's fourth largest listed company. In 1989 he transferred to IEL's UK operation and early in 1990 led the takeover of failing LSE listed financial conglomerate, Guinness Peat Group plc ("GPG"). The group was then relaunched as an investment company, applying an owner orientated approach to listed investee companies. Mr Nixon was UK Executive Director, responsible for GPG's UK operations and corporate function, for the following 20 years, finally retiring as a non-executive director in December 2015. He is a founding partner of Worsley Associates LLP, an activist fund manager, and has served as a non-executive director of a number of other UK listed companies, as well as numerous unlisted companies. He is a British resident and was appointed to the Board on 23 January 2019.

Report of Directors

The Directors of the Company present their Annual Report together with the Group's Audited Consolidated Financial Statements (the "Financial Statements") for the year ended 31 March 2022. The Directors' Report together with the Financial Statements give a true and fair view of the financial position of the Group. They have been prepared properly, in conformity with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and are in accordance with any relevant enactment for the time being in force; and are in agreement with the accounting records.

Principal Activity and Status

The Company is an Authorised closed-ended investment company domiciled in Guernsey, registered under the provision of The Companies (Guernsey) Law, 2008 and has a premium listing on the Official List and trades on the Main Market of the London Stock Exchange. Trading in the Company's ordinary shares commenced on 18 April 2005. The Company and the entities listed in note 3(f) to the Financial Statements together comprise the "Group".

Investment Objective and Investment Policy.

The investment objective and investment policy of the Company are described in greater detail below.

Going Concern

These Financial Statements have been prepared on a going concern basis. The Directors, at the time of approving the Financial Statements, have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least twelve months from the date of approval of these Financial Statements. The Group maintains a significant cash balance and an extensive portfolio of realisable securities, and the property lease generates sufficient cash flows to pay on-going expenses and other obligations. The Directors have considered the cash position and performance of the current capital invested by the Group, the potential impact on markets and supply chains of geo-political risks such as the current crisis in Ukraine, the risk of further COVID-19 uncertainty and continuing macro-economic factors and inflation and concluded that it is appropriate to adopt the going concern basis in the preparation of these Consolidated Financial Statements.

Going concern is assessed over the period until 12 months from the approval of these Consolidated Financial Statements. Owing to the fact that the Group currently has no borrowing, has a significant cash holding and that the Company's equity investments predominantly comprise readily realisable securities, the Board considers there to be no material uncertainty. Matters relating to the going concern status of the Group are also discussed in the long-term viability statement below.

Viability Statement

The Board has evaluated the long-term prospects of the Group, beyond the 12 month time horizon assumption within the going concern framework. The Directors have conducted a review of the viability of the Company taking account of the Company's current position and considering the potential impact of risks likely to threaten the Company's business model, future performance, solvency or liquidity. For the purposes of this statement the Board has adopted a three year viability period.

The Directors consider that a 20% fall in the value in the Company's equity portfolio would not have a fundamental impact on the Company's ability to continue in operation over the next three years. In reaching this conclusion, the Directors considered the Company's expenditure projections, the fact that the Group currently has no borrowing, has a significant cash holding and that the Company's equity investments predominantly comprise readily realisable securities, which in extremis could be expected to be sold to meet funding requirements if necessary, assuming usual market liquidity.

The Directors in forming this view also considered the long operational history and track record of the Group's investment property, Curno.

In addition, the Board has assumed that the regulatory and fiscal regimes under which the Group operates will continue in broadly the same form during the viability period. The Board consults with its broker and legal advisers to the extent required to understand issues impacting on the Company's regulatory and fiscal environment. The Administrator also monitors changes to regulations and advises the Board as necessary.

Based on the Company's processes for monitoring operating costs, internal controls, the Investment Advisor's performance in relation to the investment objective, the portfolio risk profile and liquidity risk, the Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period.

Results and Dividends

These Financial Statements are made up for the year ended 31 March 2022. The annual results, therefore, cover a twelve-month period up to 31 March 2022 and are not entirely comparable to the previous results, which cover a period of a nine months to 31 March 2021.

The results for the year are set out in the Consolidated Statement of Comprehensive Income.

No dividend payments were paid in the year (nine months to 31 March 2021: none).

Directors

The Directors who held office during the year and up to the date of this report and their interests in the shares of the Company (all of which are beneficial) were:

At the date of this report, Mr Nixon holds 10,083,126 shares, being an interest of 29.88% in the shares of the Company and Mr Scott holds 453,500 shares, being an interest of 1.34% in the shares of the Company.

Mr Nixon, a Director of the Company, is also Founding Partner of the Investment Advisor.

Management

With effect from 31 May 2019 the Board appointed Worsley Associates LLP as its Investment Advisor. A summary of the contract between the Company and the Investment Advisor in respect of the advisory services provided is given in note 4 to the Financial Statements.

Listing Requirements

Throughout the year the Company's shares were admitted to the Official List of the London Stock Exchange maintained by the Financial Conduct Authority ("FCA") and it has complied with the Listing Rules.

Investee Engagement

The Company is a closed-ended investment company which has no employees. The Company operates by outsourcing significant elements of its operations to reputable professional companies, which are required to comply with all relevant laws and regulations.

The nature of the Company's investments is such that it often seeks to acquire substantial shareholdings which provide a direct route via which to influence investee companies. The Company's focus is on investees' medium-term financial performance, and, if necessary, it will press them to adopt governance practices which ensure that they are properly accountable to their shareholders for the delivery of sustainable shareholder value. This active involvement is outside the scope of many traditional institutional shareholders. In matters which may affect the success of the Company's investments the Board and the Investment Advisor work together to ensure that all relevant factors are carefully considered and reflected in investment decisions.

In carrying out its investment activities and in relationship with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.

International Tax Reporting

For purposes of the US Foreign Accounts Tax Compliance Act, the Company is registered with the US Internal Revenue Service ("IRS") as a Guernsey reporting Foreign Financial Institution ("FFI"), has received a Global Intermediary Identification Number (G0W47U.99999.SL.831), and can be found on the IRS FFI list.

The Common Reporting Standard ("CRS"), which came into effect on 1 January 2016, is a global standard for the automatic exchange of financial account information, developed by the Organisation for Economic Co-operation and Development ("OECD"), and has been adopted by Guernsey. The Board has taken the necessary action to ensure that the Company is compliant with Guernsey regulations and guidance in this regard.

Significant Shareholdings

As at 8 July 2022, shareholders with 3% or more of the voting rights are as follows:

Guernsey Financial Services Commission Code of Corporate Governance

The Board of Directors confirms that, throughout the year covered by the Financial Statements, the Company complied with the Code of Corporate Governance issued by the Guernsey Financial Services Commission, to the extent it was applicable based upon its legal and operating structure and its nature, scale and complexity.

Anti-Bribery and Corruption

The Company adheres to the requirements of the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003. In consideration of the UK Bribery Act 2010, the Board abhors bribery and corruption of any form and expects all the Company's business activities, whether undertaken directly by the Directors themselves or by third parties on the Company's behalf, to be transparent, ethical and beyond reproach.

Criminal Finances Act

The Directors of the Company have a zero-tolerance commitment to preventing persons associated with it from engaging in criminal facilitation of tax evasion. The Board has satisfied itself in relation to its key service providers that they have reasonable provisions in place to prevent the criminal facilitation of tax evasion by their own associated persons and will not work with service providers who do not demonstrate the same zero-tolerance commitment to preventing persons associated with them from engaging in criminal facilitation of tax evasion.

Independent Auditor

BDO Limited served as the Company's Independent Auditor throughout the year and has indicated its willingness to continue in office.  

Annual General Meeting

The next AGM of the Company is scheduled to be held on 22 September 2022.

Directors' Responsibilities

The Directors of the Company are responsible for preparing for each financial year an annual report and the Financial Statements which give a true and fair view of the state of affairs of the Group and of the respective results for the period then ended, in accordance with applicable Guernsey law and International Accounting Standards Board ("IASB") adopted International Financial Reporting Standards ("IFRS"). In preparing these Financial Statements, the Directors are required to:

-  select suitable accounting policies and apply them consistently;

-  make judgements and estimates which are reasonable and prudent;

-  prepare the Financial Statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business; and

-  state whether or not applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements.

The Directors confirm that they have complied with the above requirements in preparing the Financial Statements.

The Directors are responsible for keeping proper accounting records which are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that its 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 which are free from material misstatement, whether owing 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.

Disclosure of Information to Auditors

So far as each Director is aware, all relevant information has been disclosed to the Company's Auditor; and each Director has taken all the steps which he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

Responsibility Statement

Each of the Directors, confirms to the best of that person's knowledge and belief:

·      the Financial Statements, prepared in accordance with the IFRS as endorsed by the IASB, give a true and fair view of the assets, liabilities, financial position and profit of the Group, as required by DTR 4.1.12R of the Disclosure and Transparency Rules, and are in compliance with the requirements set out in the Companies (Guernsey) Law, 2008;

·      the Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for the shareholders to assess the Group's position, performance, business model and strategy; and

·      the Financial Statements including information detailed in the Chairman's Statement, the Report of the Directors, the Investment Advisor's report and the notes to the Financial Statements, include a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that it faces, as required by:

- DTR 4.1.8 and DTR 4.1.9 of the Disclosure and Transparency Rules, being a fair review of the Group's business and a description of the principal risks and uncertainties facing the Group; and

- DTR 4.1.11 of the Disclosure and Transparency Rules, being an indication of important events which have occurred since the end of the financial period and the likely future development of the Group.

Signed on behalf of the Board by:

W. Scott                                                               

Director                                                               

15 July 2022       

Corporate Governance Report

On 18 December 2019, the Company became a member of the Association of Investment Companies ("AIC") and except as noted herein complies with the 2019 AIC Code of Corporate Governance issued in February 2019 ("the AIC Code"), effective for accounting periods commencing on or after 1 January 2019. By complying with the AIC Code, the Company is deemed to comply with both the UK Corporate Governance Code (July 2018) (the "UK Code") issued by the Financial Reporting Council ("FRC") and the Code of Corporate Governance issued by the Guernsey Financial Services Commission (the "GFSC Code").

The Board considers that reporting against the principles and recommendations of the AIC Code provides appropriate information to shareholders and during the period the Board has reviewed its policies and procedures against the AIC Code.

The GFSC Code provides a governance framework for GFSC licensed entities, authorised and registered collective investment schemes. Companies reporting against the UK Code or the AIC Code are deemed to comply with the GFSC Code. The AIC Code is available on the AIC's website, www.theaic.co.uk.

For the year ended 31 March 2022, the Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except for the following provisions relating to:

·      Senior Independent Director;

·      the need for an internal audit function;

·      the whistle blowing policy;

·      Remuneration Committee; and

·      Nomination Committee

The Board considers these provisions are not relevant given the nature, scale and lack of complexity of the Company and its legal and operating structure as a self-managed investment company. The Company has therefore not reported further in respect of these provisions. Details of compliance are noted below. The absence of an Internal Audit function is discussed in the Audit Committee Report.

The Directors are non-executive and the Company does not have any employees, hence no Chief Executive, Executive Directors' remuneration nor whistle-blowing policy is required. The Board is satisfied that any relevant issues can be properly considered by the Board. Moreover, the Directors have satisfied themselves that the Company's service providers have appropriate whistle-blowing policies and procedures and have received confirmation from the service providers that nothing has arisen under those policies and procedures which should be brought to the attention of the Board.

Composition, Independence and Role of the Board

The Board currently comprises three non-executive Directors. Both Mr Scott and Mr Burke are considered by the Board to be independent of the Company's Investment Advisor. Mr Nixon is Founding Partner of the Investment Advisor and is therefore not independent.

Whilst Mr Nixon is not an independent director, the presence of two other directors who are independent and non-executive mitigates the risk of Mr Nixon acting against the Company's interest.

Mr Scott was appointed Chairman on 28 March 2019. The Chairman of the Board must be independent for the purposes of Chapter 15 of the Listing Rules. Mr Scott is considered independent because he:

·      has no current or historical employment with the Investment Advisor; and

·    has no current directorships in any other investment funds managed by the Investment Advisor.

The Board has overall responsibility for maximising the Company's success by directing and supervising the affairs of the business and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Company and also ensuring protection of investors. A summary of the Board's responsibilities is as follows:

·      statutory obligations and public disclosure;

·      strategic direction and financial reporting;

·      risk assessment and management including reporting compliance, governance, monitoring and control; and

·      other matters having a material effect on the Company.

The Board is responsible to shareholders for the overall management of the Company.

The Board needs to ensure that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. In seeking to achieve this, the Directors have set out the Company's investment objective and policy and have explained how the Board and its delegated Committees operate and how the Directors review the risk environment within which the Company operates and set appropriate risk controls. Furthermore, throughout the Annual Report and Financial Statements the Board has sought to provide further information to enable shareholders better to understand the Company's business and financial performance.

The Board's responsibilities for the Annual Report are set out in the Directors' Responsibility Statement.

The Board is also responsible for issuing half yearly reports, NAV updates and other price sensitive public reports.

The Board does not consider it appropriate to appoint a Senior Independent Director. The Board believes it has a good balance of skills and experience to ensure it operates effectively. The Chairman is responsible for leadership of the Board and ensuring its effectiveness.

The Board has engaged external businesses to undertake the investment advisory and administrative activities of the Company. Documented contractual arrangements are in place with these businesses and these define the areas where the Board has delegated responsibility to them. The Board has adopted a schedule of matters specifically reserved for its decision-making and distinguished these from matters it has delegated to the Company's key service providers.

The Company holds regular board meetings to discuss general management, structure, finance, corporate governance, marketing, risk management, compliance, asset allocation and gearing, contracts and performance. The quarterly Board meetings are the principal source of regular information for the Board enabling it to determine policy and to monitor performance, compliance and controls which are supplemented by communication and discussions throughout the year.

A representative of each of the Investment Advisor and Administrator attends each Board meeting either in person or by telephone, thus enabling the Board fully to discuss and review the Company's operation and performance. Each Director has direct access to the Investment Advisor and Company Secretary and may at the expense of the Company seek independent professional advice on any matter. The Company maintains appropriate Directors' and Officers' liability insurance.

Conflicts of interest

Directors are required to disclose all actual and potential conflicts of interest as they arise for approval by the Board, who may impose restrictions or refuse to authorise conflicts. The process of consideration and, if appropriate, approval will be conducted only by those Directors with no material interest in the matter being considered. The Board maintains a Conflicts of Interest policy which is reviewed periodically and a Business Interests and Potential Conflicts of Interest register which is reviewed by the Board at each quarterly Board meeting.

Re-election

There are provisions in the Company's Articles of Incorporation which require Directors to seek re-election on a periodic basis. There is no limit on length of service, nor is there any upper age restriction on Directors. The Board considers that there is significant benefit to the Company arising from continuity and experience among directors, and accordingly does not intend to introduce restrictions based on age or tenure. It does, however, believe that shareholders should be given the opportunity to review membership of the Board on a regular basis.

The Board believes that, while regular rotation is in keeping with good governance, the unquestionable benefits of ensuring that there is some continuity mean that it is in the best interests of the Company that not all Directors offer themselves for re-election each year. The Company may terminate the appointment of a Director immediately on serving written notice and no compensation is payable upon termination of office as a director of the Company becoming effective.

In accordance with the Company's Articles of Incorporation, at each AGM all Directors who held office at the two previous AGM's and did not retire shall retire from office and shall be available for re-election. Messrs Scott and Nixon will stand for re-election at this year's AGM. Mr Nixon as Founding Partner and a Designated Member of Worsley Associates LLP stands annually. Further details regarding the experience of each of the Directors are set out within the Board of Directors section.

Board Diversity

The Board has also given careful consideration to the recommendation of the Davies Report on "Women on Boards" and notes the recommendations of the Parker review into ethnic diversity and the Hampton-Alexander review on gender balance in FTSE leadership. As recommended in the Davies Report, the Board has reviewed its composition. However, it believes that the current appointments provide an appropriate range of skills and experience and are in the interests of shareholders.

Board Evaluation and Succession Planning

The Board conducts an annual self-evaluation of its performance and that of the Company's individual Directors, which is led by the Chairman and, as regards the Chairman's performance evaluation, by the other Directors. The annual self-evaluation considers how the Board functions as a whole taking balance of skills, experience and length of service into consideration and also reviews the individual performance of its members.

To facilitate this annual self-evaluation, the Company Secretary circulates a detailed questionnaire to each Director and a separate questionnaire for the evaluation of the Chairman. The questionnaires, once completed, are returned to the Company Secretary who collates responses, prepares a summary and discusses the Board evaluation with the Chairman prior to circulation to the remaining Board members. The performance of the Chairman is evaluated by the other Directors. On occasions, the Board may seek to employ an independent third party to conduct a review of the Board.

The Board considers it has a breadth of experience relevant to the Company, and the Directors believe that any changes to the Board's composition can be managed without undue disruption. An induction programme has been prepared for any future Director appointments and all Directors receive other relevant training as necessary.

Board and Committee Meetings

The table below sets out the number of scheduled Board, Audit Committee and Management Engagement Committee meetings held during the year ended 31 March 2022 and, where appropriate, the number of such meetings attended by each Director who held office during the same period.

In normal circumstances the Board intends to meet not less than four times per year on a quarterly basis in addition to such ad hoc meetings as may be necessary.

Audit Committee

The Company has established an Audit Committee with formal duties and responsibilities. The Audit Committee meets formally at least twice a year and each meeting is attended by the independent external auditor and Administrator. The Company's Audit Committee is comprised of Mr Burke and Mr Scott. At the invitation of the Audit Committee, Mr. Nixon may attend meetings of the Committee. The Audit Committee is chaired by Mr Burke. The Company does not maintain an internal audit function, and, given that there are only three Directors, the Chair of the Board is a member of the Committee.

The Audit Committee monitors the performance of the auditor, and also examines the remuneration and engagement of the auditor, as well as its independence and any non-audit services provided by it. A report of the Audit Committee detailing its responsibilities and its key activities.

Risk Committee

The Company established a Risk Committee on 26 February 2020 with formal duties and responsibilities. The Risk Committee meets formally at least twice a year. The Risk Committee is comprised of the entire Board and is chaired by Mr Scott. The principal function of the Risk Committee is to identify, assess, monitor and, where possible, oversee the management of risks to which the Company's investments are exposed, with regular reporting to the Board. The Directors have appointed the Risk Committee to manage the additional risks faced by the Company as well as the disclosures to be made to investors and the relevant regulators.

The Risk Committee reviews the robustness of the Company's risk management processes, the integrity of the Company's system of internal controls and risk management systems, and the identification and management of risks through the use of the Company's risk matrix. The Risk Committee reviews the principal, emerging, and other risks relevant to the Company.

The Risk Committee reports on the internal controls and risk management systems to the Board of Directors. The Board of Directors is responsible for establishing the system of internal controls relevant to the Company and for reviewing the effectiveness of those systems. The review of internal controls is an on-going process for identifying and evaluating the risks faced by the Company, designed to manage effectively rather than attempt to eliminate business risks, to ensure the Board's ability to achieve the Company's business objectives.

It is the responsibility of the Board to undertake the risk assessment and review of the internal controls in the context of the Company's objectives in relation to business strategy, and the operational, compliance and financial risks facing the Company. These controls are operated in the Company's main service providers: the Investment Advisor and Administrator. The Board receives regular updates and undertakes an annual review of each service provider.

The Board of Directors considers the arrangements for the provision of Investment Advisor and Administration services to the Company and as part of the annual review the Board considered the quality of the personnel assigned to handle the Company's affairs, the investment process and the results achieved to date.

The Board is satisfied that each service provider has effective controls in place to control the risks associated with the services which they are contracted to provide to the Company and therefore the Board is satisfied with the internal controls of the Company.

Management Engagement Committee

The Company has established a Management Engagement Committee with formal duties and responsibilities. The Management Engagement Committee meets formally at least once a year. The Management Engagement Committee is comprised of Mr Burke and Mr Scott. The principal function of the Management Engagement Committee is to ensure that the Company's investment advisory arrangements are competitive and reasonable for the shareholders, along with the Company's agreements with all other third party service providers (other than the external auditor).

During the period the Management Engagement Committee has reviewed the services provided by the Investment Advisor and other service providers, and recommended that the continuing appointments of the Company's service providers was in the best interests of the Company. The Management Engagement Committee is chaired by Mr Scott.

Nomination Committee

The Board does not have a separate Nomination Committee. The Board as a whole fulfils the function of a Nomination Committee. Any proposal for a new Director will be discussed and approved by the Board, giving full consideration to succession planning and the leadership needs of the Company.

Remuneration Committee

In view of its non-executive nature, the Board considers that it is not appropriate for there to be a separate Remuneration Committee, as anticipated by the AIC Code, because this function is carried out as part of the regular Board business. A Remuneration Report prepared by the Board is contained in the Financial Statements within the Directors' Remuneration Report.

Terms of Reference

All Terms of Reference for Committees are available from the Administrator upon request.

Internal Controls

The Board is ultimately responsible for establishing and maintaining the Company's system of internal controls and for maintaining and reviewing its effectiveness. The system of internal controls is designed to manage rather than to eliminate the risk of failure to achieve business objectives and by its nature can only provide reasonable and not absolute assurance against misstatement and loss. These controls aim to ensure that assets of the Company are safeguarded, proper accounting records are maintained and the financial information for publication is reliable.

The Board has delegated the day-to-day management of the Company's investment portfolio and the administration, registrar and corporate secretarial functions including the independent calculation of the Company's NAV and the production of the Annual Report and Financial Statements, which are independently audited. Whilst the Board delegates responsibility, it retains accountability for the functions it delegates and is responsible for the systems of internal control.

Formal contractual agreements have been put in place between the Company and providers of these services. On an ongoing basis, board reports are provided at each quarterly board meeting from the Investment Advisor, Administrator and Company Secretary and Registrar; and a representative from the Investment Advisor is asked to attend these meetings.

In accordance with Listing Rule 15.6.2 (2) R the Directors formally appraise the performance and resources of the Investment Advisor on an annual basis. In the opinion of the Directors their continuing appointment of the Investment Advisor on the terms agreed is in the interests of the Company and the shareholders.

The Investment Advisor was appointed on 31 May 2019.

The Board has reviewed the need for an internal audit function and owing to the size of the Company and the delegation of day-to-day operations to regulated service providers, an internal audit function is not considered necessary. The Directors will continue to monitor the systems of internal controls in place in order to provide assurance that they operate as intended.

Principal Risks and Uncertainties

In respect of the Company's system of internal controls and its effectiveness, the Directors:

·       are satisfied that they have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; and

·       have reviewed the effectiveness of the risk management and internal control systems including material financial, operational and compliance controls (including those relating to the financial reporting process) and no significant failings or weaknesses were identified.

The principal risks and uncertainties which have been identified and the steps which are taken by the Board to mitigate them are as follows:

Investment Risks

The Company is exposed to the risk that its investment portfolio and the remaining investment property fail to perform in line with the Company's objectives. The Company is exposed to the risk that markets move adversely. The Board reviews reports from the Investment Advisor at each quarterly Board meeting and at other times when expedient, paying particular attention to the diversification of the portfolio and to the performance and volatility of underlying investments.

Operational Risks

The Company is exposed to the risk arising from any failures of systems and controls in the operations of the Investment Advisor, Administrator and the Corporate Broker. The Board and its Committees regularly review reports from the Investment Advisor and the Administrator on their internal controls.

Accounting, Legal and Regulatory Risks

The Company is exposed to the risk that it may fail to maintain accurate accounting records, fail to comply with requirements of its Prospectus or fail to adapt its processes to changes in law or regulations. The accounting records prepared by the relevant service providers are reviewed by the Investment Advisor. The Administrator, Corporate Broker and Investment Advisor provide regular updates to the Board on compliance with the Prospectus and any changes in regulation.

Financial Risks

The financial risks, including market, credit, liquidity and interest rate risk faced by the Company are set out in note 15 of the Financial Statements. These risks and the controls in place to reduce the risks are reviewed at the quarterly Board meetings.

Foreign Exchange Risk

The Company is exposed to currency risk given that the assets of its subsidiaries are predominantly denominated in Euro but the presentation currency of the Company is pounds sterling. The Investment Advisor reports at least quarterly to the Board on the strategy for managing this risk. Although the Company has the ability to hedge this risk, it has not to date chosen to do so and has no plans to make such arrangements.

COVID-19

The COVID-19 pandemic has been a significant influence on global markets and has had an economic impact on certain companies held within the Company's portfolio. The impact of the pandemic is discussed further in the Chairman's statement, the Investment Advisor's report and the report of the Audit Committee.

The Board seeks to mitigate and manage these risks through ongoing review, policy-setting and enforcement of contractual obligations and monitoring of the Company's investment portfolio. The Board, Investment Advisor and the Corporate Broker also continually monitor the investment environment in order to identify any new or emerging risks.

Emerging Risks

The Board is alert to the identification of any new or emerging risks through the ongoing monitoring of the Company's investment portfolio and by conducting regular reviews of the Company's risk assessment matrix. Should an emerging risk be identified the risk assessment matrix is updated and appropriate mitigating measures and controls will be agreed.

Non-Audit Services Policy

The Company has implemented a policy in relation to the engagement of the external auditor, BDO Limited, to perform non-audit services. As a Market Traded Company ("MTC"), since March 2020, the Company is classified as an EU/UK Public Interest Entity ("PIE") for the purposes of FRCs Ethical Standard. Accordingly, the Audit Committee must consider whether or not the provision of such non-audit services is compatible with the list of permissible services under the FRC's UK Ethical Standards:

The Audit Committee reviews the need for non-audit services, authorises such on a case by case basis, and recommends an appropriate fee for such non-audit services to the Board.

The Board considers the actual, perceived and potential impact upon the independence of the external auditor prior to engaging the external auditor to undertake any non-audit service, as well as confirming that any non-audit services are included on the list of permissible services, as amended from time to time by the FRC.

The Board reserves the right to review the policy periodically and, if required, amend it to ensure that the policy is compliant with all applicable law and regulation and best practice.

Relations with Shareholders

The Board welcomes shareholders' views and places great importance on communication with its shareholders. The Board receives regular reports on the views of shareholders and the Chairman and other Directors are available to meet shareholders if required. The Investment Advisor meets with major shareholders on a regular basis and reports to the Board on these meetings. Issues of concern can be addressed by any shareholder in writing to the Company at its registered address. The AGM of the Company provides a forum for shareholders to meet and discuss issues with the Directors and Investment Advisor of the Company. In addition, the Company maintains a website (www.worsleyinvestors.com) which contains comprehensive information, including regulatory announcements, share price information, financial reports, investment objectives and strategy and investor contacts.

Promotion of the success of the Company

The Board acts in a manner which is considered to be:

·      in good faith;

·      likely to promote the continuing success of the Company; and

·      to the benefit of its shareholders as a whole.

Whilst the primary duty of the Directors is owed to the Company, the Board considers as part of its discussions and decision making process the interests of all stakeholders.

The Board is committed to maintaining high standards of corporate governance and accountability.

As an investment company, the Company does not have any employees and conducts its core operations through third party service providers. Each provider has an established track record and, through regulatory oversight and control, is required to have in place suitable policies and procedures to ensure it maintains high standards of business conduct, treats customers fairly, and employs corporate governance best practice.

Particular consideration is given to the continued alignment between the activities of the Company and those which contribute to delivering the Board's strategy, which include the Investment Advisor, the Corporate Broker and the Administrator.

The Board respects and welcomes the views of all stakeholders. Any queries or areas of concern regarding the Company's operations can be raised with the Company Secretary.

Signed on behalf of the Board by:

W. Scott                               

Chairman                                            

15 July 2022

Audit Committee Report

Dear Shareholders,

I am pleased to present the Audit Committee's Report for the year ended 31 March 2022, which covers the following topics:

·      Responsibilities of the Audit Committee and its key activities during the period,

·      Financial reporting and significant areas of judgement and estimation,

·      Independence and effectiveness of the external auditor, and

·      Internal control and risk management systems.

The Company remains in a transition period until the Curno investment property is disposed of. The Audit Committee's activities during the year have therefore concentrated on maintaining an appropriate risk and control environment, providing suitable disclosure of progress and residual risks in the Financial Statements, ensuring ongoing engagement from service providers and maintaining sufficient liquid funds to meet expenditure for essential or justified items.

Responsibilities

The Audit Committee reviews and recommends to the Board for approval or otherwise, the Financial Statements of the Company and is the forum through which the independent external auditor reports to the Board of Directors. The independent external auditor and the Audit Committee, if either considers this to be necessary, will meet together without representatives of either the Administrator or Investment Advisor being present.

The responsibilities of the Audit Committee include:

1.     Monitoring the integrity of the Financial Statements of the Company covering:

·      formal announcements relating to the Company's financial performance;

·      significant financial reporting issues and judgements;

·      matters raised by the external auditor; and

·      appropriateness of accounting policies and practices.

2.     Reviewing and considering the AIC Code and FRC Guidance on Audit Committees.

3.     Monitoring the quality and effectiveness of the independent external auditor, which includes:

·      meeting regularly to discuss the audit plan and the subsequent findings;

·      considering the level of fees for both audit and non-audit work;

·      reviewing independence, objectivity, expertise, resources and qualification; and

·      making recommendations to the Board on their appointment, reappointment, replacement and remuneration.

4.     Reviewing the Company's procedures for prevention, detection and reporting of fraud, bribery and corruption, and

5.     Monitoring and reviewing the internal control and risk management systems of the service providers together with the need for a Company Internal Audit function.

The Audit Committee's full terms of reference can be obtained by contacting the Company's Administrator.

Financial Reporting

The Audit Committee's review of the Audited Annual Report and Financial Statements focused on the following significant risks;

Valuation of Investment Property

The Company's sole remaining investment property was independently valued at £7.33 million (€8.70 million) as at 31 March 2022 (31 March 2021: £8.17 million (€9.60 million)) and represented the majority of the assets of the Group. The remaining investment property comprises a cinema complex in Curno, Italy, owned via an intermediate holding company. The valuation of this investment is in accordance with the requirements of IFRS as issued by the International Accounting Standards Board. The valuation estimate is provided by Knight Frank LLP, an external independent valuer. The Audit Committee considers the fair value of the sole investment property held by the Group as at 31 March 2022 to be reasonable based on information provided by the Investment Advisor and Administrator. All valuations are also subject to review and oversight by the Investment Advisor.

The valuation report received from the independent valuer included a 'Material Valuation Uncertainty' paragraph in relation to the market risks linked to the COVID-19 pandemic: this paragraph explains that the valuer continues to be faced with an unprecedented set of circumstances caused by COVID-19 and an absence of relevant / sufficient market evidence on which to base their judgements. Their valuation is therefore reported as being subject to 'material valuation uncertainty' and a higher degree of caution should be attached to their valuation than would normally be the case.

Valuation of investments

The Company's non-property investments had a fair value of £5.97million as at 31 March 2022 (31 March 2021: £5.50 million). The investments are all listed. The Committee considered the fair value of the investments held by the Company as at 31 March 2022 to be reasonable based on information provided by the Investment Advisor and Administrator. All prices are confirmed to independent pricing sources as at 31 March 2022 by the Administrator and are subject to a review process at the Administrator and oversight at the Investment Advisor.

Audit Findings Report

The independent external auditor reported to the Audit Committee that no material unadjusted misstatements were found in the course of their work. Furthermore, the Investment Advisor and Administrator confirmed to the Audit Committee that they were not aware of any material unadjusted misstatements including matters relating to the Financial Statements presentation.

Accounting Policies & Practices

The Audit Committee has assessed the appropriateness of the accounting policies and practices adopted by the Group together with the clarity of disclosures included in the Financial Statements. Following a review of the presentations and reports from the Administrator and consulting where necessary with the independent external auditor, the Audit Committee is satisfied that the Financial Statements appropriately address the critical judgements and key estimates (both in respect to the amounts reported and the disclosures). It is also satisfied that the significant assumptions used for determining the value of assets and liabilities have been appropriately scrutinised, challenged and are sufficiently robust.

The Audit Committee advised the Board that this Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable.

Fraud, Bribery and Corruption

The Audit Committee continues to monitor the fraud, bribery and corruption policies of the Group. The Board receives a confirmation from all service providers that there have been no instances of fraud or bribery.

The Independent External Auditor

BDO Limited served as the Company's Independent Auditor throughout the year and has indicated its willingness to continue in office. 

The independence and objectivity of the external auditor is reviewed by the Audit Committee, which also reviews the terms under which the independent external auditor is appointed to perform non-audit services. The Audit Committee has established pre-approval policies and procedures for the engagement of the auditor to provide non audit services.

The following table summarises the remuneration payable to BDO Limited for audit and non-audit services provided to the Company during the year ended 31 March 2022 and the nine month period ended 31 March 2021.

The following table summarises the remuneration payable to BDO Italia S.p.A for audit and non-audit services provided to the Group during the year ended 31 March 2022 and the nine month period ended 31 March 2021.

Performance and Effectiveness

During the period, when considering the effectiveness of the independent external auditor, the Audit Committee has taken into account the following factors:

·      the audit plan presented to them before the audit;

·      changes in audit personnel;

·      the post audit findings report;

·      the independent external auditor's own internal procedures to identify threats to independence; and

·      feedback received from both the Investment Advisor and Administrator.

The Audit Committee reviewed and, where appropriate, challenged the audit plan and the audit findings report of the independent external auditor and concluded that the audit plan sufficiently identified audit risks and that the audit findings report indicated that the audit risks were sufficiently addressed with no significant variations from the audit plan. The Audit Committee considered reports from the independent external auditor on their procedures to identify threats to independence and concluded that the procedures were sufficient.

Appointment of External Auditor

Consequent to this review process, the Audit Committee recommended to the Board that a resolution be put to the next AGM to confirm the reappointment of BDO Limited as independent external auditor.

Internal Control and Risk Management Systems

The Board of Directors considers the arrangements for the provision of Investment Advisory, Investment Management, Administration and Custody services to the Company on an on-going basis and a formal review is conducted annually. As part of this review the Board considered the quality of the personnel assigned to handle the Company's affairs, the investment process and the results achieved to date.

The Audit Committee has reviewed the need for an internal audit function and has decided that the systems and procedures employed by the Investment Advisor and the Administrator provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. An internal audit function specific to the Group is therefore considered unnecessary.

In finalising the Financial Statements for recommendation to the Board for approval, the Audit Committee has satisfied itself that the Financial Statements taken as a whole are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

A member of the Audit Committee will continue to be available at each AGM to respond to any shareholder questions on the activities of the Audit Committee.

R. H. Burke,

Chairman, Audit Committee

15 July 2022

Directors' Remuneration Report

Introduction

An ordinary resolution for the approval of the Director's Remuneration Report will be put to the shareholders at the forthcoming AGM held.

Remuneration Policy

All Directors are non-executive and a Remuneration Committee has not been established. The Board as a whole considers matters relating to the Directors' remuneration. No advice or services were provided by any external person in respect of its consideration of the Directors' remuneration.

The Company's policy is that the fees payable to the Directors should reflect the time spent by the Directors on the Company's affairs and the responsibilities borne by the Directors and be sufficient to attract, retain and motivate directors of a quality required to run the Company successfully. The Chairman of the Board is paid a higher fee in recognition of his additional responsibilities. The policy is to review fee rates periodically, although such a review will not necessarily result in any changes to the rates, and account is taken of fees paid to directors of comparable companies. The Directors of the Company are remunerated for their services at such a rate as the Directors determine provided that the aggregate amount of such fees does not exceed £120,000 per annum.

There are no long-term incentive schemes provided by the Company and no performance fees are paid to Directors.

None of the Directors has a service contract with the Company but each of the Directors is appointed by a letter of appointment which sets out the main terms of their appointment. Directors hold office until they retire by rotation or cease to be a director in accordance with the Articles of Incorporation, by operation of law or until they resign.

Remuneration

Directors are remunerated in the form of fees, payable quarterly in arrears, to the Director personally. No Directors have been paid additional remuneration outside their normal Directors' fees and expenses.

The current annual Directors' fees comprise £20,000 per annum payable to the Chairman and £15,000 per annum payable to the other Directors.

Upon appointment of Worsley Associates as Investment Advisor on 31 May 2019, Mr Nixon waived any future Director's fee for as long as he is a member of the Investment Advisor.

For the year ended 31 March 2022 and the nine month period ended 31 March 2021 Directors' fees incurred were as follows:

The directors of the subsidiaries of the Group received emoluments amounting to £10,994 (31 March 2021: £7,858). Total fees paid to Directors and directors of the subsidiaries were £45,994 (31 March 2021: £34,108).

Signed on behalf of the Board by:

W. Scott                                              

Director                                               

15 July 2022