TIDMESO TIDMEO.P TIDMEC.P TIDMEL.P
RNS Number : 1105T
EPE Special Opportunities Limited
23 March 2021
EPE Special Opportunities Limited
("ESO" or the "Company")
Annual Reports and Accounts for the year ended 31 January
2021
The Board of EPE Special Opportunities Limited is pleased to
announce the Company's Annual Report and Accounts for the year
ended 31 January 2021.
Summary
-- The Company performed well in the face of the significant
disruption caused by the outbreak of COVID-19 and the resultant
public health response. The Board and the Investment Advisor ("IA")
have worked closely with management teams and other stakeholders to
protect the wellbeing of colleagues across the Company and its
portfolio whilst working hard to safeguard the value of the
Company's investments. The Board and IA will continue to carefully
monitor the outlook for the UK economy as progress is made with
vaccination programmes and restrictions are gradually eased over
the coming period.
-- The Net Asset Value ("NAV") per share of the Company as at 31
January 2021 was 437.63 pence per share, an increase of 38.0 per
cent. on the NAV per share of 317.18 pence as at 31 January 2020.
The increase in the Company's NAV per share has been driven
primarily by the rise in value of the Company's largest holding,
Luceco plc, whose share price has traded strongly over the last
year.
-- The share price of the Company as at 31 January 2021 was
271.00 pence, representing an increase of 36.2 per cent. on the
share price of 199.00 pence at 31 January 2020.
-- Luceco plc's share price performed well, achieving a 84.9 per
cent. increase in the year ended 31 January 2021. The business
announced strong trading for the year ended 31 December 2020,
delivering year-on-year revenue growth, increased profitability and
a reduction in leverage in the period. In November 2020, the
Company sold 4.0 million shares in Luceco plc, returning GBP10.0
million cash to ESO, whilst retaining a 24.9 per cent. holding in
the business.
-- Whittard of Chelsea's ("Whittard") business model was subject
to unprecedented disruption during the year ended 31 December 2020
as a result of COVID-19. Whilst retail stores were Whittard's
largest and most profitable sales channel in 2019, sales from the
channel contracted by 60 per cent. in 2020. Despite the disruption
to the UK store estate, Whittard remained EBITDA positive due to
growth in its ecommerce business. The Board is looking forward to
the upcoming re-opening of Whittard's stores, although it is
carefully monitoring the outlook for inbound tourism to the UK,
which contributed to sales through UK stores. Whittard has
continued to pursue compelling international opportunities, with
the business's Asian operations trading strongly. Corporate
gifting, online marketplaces and additional new geographies also
provide encouragement for the future.
-- David Phillips has made pleasing progress, building on the
profitable and growing platform established in the prior period.
The business maintained overall sales levels, whilst delivering a
year-on-year EBITDA improvement of GBP2.9 million. Growth in
profitability was achieved as a result of the ongoing benefits of
the turnaround and, more recently, through efficiencies identified
in response to the COVID-19 crisis. The business has promising
momentum, driven by a growing pipeline of large-scale projects.
-- Continuing its impressive growth trajectory, Pharmacy2U
experienced a significant acceleration in sales as patients sought
direct-to-home alternatives to collecting prescriptions in high
street pharmacies. The business's new distribution facility began
dispensing live orders in November 2020.
-- On 1 September 2020, the Company completed a GBP1.9 million
investment into Atlantic Credit Opportunities Fund, a credit
opportunities hedge fund which focuses on European high yield
credit. On 12 November 2020, the Company completed a further $2.5
million investment in a segregated account of Prelude Structured
Alternatives Master Fund LP, a multi-manager hedge fund platform.
Both funds are managed by a subsidiary of the Investment Advisor.
The investments in these funds will provide ESO with the
opportunity to generate uncorrelated returns over the multi-year
aftermath of the significant dislocations in credit markets caused
by the COVID-19 pandemic. In the year ended 31 December 2020, ACOF
achieved a net return of 13.2 per cent, ahead of the high yield
market and hedge fund peers.
-- The Company has liquidity of GBP28.0 million(1) as at 31
January 2021. The Company has GBP3.9 million of outstanding
unsecured loan notes repayable in July 2022 and has no other
third-party debt outstanding. The Company is considering raising
additional funding by the way of a loan note in the coming year to
provide funding for potential investments that are being considered
in the pipeline.
-- As at 31 January 2021, the Company's portfolio was valued at
a weighted average EBITDA to enterprise value multiple of 5.8x
(excluding Pharmacy2U, which is valued on a sales multiple) and had
a low level of third party leverage with net debt at 0.3x EBITDA in
aggregate.
-- Between November and December 2020, the Company completed
buybacks in the market totalling 799,480 ordinary shares (or 2.4
per cent. of the Company's issued ordinary share capital).
-- At the forthcoming Annual General Meeting, Robert Quayle will
be stepping down as a director of the Company. The Board would like
to thank Robert for his dedication to the Company over his long
period of service. On a personal note, the directors would like to
thank him for his wise counsel and to wish him all the best for the
future. The Company has commenced considerations for recruitment of
a new independent Director to join the Board in due course.
Mr Clive Spears, Chairman, commented: "The performance of the
Company in the year ended 31 January 2021 was pleasing in the face
of acute disruption caused by the spread of COVID-19. The Board
will carefully monitor the outlook for the UK economy as further
progress is made in vaccination programmes and restrictions are
gradually eased. The Board is reviewing a growing pipeline of
investment opportunities and hopes to deploy further capital in the
coming period. The Board would like to thank the Investment
Advisor, the Company's other service providers, colleagues and
employees across the portfolio for their efforts over this
challenging and unprecedented period, which leave the Company well
positioned for the future."
The person responsible for releasing this information on behalf
of the Company is Amanda Robinson of Langham Hall Fund Management
(Jersey) Limited.
Enquiries:
EPIC Private Equity LLP +44 (0) 207 269 8865
Alex Leslie
Langham Hall Fund Management (Jersey) Limited +44 (0) 15 3488 5200)
Amanda Robinson
Cardew Group Limited +44 (0) 207 930 0777
Richard Spiegelberg
Numis Securities Limited +44 (0) 207 260 1000
Nominated Advisor: Stuart Skinner / Henry Slater
Corporate Broker: Charles Farquhar
[1] Company liquidity is stated inclusive of cash held by
associates in which the Company is the sole investor.
Chairman's Statement
The performance of the Company in the year ended 31 January 2021
was pleasing in the face of acute disruption caused by the spread
of COVID-19. The Board, Investment Advisor and the management of
the portfolio companies have continued to prioritise the protection
and wellbeing of colleagues, whilst safeguarding the financial
position of the Company and its investments. The Board and IA are
carefully monitoring the outlook for the UK economy as progress is
made in vaccination programmes and public health restrictions are
hopefully eased over the coming period.
The Net Asset Value ("NAV") per share of the Company as at 31
January 2021 was 437.63 pence per share, representing an increase
of 38.0 per cent. on the NAV per share of 317.18 pence as at 31
January 2020. The share price of the Company as at 31 January 2021
was 271.00 pence, representing an increase of 36.2 per cent. on the
share price of 199.00 pence as at 31 January 2020.
Luceco plc's share price performed well, achieving a 84.9 per
cent. increase in the year ended 31 January 2021. The business
announced strong trading for the year ended 31 December 2020,
delivering year-on-year revenue growth, increased profitability and
a reduction in leverage in the period. In November 2020, the
Company sold 4.0 million shares in Luceco plc, returning GBP10.0
million cash to ESO, whilst retaining a 24.9 per cent. holding in
the business.
Whittard of Chelsea's ("Whittard") business model was subject to
unprecedented disruption during the year ended 31 December 2020 as
a result of COVID-19. Whilst retail stores were Whittard's largest
and most profitable sales channel in 2019, sales from the channel
contracted by 60 per cent. in 2020. Despite the disruption to the
UK store estate, Whittard remained EBITDA positive due to growth in
its ecommerce business. The Board is looking forward to the
upcoming re-opening of Whittard's stores, although it is carefully
monitoring the outlook for inbound tourism to the UK, which
contributed to sales through UK stores. Whittard has continued to
pursue compelling international opportunities, with the business's
Asian operations trading strongly. Corporate gifting, online
marketplaces and additional new geographies also provide
encouragement for the future.
David Phillips has made pleasing progress, building on the
profitable and growing platform established in the prior period.
Sustainable profitability ahead of the prior year was achieved due
to structural cost benefits gained as a result of the turnaround
phase of ESO's ownership and, more recently, through efficiencies
identified in response to the COVID-19 crisis. The business has
promising momentum, driven by a growing pipeline of large-scale
projects in institutional build-to-rent and developer markets.
Pharmacy2U experienced a significant acceleration in sales as
patients sought direct-to-home alternatives to collecting
prescriptions in high street pharmacies, continuing its impressive
growth trajectory. The business's new distribution facility began
dispensing live orders in November 2020, providing significant
additional capacity to support future expansion.
On 1 September 2020, the Company completed a GBP1.9 million
investment into Atlantic Credit Opportunities Fund, a credit
opportunities hedge fund which focuses on European high yield
credit. On 12 November 2020, the Company completed a further $2.5
million investment in a segregated account of Prelude Structured
Alternatives Master Fund LP, a multi-manager hedge fund platform.
Both funds are managed by a subsidiary of the Investment Advisor.
The investments in these funds will provide ESO with the
opportunity to generate uncorrelated returns over the multi-year
aftermath of the significant dislocations in credit markets caused
by the COVID-19 pandemic. In the year ended 31 December 2020, ACOF
achieved a net return of 13.2 per cent, ahead of the high yield
market and hedge fund peers.
The Company has liquidity of GBP28.0 million(1) as at 31 January
2021. The Company has GBP3.9 million of outstanding unsecured loan
notes repayable in July 2022 and has no other third-party debt
outstanding. The Company is considering raising additional funding
by the way of a loan note in the coming year to provide funding for
potential investments that are being considered in the
pipeline.
At the forthcoming Annual General Meeting, Robert Quayle will be
stepping down as a director of the Company. The Board would like to
thank Robert for his dedication to the Company over his long period
of service. On a personal note, the directors would like to thank
him for his wise counsel and to wish him all the best for the
future. The Company has commenced considerations for recruitment of
a new independent Director to join the Board in due course.
I would like to thank my fellow directors, the Investment
Advisor, the Company's other service providers and colleagues
across the portfolio for their efforts over this challenging and
unprecedented period. These efforts leave the Company well
positioned for the future.
Clive Spears
Chairman
22 March 2021
[1] Company liquidity is stated inclusive of cash held by
associates in which the Company is the sole investor.
Investment Advisor's Report
The year ended 31 January 2021 has been dominated by the
outbreak and response to COVID-19, requiring the Investment Advisor
("IA") to focus on positioning the portfolio to safely navigate a
rapidly changing trading environment. Encouragingly, the portfolio
has proven to have overall resilience to the turbulence
experienced. As the IA looks to the future, it is encouraged by the
healthy pipeline of attractive investment opportunities under
review with the reduced corporate finance activity in 2020
generating a backlog of demand in 2021. The challenging macro
environment may also generate an increase in the number of
well-priced opportunities and companies in need of external
funding. The IA and the Board are both optimistic that the
portfolio can build on the perseverance shown through 2020 and be
augmented by the deployment of further capital in the near
term.
The Company
The Net Asset Value ("NAV") per share of the Company as at 31
January 2021 was 437.63 pence per share, representing an increase
of 38.0 per cent. on the NAV per share of 317.18 pence as at 31
January 2020. The share price of the Company as at 31 January 2021
was 271.00 pence, representing an increase of 36.2 per cent. on the
share price of 199.00 pence as at 31 January 2020.
The Company maintains strong liquidity and prudent levels of
third-party leverage. The Company has cash balances of GBP28.0
million(1) as at 31 January 2021, which are available to support
the existing portfolio, meet committed obligations and to deploy
into attractive investment opportunities. Net debt in the
underlying portfolio stands at 0.3x EBITDA in aggregate. In
November 2020, the Company partially sold down its stake in Luceco
plc, returning GBP10.0 million cash to ESO to maintain liquidity
and finance new acquisitions.
The Portfolio
The Company's portfolio is valued at a weighted average
enterprise value to EBITDA multiple of 5.8x for mature assets
(excluding assets investing for growth). The valuation has been
derived by reference to relevant quoted comparables, after the
application of an appropriate discount to adjust for the
portfolio's scale and unquoted nature (i.e. an illiquidity
discount). Given the use of quoted comparables/actuals generally,
the valuation reflects the fair value of assets as at the balance
sheet date. The IA notes that the fair market value of the
portfolio remains exposed to a volatile macro environment and
consequent equity valuations.
The share price of Luceco plc as at 31 January 2021 was 260.00
pence, representing an increase of 84.9 per cent. vs. the prior
year. On 23 March 2021, Luceco plc released its results for the
year ended 31 December 2020. The business reported year-on-year
revenue growth of 2.4 per cent. despite disruption in the first
half of 2020. In addition, the business achieved year-on-year gross
margin gains (39.8 per cent. vs. 36.2 per cent. in the prior year)
and increased profitability (GBP30.0 million operating profit vs.
GBP18.0 million in the prior year) following the successful
implementation of manufacturing improvements, a shift in sales mix
towards high margin professional sales and tight control of
overheads. Net debt improved by GBP9.1 million over the year to
GBP18.0 million at 31 December 2020. In addition, dividends were
reinstated at the interim point, including a catch-up payment for
dividends suspended earlier in the year. On 13 November 2020, the
Company sold down 9.1 per cent. of its investment in Luceco plc in
the market, providing GBP10.0 million in funds for new
investments.
Whittard of Chelsea ("Whittard") has experienced unprecedented
adverse trading conditions during the COVID-19 pandemic.
Performance was significantly impacted by the closure of the UK
retail estate, the business's largest sales channel, following the
announcement of government social distancing rules. Whittard's
online channel performed exceptionally well in the period;
partially compensating for sales lost as a result of the closure of
the retail estate. Looking ahead, the business is focused on the
re-opening of stores across its retail estate. Confidence in the
outlook for Whittard is qualified by its exposure to tourism from
overseas, which is expected to recover at a slower rate than the
remainder of the UK economy. The business has continued to make
pleasing progress in developing its multi-channel strategy,
introducing corporate gifting and online marketplace channels in
the period, and making further progress in developing its
international presence.
David Phillips performed well in 2020, delivering sales in line
with the prior year and achieving significantly improved
profitability. The historic focus of management and the IA on
improving the financial resilience and operational flexibility of
the business during the turnaround phase meant that David Phillips
was well positioned for the macro disruption caused by COVID-19.
Positive steps have been taken in the last twelve months, most
notably in the growing pipeline of large-scale projects, the
addition of new management team members, and the refinancing of the
Company's debt facilities to improve the long-term capital
structure of the business. The IA and the management team are
closely monitoring the property market to allow the business to
respond to systemic market changes brought about by the COVID-19
crisis. The IA believes the business is well placed to take
advantage of these trends given its diversified customer base,
which encompasses both private landlords and the institutional
residential property market.
Pharmacy2U experienced significant growth in both sales and
registered patients in the period as a result of the increase in
demand for direct-to-home pharmacy driven by the pandemic.
Pharmacy2U's new Leicester facility was opened in September 2020,
with the first live orders dispatched in November 2020. The new
facility will provide the business with substantially increased
capacity, enabling the business to support its future growth
trajectory.
The IA continues to monitor the Company's investment in European
Capital Private Debt Fund, which has completed the deployment of
the Company's committed capital in the fund and continues to
distribute capital to the Company.
On 1 September 2020, the Company completed a GBP1.9 million
investment into Atlantic Credit Opportunities Fund, a credit
opportunities hedge fund which focuses on European high yield
credit. On 12 November 2020, the Company completed a further $2.5
million investment in a segregated account of Prelude Structured
Alternatives Master Fund LP, a multi-manager hedge fund platform.
Both funds are managed by a subsidiary of the Investment Advisor.
The investments in these funds will provide ESO with the
opportunity to generate uncorrelated returns over the multi-year
aftermath of the significant dislocations in credit markets caused
by the COVID-19 pandemic. In the year ended 31 December 2020, ACOF
achieved a net return of 13.2 per cent, ahead of the high yield
market and hedge fund peers.
EPE would like to join the Board in extending its thanks to
Robert Quayle for the years of the support he has provided to the
Company. Robert has been a Board member since inception; during his
tenure the Company has grown considerably and weathered several
economic cycles. We are grateful for the support and encouragement
Robert has shown EPE and its team members over the years of his
directorship. We wish him the very best for the future.
The IA would like to thank the management and employees of the
portfolio companies for their hard work and dedication during this
unprecedented period. The IA is also grateful for the continued
support and counsel of the Board and the Company's
shareholders.
EPIC Private Equity LLP
Investment Advisor to the Company
22 March 2021
[1] Company liquidity is stated inclusive of cash held by
associates in which the Company is the sole investor.
Biographies of the Directors
Clive Spears David Pirouet
Clive Spears retired from the Royal David Pirouet joined PricewaterhouseCoopers
Bank of Scotland International Channel Islands LLP in 1980,
Limited in December 2003 as Deputy retiring in 2009 after being
Director of Jersey after 32 years an Audit and Assurance Partner
of service. His main activities for over 20 years. During his
prior to retirement included Product 29 years at the firm Mr Pirouet
Development, Corporate Finance, specialised in the financial
Trust and Offshore Company Services services sector, in particular
and he was Head of Joint Venture in the alternative investment
Fund Administration with Rawlinson management area and also led
& Hunter. Mr Spears is an Associate the business's Hedge Fund and
of the Chartered Institute of Bankers business recovery practices for
and a Member of the Chartered Institute over four years. Mr Pirouet currently
for Securities & Investment. He holds a number of non-executive
has accumulated a well spread portfolio positions across private equity,
of directorships centring on private infrastructure and corporate
equity, infrastructure and corporate debt. Mr Pirouet's was previously
debt. His current appointments non-executive Director and Chair
include Chairman of Nordic Capital of the Audit and Risk committee
Limited and director of Invesco for GCP Infrastructure Investments
Enhanced Income Limited. (FTSE 250 listed company) until
he retired in February 2021.
--------------------------------------------
Heather Bestwick Robert Quayle
--------------------------------------------
Heather Bestwick has been a financial Robert Quayle qualified as an
services professional for over English solicitor at Linklaters
25 years, onshore in the City of & Paines in 1974 after reading
London and offshore in the Cayman law at Selwyn College, Cambridge.
Islands and Jersey. She qualified He subsequently practiced in
as an English solicitor, specialising London and the Isle of Man as
in ship finance, with City firm a partner in Travers Smith Braithwaite.
Norton Rose, and worked in their He served as Clerk of Tynwald
London and Greek offices for 8 (the Isle of Man's parliament)
years. Ms Bestwick subsequently for periods totalling 12 years
practised and became a partner and holds a number of public
with global offshore law firm Walkers and private appointments, and
in the Cayman Islands, and Managing is active in the voluntary sector.
Partner of the Jersey office. Ms Mr Quayle is a director of a
Bestwick sits on the boards of number of companies in the financial
Deutsche International Corporate services and distribution sectors.
Services Limited and Rathbone Investment
Management International Limited.
--------------------------------------------
Nicholas Wilson
Nicholas Wilson has over 40 years
of experience in hedge funds, derivatives
and global asset management. He
has run offshore branch operations
for Mees Pierson Derivatives Limited,
ADM Investor Services International
Limited and several other London
based financial services companies.
He is Chairman of Gulf Investment
Fund plc, a premium listed company,
and, until recently, was chairman
of Alternative Investment Strategies
Limited.
Biographies of the Investment Advisor
Giles Brand Hiren Patel
Giles Brand is a Partner and the Hiren Patel is the Managing Director
founder of EPE. He is currently of EPE Administration and is
Non-executive Chairman of Whittard a Partner and the Finance Director
of Chelsea and Luceco plc, and and Compliance Officer of EPE.
a Non-Executive Director of The He has worked in the investment
Reader Organisation, a not-for-profit management industry for the past
educational charity. Before joining twenty years. Before joining
EPE, Giles was a founding Director EPE Administration, Hiren was
of EPIC Investment Partners, a Finance Director of EPIC Investment
fund management business which Partners. Prior to this, Hiren
at sale had US$5bn under management. was employed at Groupama Asset
Prior to this, Giles worked in Management where he was the Group
Mergers and Acquisitions at Baring Financial Controller.
Brothers in Paris and London. Giles
read History at Bristol University.
----------------------------------------
Robert Fulford James Henderson
----------------------------------------
Robert Fulford is a Managing Director James Henderson is a Managing
at EPE. He previously worked at Director at EPE. He previously
Barclaycard Consumer Europe before worked in the Investment Banking
joining EPE. Whilst at Barclaycard, division of Deutsche Bank before
Robert was the Senior Manager for joining EPE. Whilst at Deutsche
Strategic Insight and was responsible Bank he worked on a number of
for identifying, analysing and M&A transactions and IPOs in
responding to competitive forces. the energy, property, retail
Prior to Barclaycard, Robert spent and gaming sectors, as well as
four years as a strategy consultant providing corporate broking advice
at Oliver Wyman Financial Services, to mandated clients. At EPE,
where he worked with a range of James manages the investment
major retail banking and institutional in Pharmacy2U. James read Modern
clients in the UK, mainland Europe, History at Oxford University
Middle East and Africa. At EPE, and Medicine at Nottingham University.
Robert manages the investments
in Whittard of Chelsea and David
Phillips. Robert read Engineering
at Cambridge University.
----------------------------------------
Alex Leslie Ian Williams
----------------------------------------
Alex Leslie is a Managing Director Ian Williams is a Managing Director
at EPE. He previously worked in at EPE. He was previously a Partner
Healthcare Investment Banking at at Lyceum Capital Partners LLP,
Piper Jaffray before joining EPE. responsible for deal origination
Whilst at Piper Jaffray he worked and engagement, with a primary
on a number of M&A transactions focus on the business services
and equity fundraisings within and software sectors, as well
the Biotechnology, Specialty Pharmaceutical as financial services, education
and Medical Technology sectors. and health sectors. Prior to
At EPE, Alex manages the investment Lyceum, Ian was a Director at
in Luceco plc. Alex read Human Arbuthnot Securities, involved
Biological and Social Sciences in transactions including IPOs,
at the University of Oxford and secondary fund raisings and M&A,
obtained an MPhil in Management focusing on the support services,
from the Judge Business School healthcare, transport & IT sectors.
at the University of Cambridge. Ian read Politics and Economics
at the University of Bristol.
----------------------------------------
Risk and Audit Committee Report
The Risk and Audit Committee is chaired by David Pirouet and
comprises all other Directors. Mr Pirouet was appointed as Chairman
of the Committee on 28 June 2019.
The Risk and Audit Committee's main duties are:
-- To review and monitor the integrity of the interim and annual
financial statements, interim statements, announcements and matters
relating to accounting policy, laws and regulations of the
Company;
-- To evaluate the risks to the quality and effectiveness of the financial reporting process;
-- To review the effectiveness and robustness of the internal
control systems and the risk management policies and procedures of
the Company;
-- To review the valuation of portfolio investments;
-- To review corporate governance compliance, including the
Company's compliance with the QCA Corporate Governance Code;
-- To review the nature and scope of the work to be performed by
the Auditors, and their independence and objectivity; and
-- To make recommendations to the Board as to the appointment
and remuneration of the external auditors.
The Risk and Audit Committee has a calendar which sets out its
work programme for the year to ensure it covers all areas within
its remit appropriately. It met four times during the period under
review to carry out its responsibilities and senior representatives
of the Investment Advisor attended the meetings as required by the
Risk and Audit Committee. In between meetings, the Risk and Audit
Committee chairman maintains ongoing dialogue with the Investment
Advisor and the lead audit partner via regular calls (which will be
replaced by physical meeting once travel restrictions permit).
The Risk and Audit Committee has a calendar which sets out its
work programme for the year to ensure it covers all areas within
its remit appropriately. It met four times during the period under
review to carry out its responsibilities and senior representatives
of the Investment Advisor attended the meetings as required by the
Risk and Audit Committee. In between meetings, the Risk and Audit
Committee chairman maintains ongoing dialogue with the Investment
Advisor and the lead audit partner via visits and meetings at the
office of the Investment Advisor.
During the past year the Risk and Audit Committee carried out an
ongoing review of its own effectiveness. These concluded that the
Risk and Audit Committee is satisfactorily fulfilling its terms of
reference and is operating effectively. In addition, the Committee
undertook a review of the Company's corporate governance and
compliance with the QCA Corporate Governance Code.
Significant accounting matters
The primary risk considered by the Risk and Audit Committee
during the period under review in relation to the financial
statements of the Company is the valuation of unquoted
investments.
The Company's accounting policy for valuing investments is set
out in notes 3i and 12. The Risk and Audit Committee examined and
challenged the valuations prepared by the Investment Advisor,
taking into account the latest available information on the
Company's investments and the Investment Advisor's knowledge of the
underlying portfolio companies through their ongoing monitoring.
The Risk and Audit Committee satisfied itself that the valuation of
investments had been carried out consistently with prior accounting
periods, or that any change in valuation basis was appropriate, and
was conducted in accordance with published industry guidelines.
The Auditors explained the results of their review of the
procedures undertaken by the Investment Advisor in preparation of
valuation recommendations for the Risk and Audit Committee. On the
basis of their audit work, no material adjustments were identified
by the Auditor.
External audit
The Risk and Audit Committee reviewed the audit plan and fees
presented by the auditors, KPMG Audit LLC ("KPMG"), and considered
their report on the financial statements. The fee for the audit of
the annual report and financial statements of the Company (and
associates) for the year ended 31 January 2021 is expected to be
GBP64,000 (2020: GBP58,500).
The Risk and Audit Committee reviews the scope and nature of all
proposed non-audit services before engagement, with a view to
ensuring that none of these services have the potential to impair
or appear to impair the independence of their audit role. The Risk
and Audit Committee receives an annual assurance from the auditors
that their independence is not compromised by the provision of such
services, if applicable. During the period under review, the
auditors provided non-audit services to the Company in relation to
taxation.
KPMG were appointed as auditors to the Company for the audit of
the year ended 31 January 2005. The Risk and Audit Committee
regularly considers the need to put the audit out to tender, the
auditors' fees and independence, alongside matters raised during
each audit.
The appointment of KPMG has not been put out to tender as yet as
the Committee, from ongoing direct observation and indirect enquiry
of the Investment Advisor, remain satisfied that KPMG continue to
provide a high-quality audit and effective independent challenge in
carrying out their responsibilities.
The current year is the sixth year in which the audit has been
undertaken by the current engagement partner at KPMG. The extension
of the engagement beyond the typical five-year limit has been
agreed following the deferral of the audit tender process as a
result of COVID-19.
The Board will review the performance and services offered by
Langham Hall, as fund administrator and EPEA as fund
sub-administrator on an ongoing basis. EPEA completed its triennial
agreed upon procedures review during the period.
Risk management and internal control
The Company does not have an internal audit function. The Risk
and Audit Committee believes this is appropriate as all of the
Company's operational functions are delegated to third party
service providers who have their own internal control and risk
monitoring arrangements. A report on these arrangements is prepared
by each third-party service provider and submitted to the Risk and
Audit Committee which it reviews on behalf of the Board to support
the Directors' responsibility for overall internal control. The
Company does not have a whistleblowing policy and procedure in
place. The Company delegates this function to the Investment
Advisor who is regulated by the FCA and has such policies in place.
The Risk and Audit Committee has been informed by the Investment
Advisor that these policies meet the industry standards and no
whistleblowing took place during the year.
David Pirouet
Chairman of the Risk and Audit Committee
22 March 2021
Corporate Governance
The Board of EPE Special Opportunities is pleased to update
shareholders of the Company's compliance with the 2018 Quoted
Companies Alliance Corporate Governance Code (the "QCA Code").
The Company is committed to the highest standards of corporate
governance, ethical practices and regulatory compliance. The Board
believe that these standards are vital to generate long-term,
sustainable value for the Company's shareholders. In particular the
Board is concerned that the Company is governed in a manner to
allow ef cient and effective decision making, with robust risk
management procedures.
As an investment vehicle, the Company is reliant upon its
service providers for many of its operations. The Board maintains
ongoing and rigorous review of these providers. Speci cally the
Board reviews the governance and compliance of these entities to
ensure they meet the high standards of the Company.
The Board is dedicated to upholding these high standards and
will look to strengthen the Company's governance on an ongoing
basis.
The Company's compliance with the QCA Code on the Company's
website (www.epespecialopportunities.com). The Company will provide
annual updates on changes to compliance with the QCA Code.
Clive Spears
Chairman
22 March 2021
Report of the Directors
Principal activity
The Company was incorporated in the Isle of Man as a company
limited by shares under the Laws with registered number 108834C on
25 July 2003. On 23 July 2012, the Company re-registered under the
Isle of Man Companies Act 2006, with registration number 008597V.
On 11 September 2018, the Company re-registered under the Bermuda
Companies Act 1981, with registration number 53954. The Company's
ordinary shares are quoted on AIM, a market operated by the London
Stock Exchange, and the Growth Market of the Aquis Stock Exchange
(formerly the NEX Exchange).
The principal activity of the Company and its associates is to
arrange income yielding financing for growth, buyout and special
situations and holding the investments with a view to exiting in
due course at a profit.
Incorporation
The Company was incorporated on 25 July 2003 and on 11 September
2018, registered under the Bermuda Companies Act 1981. The
Company's registered office is:
Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
Place of business
During the year, the Company solely operated out of and was
controlled from:
Liberation House, Castle Street, St Helier, Jersey JE1 2LH
Results of the financial year
Results for the year are set out in the Statements of
Comprehensive Income and in the Statement of Changes in Equity.
Dividends
The Board does not recommend a dividend in relation to the
current year (2020: nil) (see note 10 for further details).
Corporate governance principles
The Directors place a high degree of importance on ensuring that
the Company maintains high standards of Corporate Governance and
have therefore adopted the Quoted Companies Alliance 2018 Corporate
Governance Code (the "QCA Code").
The Board holds at least four meetings annually and has
established Audit and Risk and Investment committees. The Board
does not intend to establish remuneration and nomination committees
given the current composition of the Board and the nature of the
Company's operations. The Board reviews annually the remuneration
of the Directors and agrees on the level of Directors' fees.
Composition of the Board
The Board currently comprises five non-executive directors, all
of whom are independent. Clive Spears is Chairman of the Board,
David Pirouet is Chairman of the Audit and Risk Committee and
Nicholas Wilson is Chairman of the Investment Committee.
Robert Quayle will be stepping down from the Board at the 2021
Annual General Meeting.
Audit and Risk Committee
The activities of the Audit and Risk Committee continued,
members of which are David Pirouet (Chairman of the Committee) and
all the other Directors. The Audit and Risk Committee provides a
forum through which the Company's external auditors report to the
Board.
The Audit and Risk Committee meets twice a year, at a minimum,
and is responsible for considering the appointment and fee of the
external auditors and for agreeing the scope of the audit and
reviewing its findings. It is responsible for monitoring compliance
with accounting and legal requirements, ensuring that an effective
system of internal controls is maintained and for reviewing annual
and interim financial statements of the Company before their
submission for approval by the Board. The Audit and Risk Committee
has adopted and complied with the extended terms of reference
implemented on the Company's readmission in August 2010, as
reviewed by the Board from time to time.
The Board is satisfied that the Audit and Risk Committee
contains members with sufficient recent and relevant financial
experience.
Investment Committee
The Board established an Investment Committee, which comprises
Nicholas Wilson (Chairman of the Committee) and all the other
Directors. The purpose of this committee is to review the portfolio
of the Company, new investment opportunities and evaluate the
performance of the Investment Advisor.
The Board is satisfied that the Investment Committee contains
members with sufficient recent and relevant financial
experience.
Significant holdings
Significant shareholdings are analysed in schedule of
shareholders holding over 3% of issued shares. The Directors are
not aware of any other holdings greater than 3 per cent. of issued
shares.
Directors
The Directors of the Company holding office during the financial
year and to date are:
Mr. C.L. Spears (Chairman)
Mr. R.B.M. Quayle
Mr. N.V. Wilson
Ms. H. Bestwick
Mr. D.R. Pirouet
Staff
At 31 January 2021 the Company employed no staff (2020:
none).
Auditors
Our Auditors, KPMG Audit LLC, being eligible, have expressed
their willingness to continue in office.
The current year is the sixth year in which the audit has been
undertaken by the current engagement partner at KPMG. The extension
of the engagement beyond the typical five-year limit has been
agreed following the deferral of the audit tender process as a
result of COVID-19.
On behalf of the Board
Heather Bestwick
Director
22 March 2021
Statement of Directors' Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
The Directors are required to prepare financial statements for
each financial year. As required by the AIM Rules of the London
Stock Exchange they are required to prepare the financial
statements in accordance with International Financial Reporting
Standards as adopted by the EU (IFRS as adopted by the EU), as
applicable to a Bermuda company and applicable law.
The Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Company and of its profit or loss for that
period. In preparing the Company's financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRS as adopted by the EU;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Bermuda Companies Act.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Bermuda governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Independent Auditor's Report to the Members of EPE Special
Opportunities Limited
1 Our opinion is unmodified
We have audited the financial statements of EPE Special
Opportunities Limited (the "Company"), which comprise the statement
of assets and liabilities as at 31 January 2021, the statements of
comprehensive income, changes in equity and cash flows for the year
then ended, and notes, comprising significant accounting policies
and other explanatory information.
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 January 2021 and of the Company's profit for the
year then ended; and
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the EU.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including FRC Ethical
Standards, as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
2 Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matter was as follows (unchanged
from 2020):
The risk Our response
Valuation of unquoted Subjective valuation: Our procedures included:
investments:
GBP28.4m (2020: GBP25.4m). 24% of the Company's underlying Control design :
investment portfolio (by Documenting and assessing
Refer to Significant value) is held in investments the design and implementation
accounting matters identified and loans where no quoted of the investment valuation
by the Audit and Risk market price is available. processes and controls;
Committee), note 3 (accounting
policies), note 2d (estimates Unquoted investments are
and judgements, including measured at fair value, Methodology choice
impact of Covid 19), which is established in :
note 11 (investments accordance with the valuation In the context of the
at fair value through principles of International valuation principles
profit or loss) and note Financial Reporting Standard of IFRS 13, we challenged
12 (fair value of financial 13 (IFRS "13") such as the appropriateness
instruments). prices of recent orderly of the valuation basis
transactions, trading selected;
comparable multiples and
net assets. Our valuations experience
The effect of these matters :
is that, as part of our Challenging the investment
risk assessment, we determined advisor on key judgements
that the valuation of affecting investee company
unquoted investments has valuations, such as
a high degree of estimation discount factors and
uncertainty, with a potential the choice of benchmark
range of reasonable outcomes for earnings and sales
greater than our materiality multiples. We compared
for the financial statements key underlying financial
as a whole, and possibly data inputs to external
many times that amount. sources and investee
The impact of COVID-19 company management information
on the economy has increased as applicable. We challenged
this uncertainty. the assumptions around
sustainability of earnings
based on the plans of
the investee companies
and whether these are
achievable. Our work
included consideration
of events which occurred
subsequent to the year
end up until the date
of this audit report;
Use of KPMG specialists
We involved KPMG specialists
to examine the methodology
adopted for the valuations
and challenge the assumptions
and key judgements in
the valuations.
Assessing transparency
:
Consideration of the
appropriateness, in
accordance with relevant
accounting standards,
of the disclosures in
respect of unquoted
investments and the
effect of changing one
or more inputs to reasonably
possible alternative
valuation assumptions.
--------------------------------- --------------------------------
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at
GBP1.2m (2020: GBP0.8m), determined with reference to a benchmark
of total assets of GBP145.3m (2020: GBP109.2m), of which it
represents approximately 0.83% (2020: 0.73%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance
materiality for the Company was set at 75% (2020: 75%) of
materiality for the financial statements as a whole, which equates
to GBP0.9m (2020: GBP0.6m). We applied this percentage in our
determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding GBP0.06m (2020: GBP0.04m), in
addition to other identified misstatements that warranted reporting
on qualitative grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
4 Going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements (the "going concern period").
In our evaluation of the Directors' conclusions, we considered
the inherent risks to the Company's business model and analysed how
those risks might affect the Company's financial resources or
ability to continue operations over the going concern period. The
risk that we considered most likely to affect the Company's
financial resources or ability to continue operations over this
period was the availability of capital to meet operating costs and
other financial commitments.
We considered whether this risk could plausibly affect the
liquidity in the going concern period by comparing severe, but
plausible downside scenarios that could arise from this risk
against the level of available financial resources indicated by the
Company's financial forecasts.
We considered whether the going concern disclosure in note 2 to
the financial statements gives a full and accurate description of
the Directors' assessment of going concern.
Our conclusions based on this work:
-- we consider that the Directors' use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate;
-- we have not identified, and concur with the Directors'
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as a going
concern for the going concern period; and
-- we found the going concern disclosure in the notes to the
financial statements to be acceptable.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the
Company will continue in operation.
5 Fraud and breaches of laws and regulations - ability to
detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud ("fraud
risks") we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
-- enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as enquiring whether
management have knowledge of any actual, suspected or alleged
fraud;
-- reading minutes of meetings of those charged with governance; and
-- using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in particular
the risk that management may be in a position to make inappropriate
accounting entries. On this audit we do not believe there is a
fraud risk related to revenue recognition because the Company's
revenue streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data sources
or agreements with little or no requirement for estimation from
management. We did not identify any additional fraud risks.
We performed procedures including
-- Identifying journal entries and other adjustments to test
based on risk criteria and comparing the identified entries to
supporting documentation; and
-- incorporating an element of unpredictability in our audit procedures.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience and
through discussion with management (as required by auditing
standards), and from inspection of the Company's regulatory and
legal correspondence, and discussed with management the policies
and procedures regarding compliance with laws and regulations. As
the Company is regulated, our assessment of risks involved gaining
an understanding of the control environment including the entity's
procedures for complying with regulatory requirements.
The Company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our
procedures on the related financial statement items.
The Company is subject to other laws and regulations where the
consequences of non-compliance could have a material effect on
amounts or disclosures in the financial statements, for instance
through the imposition of fines or litigation or impacts on the
Company's ability to operate. We identified financial services
regulation as being the area most likely to have such an effect,
recognising the regulated nature of the Company's activities and
its legal form. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of management and inspection of regulatory
and legal correspondence, if any. Therefore if a breach of
operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remains a higher risk of
non-detection of fraud, as this may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6 Other information
The Directors are responsible for the other information. The
other information comprises the information included in the annual
report but does not include the financial statements and our
auditor's report thereon. Our opinion on the financial statements
does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in Directors' statement, the Directors
are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
8 The purpose of this report and restrictions on its use by
persons other than the Company's members, as a body
This report is made solely to the Company's members, as a body,
in accordance with the terms of engagement as detailed in our
letter dated 4 August 2020. Our audit work has been undertaken so
that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company and the
Company's members, as a body, for our audit work, for this report,
or for the opinions we have formed.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street Douglas
Isle of Man IM1 1LA
22 March 2021
Statement of Comprehensive Income
For the year ended 31 January 2021
31 January 31 January
2021 2020
Revenue Capital Total Total
Note GBP GBP GBP GBP
------------------------------ ------------ ----------- ------------ ------------
Income
4 Interest income 4,089 - 4,089 101,566
11 Gains on investments - 42,012,143 42,012,143 39,568,491
------------------------------ ------------ ----------- ------------ ------------
Total income 4,089 42,012,143 42,016,232 39,670,057
------------------------------ ------------ ----------- ------------ ------------
Expenses
5 Investment advisor's fees (1,937,207) - (1,937,207) (1,642,504)
6 Directors' fees (154,000) - (154,000) (154,264)
7 Share based payment expense (682,525) - (682,525) (71,158)
8 Other expenses (669,769) - (669,769) (1,257,703)
Total expense (3,443,501) - (3,443,501) (3,125,629)
------------------------------ ------------ ----------- ------------ ------------
Profit before finance costs
and tax (3,439,412) 42,012,143 38,572,731 36,544,428
------------------------------ ------------ ----------- ------------ ------------
Finance charges
Interest on unsecured loan
15 note instruments (319,685) - (319,685) (319,685)
Profit for the year before
taxation (3,759,097) 42,012,143 38,253,046 36,224,743
9 Taxation - - - -
------------------------------ ------------ ----------- ------------ ------------
Profit for the year (3,759,097) 42,012,143 38,253,046 36,224,743
------------------------------ ------------ ----------- ------------ ------------
Other comprehensive income - - - -
------------------------------ ------------ ----------- ------------ ------------
Total comprehensive income (3,759,097) 42,012,143 38,253,046 36,224,743
------------------------------ ------------ ----------- ------------ ------------
Basic earnings per ordinary
17 share (pence) (11.47) 128.16 116.69 112.86
------------------------------ ------------ ----------- ------------ ------------
Diluted earnings per ordinary
17 share (pence) (11.47) 128.16 116.69 112.86
------------------------------ ------------ ----------- ------------ ------------
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
IFRS. The supplementary revenue and capital return columns are
prepared in accordance with the Board of Directors' agreed
principles, which are that the net gain/loss on investments is
allocated to the capital column and all other income and expenses
are allocated to the revenue column. All items derive from
continuing activities.
Statement of Assets and Liabilities
At 31 January 2021
31 January
31 January 2021 2020
Note GBP GBP
-------------------------------- -------------------- ----------------
Non-current assets
Investments at fair value
11 through profit or loss 117,256,810 83,382,923
117,256,810 83,382,923
-------------------------------- -------------------- ----------------
Current assets
13 Cash and cash equivalents 27,854,701 25,604,783
Trade and other receivables 197,564 235,211
-------------------------------- -------------------- ----------------
28,052,265 25,839,994
-------------------------------- -------------------- ----------------
Current liabilities
14 Trade and other payables (659,645) (1,028,704)
--------------------------------
(659,645) (1,028,704)
-------------------------------- -------------------- ----------------
Net current assets 27,392,620 24,811,290
-------------------------------- -------------------- ----------------
Non-current liabilities
15 Unsecured loan note instruments (3,956,822) (3,936,217)
(3,956,822) (3,936,217)
-------------------------------- -------------------- ----------------
Net assets 140,692,608 104,257,996
-------------------------------- -------------------- ----------------
Equity
16 Share capital 1,730,828 1,726,953
Share premium 13,619,627 13,489,826
Capital reserve 126,297,577 84,285,434
Revenue reserve (955,424) 4,755,783
Total equity 140,692,608 104,257,996
Net asset value per share
18 (pence) 437.63 317.18
-------------------------------- -------------------- ----------------
The financial statements were approved by the Board of Directors
on 22 March 2021 and signed on its behalf by:
Clive Spears David Pirouet
Director Director
Statement of Changes in Equity
For the year ended 31 January 2021
Year ended 31 January 2021
Share Share Capital Revenue
capital premium reserve reserve Total
Note GBP GBP GBP GBP GBP
------------------------- ---------- ----------- -------------- ------------ ------------
Balance at 1 February
2020 1,726,953 13,489,826 84,285,434 4,755,783 104,257,996
Total comprehensive
income/(loss) for the
year - - 42,012,143 (3,759,097) 38,253,046
------------------------- ---------- ----------- -------------- ------------ ------------
Contributions by and
distributions to owners
Share-based payment
7 charge - - - 682,525 682,525
Share ownership scheme
7 participation - - - 3,943 3,943
Provision for future
settlement - - - 216,323 216,323
16 Purchase of shares - - - (2,068,761) (2,068,761)
Share acquisition for
7 JSOP scheme - - - (786,140) (786,140)
16 Issue of new shares 3,875 129,801 - - 133,676
Total transactions with
owners 3,875 129,801 - (1,952,110) (1,818,434)
------------------------- ---------- ----------- -------------- ------------ ------------
Balance at 31 January
2021 1,730,828 13,619,627 126,297,577 (955,424) 140,692,608
------------------------- ---------- ----------- -------------- ------------ ------------
Year ended 31 January 2020
Capital Revenue
Share capital Share premium reserve reserve Total
Note GBP GBP GBP GBP GBP
------------------------- -------------- -------------- ----------- ------------ ------------
Balance at 1 February
2019 1,503,286 3,867,209 44,716,943 9,725,035 59,812,473
Total comprehensive
income/(loss) for the
year - - 39,568,491 (3,343,748) 36,224,743
------------------------- -------------- -------------- ----------- ------------ ------------
Contributions by and
distributions to owners
Share-based payment
7 charge - - - 71,158 71,158
Share ownership scheme
7 participation - - - 64,980 64,980
Provision for future
issue of shares - - - (350,000) (350,000)
16 Purchase of shares - - - (1,411,642) (1,411,642)
16 Issue of new shares 223,667 9,622,617 - - 9,846,284
------------------------- -------------- -------------- ----------- ------------ ------------
Total transactions with
owners 223,667 9,622,617 - (1,625,504) 8,220,780
------------------------- -------------- -------------- ----------- ------------ ------------
Balance at 31 January
2020 1,726,953 13,489,826 84,285,434 4,755,783 104,257,996
------------------------- -------------- -------------- ----------- ------------ ------------
Statement of Cash Flows
For the year ended 31 January 2021
31 January 31 January
2021 2020
Note GBP GBP
--------------------------------------------- ------------ ------------
Operating activities
Interest income received 4,089 17,574
Expenses paid (2,896,656) (2,903,818)
19 Net cash used in operating activities (2,892,567) (2,886,244)
--------------------------------------------- ------------ ------------
Investing activities
11 Purchase of investments (5,320,330) (700,000)
11 Proceeds from investments 13,612,853 942,505
11 Distributions from investments - 768,650
Net cash generated from investing activities 8,292,523 1,011,155
--------------------------------------------- ------------ ------------
Financing activities
Unsecured loan note interest paid (299,080) (299,080)
Purchase of shares (2,854,901) (1,411,642)
Share ownership scheme participation 3,943 64,980
Net cash used in financing activities (3,150,038) (1,645,742)
--------------------------------------------- ------------ ------------
Increase/(decrease) in cash and cash
equivalents 2,249,918 (3,520,831)
Cash and cash equivalents at start
of year 25,604,783 29,125,615
--------------------------------------------- ------------ ------------
Cash and cash equivalents at end of
13 year 27,854,701 25,604,783
--------------------------------------------- ------------ ------------
Notes to the Financial Statements
For the year ended 31 January 2021
1 Operations
The Company was incorporated with limited liability in the Isle
of Man on 25 July 2003. The Company then re-registered under the
Isle of Man Companies Act 2006, with registration number 008597V.
On 11 September 2018, the Company re-registered under the Bermuda
Companies Act 1981, with registration number 53954. The Company
raised GBP30.0 million by a placing of ordinary shares at 100 pence
per share. In 2009 the Company raised an additional GBP5.0 million
by a placing of ordinary shares at 5 pence per share. During the
year ended 31 January 2011, the Company issued a further GBP2.4
million in share capital. During the year ended 31 January 2016,
the Company raised a further GBP0.25 million in share capital. The
Company moved its operations to Jersey with immediate effect on 17
May 2017 and has subsequently operated from Jersey only.
The Company's ordinary shares are quoted on AIM, a market
operated by the London Stock Exchange, and the Growth Market of the
Aquis Stock Exchange (formerly the NEX Exchange).
The Company's portfolio investments are held in three associates
(ESO Investments 1 Limited, ESO Investments 2 Limited and ESO
Alternative Investments LP). The remainder of the Company's
subsidiary companies and associates are to be dissolved or are in
process of liquidation.
As the Company is an investment entity per IFRS 10, interests in
associates are measured at fair value.
The principal activity of the Company and its associates is to
arrange income yielding financing for growth, buyout and special
situations and holding the investments and its associates with a
view to exiting in due course at a profit.
The financial statements comprise the results of the Company and
its associates (see notes 3(a)).
The Company has no employees.
2 Basis of prepa ration
a. Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards and Interpretations as
adopted by the EU ("IFRS") and applicable legal and regulatory
requirements of Bermuda law and reflect the following policies,
which have been adopted and applied consistently.
b. Basis of measurement
The financial statements have been prepared on the historical
cost convention except for financial instruments at fair value
through profit or loss which are measured at fair value.
c. Functional and presentation currency
These financial statements are presented in Sterling, which is
the Company's functional currency. All financial information
presented in Sterling has been rounded to the nearest pound.
'Functional currency' is the currency of the primary economic
environment in which the Company operates. The expenses (including
investment advisory and administration fees) are denominated and
paid in sterling. Accordingly, management has determined that the
functional currency of the Company is sterling.
d. Use of estimates and judgements
The preparation of financial statements in conformity with IFRS
requires Directors and the Investment Advisor to make judgements,
estimates and assumptions that affect the application of policies
and the reported amounts of assets and liabilities, income and
expense. The estimates and associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources.
The Directors have, to the best of their ability, provided as true
and fair a view as is possible. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Judgements made by Directors and the Investment Advisor in the
application of IFRS that have a significant effect on the financial
statements and estimates with a significant risk of material
adjustments in the next year relate to the determination of fair
value of financial instruments with significant unobservable inputs
(see note 12).
COVID-19 Impact:
The COVID-19 pandemic has had a significant impact on the
valuation multiples, derived from quoted comparables, used in the
preparation of the fair market valuation of the Company's unquoted
investments. These quoted comparables are subject to both market
volatility and uncertainty due to the impact of the pandemic and
their trading outlook. The performance and financial position
forecasted for the Company's portfolio is subject to the wider
market uncertainty caused by the COVID-19 pandemic. These inputs
have been used in the preparation of the fair market valuation of
the Company's unquoted investments.
e. Unconsolidated structured entities
The Company invests in portfolio investments via three entities,
which the Directors consider to be associates - see note 3(a) for
an explanation of why these entities are not controlled but the
Company has significant influence. The purpose of these entities is
investment holding. These entities meet the definition of
unconsolidated structured entities under IFRS 12. There are letters
of support in place between the Company and ESO Investments 1
Limited and ESO Investments 2 Limited for the payment of
expenses.
The total net assets of these three entities, inclusive of loan
advanced by the Company, is GBP78,337,686 and the amount recognised
in the Company's financial statements (as investments at fair
value) is GBP117,256,810.
In respect of ESO Alternative Investments LP, the Company has
100% beneficial ownership of the entity and holds no voting
rights.
In respect of ESO Investments 1 Limited, the Company has 80%
beneficial ownership of the entity and holds no voting rights.
In respect of ESO Investments 2 Limited, the Company has 80%
beneficial ownership of the entity and holds no voting rights.
There are no restrictions on the ability of the associates to
transfer funds to the Company in the form of cash dividends or loan
repayments.
f. Going concern
The Company's management has assessed the Company's ability to
continue as a going concern and is satisfied that the Company has
the resources to continue in business for the foreseeable future.
Furthermore, the management is not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern. Therefore, the financial
statements continue to be prepared on the going concern basis.
3 Significant accounting policies
a. Basis of treatment of associates
Associates
Associates are those enterprises over which the reporting entity
has significant influence, and which are neither subsidiaries nor
an interest in a joint venture. Significant influence is exerted
when the reporting entity has the power to participate in the
financial and operating policy decision of the investee, but it is
not in control or joint control of those policies.
The Company's portfolio investments are held via three entities
in which the Company is the sole investor: ESO Investments 1
Limited, ESO Investments 2 Limited and ESO Alternative Investments
LP (together the "Associates").
The primary activity of the Associates is to make, hold and
realise investments with a view to profit. Any new investment made
by the Company via the Associates is at the sole discretion of the
Company. The Associates do not have any source of capital other
than the Company and rely upon the Company for any investment
funding. Investment funding advanced to the associates from the
Company is contingent on it being used for the same investment. The
associates are required to distribute any proceeds from each
investment to the Company upon receipt. This indicates that the
Company has significant influence over the primary activity of the
Associates.
The Associates, via their general partner or their Board, have
discretion over the management of their existing portfolio and on
the realisation of those investments. The respective Boards,
general partner and appointed investment managers of the Associates
are independent of the Company and accordingly the Company does not
control the investment activities of the Associates. This indicates
that the Company does not have overall control over the primary
activity of the Associates.
As the Company is the sole investor in the Associates, they do
not meet the definition of a joint venture. The Company does not
have control over the activities of the Associates and therefore
the Directors consider that they do not meet the definition of
subsidiaries. The Company has significant influence over the
activities of the Associates and therefore the Directors consider
that, for the reasons detailed above, they meet the definition of
associates. The Company has taken advantage of the exemption from
applying IAS 28 for investment entities and therefore the interests
in these associates are accounted for at fair value through profit
and loss rather than being equity accounted.
b. Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business and geographic area being arranging
financing for growth, buyout and special situations in the United
Kingdom. Information presented to the Board of Directors for the
purpose of decision making is based on this single segment.
c. Income
Interest income is recognised as it accrues in profit or loss,
using the effective interest method. Dividend income is accounted
for when the right to receive such income is established.
d. Expenses
All expenses are accounted for on an accrual basis.
e. Cash and cash equivalents
Cash and cash equivalents comprise of current cash deposits with
banks only.
f. Finance charges
Other finance charges are recognised as an expense.
g. Trade and other payables
Trade and other payables are stated at amortised cost in
accordance with IFRS 9.
h. Unsecured loan note instruments
Unsecured loan note instruments are stated at amortised cost in
accordance with IFRS 9.
i. Financial assets and financial liabilities
i. Classification
Financial assets
When the Company first recognises a financial asset, it
classifies it based on the business model for managing the asset
and the asset's contractual cash flow characteristics, as
follows:
-- Amortised cost-a financial asset is measured at amortised
cost if both of the following conditions are met:
- the asset is held within a business model whose objective is
to hold assets in order to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
-- Fair value through other comprehensive income-financial
assets are classified and measured at fair value through other
comprehensive income if they are held in a business model whose
objective is achieved by both collecting contractual cash flows and
selling financial assets.
-- Fair value through profit or loss-any financial assets that
are not held in one of the two business models mentioned are
measured at fair value through profit or loss.
When, and only when, the Company changes its business model for
managing financial assets it must reclassify all affected financial
assets.
Financial liabilities
All financial liabilities are measured at amortised cost, except
for financial liabilities at fair value through profit or loss.
Such liabilities include derivatives (other than derivatives that
are financial guarantee contracts or are designated and effective
hedging instruments), other liabilities held for trading, and
liabilities that an entity designates to be measured at fair value
through profit or loss.
ii. Recognition
The Company recognises financial assets and financial
liabilities on the date it becomes a party to the contractual
provisions of the instrument.
iii. Measurement
Equity and debt investments, including those held by associates,
are stated at fair value. Loans and Receivables are stated at
amortised cost less any impairment losses.
The Investment Advisor determines asset values using the
valuation principles of IFRS 13.
'Fair value' is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the
principal or, in its absence, the most advantages market to which
the Company has access at that date. The fair value of a liability
reflects its non-performance risk.
When available, the Company measures the fair value of an
instrument using the quoted price in an active market for that
instrument. A market is regarded as 'active' if transactions for
the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The
Company measures instruments quoted in an active market at
mid-price.
If there is no quoted price in an active market, then the
Company uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that
market participants would take into account in pricing a
transaction.
The Company recognises transfers between levels of the fair
value hierarchy as at the end of the reporting period during which
the change has occurred.
The amortised cost of a financial asset or financial liability
is the amount at which the financial asset or financial liability
is measured at initial recognition, minus principal repayments,
plus or minus the cumulative amortisation using the effective
interest method of any difference between the initial amount
recognised and the maturity amount, minus any reduction for
impairment. Financial assets that are not carried at fair value
though profit and loss are subject to an impairment test. For loans
to portfolio companies the impairment test is undertaken as part of
the assessment of the fair value of the enterprise value of the
related business, as described above. If expected life cannot be
determined reliably, then the contractual life is used.
iv. Impairment
12-month expected credit losses
12-month expected credit losses are calculated by multiplying
the probability of a default occurring in the next 12 months with
the total (lifetime) expected credit losses that would result from
that default, regardless of when those losses occur. Therefore,
12-month expected credit losses represent a financial asset's
lifetime expected credit losses that are expected to arise from
default events that are possible within the 12 month period
following origination of an asset, or from each reporting date for
those assets in initial recognition stage.
Lifetime expected credit losses
Lifetime expected credit losses are the present value of
expected credit losses that arise if a borrower defaults on its
obligation at any point throughout the term of a lender's financial
asset (that is, all possible default events during the term of the
financial asset are included in the analysis). Lifetime expected
credit losses are calculated based on a weighted average of
expected credit losses, with the weightings being based on the
respective probabilities of default.
v. Derecognition
The Company derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for
derecognition in accordance with IFRS 9.
The Company uses the weighted average method to determine
realised gains and losses on derecognition. A financial liability
is derecognised when the obligation specified in the contract is
discharged, cancelled or expired.
j. Share capital
Ordinary share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from equity, net of any tax
effects.
Repurchase of share capital (treasury shares)
When share capital recognised as equity is repurchased, the
amount of the consideration paid, which includes directly
attributable costs, net of any tax effects, is recognised as a
deduction from equity. Repurchased shares are classified as
treasury shares and are presented as a deduction from total equity.
When treasury shares are sold or reissued subsequently, the amount
received is recognised as an increase in equity, and the resulting
surplus or deficit on the transaction is transferred to/from
revenue reserves.
Capital Reserve and Revenue Reserve
The capital reserve comprises net gains and losses on
investments. The revenue reserve comprises other income and
expenses plus other items recorded directly in equity (excluding
items recorded as share capital/share premium).
k. Joint share ownership plan ("JSOP") and share-based payments
Directors of the Company and certain employees of the Investment
Advisor (together "Participants") receive remuneration in the form
of equity-settled share-based payment transactions, through a JSOP
Scheme.
Equity-settled share-based payments are measured at fair value
at the date of grant. The fair value is determined based on the
share price of the equity instrument at the grant date. The fair
value determined at the grant date of the equity-settled
share-based payment is expensed on a straight-line basis over the
vesting period, based on the Company's estimate of the number of
shares that will eventually vest. The instruments are subject to a
three-year service vesting condition from the grant date, and their
fair value is recognised as a share-based expense with a
corresponding increase in revenue reserves within equity over the
vesting period. Contributions received from employees as part of
the JSOP arrangement are recognised directly in equity in the line
share ownership scheme participation.
The assets (other than investments in the Company's shares),
liabilities, income and expenses of the trust established to
operate the JSOP scheme (the "Trust") are recognised by the Company
as the Trust is considered to be an agent of the Company. The
Trust's investment in the Company's shares is deducted from
shareholders' funds in the Statement of Asset and Liabilities as if
they were treasury shares (see note 7).
l. Future changes in accounting policies
Several new standards are effective for annual periods beginning
after 1 January 2020 and earlier application is permitted; however,
the Company has not adopted early the new or amended standards in
preparing these financial statements.
The Directors do not expect the adoption of the standards and
interpretations to have a material impact on the Company's
financial statements in the period of initial application.
4 Interest income
2021 2020
Company Company
GBP GBP
---------------------- -------- --------
Cash balances 4,089 17,574
Bond interest income - 83,992
----------------------- -------- --------
Total 4,089 101,566
----------------------- -------- --------
5 Investment advisory, administration and performance fees
Investment advisory fees
The investment advisory fee payable to EPIC Private Equity LLP
("EPE") is assessed and payable at the end of each fiscal quarter
and is calculated as 2 per cent. of the Company's NAV where the
Company's NAV is less than GBP100 million; otherwise the investment
advisory fee is calculated as the greater of GBP2.0 million or the
sum of 2 per cent. of the Company's NAV comprising Level 3
portfolio assets (i.e. unquoted assets), 1 per cent. of the
Company's NAV comprising Level 1 assets (i.e. quoted assets), no
fees on assets which are managed or advised by a third-party
manager, 0.5 per cent. of the Company's net cash (if greater than
nil), and 2 per cent. of the Company's net cash (if less than nil)
(i.e. reducing fees for net debt positions).
The charge for the current year was GBP1,937,207 (2020:
GBP1,642,504). The amount outstanding as at 31 January 2021 was
GBP500,000 (2020: GBP500,000) (see note 14).
Administration fees
EPE Administration Limited provides accounting and financial
administration services to the Company. The fee payable to EPE
Administration Limited is assessed and payable at the end of each
fiscal quarter and is calculated as 0.15 per cent. of the Company's
NAV where the Company's NAV is less than GBP100 million (subject to
a minimum fee of GBP35,000); otherwise the advisory fee shall be
calculated as 0.15 per cent. of GBP100 million plus a fee of 0.1
per cent. of the excess of the Company's NAV above GBP100
million.
The charge for the current year was GBP163,212 (year ended 31
January 2020: GBP125,732).
Other administration fees during the year were GBP66,234 (2019:
GBP72,499).
Performance fees paid by associates
The associates are stated at fair value. Performance fees are
paid to the Investment Advisor based on the performance of the
associates and deducted in calculating the fair value of
associates.
Performance fee in ESO Investments 1 Limited
The distribution policy of ESO Investments 1 Limited includes an
allocation of profits to the Investment Advisor such that, for each
investment where a returns hurdle of 8 per cent. per annum has been
achieved, the Investment Advisor is entitled to receive 20 per
cent. of the increase in the base value of investment. For the year
ended 31 January 2021, GBP767,311 has been credited to the profit
share account of the Investment Advisor in the records of ESO
Investments 1 Limited (2020: GBP2,718,340 credited).
Performance fee in ESO Investments 2 Limited
The distribution policy of ESO Investments 2 Limited includes an
allocation of profit to the Investment Advisor such that, for each
investment where a returns hurdle of 8 per cent. per annum has been
achieved, the Investment Advisor is entitled to receive 20 per
cent. of the increase in the base value of investment. For the year
ended 31 January 2021, GBP16,125,708 has been credited to the
profit share account of the Investment Advisor in the records of
ESO Investments 2 Limited (2020: GBP4,726,677 credited).
Joint share ownership plan ("JSOP") and share-based payments
Directors of the Company and certain employees of the Investment
Advisor (together "Participants") receive remuneration in the form
of equity-settled share-based payment transactions, through a JSOP
Scheme. See note 7.
6 Directors' fees
2021 2021 2020 2020
Share-based Share-based
Company payment Company payment
GBP GBP GBP GBP
------------------------ -------- ------------ -------- ------------
C.L. Spears (Chairman) 32,000 11,222 32,000 1,899
R.B.M. Quayle 30,000 10,440 30,000 4,062
N.V. Wilson 30,000 10,928 30,000 1,899
H. Bestwick 30,000 11,222 30,000 -
D.R. Pirouet 32,000 4,776 16,264 -
G.O Vero - - 16,000 -
------------------------ -------- ------------ -------- ------------
Total 154,000 48,588 154,264 7,860
------------------------- -------- ------------ -------- ------------
In addition to above, during the year, C.L. Spears and H.
Bestwick, received Directors' fees for their directorship in ESO
Investments 1 Limited and ESO Investments 2 Limited amounting to
GBP3,000 each. The share-based payment expense is the calculated as
set out in note 7.
7 Share-based payment expense
The cost of equity-settled transactions to Participants in the
JSOP Scheme are measured at fair value at the grant date. The fair
value is determined based on the share price of the equity
instrument at the grant date.
The Trust was created to award shares to Participants as part of
the JSOP. Participants are awarded a certain number of shares
("Matching Shares") which are subject to a three-year service
vesting condition from the grant date. In order to receive their
Matching Share allocation Participants are required to purchase
shares in the Company on the open market ("Bought Shares"). The
Participant will then be entitled to acquire a joint ownership
interest in the Matching Shares for the payment of a nominal
amount, on the basis of one joint ownership interest in one
Matching Share for every Bought Share they acquire in the relevant
award period.
The Trust holds the Matching Shares jointly with the Participant
until the award vests. These shares carry the same rights as the
rest of the ordinary shares.
The Trust held 1,419,004 (2020: 956,569) matching shares at the
year-end which have traditionally not voted (see note 16).
Nil shares vested to Participants in the year ended 31 January
2021 (2020: 79,055). 271,995 shares were awarded to Participants in
the year ended 31 January 2021 (2020: 856,058).
The share-based payment expense in the Statement of
Comprehensive Income has been calculated on the basis of the fair
value of the equity instruments at the grant date and the estimated
number of equity instruments to be issued after the vesting period,
less the amount paid for the joint ownership interest in the
Matching Shares.
The total share-based payment expense in the year ended 31
January 2021 was GBP682,525 (2020: GBP71,158) of which GBP531,224
related to expenses incurred in the year ended 31 January 2021 and
GBP151,301 related to expenses incurred in the year ended 31
January 2020. Of the total share-based payment expense in the year
ended 31 January 2021, GBP48,588 related to the Directors (2020:
GBP7,860) and the balance related to members, employees and
consultants of the Investment Advisor.
8 Other expenses
The breakdown of other expenses presented in the statement of
comprehensive income is as follows:
31 January 31 January
2021 2020
Total Total
GBP GBP
------------------------------------ ----------- ------------
Administration fees (229,446) (198,231)
Directors' and officers' insurance (22,356) (22,665)
Professional fees (221,697) (780,440)
Board meeting and travel expenses (1,981) (16,425)
Auditors' remuneration (55,000) (50,000)
Bank charges (659) (1,095)
Irrecoverable VAT (675) (600)
Sundry expenses (33,111) (50,916)
Nominated advisor and broker fees (60,710) (55,740)
Listing fees (44,134) (81,591)
Other expenses (669,769) (1,257,703)
------------------------------------- ----------- ------------
9 Taxation
The Company is a tax resident of Jersey and is subject to 0 per
cent. corporation tax (2020: 0 per cent.). The Limited Liability
Partnerships and Limited Partnerships are transparent for tax
purposes.
ESO Alternative Investments LP is transparent for tax
purposes.
ESO Investments 1 Limited and ESO Investments 2 Limited are tax
resident in Jersey and are subject to 0 per cent. corporation
tax.
10 Dividends paid and proposed
No dividends were paid or proposed for the year ended 31 January
2021 (2020: GBPnil).
11 Investments at fair value through profit or loss
31 January
31 January 2021 2020
GBP GBP
Investments at fair value through
profit and loss* 117,256,810 83,382,923
117,256,810 83,382,923
----------------------------------- ----------------------- ----------------------
Investment roll forward schedule
31 January 2021 31 January 2020
GBP GBP
Investments at 1 February 83,382,923 34,793,620
Purchase of investments 5,320,330 700,000
Income from investments (13,612,853) (942,505)
Distributions (non-cash distribution
in current year) (66,664) (768,650)
Buy out of accrued carried interest - 9,846,284
Fair value movements 42,012,143 39,568,491
Loan to associates 220,931 185,683
Investments at 31 January 117,256,810 83,382,923
--------------------------------------- --------------------------- --------------------------
*Comprises associates stated at fair value in accordance with
accounting policy set out in note 3(a) ( ESO Investments 1 Limited,
ESO Investments 2 Limited and ESO Alternative Investments LP).
12 Fair value of financial instruments
The Company determines the fair value of financial instruments
with reference to IPEV guidelines and the valuation principles of
IFRS 13 (Fair Value Measurement). The Company measures fair value
using the IFRS 13 fair value hierarchy, which reflects the
significance and certainty of the inputs used in deriving the fair
value of an asset:
-- Level 1: Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments;
-- Level 2: Inputs other than quoted prices included within
Level 1 that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes
instruments valued using quoted market prices in active markets for
similar instruments, quoted prices for identical or similar
instruments in markets that are considered less than active or
other valuation techniques in which all significant inputs are
directly or indirectly observable from market data;
-- Level 3: Inputs that are unobservable. This category includes
all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a
significant effect on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for
similar instruments but for which significant unobservable
adjustments or assumptions are required to reflect differences
between the instruments.
Valuation framework
The Company employs the valuation framework detailed below with
respect to the measurement of fair values. A valuation of the
Company's investments is prepared by the Investment Advisor with
reference to IPEV guidelines and the valuation principles of IFRS
13 (Fair Value Measurement). The Investment Advisor recommends
these valuations to the Board of Directors. The Board of Directors
considers the valuations recommended by the Investment Advisor,
determines any amendments required and thereafter adopts the fair
values presented in the Company's financial statements.
Quoted equity investments
Quoted investments traded in an active market are classified as
Level 1 in the IFRS 13 fair value hierarchy. The Company's
investment in Luceco is considered as a Level 1 asset. For Level 1
assets, the Company calculates the holding value from the latest
market price (without adjustment).
Unquoted private equity investments and third-party fund
investments
Private equity investments and fund investments are classified
as Level 3 in the IFRS 13 fair value hierarchy. The Company's
investments in Whittard, David Phillips, Pharmacy2U, European
Capital Private Debt Fund LP, EPE Junior Aggregator LP and Atlantic
Credit Opportunities Fund Limited are considered to be Level 3
assets. Various valuation techniques may be applied in determining
the fair value of investments held as Level 3 in the fair value
hierarchy;
-- For recently acquired assets, the Company considers the
investment cost an applicable fair value for the asset;
-- For underperforming assets, the Company considers the net
asset or recovery valuation more applicable, in particular where
the business' performance be contingent on shareholder financial
support;
-- For performing assets, the Company considers the market
approach to be the most appropriate with a specific focus on
trading comparables, applied on a forward basis. The Company will
also consider transaction comparables, applied on a historic
basis;
-- For assets managed and valued by third party managers, the
Company reviews the valuation methodology of the third-party
manager. If deemed appropriate and consistent with the Company's
reporting standards, the Company will use the valuation prepared by
the third-party manager.
The Investment Advisor believe that it is appropriate to apply
an illiquidity discount to the multiples of comparable companies
when using them to calculate valuations for small, private
companies. This discount adjusts for the difference in size between
generally larger comparable companies and the smaller assets being
valued. The illiquidity discount also incorporates the premium the
market gives to comparable companies for being freely traded or
listed securities. The Investment Advisor has determined between 15
per cent. and 25 per cent. to be an appropriate illiquidity
discount with reference to market data and transaction multiples
seen in the market in which the Investment Advisor operates.
Where portfolio investments are held through
subsidiary/associate holding companies, the net assets of the
holding company are added to the value of the portfolio investment
being assessed to derive the fair value of the holding company held
by the Company.
Fair value hierarchy - Financial instruments measured at fair
value
The table below analyses the underlying investments held by the
associates measured at fair value at the reporting date by the
level in the fair value hierarchy into which the fair value
measurement is categorised. Debt securities are also included, as
these are also stated at fair value with the Board assessing the
fair value of the total investment, which includes debt and equity.
The amounts are based on the values recognised in the statement of
financial position of the associates.
Level 1 Level 3 Total
31 January 2021 GBP GBP GBP
------------------------------------- --------------------- --------------------- -------------------
Financial assets at fair value
through profit or loss
Unquoted private equity investments
(including debt) - 23,156,643 23,156,643
Unquoted fund investments 5,265,686 5,265,686
Quoted equity investments 88,737,691 - 88,737,691
Investments at fair value
through profit or loss 88,737,691 28,422,329 117,160,020
-------------------------------------- --------------------- --------------------- -------------------
Other asset and liabilities
(held at cost) - - 96,790
Total 88,737,691 28,422,329 117,256,810
-------------------------------------- --------------------- --------------------- -------------------
Level 1 Level 3 Total
31 January 2020 GBP GBP GBP
------------------------------------- --------------------- --------------------- -------------------
Financial assets at fair value
through profit or loss
Unquoted private equity investments
(including debt) - 23,892,971 23,892,971
Unquoted fund investments - 1,512,259 1,512,259
Quoted private equity investments 57,227,830 - 57,227,830
Investments at fair value
through profit or loss 57,227,830 25,405,230 82,633,060
-------------------------------------- --------------------- --------------------- -------------------
Other asset and liabilities
(held at cost) - - 749,863
Total 57,227,830 25,405,230 83,382,923
-------------------------------------- --------------------- --------------------- -------------------
The following table, detailing the value of portfolio
investments only, shows a reconciliation of the opening balances to
the closing balances for fair value measurements in level 3 of the
fair value hierarchy for the underlying investments held by the
associates.
31 January 31 January
2021 2020
Unquoted investments (including debt) GBP GBP
------------------------------------------ ------------ ----------------
Balance as at 1 February 25,405,230 14,209,340
Additional investments 5,339,953 700,000
Capital distributions from investments (223,018) (247,693)
Change in fair value through
profit & loss (2,099,836) 10,743,583
Balance as at 31 January 28,422,329 25,405,230
------------------------------------------ ------------ ----------------
Significant unobservable inputs used in measuring fair value
The table below sets out information about significant
unobservable inputs used at 31 January 2021 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Description Fair value Significant unobservable
at inputs
31 January
2021
------------------------------------ -------------------------
GBP
------------------------------------ -------------------- -------------------------
Unquoted private equity investments 23,156,643 Sales/EBITDA
(including debt) multiple
Unquoted fund investments 5,265,686 Reported net
asset value
------------------------------------ -------------------- -------------------------
Significant unobservable inputs are developed as follows:
-- Trading comparable multiple: valuation multiples used by
other market participants when pricing comparable assets. Relevant
comparable assets are selected from public companies determined to
be proximate to the Company's investment based on similarity of
sector, size, geography or other relevant factors. The valuation
multiple for a comparable company is determined by calculating the
enterprise value of the company implied by its market price as at
the reporting date and dividing by the relevant financial metric
(sales or EBITDA).
-- Reported net asset value: for assets managed and valued by a
third party, the manager provides the Company with periodic
valuations of the Company's investment. The Company reviews the
valuation methodology of the third-party manager. If deemed
appropriate and consistent with the Company's reporting standards,
the Board will adopt the valuation prepared by the third-party
manager. Adjustments are made to third party valuations where
considered necessary to arrive at the Director's estimate of fair
value.
Although management believes that its estimates of fair value
are appropriate, the use of different methodologies or assumptions
could lead to different measurements of fair value. For fair value
measurements of Level 3 assets, changing one or more of the
assumptions used to reasonably possible alternative assumptions
would have the following effects on the Level 3 investment
valuations:
-- For the Company's investment in mature Level 3 assets, the
valuations used in the preparation of the financial statements
imply an average EV to EBITDA multiple of 5.8x (weighted by each
asset's total valuation) (2020: 5.6x). The key unobservable inputs
into the preparation of the valuation of mature Level 3 assets was
the EV to EBITDA multiple applied to the asset's financial
forecasts. If these inputs had been taken to be 25 per cent.
higher, the value of the Level 3 assets and profit for the year
would have been GBP 3,767,551 higher. If these inputs had been
taken to be 25 per cent. lower, the value of the Level 3 assets and
profit for the year would have been GBP4,629,372 lower. A
corresponding increase or decrease in the asset's financial
forecasts would have a similar impact on the Company's assets and
profit.
-- For the Company's investment in growth Level 3 assets, the
valuations used in the preparation of the financial statements
imply an average EV to sales multiple of 1.6x (weighted by each
asset's total valuation) (2020: 0.5x). The key unobservable inputs
into the preparation of the valuation of growth Level 3 assets were
the EV to sales multiple applied to the asset's financial
forecasts. If these inputs had been taken to be 25 per cent.
higher, the value of the Level 3 assets and profit for the year
would have been GBP932,486 higher. If these inputs had been taken
to be 25 per cent. lower, the value of the Level 3 assets and
profit for the year would have been GBP932,486 lower. A
corresponding increase or decrease in the asset's financial
forecasts would have a similar impact on the Company's assets and
profit.
Classification of financial assets and liabilities
The table below sets out the classifications of the carrying
amounts of the Company's financial assets and liabilities into
categories of financial instruments.
31 January 2021
At amortised
At fair value cost Total
Financial assets GBP GBP GBP
---------------------------------- -------------------------- ----------------- ---------------
Investments at fair value
through profit or loss 117,256,810 - 117,256,810
Cash and cash equivalents - 27,854,701 27,854,701
Trade and other receivables - 98,200 98,200
117,256,810 27,952,901 145,209,711
========================== ================= ===============
Financial liabilities
---------------------------------- -------------------------- ----------------- ---------------
Trade and other payables - 659,645 659,645
Unsecured loan note instruments* - 3,956,822 3,956,822
- 4,616,467 4,616,467
========================== ================= ===============
31 January 2020
At amortised
At fair value cost Total
Financial assets GBP GBP GBP
---------------------------------- -------------------------- ----------------- ---------------
Investments at fair value
through profit or loss 83,382,923 - 83,382,923
Cash and cash equivalents - 25,604,783 25,604,783
Trade and other receivables - 135,745 135,745
83,382,923 25,740,528 109,123,451
========================== ================= ===============
Financial liabilities
---------------------------------- -------------------------- ----------------- ---------------
Trade and other payables - 678,704 678,704
Unsecured loan note instruments* - 3,936,217 3,936,217
- 4,614,921 4,614,921
========================== ================= ===============
*The directors consider that the fair value of the unsecured
loan note instruments is equal to carrying value.
13 Cash and cash equivalents
2021 2020
GBP GBP
--------------------------- ----------- -----------
Current and call accounts 27,854,701 25,604,783
--------------------------- ----------- -----------
27,854,701 25,604,783
--------------------------- ----------- -----------
The current and call accounts have been classified as cash and
cash equivalents in the Statement of Cash Flows.
14 Trade and other payables
2021 2020
GBP GBP
-------------------------------------- -------- ----------
Trade payables 688 -
Accrued administration fee 47,677 38,569
Accrued audit fee 43,466 24,136
Accrued professional fee 53,131 103,166
Accrued investment advisor fees 500,000 500,000
Accrued Directors' fees 12,833 12,833
Provision for future issue of shares - 350,000
Other payables 1,850 -
Total 659,645 1,028,704
--------------------------------------- -------- ----------
15 Non-current liabilities
The Company has issued Unsecured Loan Notes ("ULN") which pay
interest at 7.5 per cent. per annum and are redeemable on 23 July
2022 (subject to voluntary early redemption by the Company). At 31
January 2021, GBP3,987,729 (2020: GBP3,987,729) of ULNs in
principal amount were outstanding. Issue costs totalling GBP144,236
have been offset against the value of the loan note instrument and
are being amortised over the life of the instrument. The total
issue costs expensed in the year ended 31 January 2021 was
GBP20,605 (2020: GBP20,605). The carrying value of the ULNs in
issue at the year-end was GBP3,956,822 (2020: GBP3,936,217). The
total interest expense for the ULNs for the year is GBP319,685
(2020: GBP319,685). This includes the amortisation of the issue
costs.
16 Share capital
2021 2021 2020 2020
Number GBP Number GBP
------------------------------- ------------ ---------- ------------ ----------
Authorised share capital
Ordinary shares of 5p each 45,000,000 2,250,000 45,000,000 2,250,000
-------------------------------- ------------ ---------- ------------ ----------
Called up, allotted and fully
paid
Ordinary shares of 5p each 34,616,554 1,730,828 34,539,061 1,726,953
Ordinary shares of 5p each
held in treasury (2,467,731) - (1,668,251) -
-------------------------------- ------------ ---------- ------------ ----------
32,148,823 1,730,828 32,870,810 1,726,953
------------------------------- ------------ ---------- ------------ ----------
During the year ended 31 January 2021, 77,493 ordinary shares of
5 pence each were issued at a price of 172.50 pence each.
Therefore, the share capital of the Company increased by GBP3,875
(GBP223,667 as at 31 January 2020) and the share premium increased
by GBP129,801 (GBP9,622,617 as at 31 January 2020).
During the year ended 31 January 2021, the Company repurchased
799,480 shares (2020: 752,001 shares) with a total value of
GBP2,068,761 (2020: GBP1,411,642). These shares are held as
treasury shares.
During the year ended 31 January 2021, the Trust purchased
462,435 shares (2020: nil) with a total value of GBP786,140 (2020:
nil). At the year-end 1,419,004 shares were held by the Trust
(2020: 956,569) (see note 7).
17 Basic and diluted profit per share (pence)
Basic profit per share is calculated by dividing the profit of
the Company for the year attributable to the ordinary shareholders
of GBP38,253,046 (2020: GBP36,224,743) divided by the weighted
average number of shares outstanding during the year of 32,782,089
after excluding treasury shares (2020: 32,095,510 shares).
Diluted profit per share is calculated by dividing the profit of
the Company for the year attributable to ordinary shareholders of
GBP38,253,046 (2020: GBP36,224,743) divided by the weighted average
number of ordinary shares outstanding during the year, as adjusted
for the effects of all dilutive potential ordinary shares, of
32,782,089 after excluding treasury shares (2020: 32,095,510
shares).
18 NAV per share (pence)
The Company's NAV per share of 437.63 pence (2020: 317.18 pence)
is based on the net assets of the Company at the year-end of
GBP140,692,608 (2020: GBP104,257,996) divided by the shares in
issue at the end of the year of 32,148,823 after excluding treasury
shares (2020: 32,870,810).
The Company's diluted NAV per share of 437.63 pence is based on
the net assets of the Company at the year-end of GBP140,692,608
(2020: GBP104,257,996) divided by the shares in issue at the end of
the year, as adjusted for the effects of dilutive potential
ordinary shares of 32,148,823 after excluding treasury shares
(2020: 32,870,810).
19 Net cash used in operating activities
Reconciliation of profit before finance cost and tax to net cash
used in operating activities:
2021 2020
Company Company
GBP GBP
---------------------------------------------- ------------ ------------
Profit before finance cost and tax (Revenue) (3,439,412) (3,024,062)
Adjustments:
Adjustment for accrued interest on loan
to Hamsard 3463 Limited - (151,776)
Share-based payment expense 682,525 71,158
Movement in loans from associates (154,268) (33,907)
(2,911,155) (3,138,587)
Non-cash items
Movement in trade and other receivables 37,647 66,517
Movement in trade and other payables (19,059) 185,826
Net cash used in operating activities (2,892,567) (2,886,244)
---------------------------------------------- ------------ ------------
20 Financial instruments
The Company's financial instruments comprise:
-- Investments in listed and unlisted companies held by
associates, comprising equity and loans
-- Cash and cash equivalents, loans and convertible loan note instruments; and
-- Accrued interest and trade and other receivables, accrued expenses and sundry creditors.
Financial risk management objectives and policies
The main risks arising from the Company's financial instruments
are liquidity risk, credit risk, market price risk and interest
rate risk. None of those risks are hedged. These risks arise
through directly held financial instruments and through the
indirect exposures created by the underlying financial instruments
in the associates. These risks are managed by the Directors in
conjunction with the Investment Advisor. The Investment Advisor is
responsible for day to day management of financial instruments in
the associates.
Capital management
The Company's capital comprises share capital, share premium and
reserves and is not subject to externally imposed capital
requirements.
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Company's liquid assets comprise cash and cash
equivalents and trade and other receivables, which are readily
realisable.
Residual contractual maturities of financial liabilities
Less
than 1 - 3 3 months 1 - 5 Over 5 No stated
1 Month Months to 1 year years years maturity
31 January 2021 GBP GBP GBP GBP GBP GBP
----------------------- ---------- -------- ----------- ---------- ------- ----------
Financial liabilities
Trade and other
payables 659,645 - - - - -
Loan note instruments - - 4,436,341 - -
Total 659,645 - - 4,436,341 - -
------------------------- ---------- -------- ----------- ---------- ------- ----------
Less
than 1 - 3 3 months 1 - 5 Over 5 No stated
1 Month Months to 1 year years years maturity
31 January 2020 GBP GBP GBP GBP GBP GBP
----------------------- ---------- -------- ----------- ---------- ------- ----------
Financial liabilities
Trade and other
payables 1,028,704 - - - - -
Loan note instruments - - 4,735,415 - -
Total 1,028,704 - - 4,735,415 - -
------------------------- ---------- -------- ----------- ---------- ------- ----------
Credit risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company.
The Company, through its interests in associates, has advanced
loans to a number of private companies which exposes the Company to
significant credit risk. The loans are advanced to unquoted private
companies, which have no credit risk rating. They are entered into
as part of the investment strategy of the Company and its
associates, and credit risk is managed by taking security where
available (typically a floating charge) and the Investment Advisor
taking an active role in the management of the borrowing
companies.
Although the Investment Advisor looks to set realistic repayment
schedules, it does not necessarily view a portfolio company not
repaying on time and in full as 'underperforming' and seeks to
monitor each portfolio company on a case-by-case basis. However, in
all cases the Investment Advisor reserves the right to exercise
step in rights. In addition to the repayment of loans advanced, the
Company and associates will often arrange additional preference
share structures and take significant equity stakes so as to create
shareholder value. It is the performance of the combination of all
securities including third party debt that determines the Company's
view of each investment.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following (excluding exposure in the
underlying associates):
2021 2020
GBP GBP
----------------------------- ----------- -----------
Cash and cash equivalents 27,854,701 25,604,783
Trade and other receivables 98,200 135,745
Total 27,952,901 25,740,528
------------------------------ ----------- -----------
Cash balances are placed with HSBC Bank plc, Barclays Bank plc,
both of which have the credit rating of A1 Negative (Moody's) and
Santander International which has the credit rating of A2
(Moody's).
Market price risk
Market price risk is the risk that the value of a financial
instrument will fluctuate as a result of changes in market prices
(other than those arising from interest rate risk or currency
risk). The Company is exposed to a market price risk via its equity
investments held through its interests in associates, which are
stated at fair value.
Market price risk sensitivity
The Company is exposed to market price risk with regard to its
investment in the partnerships, which own equity interests in a
number of quoted and unquoted companies which are stated at fair
value. Luceco plc was quoted on the Main Market of the London Stock
Exchange at 31 January 2021. If Luceco plc's share price had been
5.0 per cent. higher than actual close of market on 31 January
2021, EPE Special Opportunities Limited's NAV / share would have
been 2.96 per cent. higher than reported. If Luceco's share price
had been 5.0 per cent. lower than actual close of market on 31
January 2021, EPE Special Opportunities Limited's NAV / share would
have been 2.96 per cent. lower than reported. Such movement would
have had a corresponding effect on the profit for the year.
Interest rate risk
The Company is exposed to interest rate risk through its
investment in the associates and on its cash balances. The
associates provide loans to portfolio companies. Most of the loans
are at fixed rates. Cash balances earn interest at variable rates.
The unsecured loan note instruments carry fixed interest rates.
The table below summarises the Company's exposure to interest
rate risks. It includes the Company's financial assets and
liabilities at the earlier of contractual re-pricing or maturity
date, measured by the carrying values of assets and
liabilities:
Less than 1 month 1 - 5 Over Non- interest
31 January 2021 1 month - 1 year years 5 years bearing Total
Assets GBP GBP GBP GBP GBP GBP
--------------------------- ----------- ---------- ------------ --------- -------------- ------------
Receivables and
cash
Trade and other
receivables - - - 98,200 98,200
Cash and cash equivalents 27,854,701 - - - - 27,854,701
---------------------------- ----------- ---------- ------------
Total financial
assets 27,854,701 - - - 98,200 27,952,901
---------------------------- ----------- ---------- ------------ --------- -------------- ------------
Liabilities
Financial liabilities
measured at amortised
cost
Trade and other
payables - - - - (659,645) (659,645)
Unsecured loan note
instruments - - (3,956,822) - - (3,956,822)
Total financial
liabilities - - (3,956,822) - (659,645) (4,616,467)
---------------------------- ----------- ---------- ------------ --------- -------------- ------------
Less than 1 month 1 - 5 Over Non- interest
31 January 2020 1 month - 1 year years 5 years bearing Total
Assets GBP GBP GBP GBP GBP GBP
----------------------------- ---------------- ---------- ------------ --------- -------------- ------------
Receivables and cash
Trade and other receivables - - - - 135,745 135,745
Cash and cash equivalents 25,604,783 - - - - 25,604,783
----------------------------- ---------------- ---------- ------------
Total financial assets 25,604,783 - - - 135,745 25,740,528
----------------------------- ---------------- ---------- ------------ --------- -------------- ------------
Liabilities
Financial liabilities
measured at amortised
cost
Trade and other payables - - - - (1,028,704) (1,028,704)
Unsecured loan note
instruments - - (3,936,217) - - (3,936,217)
Total financial liabilities - - (3,936,217) - (1,028,704) (4,964,921)
----------------------------- ---------------- ---------- ------------ --------- -------------- ------------
Interest rate sensitivity
The Company is exposed to market interest rate risk only via its
cash balances. A sensitivity analysis has not been provided as it
is not considered significant to Company performance.
Currency risk
The Company's has no significant exposure to foreign currency
risk.
Exposure to other market price risk
The investment advisor monitors the concentration of risk for
equity and debt securities based on counterparties and industries
(and geographical location). The Company's equity and debt
investments are concentrated in the following industries.
2020 2019
% %
--------------------------------------------- -------------------------- ------
Retail 13.3 21.2
Engineering, Manufacturing and Distribution 61.2 52.5
Healthcare 2.7 0.7
Credit Funds 3.6 1.4
Bank Deposits 19.2 24.2
--------------------------------------------- -------------------------- ------
100.0 100.0
--------------------------------------------- -------------------------- ------
The Company notes that there was a concentration on the
Engineering, Manufacturing and Distribution sector, representing
61.2 per cent. of investments for the year ended 31 January 2021
(31 January 2020: 52.5 per cent.). The Company monitors carefully
the sector concentration risk across the portfolio.
Operational risk
'Operational risk' is the risk of direct or indirect loss
arising from a wide variety of causes associated with the
processes, technology and infrastructure supporting the Company's
activities (both at the Company and at its service providers) and
from external factors (other than credit, market and liquidity
risks) such as those arising from legal and regulatory requirements
and generally accepted standards of investment management
behaviour.
The Company's objective is to manage operational risk so as to
balance the limitation of financial losses and damage to its
reputation with achieving its investment objective of generating
returns to investors.
The primary responsibility for the development and
implementation of controls over operational risk rests with the
Board of Directors. This responsibility is supported by the
development of overall standards for the management of operational
risk, which encompasses the controls and processes at the service
providers and the establishment of service levels with the service
providers, in the following areas:
-- documentation of controls and procedures;
-- requirements for:
- appropriate segregation of duties between various functions, roles and responsibilities;
- reconciliation and monitoring of transactions; and
- periodic assessment of operational risk faced;
-- the adequacy of controls and procedures to address the risks identified;
-- compliance with regulatory and other legal requirements;
-- development of contingency plans;
-- training and professional development;
-- ethical and business standards; and
-- risk mitigation, including insurance if this is effective.
The Company's key service providers include the following:
-- Administrator: Langham Hall Fund Management (Jersey) Limited
-- Investment Advisor: EPIC Private Equity LLP
-- Financial Administrator: EPE Administration Limited
-- Nominated Advisor and Broker: Numis Securities Limited
The Directors' assessment of the adequacy of the controls and
processes in place at the service providers with respect to
operational risk is carried out via regular discussions with the
service providers as well as site visits to their offices. The
Company also undertakes periodic third-party reviews of service
providers' activities.
21 Directors' interests
Five of the Directors have interests in the shares of the
Company as at 31 January 2021 (2020: four). Nicholas Wilson holds
131,265 ordinary shares (2020: 128,764). Robert Quayle holds
112,577 ordinary shares (2020: 109,979). Clive Spears holds 133,270
ordinary shares (2020: 129,270). Heather Bestwick holds 19,263
ordinary shares (2020: 13,888). David Pirouet holds 11,162 ordinary
shares (2020: nil).
22 Related parties
Directors' fees expense during the year amounted to GBP154,000
(year ended 31 January 2020: GBP154,264) of which GBP12,833 is
accrued as at 31 January 2021 (2020: GBP12,833)
Certain Directors of the Company and other participants are
incentivised in the form of equity settled share-based payment
transactions, through a Joint Share Ownership Plan (see note
7).
Details of remuneration payable to key service providers are
included in note 5 to the financial statements.
In August 2020, the Investment Advisor acquired a controlling
interest in Atlantic Capital Management Limited ("ACML"). ACML is
the manager of Atlantic Credit Opportunities Fund and the
sub-advisor to the segregated account of Prelude Structured
Alternatives Master Fund LP. On 1 September 2020, the Company
completed a GBP1.9 million investment into Atlantic Credit
Opportunities Fund. On 12 November 2020, the Company completed a
further $2.5 million investment in a segregated account of Prelude
Structured Alternatives Master Fund LP. The Company will not pay
any management or performance fees to ACML in relation to these two
investments.
23 Subsequent events
Following the year end, the Directors purchased 6,088 ordinary
shares in the Company at a price of 271.00 pence per ordinary share
on 18 February 2021 and 2,911 ordinary shares at 278.80 pence per
ordinary share on 12 February 2021.
Schedule of shareholders holding over 3% of issued shares
As at 31 January 2021
Percentage holding
-------------------------------------------------- -------------------
Giles Brand 32.10%
Corporation of Lloyds 9.92%
Premier Miton Investors 6.75%
Canaccord Genuity Wealth Management 6.22%
Boston Trust Company Limited (Trustee to the ESO
JSOP Scheme) 4.47%
Lombard Odier Darier Hentsch 3.11%
Total over 3% holding 62.57%
------------------------------------------------------ -------------------
Company Information
Directors Administrator and Company Address
C.L. Spears (Chairman) Langham Hall Fund Management
(Jersey) Limited
H. Bestwick Liberation House
D.R. Pirouet Castle Street, St Helier
R.B.M. Quayle Jersey JE1 2LH
N.V. Wilson
Investment Advisor Nominated Advisor and Broker
EPIC Private Equity LLP Numis Securities Limited
Audrey House 10 Paternoster Square
16-20 Ely Place London EC4M 7LT
London EC1N 6SN
Auditors and Reporting Accountants Registered Agent (Bermuda)
KPMG Audit LLC Conyers Dill & Pearman
Heritage Court Clarendon House, 2 Church Street
41 Athol Street Hamilton HM 11
Douglas Bermuda
Isle of Man IM1 1LA
Bankers Registrar and CREST Providers
Barclays Bank plc Computershare Investor Services
(Jersey) Limited
1 Churchill Place Queensway House
Canary Wharf Hilgrove Street
London E14 5HP St. Helier JE1 1ES
HSBC Bank plc Investor Relations
1st Floor Richard Spiegelberg
60 Queen Victoria Street Cardew Company
London EC4N 4TR 5 Chancery Lane
London EC4A 1BL
Santander International
PO Box 545
19-21 Commercial Street
St Helier, Jersey, JE4 8XG
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FR FFFEFVTIFFIL
(END) Dow Jones Newswires
March 23, 2021 03:15 ET (07:15 GMT)
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