1
Annual
Report
2023
2
3
Contents
Strategic Review
4. Chairman’s Statement
8. Investment Adviser’s Report
12. Strategic Report
20. Board of Directors
22. Directors’ Report
27. Statement of Corporate Governance
30. Report of the Audit Committee
33. Directors’ Remuneration Report
36. Management Report and Directors’ Responsibility Statement
37. Independent Auditor’s Report
44. Income Statement
45. Statement of Financial Position
46. Statement of Changes in Equity
47. Cash Flow Statement
48. Notes to the Financial Statements
General Information
64. Notice of Annual General Meeting
71. Shareholder Information
72. Glossary
74. Corporate Information
222524 Develop North AR23 V17.indd 3222524 Develop North AR23 V17.indd 3 25/03/2024 18:0725/03/2024 18:07
4
Chairman’s Statement
John Newlands, Chairman
Highlights
• Net Asset Value total return of 1.4%
(November 2022: 2.3%)
• Continued reduction in the Company’s risk
profile as the collective LTV reduced to 65.1%
from c.67% a year earlier
• Decrease in earnings per share from 3.7p to
2.5p
• £1.1m distributed to shareholders during the
year
• Re-pricing of loan book in line with higher
interest rates created a c.9% year-on-year
increase in average rates charged
• Total dividends of 4 pence per share paid or
payable for the year
• Share buybacks during the year enhanced the
NAV per share for remaining shareholders by
0.3%
• Loan facility with Shawbrook Bank Limited
renewed to May 2025
Introduction
I am pleased to present the Company’s results for
the year ended 30 November 2023, during which
the Company entered its seventh year of trading.
Once again the economic backdrop, especially with
regard to real estate-linked investment, has been
hallmarked by increases in interest rates, together
with high but generally easing inflation figures as 2023
progressed.
UK base rates rose from 3% at the start of our
financial year in December 2022 to 5.25% by August
2023. This figure was a little higher than the Office
of Budgetary Responsibility’s predicted 2023 peak
of 4.8% which we reported last year. However, no
further rate rises occurred during the remainder of
the year and into early 2024.
A combination of soaring energy prices, supply chain
disruptions caused by global geopolitical events, not
least Russia’s invasion of Ukraine, triggered price rises
that reached a 41-year high of 11.1% in October
2022. Underlying pressures gradually eased over the
following twelve months such that inflation had fallen
to 4.6% by the beginning of November 2023.
Turning to property prices, the latest ONS figures
show that the average house price was £6,000
cheaper in November 2023 than a year earlier, a
trend generally attributed to a combination of high
mortgage rates, cost of living increases and low
market confidence.
Prospects have undoubtedly improved as borrowing
rates have come down and cost price inflation
has eased. Our Investment Adviser has prudently
adopted Zoopla’s prediction of a 2% fall in house
prices across our regions, while reporting improved
confidence of stability within cost budgets and a
further improvement in the availability of labour and
sub-contractors, with the potential to shorten build
programmes.
Objective; Managerial
Arrangements; company name
The Company seeks to achieve its investment
objective primarily through a diversified portfolio
of fixed rate loans predominantly secured over
land and/or property in the UK and managed by its
Investment Adviser, Tier One Capital Ltd (‘TOC’).
The Investment Adviser’s Report may be found on
pages 8 to 11.
222524 Develop North AR23 V17.indd 4222524 Develop North AR23 V17.indd 4 25/03/2024 18:0725/03/2024 18:07
5
The change of the Company’s name to Develop
North PLC, as reported last year, has had a positive
impact since its implementation on 6 May 2022.
The name not only has the benefit of brevity but gives
an immediate insight into the Company’s ambitions
and regionally focused investment objective. The
Company’s upgraded web site, www.developnorth.
co.uk, has had a similarly beneficial effect while being
readily accessed via a simple internet search using the
Company’s name.
Performance; Net Asset Value
The Company’s net asset value (‘NAV’) fell to 78.9
pence per share as at 30 November 2023, having
been 81.8 pence per share twelve months earlier.
Taking into account dividends paid or declared for the
period, this equates to a net asset value total return
for the financial year of approximately +1.4% and
after a modest increase in the impairment charge,
reflecting the Investment Adviser’s expectations for
the UK economy in the year ahead.
This figure may be placed into context by comparison
with the total return figures over the same period
of the Association of Investment Companies’ (‘AIC’)
‘Property-Debt’ sector, of which the Company is a
component member, of +4.5% and of the AIC’s
‘Debt-Loans’ sector of +9.9% (Source: AIC).
The total value of the Company’s portfolio now
stands at £19.5 million.
Revenue and Dividends
The Company has adhered to the dividend policy
established in 2021, namely to pay dividends at a
rate of 1 penny per share per quarter, equivalent to 4
pence per share per year in aggregate.
For the year to 30 November 2023, revenue
decreased to 2.5 pence per share (November 2022:
3.7 pence).
The fall in revenue per share is a result of an increase
in impairments this year linked to legacy projects,
which are substantially concluded.
The Board has declared and paid three quarterly
interim dividends of 1.0 pence per share for the
year ended 30 November 2023 and I am pleased to
report that a fourth interim dividend of 1.0 pence per
share has been declared. This dividend will be paid
on 28 March 2024 to shareholders on the register at
the close of business on 8 March 2024 (ex-dividend
date 7 March 2024).
Share Buybacks
In November 2023 the Company announced the
introduction of a share buyback programme to
repurchase an initial figure of up to £500,000 of its
Ordinary shares. The programme’s objective is to
reduce the discount to net asset value at which the
shares may be trading.
As at 30 November 2023 the Company had
repurchased 689,838 Ordinary shares at an average
discount to NAV of 10%.
Gearing
Loan facilities during the year consisted of a £6.5
million credit facility with Shawbrook Bank Limited.
There were no funds drawn under the loan facility at
30 November 2023. £1.5m has been drawn down
since the year end.
The Shawbrook loan facility was renewed to May
2025, thereby providing adequate liquidity for the
Investment Adviser to take advantage of lending
opportunities as they arise.
Investment Portfolio;
New Investments; Project
Impairments
The total value of the Company’s portfolio now
stands at £19.5m, from 17 projects, a decrease of
£5.0m since last year. The quality of the underlying
loan book continues to improve with the Loan to
Value moving from 66.8% at 30 November 2022 to
65.1% at year end.
Continued
222524 Develop North AR23 V17.indd 5222524 Develop North AR23 V17.indd 5 25/03/2024 18:0725/03/2024 18:07
6
New Investments The Company agreed four
new loans during the year, including a £2.2 million,
30-month facility to fund the construction of a new
warehouse in Darlington, Durham; a £1.1 million,
18-month facility to refurbish a hotel and wedding
venue in North Yorkshire and two residential
developments for a combined £2.4 million in
Aberdeenshire, Scotland.
The change in interest rate environment is also
being reflected in the net rates of interest on new
and refinanced projects. This will help to mitigate the
higher interest and higher inflation that the Company
is facing.
Exits There were three portfolio exits, bringing total
exits to eighteen since inception. In addition, partial
redemptions occurred for three other projects in the
portfolio.
Impairments As required under the stringent
requirements of accountancy standard IFRS 9, the
Company has reflected the more uncertain economic
conditions resulting in an increased general provision
at year end.
All loans are written balancing risk and return,
whereby contingencies are put in place, typically in
the form of capital/equity in the projects subordinate
to the Company’s loan. This arrangement protects
the Company in the event that the underlying
properties being supported do not realise the full
expected value and/or that the return of capital could
be delayed by sales taking longer than anticipated.
The Board and the Investment Adviser believe that
this substantially mitigates the risks associated with
the downturn.
The Investment Adviser’s Report on pages 8 to
11 provides further detail on performance and
the activity within the loan portfolio. This includes
information on deployment of capital, progress
on projects undertaken as well as any profit share
received, impairments and uplifts on loans and loan
redemptions.
Long Term Performance
The Company was incorporated in 2016, and as is
set out in the Investment Advisor’s Report included in
this Annual Report, it has reinvested its entire capital
base more than twice, supporting SME developers
and similar entrepreneurs predominantly in the
North of England and Scotland.
The strategy adopted shortly after incorporation has
been applied consistently and has proven successful.
A deep understanding of the local market, of the
individual sites that our lending supports, and of the
borrowers themselves, coupled with financial and
credit disciplines has meant that loans issued since
2018 (22 loans and over £41 million) have produced
an IRR to date of 9.6%, with a loss of capital of only
0.5%. Given the conservative Loan to Value and the
protection this security over the underlying property
affords, this is a very acceptable outcome, particularly
in the very low interest rate environment that has
prevailed through most of this period. I believe this
compares favourably with comparative alternative
lenders and highlights the differentiators inherent in
localised lending. I also note the not inconsiderable
support that this lending has provided to the
local economies in the areas the loans have been
made, making a significant social impact in regional
communities.
When the Company was incorporated in 2016, it took
onto its balance sheet loans to ten existing projects,
and made four additional loans in the first year of
trading. Several of these loans resulted in a capital loss,
and not all were able to service their interest, leading
to historic impairments. The substantial majority of
these loans have now been concluded, and as such
the Board and the Investment Advisor are confident
that the level of impairment that has been necessary
historically will not recur.
222524 Develop North AR23 V17.indd 6222524 Develop North AR23 V17.indd 6 25/03/2024 18:0725/03/2024 18:07
7
Board of Directors
In accordance with the requirements of the UK
Corporate Governance Code all Directors will stand
for re-appointment at the AGM.
Annual General Meeting
The Company’s AGM will be held at The Grey Street
Hotel, 2-12 Grey Street, Newcastle on Thursday,
25 April 2024 at 12 noon. Visitors are requested to
arrive at the hotel reception no later than 11:50 a.m.
The Board strongly encourages all shareholders
to exercise their votes in respect of the meeting in
advance, by completing and returning their proxy
forms to the Company’s registrar. This will ensure
that the votes are registered.
In addition, shareholders are encouraged to raise any
questions in advance of the AGM with the Company
Secretary via email to cosec@MaitlandGroup.com
or by post to the Company Secretary at the address
set out on page 74 of this report.
Any questions received will be replied to by the
Company after the AGM.
Outlook
Notwithstanding one major political event looking
increasingly likely at some stage during 2024 – namely,
a general election - a degree of market confidence
and property transaction volumes is expected in
2024 as interest rates ease and affordability improves.
As well as inflation continuing a generally downward
trend, financial markets are pricing in cuts to the
base rate during 2024. Looking forward, the Bank of
England now expects to see a further slowing down in
headline inflation to a likely 3.1% in the final quarter of
2024 before returning to normalised levels of around
2% in 2025. Economic growth is expected to remain
weak, on the other hand, with unemployment rising
and frozen tax thresholds limiting any increase, in real
terms, in take home earnings.
With the return of both interest rate and construction
cost stability, our Investment Adviser has adopted
a more positive outlook for 2024, citing relative
confidence in property as an asset class, a continuing
shortage in housing and an increasing ability to
compete in debt markets. Key risks remain,
nevertheless, and a contraction in asset values cannot
be discounted, though any downturn is expected to
be shallow.
We are transitioning to the higher interest rate world,
and recent lending reflects this in the rates at which
we are now lending. While the outlook for business
is challenging, I am confident the Company has
placed itself in a good position for the current year
and beyond.
The property markets where the Company lends,
while not immune to wider economic trends, have
not suffered the turbulence experienced in other
parts of the UK (in particular the South East). As
such, the affordability of home prices has been less
stretched and there has consequently been only
a modest correction in prices in response to the
changing interest rate regime.
Moreover, I believe the lending disciplines which
the Investment Advisor has in place will continue
to provide protection to our loan portfolio; the
relationships with developers, the maintenance of
prudent Loan to Value ratios and the knowledge
of each site and developments to which we lend.
In short, Develop North will press ahead with
identifying and investing in real estate projects of the
highest quality, continuing to enhance the Company’s
portfolio and strengthen its reputation in the market.
This should lead to the creation of shareholder value
that is sustainable in the longer term, while also
providing a positive social impact to the communities
within which many of us live and work.
John Newlands, Chairman
25 MARCH 2024
222524 Develop North AR23 V17.indd 7222524 Develop North AR23 V17.indd 7 25/03/2024 18:0725/03/2024 18:07
8
Investment Adviser’s Report
INVESTMENT ADVISER’S REPORT:
REVIEW OF THE 12 MONTHS TO
30 NOVEMBER 2023
Investment Adviser’s Highlights:
• Exits of three portfolio projects, bringing the
number of exits since inception to eighteen
• NAV Total Return of 1.4% for the year to 30
November 2023 and an annualised dividend yield
of 4.7%, resulting in £1.1m of income distributed
to shareholders
• £3.4m deployed into 6 projects
• Loan to Value (‘LTV’) has decreased to 65.1%
from 66.8%, delivering on our strategy to build
risk resilience and improve the credit quality of
our loan book
• 71.2% of funds deployed in North East England
reflecting the Company’s ongoing commitment to
focus operations on our chosen regional markets.
This Annual Report covers the sixth full year of
performance and seventh audit review of the Company
since its listing in January 2017.
The Company’s primary purpose is to provide debt
finance to the property sector. The Company also
benefits from a small number of equity positions
attained at nil cost in six of the borrowing entities which
it supports. In addition, the Company benefits from exit
fees on redemption of other projects that additionally
contribute to the Senior & Profit lending type.
Progress on the Company’s Strategic
Objectives:
• Weighted Average interest generated was 8.2%
- up from 7.56% in the prior year
• Size of investment portfolio year-on-year
decreased due to three successful exits
• Prudent cost control saw overheads maintained
at £0.5m
• Portfolio Loan to Value (‘LTV’) improved at
65.1%
• Further progress in managing non-performing
assets and improvement in loan book quality,
including £0.36m repaid by legacy projects.
• Fund liquidity further improved, enabling the
commencement of the first Company share
buyback exercise in November 2023.
The Economic Backdrop and Outlook:
The year had seen continued strategic risk challenges
presented in both significant inflation and increased
borrowing rates. Average inflation in the year was 6.7%,
albeit down from 10.7% in the previous 12 months.
UK base rates saw six consecutive increases from 3%
to 5.25%. Notwithstanding those challenges, the UK
economy avoided falling into the recession predicted
at the start of the year. Looking forward, the Bank of
England (‘BoE’) expects to see a slowing down in
headline inflation from 4.6% at 30 November 2023 to a
likely 3.1% in the final quarter of 2024 before returning
to normalised levels of around 2% in 2025. Markets are
predicting that inflationary control will calm interest rate
movements and see some relief built in to lower the
base rate to 4.25% by the end of 2024, although the
BoE themselves are more pessimistic at 5.1%.
The end of 2022 saw house prices come off a peak,
coupled with lower supply of new builds as volume
housebuilders reduced the number of new site starts.
A slower market was seen across the North East and
Scotland in 2023, partly driven by increased mortgage
costs relative to wage growth. Looking forward, we
have adopted Zoopla’s prediction of a 2% fall in house
prices across our regions; however, we are encouraged
by recent pay settlements above inflation to bring some
confidence back to mortgage affordability.
222524 Develop North AR23 V17.indd 8222524 Develop North AR23 V17.indd 8 25/03/2024 18:0725/03/2024 18:07
9
This financial year also saw an easing to both build cost
inflation and labour rates. Building Cost Information
Service Construction Data (‘BCIS’) material price
increases peaked at 18% in 2022 before dropping
to zero for the 12 months to September 2023 and
forecasting 2% in 2024. That stability was coupled
with a 6% contraction in new work output in 2023
and a further 1% fall forecast in 2024. These factors
combined, this then gives some confidence of stability
within cost budgets and a further improvement in the
availability of labour and sub-contractors to aid the
shortening of build programmes.
With the return of both interest rate and construction
cost stability we have adopted a more positive outlook
for 2024. Key risks remain and a contraction in asset
values cannot be discounted, although we anticipate
any downturn to be shallow.
The increased rate environment saw us set higher
targets for Investment Rate of Return (‘IRR’) on projects.
Deployment
The Company’s portfolio can be broken down as
follows:
Despite the ongoing uncertainties, we are pleased
to report an active year for new transactions and
deployments to existing projects, together with full and
partial exits:
• Croft, North Yorkshire - £1.1m 18-month facility
• Aberdeen, Scotland - £1.7m 24-month facility
• Aberdeen, Scotland - £0.8m 10-month facility
• Darlington, North East England - £2.2m
30-month facility
During the year a total of £3.4m was deployed
into six projects, including the four new projects
mentioned above.
At the year-end, fund deployment totalled £19.5m.
The quality of the underlying loan book continues to
improve with the Loan to Value moving from 66.8%
at 30 November 2022 to 65.1% at 30 November
2023
Portfolio Exits
Three loans were repaid during the year, bringing
the number of exits in the portfolio to eighteen since
inception.
Partial Redemptions Update
During the year there were £8.6m of partial
redemptions across six of the portfolio projects,
including the three exits in the year
Impairments
In accordance with IFRS 9, the Company recognises
the gross interest receivable on all its loans, and then
recognises an impairment charge if that interest is not
paid by the borrower and there is not a clear expectation
that this can be recovered subsequently. During the year,
there were two projects unable to meet their interest
requirements in full.
Continued
Deployment by Region
North East Scotland
72%
28%
19%
72%
0% 10% 20% 30% 40% 50% 60% 70%
Mezzanine Senior & profit Senior only
Lending type
9%
80%
£0 £500,000 £1,000,000 £1,500,000 £2,000,000
Mezzanine Senior & profit Senior only
Average loan size
£0.584m
£1.727m
£0.604m
10.00%
0% 4.00% 8.00% 12.00%
Mezzanine Senior & profit Senior only
Average returns by loan type
10.50%
6.30%
6.00%2.00%
6.57%
222524 Develop North AR23 V17.indd 9222524 Develop North AR23 V17.indd 9 25/03/2024 18:0725/03/2024 18:07
10
IFRS 9 also requires the Company to consider various
credit loss scenarios and assign a risk weighting to these.
This calculation generates a provision which is taken
as a general impairment for the year. In this period the
Company has increased the provision to £146,000 from
the £114,000 that was in place at 30 November 2022.
This provision is based on forward looking scenarios
to withstand market-related shocks reflecting current
economic uncertainties
Gearing
In May 2023, the Company renewed its committed
revolving credit facility with Shawbrook Bank for a further
two years. As previously, the key driver was headroom
and liquidity and its renewal demonstrates the support
that the Company has from its lender, and the growing
confidence in future deployment given the current
strength of pipeline
Profit Share Projects
There are currently four Profit Share projects in the
portfolio (November 2022: six) reflecting further
progress in our strategic aim to simplify and focus on
debt-only products.
Buyback Programme
In November 2023, the Company announced the
commencement of a share buyback programme. The
Company repurchased 689,838 Ordinary shares in
November 2023. A further 566,369 Ordinary shares
were repurchased in December 2023. The shares are
held in treasury.
Outlook
Residential
As at 30 November 2023, 73.9% of deployed funds
were invested across twelve projects with a residential
focus with a further £1.6m committed to live projects.
This represented a 20.4% decrease over 2022 and
formed part of our response to the pressures across the
Residential sector in 2023.
Commercial
As at 30 November 2023, 24.6% of deployed funds
were invested across five projects with a commercial
focus.
Pipeline
There is currently £5.2m at various stages of due
diligence across two commercial projects in the North
East, one of which was completed post financial year
end.
Performance since 2018
Ten projects were brought into the portfolio on listing,
with a further four projects supported in the first year
of trading. Of these fourteen projects, six had capital
write-offs of circa £4m.
Since 1 June 2018, the Company has provided loans
totalling £40m across twenty new projects. These
projects have generated an average IRR of 9.6% with
only 0.5% of capital write-offs which have been more
than covered by associated exit and plot fees. These
projects have also been lower risk projects with LTVs
lower than the legacy projects.
The quality and experience of each management team
that we are in discussions with will continue to enhance
the Company’s portfolio and strengthen its reputation
in the market. This should lead to the creation of
shareholder value that is sustainable in the longer term.
With input cost stability predicted to emerge, relative
confidence in property as an asset class, a continuing
shortage in housing and an increasing ability to compete
in debt markets, we are looking forward to growing
fund deployment post the year end.
Ian McElroy,
Tier One Capital Ltd
25 MARCH 2024
222524 Develop North AR23 V17.indd 10222524 Develop North AR23 V17.indd 10 25/03/2024 18:0725/03/2024 18:07
11
Sector % of
Portfolio
LTV*
(Nov 23)
Loan Value
(Nov 23)
£’000s
LTV*
(Nov 22)
Loan Value
(Nov 22)
£’000s
Residential 69.8% 62.1% 14,221 69.0% 17,111
Commercial 24.5% 73.6% 5,005 61.9% 7,508
Cash 5.7% – 1,154 – 638
General Impairment – – (146) – (114)
Total/Weighted Average 100.0% 65.1% 20,235 66.8% 25,143
THE INVESTMENT PORTFOLIO AS AT 30 NOVEMBER 2023
*LTV has been calculated using the carrying value of the loans as at the balance sheet date
222524 Develop North AR23 V17.indd 11222524 Develop North AR23 V17.indd 11 25/03/2024 18:0725/03/2024 18:07
12
Strategic Report
STRATEGIC REPORT
The aim of the Strategic Report is to provide
shareholders with the ability to assess how the
Directors have performed their duty to promote
the success of the Company during the year under
review. The Strategic Report contains a summary of
the Company’s business model, a statement of its
objectives and policy, a review of performance and
a description of the principal and emerging risks it
faces. Please refer to the Chairman’s Statement and
the Investment Adviser’s Report for an analysis of the
Company’s performance during the financial year
and a summary of the future prospects. Pages 22 to
29, together with the sections of this Annual Report
and Accounts incorporated by reference, constitute a
Strategic Report that has been prepared in accordance
with Section 414A of the Companies Act 2006 (the
‘Act’).
PRINCIPAL ACTIVITY AND
PURPOSE
The Company’s principal activity is that of an investment
company, with a primary purpose of providing debt
finance to the property sector.
INVESTMENT OBJECTIVE
The Company’s investment objective is to provide
shareholders with a consistent and stable income and
the potential for an attractive total return over the
medium to long term.
INVESTMENT POLICY
The Company seeks to achieve its investment objective
through a diversified portfolio of fixed rate loans
predominantly secured over land and/or property in
the UK.
The Company attempts to reduce downside risk by
focusing on secured debt with both quality collateral
and contractual protection. The Company makes
investments primarily through senior secured
loans although other loans such as bridging loans,
subordinated loans, selected loan financings and other
debt instruments may be considered if appropriate.
The typical loan term is between one and five years.
The Company retains absolute discretion to make
investments for either shorter or longer periods.
The Directors present their Strategic Report for the year to 30 November 2023.
222524 Develop North AR23 V17.indd 12222524 Develop North AR23 V17.indd 12 25/03/2024 18:0725/03/2024 18:07
13
Loan to Value
The Company typically seeks to originate debt where
the effective loan to real estate value ratio of any
investment is between 40% and 100% at the time of
origination. The Company typically seeks to achieve a
blended loan to value (‘LTV’) across the portfolio of no
more than 75% (based on the initial valuations at the
time of loan origination) once fully invested.
Sector
The Company’s portfolio is appropriately diversified
by sector and predominantly split between:
• Regional residential housebuilding across the
UK, with a preliminary focus on non-London
based property;
• Small to medium commercial property
development across the UK primarily focusing on
small serviced office space, hotel developments
and wedding and conferencing venues; and
• Direct sale and leaseback vehicles primarily
operating in the professional sectors of dentists,
accountants, solicitors and finance professionals.
INVESTMENT RESTRICTIONS
The Company observes the following investment
restrictions:
• The Company derives its income from a portfolio
of not less than five loans;
• No more than 100% of the Gross Asset Value
will be exposed to the regional residential
housebuilding sector, calculated at the time of
investment;
• No more than 100% of the Gross Asset Value will
be exposed to the small to medium commercial
property development sector, calculated at the
time of investment;
• No more than 30% of the Net Asset Value will
be exposed to direct sale and leaseback vehicles,
at the time of investment;
• No more than 50% of the Net Asset Value will
be exposed to subordinated loans, calculated
at the time of investment and/or subsequent
subordination;
• No more than 50% of the Net Asset Value
will be exposed to bridging loans, selected loan
financings and other debt instruments, calculated
at the time of investment;
• No more than 5% of the Net Asset Value will
be exposed to unsecured loans, calculated at the
time of investment;
• No single investment, or aggregate investments
secured on a single property or group of
properties or connected with related borrowers,
will exceed 20% of the Net Asset Value,
calculated at the time of investment;
·• No more than 20% of the Net Asset Value will
be exposed to any one borrower or related
borrowers or developer or related developer
entities calculated at the time of investment;
• No more than 10% of the Net Asset Value will
be exposed to any sector other than regional
residential housebuilding, small to medium
commercial property development and direct
sale and leasehold vehicles; and
• The Company will not invest in other listed
closed-ended investment companies.
Borrowing
The Company may use gearing if it believes it will
enhance shareholder returns over the longer term. It
will limit the Company’s borrowings to a maximum of
30% of the Net Asset Value at the time of drawdown.
In May 2023 the Company renewed its £6.5 million
committed revolving facility with Shawbrook Bank
Limited until May 2025. At the year end the Company
had no drawings under this facility (November 2022:
£4.0m). The Company has drawn down £1.5 million
since the year end (November 2022: repaid £0.5m).
Cash Management
The Company may from time-to-time have surplus
cash. It is expected that any surplus cash will be
temporarily invested in cash or cash equivalents,
money market instruments, bonds, commercial
paper or other debt obligations with banks or other
counterparties having a single-A (or equivalent) or
higher credit rating as determined by an internationally
recognised rating agency or gilts or otherwise
approved by the Board.
Continued
222524 Develop North AR23 V17.indd 13222524 Develop North AR23 V17.indd 13 25/03/2024 18:0725/03/2024 18:07
14
Use of derivatives and hedging
The Company may invest through derivatives for
efficient portfolio management. In particular, the
Company may engage in interest rate hedging or
otherwise seek to mitigate the risk of interest rate
increases as part of the Company’s efficient portfolio
management.
In accordance with the requirements of the FCA Listing
Rules, any material changes in the principal investment
policies and restrictions of the Company would only be
made with the approval of Shareholders by ordinary
resolution.
BUSINESS MODEL, CULTURE AND
VALUES
The Company invests in accordance with the
investment objective.
The Board is the Company’s governing body and is
collectively responsible to shareholders for the long-
term success of the Company. It is responsible for the
overall strategy of the Company, including its investment
objective and policy, decisions regarding corporate
governance, asset allocation, risk and internal control
assessment and determining the overall limits and
restrictions for the portfolio. In addition, it appoints and
monitors the performance of its service providers and
seeks to secure the Company’s success by engaging
reputable third-party service suppliers with established
track records to deliver its day-to-day operations.
The management of the Company’s investments,
is delegated to the Investment Adviser, Tier One
Capital Ltd (‘TOC’), and there is a clear division of
responsibilities between the Board and the Investment
Adviser. The Board maintains a close working
relationship with the Investment Adviser as its principal
service provider.
All of the Directors seek to discharge their
responsibilities and meet shareholder expectations in
an open and transparent manner. The Company’s
values of integrity, skill and knowledge are aligned to
the delivery of its investment objective. The culture
and values of the Company are embodied in the Board
of Directors.
The Board seeks to recruit Directors who have
diverse working experience. The industry experience
on the Board ensures there is detailed knowledge and
constructive challenge in the decision-making process.
This helps the Company achieve its overarching aim
of enhancing shareholder value. The Directors are
mindful of costs and seek to ensure that the best value
for money is achieved in managing the Company.
The Board seeks to employ third-party providers who
share the Company’s values and, importantly, will work
with the Directors openly to achieve the Company’s
aims. As mentioned below, the Board expects and
seeks assurance at least annually that the companies it
works with adopt working practices that are of a very
high standard.
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE POLICY (‘ESG’)
The Company has no employees and all of its
Directors are non-executive. The day-to-day activities
are carried out by third parties. There are therefore no
disclosures to be made in respect of social, community,
employee or environmental matters.
The Company has an investment advisory contract
with Tier One Capital Ltd.
In asking the Company’s Investment Adviser to
deliver against set objectives, the Directors have
also requested that the Investment Adviser take into
account the broader social, ethical and environmental
issues of counterparties within the Company’s
portfolio, acknowledging that companies failing to
manage these issues adequately run a long-term risk to
the sustainability of their businesses. More specifically,
they expect companies to demonstrate ethical
conduct, effective management of their stakeholder
relationships, responsible management and mitigation
of social and environmental impacts, as well as due
regard for wider societal issues.
The Investment Adviser actively seeks to invest in
companies that adopt good ESG practices and, where
possible, uses its influence to encourage companies
to adopt best practice on environmental, social and
corporate governance matters.
222524 Develop North AR23 V17.indd 14222524 Develop North AR23 V17.indd 14 25/03/2024 18:0725/03/2024 18:07
15
MODERN SLAVERY ACT 2015 (‘MSA’)
The MSA requires companies to prepare a slavery and
human trafficking statement for each financial year. As
the Company does not provide goods or services in
the normal course of business, the Board considers that
the Company is not required to make any slavery or
human trafficking statement under the Modern Slavery
Act 2015. In relation to this matter the Company’s
supply chain is thought to be low risk by the Board.
PRINCIPAL AND EMERGING RISKS
The Board of Directors has overall responsibility for risk
management and internal control within the context of
achieving the Company’s objectives.
The Directors confirm that they have carried out
a robust assessment of the principal and emerging
risks facing the Company, including those that would
threaten its business model, future performance,
solvency or liquidity, as they operated during the year
and up to the approval of the Annual Report.
The Board agrees the strategy of the Company, taking
into consideration the Company’s risk appetite. With
the assistance of the Investment Adviser, the Board has
drawn up a risk matrix, which identifies the key risks to
the Company, as well as emerging risks. In assessing
the risks and how they can be mitigated, the Board
has given particular attention to those risks that might
threaten the viability of the Company. These key risks
fall broadly under the following categories:
• Investment and strategy risk
The Company’s targeted returns are targets only
and are based on estimates and assumptions about
a variety of factors including, without limitation, yield
and performance of the Company’s investments,
which are inherently subject to significant business,
economic and market uncertainties and contingencies,
all of which are beyond the Company’s control and
which may adversely affect the Company’s ability to
achieve its targeted returns. Accordingly, the actual
rate of return achieved may be materially lower than
the targeted returns, or may result in a partial or total
loss, which could have a material adverse effect on the
Company’s profitability, the net asset value (‘NAV’)
and the price of Ordinary shares.
Borrowers under the loans in which the Company
invests may not fulfil their payment obligations in full, or
at all, and/or may cause, or fail to rectify, other events
of default under the loans.
The Board is responsible for setting the investment
strategy to achieve the targeted returns and for
monitoring the performance of the Investment Adviser
and the implementation of the agreed strategy.
An inappropriate strategy could lead to poor capital
performance and lower than targeted income yields.
This risk is mitigated through regular reviews and
updates with the Investment Adviser, monitoring of the
portfolio sectors against the investment restrictions on
a quarterly basis and tracking of loan to value ratios of
the underlying property projects
• Market risk
The Company’s investment strategy relies in part upon
local credit and real estate market conditions. Adverse
conditions may prevent the Company from making
investments that it might otherwise have made, leading
to a reduction in yield and an increase in the default
rate.
The Company holds 100% of its assets in the United
Kingdom.
To mitigate the market risks, the Board receives
quarterly updates from the Investment Adviser
containing information on the local market conditions
and trends. This information is reviewed alongside the
sector split of the portfolio to ensure the portfolio is
aligned to meet future challenges.
• Financial risk
The Company’s activities expose it to a variety of
financial risks that include interest rate risk, liquidity risk
and credit risk. Further details on these risks and the
way in which they are mitigated are disclosed in the
notes to the financial statements.
• Operational risk
The Company has no employees and relies upon
the services provided by third parties. It is primarily
dependent on the control systems of the Investment
Adviser and Administrator who respectively maintain
the assets and accounting records.
Continued
222524 Develop North AR23 V17.indd 15222524 Develop North AR23 V17.indd 15 25/03/2024 18:0725/03/2024 18:07
16
Failure by any service provider to carry out its obligations
in accordance with the terms of their appointment
could have a detrimental effect on the Company.
To mitigate these risks, the Board reviews the overall
performance of the Investment Adviser and other key
third-party service providers on a regular basis and has
the ability to terminate agreements if necessary. The
business continuity plans of key third-party service
providers are subject to Board scrutiny.
• Legal and Regulatory risk
In order to qualify as an investment trust, the Company
must comply with section 1158 of the Corporation
Tax Act 2010. The Company has been approved by
HM Revenue & Customs as an investment trust. The
Company is listed on the London Stock Exchange. Non-
compliance with the taxes act or a breach of listing rules
could lead to financial penalties and reputational loss.
These risks are mitigated by the Board’s review of
quarterly financial information and compliance with the
relevant rules.
PROMOTING THE SUCCESS OF THE
COMPANY
Under section 172(1) of the Companies Act 2006
the Directors have a duty to act in good faith and to
promote the success of the Company for the benefit
of its shareholders as a whole. This includes taking into
consideration the likely consequences of their decisions
over the long term and on the Company’s stakeholders,
employees and suppliers, while acting fairly between
shareholders. The Directors must also consider
the impact on the community and its reputation for
maintaining high standards of business conduct.
Set out below is an explanation of engagement with
stakeholders:
Stakeholder
Group
Engagement in the year
Investors
Shareholders play an important role
in monitoring and safeguarding the
governance of the Company. They
have access to the Board via the
Company Secretary throughout the
year and are encouraged to attend
the Annual General Meeting. The
Board engaged with shareholders
during the year and was delighted to
be able to welcome shareholders to
the Annual General Meeting.
Key Service
Providers
Key service providers report to
the Board on a regular basis. The
Company employs a collaborative
approach and looks to build long-term
partnerships based on open terms of
business and fair payment terms.
Borrowers The Investment Adviser meets with
the management of all companies to
which the Company lends money
and reports its findings to the Board
on a quarterly basis.
Regulators Compliance with necessary rules and
regulations relevant to the Company
is maintained in order to build trust
and a good reputation in the market.
• Factoring Shareholders and Stakeholders into the
Principal Decisions
We define principal decisions as both those that are
material to the Company but also those that are
significant to any of our key stakeholders as identified
above. In making the following principal decisions, the
Board considered the outcome from its stakeholder
engagement as well as the need to maintain a reputation
for high standards of business conduct and the need to
act fairly between the members of the Company.
222524 Develop North AR23 V17.indd 16222524 Develop North AR23 V17.indd 16 25/03/2024 18:0725/03/2024 18:07
17
Principal
Decision 1
Share Buyback Programme
In November 2023 the Company
announced the commencement
of a share buyback programme to
repurchase its Ordinary shares for
up to a maximum consideration
of £500k. The programme was
designed to address the share price
discount. The programme was
extended in December 2023 to
repurchase further Ordinary shares
up to a maximum consideration of
£500k.The authority expired on 31
December 2023.
Principal
Decision 2
Dividend Policy
Directors continue to pay a consistent
and stable income. The dividend
policy is set out in the Strategic Report
on pages 12 to 19.
Principal
Decision 3
Impairments and Uplifts
The Audit Committee reviews the
Investment Adviser’s recommendations
in relation to impairments and uplifts
to the Company’s portfolio at both
the interim and year end and makes a
recommendation to the Board.
The Board considers and formally agrees
the final level of impairments and uplifts.
Principal
Decision 4
Remuneration
During the year the Remuneration
Committee undertook a review of
the level of non-executive Directors’
fees. The Remuneration Committee
recommended to the Board, and
the Board agreed, that the Directors’
remuneration should remain
unchanged for the year ending 30
November 2023. Directors’ fees will
continue to be reviewed annually.
Principal
Decision 5
Lending Strategy
The Board’s focus on the loans
provided ensures that the sustainability
of the Company and its ability to pay
dividends is not compromised
LONG TERM VIABILITY STATEMENT
In accordance with Provision 36 of the AIC Code
the Directors are required to assess the prospects of
the Company over a longer period than the twelve
months referred to in the going concern guidance and
statement.
At the forthcoming AGM shareholders are invited to
vote on the continuation of the Company. The Board
of Directors recommends that shareholders vote
in favour of the resolution. The Board understands
that the Investment Adviser has taken soundings
of major shareholders and therefore it has a high
degree of confidence that this vote will be passed by
shareholders; however, the vote is outside the control
of the Board and thus, in the context of assessing
the future prospects of the Company, it represents
a material uncertainty which (if the vote were to be
lost) may cast significant doubt upon the ability of the
Company to continue as a going concern. The financial
statements do not include the adjustments that may be
necessary should a positive vote from the shareholders
to continue not be received and the Company was not
able to continue as a going concern. Notwithstanding
this, the Board conducted this viability review for a
period of three years principally because it believes
that any investment in the shares of the Company
should be made on a medium to long-term basis. The
Board considers the Company, with no fixed life, to
be a long-term investment vehicle. It has decided this
is an appropriate time period over which to report,
reflecting the long-term objectives of the Company
and the typical loan term, whilst taking into account the
impact of uncertainties in the markets.
The Board regularly considers a detailed cash flow
model which does not indicate any matters which would
give rise to any concerns over the Company’s longer
term viability. The debt portfolio held by the Company
is however not expected to remain unchanged over
the longer term. The Investment Adviser is expected
to provide new loans and receive repayments, in line
with the Company’s investment objective and policy
throughout the year. At 30 November 2023 17 loans
had been made with an average value of £1.1m and
average time to loan maturity of 0.9 years. The longer
the time horizon which is considered, the higher the
Continued
Key Service
Providers
Key service providers report to
the Board on a regular basis. The
Company employs a collaborative
approach and looks to build long-term
partnerships based on open terms of
business and fair payment terms.
Borrowers The Investment Adviser meets with
the management of all companies to
which the Company lends money
and reports its findings to the Board
on a quarterly basis.
Regulators Compliance with necessary rules and
regulations relevant to the Company
is maintained in order to build trust
and a good reputation in the market.
222524 Develop North AR23 V17.indd 17222524 Develop North AR23 V17.indd 17 25/03/2024 18:0725/03/2024 18:07
18
degree of uncertainty over the constituents of the
Company’s debt portfolio and, on balance, the Board
considers that a period of three years is an appropriate
length of time over which a detailed sensitivity analysis
can be conducted whilst retaining a reasonable level of
accuracy regarding forecast interest rate movements.
In making this statement the Board carried out a robust
assessment of the principal risks facing the Company
including those that would threaten its business model,
future performance, solvency or liquidity. These risks
and their mitigations are set out above.
The principal risks identified as most relevant to the
assessment of the viability of the Company were those
relating to potential impairment of loans in the portfolio
and its effect on the capital value of the Company and
its ability to pay dividends.
When considering the risk of under-performance, the
Board carries out a series of stress tests to understand
the effects of any substantial future increases in interest
rates and future worsening of the property and
development markets on the value of the underlying
security leading to potential breaches of loan covenants
by the borrowers.
The results of these stress tests have given the Board
comfort over the viability of the Company and its
ability to maintain capital value and dividend levels.
The Board has also considered the impact of potential
regulatory change for future periods and the controls
in place surrounding significant third-party providers,
including the Investment Adviser.
The Directors have considered the current economic
uncertainty, the ongoing conflict in Ukraine and the
escalating conflict in the Middle East. The Board
considers that the mitigation measures put in place by
the Investment Adviser in relation to the Company
and its loan portfolio, together with those in place at
key service providers serve to maintain operational
resilience. The Directors do not believe that these call
into question the long-term viability of the Company.
Based on the Company’s processes for monitoring
revenue and costs, together with the Investment
Adviser’s compliance with the investment objective
and policies, the Directors have concluded that there
is a reasonable expectation that the Company will be
able to continue in operational existence and meet its
liabilities as they fall due for a period of three years
from the date of approval of this Report
REVIEW OF THE BUSINESS
A review of the year and commentary on the future
outlook is provided in the Chairman’s Statement and
Investment Adviser’s Review on pages 4 to 7 and 8 to
11 respectively.
During the year under review, the assets of the
Company were invested in accordance with the
Company’s investment policy.
During the year the Company’s net assets have
decreased from £22.0m to £20.7m, partly as a result
of the share buyback programme which commenced
in November 2023, as well as a modest decline in the
value of investments. As at 30 November 2023 the
net asset value per share was 78.9p.
KEY PERFORMANCE INDICATORS
The below key performance indicators (KPIs) are
used by the Board to assess the Company’s success in
meeting its objectives. The KPIs and related Alternative
Performance Measures are described in the Glossary
on pages 72 and 73.
• Dividends
The payment of dividends is a key element of the
Company’s investment objective. The Board monitors
the Company’s ability to provide shareholders with
a consistent and stable income on a continuing basis.
Further details on the Board’s policy is set out in the
Chairman’s Statement on page 5.
Details of the dividends declared and paid are set out
on page 54.
• Net Asset Value Total Return (NAV total return)
The Board regards the growth of the Company’s NAV
total return as inherent to the successful delivery of
value to the shareholders over the longer term.
Since listing in January 2017, the Company has
generated a NAV total return of 16.9% (November
2022: 15.3%) (including launch costs) as at 30
November 2023. The NAV total return for the year
to 30 November 2023 was 1.4% (November 2022:
2.3%).
• Ongoing charges ratio (OCR)
The ongoing charges are a measure of the total
expenses incurred by the Company expressed as a
percentage of the average net assets over the year.
222524 Develop North AR23 V17.indd 18222524 Develop North AR23 V17.indd 18 25/03/2024 18:0725/03/2024 18:07
19
The Board regularly reviews the ongoing charges. The
Board seeks to ensure the expenses incurred by the
Company are kept to a minimum whilst not impacting
the services obtained.
The ongoing charges ratio as at 30 November 2023
was 2.7% (November 2022: 2.8%).
• Discount/Premium to NAV
The Board monitors the level of the Company’s
discount/premium to NAV. The annualised average
premium to the NAV for the Company is 2.8%
(November 2022: premium 3.7%).
CRIMINAL CORPORATE OFFENCE
In line with the requirements of The Criminal Finances
Act 2017, the Directors confirm that the Company has
a commitment to zero tolerance towards the criminal
facilitation of tax evasion.
THE BRIBERY ACT
In order to ensure compliance with the UK Bribery
Act 2010, the Directors confirm that the Company
has a zero tolerance policy towards the provision of
illegal services, bribery and corruption acts and a 18
commitment to carry out business openly, honestly
and fairly.
TASKFORCE FOR CLIMATE RELATED
FINANCIAL DISCLOSURES (‘TCFD’)
The Company notes the TCFD recommendations on
climate related financial disclosures. The Company is
an investment company and, as such, it is exempt from
the Listing Rules requirement to report against the
TCFD framework.
GREENHOUSE GAS EMISSIONS
The Company has no greenhouse gas emissions
to report from its operations for the year ended 30
November 2022 nor does it have responsibility for
any other emissions producing sources under the
Companies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013 (including those within the
underlying investment portfolio).
STREAMLINED ENERGY AND
CARBON REPORTING
The Company is categorised as a lower energy user
under the HMRC Environmental Reporting Guidelines
March 2019 and is therefore not required to make the
detailed disclosures of energy and carbon information
set out within the guidelines. The Company’s energy
and carbon information is therefore not disclosed in
this Report
BOARD COMPOSITION
The Board comprises four male non-executive
Directors. In accordance with best practice all Directors
stand for re-election annually. The Board is mindful of
the composition of the Board and the range of skills
and expertise brought by each of the Directors. The
Board is committed to ensuring that any vacancies are
filled by the most qualified candidates and it recognises
the merits of diversity in its composition.
The FCA Listing Rules require companies to report on
whether they have met the targets on board diversity
set out in the Parker Review’s recommendations with
respect to ethnic and cultural representation on UK
boards. As at 30 November 2022 the Company had
not met the gender diversity requirement that 40%
of the individuals on the board are women, and that
at least one of the senior positions on the board is
woman. Nor had it met the requirement for at least
one director from a minority ethnic background.
With a small Board comprising solely non-executive
Directors, and in light of the specialist nature of the
Company, it is challenging to meet diversity targets
when appointing new board members. As such, the
Board does not consider it appropriate to set targets;
however, it will ensure that diversity criteria are
considered as part of any future succession planning.
Further details on the gender and ethnic background
of the Directors are included in the Corporate
Governance Statement on pages 27 and 28.
On behalf of the Board
John Newlands, Chairman
25 MARCH 2024
222524 Develop North AR23 V17.indd 19222524 Develop North AR23 V17.indd 19 25/03/2024 18:0725/03/2024 18:07
20
Matthew Harris (‘Matt’)
Independent non-executive
director and audit committee
chairman
Matt is a Chartered Accountant, with a career
background as an auditor and in the provision of due
diligence advice to private equity firms and corporates.
He has advised on numerous transactions across
Europe and around the world. Matt started his career
at Arthur Andersen in New Zealand, but has spent
the majority of his career in London, including as a
Partner in the KPMG Private Equity Group. He sits
on a number of boards and provides deal related and
ongoing advice to PE buyers and portfolio companies.
Shareholding as at 30 November 2023: 60,724
ordinary shares (30 November 2022: 60,724).
Date of appointment: 19 December 2016.
John Newlands
Non-executive chairman
John has served more than twenty years in the City,
most recently with Brewin Dolphin Limited as Head of
Investment Companies Research from 2007 to 2017.
He was a member of the Association of Investment
Companies Statistics’ Committee from 2000 to 2017.
He has an MBA from Edinburgh University Business
School and is a Chartered Engineer. He is Deputy
Chair of the Investment Committee of Durham
Cathedral. He has written four books about financial
history, the most recent being 150 years: A history of
The Scottish American Investment Company PLC (Baillie
Gifford, June 2023). John is currently Director of
Gabelli Merger Plus+ Trust PLC and CQS New City
High Yield Fund Limited.
Shareholding as at 30 November 2023: 5,000 ordinary
shares (30 November 2022: 5,000).
Date of appointment: 14 November 2017.
Board of Directors
222524 Develop North AR23 V17.indd 20222524 Develop North AR23 V17.indd 20 25/03/2024 18:0725/03/2024 18:07
21
Douglas Noble
Independent non-executive
director
Douglas has over 30 years’ private banking experience.
He is currently a Director of Jigsaw Lending and
also holds the position of Consultant with Hallcroft
Finance where he is assisting Hallcroft in launching
their business in Scotland. Previous to this he has held
Senior Executive roles in the Banking Industry including
the Scottish Head of Private Banking for Barclays,
Adam & Company and HBOS. He also launched
Bank of Scotland’s first ever private banking operation.
Douglas holds a law degree from Dundee University,
as well as achieving the PCIAM and IMC from the CFA.
He is a member of the Chartered Institute of Bankers,
Scotland and holds Chartered Banker status.
Shareholding as at 30 November 2023: 8,600 ordinary
shares (30 November 2022: 8,600).
Date of appointment: 19 December 2016.
Ian McElroy
Non-independent
non-executive director
Ian is one of the founding shareholders of Tier One
Capital Ltd, establishing the business having spent
many years in the wealth management industry. Ian
initially trained and qualified as an investment manager
with Gerrard Stockbrokers before moving into financial
advice, corporate finance and credit structuring during
senior roles with Barclays Wealth, Kleinwort Benson
and Coutts. Over the last 20 years, Ian has worked
closely with business owners and company directors,
senior executives and professionals across many
industries to help structure, preserve and achieve their
financial objectives. Ian is a Chartered Fellow of the
CISI and a Chartered Wealth Manager.
Shareholding as at 30 November 2023: 74,005
ordinary shares (30 November 2022: 74,005).
Date of appointment: 18 April 2018.
222524 Develop North AR23 V17.indd 21222524 Develop North AR23 V17.indd 21 25/03/2024 18:0725/03/2024 18:07
22
Directors’ Report
INFORMATION DISCLOSED IN THE
STRATEGIC REPORT
The following matters required to be disclosed in this
Report under the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008
are covered in the Chairman’s Statement, Investment
Adviser’s and the Strategic Report on pages 4 to 19:
the Company’s objectives, policies and financial risk
management, the Company’s exposure to risks and
its prospects, as well as important events affecting the
Company since the year end.
STATUS
The Company was incorporated in England and Wales
as a public limited company under the Companies Act
2006 (number 10395804). It is an investment company
as defined by Section 833 of the Companies Act 2006.
The Company is a member of the Association of
Investment Companies (‘AIC’).
The Company has been confirmed by HM Revenue
& Customs as having approved investment trust status
under the Investment Trusts (Approved Company) (Tax)
Regulations 2011, subject to it continuing to comply
with those regulations. The Directors conduct the
affairs of the Company with a view to maintaining this
approved investment trust status in order to preserve
the Company’s exemption from UK capital gains tax.
The Directors have no reason to believe that approval
will not continue to be obtained. The Company is not a
close company for taxation purposes.
MANAGEMENT OF THE COMPANY
The Investment Adviser is Tier One Capital Ltd
(‘TOC’). TOC undertakes portfolio management
The Directors present their Annual Report and Financial Statements of the Company for the year to 30 November
2023.
Oak Meadows, Middleton St George
222524 Develop North AR23 V17.indd 22222524 Develop North AR23 V17.indd 22 25/03/2024 18:0725/03/2024 18:07
23
Continued
services for the Company, subject to overall control
and supervision by the Board. TOC is employed
under a contract which can be terminated on 12
months’ notice. If the Company wishes to terminate
the contract on shorter notice, the balance of
remuneration is payable by way of compensation.
TOC is entitled to receive from the Company an
investment advisory fee which is calculated and paid
quarterly in arrears at an annual rate of 0.25% per
annum of the prevailing Net Asset Value if less than
£100m, or 0.50% per annum of the prevailing Net
Asset Value if £100m or more.
The Board has reviewed the performance of the
Investment Adviser and believes that its continued
appointment is in the interests of the Company and
shareholders. Such a review is carried out on an
annual basis.
ALTERNATIVE INVESTMENT FUND
MANAGER’S DIRECTIVE (‘AIFMD’)
The Company is registered with the FCA as a Small
Registered Alternative Investment Fund Manager
(‘AIFM’).
The Alternative Investment Managers’ Directive
requires certain disclosures to be made in respect
of any remuneration policy of the AIFM, leverage,
risk disclosures and pre-investment disclosures. The
Board, as AIFM, receives no remuneration in this
regard. The Company makes sufficient disclosures in
relation to gearing and risk within the Annual Report.
The investment policy and guidelines are set out in this
Strategic Report on pages 12 to 19. Therefore, no
further separate disclosures are required.
INVESTMENT POLICY AND
OBJECTIVE
Details of the Company’s Investment Policy and
Objective are set out in the Strategic Report on pages
12 to 19.
RESULTS AND DIVIDENDS
The revenue return for the financial year ended 30
November 2023 after taxation amounted to £672,000
(November 2022: £992,000). An interim dividend of
1.0p per Ordinary share was declared and paid on
28 December 2023 and a further interim dividend
has been declared, to be paid to shareholders on the
register at the close of business on 8 March 2024 (ex-
dividend date 7 March 2024). These dividends when
added to the two quarterly interim dividends paid in
2023, make a total dividend for the year of 4 pence
per share (November 2022: 4 pence).
The post balance sheet events of the Company are
described in detail in Note 18 on page 63.
FUTURE DEVELOPMENTS
The outlook for the Company is described in the
Chairman’s Statement on pages 4 to 7 and in the
Investment Adviser’s Report on pages 8 to 11.
USE OF FINANCIAL INSTRUMENTS
The Company’s use of financial instruments is disclosed
in note 16 to the Financial Statements.
CAPITAL STRUCTURE AND VOTING
RIGHTS
Capital Structure and Voting Rights
As at 30 November 2023 the Company’s share
capital comprised 26,234,225 (November 2022:
26,924,063) Ordinary shares of 1p each. There were
689,838 (November 2022: nil) Ordinary shares held
in Treasury. The Ordinary shares have a premium
listing on The London Stock Exchange
Voting Rights in the Company’s shares
Details of the voting rights in the Company’s shares as
at the date of this report are given in note (xvi) to the
Notice of Meeting on page 68.
222524 Develop North AR23 V17.indd 23222524 Develop North AR23 V17.indd 23 25/03/2024 18:0725/03/2024 18:07
24
Substantial Interests in Voting Rights
As at the end of the financial year the following had
a declared notifiable interest in the Company’s
voting rights in accordance with the FCA’s Disclosure
Guidance and Transparency Rules:
Number of Shares % held*
Mr B Thompson 1,638,000 6.1
Preston Transport Ltd 1,700,000 6.3
Peter Harley Jasper 1,433,790 5.3
*Percentage as at the date of notification.
No changes have been notified since the year end to
the date of this report.
There are no restrictions on the transfers of securities
in the Company; no special rights with regard to
control attached to securities; no agreements between
holders of securities regarding their transfer known to
the Company; no agreements which the Company
is party to that affect its control following a takeover
bid; and no agreement between the Company and its
Directors concerning compensation for loss of office.
DIRECTORS
Biographical details of the Directors who held office
throughout the year can be found on pages 20 and 21.
All are non-executive and, save for Ian McElroy, are
independent of the Investment Adviser and the other
service providers. The Directors have reviewed their
independence by reference to the AIC Code.
Details of the Directors’ beneficial shareholdings can
be found on page 34.
Mr McElroy has agreed to waive his Director’s fee
for so long as he has an interest in the Company’s
Investment Adviser.
All Directors will retire at the forthcoming Annual
General Meeting and, being eligible, will offer
themselves for reappointment. The Board having
considered their qualifications, performance and
contribution to the Board and its committees,
confirms that each Director continues to be effective
and demonstrates commitment to the role and the
Board recommends to shareholders that they be
reappointed.
The rules concerning the appointment, reappointment
and replacement of Directors, amendment of the Articles
of Association and powers to repurchase the Company’s
shares are contained in the Articles of Association of the
Company and the Companies Act 2006.
DIRECTORS’ AND OFFICERS’
LIABILITY INSURANCE AND
INDEMNIFICATION
Directors’ and Officers’ liability insurance cover is
maintained by the Company on behalf of the Directors.
As permitted by the Company’s Articles of Association,
each Director has the benefit of an indemnity which is
a qualifying third party indemnity, as defined by Section
234 of the Companies Act 2006. These indemnities
were in place during the year and as at the date of this
Report.
CORPORATE GOVERNANCE
The Statement of Corporate Governance is set out on
pages 27 to 29 and forms part of this Report.
EMPLOYMENT, SOCIAL,
COMMUNITY AND HUMAN
RIGHTS ISSUES
The Company has no employees and the day-to-
day activities are carried out by third parties. There
are therefore no disclosures to be made in respect of
employees
LISTING RULE 9.8 4
The Company itself has no greenhouse gas emissions
to report from its activities.
LISTING RULE 9.8.4R
Listing Rule 9.8.4R requires the Company to include
certain information in a single identifiable section of
the Annual Report or a cross reference table indicating
where the information is set out. Other than Listing
Rule 9.8.4 (10), under which Ian McElroy who is an
employee of the Investment Adviser and is deemed to
be interested in the Company’s investment advisory
agreement, the Directors confirm that there are no
disclosures to be made in respect of Listing Rule 9.8.4R.
222524 Develop North AR23 V17.indd 24222524 Develop North AR23 V17.indd 24 25/03/2024 18:0725/03/2024 18:07
25
DISCLOSURE OF INFORMATION TO
THE AUDITOR
The Directors confirm that, so far as each of them are
aware, there is no relevant audit information of which
the Company’s auditor is unaware and the Directors
have taken all the steps that they ought to have taken
as Directors in order to make themselves aware of
any relevant audit information and to establish that the
Company’s auditor is aware of that information.
The above confirmation is given and should be
interpreted in accordance with the provision of section
418 (2) of the Companies Act 2006.
AUDITOR
The Independent Auditor’s Report can be found on
pages 37 to 43. Following a rebranding exercise on
15 May 2023 the trading name of the Company’s
independent auditor changed from MHA Macintyre
Hudson to MHA. MHA has indicated its willingness to
continue in office with the Company and a resolution
to re-appoint them will be proposed at the Annual
General Meeting (resolution 9).
DIRECTORS’ REMUNERATION
POLICY AND REPORT
It is mandatory for listed companies to put their
Directors’ Remuneration Report to an advisory
shareholder vote on an annual basis. Resolution 2
seeks to approve the Directors’ Remuneration Report.
The Company’s remuneration policy was last
approved by shareholders at the AGM in 2019 in
accordance with the provisions of the Companies Act
2006. There have been no changes to the policy since
that approval. It has been decided that the policy will
be approved by shareholders annually. Resolution 3
seeks to approve the Directors’ Remuneration Policy.
GOING CONCERN
The Company does not have a fixed wind-up date
and, therefore, unless shareholders vote to wind-up
the Company, shareholders will only be able to realise
their investment through the market. In addition, the
Articles of Association require shareholders to approve
a resolution to continue the Company at three yearly
intervals. At a General Meeting of the Company held
on 29 March 2021 a resolution was approved by
shareholders to continue the Company for a further
three years. A resolution will be proposed at the
forthcoming AGM to seek shareholder approval for
the Company to continue its business as presently
constituted for a further three years. The Board
understands that the Investment Adviser has taken
soundings of major shareholders and therefore it
has a high degree of confidence that this vote will be
passed by shareholders; however, the vote is outside
the control of the Board and thus, in the context of
assessing the future prospects of the Company, it
represents a material uncertainty which (if the vote
were to be lost) may cast significant doubt upon the
ability of the Company to continue as a going concern.
The Company has a strong balance sheet which is
made up of realisable investments. The Investment
Adviser monitors the Company’s cash balances
continually and forecasts cash flows, including stress
testing in respect of the timing of those cash flows.
The Board reviews the Company’s liquidity, cash flow
requirements and the associated assumptions at every
meeting. In reaching its conclusion that the Company
is a going concern, the Board takes comfort from the
solid performance and improved cash generation over
the past year, as well as the ongoing support of the
Company’s lender.
In assessing the going concern basis of accounting the
Directors have had regard to the guidance issued by
the Financial Reporting Council. After making enquiries,
and bearing in mind the nature of the Company’s
business and assets, the Directors consider that the
Company has adequate resources to continue in
operational existence for a period of at least twelve
months from the date of approval of the financial
statements subject to the material uncertainty. For this
reason, they continue to adopt the going concern basis
ANNUAL GENERAL MEETING
The notice of the Annual General Meeting of the
Company to be held on 25 April 2024 is set out on
pages 64 to 70. The full text of the resolutions is set
Continued
222524 Develop North AR23 V17.indd 25222524 Develop North AR23 V17.indd 25 25/03/2024 18:0725/03/2024 18:07
26
out in the notice of meeting. Resolutions relating to the
following items of special business will be proposed at
the meeting:
(i) Dividend Policy (resolution 8)
Subject to market conditions and the Company’s
performance, financial position and financial outlook
it is the Directors’ intention to pay a consistent and
stable income to shareholders on a quarterly basis.
The Company intends to continue to pay all dividends
as interim dividends
Recognising that this means that shareholders will not
have the opportunity to vote on a final dividend, the
Company will instead propose a resolution to approve
the Company’s dividend policy at the AGM (resolution
8). The Directors expect that this resolution to
approve the Company’s dividend policy will continue
to be approved annually.
The Company intends to distribute at least 85% of its
eligible income or such other percentage as may be
prescribed by HMRC in accordance with Chapter 4 of
Part 24 ICTA 2010.
(ii) Authority to allot new shares and to disapply
pre-emption rights (resolution 12 and 13)
It is advantageous for the Company to be able to issue
new shares for cash to investors when the Directors
consider that it is in the best interests of shareholders to
do so. The proceeds of any such issue will be available
for investment in line with the Company’s investment
policies. The Board is seeking authority to issue up to
20% of the Company’s issued share capital (excluding
Treasury shares) in order to provide flexibility to issue
shares at a premium and manage share price volatility
to NAV. This authority will expire on the earlier of the
conclusion of the next Annual General Meeting of the
Company and 15 months from the passing of this
resolution unless it is previously renewed, varied or
revoked.
Resolution 13 will enable the allotment of new ordinary
shares, pursuant to Resolution 12 otherwise than by
way of a pro-rata issue to existing shareholders. This
authority will expire on the earlier of the conclusion of
the next Annual General Meeting of the Company and
15 months from the passing of this resolution unless it
is previously renewed, varied or revoked.
The full text of resolutions 12 and 13 is set out in the
Notice of Meeting on pages 64 and 65.
(iii) Authority to repurchase the Company’s shares
(resolution 14)
The authority to repurchase up to 14.99% of the
Company’s issued share capital will expire at the
conclusion of the forthcoming Annual General Meeting
unless renewed at that meeting. The Directors consider
that the renewal is in the interests of shareholders as a
whole, as the repurchase of shares at a discount to the
underlying NAV enhances the NAV of the remaining
shares. Resolution 14 will be proposed as a special
resolution and seeks to provide the Directors with the
authority to purchase up to 3,847,600 ordinary shares
or, if less, the number representing approximately
14.99 per cent. of the Company’s ordinary shares
in issue at the date of the passing of resolution 14.
The Company may either cancel any ordinary shares
it purchases under this authority or hold them in
Treasury. This authority will expire on the earlier of
the conclusion of the next Annual General Meeting of
the Company and 15 months from the passing of this
resolution unless it is previously renewed, varied or
revoked.
RECOMMENDATION
The Directors consider the passing of the Resolutions
to be proposed at the Annual General Meeting to be in
the best interests of the Company and its shareholders
and likely to promote the success of the Company for
the benefit of its shareholders as a whole.
Accordingly, the Directors unanimously recommend
that shareholders should vote in favour of the
resolutions, as they intend to in respect of their own
beneficial shareholders amounting to less than 1% of
the shares in issue.
On Behalf of the Board
John Newlands, Chairman
25 MARCH 2024
222524 Develop North AR23 V17.indd 26222524 Develop North AR23 V17.indd 26 26/03/2024 09:3526/03/2024 09:35
27
Statement of
Corporate Governance
STATEMENT OF CORPORATE
GOVERNANCE
The Company is committed to high standards of
corporate governance. The Board has considered the
Principles and Provisions of the AIC Code of Corporate
Governance, published in February 2019 (‘AIC Code’).
The AIC Code addresses the Principles and Provisions
set out in the UK Corporate Governance Code (the
UK Code), as well as setting out additional Provisions
on issues that are of specific relevance to the Company.
The Board considers that reporting against the
Principles and Provisions of the AIC Code, which has
been endorsed by the Financial Reporting Council,
provides more relevant information to shareholders.
The AIC Code is available on the AIC website (www.
theaic.co.uk). It includes an explanation of how the
AIC Code adapts the Principles and Provisions set out
in the UK Code to make them relevant for investment
companies.
The Company has complied with the Principles and
Provisions of the AIC Code; however, the Board has
elected not to designate a senior independent non-
executive Director as it considers that each Director
has different strengths and qualities on which they may
provide leadership.
THE BOARD
Composition
The Board consists of four Directors. Three are
independent non-executive Directors, including
the Chairman John Newlands. These Directors
are considered by the Board to be independent in
character and judgment of the Investment Adviser.
Ian McElroy is considered not to be independent on
the basis of his role at the Investment Adviser. The
independence of the Directors is determined with
reference to the AIC Code and is reviewed annually.
Biographical details of the Directors and their
experience is disclosed on pages 20 and 21.
Induction and Training
On appointment, the Investment Adviser and
Company Secretary provide all Directors with
induction training. Thereafter, regular briefings
are provided on changes in law and regulatory
requirements that affect the Company and the
Directors. Directors are encouraged to attend industry
and other seminars covering issues and developments
relevant to investment trust companies.
Regular reviews of the Directors’ training needs are
carried out by the Chairman by means of the Board
and Committee evaluation process.
Role of the Board
The basis on which the Company agrees to generate
value over the longer term is set out in its objective
and investment policy as contained within the Strategic
Review.
The Company has no executive Directors or
employees. An Investment Adviser Agreement
between the Company and its Investment Adviser sets
out the matters over which the Investment Adviser
has authority and the limits beyond which Board
approval must be sought. All other matters, including
strategy, investment and dividend policies, gearing and
corporate governance procedures, are reserved for
the approval of the Board.
Tenure and Reappointment of Directors
Directors are initially appointed until the following
Annual General Meeting when, under the Articles
of Association, they are required to be elected by
shareholders.
Although the Articles require that Directors submit
themselves for re-election at least every three years
the Board has resolved to adopt corporate governance
best practice and all of the Directors are subject to re--
election on an annual basis. In addition, the Board has
agreed that any Director with more than nine years’
service will be required to stand for re-election at each
annual general meeting.
Board Diversity – Gender and Ethnic Background
In accordance with Listing Rule 9.8.6 R(9) and (11),
the Company is required to include a statement in
the Annual Report setting out whether it has met the
following targets on board diversity. The reference
date for this statement is 30 November 2023, the
Company’s year end:
1) At least 40% of individuals on its board are women;
2) At least one of the senior board positions is held by
a woman; and
3) At least one individual on its board is from a minority
ethnic background.
Continued
222524 Develop North AR23 V17.indd 27222524 Develop North AR23 V17.indd 27 25/03/2024 18:0725/03/2024 18:07
28
The following tables set out the prescribed format for
information in accordance with the requirements of
LR 9 Annex 2.
(a) Table for reporting on gender identity or sex
Number
of
Board
Members
Percentage of
the Board
Number
of senior
positions
on the
Board
Men 4 100% 2
Women – – –
Not specified/prefer not to say – – –
(b) Table for reporting on ethnic background
Number
of
Board
Members
Percentage of
the Board
Number
of senior
positions
on the
Board
White British or other White
(including minority white
groups)
4 100% 2
Mixed Multiple Ethnic Groups
– – –
Asian/Asian British
– – –
Black/African/Caribbean/Black
British
– – –
Other ethnic group, including
Arab
– – –
Not specified/prefer not to say
– – –
The Listing Rules only recognise the roles of Chairman,
Chief Executive (CEO), Senior Independent Director
and Chief Financial Officer (CFO) as senior board
positions. As an externally managed investment
company with no executive management the Board
considers that the CEO and CFO positions are not
relevant to the Company. The Board does, however,
consider the role of the Chair of the Audit Committee
to be a senior board position and the above disclosure
is made on this basis.
The Listing Rules require disclosure of an explanation
of the Company’s approach to collecting the data used
for the purposes of making the disclosures. The data
was collated in consultation with the Directors.
Further details on Board diversity and the Board’s
approach to meeting the diversity targets are set out in
the Strategic Report on page 19.
There have been no changes to the Board since 30
November 2023 and the date of approval of this report.
Meetings and Committees
The Board delegates certain responsibilities and
functions to committees. Directors who are not
members of committees may attend at the invitation
of the Chairman of the relevant committee.
Directors have attended scheduled Board and
Committee meetings during the year ended 30
November 2023 as follows (with their eligibility to
attend the relevant meeting in brackets):
Board AC RC NC MEC
M Harris 4 (4) 3 (3) 1 (1) 1 (1) 1 (1)
I McElroy 3 (4) – (–) – (1) – (1) – (–)
J Newlands 4 (4) 3 (3) 1 (1) 1 (1) 1 (1)
D Noble 4 (4) 3 (3) 1 (1) 1 (1) 1 (1)
In addition to the above, ad-hoc Board and Board
Committee meetings were held during the year to
deal with such matters as the approval of the Annual
and Half Year Reports, the renewal of the Shawbrook
Loan Facility, the commencement of the share buyback
programme, as well as project specific matters.
The Board has a schedule of matters reserved to it
for decision and the requirement for Board approval
on these matters is communicated directly to the
Investment Adviser. In addition to the scheduled
meetings above, additional meetings were held
to consider ad-hoc matters including borrowings,
investment decisions and dividend payments.
Full and timely information is provided to the Directors
to enable the Board to function effectively and to
discharge its responsibilities. The Board also reviews
the financial statements, performance and revenue
budgets.
AUDIT COMMITTEE
Matthew Harris is the Chairman of the Company’s
Audit Committee which comprises the three
independent Directors. Mr Ian McElroy may attend
Audit Committee meetings by standing invitation.
The report of the Audit Committee is set out on pages
30 to 32.
222524 Develop North AR23 V17.indd 28222524 Develop North AR23 V17.indd 28 25/03/2024 18:0725/03/2024 18:07
29
MANAGEMENT ENGAGEMENT
COMMITTEE
John Newlands is the Chairman of the Company’s
Management Engagement Committee which
comprises the three independent Directors. The
Management Engagement Committee reviews the
appropriateness of the Investment Adviser’s continuing
appointment, together with the terms and conditions
thereof, on a regular basis. The Management
Engagement Committee meets at least annually.
NOMINATION COMMITTEE
John Newlands is the Chairman of the Company’s
Nomination Committee which comprises the three
independent Directors. The Nomination Committee is
responsible for Director appointments and succession
planning.
The Company’s affairs are overseen by a Board
currently comprising four male non-executive
Directors. In terms of progress in achieving diversity,
the Company is committed to ensuring that vacancies
arising are filled by the best qualified candidates and
recognises the value of diversity in the composition
of the Board. When the Board goes through its next
recruitment process, improving the Board’s diversity
will be a key consideration.
The Directors have a wealth of experience, bringing
knowledge of investment markets, business, financial
services, accounting and regulatory expertise to
discussions on the Company’s business. The Directors
regularly consider the leadership needs and specific
skills required to achieve the Company’s investment
objective. While appointments are based on skills
and experience, the Board is conscious of diversity of
gender, social and ethnic backgrounds, cognitive and
personal strengths and experience. All appointments
are based on objective criteria and merit, and are made
following a formal, rigorous and transparent process.
The Board has put in place necessary procedures
to conduct, on an annual basis, an appraisal of the
Chairman of the Board as well as a performance
evaluation of the Board, the individual Directors
and the Board Committees. This was conducted
through completion of evaluation questionnaires. The
evaluation includes an assessment of how cohesively
the Board and its committees operate as a whole and in
conjunction with the Company’s key service providers,
as well as the effectiveness of the Chairman. The
evaluation process is used as a mechanism to improve
Board effectiveness, maximise strengths, ascertain any
training needs and also to identify potential risks and
strategic imperatives for the coming year.
REMUNERATION COMMITTEE
The Board has established a Remuneration Committee
comprising all Directors for the purposes of considering
the Directors’ remuneration. The committee is chaired
by Douglas Noble and meets at least annually.
The Company’s policy on remuneration is discussed
in the Directors’ Remuneration Report on pages 33
to 35.
TERMS OF REFERENCE
The Audit Committee, Nomination Committee,
Remuneration Committee and Management
Engagement Committee all have written terms
of reference which define clearly their respective
responsibilities, copies of which are available for
inspection on the Company’s website at www.
DevelopNorth.co.uk and on request at the Company’s
registered office.
RELATIONS WITH SHAREHOLDERS
The Directors place a great deal of importance on
communication with shareholders. The Annual Report
and Accounts are distributed to other parties who
have an interest in the Company’s performance.
Shareholders and investors may obtain up to date
information on the Company through the Investment
Adviser’s website. The Company responds to
questions from shareholders on a wide range of issues.
A regular dialogue is maintained with the Company’s
shareholders.
The Notice of the General Meeting included within
the Annual Report and Accounts is sent out 20 working
days in advance of the meeting. The Company
Secretary is available to answer general shareholder
queries at any time throughout the year.
On Behalf of the Board
Apex Fund Administration
Services (uk) Limited
25 MARCH 2024
222524 Develop North AR23 V17.indd 29222524 Develop North AR23 V17.indd 29 25/03/2024 18:0725/03/2024 18:07
30
Report of the
Audit Committee
COMPOSITION OF THE AUDIT
COMMITTEE
An Audit Committee (the ‘Committee’) has been
established with written terms of reference and
comprises three non-executive Directors, Matthew
Harris (Chairman), Douglas Noble and John Newlands.
The Committee meets on at least two occasions
each year. In addition the Committee meets with the
Auditors at least twice a year.
The members of the Committee consider that they
have the requisite skills and experience to fulfill the
responsibilities of the Committee. As a Chartered
Accountant the Committee Chairman has recent and
relevant financial experience and the Committee, as a
whole, has competence relevant to the sector.
ROLE OF THE AUDIT COMMITTEE
A summary of the Committee’s main audit review
functions is shown below:
• To monitor and review the principles, policies,
and practices adopted in the preparation and
audit of the accounts of the Company;
• To review and monitor the effectiveness of the
internal control systems and risk management
systems on which the Company is reliant;
• To consider annually whether there is a need
for the Company to have its own internal audit
function;
• To monitor the integrity of the half-yearly and
annual financial statements of the Company by
reviewing, and challenging where necessary, the
actions and judgments of the Investment Adviser,
the Company Secretary and Administrator;
• To meet with the external Auditor to review their
proposed audit programme of work and their
findings following completion of the audit. The
Committee also uses this as an opportunity to
assess the effectiveness of the audit process;
• To make recommendations in relation to
the appointment of the external Auditor and
to approve the remuneration and terms of
engagement of the external Auditor;
• To monitor and review annually the external
Auditor’s independence, objectivity, effectiveness,
resources and qualification; and
·• To consider and approve all non-audit services.
222524 Develop North AR23 V17.indd 30222524 Develop North AR23 V17.indd 30 25/03/2024 18:0725/03/2024 18:07
31
FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING
MATTERS
The Board of Directors is responsible for preparing
the Annual Report and financial statements. The
Committee advises the Board on the form and content
of the Annual Report and financial statements, any
issues which may arise and any specific areas which
require judgement.
The valuation of investments in the form of loans and
profit shares, the building projects given as guarantee
for the loans, and the loan recoverability and interest
receipts were areas of focus given their significance to
the financial statements as a whole and these were
specifically reviewed by the Committee.
Following discussion with the Investment Adviser, the
Committee gained comfort over the valuation of the
loans as included in the Annual Report and financial
statements.
AUDITOR
As part of its review of the scope and results of the
audit, during the year the Committee considered and
approved MHA’s plan for the audit of the financial
statements for the year ended 30 November 2023.
At the conclusion of the audit MHA did not highlight
any issues to the Committee which would cause
it to qualify its audit report nor did it highlight any
fundamental internal control weaknesses. MHA issued
an unqualified audit report with a material uncertainty
relating to going concern which is included on pages
37 to 43.
Non-audit services
There were no fees paid to the auditor in respect
of non-audit services during the year ended 30
November 2023 (November 2022: £nil).
Auditor Independence
As part of the review of auditor independence
and effectiveness, MHA has confirmed that it is
independent of the Company and has complied with
relevant auditing standards. In evaluating MHA, the
Audit Committee has taken into consideration the
standing, skills and experience of the firm and the audit
team. The Audit Committee, from direct observation
and enquiry of the Investment Adviser and the
Administrator, remains satisfied that MHA continues to
provide effective independent challenge in carrying out
its responsibilities.
The main areas of accounting risk considered by
the Committee during the year in relation to the
Company’s financial statements were the valuation
and ownership of investments held by the Company.
The valuation of investments is undertaken in
accordance with the accounting policies as set out in
note 1 to the financial statements. Details of the fair
value hierarchy are set out in note 8.
The Committee reviews detailed information on the
loan book and its value on a quarterly basis. A full
portfolio analysis is prepared for each Board meeting,
including a detailed update on development works,
collateral given and loan to value ratios, which is
reviewed in detail and considered by the Directors.
The Company also receives regular reporting on
internal controls (as detailed below).
RISK MANAGEMENT AND
INTERNAL CONTROLS
The Board is ultimately responsible for the Company’s
systems of internal control and for reviewing its
effectiveness. Following publication of the Financial
Reporting Council’s Guidance on Risk Management,
Internal Control and Related Financial and Business
Reporting (the “FRC Guidance”) the Board confirms
that there is an on-going process for identifying,
evaluating and managing the significant risks faced by
the Company. This process has been in place for the
year under review and up to the date of approval of
this Annual Report and is regularly reviewed by the
Board to ensure it accords with the FRC Guidance.
The Board has reviewed the effectiveness of the
system of internal control. In particular, it has reviewed
and updated the process for identifying and evaluating
the significant risks affecting the Company and policies
by which these risks are managed. The significant risks
faced by the Company are as follows:
Continued
222524 Develop North AR23 V17.indd 31222524 Develop North AR23 V17.indd 31 25/03/2024 18:0725/03/2024 18:07
32
• Investment and strategy;
• Market;
• Financial;
• Operational; and
• Legal and regulatory
The key components designed to provide effective
internal control are outlined below:
• · Apex Fund Administration Services (UK)
Limited (formerly Maitland Administration
Services Limited) acts as Company Secretary and
Administrator and, together with the Investment
Adviser, prepares forecasts and management
accounts which allow the Board to assess the
Company’s activities and review its performance;
• the Board and Investment Adviser have agreed
clearly defined investment criteria, specified
levels of authority and exposure limits. Reports
on these issues, including concentration limits
and loan to value ratios, are regularly submitted
to the Board and there are meetings with the
Investment Adviser in between as appropriate;
• as a matter of course the Investment Adviser’s
Credit and Compliance teams continually review
the Investment Adviser’s operations and will
report to the Board on any breaches;
• written agreements are in place which
specifically define the roles and responsibilities
of the Investment Adviser, Company Secretary,
Administrator and other third-party service
providers; and
• the Board has considered the need for an
internal audit function but, due to the compliance
and internal control systems in place at the
Investment Adviser, the Company Secretary and
Administrator, it has decided to place reliance on
their systems and internal audit procedures.
At its March 2024 meeting, the Committee carried out
an annual assessment of internal controls for the year
ended 30 November 2023 and subsequent events
by considering documentation from the Investment
Adviser, the Company Secretary and Administrator.
The results of the assessment were reported to, and
considered by, the Board at its next meeting.
Internal control systems are designed to meet the
Company’s particular needs and the risks to which it
is exposed. Accordingly, the internal control systems
are designed to manage rather than eliminate the risk
of failure to achieve business objectives and, by their
nature, can only provide reasonable and not absolute
assurance against mis-statement and loss.
The principal risks and uncertainties affecting the
Company are disclosed in the Strategic Report on
pages 12 to 19.
FAIR, BALANCED AND
UNDERSTANDABLE
As a result of the work performed, the Committee
has concluded that the Annual Report and Financial
Statements for the year ended 30 November 2023,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Company’s position and
performance, business model and strategy, and has
reported on these findings to the Board. The Board’s
conclusions in this respect are set out in the Statement
of Director’s Responsibilities on page 36.
Matthew Harris
Chairman of Audit
Committee
25 MARCH 2024
222524 Develop North AR23 V17.indd 32222524 Develop North AR23 V17.indd 32 25/03/2024 18:0725/03/2024 18:07
33
Directors’
Remuneration Report
The Board presents the Directors’ Remuneration
Report for the year ended 30 November 2023, which
has been prepared in accordance with the requirements
of Section 421 of the Companies Act 2006.
The law requires the Company’s Auditor to audit
certain of the disclosures provided. Where disclosures
have been audited, they are indicated as such. The
Auditor’s opinion is included in their report on pages
37 to 43.
All of the Directors are non-executive. In late 2020
the Board established a Remuneration Committee
with Douglas Noble as Chairman. This Committee
reviews Director’s fees on a regular basis and
makes recommendations to the Board as and when
appropriate.
The Remuneration Committee completed an
assessment of the level of Directors’ fees during the
year. This assessment considered a number of factors,
including external peer group analyses, increased
regulatory responsibilities and inflationary trends.
This review did not result in any changes to the
Directors’ remuneration for the coming year. The
current level of fees is: Chairman of the Board,
£29,000, Audit Committee Chair, £28,500, and non-
executive Directors, £27,500
POLICY ON DIRECTORS’
REMUNERATION
The Company’s policy is that the remuneration of the
Directors should reflect the experience of the Board
as a whole, the time commitment required, and be fair
and comparable with that of other similar companies.
The remuneration of Directors has been set at a level
designed to attract individuals of a calibre appropriate to
the future development of the Company. to the future
development of the Company. Furthermore, the level
of remuneration should be sufficient to attract and
retain the Directors needed to oversee the Company
properly and to reflect its specific circumstances.
The fees for the Directors are determined within the
limit set out in the Company’s Articles of Association.
The present limit is an aggregate of £400,000 per
annum and may not be changed without seeking
shareholder approval at a general meeting. Directors
are not eligible for bonuses, pension benefits, share
options, long-term incentive schemes or other
benefits. No element of the Directors’ remuneration
is performance-related.
It is the Board’s policy that Directors do not have
service contracts, but each new Director is provided
with a letter of appointment. The terms of Directors’
appointments provide that Directors should retire
and be subject to election at the first Annual General
Meeting after their appointment. Directors are subject
to re-election annually thereafter.
Although the Company’s Articles of Association
provide that Directors shall not remain in office for
longer than three years without submitting themselves
for re-election, the Board has resolved that all of the
Directors should be subject to re-election on an annual
basis.
The terms and conditions of Directors’ appointments
are set out in formal letters of appointment which are
available for review at the Company’s Annual General
Meeting and the Company’s registered office. There
is no notice period and no provision for compensation
upon early termination of appointment. Details of the
Board’s policy on tenure are set out on page 27.
Continued
222524 Develop North AR23 V17.indd 33222524 Develop North AR23 V17.indd 33 25/03/2024 18:0725/03/2024 18:07
34
ANNUAL REPORT ON DIRECTORS’
REMUNERATION
The Directors who served in the year received the
below fees:
2023 2022
John Newlands (Chairman) £29,000 £29,000
Matthew Harris £28,500 £28,500
Douglas Noble £27,500 £27,500
Ian McElroy* £nil £nil
Total £85,000 £85,000
*Ian McElroy is entitled to Directors fees of £27,500 per annum.
He has waived this entitlement in respect of the years ended 30
November 2023 and 2022.
ANNUAL PERCENTAGE CHANGE
IN DIRECTORS’ REMUNERATION
The annual percentage change in fees for each
Director who served in the year under review is set
out in the following table:
RELATIVE IMPORTANCE OF
DIRECTORS’ FEES
The table below sets out in respect of the financial year
ended 30 November 2023 and the preceding financial
year:
a) the remuneration paid to Directors;
b) the distribution made to shareholders by way of
dividend; and
c) expenses paid by the Company.
2023 2022
£’000 £’000
Total remuneration 85 85
Dividend 1,077 1,077
Expenses 578 615
National Insurance Contributions 3 3
Directors’ fees as a percentage of:
2023 2022
% %
Dividend 7.9 7.9
Expenses 14.7 13.8
DIRECTORS’ INTERESTS
The Directors, including connected parties who held
office at the year end and their interests (all beneficial)
in the Ordinary Shares of the Company were as
follows:
At 30 November At 30 November
2023 2022
Ordinary shares Ordinary Shares
John Newlands 5,000 5,000
Matthew Harris 60,724 60,724
Ian McElroy 74,005 74,005
Douglas Noble 8,600 8,600
Year Year Year Year Year
to to to to to
Nov Nov Nov Nov Nov
2023 2022 2021 2020 2019
% % % % %
John Newlands
(Chairman) 0 -3.3 0 0 0
................................................................................................
Matthew Harris
0
-5.0 0 0 0
................................................................................................
Douglas Noble
0
-8.3 0 0 0
................................................................................................
Ian McElroy 0 0 0 0 0
................................................................................................
The Company has no employees.
222524 Develop North AR23 V17.indd 34222524 Develop North AR23 V17.indd 34 25/03/2024 18:0725/03/2024 18:07
35
The graph below illustrates the total shareholder return
for a holding in the Company’s shares as compared
to the FTSE 250 for the period from Listing to 30
November 2023. The Company considers this to be
an appropriate index against which to measure the
Company’s performance, in the absence of a meaningful
benchmark index.
VOTING AT AGM
At the Company’s General Meeting, held on 27
April 2023, shareholders approved the Directors’
Remuneration Policy and Report in respect of the year
ended 30 November 2022. 100% of the votes cast
were in favour of these resolutions.
Ordinary resolutions for the approval of the Directors’
Remuneration Policy and Report will be put to a
shareholder vote at the forthcoming Annual General
Meeting.
For and on behalf of the Board
Douglas Noble, Chairman
25 MARCH 2024
140
130
120
110
100
90
80
70
Nov 18 May 19 Nov 19 May 20 Nov 20 May 21 Nov 21 May 22 Nov 22 May 23 Nov 23
DVNO price TR FTSE 250 TR
222524 Develop North AR23 V17.indd 35222524 Develop North AR23 V17.indd 35 25/03/2024 18:0725/03/2024 18:07
36
Management Report and Directors’
Responsibility Statement
Management report
Listed companies are required by the DTRs to include
a management report in their Financial Statements.
The information is included in the Strategic Report on
pages 12 to 19 inclusive (together with the sections
of the Annual Report and Accounts incorporated by
reference) and the Directors’ Report on pages 22 to
26. Therefore, a separate management report has not
been included.
Directors’ responsibility statement
The Directors are responsible for preparing the Annual
Report and financial statements, in accordance with
applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under that
law the Directors have elected to prepare the financial
statements in accordance with UK adopted International
Financial Reporting Standards (”UK adopted IFRS”)
and with the Companies Act 2006, as applicable to
companies reporting under international accounting
standards.
Under Company law the Directors must not approve the
financial statements unless they are satisfied that, taken
as a whole, they are fair, balanced and understandable
and provide the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy and that they give a true
and fair view of the state of affairs of the Company
and of the total return or loss of the Company for that
period. In order to provide these confirmations and in
preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply
them consistently;
• make judgments and estimates that are reasonable
and prudent;
• state whether applicable UK adopted IFRS have
been followed, subject to any material departures
disclosed and explained in the financial statements;
and
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business and
the Directors confirm that they have done 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 the
financial statements comply with the Companies Act
2006, where applicable. They are responsible 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 financial statements are published on www.
DevelopNorth.co.uk which is a website maintained
by the Company’s Investment Adviser. The Directors
are responsible for the maintenance and integrity of
the corporate and financial information included on the
Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Under applicable UK law and regulations, the Directors
are also responsible for preparing a Strategic Report, a
Directors’ Report, Statement of Corporate Governance
and Directors’ Remuneration Report that complies with
that law and those regulations.
Directors’ confirmation statement
Each of the Directors, whose names and functions
appear on pages 20 and 21, confirm that to the best of
their knowledge:
• the financial statements, prepared in accordance
with UK adopted IFRS and with the Companies
Act 2006, as applicable to companies reporting
under international accounting standards, give
a true and fair view of the assets, liabilities and
financial position and total return or loss of the
Company; and
• The Management Report, referred to herein,
which comprises the Chairman’s Statement,
the Investment Adviser’s Report, Strategic
Report (including risk factors) and note 17 of the
Financial Statements includes a fair review of the
development and performance of the business
and position of the Company, together with the
principal risks and uncertainties that it faces.
The Directors consider that the Annual Report
and Accounts taken as a whole, is fair, balanced
and understandable and it provides the information
necessary to assess the Company’s position and
performance, business model and strategy.
On Behalf of the Board
John Newlands, Chairman
25 MARCH 2024
222524 Develop North AR23 V17.indd 36222524 Develop North AR23 V17.indd 36 25/03/2024 18:0725/03/2024 18:07
37
Independent
Auditor’s Report
For the purpose of this report, the terms “we” and “our”
denote MHA in relation to UK legal, professional and
regulatory responsibilities and reporting obligations to
the members of Develop North Plc. For the purposes
of the table on pages 39 to 40 that sets out the key
audit matters and how our audit addressed the key
audit matters, the terms “we” and “our” refer to MHA.
The “Company” is defined as Develop North PLC.
The relevant legislation governing the Company is the
United Kingdom Companies Act 2006 (“Companies Act
2006”).
OPINION
We have audited the financial statements of Develop
North PLC for the year ended 30 November 2023.
The financial statements that we have audited
comprise:
• the Income Statement
• the Statement of Financial Position
• the Statement of Changes in Equity
• the Statement of Cash Flows, and
• Notes 1 to 18 of the financial statements,
including the significant accounting policies.
The financial reporting framework that has been
applied in the preparation of the Company’s financial
statements is applicable law and UK adopted
International Financial Reporting Standards (“UK
Adopted IFRS”).
In our opinion the financial statements
• give a true and fair view of the state of the
Company’s affairs as at 30 November 2023
and of the Company’s profit for the year then
ended;
• have been properly prepared in accordance
with UK adopted International Financial
Reporting Standards (“UK Adopted IFRS”); and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
Our opinion is consistent with our reporting to the
Audit Committee.
BASIS FOR OPINION
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in
the Auditor Responsibilities for the Audit of the
Financial Statements section of our report. We
are independent of the Company in accordance
with the ethical requirements that are relevant
to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to
listed public interest entities, and we have fulfilled
our ethical responsibilities in accordance with those
requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide
a basis for our opinion.
MATERIAL UNCERTAINTY
RELATING TO GOING CONCERN
We draw your attention to the disclosures on going
concern on page 48 of this Annual Report, which
indicate the requirement as outlined in the Articles of
Association, for shareholders to approve a resolution
on the continuation of the Company. This resolution
is being proposed at the forthcoming AGM and, while
the Board has a high degree of confidence that this
vote will be approved by shareholders, the vote
represents a material uncertainty that may cause
doubt over the Company’s ability to continue as a
going concern. Our opinion is not modified in respect
of this matter.
In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis
of accounting in the preparation of the financial
statements is appropriate.
Our evaluation of the Directors’ assessment of the
entity’s ability to continue to adopt the going concern
basis of accounting included:
• The consideration of inherent risks to the
Company’s operations and specifically its
business model.
• The evaluation of how those risks might impact
on the Company’s available financial resources.
Independent Auditor’s Report to the Members of Develop North PLC
Continued
222524 Develop North AR23 V17.indd 37222524 Develop North AR23 V17.indd 37 25/03/2024 18:0725/03/2024 18:07
38
• Review of the mathematical accuracy of
the cashflow forecast model prepared by
management and corroboration of key data
inputs to supporting documentation for
consistency of assumptions used with our
knowledge obtained during the audit.
• Challenging management for reasonableness of
assumptions in respect of the timing and values
of cash receipts and payments included in the
cash flow model.
• Holding discussions with management regarding
future financing plans, corroborating these were
necessary and assessing the impact on the cash
flow forecast.
• Performing sensitivity analysis and reverse stress
tests on key inputs to the cash flow forecast,
including the timing of capital repayments,
quantum of interest revenue and dividends.
• Viability assessment including consideration of
current investments and future business plans.
In relation to the Company’s reporting on how it has
applied the UK Corporate Governance Code, we
have nothing material to add or draw attention to in
relation to the Directors’ statement in the Company’s
financial statements about whether the directors
considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the
directors with respect to going concern are described
in the relevant sections of this report.
KEY AUDIT MATTERS
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those matters 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.
OVERVIEW OF OUR AUDIT APPROACH
Materiality 2023 2022
Company £209k £261k
1% of gross assets (2022: 1% of gross assets)
Key Audit Matters
Scope
Recurring
• Valuation of Loan Portfolio
Our audit was scoped by obtaining an understanding of the
Company and its environment, including the Company’s system
of internal control, and assessing the risks of material misstatement
in the financial statements. We also addressed the risk of
management override of internal controls, including assessing
whether there was evidence of bias by the directors that may
have represented a risk of material misstatement.
222524 Develop North AR23 V17.indd 38222524 Develop North AR23 V17.indd 38 25/03/2024 18:0725/03/2024 18:07
39
Continued
Key audit matter description
How the scope of our audit responded
to the key audit matter
Loans are held at amortised cost or fair value through profit or loss,
depending on the loan classification in accordance with IFRS 9. As
such, a key issue for the Company is estimating the expected credit
losses on loans at amortised cost and estimating the fair value of
loans at fair value through profit or loss.
In addition, judgement is required in determining the classification
of loans under IFRS 9 based on the business model for managing
the financial assets.
Management undertake an assessment regarding the staging of each
loan held under amortised cost by determining if there has been a
significant increase in credit risk or whether the loan is deemed to
be credit impaired.
Expected credit losses (ECL’s) are then estimated based on the
various loan stages, the underlying property value and the progress
of the particular development.
The calculation of the ECL involves a significant amount of judgement
and therefore may be subject to a degree of management bias. This
has therefore been a key area of audit focus.
For loans held at fair value through profit or loss, the management
estimate lies in the fair value calculation for the relevant loans.
Management calculate this using techniques such as estimating
future cash flows and discounting them at the appropriate discount
rate. The potential for management bias therefore lies in the
consideration of discount rate used and also the future cash flows.
This was also considered to be a key area of audit focus.
We have reviewed Management’s assessment of the classification
of each loan by reviewing the terms of the underlying loan
agreements and any other evidence of contractual cash flows,
such as profit share agreements as well as the entity’s business
model for managing financial assets.
We have reviewed management’s assessment of the ageing of each
loan against its underlying agreement and information available at
the balance sheet date, including considering the classification of
amounts between current and non-current.
We have reviewed Management’s staging assessment including
criteria for determining significant increases in credit risk and
when a loan is considered to be credit impaired, to supporting
documentation such as
loan to value (“LTV”) data, property
valuation reports, interest payment history and progress reports on
property developments.
We have assessed and challenged the reasonableness of key
assumptions used to estimate 12-month ECL’s, such as probability
of default and loss given default, with reference to industry data and
the Company’s lending experience.
VALUATION OF LOAN PORTFOLIO
222524 Develop North AR23 V17.indd 39222524 Develop North AR23 V17.indd 39 25/03/2024 18:0725/03/2024 18:07
40
OUR APPLICATION OF MATERIALITY
Our definition of materiality considers the value of
error or omission on the financial statements that,
individually or in aggregate, would change or influence
the economic decision of a reasonably knowledgeable
user of those financial statements. Misstatements
below these levels will not necessarily be evaluated
as immaterial as we also take account of the nature
of identified misstatements, and the particular
circumstances of their occurrence, when evaluating
their effect on the financial statements as a whole.
Materiality is used in planning the scope of our work,
executing that work and evaluating the results.
Materiality in respect of the Company was set at
£209,000 (2022: £261,000) which was determined
on the basis of 1% (2022: 1%) of the Company’s
gross assets. This was deemed to be the appropriate
benchmark for the calculation of materiality as this is a
key area of the financial statements with which the users
of the financial statements are principally concerned.
Performance materiality is the application of materiality
at the individual account or balance level, set at an
amount to reduce, to an appropriately low level,
the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the
financial statements as a whole.
Performance materiality for the Company was set at
£146,300 (2022: £182,700) which represents 70%
(2022: 70%) of the above materiality levels.
The determination of performance materiality reflects
our assessment of the risk of undetected errors existing,
the nature of the systems and controls and the level of
misstatements arising in previous audits.
We agreed to report any corrected or uncorrected
adjustments exceeding £10,450 to the Audit Committee
as well as differences below this threshold that in our
view warranted reporting on qualitative grounds
.
THE CONTROL ENVIRONMENT
We evaluated the design and implementation of those
internal controls of the Company which are relevant
to our audit, such as those relating to the financial
reporting cycle.
CLIMATE-RELATED RISKS
In planning our audit and gaining an understanding of
the Company, we considered the potential impact of
climate-related risks on the business and its financial
statements. We have held discussion with management
in relation to their climate-related risk assessment to
understand their process for identifying and assessing
those risks.
We have agreed with managements’ assessment that
climate-related risks are not material to these financial
statements.
REPORTING ON OTHER
INFORMATION
The other information comprises the information
included in the annual report other than the financial
statements and our auditor’s report thereon. The
How the scope of our audit responded
to the key audit matter
Key Observations
We have assessed and challenged the reasonableness of the key
assumptions used to estimate lifetime ECL, including forecasted
value and timing of sales for the underlying development project.
We have performed sensitivity analysis of the estimated
impairment provision with reference to the key assumptions to
assess the reasonableness thereof. In respect of loans held at fair
value, we have challenged key inputs into the discounted cash
flow models with regard to quantum and timing of cashflows
and reasonableness of discount rates and carrying out sensitivity
analysis thereon
.
For both loans at amortised cost and fair value through profit or
loss we have reviewed, where available, the most recent RICs
valuations of the underlying property as security for the loans.
From the audit procedures completed, we are satisfied that valuation
of the loan portfolio is reasonable and recognised in accordance
with IFRS 9.
222524 Develop North AR23 V17.indd 40222524 Develop North AR23 V17.indd 40 25/03/2024 18:0725/03/2024 18:07
41
directors are responsible for the other information
contained within the annual report. Our opinion on
the financial statements does not cover the other
information and, except to the extent otherwise
explicitly stated in our report, we do not express
any form of assurance conclusion thereon. 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 course of the audit,
or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether this gives rise to a material misstatement in
the financial statements themselves. 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.
STRATEGIC REPORT AND
DIRECTORS’ REPORT
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the strategic report and
the directors’ report for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and
• the strategic report and the directors’ report have
been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the
Company and its environment obtained in the course of
the audit, we have not identified material misstatements
in the strategic report or the directors’ report.
DIRECTORS’ REMUNERATION
REPORT
Those aspects of the director’s remuneration report
which are required to be audited have been prepared
in accordance with applicable legal requirements.
CORPORATE GOVERNANCE
REPORT
We have reviewed the directors’ statement in relation
to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to
the entity’s compliance with the provisions of the UK
Corporate Governance Code specified for our review
by the Listing Rules.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements
of the Corporate Governance Statement is materially
consistent with the financial statements and our
knowledge obtained during the audit:
• Directors’ statement with regards the
appropriateness of adopting the going concern
basis of accounting and any material uncertainties
identified as seen on page 25;
• Directors’ explanation as to its assessment of the
group’s prospects, the period this assessment
covers and why the period is appropriate as seen
on page 17;
• Director’s statement on whether it has a
reasonable expectation that the group will be
able to continue in operation and meets its
liabilities as seen on page 18;
• Directors’ statement on fair, balanced and
understandable as seen on page 36;
• Board’s confirmation that it has carried out a
robust assessment of the emerging and principal
risks as seen on page15;
• Section of the annual report that describes the
review of effectiveness of risk management and
internal control systems as seen on pages 31 and
32; and
• Section describing the work of the audit
committee as seen on page 30.
MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY
EXCEPTION
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been
kept, or returns adequate for our audit have not
been received by branches not visited by us; or
• the financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration
specified by law are not made; or
• the part of the directors’ remuneration report
to be audited is not in agreement with the
accounting records and returns; or
• we have not received all the information and
explanations we require for our audit; or
• a corporate governance statement has not been
prepared by the Company.
Continued
222524 Develop North AR23 V17.indd 41222524 Develop North AR23 V17.indd 41 25/03/2024 18:0725/03/2024 18:07
42
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities
statement, the directors are responsible for the
preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary
to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the directors
are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the directors either
intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR
THE AUDIT OF THE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high
level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (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 these
financial statements.
A further description of our responsibilities for the
financial statements is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
EXTENT TO WHICH THE AUDIT
WAS CONSIDERED CAPABLE OF
DETECTING IRREGULARITIES,
INCLUDING FRAUD
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud.
These audit procedures were designed to provide
reasonable assurance that the financial statements
were free from fraud or error. The risk of not detecting
a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error
and detecting irregularities that result from fraud is
inherently more difficult than detecting those that result
from error, as fraud may involve collusion, deliberate
concealment, forgery or intentional misrepresentations.
Also, the further removed non-compliance with laws
and regulations is from events and transactions reflected
in the financial statements, the less likely we would
become aware of it.
IDENTIFYING AND ASSESSING
POTENTIAL RISKS ARISING FROM
IRREGULARITIES, INCLUDING
FRAUD
The extent of the procedures undertaken to identify
and assess the risks of material misstatement in respect
of irregularities, including fraud, included the following:
• We considered the nature of the industry and
sector the control environment, business
performance including remuneration policies
and the Company’s own risk assessment that
irregularities might occur as a result of fraud or
error. From our sector experience and through
discussion with the directors, we obtained
an understanding of the legal and regulatory
frameworks applicable to the Company focusing
on laws and regulations that could reasonably be
expected to have a direct material effect on the
financial statements, such as provisions of the
Companies Act 2006, UK tax legislation or those
that had a fundamental effect on the operations
of the Company.
• We enquired of the directors and management
concerning the Company’s policies and
procedures relating to:
- identifying, evaluating and complying with the
laws and regulations and whether they were
aware of any instances of non-compliance;
- detecting and responding to the risks of fraud
and whether they had any knowledge of actual
or suspected fraud; and
- the internal controls established to mitigate risks
related to fraud or non-compliance with laws
and regulations.
• We assessed the susceptibility of the Company’s
financial statements to material misstatement,
222524 Develop North AR23 V17.indd 42222524 Develop North AR23 V17.indd 42 25/03/2024 18:0725/03/2024 18:07
43
including how fraud might occur by evaluating
management’s incentives and opportunities for
manipulation of the financial statements. This
included utilising the spectrum of inherent risk
and an evaluation of the risk of management
override of controls. We determined that
the principal risks were related to posting
inappropriate journal entries to increase revenue
or reduce costs, creating fictitious transactions to
hide losses or to improve financial performance,
and management bias in accounting estimates
particularly in determining expected credit losses.
AUDIT RESPONSE TO RISKS
IDENTIFIED
In respect of the above procedures:
• we corroborated the results of our enquiries
through our review of the minutes of the
Company’s board meetings and the inspection
of legal correspondence;
• audit procedures performed by the engagement
team in connection with the risks identified
included:
- reviewing financial statement disclosures and
testing to supporting documentation to assess
compliance with applicable laws and regulations
expected to have a direct impact on the financial
statements;
- reviewing legal fees incurred during the year
in order to assess for potential unrecorded
contingent liabilities;
- testing journal entries, including those processed
late for financial statements preparation, those
posted by infrequent or unexpected users, those
posted to unusual account combinations;
-
evaluating the business rationale of significant
transactions outside the normal course of business,
and reviewing accounting estimates for bias;
- enquiry of management around actual and
potential litigation and claims.
- challenging the assumptions and judgements
made by management in its significant accounting
estimates, in particular those relating to the
determination of the expected credit losses as
reported in the key audit matter section of our
report.
• we communicated relevant laws and regulations
and potential fraud risks to all engagement team
members, and remained alert to any indications
of fraud or non-compliance with laws and
regulations throughout the audit.
OTHER REQUIREMENTS
We were appointed by the Directors on 16 September
2021. The period of total uninterrupted engagement
including previous renewals and reappointments of the
firm is three years.
We did not provide any non-audit services which
are prohibited by the FRC’s Ethical Standard to
the Company, and we remain independent of the
Company in conducting our audit.
USE OF OUR REPORT
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. 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.
As required by the Financial Conduct Authority (FCA)
Disclosure Guidance and Transparency Rule (DTR)
4.1.14R, these financial statements form part of the
European Single Electronic Format (ESEF) prepared
Annual Financial Report filed on the National Storage
Mechanism of the UK FCA in accordance with the
ESEF Regulatory Technical Standard ((‘ESEF RTS’). This
auditor’s report provides no assurance over whether
the annual financial report has been prepared using the
single electronic format specified in the ESEF RTS.
Andrew Moyser FCA FCCA
(Senior Statutory Auditor)
for and on behalf of MHA
Statutory Auditor
London
United Kingdom
25 MARCH 2024
MHA is the trading name of MacIntyre Hudson LLP,
a limited liability partnership in England and Wales
(registered number OC312313)
222524 Develop North AR23 V17.indd 43222524 Develop North AR23 V17.indd 43 25/03/2024 18:0725/03/2024 18:07
44
Income Statement
Notes
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
Investment interest 2 1,722 – 1,722 1,787 – 1,787
Total revenue 1,722 – 1,722 1,787 – 1,787
Losses on investments held at fair
value through profit or loss
4,8 (201) (2) (203) (36) (342) (378)
Amortisation of exit fees
8,9 – 32 32 – – –
Total net income 1,521 30 1,551 1,751 (342) 1,409
Expenditure
Investment adviser fee 3 (65) – (65) (67) – (67)
Impairments on investments held
at amortised cost
4,9 (116) (441) (557) (12) (136) (148)
Other expenses 4 (513) – (513) (548) – (548)
Total expenditure (694) (441) (1,135) (627) (136) (763)
Profit/(loss) before finance costs
and taxation 827 (411) 416 1,124 (478) 646
Finance costs
Interest payable (155) – (155) (132) – (132)
Profit/(loss) before taxation 672 (411) 261 992 (478) 514
Taxation 5 – – – – – –
Profit/(loss) for the year 672 (411) 261 992 (478) 514
Basic earnings per share 7 2.50p (1.53)p 0.97p 3.68p (1.78)p 1.90p
Year ending
30 November 2023
Year ending
30 November 2022
The notes on pages 48 to 63 form an integral part of the financial statements.
The total column of this statement represents the Company’s Income Statement, prepared in accordance with UK
adopted IFRS. The supplementary revenue return and capital return columns are both prepared under guidance
published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
There is no other comprehensive income as all income is recorded in the statement above.
222524 Develop North AR23 V17.indd 44222524 Develop North AR23 V17.indd 44 25/03/2024 18:0725/03/2024 18:07
45
Statement of
Financial Position
Notes £’000 £’000
Non-current assets
Loans at amortised cost 9
6,208 12,659
6,208 12,659
Current assets
Investments held at fair value through profit or loss 8 3,024 4,874
Loans at amortised cost 9 10,496 7,948
Other receivables and prepayments 10 13 11
Cash and cash equivalents 1,154 638
14,687 13,471
Total assets 20,895 26,130
Current liabilities
Loan facility 11 – (4,000)
Other payables and accrued expenses 12 (191) (109)
Total liabilities (191) (4,109)
Net assets
20,704 22,021
Share capital and reserves
Share capital 13 269 269
Share premium 9,094 9,094
Special distributable reserve 12,267 12,849
Capital reserve (1,059) (644)
Revenue reserve 133 453
Equity shareholders’ funds 20,704 22,021
Net asset value per ordinary share 78.92p 81.79p
As at 30
November
2023
As at 30
November
2022
The notes on pages 48 to 63 form an integral part of the financial statements.
The financial statements on pages 44 to 63 were approved by the Board of Directors of Develop North plc (a
public limited company incorporated in England and Wales with company number 10395804) and authorised for
issue on 25 March 2024. They were signed on its behalf by
John Newlands
Chairman
222524 Develop North AR23 V17.indd 45222524 Develop North AR23 V17.indd 45 25/03/2024 18:0725/03/2024 18:07
46
Statement of
Changes in Equity
Share
capital
Share
premium
Special
distributable
reserve
Capital
reserve
Revenue
reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
At beginning of the year 269 9,094 12,849 (644) 453 22,021
Total comprehensive profit for the
year:
Profit for the year – – – (411) 672 261
Transaction with owners
in their capacity as
owners:
Dividends paid – – (85) – (992) (1,077)
Repurchase of shares into treasury
– –
(497)
(4)
– (501)
At 30 November 2023 269 9,094 12,267 (1,059) 133 20,704
Share
capital
Share
premium
Special
distributable
reserve
Capital
reserve
Revenue
reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
At beginning of the year 269 9,094 13,093 (166) 294 22,584
Total comprehensive profit for the
year:
Profit for the year – – – (478) 992 514
Transaction with owners
in their capacity as
owners:
Dividends paid – – (244) – (833) (1,077)
At 30 November 2022 269 9,094 12,849 (644) 453 22,021
For the year ending
30 November 2023
For the year ending
30 November 2022
222524 Develop North AR23 V17.indd 46222524 Develop North AR23 V17.indd 46 25/03/2024 18:0725/03/2024 18:07
47
Cash Flow Statement
Notes £’000 £’000
Operating activities
Profit before taxation 261 514
Losses on investments held at fair value through profit and loss 213 342
Impairments on loans at amortised cost 592 136
Gains on investments held at fair value through profit and loss (10) –
Uplifts on loans at amortised cost (35) –
Amortisation of exit fees (32) –
Changes in working capital
Increase in loan interest receivable on investments held at fair value
through profit and loss (93) (147)
Increase in loan interest receivable on loans at amortised cost (133) (249)
(Increase)/decrease in other receivables (2) 16
Increase/(decrease) in other payables 82 (26)
Net cash inflow from operating activities after
taxation
998 718
Investing activities
Loans given (3,369) (10,986)
Loans repaid 8,620 3,570
Net cash inflow/(outflow) from investing
activities
5,251 (7,416)
Financing
Equity dividends paid (1,077) (1,077)
Repurchase of shares into Treasury 13 (501) –
Bank loan drawn down 14 – 4,251
Repayment of bank loan 14 (4,000) (251)
Interest paid (155) (132)
Net cash (outflow)/inflow from financing (5,733) 2,791
Increase/(decrease) in cash and cash
equivalents 516 (3,907)
Cash and cash equivalents at the start of the year 638 4,545
Cash and cash equivalents at the end of the year
1,154 638
Year ending
30 November
2023
Year ending
30 November
2022
Interest expense 155 132
222524 Develop North AR23 V17.indd 47222524 Develop North AR23 V17.indd 47 25/03/2024 18:0725/03/2024 18:07
48
Notes to the
Financial Statements
1. ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PREPARATION
The financial statements of Develop North plc have been
prepared in accordance with UK adopted International
Financial Reporting Standards (“UK adopted IFRS”) and
with the Companies Act 2006, as applicable to companies
reporting under international accounting standards. The
financial statements were also prepared in accordance
with the Statement of Recommended Practice, Financial
Statements of Investment Trust Companies and Venture
Capital Trusts (“SORP”) issued by the AIC (as issued in July
2022), where this guidance is consistent with UK adopted
IFRS.
The financial statements have been prepared on a going
concern basis under the historical cost convention, except
for certain investment valuations which are measured at
fair value.
The notes and financial statements are presented in pounds
sterling (being the functional currency and presentational
currency for the Company) and are rounded to the
nearest thousand except where otherwise indicated.
The Company reviews forthcoming changes to UK
adopted IFRS and does not anticipate material changes as
a result of these.
NEW STANDARDS OR AMENDMENTS
FOR 2023 FOR FORTHCOMING
REQUIREMENTS
New standards, interpretations and amendments issued
which are not yet effective and applicable for the periods
beginning on or after 1 December 2023:
Effective date accounting periods on or after 1 January
2024:
IAS 1 Amendments to accounting for non-current liabilities
with covenants
GOING CONCERN
The financial statements have been prepared on a going
concern basis. At the forthcoming AGM shareholders are
invited to vote on the continuation of the Company. The
Board understands that the Investment Adviser has taken
soundings of major shareholders and therefore it has a
high degree of confidence that this vote will be passed
by shareholders; however, the vote is outside the control
of the Board and thus, in the context of assessing the
future prospects of the Company, it represents a material
uncertainty which (if the vote were to be lost) may cast
significant doubt upon the ability of the Company to
continue as a going concern. The financial statements do
not include the adjustments that may be necessary should
a positive vote from the shareholders to continue not be
received and the Company was not able to continue as a
going concern. The disclosures on going concern on page
25 of the Directors’ Report form part of these financial
statements.
222524 Develop North AR23 V17.indd 48222524 Develop North AR23 V17.indd 48 25/03/2024 18:0725/03/2024 18:07
49
INTEREST INCOME
For financial instruments measured at amortised cost, the
effective interest rate method is used to measure the carrying
value of a financial asset or liability and to allocate associated
interest income or expense over the relevant period. The
effective interest rate is the rate that discounts estimated
future cash payments or receipts over the expected life of
the financial instrument or, when appropriate, a shorter
period, to the net carrying amount of the financial asset or
financial liability. In calculating the effective interest rate, the
cash flows are estimated considering all contractual terms
of the financial instrument but does not consider expected
credit losses. The calculation includes all fees received and
paid and costs borne that are an integral part of the effective
interest rate.
On an ongoing basis the Investment Adviser assesses
whether there is evidence that a financial asset is impaired.
The basis of calculating interest income on the three stages
of impairment (detailed below) are as follows:
Stage 1 Interest is calculated on the gross outstanding
principal
Stage 2 Interest is calculated on the gross outstanding
principal
Stage 3 Interest is calculated on the principal amount less
impairment
EXPENSES
Expenses are accounted for on an accruals basis. The
Company’s administration fees, finance costs and all other
expenses are charged through the Income Statement
and are charged to revenue. Fees incurred in relation
to operational costs of the loan portfolio, such as legal
fees, are charged through the Income Statement and are
charged to capital.
DIVIDENDS TO SHAREHOLDERS
Interim dividends declared during the year are recognised
when they are paid. Any final dividends declared are
recognised when they are approved by the Shareholders
at the Annual General Meeting.
TAXATION
Taxation on the profit or loss for the period comprises
current and deferred tax. Taxation is recognised in
profit or loss except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity, in which case it is also recognised in other
comprehensive income or directly in equity respectively.
Current tax is the expected tax payable on the taxable
income for the period, using tax rates and laws enacted
or substantively enacted at the reporting date.
Deferred income taxes are calculated using rates and
laws that are enacted or substantivity are expected to
apply as or when the associated temporary differences
reverse. Deferred income tax is provided using the
liability method on all temporary differences at the
reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial
reporting purposes. Deferred income tax assets are
recognised only to the extent that it is probable that
taxable profit will be available against which deductible
temporary differences, carried forward tax credits or
tax losses can be utilised. The amount of deferred tax
provided is based on the expected manner of realisation
or settlement of the carrying amount of assets and
liabilities. Deferred income is recognised in profit or
loss unless it relates to a transaction recorded in other
comprehensive income or equity, in which case it is
also recognised in other comprehensive income or
directly in equity respectively.
FINANCIAL ASSETS AND FINANCIAL
LIABILITIES
The financial assets and financial liabilities are classified at
inception into the following categories:
Amortised cost:
Financial assets that are held for collection of contractual
cash flows where those cash flows represent SPPI
(‘solely payment of principal and interest’) and that
are not designated at fair value through profit and loss
are measured at amortised cost. At initial recognition,
these assets are recognised as the amounts advanced
to customers on the trade date. Financial assets are
derecognised when the rights to receive cashflows from
the financial assets no longer exists. The carrying amount
of these assets is adjusted by any expected credit loss
allowance as described in the impairment note below.
Interest income from these financial assets is included
in investment interest using the effective interest rate
method. Any gain or loss on derecognition is recognised
directly in the Income Statement. Impairment losses are
presented as separate line item in the Income Statement.
The Company’s cash and cash equivalents, other
receivables, other payables and accruals, and the
Company’s loan facility are included within this category.
Continued
222524 Develop North AR23 V17.indd 49222524 Develop North AR23 V17.indd 49 25/03/2024 18:0725/03/2024 18:07
50
Fair value through profit and loss:
The Company has a number of borrower facilities in which
it received a minority equity stake or exit fee mechanism
in conjunction with providing those loan facilities. These
loans are recognised at fair value through profit and
loss. At initial recognition, these assets are recognised as
the amounts advanced to customers on the trade date.
Financial assets are derecognised when the rights to
receive cashflows from the financial assets no longer exists.
The fair value of the contracts is monitored and reviewed
quarterly using discounted cash flow forecasts based on
the estimated cash flows that will flow through from the
underlying development project. Interest income from
these financial assets is included in investment interest
using the effective interest rate method. Any gain or loss
on derecognition is recognised directly in the Income
Statement. Impairment losses are presented as separate
line item in the Income Statement. A sensitivity analysis is
included in note 16.
Any values attributed to the equity stakes of these
borrowers are incorporated into the overall loan valuation.
Exit fees:
Some of the financial assets measured at amortised costs
have an exit fee. There are two types of exit fees; those
recognised at the end of the term of the financial asset
once it has been repaid, and those recognised during
the term of the financial instrument where here they are
linked to specific events such as plot sales.
IMPAIRMENT
At initial recognition, an impairment allowance is required
for expected credit losses (‘ECL’) resulting from possible
default events within the next 12 months. When an
event occurs that increases the credit risk, an allowance
is required for ECL for possible defaults over the term of
the financial instrument.
The key inputs into the measurement of ECL are
probability of default (‘PD’), loss given default (‘LGD’),
and exposure at default (‘EAD’). These inputs are then
considered and applied against residential and commercial
facilities in the loan book. ECL are calculated by multiplying
the PD by LGD and EAD.
PD has been determined by considering the local market
where the underlying assets are situated, economic
indicators including inflationary pressures on build costs,
government policy, and market sentiment. For residential
loans this has been further broken down into two
scenarios; where only sales risk is still present, and where
both construction risk and sales risk still exist. LGD is the
magnitude of the likely loss if there is a default. The LGD
models consider the structure, collateral, seniority of the
claim, and recovery costs of any collateral that is integral
to the financial asset. LTV ratios are a key parameter in
determining LGD. LGD estimates are recalibrated for
different economic scenarios and, for lending collateralised
by property, to reflect possible changes in property prices.
EAD represents the expected exposure in the event of a
default. The Company derives the EAD from the current
exposure to the borrower. The EAD of a financial asset
is its gross carrying amount at the time of default. EAD
for residential facilities has been further broken down into
two scenarios; where the build is complete, and where
construction is ongoing.
A financial asset is credit-impaired when one or more
events that have occurred have a significant impact on the
expected future cash flows of the financial asset. It includes
observable data that has come to our attention regarding
one or more of the following events:
• delinquency in contractual payments of principal
and interest;
• cash flow difficulties experienced by the borrower;
• initiation of bankruptcy proceedings;
• the borrower being granted a concession that
would otherwise not be considered;
• observable data indicating that there is a measurable
decrease in the estimated future cash flows from
a portfolio of assets since the initial recognition of
those assets, although the decrease cannot yet be
identified with the individual financial assets in the
portfolio; and
• a significant decrease in assets values held as
security.
Impairment of financial assets is recognised on a loan-by-
loan basis in stages:
• Stage 1: A general impairment covering what may
happen within the next 12 months, based on the
adoption of BIS standards as outlined below.
• Stage 2: Significant increase in credit risk, where the
borrower is in default, potentially in arrears, where
full repayment is expected and the underlying
asset value remains robust. The ECL calculation
recognises the lifetime of the loan.
• Stage 3: Credit impaired, where the borrower
is in default of their loan contract, in arrears, full
loan repayment is uncertain and there is a shortfall
in underlying asset value. The ECL calculation
recognises likely failure of the borrower.
As at 30 November 2023, there were eighteen loans in
222524 Develop North AR23 V17.indd 50222524 Develop North AR23 V17.indd 50 25/03/2024 18:0725/03/2024 18:07
51
the portfolio. Four of those projects supported included
either an equity stake of at least 25.1% for the Company
or an exit fee mechanism. Please see note 8 for details on
these four projects.
The Board has deemed that six projects (November
2022: five); are currently impaired and specific additional
provisions have been made against these facilities in these
financial statements.
The other twelve loans have been assessed as not
impaired.
The Company’s response to IFRS 9 requirements has
been based on the Bank for International Settlements
(‘BIS’) Basel Supervisory Committee liquidity risk tool
recommendations.
FAIR VALUE HIERARCHY
Accounting standards recognise a hierarchy of fair value
measurements for financial instruments which gives the
highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1) and the
lowest priority to unobservable inputs (Level 3). The
classification of financial instruments depends on the
lowest significant applicable input, as follows:
• Level 1 – Unadjusted, fully accessible and current
quoted prices in active markets for identical assets
or liabilities. Examples of such instruments would
be investments listed or quoted on any recognised
stock exchange.
• Level 2 – Quoted prices for similar assets or
liabilities, or other directly or indirectly observable
inputs which exist for the duration of the period of
investment. Examples of such instruments would
be forward exchange contracts and certain other
derivative instruments.
• Level 3 – External inputs are unobservable. Value is
the Directors’ best estimate, based on advice from
relevant knowledgeable experts, use of recognised
valuation techniques and on assumptions as to
what inputs other market participants would apply
in pricing the same or similar instrument.
All loans are considered Level 3.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in hand and
short-term deposits in banks with an original maturity of
three months or less from inception.
OTHER RECEIVABLES
Other receivables do not carry interest and are short-
term in nature. There were no irrecoverable amounts
accounted for at the year end or the prior period end.
RESERVES
SHARE PREMIUM
The surplus of net proceeds received from the issuance
of new shares over their par value is credited to this
account and the related issue costs are deducted from
this account.
CAPITAL RESERVE
The following are accounted for in the capital reserve:
• Capital charges;
• Increases and decreases in the fair value of and
impairments of loan capital held at the year end
As at year end the Capital Reserve comprises both
realised and unrealised gains and losses and so does not
contain distributable reserves.
REVENUE RESERVE
The net profit/(loss) arising in the revenue column of
the Income Statement is added to or deducted from this
reserve which is available for paying dividends.
SPECIAL DISTRIBUTABLE RESERVE
Created from the Court of Session cancellation of the
initial launch share premium account and is available
for paying dividends and the repurchase of shares. The
Special distributable reserve is used to prevent the
Revenue reserve going into a negative position when
paying distributions.
REPURCHASE OF SHARES TO HOLD
IN TREASURY
The cost of repurchasing ordinary shares to hold in Treasury
is charged to the Special distributable reserve and the
related stamp duty and transaction cost is charged to the
‘capital reserve’ and dealt with in the Statement of Changes
in Equity. Share repurchase transactions are accounted for
on a trade date basis.
SEGMENTAL REPORTING
The Chief Operating Decision Maker is the Board of
Directors. The Directors are of the opinion that the
Company is engaged in a single segment of business,
being the investment of the Company’s capital in financial
Continued
222524 Develop North AR23 V17.indd 51222524 Develop North AR23 V17.indd 51 25/03/2024 18:0725/03/2024 18:07
52
assets comprising loans. All loan income is derived from the
UK. The Company derived revenue totalling £714,000
(November 2022: £978,000) where the amounts from
two (November 2022: four) individual borrowers each
exceeded 10% or more of the Company’s revenue.
The individual amounts were £354,000 and £360,000,
(November 2022: £282,000, £256,000, £243,000 and
£196,000).
USE OF SIGNIFICANT ACCOUNTING
JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of financial statements requires
management to make estimates and assumptions that
affect the amounts reported for assets and liabilities as
at the reporting date and the amounts reported for
revenue and expenses during the year. The nature of the
estimation means that actual outcomes could differ from
those estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
The key driver to determine whether loans are classified
as fair value through profit or loss or amortised cost is if
the facility has an exit fee or equity stake attached. Where
these are present the loan is classified as fair value through
profit or loss.
The following are areas of particular significance to the
Company’s financial statements and include the use of
estimates or the application of judgement:
CRITICAL JUDGEMENTS AND
ESTIMATES IN APPLYING THE
COMPANY’S ACCOUNTING POLICIES
– INVESTMENTS AT FAIR VALUE
THROUGH PROFIT OR LOSS:
The Company owns profit share holdings or has exit fees
mechanism in relation to 6 of the borrowers in place as at
the year end. The loans held have been designated at fair
value through profit and loss. The determination of the fair
value requires the use of estimates. A sensitivity analysis is
included in note 16. The key uncertainties are around the
timings and amounts of both drawdown and repayments
as these are determined by construction progress and the
timing of sales.
CRITICAL JUDGEMENTS AND
ESTIMATES IN APPLYING THE
COMPANY’S ACCOUNTING
POLICIES – LOANS AMORTISED
COST CLASSIFICATION AND
IMPAIRMENTS:
The Company uses critical judgements to determine
whether it accounts for its loans at either amortised cost
using the effective interest rate method less impairment
provisions or at fair value through profit and loss. The
determination of the required impairment adjustment
requires the use of estimates. The key uncertainties are
around the timings and amounts of both drawdown and
repayments as these are determined by construction
progress and the timing of sales. See notes 8 and 9 on
pages 54 and 55 for further details.
2. REVENUE
30 November
2023
£’000
30 November
2022
£’000
Interest from
loans
1,722 1,787
Total income
1,722 1,787
3. INVESTMENT ADVISER’S FEES
INVESTMENT ADVISER
In its role as the Investment Adviser, Tier One Capital Ltd
is entitled to receive from the Company an investment
adviser fee which is calculated and paid quarterly in
arrears at an annual rate of 0.25% per annum of the
prevailing Net Asset Value if less than £100m; or 0.50%.
per annum of the prevailing Net Asset Value if £100m or
more.
There is no balance accrued for the Investment Adviser
for the period ended 30 November 2023 (year to 30
November 2022: £nil).
There are no performance fees payable.
30 November
2023
£’000
30 November
2022
£’000
Investment
Adviser fee
65 67
222524 Develop North AR23 V17.indd 52222524 Develop North AR23 V17.indd 52 25/03/2024 18:0725/03/2024 18:07
53
Revenue Capital Revenue Capital
£’000 £’000 £’000 £’000
Legal & professional
20 – 13 –
Directors’ fees
85 – 85 –
Audit fees related to the audit of the financial statements 77 – 57 –
Fund Administration and Company Secretarial 97 – 85 –
Brokers’ fees 30 – 30 –
Marketing fees 1 – 18 –
AIFM fee 18 – 17 –
Impairments on loans amortised at cost* 116 476 12 136
Uplifts on loans amortised at cost* – (35) -– –
Losses on investments held at fair value through profit or loss*
201 2 36 342
Other expenses 185 – 243 –
Total other expenses 830 443 596 478
30 November 2023
*Loan impairments consist of impairments to interest on loans of £317,000 (November 2022: £48,000) and a capital
impairment on the loan of £478,000 (November 2022: £478,000). Loan uplifts consist of a capital uplift on the loans
of £35,000 (November 2022: £nil).
All expenses are inclusive of VAT where applicable. Further details on Directors’ fees can be found in the Directors’
Remuneration Report on pages 33 to 35.
30 November 2022
4. OPERATING EXPENSES
30 November 2023
£’000
30 November 2022
£’000
Current corporation tax at 23% (November 2022:19%)
– –
Deferred taxation
– –
Tax on profit on ordinary activities – –
Reconciliation of tax charge
Profit on ordinary activities before taxation
261 514
Taxation at standard corporation tax rate 23%
(November 2022:
19%)
60 98
Effects of:
Expenses/(Income) not subject to tax 95 91
Interest distributions (248) (205)
Tax losses not recognised within deferred tax 93 16
Tax charge for the year – –
As an investment trust the Company is exempt from corporation tax on capital gains. The Company’s revenue
income from loans is subject to tax, but offset by any interest distribution paid, which has the effect of reducing the
corporation tax. The interest distribution may be taxable in the hands of the Company’s shareholders.
5. TAXATION
Continued
* With effect from 1 April 2023, the main rate of Corporation tax increased from 19% to 25%, therefore a
hybrid rate of 23% has been used.
There is an unrecognised deferred tax asset not recognised on losses of £331,409 (November 2022:
£230,408) calculated at the relevant deferred tax rate of 25%. There is no expiry date for the recognition of the
unrecognised deferred tax asset.
222524 Develop North AR23 V17.indd 53222524 Develop North AR23 V17.indd 53 25/03/2024 18:0725/03/2024 18:07
54
30 November 2023 30 November 2022
Pence per
share £’000
Pence per
share £’000
Dividends paid in the year relating to previous year:
Interim dividend for the quarter ended August, paid in December
1.00 269 1.0 269
Interim dividend for the quarter ended November, paid in April 1.00 269 1.0 269
Dividends paid during and relating to the year:
Interim dividend for the quarter ended February, paid in June 1.00 269 1.0 269
Interim dividend for the quarter ended May, paid in September 1.00 270 1.0 270
Total dividends paid in the year 1,077 1,077
Of the dividends paid in the year, £85,000 (November 2022: £244,000) has been paid from the Special distributable
reserve. This is to ensure the Revenue reserve does not go into a negative position.
The Company intends to distribute at least 85% of its distributable income earned in each financial year by way of
interest distribution. A third interim dividend of 1.00 pence per share was declared on 23 November 2023, payable
on 28 December 2023. On 29 February 2024, the Company declared a fourth interim dividend of 1.00 pence per
share for the quarter ended 30 November 2023, payable on 28 March 2024.
6. ORDINARY DIVIDENDS
30 November
2023
£’000
30 November
2022
£’000
Opening Balance 4,874 7,589
Loans deployed 59 80
Principal repayments (1,802) (2,600)
Movements in interest receivable 93 183
Unrealised losses on investments held at fair value through profit
or loss
(203) (378)
Amortisation of exit fees 3 –
Total investments held at fair value through profit and loss 3,024 4,874
Split:
Non-current assets: Investments held at fair value through profit
and loss due for repayment after one year
– –
Current assets: Investments held at fair value through profit and
loss due for repayment under one year
3,024 4,874
Please refer to note 16 for details of the approach to valuation and sensitivity analysis.
7. EARNINGS PER SHARE
The revenue, capital and total return per ordinary share is based on each of the profit after tax and on 26,907,053
ordinary shares, being the weighted average number of ordinary shares in issue (excluding shares held in Treasury)
throughout the year. During the year there were no dilutive instruments held, therefore the basic and diluted
earnings per share are the same.
8. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
The Company’s investment held at fair value through profit or loss represents its profit share arrangements whereby the
Company owns at least 25.1% or has an exit fee mechanism for four companies.
222524 Develop North AR23 V17.indd 54222524 Develop North AR23 V17.indd 54 25/03/2024 18:0725/03/2024 18:07
55
30 November
2023
£’000
30 November
2022
£’000
Opening balance 20,607 10,558
Loans deployed 3,310 10,906
Principal repayments (6,818) (970)
Movements in interest receivable 133 261
Movement in impairments (557) (148)
Amortisation of exit fees 29 –
Total loans at amortised cost 16,704 20,607
Split:
Non-current assets: Loans at amortised cost due for repayment
after one year
6,283
12,659
Current assets: Loans at amortised cost due for repayment
under one year
10,421 7,948
The Company’s loans held at amortised cost are accounted for using the effective interest method. The carrying
value of each loan is determined after taking into consideration any requirement for impairment provisions during
the year, allowances for impairment losses amounted to £557,000 (November 2022: £148,000).
Further details on impairment can be found within the accounting policies note on pages 50 and 51.
9. LOANS AT AMORTISED COST
Nominal value
£’000
at 1 December 2022 3,227
Provisions for impairment losses 475
Write off prior year impairment (1,560)
at 30 November 2023 2,142
Stage 1 provisions at 1 December 2022 114
Provisions for impairment losses 32
Stage 1 provisions at 30 November 2023 146
Stage 2 provisions at 1 December 2022 –
Provisions for impairment losses –
Stage 2 provisions at 30 November 2023 –
Stage 3 provisions at 1 December 2022 3,113
Provisions for impairment losses 443
Write off prior year impairment (1,560)
Stage 3 provisions at 30 November 2023 1,996
Stage 1, 2, and 3 are referenced in more detail on page 50.
Movements in allowances for impairment losses in the year
Continued
222524 Develop North AR23 V17.indd 55222524 Develop North AR23 V17.indd 55 25/03/2024 18:0725/03/2024 18:07
56
In May 2023 the Company renewed its £6.5m committed revolving facility with Shawbrook Bank Limited, expiring
in May 2025. No balance was drawn down at the year end.
The facility is secured against a debenture over the assets of the Company.
30 November
2023
£’000
30 November
2022
£’000
Bank loan – 4,000
11. LOAN FACILITY
30 November
2023
£’000
30 November
2022
£’000
Prepayments 13 11
Total receivables 13 11
10. RECEIVABLES
222524 Develop North AR23 V17.indd 56222524 Develop North AR23 V17.indd 56 25/03/2024 18:0725/03/2024 18:07
57
Allotted, issued and fully paid:
2023
£’000
2022
£’000
26,234,225 (November 2022: 26,924,063) ordinary shares of
1p each
*
262 269
689,838 (November 2022: nil) ordinary shares of 1p held in
Treasury
7 –
26,924,063 (November 2022: 26,924,063) total ordinary
shares of 1p each
269 269
*
The Ordinary Shares (excluding shares held in Treasury) are eligible to vote and have the right to participate in
either an interest distribution or participate in a capital distribution (on winding up).
No shares were issued by the Company during the year (November 2022: nil).
During the year, the Company bought back 689,838 shares to be held in Treasury at a cost of £501,000
(November 2022: nil).
Between 1 December 2023 and 20 March 2024, the Company bought back a further 566,369 shares into Treasury.
13. SHARE CAPITAL
Continued
30 November
2023
£’000
30 November
2022
£’000
Accruals 191 109
Total other payables 191 109
12. OTHER PAYABLES
At 30 November
2022
£’000
Cash
flows
£’000
Non-cash
flows
£’000
At 30 November
2023
£’000
Short term borrowings 4,000 (4,000) – –
Total liabilities from financing activities 4,000 (4,000) – –
At 30 November
2021
£’000
Cash
flows
£’000
Non-cash
flows
£’000
At 30 November
2022
£’000
Short term borrowings – 4,000 – 4,000
Total liabilities from financing activities – 4,000 – 4,000
14. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING
ACTIVITIES
222524 Develop North AR23 V17.indd 57222524 Develop North AR23 V17.indd 57 25/03/2024 18:0725/03/2024 18:07
58
15. RELATED PARTIES
The Directors are considered to be related parties.
No Director has an interest in any transactions which
are, or were, unusual in their nature or significant to
the nature of the Company.
The Directors of the Company received £85,000 fees
for their services during the year to 30 November
2023 (30 November 2022: £85,000). £nil was
payable at the period and prior year end.
Ian McElroy is Chief Executive of Tier One Capital Ltd
and is a founding shareholder and director of the firm.
Tier One Capital Ltd received £65,000 investment
adviser’s fee during the year (30 November 2022:
£67,000) and £nil was payable at the year end (30
November 2022: £nil). Tier One Capital Ltd receives
up to a 20% margin and arrangement fee for all loans
it facilitates.
There are various related party relationships in place
with the borrowers as below:
The following related parties arise due to the
opportunity taken to advance the profit share contracts:
• Thursby Homes (Springs)
The Company owns 25.1% of the borrower
Thursby Homes (Springs) Ltd. The loan amount
outstanding as at 30 November 2023 was £36,000
(30 November 2022: £1.3m). Transactions in
relation to loans repaid during the year amounted to
(£1.5m) (30 November 2022: £918,000). Interest
due to be received as at 30 November 2023 was
£1,000 (30 November 2022: £213,000). Interest
received during the year amounted to £33,000 (30
November 2022: £157,000).
• Northumberland
Develop North PLC owns 25.1% of the borrower
Northumberland Ltd. The loan amount outstanding as
at 30 November 2023 was £42,000 (30 November
2022: £356,000). Transactions in relation to loans
repaid during the year amounted to £288,000 (30
November 2022: £911,000). Interest due to be
received as at 30 November 2023 was £2,000 (30
November 2022: £3,000). Interest received during
the year amounted to £3,000 (30 November 2022:
£32,000).
• Coalsnaughton
Develop North PLC owns 40.1% of the borrower
Kudos Partnership. The loan amount outstanding as
at 30 November 2023 was £2.0m (30 November
2022: £2.2m). Transactions in relation to loans made
during the year amounted to £nil (30 November
2022: £80,000). Interest due to be received as at
30 November 2023 was £424,000 (30 November
2022: £324,000). Interest received during the year
amounted to £108,000 (30 November 2022:
£196,000).
• Oswald Street
Develop North PLC owns 25.1% of the Riverfront
Property Limited Partnership. The loan amount
outstanding as at 30 November 2023 was £448,000
(30 November 2022: £388,000). Transactions in
relation to loans made during the year amounted
to £59,000 (30 November 2022: £nil). Interest
due to be received as at 30 November 2023 was
£8,000 (30 November 2022: £5,000). Interest
received during the year amounted to £47,000 (30
November 2022: £31,000).
222524 Develop North AR23 V17.indd 58222524 Develop North AR23 V17.indd 58 25/03/2024 18:0725/03/2024 18:07
59
16. FINANCIAL INSTRUMENTS
Consistent with its objective, the Company holds a
diversified portfolio of fixed rate loans secured with
collateral in the form of; land or property in the UK,
charges held over bank accounts and personal or
corporate guarantees. The benefit of a related profit
share or exit fee mechanism may also be agreed.
In addition, the Company’s financial instruments
comprise cash and receivables and payables that arise
directly from its operations. The Company does not
have exposure to any derivative instruments.
The Company is exposed to various types of risk that
are associated with financial instruments. The most
important types are credit risk, liquidity risk, interest
rate risk and market price risk. There is no foreign
currency risk as all assets and liabilities of the Company
are maintained in pounds sterling.
The Board reviews and agrees policies for managing
the Company’s risk exposure. These policies are
summarised below:
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.
In the event of default by a borrower if it is in financial
difficulty or otherwise unable to meet its obligations
under the agreement, the Company will suffer an
interest shortfall and potentially a loss of capital. This
potentially will have a material adverse impact on the
financial condition and performance of the Company
and/or the level of dividend cover. Management
determines concentrations of risk by assessing the
characteristics of each borrower and including these
in the underwriting process. The most applicable of
these are the geographical location of the projects and
the economic sector the borrowers operate in. The
Board receives regular reports on concentrations of
risk and the performance of the projects underlying the
loans, using loan to value percentages to help monitor
the level of risk. The Investment Adviser monitors such
reports in order to anticipate, and minimise the impact
of, default.
There were financial assets which were considered
impaired at 30 November 2023, with impairments
amounting to £557,000 (30 November 2022:
£148,000). Our maximum exposure to credit risk as at
30 November 2022 was £20,895,000 (30 November
2022: £26,130,000).
All of the Company’s cash is placed with financial
institutions with a long-term credit rating of A or better.
Bankruptcy or insolvency of such financial institutions
may cause the Company’s ability to access cash placed
on deposit to be delayed or limited. Should the credit
quality or the financial position of the banks currently
employed significantly deteriorate, cash holdings would
be moved to another bank.
The carrying amount for investments held at fair value
through profit or loss best represents the maximum
exposure to credit risk. The Company holds assets as
collateral against loans issued. The Company does not
have assets held as collateral.
Further details on the exposure to, and management
of, credit risk by the Company is included in both the
Investment Advisor’s report and the Strategic Report
on pages 8 to 19.
Continued
222524 Develop North AR23 V17.indd 59222524 Develop North AR23 V17.indd 59 25/03/2024 18:0725/03/2024 18:07
60
Financial assets as at 30 November 2023
In one year
£’000
In two or more
years
£’000
Total
£’000
Cash and cash equivalents 1,154 – 1,154
Loans at amortised cost 10,421 6,283 16,704
Investments held at fair value 3,024 – 3,024
Total 14,599 6,283 20,882
Loans held at amortised cost as at 30 November 2023
Total
£’000
Stage 1 16,390
Stage 2 275
Stage 3 39
16,704
Loans held at amortised cost as at 30 November 2022
Total
£’000
Stage 1 20,000
Stage 2 378
Stage 3 229
20,607
LIQUIDITY RISK
Liquidity risk is the risk that the Company will encounter
difficulties in realising assets or otherwise raising funds
to meet financial commitments. The Company’s
investments comprise loans.
Property and property-related assets in which the
Company invests via loans are not traded in an
organised public market and are relatively illiquid assets,
requiring individual attention to sell in an orderly way.
As a result, the Company may not be able to liquidate
quickly its investments in these loans at an amount
close to their fair value in order to meet its liquidity
requirements.
The Company’s liquidity risk is managed on an ongoing
basis by the Investment Adviser and monitored on
a quarterly basis by the Board. In order to mitigate
liquidity risk the Company has a comprehensive three-
year cash flow forecast that aims to have sufficient cash
balances, taking into account projected drawdowns on
the live facilities to meet its obligations for a period of
at least 12 months. At the reporting date, the maturity
of the financial assets and liabilities was:
Financial assets as at 30 November 2022
In one year
£’000
In two or more
years
£’000
Total
£’000
Cash and cash equivalents 638 – 638
Loans at amortised cost 7,948 12,659 20,607
Investments held at fair value 4,874 – 4,874
Total 13,460 12,659 26,119
222524 Develop North AR23 V17.indd 60222524 Develop North AR23 V17.indd 60 25/03/2024 18:0725/03/2024 18:07
61
Financial liabilities as at 30 November 2023
In one year
£’000
In two or more
years
£’000
Total
£’000
Bank loan – – –
Total
– – –
Financial liabilities as at 30 November 2022
In one year
£’000
In two or more
years
£’000
Total
£’000
Bank loan 4,000 – 4,000
Total
4,000 – 4,000
as at 30 November 2023
Financial net assets
on which no
interest is paid
£’000
Fixed rate
Financial Assets
£’000
Variable rate
financial net
assets
£’000
Total
£’000
Other receivables and prepayments
13 – – 13
Loan Interest receivable
766 – – 766
Other payables and accrued expenses
(191)
– –
(191)
Cash and cash equivalents
–
–
1,154 1,154
Investments held at fair value through
profit and loss
– 2,588 – 2,588
Loans at amortised cost
– 16,374 – 16,374
Total
588 18,962 1,154 20,704
INTEREST RATE RISK
The interest rate profile of the Company was as follows:
Continued
as at 30 November 2022
Financial net assets
on which no
interest is paid
£’000
Fixed rate
Financial Assets
£’000
Variable rate
financial net
assets
£’000
Total
£’000
Other receivables and prepayments
11 – – 11
Loan Interest receivable
976 – – 976
Other payables and accrued expenses
(109) – – (109)
Cash and cash equivalents
– – 638 638
Loan facility
– – (4,000) (4,000)
Investments held at fair value through
profit and loss
– 4,329 – 4,329
Loans at amortised cost
– 20,176 – 20,176
Total
878 24,505 (3,362) 22,021
222524 Develop North AR23 V17.indd 61222524 Develop North AR23 V17.indd 61 25/03/2024 18:0725/03/2024 18:07
62
Shawbrook provide a working capital facility which is
capped at 30% of the Net Asset value of the Company.
Using forward looking SONIA figures as at November
2023, the forecast decrease in interest rates will see
£2k less of finance costs over the next twelve months
assuming an average drawn balance of £1.4m in the
year. Since year end, the outlook for interest rate rises
has eased.
Sensitising the equity discount rate has immaterial
impact on the loans held at fair value.
MARKET PRICE RISK
The management of market price risk is part of the
investment management process and is typical of
an investment company. The portfolio is managed
with an awareness of the effects of adverse valuation
movements through detailed and continuing analysis,
with an objective of maximising overall returns to
shareholders. Investments in property and property-
related assets are inherently difficult to value due to
the individual nature of each property. As a result,
valuations are subject to substantial uncertainty. There
is no assurance that the estimates resulting from the
valuation process will reflect the actual sales price
even where such sales occur shortly after the valuation
date. Such risk is minimised through the appointment
of external property valuers. The basis of valuation of
the loan portfolio is set out in detail in the accounting
policies. The inputs into the DCF models are the
forecast monthly cashflows including sales values and
build costs, the discount rate which is the imputed
interest rate at the time the facility was entered into
adjusted for any movements in the risk free rate as
at current year end, and a 30% (November 2022:
30%) discount rate for the equity element to reflect
the higher level of uncertainty. Any changes in market
conditions will directly affect the profit and loss
reported through the Income Statement. Details of the
Company’s investment portfolio held at the balance
sheet date are disclosed in the Investment Adviser’s
Review on page 11. A 10% fall in the sales value of the
residential development projects and a 10% reduction
in asset value of commercial and investment property
assets for those loans held at fair value would have
resulted in a further impairment to the portfolio of
£254,000 as at 30 November 2023 (30 November
2022: £330,000). The calculations are based on the
property valuations at the respective balance sheet
date and are not representative of the year as a whole,
nor reflective of future market conditions.
VALUATION OF FINANCIAL
INSTRUMENTS
Accounting standards recognise a hierarchy of fair
value measurements for financial instruments which
gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1)
and the lowest priority to unobservable inputs (Level
3). The classification of financial instruments depends
on the lowest significant applicable input, as follows:
• Level 1 – Unadjusted, fully accessible and current
quoted prices in active markets for identical assets
or liabilities. Examples of such instruments would
be investments listed or quoted on any recognised
stock exchange.
• Level 2 – Quoted prices for similar assets or
liabilities, or other directly or indirectly observable
inputs which exist for the duration of the period of
investment. Examples of such instruments would
be forward exchange contracts and certain other
derivative instruments.
• Level 3 – External inputs are unobservable. Value is
the Directors’ best estimate, based on advice from
relevant knowledgeable experts, use of recognised
valuation techniques and on assumptions as to what
inputs other market participants would apply in
pricing the same or similar instrument.
222524 Develop North AR23 V17.indd 62222524 Develop North AR23 V17.indd 62 25/03/2024 18:0725/03/2024 18:07
63
17. CAPITAL MANAGEMENT
The Company’s capital is represented by the Ordinary
Shares, share premium, capital reserves, revenue reserve
and special distributable reserve. The Company is not
subject to any externally imposed capital requirements.
The capital of the Company is managed in accordance
with its investment policy, in pursuit of its investment
objective. Capital management activities may include the
allotment of new shares, the buy back or re-issuance of
shares from treasury, the management of the Company’s
discount to net asset value and consideration of the
Company’s net gearing level.
18. POST BALANCE SHEET EVENTS
•
Since the year end £1,475,000 has been drawn down on
the Shawbrook loan facility
•
on 23 November 2023, a third interim dividend of 1.00
pence per share was declared, payable on 28 December
2023
•
on 8 December 2023, the Company bought back a
further 436,532 shares into Treasury
•
on 13 December 2023, the Company bought back a
further 20,834 shares into Treasury
•
on 18 December 2023, the Company bought back a
further 81,037 shares into Treasury
•
on 21 December 2023, the Company bought back a
further 27,966 shares into Treasury
•
on 13 February 2024, a new loan was issued to Almscliffe
Dhesi Developments (1) Ltd with an initial drawdown of
£576,000
•
on 29 February 2024, a fourth interim dividend of 1.00
pence per share was declared, payable on 28 March 2024
30 November 2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Investments held at fair value through profit
and loss
– – 3,024 3,024
Total – – 3,024 3,024
30 November 2022
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Investments held at fair value through profit
and loss
– – 4,874 4,874
Total – – 4,874 4,874
A reconciliation of fair value measurements in Level 3 is set out in the following table:
30 November 2023 30 November 2022
£’000 £’000
Opening Balance 4,874 7,589
Loans deployed 59 80
Principal repayments (1,802) (2,600)
Movements in interest receivable 93 183
Unrealised losses on investments held at fair value
through profit or loss (203) (378)
Amortisation of exit fees 3 –
Closing Balance 3,024 4,874
222524 Develop North AR23 V17.indd 63222524 Develop North AR23 V17.indd 63 25/03/2024 18:0725/03/2024 18:07
64
Notice of Annual General
Meeting
Notice is hereby given that the annual general meeting
(“AGM”) of Develop North PLC (the “Company”) will
be held on Thursday, 25 April 2024 at 12 noon at the
Grey Street Hotel, 2-12 Grey Street, Newcastle, NE1
6AE for the purposes of considering and, if thought
fit, passing the resolutions below. Resolutions 1 to 12
(inclusive) will be proposed as ordinary resolutions
and resolutions 13 to 15 will be proposed as special
resolutions.
ORDINARY BUSINESS
Ordinary Resolutions
1. To receive the Company’s annual report and
accounts for the financial year ended 30 November
2023 (the “Annual Report and Accounts”), together
with the Directors’ report and the auditors’ report
on those accounts.
2. To approve the Directors’ Remuneration Report
(excluding the Directors’ remuneration policy) for
the year ended 30 November 2023.
3. To approve the Directors’ Remuneration Policy.
4. To re-elect Ian McElroy as a Director of the
Company.
5. To re-elect Matthew Harris as a Director of the
Company.
6. To re-elect John Newlands as a Director of the
Company.
7. To re-elect Douglas Noble as a Director of the
Company.
8. To approve the dividend policy of the Company.
9. To re-appoint MHA as the Company’s Auditor to
hold office until the conclusion of the next Annual
General Meeting of the Company.
10. To authorise the Audit Committee to determine
the Auditor’s remuneration.
11. That the Company continue its business as
presently constituted.
SPECIAL BUSINESS
12. Authority to allot shares
THAT, in accordance with section 551 of the
Companies Act 2006 (the “CA 2006”), the board
of directors of the Company (or a duly constituted
committee of the directors of the Company) (the
“Directors”) be generally and unconditionally
authorised to allot shares in the Company or grant
rights to subscribe for or to convert any security into
shares in the Company up to an aggregate nominal
amount of £51,335 provided that this authority
shall, unless renewed, varied or revoked by the
Company, expire on 25 July 2025 or, if earlier,
the date of the next annual general meeting of the
Company save that the Company may, before such
expiry, make offers or agreements which would
or might require shares in the Company to be
allotted or rights to subscribe for or to convert any
security into shares in the Company to be granted
and the Directors may allot shares in the Company
or grant rights to subscribe for or to convert any
security into shares in the Company in pursuance
of such offer or agreement notwithstanding that
the authority conferred by this resolution has
expired. This resolution revokes and replaces all
unexercised authorities previously granted to the
Directors to allot shares in the Company or grant
rights to subscribe for or to convert any security
into shares in the Company but without prejudice
to any allotment of shares or grant of rights already
made, offered or agreed to be made pursuant to
such authorities.
Special Resolutions
13. Disapplication of pre-emption rights
THAT, subject to the passing of resolution 11
and in accordance with section 570 of the CA
2006, the Directors be authorised to allot equity
securities (as defined in section 560 of the CA
2006) for cash under the authority conferred by
resolution 12 and/or to sell ordinary shares of one
pence each in the capital of the Company held
by the Company as treasury shares as if section
561 of the CA 2006 did not apply to any such
allotment or sale, provided that such authority shall
222524 Develop North AR23 V17.indd 64222524 Develop North AR23 V17.indd 64 25/03/2024 18:0725/03/2024 18:07
65
be limited to the allotment of equity securities or
sale of treasury shares up to an aggregate nominal
amount of £51,335. The authority granted by this
resolution will, unless renewed, varied or revoked
by the Company, expire at the conclusion of the
Company’s next annual general meeting after this
resolution is passed or, if earlier, at the close of
business on 25 July 2025, save that the Company
may, before such expiry make offers or agreements
which would or might require equity securities to
be allotted (or treasury shares to be sold) after the
authority expires and the Directors may allot equity
securities (or sell treasury shares) in pursuance of
any such offer or agreement as if the authority had
not expired. This resolution revokes and replaces
all unexercised powers previously granted to the
Directors to allot equity securities or sell treasury
shares as if section 561 of the CA 2006 did not apply
but without prejudice to any allotment of equity
securities or sale of treasury shares already made or
agreed to be made pursuant to such authorities.
14. That the Company be authorised generally and
unconditionally, in accordance with Section 701
of the Companies Act 2006 (the “Act”), to make
market purchases (within the meaning of Section
693(4) of the Act) of ordinary shares of £0.01 each
(“Ordinary Shares”) provided that:
a. the maximum number of Ordinary Shares
authorised to be purchased is 3,847,600;
b. the minimum price which may be paid for an
Ordinary Share is £0.01; and
c. the maximum price which may be paid for an
Ordinary Share must not be more than the
higher of: (i) 5 per cent. above the average of
the mid-market value of the Ordinary Shares
for the five business days before the purchase is
made; or (ii) the higher of the last independent
trade and the highest current independent bid
for Ordinary Shares.
The authority conferred by this resolution will expire
on the earlier of the conclusion of the next Annual
General Meeting of the Company and 15 months
from the passing of this resolution save that the
Company may, before the expiry of the authority
granted by this resolution, enter into a contract to
purchase Ordinary Shares which will or may be
executed wholly or partly after the expiry of such
authority.
15. That a general meeting of the Company, other than
an Annual General Meeting, may be called on not
less than 14 clear days’ notice.
By order of the Board
APEX FUND ADMINISTRATION
SERVICES (UK) LIMITED
Company Secretary
Registered office:
Hamilton Centre, Rodney Way,
Chelmsford, Essex CM1 3BY
25 MARCH 2024
222524 Develop North AR23 V17.indd 65222524 Develop North AR23 V17.indd 65 25/03/2024 18:0725/03/2024 18:07
66
Notes
These notes should be read in conjunction with the
notes on the Form of Proxy.
Only shareholders on the Register of Members (the
“Register”) at close of business on 23 April 2024 are
entitled to vote at the AGM in respect of the number
of Ordinary Shares registered in their name at such
time. In the event of any adjournment of the AGM,
the time by which a person must be entered on the
Register in order to have the right to attend and vote
at the adjourned AGM is the close of business 48
hours (excluding non-business days) before the time
of the adjourned meeting. Such shareholders can vote
in respect of the number of shares registered in their
names at that time, but any subsequent changes to the
Register shall be disregarded in determining rights to
attend and vote
(i) A member entitled to attend and vote at the
AGM is entitled to appoint one or more proxies
to exercise all or any of the rights of the member
to attend and speak and vote in his place. A
proxy need not be a member of the Company.
If a member appoints more than one proxy to attend
the AGM, each proxy must be appointed to exercise
the rights attached to a different share or shares held
by the member.
(ii) To appoint a proxy you may use the Form of
Proxy enclosed with this notice. To be valid,
the Form of Proxy, together with the power of
attorney or other authority (if any) under which
it is signed or a notarially certified or office copy
of the same, must be completed and returned
in accordance with the instructions printed
thereon to Computershare Investor Services
PLC at The Pavilions, Bridgwater Road, Bristol
BS99 6ZY to be received as soon as possible
and in any event by not later than 12 noon on
23 April 2024. You can only appoint a proxy
using the procedures set out in these notes and
the notes to the Form of Proxy.
(iii) Completion of the Form of Proxy will not
prevent you from attending and voting in
person.
(iv) Any person receiving a copy of this notice as
a person nominated by a member to enjoy
information rights under section 146 of the Act
(a “Nominated Person”) should note that the
provisions in note (ii) above concerning the
appointment of a proxy or proxies to attend
the AGM in place of a member, do not apply
to a Nominated Person as only shareholders
have the right to appoint a proxy. However,
a Nominated Person may have a right under
an agreement between the Nominated
Person and the member by whom he or she
was nominated to be appointed, or to have
222524 Develop North AR23 V17.indd 66222524 Develop North AR23 V17.indd 66 25/03/2024 18:0725/03/2024 18:07
67
someone else appointed, as a proxy for the
AGM. If a Nominated Person has no such proxy
appointment right or does not wish to exercise
it, he/she may have a right under such an
agreement to give instructions to the member
as to the exercise of voting rights at the AGM.
(v) Nominated Persons should also remember
that their main point of contact in terms of
their investment in the Company remains
the member who nominated the Nominated
Person to enjoy information rights (or perhaps
the custodian or broker who administers the
investment on their behalf). Nominated Persons
should continue to contact that member,
custodian or broker (and not the Company)
regarding any changes or queries relating
to the Nominated Person’s personal details
and interest in the Company (including any
administrative matter). The only exception to
this is where the Company expressly requests a
response from a Nominated Person.
(vi) In the case of joint holders, the vote of the senior
holder who tenders a vote whether in person
or by proxy shall be accepted to the exclusion of
the votes of the other joint holders and, for this
purpose, seniority shall be determined by the
order in which the names stand in the register
of members of the Company in respect of the
relevant joint holding.
(vii) Shareholders who hold their Ordinary Shares
electronically may submit their votes through
CREST, by submitting the appropriate and
authenticated CREST message so as to be
received by the Company’s registrar not later
than 48 hours before the start of the meeting.
Instructions on how to vote through CREST can
be found by accessing the following website:
www.euroclear.com/CREST. Shareholders are
advised that CREST is the only method by
which completed proxies can be submitted
electronically.
(viii) If you are a CREST system user (including a
CREST personal member) you can appoint
one or more proxies or give an instruction
to a proxy by having an appropriate CREST
message transmitted. To appoint one or more
proxies or to give an instruction to a proxy
(whether previously appointed or otherwise)
via the CREST system, CREST messages
must be received by Computershare Investor
Services PLC (ID number 3RA50) not later
than 48 hours before the time appointed for
holding the AGM excluding non-business days.
For this purpose, the time of receipt will be
taken to be the time (as determined by the
timestamp generated by the CREST system)
from which Computershare Investor Services
PLC is able to retrieve the message. CREST
personal members or other CREST sponsored
members should contact their CREST sponsor
for assistance with appointing proxies via CREST.
For further information on CREST procedures,
limitations and system timings please refer to
the CREST Manual. The Company may treat
as invalid a proxy appointment sent by CREST
in the circumstances set out in regulation 35(5)
(a) of the Uncertificated Securities Regulations
2001.
(ix) Any corporation which is a member may appoint
one or more corporate representative(s) who
may exercise on its behalf all of its powers as a
member provided that, if it is appointing more
than one corporate representative, it does
not do so in relation to the same shares. It is,
therefore, no longer necessary to nominate
a designated corporate representative.
Representatives should bring to the AGM
evidence of their appointment, including any
authority under which it is signed.
(x) If the Chairman, as a result of any proxy
appointments, is given discretion as to how the
votes of those proxies are cast and the voting
rights in respect of those discretionary proxies,
when added to the interests in the Company’s
securities already held by the Chairman, result
in the Chairman holding such number of voting
rights that he has a notifiable obligation under
the Disclosure Guidelines and Transparency
Rules, the Chairman will make the necessary
notifications to the Company and the Financial
Continued
222524 Develop North AR23 V17.indd 67222524 Develop North AR23 V17.indd 67 25/03/2024 18:0725/03/2024 18:07
68
Conduct Authority. As a result, any member
holding 3 per cent or more of the voting rights
in the Company who grants the Chairman a
discretionary proxy in respect of some or all of
those voting rights and so would otherwise have
a notification obligation under the Disclosure
Guidelines and Transparency Rules, need not
make a separate notification to the Company
and the Financial Conduct Authority
(xi) Any question relevant to the business of the
AGM may be asked at the AGM by anyone
permitted to speak at the AGM. A holder of
shares may alternatively submit a question
in advance by a letter addressed to the
Company’s registered office. Under section
319A of the Act, the Company must answer
any question a shareholder asks relating to the
business being dealt with at the AGM, unless, (i)
answering the question would interfere unduly
with the preparation for the AGM or involve the
disclosure of confidential information; (ii) the
answer had already been given on a website in
the form of an answer to a question; or (iii) it is
undesirable in the interests of the Company or
the good order of the AGM that the question
be answered.
(xii) Under section 527 of the Act, a shareholder
or shareholders meeting the criteria set out in
note (xiv) below, have the right to request the
Company to publish on its website a statement
setting out any matter that such shareholders
propose to raise at the AGM relating to the
audit of the Company’s accounts (including the
auditor’s report and the conduct of the audit)
that are to be laid before the AGM. Where
the Company is required to publish such a
statement on its website: (i) it may not require
the shareholder making the request to pay any
expense incurred by the Company in complying
with the request; (ii) it must forward the
statement to the Company’s auditors no later
than the time the statement is made available on
the Company’s website; and (iii) that statement
may be dealt with as part of the business of the
AGM. The request: (a) may be in hard copy
form or in electronic form; (b) either set out
the statement in full or, if supporting a statement
sent by another shareholder, clearly identify the
statement which is being supported; (c) must be
authenticated by the person or persons making
it; and (d) be received by the Company at least
one week before the AGM.
(xiii) In order to be able to exercise the shareholders’
right to require the Company to publish audit
concerns in accordance with note (xii) above,
the relevant request must be made by: (i) a
shareholder or shareholders having a right to
vote at the AGM and holding at least 5 per cent.
of total voting rights in the Company (please
see note (xvi) below in relation to total voting
rights); or (ii) at least 100 shareholders having
a right to vote at the AGM and holding, on
average, at least £100 of paid up share capital.
(xiv) Where a shareholder or shareholders wishes to
request the Company to publish audit concerns
in accordance with note (xii) above, such
request must be made by either sending:
(a) a hard copy request which is signed by the
relevant shareholder or shareholders, states
such persons’ full name(s) and address(es)
and sent to the Company Secretary, Maitland
Administration Services Limited; or
(b) a request which states the shareholder or
shareholders’ full name and address(es), and
sent by email to CoSec@maitlandgroup.com.
Please state “Develop North AGM” in the subject
line of the e-mail.
(xv) Further information regarding the AGM which
the Company is required by section 311A of
the Act to publish on a website in advance of the
GM can be accessed at www.DevelopNorth.
co.uk.
(xvi) As at 20 March 2024 (being the latest practicable
date prior to the printing of this notice) the
Company’s issued share capital consisted of
25,667,856 Ordinary Shares carrying one vote
each.
222524 Develop North AR23 V17.indd 68222524 Develop North AR23 V17.indd 68 25/03/2024 18:0725/03/2024 18:07
69
(xvii) You may not use any electronic address provided
either in this notice or any related documents
(including the Form of Proxy) to communicate
with the Company for any purpose other than
those expressly stated.
(xviii) A copy of the letters of appointment of the
Directors will be available for inspection during
normal business hours at the Company’s
registered office and at the place of the meeting
from at least 15 minutes prior to the meeting
until the end of the meeting.
EXPLANATION OF RESOLUTIONS
Resolutions 1 to 12 (inclusive) are proposed as
ordinary resolutions. This means that for each of those
resolutions to be passed, more than half of the votes
cast must be in favour of the resolution. Resolutions
13 to 15 (inclusive) are to be proposed as special
resolutions. This means that for the resolutions to be
passed, at least three-quarters of the votes cast must
be in favour of the resolutions.
1. Resolution 1 – The Directors are required to
lay before the meeting the Audited Financial
Statements of the Company for the year ended
30 November 2023 including the Strategic Report,
Report of the Directors, the Independent Auditor’s
report and the Director’s Remuneration Report.
2. Resolution 2 – The shareholders are asked to
approve the Directors’ Remuneration Report for
the year ended 30 November 2023, as set out
on pages 33 to 35 of the Annual Report. The vote
is advisory and does not affect the remuneration
payable to any individual Director.
3.
Resolution 3 – Is a resolution subject to a binding
vote. The Company is seeking approval for
its remuneration policy as set out on page 33
of the Directors’ Remuneration Report. The
remuneration policy will take effect immediately
on approval by shareholders and will continue to
apply for the next three years, unless amended
by the Company in general meeting at an earlier
date.
4. Resolutions 4 to 7 – the Directors to be
reappointed.
5. Resolution 8 – The Directors’ present the
Company’s dividend policy on an annual basis
recognising that shareholders will not have the
opportunity to vote on a final dividend.
6. Resolutions 9 and 10 – Shareholders are required to
approve the appointment of the Company’s auditor
each year and to give the Audit Committee the
Continued
222524 Develop North AR23 V17.indd 69222524 Develop North AR23 V17.indd 69 25/03/2024 18:0725/03/2024 18:07
70
authority to determine the auditor’s remuneration.
MHA have indicated their willingness to continue
in office. Resolution 9 covers their re-appointment
for the year ending 30 November 2024 and
resolution 10 authorises the Audit Committee to
determine their remuneration.
7. Resolution 11 – continuation of the Company.
In accordance with article 166.2 an ordinary
resolution to approve the continuation of the
Company as presently constituted is required to
be proposed at the AGM in 2024 and every three
years thereafter.
8. Resolution 12 – allotment of shares
9. Resolution 13 – disapplication of pre-emption
rights
10. Resolution 14 – The Directors are requesting
authority for the Company to make market
purchases of Ordinary Shares up to a maximum
nominal amount of 3,847,600 (representing
approximately 14.99 per cent. of the issued
Ordinary Share capital of the Company as at 20
March 2024 (the latest practicable date prior
to the publication of this document)). There is
no present intention to exercise such general
authority. Any repurchase of Ordinary Shares will
be made subject to the Act and within guidelines
established from time to time by the Directors
(which will take into account the income and cash
flow requirements of the Company) and will be at
the absolute discretion of the Directors, and not at
the option of shareholders. Subject to shareholder
authority for the proposed repurchases, general
purchases of the Ordinary Shares in issue will only
be made through the market. Such purchases may
only be made provided the price to be paid is not
more than the higher of: (i) five per cent. above the
average of the middle market quotations for the
Ordinary Shares for the five Business Days before
the purchase is made; or (ii) the higher of the
price of the last independent trade and the highest
current independent bid at the time of purchase.
11. Resolution 15 – The Act provides that the notice
period required for general meetings of the
Company must be at least 21 clear days unless
shareholders approve a shorter notice period,
which cannot be less than 14 clear days (annual
general meetings will continue to be held on at
least 21 clear days’ notice). This resolution seeks
shareholder approval to hold general meetings
after giving notice of 14 or more clear days. The
approval will be effective until the next annual
general meeting, when it is intended that a similar
resolution will be proposed. The Act provides that,
in order to be able to call a general meeting on
less than 21 clear days’ notice, the Company must
make a means of electronic voting available to all
shareholders for that meeting.
222524 Develop North AR23 V17.indd 70222524 Develop North AR23 V17.indd 70 25/03/2024 18:0725/03/2024 18:07
71
Share Register Enquiries
For shareholder enquiries, please contact the registrar, Computershare +44 (0) 370 702 0000.
Share Capital and General Information
Ordinary £0.01 Shares 25,667,856
SEDOL Number BD0ND66
ISIN GB00BD0ND667
Ticker DVNO
Share Prices
The Company’s shares are listed on the London Stock Exchange.
Annual and Interim Reports
Copies of the Annual and Interim Reports are available from the Company Secretary on telephone 01245 398950
and are also available on the Company’s website www.developnorth.co.uk
Provisional Financial Calendar
March 2024 Payment of interim dividend
25 April 2024 Annual General Meeting
31 May 2024 Interim period end
July 2024 Payment of interim dividend
September 2024 Payment of interim dividend
30 November 2024 Year end
December 2024 Payment of interim dividend
March 2025 Year end results announced
March 2025 Payment of interim dividend
Shareholder Information
222524 Develop North AR23 V17.indd 71222524 Develop North AR23 V17.indd 71 25/03/2024 18:0725/03/2024 18:07
72
AIC Association of Investment Companies
This is the trade body for Closed-end Investment
Companies (www.theaic.co.uk).
AIFMD Alternative Investment Fund Managers
Directive
Issued by the European Parliament in 2012 and 2013,
the Directive requires the Company to appoint an
Alternative Investment Fund Manager (AIFM). The
Board of Directors of a Closed-ended Investment
Company, nevertheless, remains fully responsible for
all aspects of the Company’s strategy, operations and
compliance with regulations.
AIFM Alternative Investment Fund Manager
The entity that provides portfolio management and
risk management services to the Company and which
ensures the Company complies with the AIFMD.
Basic Total Earnings per Share Total
Profit after taxation divided by the weighted average
number of Ordinary Shares in issue during the period.
C share This is a class of share issued by investment
trusts. It allows the increase in number of shares in
issue and funds under management without reducing
the value of the existing ordinary shares. ‘C’ shares are
quoted separately from the ordinary shares until the
money raised from their issue has been fully invested.
After that, they are converted to ordinary shares at a
value based on the trust’s net asset value.
Closed-end Investment Company
A company with a fixed issued ordinary share capital
which is traded on a stock exchange at a price not
necessarily related to the Net Asset Value of the
company and where shares can only be issued or
bought back by the company in certain circumstances.
Discount (or Premium) of Share Price to NAV
If the share price is less than the Net Asset Value per
share, the shares are trading at a discount. If the share
price is greater than the Net Asset Value per share,
the shares are trading at a premium. The discount
(or premium) is calculated by reporting the difference
between the Net Asset Value per share and the Share
Price as a percentage of the Net Asset Value per share.
Dividend Yield
Calculated using the annual dividend as a percentage of
the share price at the year end.
Dividends per Share
Dividends declared for the year.
Gearing
Total Assets less all cash divided by shareholders’ funds.
Increase/decrease in NAV
The movement in NAV in the period, shown in total
and as a movement per share. Expressed in whole
numbers and as a percentage.
Investment Trust Qualification
The Investment Trust (Approved Company) Tax
Regulations 2011 (SI 2011/2999) set out requirements
for investment trust approval, amongst which is that
an investment trust must not retain in respect of an
accounting period an amount which is greater than
15% of its income for the accounting period.
Loan to Value
Debt outstanding and drawn at the period end, net of
any cash held in the Lender deposit account, expressed
as a percentage of the market value of all property
assets.
Net Assets (or Shareholders’ Funds)
This is calculated as the value of the investments and
other assets of an Investment Company, plus cash
and debtors, less borrowings and any other creditors.
It represents the underlying value of an Investment
Company at a point in time.
Net Asset Value (NAV) per Ordinary Share
This is calculated as the net assets of the Company
calculated under its accounting policies as set out in
the Financial Statements on pages 44 to 63 divided by
the number of shares in issue (excluding shares held in
Treasury). This is the number disclosed at the foot of
the Statement of Financial Position on page 45.
NAV Total Return
The growth in NAV plus dividends reinvested. This is
expressed as a percentage of NAV per share at the start
of the year.
Glossary
222524 Develop North AR23 V17.indd 72222524 Develop North AR23 V17.indd 72 25/03/2024 18:0725/03/2024 18:07
73
Ongoing Charges
All operating costs incurred by the Company,
expressed as a proportion of its average Net Assets
over the reporting year.
Share Price Total Return
The percentage change in the Share Price assuming
dividends are reinvested to purchase additional
Ordinary Shares at the prevailing share price.
SORP
Statement of Recommended Practice ‘Financial
Statements of Investment Trust Companies and
Venture Capital Trusts’ issued by the AIC.
Total Assets
This is calculated as the value of the investments and
other assets of the Company, plus cash and debtors.
Total Return
The return to shareholders calculated on a per share
basis by adding dividends paid in the period to the
increase or decrease in the Share Price or NAV. The
dividends are assumed to have been reinvested in the
form of Ordinary Shares.
UK Corporate Governance Code
A code issued by the Financial Reporting Council
which sets out standards of good practice in relation
to Board leadership and effectiveness, remuneration,
accountability and relations with shareholders. All
companies with a Premium Listing of equity shares in
the UK are required under the Listing Rules to report
on how they have applied the Code in their annual
report and accounts.
Alternative Performance Measures (APMs)
The Company uses the following APMs (as described
in the glossary) to present a measure of profitability
which is aligned with the requirements of our investors
and potential investors, to draw out meaningful
data around revenues and earnings to provide
additional information not required for disclosure
under accounting standards. All APMs relate to past
performance.
• Dividend yield
• Increase / decrease in NAV
• Loan to value
• NAV total return
• Ongoing charges
• Share price total return
222524 Develop North AR23 V17.indd 73222524 Develop North AR23 V17.indd 73 25/03/2024 18:0725/03/2024 18:07
74
DIRECTORS
John Newlands
Chairman
Matthew Harris
Chairman of the Audit Committee
Ian McElroy
Douglas Noble
Chairman of the Remuneration Committee
REGISTERED OFFICE
Hamilton Centre
Rodney Way
Chelmsford
Essex CM1 3BY
INVESTMENT ADVISER
Tier One Capital Ltd
Eagle House
Asama Court
Newcastle-upon-Tyne NE4 7YD
BROKER AND FINANCIAL ADVISER
Cavendish Capital Markets
Limited
One Bartholomew Close
London EC1A 7BL
SOLICITOR
Gowling WLG (UK) LLP
4 More London
Riverside
London SE1 2AU
ADMINISTRATOR AND SECRETARY
APEX Fund Administration
Services (UK) Limited
(Formerly Maitland Administration Services Limited)
Hamilton Centre
Rodney Way
Chelmsford
Essex CM1 3BY
INDEPENDENT AUDITOR
MHA
Chartered Accountants & Statutory Auditor
2 London Wall Place
London
EC2Y 5AU
REGISTRAR
Computershare Investor
Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
WEBSITE
www.developnorth.co.uk
Corporate Information
222524 Develop North AR23 V17.indd 74222524 Develop North AR23 V17.indd 74 25/03/2024 18:0725/03/2024 18:07
75
76
DEV ELOP
NORTH