## Annual
## Report
## 2023
1
2
# 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

3
## Chairman’s Statement
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
John Newlands, Chairman that reached a 41-year high of 11.1% in October
2022. Underlying pressures gradually eased over the
Highlights
following twelve months such that inflation had fallen
to 4.6% by the beginning of November 2023.
• Net Asset Value total return of 1.4%
(November 2022: 2.3%)
Turning to property prices, the latest ONS figures

| • Continued reduction in the Company’s risk |  | show that the average house price was £6,000 |
| --- | --- | --- |
|  | profile as the collective LTV reduced to 65.1% | cheaper in November 2023 than a year earlier, a |
|  | from c.67% a year earlier | trend generally attributed to a combination of high |
| • Decrease in earnings per share from 3.7p to |  | mortgage rates, cost of living increases and low |
|  | 2.5p | market confidence. |

• £1.1m distributed to shareholders during the
Prospects have undoubtedly improved as borrowing
year
rates have come down and cost price inflation
• Re-pricing of loan book in line with higher has eased. Our Investment Adviser has prudently
interest rates created a c.9% year-on-year adopted Zoopla’s prediction of a 2% fall in house
increase in average rates charged prices across our regions, while reporting improved
• Total dividends of 4 pence per share paid or confidence of stability within cost budgets and a
payable for the year further improvement in the availability of labour and
sub-contractors, with the potential to shorten build
• Share buybacks during the year enhanced the
programmes.
NAV per share for remaining shareholders by
0.3%
Objective; Managerial
• Loan facility with Shawbrook Bank Limited
renewed to May 2025 Arrangements; company name
The Company seeks to achieve its investment
Introduction objective primarily through a diversified portfolio
of fixed rate loans predominantly secured over
I am pleased to present the Company’s results for
land and/or property in the UK and managed by its
the year ended 30 November 2023, during which
Investment Adviser, Tier One Capital Ltd (‘TOC’).
the Company entered its seventh year of trading.
The Investment Adviser’s Report may be found on
Once again the economic backdrop, especially with
pages 8 to 11.
regard to real estate-linked investment, has been
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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

5
**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.

6
## 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

7
## Investment Adviser’s Report

| INVESTMENT ADVISER’S REPORT: | • Portfolio Loan to Value (‘LTV’) improved at |  |
| --- | --- | --- |
| REVIEW OF THE 12 MONTHS TO |  | 65.1% |
| 30 NOVEMBER 2023 | • Further progress in managing non-performing |  |

assets and improvement in loan book quality,
Investment Adviser’s Highlights:
including £0.36m repaid by legacy projects.
• Exits of three portfolio projects, bringing the
• Fund liquidity further improved, enabling the
number of exits since inception to eighteen
commencement of the first Company share
• NAV Total Return of 1.4% for the year to 30 buyback exercise in November 2023.
November 2023 and an annualised dividend yield
of 4.7%, resulting in £1.1m of income distributed The Economic Backdrop and Outlook:
to shareholders The year had seen continued strategic risk challenges
• £3.4m deployed into 6 projects presented in both significant inflation and increased
borrowing rates. Average inflation in the year was 6.7%,
• Loan to Value (‘LTV’) has decreased to 65.1%
albeit down from 10.7% in the previous 12 months.
from 66.8%, delivering on our strategy to build
UK base rates saw six consecutive increases from 3%
risk resilience and improve the credit quality of
to 5.25%. Notwithstanding those challenges, the UK
our loan book
economy avoided falling into the recession predicted
• 71.2% of funds deployed in North East England
at the start of the year. Looking forward, the Bank of
reflecting the Company’s ongoing commitment to
England (‘BoE’) expects to see a slowing down in
focus operations on our chosen regional markets.
headline inflation from 4.6% at 30 November 2023 to a
This Annual Report covers the sixth full year of
likely 3.1% in the final quarter of 2024 before returning
performance and seventh audit review of the Company
to normalised levels of around 2% in 2025. Markets are
since its listing in January 2017.
predicting that inflationary control will calm interest rate
The Company’s primary purpose is to provide debt
movements and see some relief built in to lower the
finance to the property sector. The Company also
base rate to 4.25% by the end of 2024, although the
benefits from a small number of equity positions
BoE themselves are more pessimistic at 5.1%.
attained at nil cost in six of the borrowing entities which
The end of 2022 saw house prices come off a peak,
it supports. In addition, the Company benefits from exit
coupled with lower supply of new builds as volume
fees on redemption of other projects that additionally
housebuilders reduced the number of new site starts.
contribute to the Senior & Profit lending type.
A slower market was seen across the North East and
Progress on the Company’s Strategic Scotland in 2023, partly driven by increased mortgage
Objectives: costs relative to wage growth. Looking forward, we
have adopted Zoopla’s prediction of a 2% fall in house
• Weighted Average interest generated was 8.2%
prices across our regions; however, we are encouraged
- up from 7.56% in the prior year
by recent pay settlements above inflation to bring some
• Size of investment portfolio year-on-year
confidence back to mortgage affordability.
decreased due to three successful exits
• Prudent cost control saw overheads maintained
at £0.5m
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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. Despite the ongoing uncertainties, we are pleased
to report an active year for new transactions and
With the return of both interest rate and construction
deployments to existing projects, together with full and
cost stability we have adopted a more positive outlook
partial exits:
for 2024. Key risks remain and a contraction in asset
values cannot be discounted, although we anticipate • Croft, North Yorkshire - £1.1m 18-month facility
any downturn to be shallow.
• Aberdeen, Scotland - £1.7m 24-month facility
The increased rate environment saw us set higher
• Aberdeen, Scotland - £0.8m 10-month facility
targets for Investment Rate of Return (‘IRR’) on projects.
• Darlington, North East England - £2.2m
30-month facility
Deployment

| The Company’s portfolio can be broken down as |  | During the year a total of £3.4m was deployed |
| --- | --- | --- |
| follows: |  | into six projects, including the four new projects |
|  | Deployment by Region | mentioned above. |

At the year-end, fund deployment totalled £19.5m.
28% The quality of the underlying loan book continues to
improve with the Loan to Value moving from 66.8%
72%
at 30 November 2022 to 65.1% at 30 November
2023
Portfolio Exits
North East Scotland
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
Average loan size
Average returns by loan type recognises an impairment charge if that interest is not
Lending type paid by the borrower and there is not a clear expectation
£0.584m that this can be recovered subsequently. During the year,
10.50%

|  |  | 9% |  |  |  |  |  |  | there were two projects unable to meet their interest |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | 6.30% | £1.727m |  |  |  |  |  |  |
|  |  |  |  |  |  |  | 72% |  | requirements in full. |  |  |
|  |  | £0.604m |  | 6.57% |  |  |  |  |  |  |  |
|  |  |  | 19% |  |  |  |  |  |  | Continued |  |
| £0 £500,000 £1,000,000 £1,500,000 £2,000,000 | 0% 4.00% 8.00% 12.00% |  |  | 6.00%2.00% |  | 10.00% |  |  |  |  | 9 |
|  | 0% 10% 20% 30% 40% 50% 60% 70% |  |  |  |  |  |  | 80% |  |  |  |
|  |  | Mezzanine Senior & profit Senior only | Mezzanine Senior & profit Senior only |  |  |  |  |  |  |  |  |

Mezzanine Senior & profit Senior only
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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.

TIER ONE CAPITAL LTD

25 MARCH 2024

10
THE INVESTMENT PORTFOLIO AS AT 30 NOVEMBER 2023

| Sector % of |  |  | LTV* | Loan Value |  |  | LTV* | Loan Value |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Portfolio | (Nov 23) |  | (Nov 23) |  | (Nov 22) |  | (Nov 22) |  |
|  |  |  |  |  | £’000s |  |  |  | £’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
*LTV has been calculated using the carrying value of the loans as at the balance sheet date
11
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## Strategic Report
The Directors present their Strategic Report for the year to 30 November 2023.
STRATEGIC REPORT INVESTMENT OBJECTIVE
The aim of the Strategic Report is to provide The Company’s investment objective is to provide
shareholders with the ability to assess how the shareholders with a consistent and stable income and
Directors have performed their duty to promote the potential for an attractive total return over the
the success of the Company during the year under medium to long term.
review. The Strategic Report contains a summary of
the Company’s business model, a statement of its
INVESTMENT POLICY
objectives and policy, a review of performance and
a description of the principal and emerging risks it The Company seeks to achieve its investment objective
faces. Please refer to the Chairman’s Statement and through a diversified portfolio of fixed rate loans
the Investment Adviser’s Report for an analysis of the predominantly secured over land and/or property in
Company’s performance during the financial year the UK.
and a summary of the future prospects. Pages 22 to
The Company attempts to reduce downside risk by
29, together with the sections of this Annual Report
focusing on secured debt with both quality collateral
and Accounts incorporated by reference, constitute a
and contractual protection. The Company makes
Strategic Report that has been prepared in accordance
investments primarily through senior secured
with Section 414A of the Companies Act 2006 (the
loans although other loans such as bridging loans,
‘Act’).
subordinated loans, selected loan financings and other
debt instruments may be considered if appropriate.
PRINCIPAL ACTIVITY AND
PURPOSE
The typical loan term is between one and five years.
The Company retains absolute discretion to make
The Company’s principal activity is that of an investment
investments for either shorter or longer periods.
company, with a primary purpose of providing debt
finance to the property sector.
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Loan to Value • No more than 50% of the Net Asset Value
will be exposed to bridging loans, selected loan
The Company typically seeks to originate debt where
financings and other debt instruments, calculated
the effective loan to real estate value ratio of any
at the time of investment;
investment is between 40% and 100% at the time of
origination. The Company typically seeks to achieve a • No more than 5% of the Net Asset Value will
blended loan to value (‘LTV’) across the portfolio of no be exposed to unsecured loans, calculated at the
more than 75% (based on the initial valuations at the time of investment;
time of loan origination) once fully invested.
• No single investment, or aggregate investments
secured on a single property or group of
Sector
properties or connected with related borrowers,
The Company’s portfolio is appropriately diversified
will exceed 20% of the Net Asset Value,
by sector and predominantly split between:
calculated at the time of investment;

| • Regional residential housebuilding across the |  | ·• No more than 20% of the Net Asset Value will |  |
| --- | --- | --- | --- |
|  | UK, with a preliminary focus on non-London |  | be exposed to any one borrower or related |
|  | based property; |  | borrowers or developer or related developer |

entities calculated at the time of investment;
• Small to medium commercial property
• No more than 10% of the Net Asset Value will
development across the UK primarily focusing on
be exposed to any sector other than regional
small serviced office space, hotel developments
residential housebuilding, small to medium
and wedding and conferencing venues; and
commercial property development and direct
• Direct sale and leaseback vehicles primarily
sale and leasehold vehicles; and
operating in the professional sectors of dentists,
• The Company will not invest in other listed
accountants, solicitors and finance professionals.
closed-ended investment companies.
INVESTMENT RESTRICTIONS Borrowing
The Company may use gearing if it believes it will
The Company observes the following investment
enhance shareholder returns over the longer term. It
restrictions:
will limit the Company’s borrowings to a maximum of
• The Company derives its income from a portfolio
30% of the Net Asset Value at the time of drawdown.
of not less than five loans;
In May 2023 the Company renewed its £6.5 million
• No more than 100% of the Gross Asset Value
committed revolving facility with Shawbrook Bank
will be exposed to the regional residential
Limited until May 2025. At the year end the Company
housebuilding sector, calculated at the time of
had no drawings under this facility (November 2022:
investment;
£4.0m). The Company has drawn down £1.5 million
• No more than 100% of the Gross Asset Value will
since the year end (November 2022: repaid £0.5m).
be exposed to the small to medium commercial
Cash Management
property development sector, calculated at the
time of investment; The Company may from time-to-time have surplus
• No more than 30% of the Net Asset Value will cash. It is expected that any surplus cash will be
be exposed to direct sale and leaseback vehicles, temporarily invested in cash or cash equivalents,
at the time of investment; money market instruments, bonds, commercial
paper or other debt obligations with banks or other
• No more than 50% of the Net Asset Value will
counterparties having a single-A (or equivalent) or
be exposed to subordinated loans, calculated
higher credit rating as determined by an internationally
at the time of investment and/or subsequent
recognised rating agency or gilts or otherwise
subordination;
approved by the Board.
Continued
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Use of derivatives and hedging The Board seeks to recruit Directors who have
diverse working experience. The industry experience
The Company may invest through derivatives for
on the Board ensures there is detailed knowledge and
efficient portfolio management. In particular, the
constructive challenge in the decision-making process.
Company may engage in interest rate hedging or
This helps the Company achieve its overarching aim
otherwise seek to mitigate the risk of interest rate
of enhancing shareholder value. The Directors are
increases as part of the Company’s efficient portfolio
mindful of costs and seek to ensure that the best value
management.
for money is achieved in managing the Company.
In accordance with the requirements of the FCA Listing
The Board seeks to employ third-party providers who
Rules, any material changes in the principal investment
share the Company’s values and, importantly, will work
policies and restrictions of the Company would only be
with the Directors openly to achieve the Company’s
made with the approval of Shareholders by ordinary
aims. As mentioned below, the Board expects and
resolution.
seeks assurance at least annually that the companies it
works with adopt working practices that are of a very
BUSINESS MODEL, CULTURE AND
high standard.
VALUES
The Company invests in accordance with the
ENVIRONMENTAL, SOCIAL AND
investment objective.
GOVERNANCE POLICY (‘ESG’)
The Board is the Company’s governing body and is
The Company has no employees and all of its
collectively responsible to shareholders for the long-
Directors are non-executive. The day-to-day activities
term success of the Company. It is responsible for the
are carried out by third parties. There are therefore no
overall strategy of the Company, including its investment
disclosures to be made in respect of social, community,
objective and policy, decisions regarding corporate
employee or environmental matters.
governance, asset allocation, risk and internal control
The Company has an investment advisory contract
assessment and determining the overall limits and
with Tier One Capital Ltd.
restrictions for the portfolio. In addition, it appoints and
monitors the performance of its service providers and
In asking the Company’s Investment Adviser to
seeks to secure the Company’s success by engaging
deliver against set objectives, the Directors have
reputable third-party service suppliers with established
also requested that the Investment Adviser take into
track records to deliver its day-to-day operations.
account the broader social, ethical and environmental
issues of counterparties within the Company’s
The management of the Company’s investments,
portfolio, acknowledging that companies failing to
is delegated to the Investment Adviser, Tier One
manage these issues adequately run a long-term risk to
Capital Ltd (‘TOC’), and there is a clear division of
the sustainability of their businesses. More specifically,
responsibilities between the Board and the Investment
they expect companies to demonstrate ethical
Adviser. The Board maintains a close working
conduct, effective management of their stakeholder
relationship with the Investment Adviser as its principal
relationships, responsible management and mitigation
service provider.
of social and environmental impacts, as well as due
All of the Directors seek to discharge their
regard for wider societal issues.
responsibilities and meet shareholder expectations in
The Investment Adviser actively seeks to invest in
an open and transparent manner. The Company’s
companies that adopt good ESG practices and, where
values of integrity, skill and knowledge are aligned to
possible, uses its influence to encourage companies
the delivery of its investment objective. The culture
to adopt best practice on environmental, social and
and values of the Company are embodied in the Board
corporate governance matters.
of Directors.
14
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MODERN SLAVERY ACT 2015 (‘MSA’) Borrowers under the loans in which the Company
invests may not fulfil their payment obligations in full, or
The MSA requires companies to prepare a slavery and
at all, and/or may cause, or fail to rectify, other events
human trafficking statement for each financial year. As
of default under the loans.
the Company does not provide goods or services in
The Board is responsible for setting the investment
the normal course of business, the Board considers that
strategy to achieve the targeted returns and for
the Company is not required to make any slavery or
monitoring the performance of the Investment Adviser
human trafficking statement under the Modern Slavery
and the implementation of the agreed strategy.
Act 2015. In relation to this matter the Company’s
supply chain is thought to be low risk by the Board. An inappropriate strategy could lead to poor capital
performance and lower than targeted income yields.
PRINCIPAL AND EMERGING RISKS
This risk is mitigated through regular reviews and
The Board of Directors has overall responsibility for risk updates with the Investment Adviser, monitoring of the
management and internal control within the context of portfolio sectors against the investment restrictions on
achieving the Company’s objectives. a quarterly basis and tracking of loan to value ratios of
the underlying property projects
The Directors confirm that they have carried out
a robust assessment of the principal and emerging • Market risk
risks facing the Company, including those that would
The Company’s investment strategy relies in part upon
threaten its business model, future performance,
local credit and real estate market conditions. Adverse
solvency or liquidity, as they operated during the year
conditions may prevent the Company from making
and up to the approval of the Annual Report.
investments that it might otherwise have made, leading
The Board agrees the strategy of the Company, taking
to a reduction in yield and an increase in the default
into consideration the Company’s risk appetite. With
rate.
the assistance of the Investment Adviser, the Board has
The Company holds 100% of its assets in the United
drawn up a risk matrix, which identifies the key risks to
Kingdom.
the Company, as well as emerging risks. In assessing
the risks and how they can be mitigated, the Board To mitigate the market risks, the Board receives
has given particular attention to those risks that might quarterly updates from the Investment Adviser
threaten the viability of the Company. These key risks containing information on the local market conditions
fall broadly under the following categories: and trends. This information is reviewed alongside the
sector split of the portfolio to ensure the portfolio is
• Investment and strategy risk
aligned to meet future challenges.
The Company’s targeted returns are targets only
and are based on estimates and assumptions about • Financial risk
a variety of factors including, without limitation, yield The Company’s activities expose it to a variety of
and performance of the Company’s investments, financial risks that include interest rate risk, liquidity risk
which are inherently subject to significant business, and credit risk. Further details on these risks and the
economic and market uncertainties and contingencies, way in which they are mitigated are disclosed in the
all of which are beyond the Company’s control and notes to the financial statements.
which may adversely affect the Company’s ability to
• Operational risk
achieve its targeted returns. Accordingly, the actual
rate of return achieved may be materially lower than The Company has no employees and relies upon
the targeted returns, or may result in a partial or total the services provided by third parties. It is primarily
loss, which could have a material adverse effect on the dependent on the control systems of the Investment
Company’s profitability, the net asset value (‘NAV’) Adviser and Administrator who respectively maintain
and the price of Ordinary shares. the assets and accounting records.
Continued
15
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Failure by any service provider to carry out its obligations
Stakeholder Engagement in the year
in accordance with the terms of their appointment
Group
could have a detrimental effect on the Company.
Investors Shareholders play an important role
To mitigate these risks, the Board reviews the overall
in monitoring and safeguarding the
performance of the Investment Adviser and other key
governance of the Company. They
third-party service providers on a regular basis and has
have access to the Board via the
the ability to terminate agreements if necessary. The
Company Secretary throughout the
business continuity plans of key third-party service
year and are encouraged to attend
providers are subject to Board scrutiny.
the Annual General Meeting. The
• Legal and Regulatory risk Board engaged with shareholders
during the year and was delighted to
In order to qualify as an investment trust, the Company
be able to welcome shareholders to
must comply with section 1158 of the Corporation
the Annual General Meeting.
Tax Act 2010. The Company has been approved by
HM Revenue & Customs as an investment trust. The
Key Service Key service providers report to
Company is listed on the London Stock Exchange. Non-
Providers the Board on a regular basis. The
compliance with the taxes act or a breach of listing rules
Company employs a collaborative
could lead to financial penalties and reputational loss.
approach and looks to build long-term
These risks are mitigated by the Board’s review of partnerships based on open terms of
quarterly financial information and compliance with the business and fair payment terms.
relevant rules.
Borrowers The Investment Adviser meets with
the management of all companies to
PROMOTING THE SUCCESS OF THE
which the Company lends money
COMPANY
and reports its findings to the Board
Under section 172(1) of the Companies Act 2006
on a quarterly basis.
the Directors have a duty to act in good faith and to
Regulators Compliance with necessary rules and
promote the success of the Company for the benefit
regulations relevant to the Company
of its shareholders as a whole. This includes taking into
is maintained in order to build trust
consideration the likely consequences of their decisions
and a good reputation in the market.
over the long term and on the Company’s stakeholders,
employees and suppliers, while acting fairly between
• Factoring Shareholders and Stakeholders into the
shareholders. The Directors must also consider
Principal Decisions
the impact on the community and its reputation for
maintaining high standards of business conduct. We define principal decisions as both those that are
material to the Company but also those that are
Set out below is an explanation of engagement with
significant to any of our key stakeholders as identified
stakeholders:
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.
16
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LONG TERM VIABILITY STATEMENT

| Principal | Share Buyback Programme |  |
| --- | --- | --- |
| Decision 1 | In November 2023 the Company | In accordance with Provision 36 of the AIC Code |
|  | announced the commencement | the Directors are required to assess the prospects of |

of a share buyback programme to
the Company over a longer period than the twelve
repurchase its Ordinary shares for
months referred to in the going concern guidance and
up to a maximum consideration
statement.
of £500k. The programme was

|  |  |  | designed to address the share price | At the forthcoming AGM shareholders are invited to |
| --- | --- | --- | --- | --- |
|  |  |  | discount. The programme was | vote on the continuation of the Company. The Board |
|  |  |  | extended in December 2023 to | of Directors recommends that shareholders vote |
|  |  |  | repurchase further Ordinary shares | in favour of the resolution. The Board understands |
|  |  |  | up to a maximum consideration of | that the Investment Adviser has taken soundings |
|  |  |  | £500k.The authority expired on 31 | of major shareholders and therefore it has a high |
|  |  |  | December 2023. | degree of confidence that this vote will be passed by |
| Key Service | Key service providers report to | Principal | Dividend Policy | shareholders; however, the vote is outside the control |
| Providers | the Board on a regular basis. The | Decision 2 | Directors continue to pay a consistent | of the Board and thus, in the context of assessing |
|  | Company employs a collaborative |  | and stable income. The dividend | the future prospects of the Company, it represents |
|  | approach and looks to build long-term |  | policy is set out in the Strategic Report | a material uncertainty which (if the vote were to be |
|  | partnerships based on open terms of |  | on pages 12 to 19. | lost) may cast significant doubt upon the ability of the |
|  | business and fair payment terms. |  |  | Company to continue as a going concern. The financial |
|  |  | Principal | Impairments and Uplifts |  |
| Borrowers The Investment Adviser meets with |  |  |  | statements do not include the adjustments that may be |
|  |  | Decision 3 | The Audit Committee reviews the |  |
|  | the management of all companies to |  |  | necessary should a positive vote from the shareholders |

Investment Adviser’s recommendations
which the Company lends money to continue not be received and the Company was not
in relation to impairments and uplifts
and reports its findings to the Board able to continue as a going concern. Notwithstanding
to the Company’s portfolio at both
on a quarterly basis. this, the Board conducted this viability review for a
the interim and year end and makes a
period of three years principally because it believes
Regulators Compliance with necessary rules and recommendation to the Board.
that any investment in the shares of the Company
regulations relevant to the Company
The Board considers and formally agrees
should be made on a medium to long-term basis. The
is maintained in order to build trust
the final level of impairments and uplifts.
Board considers the Company, with no fixed life, to
and a good reputation in the market.
be a long-term investment vehicle. It has decided this
Principal Remuneration
is an appropriate time period over which to report,
Decision 4 During the year the Remuneration
reflecting the long-term objectives of the Company
Committee undertook a review of
and the typical loan term, whilst taking into account the
the level of non-executive Directors’
impact of uncertainties in the markets.
fees. The Remuneration Committee
The Board regularly considers a detailed cash flow
recommended to the Board, and
model which does not indicate any matters which would
the Board agreed, that the Directors’
give rise to any concerns over the Company’s longer
remuneration should remain
term viability. The debt portfolio held by the Company
unchanged for the year ending 30
is however not expected to remain unchanged over
November 2023. Directors’ fees will
the longer term. The Investment Adviser is expected
continue to be reviewed annually.
to provide new loans and receive repayments, in line
Principal Lending Strategy
with the Company’s investment objective and policy
Decision 5 The Board’s focus on the loans
throughout the year. At 30 November 2023 17 loans
provided ensures that the sustainability
had been made with an average value of £1.1m and
of the Company and its ability to pay
average time to loan maturity of 0.9 years. The longer
dividends is not compromised
the time horizon which is considered, the higher the
Continued
17
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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.

18
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

19
# BOARD OF DIRECTORS

![img-0.jpeg](img-0.jpeg)

![img-1.jpeg](img-1.jpeg)

## 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.

## 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.

20
Ian McElroy Douglas Noble
Non-independent Independent non-executive
non-executive director director
Ian is one of the founding shareholders of Tier One Douglas has over 30 years’ private banking experience.
Capital Ltd, establishing the business having spent He is currently a Director of Jigsaw Lending and
many years in the wealth management industry. Ian also holds the position of Consultant with Hallcroft
initially trained and qualified as an investment manager Finance where he is assisting Hallcroft in launching
with Gerrard Stockbrokers before moving into financial their business in Scotland. Previous to this he has held
advice, corporate finance and credit structuring during Senior Executive roles in the Banking Industry including
senior roles with Barclays Wealth, Kleinwort Benson the Scottish Head of Private Banking for Barclays,
and Coutts. Over the last 20 years, Ian has worked Adam & Company and HBOS. He also launched
closely with business owners and company directors, Bank of Scotland’s first ever private banking operation.
senior executives and professionals across many Douglas holds a law degree from Dundee University,

| industries to help structure, preserve and achieve their | as well as achieving the PCIAM and IMC from the CFA. |
| --- | --- |
| financial objectives. Ian is a Chartered Fellow of the | He is a member of the Chartered Institute of Bankers, |
| CISI and a Chartered Wealth Manager. | Scotland and holds Chartered Banker status. |
| Shareholding as at 30 November 2023: 74,005 | Shareholding as at 30 November 2023: 8,600 ordinary |
| ordinary shares (30 November 2022: 74,005). | shares (30 November 2022: 8,600). |
| Date of appointment: 18 April 2018. | Date of appointment: 19 December 2016. |

21
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# DIRECTORS' REPORT

![img-2.jpeg](img-2.jpeg)

Oak Meadows, Middleton St George

The Directors present their Annual Report and Financial Statements of the Company for the year to 30 November 2023.

## 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

22
services for the Company, subject to overall control RESULTS AND DIVIDENDS
and supervision by the Board. TOC is employed
The revenue return for the financial year ended 30
under a contract which can be terminated on 12
November 2023 after taxation amounted to £672,000
months’ notice. If the Company wishes to terminate
(November 2022: £992,000). An interim dividend of
the contract on shorter notice, the balance of
1.0p per Ordinary share was declared and paid on
remuneration is payable by way of compensation.
28 December 2023 and a further interim dividend
TOC is entitled to receive from the Company an has been declared, to be paid to shareholders on the
investment advisory fee which is calculated and paid register at the close of business on 8 March 2024 (ex-
quarterly in arrears at an annual rate of 0.25% per dividend date 7 March 2024). These dividends when
annum of the prevailing Net Asset Value if less than added to the two quarterly interim dividends paid in
£100m, or 0.50% per annum of the prevailing Net 2023, make a total dividend for the year of 4 pence

| Asset Value if £100m or more. | per share (November 2022: 4 pence). |
| --- | --- |
| The Board has reviewed the performance of the | The post balance sheet events of the Company are |
| Investment Adviser and believes that its continued | described in detail in Note 18 on page 63. |

appointment is in the interests of the Company and
shareholders. Such a review is carried out on an FUTURE DEVELOPMENTS
annual basis.
The outlook for the Company is described in the
Chairman’s Statement on pages 4 to 7 and in the
ALTERNATIVE INVESTMENT FUND
Investment Adviser’s Report on pages 8 to 11.
MANAGER’S DIRECTIVE (‘AIFMD’)
The Company is registered with the FCA as a Small USE OF FINANCIAL INSTRUMENTS
Registered Alternative Investment Fund Manager
The Company’s use of financial instruments is disclosed
(‘AIFM’).
in note 16 to the Financial Statements.
The Alternative Investment Managers’ Directive
requires certain disclosures to be made in respect CAPITAL STRUCTURE AND VOTING
of any remuneration policy of the AIFM, leverage, RIGHTS
risk disclosures and pre-investment disclosures. The
Capital Structure and Voting Rights
Board, as AIFM, receives no remuneration in this
As at 30 November 2023 the Company’s share
regard. The Company makes sufficient disclosures in
capital comprised 26,234,225 (November 2022:
relation to gearing and risk within the Annual Report.
26,924,063) Ordinary shares of 1p each. There were
The investment policy and guidelines are set out in this
689,838 (November 2022: nil) Ordinary shares held
Strategic Report on pages 12 to 19. Therefore, no
in Treasury. The Ordinary shares have a premium
further separate disclosures are required.
listing on The London Stock Exchange
INVESTMENT POLICY AND
Voting Rights in the Company’s shares
OBJECTIVE
Details of the voting rights in the Company’s shares as
Details of the Company’s Investment Policy and at the date of this report are given in note (xvi) to the
Objective are set out in the Strategic Report on pages Notice of Meeting on page 68.
12 to 19.
Continued
23
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### 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.

24
## 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

25
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

26
## Statement of
## Corporate Governance
STATEMENT OF CORPORATE and other seminars covering issues and developments
GOVERNANCE relevant to investment trust companies.
Regular reviews of the Directors’ training needs are
The Company is committed to high standards of
carried out by the Chairman by means of the Board
corporate governance. The Board has considered the
and Committee evaluation process.
Principles and Provisions of the AIC Code of Corporate
Governance, published in February 2019 (‘AIC Code’).
Role of the Board
The AIC Code addresses the Principles and Provisions
The basis on which the Company agrees to generate
set out in the UK Corporate Governance Code (the
value over the longer term is set out in its objective
UK Code), as well as setting out additional Provisions
and investment policy as contained within the Strategic
on issues that are of specific relevance to the Company.
Review.
The Board considers that reporting against the
The Company has no executive Directors or
Principles and Provisions of the AIC Code, which has
employees. An Investment Adviser Agreement
been endorsed by the Financial Reporting Council,
between the Company and its Investment Adviser sets
provides more relevant information to shareholders.
out the matters over which the Investment Adviser
The AIC Code is available on the AIC website (www.
has authority and the limits beyond which Board
theaic.co.uk). It includes an explanation of how the
approval must be sought. All other matters, including
AIC Code adapts the Principles and Provisions set out
strategy, investment and dividend policies, gearing and
in the UK Code to make them relevant for investment
corporate governance procedures, are reserved for
companies.
the approval of the Board.
The Company has complied with the Principles and
Tenure and Reappointment of Directors
Provisions of the AIC Code; however, the Board has
elected not to designate a senior independent non- Directors are initially appointed until the following
executive Director as it considers that each Director Annual General Meeting when, under the Articles
has different strengths and qualities on which they may of Association, they are required to be elected by
provide leadership. shareholders.
Although the Articles require that Directors submit
THE BOARD themselves for re-election at least every three years
the Board has resolved to adopt corporate governance
Composition
best practice and all of the Directors are subject to re--
The Board consists of four Directors. Three are
election on an annual basis. In addition, the Board has
independent non-executive Directors, including
agreed that any Director with more than nine years’
the Chairman John Newlands. These Directors
service will be required to stand for re-election at each
are considered by the Board to be independent in
annual general meeting.
character and judgment of the Investment Adviser.
Ian McElroy is considered not to be independent on Board Diversity – Gender and Ethnic Background
the basis of his role at the Investment Adviser. The
In accordance with Listing Rule 9.8.6 R(9) and (11),
independence of the Directors is determined with
the Company is required to include a statement in
reference to the AIC Code and is reviewed annually.
the Annual Report setting out whether it has met the
Biographical details of the Directors and their following targets on board diversity. The reference
experience is disclosed on pages 20 and 21. date for this statement is 30 November 2023, the
Company’s year end:
Induction and Training
1) At least 40% of individuals on its board are women;
On appointment, the Investment Adviser and
Company Secretary provide all Directors with
2) At least one of the senior board positions is held by
induction training. Thereafter, regular briefings
a woman; and
are provided on changes in law and regulatory
3) At least one individual on its board is from a minority
requirements that affect the Company and the
ethnic background.
Directors. Directors are encouraged to attend industry
Continued
27
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The following tables set out the prescribed format for Meetings and Committees
information in accordance with the requirements of The Board delegates certain responsibilities and
LR 9 Annex 2. functions to committees. Directors who are not
members of committees may attend at the invitation
(a) Table for reporting on gender identity or sex
of the Chairman of the relevant committee.
Number
Directors have attended scheduled Board and

| Number |  | Percentage of | of senior |  |
| --- | --- | --- | --- | --- |
|  | of | the Board | positions | Committee meetings during the year ended 30 |
| Board |  |  | on the |  |

November 2023 as follows (with their eligibility to
Members Board
attend the relevant meeting in brackets):
Men 4 100% 2
Women – – – Board AC RC NC MEC
Not specified/prefer not to say – – –
M Harris 4 (4) 3 (3) 1 (1) 1 (1) 1 (1)
(b) Table for reporting on ethnic background
I McElroy 3 (4) – (–) – (1) – (1) – (–)
Number
Number of senior
J Newlands 4 (4) 3 (3) 1 (1) 1 (1) 1 (1)
of positions
Board Percentage of on the
Members the Board Board
D Noble 4 (4) 3 (3) 1 (1) 1 (1) 1 (1)
White British or other White 4 100% 2
(including minority white
In addition to the above, ad-hoc Board and Board
groups)
Committee meetings were held during the year to
Mixed Multiple Ethnic Groups – – –
deal with such matters as the approval of the Annual
Asian/Asian British – – –
and Half Year Reports, the renewal of the Shawbrook
Black/African/Caribbean/Black – – –
British Loan Facility, the commencement of the share buyback
– – – programme, as well as project specific matters.
Other ethnic group, including
Arab
The Board has a schedule of matters reserved to it
Not specified/prefer not to say – – –
for decision and the requirement for Board approval
on these matters is communicated directly to the
The Listing Rules only recognise the roles of Chairman,
Investment Adviser. In addition to the scheduled
Chief Executive (CEO), Senior Independent Director
meetings above, additional meetings were held
and Chief Financial Officer (CFO) as senior board
to consider ad-hoc matters including borrowings,
positions. As an externally managed investment
investment decisions and dividend payments.
company with no executive management the Board
Full and timely information is provided to the Directors
considers that the CEO and CFO positions are not
to enable the Board to function effectively and to
relevant to the Company. The Board does, however,
discharge its responsibilities. The Board also reviews
consider the role of the Chair of the Audit Committee
the financial statements, performance and revenue
to be a senior board position and the above disclosure
is made on this basis. budgets.
The Listing Rules require disclosure of an explanation
AUDIT COMMITTEE
of the Company’s approach to collecting the data used
for the purposes of making the disclosures. The data Matthew Harris is the Chairman of the Company’s
was collated in consultation with the Directors. Audit Committee which comprises the three
independent Directors. Mr Ian McElroy may attend
Further details on Board diversity and the Board’s
Audit Committee meetings by standing invitation.
approach to meeting the diversity targets are set out in
the Strategic Report on page 19. The report of the Audit Committee is set out on pages
30 to 32.
There have been no changes to the Board since 30
November 2023 and the date of approval of this report.
28
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MANAGEMENT ENGAGEMENT Board effectiveness, maximise strengths, ascertain any
training needs and also to identify potential risks and
COMMITTEE
strategic imperatives for the coming year.
John Newlands is the Chairman of the Company’s
Management Engagement Committee which
REMUNERATION COMMITTEE
comprises the three independent Directors. The
Management Engagement Committee reviews the The Board has established a Remuneration Committee
appropriateness of the Investment Adviser’s continuing
comprising all Directors for the purposes of considering
appointment, together with the terms and conditions
the Directors’ remuneration. The committee is chaired
thereof, on a regular basis. The Management
by Douglas Noble and meets at least annually.
Engagement Committee meets at least annually.
The Company’s policy on remuneration is discussed
in the Directors’ Remuneration Report on pages 33
NOMINATION COMMITTEE
to 35.
John Newlands is the Chairman of the Company’s
Nomination Committee which comprises the three
TERMS OF REFERENCE
independent Directors. The Nomination Committee is
responsible for Director appointments and succession The Audit Committee, Nomination Committee,
planning. Remuneration Committee and Management
Engagement Committee all have written terms
The Company’s affairs are overseen by a Board
of reference which define clearly their respective
currently comprising four male non-executive
responsibilities, copies of which are available for
Directors. In terms of progress in achieving diversity,
inspection on the Company’s website at www.
the Company is committed to ensuring that vacancies
DevelopNorth.co.uk and on request at the Company’s
arising are filled by the best qualified candidates and
registered office.
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 RELATIONS WITH SHAREHOLDERS
will be a key consideration.
The Directors place a great deal of importance on
The Directors have a wealth of experience, bringing communication with shareholders. The Annual Report
knowledge of investment markets, business, financial
and Accounts are distributed to other parties who
services, accounting and regulatory expertise to
have an interest in the Company’s performance.
discussions on the Company’s business. The Directors
Shareholders and investors may obtain up to date
regularly consider the leadership needs and specific
information on the Company through the Investment
skills required to achieve the Company’s investment
Adviser’s website. The Company responds to
objective. While appointments are based on skills
questions from shareholders on a wide range of issues.
and experience, the Board is conscious of diversity of
gender, social and ethnic backgrounds, cognitive and A regular dialogue is maintained with the Company’s
personal strengths and experience. All appointments shareholders.
are based on objective criteria and merit, and are made
The Notice of the General Meeting included within
following a formal, rigorous and transparent process.
the Annual Report and Accounts is sent out 20 working
The Board has put in place necessary procedures days in advance of the meeting. The Company
to conduct, on an annual basis, an appraisal of the
Secretary is available to answer general shareholder
Chairman of the Board as well as a performance
queries at any time throughout the year.
evaluation of the Board, the individual Directors
and the Board Committees. This was conducted
through completion of evaluation questionnaires. The
On Behalf of the Board
evaluation includes an assessment of how cohesively
the Board and its committees operate as a whole and in Apex Fund Administration
conjunction with the Company’s key service providers, Services (uk) Limited
as well as the effectiveness of the Chairman. The
25 MARCH 2024
evaluation process is used as a mechanism to improve
29
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## Report of the
## Audit Committee
COMPOSITION OF THE AUDIT • To consider annually whether there is a need
COMMITTEE for the Company to have its own internal audit
function;
An Audit Committee (the ‘Committee’) has been
established with written terms of reference and • To monitor the integrity of the half-yearly and
comprises three non-executive Directors, Matthew annual financial statements of the Company by
Harris (Chairman), Douglas Noble and John Newlands. reviewing, and challenging where necessary, the
The Committee meets on at least two occasions actions and judgments of the Investment Adviser,
each year. In addition the Committee meets with the the Company Secretary and Administrator;
Auditors at least twice a year.
• To meet with the external Auditor to review their
The members of the Committee consider that they proposed audit programme of work and their
have the requisite skills and experience to fulfill the findings following completion of the audit. The
responsibilities of the Committee. As a Chartered Committee also uses this as an opportunity to
Accountant the Committee Chairman has recent and assess the effectiveness of the audit process;
relevant financial experience and the Committee, as a
• To make recommendations in relation to
whole, has competence relevant to the sector.
the appointment of the external Auditor and
to approve the remuneration and terms of
ROLE OF THE AUDIT COMMITTEE engagement of the external Auditor;
A summary of the Committee’s main audit review • To monitor and review annually the external
functions is shown below: Auditor’s independence, objectivity, effectiveness,
resources and qualification; and
• To monitor and review the principles, policies,
and practices adopted in the preparation and ·• To consider and approve all non-audit services.
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;
30
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FINANCIAL STATEMENTS AND standing, skills and experience of the firm and the audit
SIGNIFICANT ACCOUNTING team. The Audit Committee, from direct observation
and enquiry of the Investment Adviser and the
MATTERS
Administrator, remains satisfied that MHA continues to
The Board of Directors is responsible for preparing
provide effective independent challenge in carrying out
the Annual Report and financial statements. The
its responsibilities.
Committee advises the Board on the form and content
The main areas of accounting risk considered by
of the Annual Report and financial statements, any
the Committee during the year in relation to the
issues which may arise and any specific areas which
Company’s financial statements were the valuation
require judgement.
and ownership of investments held by the Company.
The valuation of investments in the form of loans and
The valuation of investments is undertaken in
profit shares, the building projects given as guarantee
accordance with the accounting policies as set out in
for the loans, and the loan recoverability and interest
note 1 to the financial statements. Details of the fair
receipts were areas of focus given their significance to
value hierarchy are set out in note 8.
the financial statements as a whole and these were
specifically reviewed by the Committee. The Committee reviews detailed information on the
loan book and its value on a quarterly basis. A full
Following discussion with the Investment Adviser, the
portfolio analysis is prepared for each Board meeting,
Committee gained comfort over the valuation of the
including a detailed update on development works,
loans as included in the Annual Report and financial
collateral given and loan to value ratios, which is
statements.
reviewed in detail and considered by the Directors.
AUDITOR The Company also receives regular reporting on
internal controls (as detailed below).
As part of its review of the scope and results of the
audit, during the year the Committee considered and
RISK MANAGEMENT AND
approved MHA’s plan for the audit of the financial
INTERNAL CONTROLS
statements for the year ended 30 November 2023.
At the conclusion of the audit MHA did not highlight The Board is ultimately responsible for the Company’s
any issues to the Committee which would cause systems of internal control and for reviewing its
it to qualify its audit report nor did it highlight any effectiveness. Following publication of the Financial
fundamental internal control weaknesses. MHA issued Reporting Council’s Guidance on Risk Management,
an unqualified audit report with a material uncertainty Internal Control and Related Financial and Business
relating to going concern which is included on pages Reporting (the “FRC Guidance”) the Board confirms
37 to 43. that there is an on-going process for identifying,
evaluating and managing the significant risks faced by
Non-audit services
the Company. This process has been in place for the
There were no fees paid to the auditor in respect year under review and up to the date of approval of
of non-audit services during the year ended 30 this Annual Report and is regularly reviewed by the
November 2023 (November 2022: £nil). Board to ensure it accords with the FRC Guidance.
Auditor Independence
The Board has reviewed the effectiveness of the
As part of the review of auditor independence system of internal control. In particular, it has reviewed
and effectiveness, MHA has confirmed that it is and updated the process for identifying and evaluating
independent of the Company and has complied with the significant risks affecting the Company and policies
relevant auditing standards. In evaluating MHA, the by which these risks are managed. The significant risks
Audit Committee has taken into consideration the faced by the Company are as follows:
Continued
31
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- 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

32
# 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

33

| ANNUAL REPORT ON DIRECTORS’ | RELATIVE IMPORTANCE OF |
| --- | --- |
| REMUNERATION | DIRECTORS’ FEES |
| The Directors who served in the year received the | The table below sets out in respect of the financial year |
| below fees: | ended 30 November 2023 and the preceding financial |

year:
2023 2022
a) the remuneration paid to Directors;
John Newlands (Chairman) £29,000 £29,000
b) the distribution made to shareholders by way of
Matthew Harris £28,500 £28,500
dividend; and
Douglas Noble £27,500 £27,500 c) expenses paid by the Company.
Ian McElroy* £nil £nil 2023 2022
£’000 £’000
Total £85,000 £85,000
Total remuneration 85 85
*Ian McElroy is entitled to Directors fees of £27,500 per annum.
He has waived this entitlement in respect of the years ended 30
Dividend 1,077 1,077
November 2023 and 2022.
Expenses 578 615
ANNUAL PERCENTAGE CHANGE
IN DIRECTORS’ REMUNERATION National Insurance Contributions 3 3
The annual percentage change in fees for each
Director who served in the year under review is set
Directors’ fees as a percentage of:
out in the following table:
2023 2022
% %
Dividend 7.9 7.9
Year Year Year Year Year
to to to to to
Nov Nov Nov Nov Nov Expenses 14.7 13.8
2023 2022 2021 2020 2019
% % % % %
John Newlands
DIRECTORS’ INTERESTS
(Chairman) 0 -3.3 0 0 0
................................................................................................ The Directors, including connected parties who held
0
Matthew Harris -5.0 0 0 0 office at the year end and their interests (all beneficial)
................................................................................................
in the Ordinary Shares of the Company were as
0
Douglas Noble -8.3 0 0 0 follows:
................................................................................................
At 30 November At 30 November
Ian McElroy 0 0 0 0 0
2023 2022
................................................................................................
Ordinary shares Ordinary Shares
The Company has no employees.
John Newlands 5,000 5,000
Matthew Harris 60,724 60,724
Ian McElroy 74,005 74,005
Douglas Noble 8,600 8,600
34
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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.

![img-3.jpeg](img-3.jpeg)

## 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

35
# 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

36
## Independent
## Auditor’s Report
Independent Auditor’s Report to the Members of Develop North PLC
For the purpose of this report, the terms “we” and “our” BASIS FOR OPINION
denote MHA in relation to UK legal, professional and
We conducted our audit in accordance with
regulatory responsibilities and reporting obligations to
International Standards on Auditing (UK) (ISAs
the members of Develop North Plc. For the purposes
(UK)) and applicable law. Our responsibilities
of the table on pages 39 to 40 that sets out the key
under those standards are further described in
audit matters and how our audit addressed the key
the Auditor Responsibilities for the Audit of the
audit matters, the terms “we” and “our” refer to MHA. Financial Statements section of our report. We
The “Company” is defined as Develop North PLC. are independent of the Company in accordance
The relevant legislation governing the Company is the with the ethical requirements that are relevant
United Kingdom Companies Act 2006 (“Companies Act to our audit of the financial statements in the UK,
2006”). including the FRC’s Ethical Standard as applied to
listed public interest entities, and we have fulfilled
our ethical responsibilities in accordance with those
OPINION
requirements. We believe that the audit evidence we
We have audited the financial statements of Develop
have obtained is sufficient and appropriate to provide
North PLC for the year ended 30 November 2023.
a basis for our opinion.
The financial statements that we have audited

| comprise: |  | MATERIAL UNCERTAINTY |
| --- | --- | --- |
|  | • the Income Statement | RELATING TO GOING CONCERN |
|  | • the Statement of Financial Position | We draw your attention to the disclosures on going |
|  | • the Statement of Changes in Equity | concern on page 48 of this Annual Report, which |
|  | • the Statement of Cash Flows, and | indicate the requirement as outlined in the Articles of |

Association, for shareholders to approve a resolution
• Notes 1 to 18 of the financial statements,
on the continuation of the Company. This resolution
including the significant accounting policies.
is being proposed at the forthcoming AGM and, while
The financial reporting framework that has been
the Board has a high degree of confidence that this
applied in the preparation of the Company’s financial
vote will be approved by shareholders, the vote
statements is applicable law and UK adopted
represents a material uncertainty that may cause
International Financial Reporting Standards (“UK
doubt over the Company’s ability to continue as a
Adopted IFRS”).
going concern. Our opinion is not modified in respect
In our opinion the financial statements of this matter.
• give a true and fair view of the state of the In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis
Company’s affairs as at 30 November 2023
of accounting in the preparation of the financial
and of the Company’s profit for the year then
statements is appropriate.
ended;
Our evaluation of the Directors’ assessment of the
• have been properly prepared in accordance
entity’s ability to continue to adopt the going concern
with UK adopted International Financial
basis of accounting included:
Reporting Standards (“UK Adopted IFRS”); and
• The consideration of inherent risks to the
• have been prepared in accordance with the
Company’s operations and specifically its
requirements of the Companies Act 2006.
business model.
Our opinion is consistent with our reporting to the • The evaluation of how those risks might impact
Audit Committee. on the Company’s available financial resources.
Continued
37
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- 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.

# OVERVIEW OF OUR AUDIT APPROACH

|  Materiality | 2023 | 2022  |
| --- | --- | --- |
|  Company | £209k | £261k 1% of gross assets (2022: 1% of gross assets)  |
|  **Key Audit Matters** | Recurring • Valuation of Loan Portfolio  |   |
|  **Scope** | 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.  |   |

# 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.

38
VALUATION OF LOAN PORTFOLIO
Key audit matter description 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.
How the scope of our audit responded We have reviewed Management’s assessment of the classification
to the key audit matter 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.
Continued
39
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|  **How the scope of our audit responded to the key audit matter** | 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.  |
| --- | --- |
|  **Key Observations** | From the audit procedures completed, we are satisfied that valuation of the loan portfolio is reasonable and recognised in accordance with IFRS 9.  |

## 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

40
directors are responsible for the other information Based on the work undertaken as part of our audit, we
contained within the annual report. Our opinion on have concluded that each of the following elements
the financial statements does not cover the other of the Corporate Governance Statement is materially
information and, except to the extent otherwise consistent with the financial statements and our
explicitly stated in our report, we do not express knowledge obtained during the audit:
any form of assurance conclusion thereon. Our • Directors’ statement with regards the
responsibility is to read the other information and, in appropriateness of adopting the going concern
doing so, consider whether the other information is basis of accounting and any material uncertainties
materially inconsistent with the financial statements or identified as seen on page 25;
our knowledge obtained in the course of the audit,
• Directors’ explanation as to its assessment of the
or otherwise appears to be materially misstated. If
group’s prospects, the period this assessment
we identify such material inconsistencies or apparent
covers and why the period is appropriate as seen
material misstatements, we are required to determine
on page 17;
whether this gives rise to a material misstatement in
• Director’s statement on whether it has a
the financial statements themselves. If, based on the
reasonable expectation that the group will be
work we have performed, we conclude that there is
able to continue in operation and meets its
a material misstatement of this other information, we
liabilities as seen on page 18;
are required to report that fact.
• Directors’ statement on fair, balanced and
We have nothing to report in this regard. understandable as seen on page 36;
• Board’s confirmation that it has carried out a
STRATEGIC REPORT AND
robust assessment of the emerging and principal
DIRECTORS’ REPORT
risks as seen on page15;
In our opinion, based on the work undertaken in the
• Section of the annual report that describes the
course of the audit:
review of effectiveness of risk management and
• the information given in the strategic report and
internal control systems as seen on pages 31 and
the directors’ report for the financial year for
32; and
which the financial statements are prepared is
• Section describing the work of the audit
consistent with the financial statements; and
committee as seen on page 30.
• the strategic report and the directors’ report have
been prepared in accordance with applicable MATTERS ON WHICH WE ARE
legal requirements. REQUIRED TO REPORT BY
In the light of the knowledge and understanding of the EXCEPTION
Company and its environment obtained in the course of
We have nothing to report in respect of the following
the audit, we have not identified material misstatements
matters in relation to which the Companies Act 2006
in the strategic report or the directors’ report.
requires us to report to you if, in our opinion:
DIRECTORS’ REMUNERATION • adequate accounting records have not been
REPORT kept, or returns adequate for our audit have not
been received by branches not visited by us; or
Those aspects of the director’s remuneration report
• the financial statements are not in agreement
which are required to be audited have been prepared
with the accounting records and returns; or
in accordance with applicable legal requirements.
• certain disclosures of directors’ remuneration
CORPORATE GOVERNANCE specified by law are not made; or
REPORT • the part of the directors’ remuneration report
to be audited is not in agreement with the
We have reviewed the directors’ statement in relation
accounting records and returns; or
to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to • we have not received all the information and
the entity’s compliance with the provisions of the UK explanations we require for our audit; or
Corporate Governance Code specified for our review • a corporate governance statement has not been
by the Listing Rules. prepared by the Company.
Continued
41
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RESPONSIBILITIES OF DIRECTORS reasonable assurance that the financial statements
were free from fraud or error. The risk of not detecting
As explained more fully in the directors’ responsibilities
a material misstatement due to fraud is higher than
statement, the directors are responsible for the
the risk of not detecting one resulting from error
preparation of the financial statements and for being
and detecting irregularities that result from fraud is
satisfied that they give a true and fair view, and for such
inherently more difficult than detecting those that result
internal control as the directors determine is necessary
from error, as fraud may involve collusion, deliberate
to enable the preparation of financial statements that are
concealment, forgery or intentional misrepresentations.
free from material misstatement, whether due to fraud
Also, the further removed non-compliance with laws
or error.
and regulations is from events and transactions reflected
In preparing the financial statements, the directors
in the financial statements, the less likely we would
are responsible for assessing the Company’s ability to
become aware of it.
continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
IDENTIFYING AND ASSESSING
concern basis of accounting unless the directors either
POTENTIAL RISKS ARISING FROM
intend to liquidate the Company or to cease operations,
IRREGULARITIES, INCLUDING
or have no realistic alternative but to do so.
FRAUD
AUDITOR’S RESPONSIBILITIES FOR The extent of the procedures undertaken to identify
THE AUDIT OF THE FINANCIAL and assess the risks of material misstatement in respect
STATEMENTS of irregularities, including fraud, included the following:
Our objectives are to obtain reasonable assurance • We considered the nature of the industry and
about whether the financial statements as a whole sector the control environment, business
are free from material misstatement, whether due to performance including remuneration policies
fraud or error, and to issue an auditor’s report that and the Company’s own risk assessment that
includes our opinion. Reasonable assurance is a high irregularities might occur as a result of fraud or
level of assurance but is not a guarantee that an audit error. From our sector experience and through
conducted in accordance with ISAs (UK) will always discussion with the directors, we obtained
detect a material misstatement when it exists. an understanding of the legal and regulatory
frameworks applicable to the Company focusing
Misstatements can arise from fraud or error and are
on laws and regulations that could reasonably be
considered material if, individually or in aggregate,
expected to have a direct material effect on the
they could reasonably be expected to influence the
financial statements, such as provisions of the
economic decisions of users taken on the basis of these
Companies Act 2006, UK tax legislation or those
financial statements.
that had a fundamental effect on the operations
A further description of our responsibilities for the of the Company.
financial statements is located on the FRC’s website
• We enquired of the directors and management
at: www.frc.org.uk/auditorsresponsibilities. This concerning the Company’s policies and
description forms part of our auditor’s report. procedures relating to:
- identifying, evaluating and complying with the
EXTENT TO WHICH THE AUDIT
laws and regulations and whether they were
WAS CONSIDERED CAPABLE OF
aware of any instances of non-compliance;
DETECTING IRREGULARITIES,
- detecting and responding to the risks of fraud
INCLUDING FRAUD
and whether they had any knowledge of actual
Irregularities, including fraud, are instances of non- or suspected fraud; and
compliance with laws and regulations. We design
- the internal controls established to mitigate risks
procedures in line with our responsibilities, outlined
related to fraud or non-compliance with laws
above, to detect material misstatements in respect of
and regulations.
irregularities, including fraud.
• We assessed the susceptibility of the Company’s
These audit procedures were designed to provide
financial statements to material misstatement,
42
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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)

43
## Income Statement

|  |  |  | Year ending |  |  |  |  | Year ending |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | 30 November 2023 |  |  |  |  | 30 November 2022 |  |  |  |
|  | Revenue |  |  | Capital | Total | Revenue |  |  | Capital | Total |
| Notes |  | £’000 |  | £’000 | £’000 |  | £’000 |  | £’000 | £’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
4,8 (201) (2) (203) (36) (342) (378)
value through profit or loss
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
4,9 (116) (441) (557) (12) (136) (148)
at amortised cost
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
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.
44
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## Statement of
## Financial Position

|  | As at 30 |  |  | As at 30 |  |
| --- | --- | --- | --- | --- | --- |
| November |  |  | November |  |  |
|  |  | 2023 |  |  | 2022 |

Notes £’000 £’000
Non-current assets
6,208 12,659
Loans at amortised cost 9
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
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
45
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# STATEMENT OF CHANGES IN EQUITY

For the year ending 30 November 2023

|   | Share capital £'000 | Share premium £'000 | Special distributable reserve £'000 | Capital reserve £'000 | Revenue reserve £'000 | Total £'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**  |

For the year ending 30 November 2022

|   | Share capital £'000 | Share premium £'000 | Special distributable reserve £'000 | Capital reserve £'000 | Revenue reserve £'000 | Total £'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**  |

46
## Cash Flow Statement

|  | Year ending |  |  | Year ending |  |
| --- | --- | --- | --- | --- | --- |
| 30 November |  |  | 30 November |  |  |
|  |  | 2023 |  |  | 2022 |

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) –
Interest expense 155 132
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
998 718
taxation
Investing activities
Loans given (3,369) (10,986)
Loans repaid 8,620 3,570
Net cash inflow/(outflow) from investing
5,251 (7,416)
activities
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
47
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# NOTES TO THE FINANCIAL STATEMENTS

![img-4.jpeg](img-4.jpeg)

## 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 | 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.

48
INTEREST INCOME Current tax is the expected tax payable on the taxable
income for the period, using tax rates and laws enacted
For financial instruments measured at amortised cost, the
effective interest rate method is used to measure the carrying or substantively enacted at the reporting date.
value of a financial asset or liability and to allocate associated Deferred income taxes are calculated using rates and
interest income or expense over the relevant period. The laws that are enacted or substantivity are expected to
effective interest rate is the rate that discounts estimated
apply as or when the associated temporary differences
future cash payments or receipts over the expected life of
reverse. Deferred income tax is provided using the
the financial instrument or, when appropriate, a shorter
liability method on all temporary differences at the
period, to the net carrying amount of the financial asset or
reporting date between the tax bases of assets and
financial liability. In calculating the effective interest rate, the
liabilities and their carrying amounts for financial
cash flows are estimated considering all contractual terms
reporting purposes. Deferred income tax assets are
of the financial instrument but does not consider expected
recognised only to the extent that it is probable that
credit losses. The calculation includes all fees received and
taxable profit will be available against which deductible
paid and costs borne that are an integral part of the effective
temporary differences, carried forward tax credits or
interest rate.
tax losses can be utilised. The amount of deferred tax
On an ongoing basis the Investment Adviser assesses
provided is based on the expected manner of realisation
whether there is evidence that a financial asset is impaired.
or settlement of the carrying amount of assets and
The basis of calculating interest income on the three stages
liabilities. Deferred income is recognised in profit or
of impairment (detailed below) are as follows:
loss unless it relates to a transaction recorded in other
Stage 1 Interest is calculated on the gross outstanding
comprehensive income or equity, in which case it is
principal
also recognised in other comprehensive income or
Stage 2 Interest is calculated on the gross outstanding
directly in equity respectively.
principal
FINANCIAL ASSETS AND FINANCIAL
Stage 3 Interest is calculated on the principal amount less
LIABILITIES
impairment
The financial assets and financial liabilities are classified at
EXPENSES
inception into the following categories:
Expenses are accounted for on an accruals basis. The
Amortised cost:
Company’s administration fees, finance costs and all other
Financial assets that are held for collection of contractual
expenses are charged through the Income Statement
cash flows where those cash flows represent SPPI
and are charged to revenue. Fees incurred in relation
(‘solely payment of principal and interest’) and that
to operational costs of the loan portfolio, such as legal
are not designated at fair value through profit and loss
fees, are charged through the Income Statement and are
are measured at amortised cost. At initial recognition,
charged to capital.
these assets are recognised as the amounts advanced
DIVIDENDS TO SHAREHOLDERS to customers on the trade date. Financial assets are
derecognised when the rights to receive cashflows from
Interim dividends declared during the year are recognised
the financial assets no longer exists. The carrying amount
when they are paid. Any final dividends declared are
of these assets is adjusted by any expected credit loss
recognised when they are approved by the Shareholders
allowance as described in the impairment note below.
at the Annual General Meeting.
Interest income from these financial assets is included
TAXATION in investment interest using the effective interest rate
method. Any gain or loss on derecognition is recognised
Taxation on the profit or loss for the period comprises
directly in the Income Statement. Impairment losses are
current and deferred tax. Taxation is recognised in
presented as separate line item in the Income Statement.
profit or loss except to the extent that it relates to items
recognised in other comprehensive income or directly The Company’s cash and cash equivalents, other
in equity, in which case it is also recognised in other receivables, other payables and accruals, and the
comprehensive income or directly in equity respectively. Company’s loan facility are included within this category.
Continued
49
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Fair value through profit and loss: models consider the structure, collateral, seniority of the
The Company has a number of borrower facilities in which claim, and recovery costs of any collateral that is integral
it received a minority equity stake or exit fee mechanism to the financial asset. LTV ratios are a key parameter in
in conjunction with providing those loan facilities. These determining LGD. LGD estimates are recalibrated for
loans are recognised at fair value through profit and different economic scenarios and, for lending collateralised
loss. At initial recognition, these assets are recognised as by property, to reflect possible changes in property prices.
the amounts advanced to customers on the trade date. EAD represents the expected exposure in the event of a
Financial assets are derecognised when the rights to default. The Company derives the EAD from the current
receive cashflows from the financial assets no longer exists. exposure to the borrower. The EAD of a financial asset
The fair value of the contracts is monitored and reviewed is its gross carrying amount at the time of default. EAD
quarterly using discounted cash flow forecasts based on for residential facilities has been further broken down into
the estimated cash flows that will flow through from the two scenarios; where the build is complete, and where
underlying development project. Interest income from construction is ongoing.
these financial assets is included in investment interest
A financial asset is credit-impaired when one or more
using the effective interest rate method. Any gain or loss
events that have occurred have a significant impact on the
on derecognition is recognised directly in the Income
expected future cash flows of the financial asset. It includes
Statement. Impairment losses are presented as separate
observable data that has come to our attention regarding
line item in the Income Statement. A sensitivity analysis is
one or more of the following events:
included in note 16.
• delinquency in contractual payments of principal
Any values attributed to the equity stakes of these
and interest;
borrowers are incorporated into the overall loan valuation.
• cash flow difficulties experienced by the borrower;
Exit fees:
• initiation of bankruptcy proceedings;
Some of the financial assets measured at amortised costs
• the borrower being granted a concession that
have an exit fee. There are two types of exit fees; those
would otherwise not be considered;
recognised at the end of the term of the financial asset
• observable data indicating that there is a measurable
once it has been repaid, and those recognised during
decrease in the estimated future cash flows from
the term of the financial instrument where here they are
a portfolio of assets since the initial recognition of
linked to specific events such as plot sales.
those assets, although the decrease cannot yet be
IMPAIRMENT identified with the individual financial assets in the
portfolio; and
At initial recognition, an impairment allowance is required
for expected credit losses (‘ECL’) resulting from possible • a significant decrease in assets values held as
default events within the next 12 months. When an security.
event occurs that increases the credit risk, an allowance
Impairment of financial assets is recognised on a loan-by-
is required for ECL for possible defaults over the term of
loan basis in stages:
the financial instrument.
• Stage 1: A general impairment covering what may
The key inputs into the measurement of ECL are
happen within the next 12 months, based on the
probability of default (‘PD’), loss given default (‘LGD’),
adoption of BIS standards as outlined below.
and exposure at default (‘EAD’). These inputs are then
• Stage 2: Significant increase in credit risk, where the
considered and applied against residential and commercial
borrower is in default, potentially in arrears, where
facilities in the loan book. ECL are calculated by multiplying
full repayment is expected and the underlying
the PD by LGD and EAD.
asset value remains robust. The ECL calculation
PD has been determined by considering the local market
recognises the lifetime of the loan.
where the underlying assets are situated, economic
• Stage 3: Credit impaired, where the borrower
indicators including inflationary pressures on build costs,
is in default of their loan contract, in arrears, full
government policy, and market sentiment. For residential
loan repayment is uncertain and there is a shortfall
loans this has been further broken down into two
in underlying asset value. The ECL calculation
scenarios; where only sales risk is still present, and where
recognises likely failure of the borrower.
both construction risk and sales risk still exist. LGD is the
magnitude of the likely loss if there is a default. The LGD As at 30 November 2023, there were eighteen loans in
50
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the portfolio. Four of those projects supported included OTHER RECEIVABLES
either an equity stake of at least 25.1% for the Company
Other receivables do not carry interest and are short-
or an exit fee mechanism. Please see note 8 for details on
term in nature. There were no irrecoverable amounts
these four projects.
accounted for at the year end or the prior period end.
The Board has deemed that six projects (November
RESERVES
2022: five); are currently impaired and specific additional
provisions have been made against these facilities in these SHARE PREMIUM
financial statements. The surplus of net proceeds received from the issuance
of new shares over their par value is credited to this
The other twelve loans have been assessed as not
account and the related issue costs are deducted from
impaired.
this account.
The Company’s response to IFRS 9 requirements has
been based on the Bank for International Settlements
CAPITAL RESERVE
(‘BIS’) Basel Supervisory Committee liquidity risk tool
The following are accounted for in the capital reserve:
recommendations.
• Capital charges;
FAIR VALUE HIERARCHY • Increases and decreases in the fair value of and
Accounting standards recognise a hierarchy of fair value impairments of loan capital held at the year end
measurements for financial instruments which gives the As at year end the Capital Reserve comprises both
highest priority to unadjusted quoted prices in active realised and unrealised gains and losses and so does not
markets for identical assets or liabilities (Level 1) and the contain distributable reserves.
lowest priority to unobservable inputs (Level 3). The
classification of financial instruments depends on the REVENUE RESERVE
lowest significant applicable input, as follows:
The net profit/(loss) arising in the revenue column of
• Level 1 – Unadjusted, fully accessible and current the Income Statement is added to or deducted from this
quoted prices in active markets for identical assets reserve which is available for paying dividends.
or liabilities. Examples of such instruments would
be investments listed or quoted on any recognised SPECIAL DISTRIBUTABLE RESERVE
stock exchange.
Created from the Court of Session cancellation of the
• Level 2 – Quoted prices for similar assets or initial launch share premium account and is available
liabilities, or other directly or indirectly observable for paying dividends and the repurchase of shares. The
inputs which exist for the duration of the period of Special distributable reserve is used to prevent the
investment. Examples of such instruments would
Revenue reserve going into a negative position when
be forward exchange contracts and certain other
paying distributions.
derivative instruments.
• Level 3 – External inputs are unobservable. Value is REPURCHASE OF SHARES TO HOLD
the Directors’ best estimate, based on advice from IN TREASURY
relevant knowledgeable experts, use of recognised
The cost of repurchasing ordinary shares to hold in Treasury
valuation techniques and on assumptions as to
is charged to the Special distributable reserve and the
what inputs other market participants would apply
related stamp duty and transaction cost is charged to the
in pricing the same or similar instrument.
‘capital reserve’ and dealt with in the Statement of Changes
All loans are considered Level 3. in Equity. Share repurchase transactions are accounted for
on a trade date basis.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in hand and
SEGMENTAL REPORTING
short-term deposits in banks with an original maturity of
The Chief Operating Decision Maker is the Board of
three months or less from inception.
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
51
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assets comprising loans. All loan income is derived from the CRITICAL JUDGEMENTS AND
UK. The Company derived revenue totalling £714,000 ESTIMATES IN APPLYING THE
(November 2022: £978,000) where the amounts from COMPANY’S ACCOUNTING
two (November 2022: four) individual borrowers each POLICIES – LOANS AMORTISED
exceeded 10% or more of the Company’s revenue. COST CLASSIFICATION AND
The individual amounts were £354,000 and £360,000,
IMPAIRMENTS:
(November 2022: £282,000, £256,000, £243,000 and
The Company uses critical judgements to determine
£196,000).
whether it accounts for its loans at either amortised cost
using the effective interest rate method less impairment
USE OF SIGNIFICANT ACCOUNTING
provisions or at fair value through profit and loss. The
JUDGEMENTS, ESTIMATES AND
determination of the required impairment adjustment
ASSUMPTIONS
requires the use of estimates. The key uncertainties are
The preparation of financial statements requires
around the timings and amounts of both drawdown and
management to make estimates and assumptions that
repayments as these are determined by construction
affect the amounts reported for assets and liabilities as
progress and the timing of sales. See notes 8 and 9 on
at the reporting date and the amounts reported for
pages 54 and 55 for further details.
revenue and expenses during the year. The nature of the
estimation means that actual outcomes could differ from
2. REVENUE
those estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting

| estimates are recognised in the period in which the | 30 November |  | 30 November |  |
| --- | --- | --- | --- | --- |
| estimates are revised and in any future periods affected. |  | 2023 |  | 2022 |
| The key driver to determine whether loans are classified |  | £’000 |  | £’000 |

as fair value through profit or loss or amortised cost is if
Interest from
1,722 1,787
the facility has an exit fee or equity stake attached. Where
loans
these are present the loan is classified as fair value through
Total income 1,722 1,787
profit or loss.
The following are areas of particular significance to the
Company’s financial statements and include the use of
3. INVESTMENT ADVISER’S FEES
estimates or the application of judgement:
CRITICAL JUDGEMENTS AND
INVESTMENT ADVISER
ESTIMATES IN APPLYING THE
In its role as the Investment Adviser, Tier One Capital Ltd
COMPANY’S ACCOUNTING POLICIES
is entitled to receive from the Company an investment
– INVESTMENTS AT FAIR VALUE
adviser fee which is calculated and paid quarterly in
THROUGH PROFIT OR LOSS:
arrears at an annual rate of 0.25% per annum of the
The Company owns profit share holdings or has exit fees prevailing Net Asset Value if less than £100m; or 0.50%.
mechanism in relation to 6 of the borrowers in place as at per annum of the prevailing Net Asset Value if £100m or
the year end. The loans held have been designated at fair more.
value through profit and loss. The determination of the fair
There is no balance accrued for the Investment Adviser
value requires the use of estimates. A sensitivity analysis is
for the period ended 30 November 2023 (year to 30
included in note 16. The key uncertainties are around the
November 2022: £nil).
timings and amounts of both drawdown and repayments
as these are determined by construction progress and the There are no performance fees payable.
timing of sales.

| 30 November |  | 30 November |  |
| --- | --- | --- | --- |
|  | 2023 |  | 2022 |
|  | £’000 |  | £’000 |

Investment
65 67
Adviser fee
52
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4. OPERATING EXPENSES
30 November 2023 30 November 2022
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
*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.
5. TAXATION
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.

|  | 30 November 2023 |  |  | 30 November 2022 |  |
| --- | --- | --- | --- | --- | --- |
|  |  | £’000 |  |  | £’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 – –
* 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.
Continued
53
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30 November 2023 30 November 2022
6. ORDINARY DIVIDENDS
Pence per Pence per
share £’000 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.
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.

| 30 November |  | 30 November |  |
| --- | --- | --- | --- |
|  | 2023 |  | 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
(203) (378)
or loss
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
3,024 4,874
loss due for repayment under one year
Please refer to note 16 for details of the approach to valuation and sensitivity analysis.
54
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9. LOANS AT AMORTISED COST

| 30 November |  | 30 November |  |
| --- | --- | --- | --- |
|  | 2023 |  | 2022 |
|  | £’000 |  | £’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 6,283 12,659
after one year
Current assets: Loans at amortised cost due for repayment 10,421 7,948
under one year
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.
Movements in allowances for impairment losses in the year
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.
Continued
55
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10. RECEIVABLES

| 30 November |  | 30 November |  |
| --- | --- | --- | --- |
|  | 2023 |  | 2022 |
|  | £’000 |  | £’000 |

Prepayments 13 11
Total receivables 13 11
11. LOAN FACILITY

| 30 November |  | 30 November |  |
| --- | --- | --- | --- |
|  | 2023 |  | 2022 |
|  | £’000 |  | £’000 |

Bank loan – 4,000
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.
56
222524 Develop North AR23 V17.indd 56222524 Develop North AR23 V17.indd 56 25/03/2024 18:0725/03/2024 18:07
12. OTHER PAYABLES

| 30 November |  | 30 November |  |
| --- | --- | --- | --- |
|  | 2023 |  | 2022 |
|  | £’000 |  | £’000 |

Accruals 191 109
Total other payables 191 109
13. SHARE CAPITAL
2023 2022
Allotted, issued and fully paid: £’000 £’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
7 –
Treasury
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.
14. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING
ACTIVITIES

| At 30 November |  | Cash | Non-cash |  | At 30 November |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | flows |  | flows |  | 2023 |
|  | £’000 | £’000 |  | £’000 |  | £’000 |

Short term borrowings 4,000 (4,000) – –
Total liabilities from financing activities 4,000 (4,000) – –

| At 30 November |  | Cash | Non-cash |  | At 30 November |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2021 | flows |  | flows |  | 2022 |
|  | £’000 | £’000 |  | £’000 |  | £’000 |

Short term borrowings – 4,000 – 4,000
Total liabilities from financing activities – 4,000 – 4,000
Continued
57
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## 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).

58
## 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

59
#### 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 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**  |

#### 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**  |

60
Financial liabilities as at 30 November 2023
In two or more
In one year years Total
£’000 £’000 £’000
Bank loan – – –
Total – – –
Financial liabilities as at 30 November 2022
In two or more
In one year years Total
£’000 £’000 £’000
Bank loan 4,000 – 4,000
Total 4,000 – 4,000
INTEREST RATE RISK
The interest rate profile of the Company was as follows:
as at 30 November 2023

|  | Financial net assets |  |  |  |  |  |  | Variable rate |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | on which no |  |  |  | Fixed rate |  | financial net |  |  |
|  |  | interest is paid |  |  | Financial Assets |  |  |  | assets | Total |
|  |  |  | £’000 |  |  |  | £’000 |  | £’000 | £’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
– 2,588 – 2,588
profit and loss
Loans at amortised cost – 16,374 – 16,374
Total
588 18,962 1,154 20,704
as at 30 November 2022

|  | Financial net assets |  |  |  |  |  |  | Variable rate |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | on which no |  |  |  | Fixed rate |  | financial net |  |  |
|  |  | interest is paid |  |  | Financial Assets |  |  |  | assets | Total |
|  |  |  | £’000 |  |  |  | £’000 |  | £’000 | £’000 |
| Other receivables and prepayments |  |  |  | 11 – – 11 |  |  |  |  |  |  |

976 – – 976
Loan Interest receivable
(109) – – (109)
Other payables and accrued expenses
– – 638 638
Cash and cash equivalents
– – (4,000) (4,000)
Loan facility
Investments held at fair value through
– 4,329 – 4,329
profit and loss
– 20,176 – 20,176
Loans at amortised cost
Total 878 24,505 (3,362) 22,021
Continued
61
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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.

62
30 November 2023
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Investments held at fair value through profit
– – 3,024 3,024
and loss
Total – – 3,024 3,024
30 November 2022
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Investments held at fair value through profit
– – 4,874 4,874
and loss
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

| 17. CAPITAL MANAGEMENT | 18. POST BALANCE SHEET EVENTS |  |
| --- | --- | --- |
| The Company’s capital is represented by the Ordinary | • | Since the year end £1,475,000 has been drawn down on |
| Shares, share premium, capital reserves, revenue reserve |  | the Shawbrook loan facility |

and special distributable reserve. The Company is not
• on 23 November 2023, a third interim dividend of 1.00
subject to any externally imposed capital requirements.
pence per share was declared, payable on 28 December
2023
The capital of the Company is managed in accordance
with its investment policy, in pursuit of its investment • on 8 December 2023, the Company bought back a
objective. Capital management activities may include the further 436,532 shares into Treasury
allotment of new shares, the buy back or re-issuance of • on 13 December 2023, the Company bought back a
shares from treasury, the management of the Company’s further 20,834 shares into Treasury
discount to net asset value and consideration of the
• on 18 December 2023, the Company bought back a
Company’s net gearing level.
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
63
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# 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

64
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

65
## Notes
These notes should be read in conjunction with the the Form of Proxy, together with the power of
notes on the Form of Proxy. attorney or other authority (if any) under which
it is signed or a notarially certified or office copy
Only shareholders on the Register of Members (the
of the same, must be completed and returned
“Register”) at close of business on 23 April 2024 are
in accordance with the instructions printed
entitled to vote at the AGM in respect of the number
thereon to Computershare Investor Services
of Ordinary Shares registered in their name at such
PLC at The Pavilions, Bridgwater Road, Bristol
time. In the event of any adjournment of the AGM,
BS99 6ZY to be received as soon as possible
the time by which a person must be entered on the
and in any event by not later than 12 noon on
Register in order to have the right to attend and vote
23 April 2024. You can only appoint a proxy
at the adjourned AGM is the close of business 48
using the procedures set out in these notes and
hours (excluding non-business days) before the time
the notes to the Form of Proxy.
of the adjourned meeting. Such shareholders can vote
in respect of the number of shares registered in their (iii) Completion of the Form of Proxy will not
names at that time, but any subsequent changes to the prevent you from attending and voting in
Register shall be disregarded in determining rights to person.
attend and vote
(iv) Any person receiving a copy of this notice as

| (i) A member entitled to attend and vote at the |  | a person nominated by a member to enjoy |
| --- | --- | --- |
|  | AGM is entitled to appoint one or more proxies | information rights under section 146 of the Act |
|  | to exercise all or any of the rights of the member | (a “Nominated Person”) should note that the |
|  | to attend and speak and vote in his place. A | provisions in note (ii) above concerning the |
|  | proxy need not be a member of the Company. | appointment of a proxy or proxies to attend |

the AGM in place of a member, do not apply
If a member appoints more than one proxy to attend
to a Nominated Person as only shareholders
the AGM, each proxy must be appointed to exercise
have the right to appoint a proxy. However,
the rights attached to a different share or shares held
a Nominated Person may have a right under
by the member.
an agreement between the Nominated
(ii) To appoint a proxy you may use the Form of Person and the member by whom he or she
Proxy enclosed with this notice. To be valid, was nominated to be appointed, or to have
66
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| someone else appointed, as a proxy for the | message transmitted. To appoint one or more |
| --- | --- |
| AGM. If a Nominated Person has no such proxy | proxies or to give an instruction to a proxy |
| appointment right or does not wish to exercise | (whether previously appointed or otherwise) |
| it, he/she may have a right under such an | via the CREST system, CREST messages |
| agreement to give instructions to the member | must be received by Computershare Investor |
| as to the exercise of voting rights at the AGM. | Services PLC (ID number 3RA50) not later |

than 48 hours before the time appointed for
(v) Nominated Persons should also remember
holding the AGM excluding non-business days.
that their main point of contact in terms of
For this purpose, the time of receipt will be
their investment in the Company remains
taken to be the time (as determined by the
the member who nominated the Nominated
timestamp generated by the CREST system)
Person to enjoy information rights (or perhaps

| the custodian or broker who administers the | from which Computershare Investor Services |
| --- | --- |
| investment on their behalf). Nominated Persons | PLC is able to retrieve the message. CREST |
| should continue to contact that member, | personal members or other CREST sponsored |
| custodian or broker (and not the Company) | members should contact their CREST sponsor |
| regarding any changes or queries relating | for assistance with appointing proxies via CREST. |
| to the Nominated Person’s personal details | For further information on CREST procedures, |
| and interest in the Company (including any | limitations and system timings please refer to |
| administrative matter). The only exception to | the CREST Manual. The Company may treat |
| this is where the Company expressly requests a | as invalid a proxy appointment sent by CREST |
| response from a Nominated Person. | in the circumstances set out in regulation 35(5) |

(a) of the Uncertificated Securities Regulations
(vi) In the case of joint holders, the vote of the senior
2001.
holder who tenders a vote whether in person
or by proxy shall be accepted to the exclusion of (ix) Any corporation which is a member may appoint
the votes of the other joint holders and, for this one or more corporate representative(s) who
purpose, seniority shall be determined by the may exercise on its behalf all of its powers as a
order in which the names stand in the register member provided that, if it is appointing more
of members of the Company in respect of the than one corporate representative, it does
relevant joint holding. not do so in relation to the same shares. It is,
therefore, no longer necessary to nominate
(vii) Shareholders who hold their Ordinary Shares
a designated corporate representative.
electronically may submit their votes through
Representatives should bring to the AGM
CREST, by submitting the appropriate and
authenticated CREST message so as to be evidence of their appointment, including any
received by the Company’s registrar not later authority under which it is signed.
than 48 hours before the start of the meeting.
(x) If the Chairman, as a result of any proxy
Instructions on how to vote through CREST can
appointments, is given discretion as to how the
be found by accessing the following website:
votes of those proxies are cast and the voting
www.euroclear.com/CREST. Shareholders are
rights in respect of those discretionary proxies,
advised that CREST is the only method by
when added to the interests in the Company’s
which completed proxies can be submitted
securities already held by the Chairman, result
electronically.
in the Chairman holding such number of voting
(viii) If you are a CREST system user (including a rights that he has a notifiable obligation under
CREST personal member) you can appoint the Disclosure Guidelines and Transparency
one or more proxies or give an instruction Rules, the Chairman will make the necessary
to a proxy by having an appropriate CREST notifications to the Company and the Financial
Continued
67
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Conduct Authority. As a result, any member form or in electronic form; (b) either set out
holding 3 per cent or more of the voting rights the statement in full or, if supporting a statement
in the Company who grants the Chairman a sent by another shareholder, clearly identify the
discretionary proxy in respect of some or all of statement which is being supported; (c) must be
those voting rights and so would otherwise have authenticated by the person or persons making
a notification obligation under the Disclosure it; and (d) be received by the Company at least
Guidelines and Transparency Rules, need not one week before the AGM.
make a separate notification to the Company
(xiii) In order to be able to exercise the shareholders’
and the Financial Conduct Authority
right to require the Company to publish audit

| (xi) Any question relevant to the business of the |  | concerns in accordance with note (xii) above, |
| --- | --- | --- |
|  | AGM may be asked at the AGM by anyone | the relevant request must be made by: (i) a |
|  | permitted to speak at the AGM. A holder of | shareholder or shareholders having a right to |
|  | shares may alternatively submit a question | vote at the AGM and holding at least 5 per cent. |
|  | in advance by a letter addressed to the | of total voting rights in the Company (please |
|  | Company’s registered office. Under section | see note (xvi) below in relation to total voting |
|  | 319A of the Act, the Company must answer | rights); or (ii) at least 100 shareholders having |
|  | any question a shareholder asks relating to the | a right to vote at the AGM and holding, on |
|  | business being dealt with at the AGM, unless, (i) | average, at least £100 of paid up share capital. |

answering the question would interfere unduly
(xiv) Where a shareholder or shareholders wishes to
with the preparation for the AGM or involve the
request the Company to publish audit concerns
disclosure of confidential information; (ii) the
in accordance with note (xii) above, such
answer had already been given on a website in
request must be made by either sending:
the form of an answer to a question; or (iii) it is
undesirable in the interests of the Company or (a) a hard copy request which is signed by the
the good order of the AGM that the question relevant shareholder or shareholders, states
be answered. such persons’ full name(s) and address(es)
and sent to the Company Secretary, Maitland
(xii) Under section 527 of the Act, a shareholder
Administration Services Limited; or
or shareholders meeting the criteria set out in
note (xiv) below, have the right to request the (b) a request which states the shareholder or
Company to publish on its website a statement shareholders’ full name and address(es), and
setting out any matter that such shareholders sent by email to CoSec@maitlandgroup.com.
propose to raise at the AGM relating to the Please state “Develop North AGM” in the subject
audit of the Company’s accounts (including the line of the e-mail.
auditor’s report and the conduct of the audit)
(xv) Further information regarding the AGM which
that are to be laid before the AGM. Where
the Company is required by section 311A of
the Company is required to publish such a
the Act to publish on a website in advance of the
statement on its website: (i) it may not require
GM can be accessed at www.DevelopNorth.
the shareholder making the request to pay any
co.uk.
expense incurred by the Company in complying
with the request; (ii) it must forward the (xvi) As at 20 March 2024 (being the latest practicable
statement to the Company’s auditors no later date prior to the printing of this notice) the
than the time the statement is made available on Company’s issued share capital consisted of
the Company’s website; and (iii) that statement 25,667,856 Ordinary Shares carrying one vote
may be dealt with as part of the business of the each.
AGM. The request: (a) may be in hard copy
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(xvii) You may not use any electronic address provided report and the Director’s Remuneration Report.
either in this notice or any related documents
2. Resolution 2 – The shareholders are asked to
(including the Form of Proxy) to communicate
approve the Directors’ Remuneration Report for
with the Company for any purpose other than
the year ended 30 November 2023, as set out
those expressly stated.
on pages 33 to 35 of the Annual Report. The vote
is advisory and does not affect the remuneration
(xviii) A copy of the letters of appointment of the
payable to any individual Director.
Directors will be available for inspection during
normal business hours at the Company’s
3. Resolution 3 – Is a resolution subject to a binding
registered office and at the place of the meeting
vote. The Company is seeking approval for
from at least 15 minutes prior to the meeting
its remuneration policy as set out on page 33
until the end of the meeting.
of the Directors’ Remuneration Report. The
remuneration policy will take effect immediately
EXPLANATION OF RESOLUTIONS on approval by shareholders and will continue to
apply for the next three years, unless amended
Resolutions 1 to 12 (inclusive) are proposed as
by the Company in general meeting at an earlier
ordinary resolutions. This means that for each of those
date.
resolutions to be passed, more than half of the votes
cast must be in favour of the resolution. Resolutions 4. Resolutions 4 to 7 – the Directors to be
13 to 15 (inclusive) are to be proposed as special reappointed.
resolutions. This means that for the resolutions to be
5. Resolution 8 – The Directors’ present the
passed, at least three-quarters of the votes cast must
Company’s dividend policy on an annual basis
be in favour of the resolutions.
recognising that shareholders will not have the
1. Resolution 1 – The Directors are required to opportunity to vote on a final dividend.
lay before the meeting the Audited Financial
6. Resolutions 9 and 10 – Shareholders are required to
Statements of the Company for the year ended
approve the appointment of the Company’s auditor
30 November 2023 including the Strategic Report,
each year and to give the Audit Committee the
Report of the Directors, the Independent Auditor’s
Continued
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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.

70
# SHAREHOLDER INFORMATION

## 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  |

71
# GLOSSARY

## 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.

72
Ongoing Charges Alternative Performance Measures (APMs)
All operating costs incurred by the Company, The Company uses the following APMs (as described
expressed as a proportion of its average Net Assets in the glossary) to present a measure of profitability
over the reporting year. which is aligned with the requirements of our investors
and potential investors, to draw out meaningful
Share Price Total Return
data around revenues and earnings to provide
The percentage change in the Share Price assuming
additional information not required for disclosure
dividends are reinvested to purchase additional
under accounting standards. All APMs relate to past
Ordinary Shares at the prevailing share price.
performance.
SORP
• Dividend yield
Statement of Recommended Practice ‘Financial
• Increase / decrease in NAV
Statements of Investment Trust Companies and
• Loan to value
Venture Capital Trusts’ issued by the AIC.
• NAV total return
Total Assets
• Ongoing charges
This is calculated as the value of the investments and
• Share price total return
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.
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## Corporate Information
DIRECTORS ADMINISTRATOR AND SECRETARY
John Newlands APEX Fund Administration
Chairman Services (UK) Limited
(Formerly Maitland Administration Services Limited)
Matthew Harris
Hamilton Centre
Chairman of the Audit Committee
Rodney Way
Chelmsford
Ian McElroy
Essex CM1 3BY
Douglas Noble
Chairman of the Remuneration Committee INDEPENDENT AUDITOR
MHA
REGISTERED OFFICE
Chartered Accountants & Statutory Auditor
2 London Wall Place
Hamilton Centre
London
Rodney Way
EC2Y 5AU
Chelmsford
Essex CM1 3BY
REGISTRAR
INVESTMENT ADVISER
Computershare Investor
Services PLC
Tier One Capital Ltd
The Pavilions
Eagle House
Bridgwater Road
Asama Court
Bristol
Newcastle-upon-Tyne NE4 7YD
BS99 6ZZ
BROKER AND FINANCIAL ADVISER
WEBSITE
Cavendish Capital Markets
Limited
One Bartholomew Close www.developnorth.co.uk
London EC1A 7BL
SOLICITOR
Gowling WLG (UK) LLP
4 More London
Riverside
London SE1 2AU
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75
## DEV ELOP
## NORTH
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