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EPE Special Opportunities Limited Annual Financial Report

23/03/2021 7:15am

UK Regulatory (RNS & others)


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RNS Number : 1105T

EPE Special Opportunities Limited

23 March 2021

EPE Special Opportunities Limited

("ESO" or the "Company")

Annual Reports and Accounts for the year ended 31 January 2021

The Board of EPE Special Opportunities Limited is pleased to announce the Company's Annual Report and Accounts for the year ended 31 January 2021.

Summary

-- The Company performed well in the face of the significant disruption caused by the outbreak of COVID-19 and the resultant public health response. The Board and the Investment Advisor ("IA") have worked closely with management teams and other stakeholders to protect the wellbeing of colleagues across the Company and its portfolio whilst working hard to safeguard the value of the Company's investments. The Board and IA will continue to carefully monitor the outlook for the UK economy as progress is made with vaccination programmes and restrictions are gradually eased over the coming period.

-- The Net Asset Value ("NAV") per share of the Company as at 31 January 2021 was 437.63 pence per share, an increase of 38.0 per cent. on the NAV per share of 317.18 pence as at 31 January 2020. The increase in the Company's NAV per share has been driven primarily by the rise in value of the Company's largest holding, Luceco plc, whose share price has traded strongly over the last year.

-- The share price of the Company as at 31 January 2021 was 271.00 pence, representing an increase of 36.2 per cent. on the share price of 199.00 pence at 31 January 2020.

-- Luceco plc's share price performed well, achieving a 84.9 per cent. increase in the year ended 31 January 2021. The business announced strong trading for the year ended 31 December 2020, delivering year-on-year revenue growth, increased profitability and a reduction in leverage in the period. In November 2020, the Company sold 4.0 million shares in Luceco plc, returning GBP10.0 million cash to ESO, whilst retaining a 24.9 per cent. holding in the business.

-- Whittard of Chelsea's ("Whittard") business model was subject to unprecedented disruption during the year ended 31 December 2020 as a result of COVID-19. Whilst retail stores were Whittard's largest and most profitable sales channel in 2019, sales from the channel contracted by 60 per cent. in 2020. Despite the disruption to the UK store estate, Whittard remained EBITDA positive due to growth in its ecommerce business. The Board is looking forward to the upcoming re-opening of Whittard's stores, although it is carefully monitoring the outlook for inbound tourism to the UK, which contributed to sales through UK stores. Whittard has continued to pursue compelling international opportunities, with the business's Asian operations trading strongly. Corporate gifting, online marketplaces and additional new geographies also provide encouragement for the future.

-- David Phillips has made pleasing progress, building on the profitable and growing platform established in the prior period. The business maintained overall sales levels, whilst delivering a year-on-year EBITDA improvement of GBP2.9 million. Growth in profitability was achieved as a result of the ongoing benefits of the turnaround and, more recently, through efficiencies identified in response to the COVID-19 crisis. The business has promising momentum, driven by a growing pipeline of large-scale projects.

-- Continuing its impressive growth trajectory, Pharmacy2U experienced a significant acceleration in sales as patients sought direct-to-home alternatives to collecting prescriptions in high street pharmacies. The business's new distribution facility began dispensing live orders in November 2020.

-- On 1 September 2020, the Company completed a GBP1.9 million investment into Atlantic Credit Opportunities Fund, a credit opportunities hedge fund which focuses on European high yield credit. On 12 November 2020, the Company completed a further $2.5 million investment in a segregated account of Prelude Structured Alternatives Master Fund LP, a multi-manager hedge fund platform. Both funds are managed by a subsidiary of the Investment Advisor. The investments in these funds will provide ESO with the opportunity to generate uncorrelated returns over the multi-year aftermath of the significant dislocations in credit markets caused by the COVID-19 pandemic. In the year ended 31 December 2020, ACOF achieved a net return of 13.2 per cent, ahead of the high yield market and hedge fund peers.

-- The Company has liquidity of GBP28.0 million(1) as at 31 January 2021. The Company has GBP3.9 million of outstanding unsecured loan notes repayable in July 2022 and has no other third-party debt outstanding. The Company is considering raising additional funding by the way of a loan note in the coming year to provide funding for potential investments that are being considered in the pipeline.

-- As at 31 January 2021, the Company's portfolio was valued at a weighted average EBITDA to enterprise value multiple of 5.8x (excluding Pharmacy2U, which is valued on a sales multiple) and had a low level of third party leverage with net debt at 0.3x EBITDA in aggregate.

-- Between November and December 2020, the Company completed buybacks in the market totalling 799,480 ordinary shares (or 2.4 per cent. of the Company's issued ordinary share capital).

-- At the forthcoming Annual General Meeting, Robert Quayle will be stepping down as a director of the Company. The Board would like to thank Robert for his dedication to the Company over his long period of service. On a personal note, the directors would like to thank him for his wise counsel and to wish him all the best for the future. The Company has commenced considerations for recruitment of a new independent Director to join the Board in due course.

Mr Clive Spears, Chairman, commented: "The performance of the Company in the year ended 31 January 2021 was pleasing in the face of acute disruption caused by the spread of COVID-19. The Board will carefully monitor the outlook for the UK economy as further progress is made in vaccination programmes and restrictions are gradually eased. The Board is reviewing a growing pipeline of investment opportunities and hopes to deploy further capital in the coming period. The Board would like to thank the Investment Advisor, the Company's other service providers, colleagues and employees across the portfolio for their efforts over this challenging and unprecedented period, which leave the Company well positioned for the future."

The person responsible for releasing this information on behalf of the Company is Amanda Robinson of Langham Hall Fund Management (Jersey) Limited.

Enquiries:

 
       EPIC Private Equity LLP                                +44 (0) 207 269 8865 
                                                               Alex Leslie 
       Langham Hall Fund Management (Jersey) Limited          +44 (0) 15 3488 5200) 
                                                               Amanda Robinson 
       Cardew Group Limited                                   +44 (0) 207 930 0777 
                                                               Richard Spiegelberg 
       Numis Securities Limited                               +44 (0) 207 260 1000 
       Nominated Advisor:                                     Stuart Skinner / Henry Slater 
       Corporate Broker:                                      Charles Farquhar 
 

[1] Company liquidity is stated inclusive of cash held by associates in which the Company is the sole investor.

Chairman's Statement

The performance of the Company in the year ended 31 January 2021 was pleasing in the face of acute disruption caused by the spread of COVID-19. The Board, Investment Advisor and the management of the portfolio companies have continued to prioritise the protection and wellbeing of colleagues, whilst safeguarding the financial position of the Company and its investments. The Board and IA are carefully monitoring the outlook for the UK economy as progress is made in vaccination programmes and public health restrictions are hopefully eased over the coming period.

The Net Asset Value ("NAV") per share of the Company as at 31 January 2021 was 437.63 pence per share, representing an increase of 38.0 per cent. on the NAV per share of 317.18 pence as at 31 January 2020. The share price of the Company as at 31 January 2021 was 271.00 pence, representing an increase of 36.2 per cent. on the share price of 199.00 pence as at 31 January 2020.

Luceco plc's share price performed well, achieving a 84.9 per cent. increase in the year ended 31 January 2021. The business announced strong trading for the year ended 31 December 2020, delivering year-on-year revenue growth, increased profitability and a reduction in leverage in the period. In November 2020, the Company sold 4.0 million shares in Luceco plc, returning GBP10.0 million cash to ESO, whilst retaining a 24.9 per cent. holding in the business.

Whittard of Chelsea's ("Whittard") business model was subject to unprecedented disruption during the year ended 31 December 2020 as a result of COVID-19. Whilst retail stores were Whittard's largest and most profitable sales channel in 2019, sales from the channel contracted by 60 per cent. in 2020. Despite the disruption to the UK store estate, Whittard remained EBITDA positive due to growth in its ecommerce business. The Board is looking forward to the upcoming re-opening of Whittard's stores, although it is carefully monitoring the outlook for inbound tourism to the UK, which contributed to sales through UK stores. Whittard has continued to pursue compelling international opportunities, with the business's Asian operations trading strongly. Corporate gifting, online marketplaces and additional new geographies also provide encouragement for the future.

David Phillips has made pleasing progress, building on the profitable and growing platform established in the prior period. Sustainable profitability ahead of the prior year was achieved due to structural cost benefits gained as a result of the turnaround phase of ESO's ownership and, more recently, through efficiencies identified in response to the COVID-19 crisis. The business has promising momentum, driven by a growing pipeline of large-scale projects in institutional build-to-rent and developer markets.

Pharmacy2U experienced a significant acceleration in sales as patients sought direct-to-home alternatives to collecting prescriptions in high street pharmacies, continuing its impressive growth trajectory. The business's new distribution facility began dispensing live orders in November 2020, providing significant additional capacity to support future expansion.

On 1 September 2020, the Company completed a GBP1.9 million investment into Atlantic Credit Opportunities Fund, a credit opportunities hedge fund which focuses on European high yield credit. On 12 November 2020, the Company completed a further $2.5 million investment in a segregated account of Prelude Structured Alternatives Master Fund LP, a multi-manager hedge fund platform. Both funds are managed by a subsidiary of the Investment Advisor. The investments in these funds will provide ESO with the opportunity to generate uncorrelated returns over the multi-year aftermath of the significant dislocations in credit markets caused by the COVID-19 pandemic. In the year ended 31 December 2020, ACOF achieved a net return of 13.2 per cent, ahead of the high yield market and hedge fund peers.

The Company has liquidity of GBP28.0 million(1) as at 31 January 2021. The Company has GBP3.9 million of outstanding unsecured loan notes repayable in July 2022 and has no other third-party debt outstanding. The Company is considering raising additional funding by the way of a loan note in the coming year to provide funding for potential investments that are being considered in the pipeline.

At the forthcoming Annual General Meeting, Robert Quayle will be stepping down as a director of the Company. The Board would like to thank Robert for his dedication to the Company over his long period of service. On a personal note, the directors would like to thank him for his wise counsel and to wish him all the best for the future. The Company has commenced considerations for recruitment of a new independent Director to join the Board in due course.

I would like to thank my fellow directors, the Investment Advisor, the Company's other service providers and colleagues across the portfolio for their efforts over this challenging and unprecedented period. These efforts leave the Company well positioned for the future.

Clive Spears

Chairman

22 March 2021

[1] Company liquidity is stated inclusive of cash held by associates in which the Company is the sole investor.

Investment Advisor's Report

The year ended 31 January 2021 has been dominated by the outbreak and response to COVID-19, requiring the Investment Advisor ("IA") to focus on positioning the portfolio to safely navigate a rapidly changing trading environment. Encouragingly, the portfolio has proven to have overall resilience to the turbulence experienced. As the IA looks to the future, it is encouraged by the healthy pipeline of attractive investment opportunities under review with the reduced corporate finance activity in 2020 generating a backlog of demand in 2021. The challenging macro environment may also generate an increase in the number of well-priced opportunities and companies in need of external funding. The IA and the Board are both optimistic that the portfolio can build on the perseverance shown through 2020 and be augmented by the deployment of further capital in the near term.

The Company

The Net Asset Value ("NAV") per share of the Company as at 31 January 2021 was 437.63 pence per share, representing an increase of 38.0 per cent. on the NAV per share of 317.18 pence as at 31 January 2020. The share price of the Company as at 31 January 2021 was 271.00 pence, representing an increase of 36.2 per cent. on the share price of 199.00 pence as at 31 January 2020.

The Company maintains strong liquidity and prudent levels of third-party leverage. The Company has cash balances of GBP28.0 million(1) as at 31 January 2021, which are available to support the existing portfolio, meet committed obligations and to deploy into attractive investment opportunities. Net debt in the underlying portfolio stands at 0.3x EBITDA in aggregate. In November 2020, the Company partially sold down its stake in Luceco plc, returning GBP10.0 million cash to ESO to maintain liquidity and finance new acquisitions.

The Portfolio

The Company's portfolio is valued at a weighted average enterprise value to EBITDA multiple of 5.8x for mature assets (excluding assets investing for growth). The valuation has been derived by reference to relevant quoted comparables, after the application of an appropriate discount to adjust for the portfolio's scale and unquoted nature (i.e. an illiquidity discount). Given the use of quoted comparables/actuals generally, the valuation reflects the fair value of assets as at the balance sheet date. The IA notes that the fair market value of the portfolio remains exposed to a volatile macro environment and consequent equity valuations.

The share price of Luceco plc as at 31 January 2021 was 260.00 pence, representing an increase of 84.9 per cent. vs. the prior year. On 23 March 2021, Luceco plc released its results for the year ended 31 December 2020. The business reported year-on-year revenue growth of 2.4 per cent. despite disruption in the first half of 2020. In addition, the business achieved year-on-year gross margin gains (39.8 per cent. vs. 36.2 per cent. in the prior year) and increased profitability (GBP30.0 million operating profit vs. GBP18.0 million in the prior year) following the successful implementation of manufacturing improvements, a shift in sales mix towards high margin professional sales and tight control of overheads. Net debt improved by GBP9.1 million over the year to GBP18.0 million at 31 December 2020. In addition, dividends were reinstated at the interim point, including a catch-up payment for dividends suspended earlier in the year. On 13 November 2020, the Company sold down 9.1 per cent. of its investment in Luceco plc in the market, providing GBP10.0 million in funds for new investments.

Whittard of Chelsea ("Whittard") has experienced unprecedented adverse trading conditions during the COVID-19 pandemic. Performance was significantly impacted by the closure of the UK retail estate, the business's largest sales channel, following the announcement of government social distancing rules. Whittard's online channel performed exceptionally well in the period; partially compensating for sales lost as a result of the closure of the retail estate. Looking ahead, the business is focused on the re-opening of stores across its retail estate. Confidence in the outlook for Whittard is qualified by its exposure to tourism from overseas, which is expected to recover at a slower rate than the remainder of the UK economy. The business has continued to make pleasing progress in developing its multi-channel strategy, introducing corporate gifting and online marketplace channels in the period, and making further progress in developing its international presence.

David Phillips performed well in 2020, delivering sales in line with the prior year and achieving significantly improved profitability. The historic focus of management and the IA on improving the financial resilience and operational flexibility of the business during the turnaround phase meant that David Phillips was well positioned for the macro disruption caused by COVID-19. Positive steps have been taken in the last twelve months, most notably in the growing pipeline of large-scale projects, the addition of new management team members, and the refinancing of the Company's debt facilities to improve the long-term capital structure of the business. The IA and the management team are closely monitoring the property market to allow the business to respond to systemic market changes brought about by the COVID-19 crisis. The IA believes the business is well placed to take advantage of these trends given its diversified customer base, which encompasses both private landlords and the institutional residential property market.

Pharmacy2U experienced significant growth in both sales and registered patients in the period as a result of the increase in demand for direct-to-home pharmacy driven by the pandemic. Pharmacy2U's new Leicester facility was opened in September 2020, with the first live orders dispatched in November 2020. The new facility will provide the business with substantially increased capacity, enabling the business to support its future growth trajectory.

The IA continues to monitor the Company's investment in European Capital Private Debt Fund, which has completed the deployment of the Company's committed capital in the fund and continues to distribute capital to the Company.

On 1 September 2020, the Company completed a GBP1.9 million investment into Atlantic Credit Opportunities Fund, a credit opportunities hedge fund which focuses on European high yield credit. On 12 November 2020, the Company completed a further $2.5 million investment in a segregated account of Prelude Structured Alternatives Master Fund LP, a multi-manager hedge fund platform. Both funds are managed by a subsidiary of the Investment Advisor. The investments in these funds will provide ESO with the opportunity to generate uncorrelated returns over the multi-year aftermath of the significant dislocations in credit markets caused by the COVID-19 pandemic. In the year ended 31 December 2020, ACOF achieved a net return of 13.2 per cent, ahead of the high yield market and hedge fund peers.

EPE would like to join the Board in extending its thanks to Robert Quayle for the years of the support he has provided to the Company. Robert has been a Board member since inception; during his tenure the Company has grown considerably and weathered several economic cycles. We are grateful for the support and encouragement Robert has shown EPE and its team members over the years of his directorship. We wish him the very best for the future.

The IA would like to thank the management and employees of the portfolio companies for their hard work and dedication during this unprecedented period. The IA is also grateful for the continued support and counsel of the Board and the Company's shareholders.

EPIC Private Equity LLP

Investment Advisor to the Company

22 March 2021

[1] Company liquidity is stated inclusive of cash held by associates in which the Company is the sole investor.

Biographies of the Directors

 
 Clive Spears                                  David Pirouet 
 Clive Spears retired from the Royal          David Pirouet joined PricewaterhouseCoopers 
  Bank of Scotland International               Channel Islands LLP in 1980, 
  Limited in December 2003 as Deputy           retiring in 2009 after being 
  Director of Jersey after 32 years            an Audit and Assurance Partner 
  of service. His main activities              for over 20 years. During his 
  prior to retirement included Product         29 years at the firm Mr Pirouet 
  Development, Corporate Finance,              specialised in the financial 
  Trust and Offshore Company Services          services sector, in particular 
  and he was Head of Joint Venture             in the alternative investment 
  Fund Administration with Rawlinson           management area and also led 
  & Hunter. Mr Spears is an Associate          the business's Hedge Fund and 
  of the Chartered Institute of Bankers        business recovery practices for 
  and a Member of the Chartered Institute      over four years. Mr Pirouet currently 
  for Securities & Investment. He              holds a number of non-executive 
  has accumulated a well spread portfolio      positions across private equity, 
  of directorships centring on private         infrastructure and corporate 
  equity, infrastructure and corporate         debt. Mr Pirouet's was previously 
  debt. His current appointments               non-executive Director and Chair 
  include Chairman of Nordic Capital           of the Audit and Risk committee 
  Limited and director of Invesco              for GCP Infrastructure Investments 
  Enhanced Income Limited.                     (FTSE 250 listed company) until 
                                               he retired in February 2021. 
                                             -------------------------------------------- 
  Heather Bestwick                             Robert Quayle 
                                             -------------------------------------------- 
 Heather Bestwick has been a financial        Robert Quayle qualified as an 
  services professional for over               English solicitor at Linklaters 
  25 years, onshore in the City of             & Paines in 1974 after reading 
  London and offshore in the Cayman            law at Selwyn College, Cambridge. 
  Islands and Jersey. She qualified            He subsequently practiced in 
  as an English solicitor, specialising        London and the Isle of Man as 
  in ship finance, with City firm              a partner in Travers Smith Braithwaite. 
  Norton Rose, and worked in their             He served as Clerk of Tynwald 
  London and Greek offices for 8               (the Isle of Man's parliament) 
  years. Ms Bestwick subsequently              for periods totalling 12 years 
  practised and became a partner               and holds a number of public 
  with global offshore law firm Walkers        and private appointments, and 
  in the Cayman Islands, and Managing          is active in the voluntary sector. 
  Partner of the Jersey office. Ms             Mr Quayle is a director of a 
  Bestwick sits on the boards of               number of companies in the financial 
  Deutsche International Corporate             services and distribution sectors. 
  Services Limited and Rathbone Investment 
  Management International Limited. 
                                             -------------------------------------------- 
 Nicholas Wilson 
 Nicholas Wilson has over 40 years 
  of experience in hedge funds, derivatives 
  and global asset management. He 
  has run offshore branch operations 
  for Mees Pierson Derivatives Limited, 
  ADM Investor Services International 
  Limited and several other London 
  based financial services companies. 
  He is Chairman of Gulf Investment 
  Fund plc, a premium listed company, 
  and, until recently, was chairman 
  of Alternative Investment Strategies 
  Limited. 
 

Biographies of the Investment Advisor

 
 Giles Brand                                    Hiren Patel 
 Giles Brand is a Partner and the               Hiren Patel is the Managing Director 
  founder of EPE. He is currently                of EPE Administration and is 
  Non-executive Chairman of Whittard             a Partner and the Finance Director 
  of Chelsea and Luceco plc, and                 and Compliance Officer of EPE. 
  a Non-Executive Director of The                He has worked in the investment 
  Reader Organisation, a not-for-profit          management industry for the past 
  educational charity. Before joining            twenty years. Before joining 
  EPE, Giles was a founding Director             EPE Administration, Hiren was 
  of EPIC Investment Partners, a                 Finance Director of EPIC Investment 
  fund management business which                 Partners. Prior to this, Hiren 
  at sale had US$5bn under management.           was employed at Groupama Asset 
  Prior to this, Giles worked in                 Management where he was the Group 
  Mergers and Acquisitions at Baring             Financial Controller. 
  Brothers in Paris and London. Giles 
  read History at Bristol University. 
                                               ---------------------------------------- 
 Robert Fulford                                 James Henderson 
                                               ---------------------------------------- 
 Robert Fulford is a Managing Director          James Henderson is a Managing 
  at EPE. He previously worked at                Director at EPE. He previously 
  Barclaycard Consumer Europe before             worked in the Investment Banking 
  joining EPE. Whilst at Barclaycard,            division of Deutsche Bank before 
  Robert was the Senior Manager for              joining EPE. Whilst at Deutsche 
  Strategic Insight and was responsible          Bank he worked on a number of 
  for identifying, analysing and                 M&A transactions and IPOs in 
  responding to competitive forces.              the energy, property, retail 
  Prior to Barclaycard, Robert spent             and gaming sectors, as well as 
  four years as a strategy consultant            providing corporate broking advice 
  at Oliver Wyman Financial Services,            to mandated clients. At EPE, 
  where he worked with a range of                James manages the investment 
  major retail banking and institutional         in Pharmacy2U. James read Modern 
  clients in the UK, mainland Europe,            History at Oxford University 
  Middle East and Africa. At EPE,                and Medicine at Nottingham University. 
  Robert manages the investments 
  in Whittard of Chelsea and David 
  Phillips. Robert read Engineering 
  at Cambridge University. 
                                               ---------------------------------------- 
 Alex Leslie                                    Ian Williams 
                                               ---------------------------------------- 
 Alex Leslie is a Managing Director             Ian Williams is a Managing Director 
  at EPE. He previously worked in                at EPE. He was previously a Partner 
  Healthcare Investment Banking at               at Lyceum Capital Partners LLP, 
  Piper Jaffray before joining EPE.              responsible for deal origination 
  Whilst at Piper Jaffray he worked              and engagement, with a primary 
  on a number of M&A transactions                focus on the business services 
  and equity fundraisings within                 and software sectors, as well 
  the Biotechnology, Specialty Pharmaceutical    as financial services, education 
  and Medical Technology sectors.                and health sectors. Prior to 
  At EPE, Alex manages the investment            Lyceum, Ian was a Director at 
  in Luceco plc. Alex read Human                 Arbuthnot Securities, involved 
  Biological and Social Sciences                 in transactions including IPOs, 
  at the University of Oxford and                secondary fund raisings and M&A, 
  obtained an MPhil in Management                focusing on the support services, 
  from the Judge Business School                 healthcare, transport & IT sectors. 
  at the University of Cambridge.                Ian read Politics and Economics 
                                                 at the University of Bristol. 
                                               ---------------------------------------- 
 

Risk and Audit Committee Report

The Risk and Audit Committee is chaired by David Pirouet and comprises all other Directors. Mr Pirouet was appointed as Chairman of the Committee on 28 June 2019.

The Risk and Audit Committee's main duties are:

-- To review and monitor the integrity of the interim and annual financial statements, interim statements, announcements and matters relating to accounting policy, laws and regulations of the Company;

   --     To evaluate the risks to the quality and effectiveness of the financial reporting process; 

-- To review the effectiveness and robustness of the internal control systems and the risk management policies and procedures of the Company;

   --     To review the valuation of portfolio investments; 

-- To review corporate governance compliance, including the Company's compliance with the QCA Corporate Governance Code;

-- To review the nature and scope of the work to be performed by the Auditors, and their independence and objectivity; and

-- To make recommendations to the Board as to the appointment and remuneration of the external auditors.

The Risk and Audit Committee has a calendar which sets out its work programme for the year to ensure it covers all areas within its remit appropriately. It met four times during the period under review to carry out its responsibilities and senior representatives of the Investment Advisor attended the meetings as required by the Risk and Audit Committee. In between meetings, the Risk and Audit Committee chairman maintains ongoing dialogue with the Investment Advisor and the lead audit partner via regular calls (which will be replaced by physical meeting once travel restrictions permit).

The Risk and Audit Committee has a calendar which sets out its work programme for the year to ensure it covers all areas within its remit appropriately. It met four times during the period under review to carry out its responsibilities and senior representatives of the Investment Advisor attended the meetings as required by the Risk and Audit Committee. In between meetings, the Risk and Audit Committee chairman maintains ongoing dialogue with the Investment Advisor and the lead audit partner via visits and meetings at the office of the Investment Advisor.

During the past year the Risk and Audit Committee carried out an ongoing review of its own effectiveness. These concluded that the Risk and Audit Committee is satisfactorily fulfilling its terms of reference and is operating effectively. In addition, the Committee undertook a review of the Company's corporate governance and compliance with the QCA Corporate Governance Code.

Significant accounting matters

The primary risk considered by the Risk and Audit Committee during the period under review in relation to the financial statements of the Company is the valuation of unquoted investments.

The Company's accounting policy for valuing investments is set out in notes 3i and 12. The Risk and Audit Committee examined and challenged the valuations prepared by the Investment Advisor, taking into account the latest available information on the Company's investments and the Investment Advisor's knowledge of the underlying portfolio companies through their ongoing monitoring. The Risk and Audit Committee satisfied itself that the valuation of investments had been carried out consistently with prior accounting periods, or that any change in valuation basis was appropriate, and was conducted in accordance with published industry guidelines.

The Auditors explained the results of their review of the procedures undertaken by the Investment Advisor in preparation of valuation recommendations for the Risk and Audit Committee. On the basis of their audit work, no material adjustments were identified by the Auditor.

External audit

The Risk and Audit Committee reviewed the audit plan and fees presented by the auditors, KPMG Audit LLC ("KPMG"), and considered their report on the financial statements. The fee for the audit of the annual report and financial statements of the Company (and associates) for the year ended 31 January 2021 is expected to be GBP64,000 (2020: GBP58,500).

The Risk and Audit Committee reviews the scope and nature of all proposed non-audit services before engagement, with a view to ensuring that none of these services have the potential to impair or appear to impair the independence of their audit role. The Risk and Audit Committee receives an annual assurance from the auditors that their independence is not compromised by the provision of such services, if applicable. During the period under review, the auditors provided non-audit services to the Company in relation to taxation.

KPMG were appointed as auditors to the Company for the audit of the year ended 31 January 2005. The Risk and Audit Committee regularly considers the need to put the audit out to tender, the auditors' fees and independence, alongside matters raised during each audit.

The appointment of KPMG has not been put out to tender as yet as the Committee, from ongoing direct observation and indirect enquiry of the Investment Advisor, remain satisfied that KPMG continue to provide a high-quality audit and effective independent challenge in carrying out their responsibilities.

The current year is the sixth year in which the audit has been undertaken by the current engagement partner at KPMG. The extension of the engagement beyond the typical five-year limit has been agreed following the deferral of the audit tender process as a result of COVID-19.

The Board will review the performance and services offered by Langham Hall, as fund administrator and EPEA as fund sub-administrator on an ongoing basis. EPEA completed its triennial agreed upon procedures review during the period.

Risk management and internal control

The Company does not have an internal audit function. The Risk and Audit Committee believes this is appropriate as all of the Company's operational functions are delegated to third party service providers who have their own internal control and risk monitoring arrangements. A report on these arrangements is prepared by each third-party service provider and submitted to the Risk and Audit Committee which it reviews on behalf of the Board to support the Directors' responsibility for overall internal control. The Company does not have a whistleblowing policy and procedure in place. The Company delegates this function to the Investment Advisor who is regulated by the FCA and has such policies in place. The Risk and Audit Committee has been informed by the Investment Advisor that these policies meet the industry standards and no whistleblowing took place during the year.

David Pirouet

Chairman of the Risk and Audit Committee

22 March 2021

Corporate Governance

The Board of EPE Special Opportunities is pleased to update shareholders of the Company's compliance with the 2018 Quoted Companies Alliance Corporate Governance Code (the "QCA Code").

The Company is committed to the highest standards of corporate governance, ethical practices and regulatory compliance. The Board believe that these standards are vital to generate long-term, sustainable value for the Company's shareholders. In particular the Board is concerned that the Company is governed in a manner to allow ef cient and effective decision making, with robust risk management procedures.

As an investment vehicle, the Company is reliant upon its service providers for many of its operations. The Board maintains ongoing and rigorous review of these providers. Speci cally the Board reviews the governance and compliance of these entities to ensure they meet the high standards of the Company.

The Board is dedicated to upholding these high standards and will look to strengthen the Company's governance on an ongoing basis.

The Company's compliance with the QCA Code on the Company's website (www.epespecialopportunities.com). The Company will provide annual updates on changes to compliance with the QCA Code.

Clive Spears

Chairman

22 March 2021

Report of the Directors

Principal activity

The Company was incorporated in the Isle of Man as a company limited by shares under the Laws with registered number 108834C on 25 July 2003. On 23 July 2012, the Company re-registered under the Isle of Man Companies Act 2006, with registration number 008597V. On 11 September 2018, the Company re-registered under the Bermuda Companies Act 1981, with registration number 53954. The Company's ordinary shares are quoted on AIM, a market operated by the London Stock Exchange, and the Growth Market of the Aquis Stock Exchange (formerly the NEX Exchange).

The principal activity of the Company and its associates is to arrange income yielding financing for growth, buyout and special situations and holding the investments with a view to exiting in due course at a profit.

Incorporation

The Company was incorporated on 25 July 2003 and on 11 September 2018, registered under the Bermuda Companies Act 1981. The Company's registered office is:

Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.

Place of business

During the year, the Company solely operated out of and was controlled from:

Liberation House, Castle Street, St Helier, Jersey JE1 2LH

Results of the financial year

Results for the year are set out in the Statements of Comprehensive Income and in the Statement of Changes in Equity.

Dividends

The Board does not recommend a dividend in relation to the current year (2020: nil) (see note 10 for further details).

Corporate governance principles

The Directors place a high degree of importance on ensuring that the Company maintains high standards of Corporate Governance and have therefore adopted the Quoted Companies Alliance 2018 Corporate Governance Code (the "QCA Code").

The Board holds at least four meetings annually and has established Audit and Risk and Investment committees. The Board does not intend to establish remuneration and nomination committees given the current composition of the Board and the nature of the Company's operations. The Board reviews annually the remuneration of the Directors and agrees on the level of Directors' fees.

Composition of the Board

The Board currently comprises five non-executive directors, all of whom are independent. Clive Spears is Chairman of the Board, David Pirouet is Chairman of the Audit and Risk Committee and Nicholas Wilson is Chairman of the Investment Committee.

Robert Quayle will be stepping down from the Board at the 2021 Annual General Meeting.

Audit and Risk Committee

The activities of the Audit and Risk Committee continued, members of which are David Pirouet (Chairman of the Committee) and all the other Directors. The Audit and Risk Committee provides a forum through which the Company's external auditors report to the Board.

The Audit and Risk Committee meets twice a year, at a minimum, and is responsible for considering the appointment and fee of the external auditors and for agreeing the scope of the audit and reviewing its findings. It is responsible for monitoring compliance with accounting and legal requirements, ensuring that an effective system of internal controls is maintained and for reviewing annual and interim financial statements of the Company before their submission for approval by the Board. The Audit and Risk Committee has adopted and complied with the extended terms of reference implemented on the Company's readmission in August 2010, as reviewed by the Board from time to time.

The Board is satisfied that the Audit and Risk Committee contains members with sufficient recent and relevant financial experience.

Investment Committee

The Board established an Investment Committee, which comprises Nicholas Wilson (Chairman of the Committee) and all the other Directors. The purpose of this committee is to review the portfolio of the Company, new investment opportunities and evaluate the performance of the Investment Advisor.

The Board is satisfied that the Investment Committee contains members with sufficient recent and relevant financial experience.

Significant holdings

Significant shareholdings are analysed in schedule of shareholders holding over 3% of issued shares. The Directors are not aware of any other holdings greater than 3 per cent. of issued shares.

Directors

The Directors of the Company holding office during the financial year and to date are:

Mr. C.L. Spears (Chairman)

Mr. R.B.M. Quayle

Mr. N.V. Wilson

Ms. H. Bestwick

Mr. D.R. Pirouet

Staff

At 31 January 2021 the Company employed no staff (2020: none).

Auditors

Our Auditors, KPMG Audit LLC, being eligible, have expressed their willingness to continue in office.

The current year is the sixth year in which the audit has been undertaken by the current engagement partner at KPMG. The extension of the engagement beyond the typical five-year limit has been agreed following the deferral of the audit tender process as a result of COVID-19.

On behalf of the Board

Heather Bestwick

Director

22 March 2021

Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

The Directors are required to prepare financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the EU (IFRS as adopted by the EU), as applicable to a Bermuda company and applicable law.

The Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing the Company's financial statements, the Directors are required to:

   --      select suitable accounting policies and then apply them consistently; 
   --      make judgements and estimates that are reasonable, relevant and reliable; 
   --      state whether they have been prepared in accordance with IFRS as adopted by the EU; 

-- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

-- use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Bermuda Companies Act. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Bermuda governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Independent Auditor's Report to the Members of EPE Special Opportunities Limited

1 Our opinion is unmodified

We have audited the financial statements of EPE Special Opportunities Limited (the "Company"), which comprise the statement of assets and liabilities as at 31 January 2021, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion the financial statements:

-- give a true and fair view of the state of the Company's affairs as at 31 January 2021 and of the Company's profit for the year then ended; and

-- have been properly prepared in accordance with International Financial Reporting Standards as adopted by the EU.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including FRC Ethical Standards, as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

2 Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows (unchanged from 2020):

 
                                   The risk                           Our response 
           Valuation of unquoted   Subjective valuation:              Our procedures included: 
                    investments: 
      GBP28.4m (2020: GBP25.4m).    24% of the Company's underlying    Control design : 
                                    investment portfolio (by           Documenting and assessing 
            Refer to Significant    value) is held in investments      the design and implementation 
   accounting matters identified    and loans where no quoted          of the investment valuation 
           by the Audit and Risk    market price is available.         processes and controls; 
  Committee), note 3 (accounting 
   policies), note 2d (estimates    Unquoted investments are 
       and judgements, including    measured at fair value,            Methodology choice 
            impact of Covid 19),    which is established in            : 
            note 11 (investments    accordance with the valuation      In the context of the 
           at fair value through    principles of International        valuation principles 
        profit or loss) and note    Financial Reporting Standard       of IFRS 13, we challenged 
     12 (fair value of financial    13 (IFRS "13") such as             the appropriateness 
                   instruments).    prices of recent orderly           of the valuation basis 
                                    transactions, trading              selected; 
                                    comparable multiples and 
                                    net assets.                        Our valuations experience 
                                    The effect of these matters        : 
                                    is that, as part of our            Challenging the investment 
                                    risk assessment, we determined     advisor on key judgements 
                                    that the valuation of              affecting investee company 
                                    unquoted investments has           valuations, such as 
                                    a high degree of estimation        discount factors and 
                                    uncertainty, with a potential      the choice of benchmark 
                                    range of reasonable outcomes       for earnings and sales 
                                    greater than our materiality       multiples. We compared 
                                    for the financial statements       key underlying financial 
                                    as a whole, and possibly           data inputs to external 
                                    many times that amount.            sources and investee 
                                    The impact of COVID-19             company management information 
                                    on the economy has increased       as applicable. We challenged 
                                    this uncertainty.                  the assumptions around 
                                                                       sustainability of earnings 
                                                                       based on the plans of 
                                                                       the investee companies 
                                                                       and whether these are 
                                                                       achievable. Our work 
                                                                       included consideration 
                                                                       of events which occurred 
                                                                       subsequent to the year 
                                                                       end up until the date 
                                                                       of this audit report; 
                                                                       Use of KPMG specialists 
                                                                       We involved KPMG specialists 
                                                                       to examine the methodology 
                                                                       adopted for the valuations 
                                                                       and challenge the assumptions 
                                                                       and key judgements in 
                                                                       the valuations. 
                                                                       Assessing transparency 
                                                                       : 
                                                                       Consideration of the 
                                                                       appropriateness, in 
                                                                       accordance with relevant 
                                                                       accounting standards, 
                                                                       of the disclosures in 
                                                                       respect of unquoted 
                                                                       investments and the 
                                                                       effect of changing one 
                                                                       or more inputs to reasonably 
                                                                       possible alternative 
                                                                       valuation assumptions. 
                                  ---------------------------------  -------------------------------- 
 

3 Our application of materiality and an overview of the scope of our audit

Materiality for the financial statements as a whole was set at GBP1.2m (2020: GBP0.8m), determined with reference to a benchmark of total assets of GBP145.3m (2020: GBP109.2m), of which it represents approximately 0.83% (2020: 0.73%).

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was set at 75% (2020: 75%) of materiality for the financial statements as a whole, which equates to GBP0.9m (2020: GBP0.6m). We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk.

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding GBP0.06m (2020: GBP0.04m), in addition to other identified misstatements that warranted reporting on qualitative grounds.

Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above.

4 Going concern

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (the "going concern period").

In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's business model and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. The risk that we considered most likely to affect the Company's financial resources or ability to continue operations over this period was the availability of capital to meet operating costs and other financial commitments.

We considered whether this risk could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from this risk against the level of available financial resources indicated by the Company's financial forecasts.

We considered whether the going concern disclosure in note 2 to the financial statements gives a full and accurate description of the Directors' assessment of going concern.

Our conclusions based on this work:

-- we consider that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate;

-- we have not identified, and concur with the Directors' assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period; and

-- we found the going concern disclosure in the notes to the financial statements to be acceptable.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation.

5 Fraud and breaches of laws and regulations - ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud ("fraud risks") we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

-- enquiring of management as to the Company's policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud;

   --     reading minutes of meetings of those charged with governance; and 
   --     using analytical procedures to identify any unusual or unexpected relationships. 

As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk related to revenue recognition because the Company's revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks.

We performed procedures including

-- Identifying journal entries and other adjustments to test based on risk criteria and comparing the identified entries to supporting documentation; and

   --     incorporating an element of unpredictability in our audit procedures. 

Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company's regulatory and legal correspondence, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements.

The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Company's ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Company's activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

6 Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

7 Respective responsibilities

Directors' responsibilities

As explained more fully in Directors' statement, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.

8 The purpose of this report and restrictions on its use by persons other than the Company's members, as a body

This report is made solely to the Company's members, as a body, in accordance with the terms of engagement as detailed in our letter dated 4 August 2020. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street Douglas

Isle of Man IM1 1LA

22 March 2021

Statement of Comprehensive Income

For the year ended 31 January 2021

 
                                                                      31 January      31 January 
                                                                            2021            2020 
                                              Revenue      Capital         Total           Total 
 Note                                             GBP          GBP           GBP             GBP 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Income 
  4     Interest income                         4,089            -         4,089         101,566 
  11    Gains on investments                        -   42,012,143    42,012,143      39,568,491 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Total income                            4,089   42,012,143    42,016,232      39,670,057 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Expenses 
  5     Investment advisor's fees         (1,937,207)            -   (1,937,207)     (1,642,504) 
  6     Directors' fees                     (154,000)            -     (154,000)       (154,264) 
  7     Share based payment expense         (682,525)            -     (682,525)        (71,158) 
  8     Other expenses                      (669,769)            -     (669,769)     (1,257,703) 
        Total expense                     (3,443,501)            -   (3,443,501)     (3,125,629) 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Profit before finance costs 
         and tax                          (3,439,412)   42,012,143    38,572,731      36,544,428 
       ------------------------------    ------------  -----------  ------------    ------------ 
 
        Finance charges 
        Interest on unsecured loan 
  15     note instruments                   (319,685)            -     (319,685)       (319,685) 
        Profit for the year before 
         taxation                         (3,759,097)   42,012,143    38,253,046      36,224,743 
  9     Taxation                                    -            -             -               - 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Profit for the year               (3,759,097)   42,012,143    38,253,046      36,224,743 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Other comprehensive income                  -            -             -               - 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Total comprehensive income        (3,759,097)   42,012,143    38,253,046      36,224,743 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Basic earnings per ordinary 
  17     share (pence)                        (11.47)       128.16        116.69          112.86 
       ------------------------------    ------------  -----------  ------------    ------------ 
        Diluted earnings per ordinary 
  17     share (pence)                        (11.47)       128.16        116.69          112.86 
       ------------------------------    ------------  -----------  ------------    ------------ 
 

The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue and capital return columns are prepared in accordance with the Board of Directors' agreed principles, which are that the net gain/loss on investments is allocated to the capital column and all other income and expenses are allocated to the revenue column. All items derive from continuing activities.

Statement of Assets and Liabilities

At 31 January 2021

 
                                                                             31 January 
                                                    31 January 2021                2020 
     Note                                                       GBP                 GBP 
           --------------------------------    --------------------    ---------------- 
            Non-current assets 
            Investments at fair value 
      11     through profit or loss                     117,256,810          83,382,923 
                                                        117,256,810          83,382,923 
           --------------------------------    --------------------    ---------------- 
            Current assets 
      13    Cash and cash equivalents                    27,854,701          25,604,783 
            Trade and other receivables                     197,564             235,211 
           --------------------------------    --------------------    ---------------- 
 
                                                         28,052,265          25,839,994 
           --------------------------------    --------------------    ---------------- 
            Current liabilities 
      14    Trade and other payables                      (659,645)         (1,028,704) 
           -------------------------------- 
                                                          (659,645)         (1,028,704) 
           --------------------------------    --------------------    ---------------- 
            Net current assets                           27,392,620          24,811,290 
           --------------------------------    --------------------    ---------------- 
 
            Non-current liabilities 
      15    Unsecured loan note instruments             (3,956,822)         (3,936,217) 
                                                        (3,956,822)         (3,936,217) 
           --------------------------------    --------------------    ---------------- 
            Net assets                                  140,692,608         104,257,996 
           --------------------------------    --------------------    ---------------- 
            Equity 
      16    Share capital                                 1,730,828           1,726,953 
            Share premium                                13,619,627          13,489,826 
            Capital reserve                             126,297,577          84,285,434 
            Revenue reserve                               (955,424)           4,755,783 
            Total equity                                140,692,608         104,257,996 
            Net asset value per share 
      18     (pence)                                         437.63              317.18 
           --------------------------------    --------------------    ---------------- 
 

The financial statements were approved by the Board of Directors on 22 March 2021 and signed on its behalf by:

Clive Spears David Pirouet

Director Director

Statement of Changes in Equity

For the year ended 31 January 2021

 
                                                         Year ended 31 January 2021 
                                         Share        Share         Capital       Revenue 
                                       capital      premium         reserve       reserve         Total 
 Note                                      GBP          GBP             GBP           GBP           GBP 
       -------------------------    ----------  -----------  --------------  ------------  ------------ 
        Balance at 1 February 
         2020                        1,726,953   13,489,826      84,285,434     4,755,783   104,257,996 
 
        Total comprehensive 
         income/(loss) for the 
         year                                -            -      42,012,143   (3,759,097)    38,253,046 
       -------------------------    ----------  -----------  --------------  ------------  ------------ 
 
        Contributions by and 
         distributions to owners 
        Share-based payment 
  7      charge                              -            -               -       682,525       682,525 
        Share ownership scheme 
  7      participation                       -            -               -         3,943         3,943 
        Provision for future 
         settlement                          -            -               -       216,323       216,323 
  16    Purchase of shares                   -            -               -   (2,068,761)   (2,068,761) 
        Share acquisition for 
  7      JSOP scheme                         -            -               -     (786,140)     (786,140) 
  16    Issue of new shares              3,875      129,801               -             -       133,676 
        Total transactions with 
         owners                          3,875      129,801               -   (1,952,110)   (1,818,434) 
       -------------------------    ----------  -----------  --------------  ------------  ------------ 
        Balance at 31 January 
         2021                        1,730,828   13,619,627     126,297,577     (955,424)   140,692,608 
       -------------------------    ----------  -----------  --------------  ------------  ------------ 
 
 
 
 
                                                         Year ended 31 January 2020 
                                                                      Capital       Revenue 
                                   Share capital   Share premium      reserve       reserve         Total 
 Note                                        GBP             GBP          GBP           GBP           GBP 
       -------------------------  --------------  --------------  -----------  ------------  ------------ 
        Balance at 1 February 
         2019                          1,503,286       3,867,209   44,716,943     9,725,035    59,812,473 
 
        Total comprehensive 
         income/(loss) for the 
         year                                  -               -   39,568,491   (3,343,748)    36,224,743 
       -------------------------  --------------  --------------  -----------  ------------  ------------ 
 
        Contributions by and 
         distributions to owners 
        Share-based payment 
  7      charge                                -               -            -        71,158        71,158 
        Share ownership scheme 
  7      participation                         -               -            -        64,980        64,980 
        Provision for future 
         issue of shares                       -               -            -     (350,000)     (350,000) 
  16    Purchase of shares                     -               -            -   (1,411,642)   (1,411,642) 
  16    Issue of new shares              223,667       9,622,617            -             -     9,846,284 
       -------------------------  --------------  --------------  -----------  ------------  ------------ 
        Total transactions with 
         owners                          223,667       9,622,617            -   (1,625,504)     8,220,780 
       -------------------------  --------------  --------------  -----------  ------------  ------------ 
        Balance at 31 January 
         2020                          1,726,953      13,489,826   84,285,434     4,755,783   104,257,996 
       -------------------------  --------------  --------------  -----------  ------------  ------------ 
 

Statement of Cash Flows

For the year ended 31 January 2021

 
                                                          31 January      31 January 
                                                                2021            2020 
 Note                                                            GBP             GBP 
       ---------------------------------------------    ------------    ------------ 
        Operating activities 
        Interest income received                               4,089          17,574 
        Expenses paid                                    (2,896,656)     (2,903,818) 
  19    Net cash used in operating activities            (2,892,567)     (2,886,244) 
       ---------------------------------------------    ------------    ------------ 
 
        Investing activities 
  11    Purchase of investments                          (5,320,330)       (700,000) 
  11    Proceeds from investments                         13,612,853         942,505 
  11    Distributions from investments                             -         768,650 
        Net cash generated from investing activities       8,292,523       1,011,155 
       ---------------------------------------------    ------------    ------------ 
        Financing activities 
        Unsecured loan note interest paid                  (299,080)       (299,080) 
        Purchase of shares                               (2,854,901)     (1,411,642) 
        Share ownership scheme participation                   3,943          64,980 
        Net cash used in financing activities            (3,150,038)     (1,645,742) 
       ---------------------------------------------    ------------    ------------ 
        Increase/(decrease) in cash and cash 
         equivalents                                       2,249,918     (3,520,831) 
        Cash and cash equivalents at start 
         of year                                          25,604,783      29,125,615 
       ---------------------------------------------    ------------    ------------ 
        Cash and cash equivalents at end of 
  13     year                                             27,854,701      25,604,783 
       ---------------------------------------------    ------------    ------------ 
 

Notes to the Financial Statements

For the year ended 31 January 2021

   1    Operations 

The Company was incorporated with limited liability in the Isle of Man on 25 July 2003. The Company then re-registered under the Isle of Man Companies Act 2006, with registration number 008597V. On 11 September 2018, the Company re-registered under the Bermuda Companies Act 1981, with registration number 53954. The Company raised GBP30.0 million by a placing of ordinary shares at 100 pence per share. In 2009 the Company raised an additional GBP5.0 million by a placing of ordinary shares at 5 pence per share. During the year ended 31 January 2011, the Company issued a further GBP2.4 million in share capital. During the year ended 31 January 2016, the Company raised a further GBP0.25 million in share capital. The Company moved its operations to Jersey with immediate effect on 17 May 2017 and has subsequently operated from Jersey only.

The Company's ordinary shares are quoted on AIM, a market operated by the London Stock Exchange, and the Growth Market of the Aquis Stock Exchange (formerly the NEX Exchange).

The Company's portfolio investments are held in three associates (ESO Investments 1 Limited, ESO Investments 2 Limited and ESO Alternative Investments LP). The remainder of the Company's subsidiary companies and associates are to be dissolved or are in process of liquidation.

As the Company is an investment entity per IFRS 10, interests in associates are measured at fair value.

The principal activity of the Company and its associates is to arrange income yielding financing for growth, buyout and special situations and holding the investments and its associates with a view to exiting in due course at a profit.

The financial statements comprise the results of the Company and its associates (see notes 3(a)).

The Company has no employees.

   2    Basis of prepa ration 
   a.   Statement of compliance 

The financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretations as adopted by the EU ("IFRS") and applicable legal and regulatory requirements of Bermuda law and reflect the following policies, which have been adopted and applied consistently.

   b.   Basis of measurement 

The financial statements have been prepared on the historical cost convention except for financial instruments at fair value through profit or loss which are measured at fair value.

   c.   Functional and presentation currency 

These financial statements are presented in Sterling, which is the Company's functional currency. All financial information presented in Sterling has been rounded to the nearest pound.

'Functional currency' is the currency of the primary economic environment in which the Company operates. The expenses (including investment advisory and administration fees) are denominated and paid in sterling. Accordingly, management has determined that the functional currency of the Company is sterling.

   d.   Use of estimates and judgements 

The preparation of financial statements in conformity with IFRS requires Directors and the Investment Advisor to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. The Directors have, to the best of their ability, provided as true and fair a view as is possible. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by Directors and the Investment Advisor in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustments in the next year relate to the determination of fair value of financial instruments with significant unobservable inputs (see note 12).

COVID-19 Impact:

The COVID-19 pandemic has had a significant impact on the valuation multiples, derived from quoted comparables, used in the preparation of the fair market valuation of the Company's unquoted investments. These quoted comparables are subject to both market volatility and uncertainty due to the impact of the pandemic and their trading outlook. The performance and financial position forecasted for the Company's portfolio is subject to the wider market uncertainty caused by the COVID-19 pandemic. These inputs have been used in the preparation of the fair market valuation of the Company's unquoted investments.

   e.   Unconsolidated structured entities 

The Company invests in portfolio investments via three entities, which the Directors consider to be associates - see note 3(a) for an explanation of why these entities are not controlled but the Company has significant influence. The purpose of these entities is investment holding. These entities meet the definition of unconsolidated structured entities under IFRS 12. There are letters of support in place between the Company and ESO Investments 1 Limited and ESO Investments 2 Limited for the payment of expenses.

The total net assets of these three entities, inclusive of loan advanced by the Company, is GBP78,337,686 and the amount recognised in the Company's financial statements (as investments at fair value) is GBP117,256,810.

In respect of ESO Alternative Investments LP, the Company has 100% beneficial ownership of the entity and holds no voting rights.

In respect of ESO Investments 1 Limited, the Company has 80% beneficial ownership of the entity and holds no voting rights.

In respect of ESO Investments 2 Limited, the Company has 80% beneficial ownership of the entity and holds no voting rights.

There are no restrictions on the ability of the associates to transfer funds to the Company in the form of cash dividends or loan repayments.

   f.    Going concern 

The Company's management has assessed the Company's ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.

   3    Significant accounting policies 
   a.   Basis of treatment of associates 

Associates

Associates are those enterprises over which the reporting entity has significant influence, and which are neither subsidiaries nor an interest in a joint venture. Significant influence is exerted when the reporting entity has the power to participate in the financial and operating policy decision of the investee, but it is not in control or joint control of those policies.

The Company's portfolio investments are held via three entities in which the Company is the sole investor: ESO Investments 1 Limited, ESO Investments 2 Limited and ESO Alternative Investments LP (together the "Associates").

The primary activity of the Associates is to make, hold and realise investments with a view to profit. Any new investment made by the Company via the Associates is at the sole discretion of the Company. The Associates do not have any source of capital other than the Company and rely upon the Company for any investment funding. Investment funding advanced to the associates from the Company is contingent on it being used for the same investment. The associates are required to distribute any proceeds from each investment to the Company upon receipt. This indicates that the Company has significant influence over the primary activity of the Associates.

The Associates, via their general partner or their Board, have discretion over the management of their existing portfolio and on the realisation of those investments. The respective Boards, general partner and appointed investment managers of the Associates are independent of the Company and accordingly the Company does not control the investment activities of the Associates. This indicates that the Company does not have overall control over the primary activity of the Associates.

As the Company is the sole investor in the Associates, they do not meet the definition of a joint venture. The Company does not have control over the activities of the Associates and therefore the Directors consider that they do not meet the definition of subsidiaries. The Company has significant influence over the activities of the Associates and therefore the Directors consider that, for the reasons detailed above, they meet the definition of associates. The Company has taken advantage of the exemption from applying IAS 28 for investment entities and therefore the interests in these associates are accounted for at fair value through profit and loss rather than being equity accounted.

   b.   Segmental reporting 

The Directors are of the opinion that the Company is engaged in a single segment of business and geographic area being arranging financing for growth, buyout and special situations in the United Kingdom. Information presented to the Board of Directors for the purpose of decision making is based on this single segment.

   c.   Income 

Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is accounted for when the right to receive such income is established.

   d.   Expenses 

All expenses are accounted for on an accrual basis.

   e.   Cash and cash equivalents 

Cash and cash equivalents comprise of current cash deposits with banks only.

   f.    Finance charges 

Other finance charges are recognised as an expense.

   g.   Trade and other payables 

Trade and other payables are stated at amortised cost in accordance with IFRS 9.

   h.   Unsecured loan note instruments 

Unsecured loan note instruments are stated at amortised cost in accordance with IFRS 9.

   i.    Financial assets and financial liabilities 

i. Classification

Financial assets

When the Company first recognises a financial asset, it classifies it based on the business model for managing the asset and the asset's contractual cash flow characteristics, as follows:

-- Amortised cost-a financial asset is measured at amortised cost if both of the following conditions are met:

- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

-- Fair value through other comprehensive income-financial assets are classified and measured at fair value through other comprehensive income if they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

-- Fair value through profit or loss-any financial assets that are not held in one of the two business models mentioned are measured at fair value through profit or loss.

When, and only when, the Company changes its business model for managing financial assets it must reclassify all affected financial assets.

Financial liabilities

All financial liabilities are measured at amortised cost, except for financial liabilities at fair value through profit or loss. Such liabilities include derivatives (other than derivatives that are financial guarantee contracts or are designated and effective hedging instruments), other liabilities held for trading, and liabilities that an entity designates to be measured at fair value through profit or loss.

   ii.         Recognition 

The Company recognises financial assets and financial liabilities on the date it becomes a party to the contractual provisions of the instrument.

   iii.       Measurement 

Equity and debt investments, including those held by associates, are stated at fair value. Loans and Receivables are stated at amortised cost less any impairment losses.

The Investment Advisor determines asset values using the valuation principles of IFRS 13.

'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantages market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as 'active' if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company measures instruments quoted in an active market at mid-price.

If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The Company recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. Financial assets that are not carried at fair value though profit and loss are subject to an impairment test. For loans to portfolio companies the impairment test is undertaken as part of the assessment of the fair value of the enterprise value of the related business, as described above. If expected life cannot be determined reliably, then the contractual life is used.

   iv.        Impairment 

12-month expected credit losses

12-month expected credit losses are calculated by multiplying the probability of a default occurring in the next 12 months with the total (lifetime) expected credit losses that would result from that default, regardless of when those losses occur. Therefore, 12-month expected credit losses represent a financial asset's lifetime expected credit losses that are expected to arise from default events that are possible within the 12 month period following origination of an asset, or from each reporting date for those assets in initial recognition stage.

Lifetime expected credit losses

Lifetime expected credit losses are the present value of expected credit losses that arise if a borrower defaults on its obligation at any point throughout the term of a lender's financial asset (that is, all possible default events during the term of the financial asset are included in the analysis). Lifetime expected credit losses are calculated based on a weighted average of expected credit losses, with the weightings being based on the respective probabilities of default.

v. Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition in accordance with IFRS 9.

The Company uses the weighted average method to determine realised gains and losses on derecognition. A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.

   j.    Share capital 

Ordinary share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Repurchase of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from revenue reserves.

Capital Reserve and Revenue Reserve

The capital reserve comprises net gains and losses on investments. The revenue reserve comprises other income and expenses plus other items recorded directly in equity (excluding items recorded as share capital/share premium).

   k.   Joint share ownership plan ("JSOP") and share-based payments 

Directors of the Company and certain employees of the Investment Advisor (together "Participants") receive remuneration in the form of equity-settled share-based payment transactions, through a JSOP Scheme.

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value is determined based on the share price of the equity instrument at the grant date. The fair value determined at the grant date of the equity-settled share-based payment is expensed on a straight-line basis over the vesting period, based on the Company's estimate of the number of shares that will eventually vest. The instruments are subject to a three-year service vesting condition from the grant date, and their fair value is recognised as a share-based expense with a corresponding increase in revenue reserves within equity over the vesting period. Contributions received from employees as part of the JSOP arrangement are recognised directly in equity in the line share ownership scheme participation.

The assets (other than investments in the Company's shares), liabilities, income and expenses of the trust established to operate the JSOP scheme (the "Trust") are recognised by the Company as the Trust is considered to be an agent of the Company. The Trust's investment in the Company's shares is deducted from shareholders' funds in the Statement of Asset and Liabilities as if they were treasury shares (see note 7).

   l.    Future changes in accounting policies 

Several new standards are effective for annual periods beginning after 1 January 2020 and earlier application is permitted; however, the Company has not adopted early the new or amended standards in preparing these financial statements.

The Directors do not expect the adoption of the standards and interpretations to have a material impact on the Company's financial statements in the period of initial application.

   4    Interest income 
 
                             2021      2020 
                          Company   Company 
                              GBP       GBP 
----------------------   --------  -------- 
 Cash balances              4,089    17,574 
 Bond interest income           -    83,992 
-----------------------  --------  -------- 
 Total                      4,089   101,566 
-----------------------  --------  -------- 
 
   5    Investment advisory, administration and performance fees 

Investment advisory fees

The investment advisory fee payable to EPIC Private Equity LLP ("EPE") is assessed and payable at the end of each fiscal quarter and is calculated as 2 per cent. of the Company's NAV where the Company's NAV is less than GBP100 million; otherwise the investment advisory fee is calculated as the greater of GBP2.0 million or the sum of 2 per cent. of the Company's NAV comprising Level 3 portfolio assets (i.e. unquoted assets), 1 per cent. of the Company's NAV comprising Level 1 assets (i.e. quoted assets), no fees on assets which are managed or advised by a third-party manager, 0.5 per cent. of the Company's net cash (if greater than nil), and 2 per cent. of the Company's net cash (if less than nil) (i.e. reducing fees for net debt positions).

The charge for the current year was GBP1,937,207 (2020: GBP1,642,504). The amount outstanding as at 31 January 2021 was GBP500,000 (2020: GBP500,000) (see note 14).

Administration fees

EPE Administration Limited provides accounting and financial administration services to the Company. The fee payable to EPE Administration Limited is assessed and payable at the end of each fiscal quarter and is calculated as 0.15 per cent. of the Company's NAV where the Company's NAV is less than GBP100 million (subject to a minimum fee of GBP35,000); otherwise the advisory fee shall be calculated as 0.15 per cent. of GBP100 million plus a fee of 0.1 per cent. of the excess of the Company's NAV above GBP100 million.

The charge for the current year was GBP163,212 (year ended 31 January 2020: GBP125,732).

Other administration fees during the year were GBP66,234 (2019: GBP72,499).

Performance fees paid by associates

The associates are stated at fair value. Performance fees are paid to the Investment Advisor based on the performance of the associates and deducted in calculating the fair value of associates.

Performance fee in ESO Investments 1 Limited

The distribution policy of ESO Investments 1 Limited includes an allocation of profits to the Investment Advisor such that, for each investment where a returns hurdle of 8 per cent. per annum has been achieved, the Investment Advisor is entitled to receive 20 per cent. of the increase in the base value of investment. For the year ended 31 January 2021, GBP767,311 has been credited to the profit share account of the Investment Advisor in the records of ESO Investments 1 Limited (2020: GBP2,718,340 credited).

Performance fee in ESO Investments 2 Limited

The distribution policy of ESO Investments 2 Limited includes an allocation of profit to the Investment Advisor such that, for each investment where a returns hurdle of 8 per cent. per annum has been achieved, the Investment Advisor is entitled to receive 20 per cent. of the increase in the base value of investment. For the year ended 31 January 2021, GBP16,125,708 has been credited to the profit share account of the Investment Advisor in the records of ESO Investments 2 Limited (2020: GBP4,726,677 credited).

Joint share ownership plan ("JSOP") and share-based payments

Directors of the Company and certain employees of the Investment Advisor (together "Participants") receive remuneration in the form of equity-settled share-based payment transactions, through a JSOP Scheme. See note 7.

   6    Directors' fees 
 
                               2021          2021      2020          2020 
                                      Share-based             Share-based 
                            Company       payment   Company       payment 
                                GBP           GBP       GBP           GBP 
------------------------   --------  ------------  --------  ------------ 
 C.L. Spears (Chairman)      32,000        11,222    32,000         1,899 
 R.B.M. Quayle               30,000        10,440    30,000         4,062 
 N.V. Wilson                 30,000        10,928    30,000         1,899 
 H. Bestwick                 30,000        11,222    30,000             - 
 D.R. Pirouet                32,000         4,776    16,264             - 
 G.O Vero                         -             -    16,000             - 
------------------------   --------  ------------  --------  ------------ 
 Total                      154,000        48,588   154,264         7,860 
-------------------------  --------  ------------  --------  ------------ 
 

In addition to above, during the year, C.L. Spears and H. Bestwick, received Directors' fees for their directorship in ESO Investments 1 Limited and ESO Investments 2 Limited amounting to GBP3,000 each. The share-based payment expense is the calculated as set out in note 7.

   7    Share-based payment expense 

The cost of equity-settled transactions to Participants in the JSOP Scheme are measured at fair value at the grant date. The fair value is determined based on the share price of the equity instrument at the grant date.

The Trust was created to award shares to Participants as part of the JSOP. Participants are awarded a certain number of shares ("Matching Shares") which are subject to a three-year service vesting condition from the grant date. In order to receive their Matching Share allocation Participants are required to purchase shares in the Company on the open market ("Bought Shares"). The Participant will then be entitled to acquire a joint ownership interest in the Matching Shares for the payment of a nominal amount, on the basis of one joint ownership interest in one Matching Share for every Bought Share they acquire in the relevant award period.

The Trust holds the Matching Shares jointly with the Participant until the award vests. These shares carry the same rights as the rest of the ordinary shares.

The Trust held 1,419,004 (2020: 956,569) matching shares at the year-end which have traditionally not voted (see note 16).

Nil shares vested to Participants in the year ended 31 January 2021 (2020: 79,055). 271,995 shares were awarded to Participants in the year ended 31 January 2021 (2020: 856,058).

The share-based payment expense in the Statement of Comprehensive Income has been calculated on the basis of the fair value of the equity instruments at the grant date and the estimated number of equity instruments to be issued after the vesting period, less the amount paid for the joint ownership interest in the Matching Shares.

The total share-based payment expense in the year ended 31 January 2021 was GBP682,525 (2020: GBP71,158) of which GBP531,224 related to expenses incurred in the year ended 31 January 2021 and GBP151,301 related to expenses incurred in the year ended 31 January 2020. Of the total share-based payment expense in the year ended 31 January 2021, GBP48,588 related to the Directors (2020: GBP7,860) and the balance related to members, employees and consultants of the Investment Advisor.

   8    Other expenses 

The breakdown of other expenses presented in the statement of comprehensive income is as follows:

 
                                        31 January    31 January 
                                              2021          2020 
                                             Total         Total 
                                               GBP           GBP 
------------------------------------   -----------  ------------ 
 Administration fees                     (229,446)     (198,231) 
 Directors' and officers' insurance       (22,356)      (22,665) 
 Professional fees                       (221,697)     (780,440) 
 Board meeting and travel expenses         (1,981)      (16,425) 
 Auditors' remuneration                   (55,000)      (50,000) 
 Bank charges                                (659)       (1,095) 
 Irrecoverable VAT                           (675)         (600) 
 Sundry expenses                          (33,111)      (50,916) 
 Nominated advisor and broker fees        (60,710)      (55,740) 
 Listing fees                             (44,134)      (81,591) 
 Other expenses                          (669,769)   (1,257,703) 
-------------------------------------  -----------  ------------ 
 
   9    Taxation 

The Company is a tax resident of Jersey and is subject to 0 per cent. corporation tax (2020: 0 per cent.). The Limited Liability Partnerships and Limited Partnerships are transparent for tax purposes.

ESO Alternative Investments LP is transparent for tax purposes.

ESO Investments 1 Limited and ESO Investments 2 Limited are tax resident in Jersey and are subject to 0 per cent. corporation tax.

10 Dividends paid and proposed

No dividends were paid or proposed for the year ended 31 January 2021 (2020: GBPnil).

11 Investments at fair value through profit or loss

 
                                                                           31 January 
                                              31 January 2021                    2020 
                                                          GBP                     GBP 
 Investments at fair value through 
  profit and loss*                                117,256,810              83,382,923 
                                                  117,256,810              83,382,923 
 -----------------------------------  -----------------------  ---------------------- 
 
 
 Investment roll forward schedule 
                                                     31 January 2021             31 January 2020 
                                                                 GBP                         GBP 
 Investments at 1 February                                83,382,923                  34,793,620 
 Purchase of investments                                   5,320,330                     700,000 
 Income from investments                                (13,612,853)                   (942,505) 
 Distributions (non-cash distribution 
  in current year)                                          (66,664)                   (768,650) 
 Buy out of accrued carried interest                               -                   9,846,284 
 Fair value movements                                     42,012,143                  39,568,491 
 Loan to associates                                          220,931                     185,683 
 Investments at 31 January                               117,256,810                  83,382,923 
---------------------------------------  ---------------------------  -------------------------- 
 

*Comprises associates stated at fair value in accordance with accounting policy set out in note 3(a) ( ESO Investments 1 Limited, ESO Investments 2 Limited and ESO Alternative Investments LP).

   12    Fair value of financial instruments 

The Company determines the fair value of financial instruments with reference to IPEV guidelines and the valuation principles of IFRS 13 (Fair Value Measurement). The Company measures fair value using the IFRS 13 fair value hierarchy, which reflects the significance and certainty of the inputs used in deriving the fair value of an asset:

-- Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments;

-- Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using quoted market prices in active markets for similar instruments, quoted prices for identical or similar instruments in markets that are considered less than active or other valuation techniques in which all significant inputs are directly or indirectly observable from market data;

-- Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments but for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Valuation framework

The Company employs the valuation framework detailed below with respect to the measurement of fair values. A valuation of the Company's investments is prepared by the Investment Advisor with reference to IPEV guidelines and the valuation principles of IFRS 13 (Fair Value Measurement). The Investment Advisor recommends these valuations to the Board of Directors. The Board of Directors considers the valuations recommended by the Investment Advisor, determines any amendments required and thereafter adopts the fair values presented in the Company's financial statements.

Quoted equity investments

Quoted investments traded in an active market are classified as Level 1 in the IFRS 13 fair value hierarchy. The Company's investment in Luceco is considered as a Level 1 asset. For Level 1 assets, the Company calculates the holding value from the latest market price (without adjustment).

Unquoted private equity investments and third-party fund investments

Private equity investments and fund investments are classified as Level 3 in the IFRS 13 fair value hierarchy. The Company's investments in Whittard, David Phillips, Pharmacy2U, European Capital Private Debt Fund LP, EPE Junior Aggregator LP and Atlantic Credit Opportunities Fund Limited are considered to be Level 3 assets. Various valuation techniques may be applied in determining the fair value of investments held as Level 3 in the fair value hierarchy;

-- For recently acquired assets, the Company considers the investment cost an applicable fair value for the asset;

-- For underperforming assets, the Company considers the net asset or recovery valuation more applicable, in particular where the business' performance be contingent on shareholder financial support;

-- For performing assets, the Company considers the market approach to be the most appropriate with a specific focus on trading comparables, applied on a forward basis. The Company will also consider transaction comparables, applied on a historic basis;

-- For assets managed and valued by third party managers, the Company reviews the valuation methodology of the third-party manager. If deemed appropriate and consistent with the Company's reporting standards, the Company will use the valuation prepared by the third-party manager.

The Investment Advisor believe that it is appropriate to apply an illiquidity discount to the multiples of comparable companies when using them to calculate valuations for small, private companies. This discount adjusts for the difference in size between generally larger comparable companies and the smaller assets being valued. The illiquidity discount also incorporates the premium the market gives to comparable companies for being freely traded or listed securities. The Investment Advisor has determined between 15 per cent. and 25 per cent. to be an appropriate illiquidity discount with reference to market data and transaction multiples seen in the market in which the Investment Advisor operates.

Where portfolio investments are held through subsidiary/associate holding companies, the net assets of the holding company are added to the value of the portfolio investment being assessed to derive the fair value of the holding company held by the Company.

Fair value hierarchy - Financial instruments measured at fair value

The table below analyses the underlying investments held by the associates measured at fair value at the reporting date by the level in the fair value hierarchy into which the fair value measurement is categorised. Debt securities are also included, as these are also stated at fair value with the Board assessing the fair value of the total investment, which includes debt and equity. The amounts are based on the values recognised in the statement of financial position of the associates.

 
                                                      Level 1                Level 3                Total 
 31 January 2021                                          GBP                    GBP                  GBP 
-------------------------------------   ---------------------  ---------------------  ------------------- 
 Financial assets at fair value 
  through profit or loss 
 Unquoted private equity investments 
  (including debt)                                          -             23,156,643           23,156,643 
 Unquoted fund investments                                                 5,265,686            5,265,686 
 Quoted equity investments                         88,737,691                      -           88,737,691 
 Investments at fair value 
  through profit or loss                           88,737,691             28,422,329          117,160,020 
--------------------------------------  ---------------------  ---------------------  ------------------- 
 Other asset and liabilities 
  (held at cost)                                            -                      -               96,790 
 Total                                             88,737,691             28,422,329          117,256,810 
--------------------------------------  ---------------------  ---------------------  ------------------- 
 
 
                                                      Level 1                Level 3                Total 
 31 January 2020                                          GBP                    GBP                  GBP 
-------------------------------------   ---------------------  ---------------------  ------------------- 
 Financial assets at fair value 
  through profit or loss 
 Unquoted private equity investments 
  (including debt)                                          -             23,892,971           23,892,971 
 Unquoted fund investments                                  -              1,512,259            1,512,259 
 Quoted private equity investments                 57,227,830                      -           57,227,830 
 Investments at fair value 
  through profit or loss                           57,227,830             25,405,230           82,633,060 
--------------------------------------  ---------------------  ---------------------  ------------------- 
 Other asset and liabilities 
  (held at cost)                                            -                      -              749,863 
 Total                                             57,227,830             25,405,230           83,382,923 
--------------------------------------  ---------------------  ---------------------  ------------------- 
 

The following table, detailing the value of portfolio investments only, shows a reconciliation of the opening balances to the closing balances for fair value measurements in level 3 of the fair value hierarchy for the underlying investments held by the associates.

 
                                              31 January        31 January 
                                                    2021              2020 
 Unquoted investments (including debt)               GBP               GBP 
------------------------------------------  ------------  ---------------- 
 Balance as at 1 February                     25,405,230        14,209,340 
 Additional investments                        5,339,953           700,000 
 Capital distributions from investments        (223,018)         (247,693) 
 Change in fair value through 
  profit & loss                              (2,099,836)        10,743,583 
 Balance as at 31 January                     28,422,329        25,405,230 
------------------------------------------  ------------  ---------------- 
 

Significant unobservable inputs used in measuring fair value

The table below sets out information about significant unobservable inputs used at 31 January 2021 in measuring financial instruments categorised as Level 3 in the fair value hierarchy.

 
 Description                                    Fair value   Significant unobservable 
                                                        at    inputs 
                                                31 January 
                                                      2021 
------------------------------------                        ------------------------- 
                                                       GBP 
------------------------------------  --------------------  ------------------------- 
 Unquoted private equity investments            23,156,643   Sales/EBITDA 
  (including debt)                                            multiple 
 Unquoted fund investments                       5,265,686   Reported net 
                                                              asset value 
------------------------------------  --------------------  ------------------------- 
 

Significant unobservable inputs are developed as follows:

-- Trading comparable multiple: valuation multiples used by other market participants when pricing comparable assets. Relevant comparable assets are selected from public companies determined to be proximate to the Company's investment based on similarity of sector, size, geography or other relevant factors. The valuation multiple for a comparable company is determined by calculating the enterprise value of the company implied by its market price as at the reporting date and dividing by the relevant financial metric (sales or EBITDA).

-- Reported net asset value: for assets managed and valued by a third party, the manager provides the Company with periodic valuations of the Company's investment. The Company reviews the valuation methodology of the third-party manager. If deemed appropriate and consistent with the Company's reporting standards, the Board will adopt the valuation prepared by the third-party manager. Adjustments are made to third party valuations where considered necessary to arrive at the Director's estimate of fair value.

Although management believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurements of Level 3 assets, changing one or more of the assumptions used to reasonably possible alternative assumptions would have the following effects on the Level 3 investment valuations:

-- For the Company's investment in mature Level 3 assets, the valuations used in the preparation of the financial statements imply an average EV to EBITDA multiple of 5.8x (weighted by each asset's total valuation) (2020: 5.6x). The key unobservable inputs into the preparation of the valuation of mature Level 3 assets was the EV to EBITDA multiple applied to the asset's financial forecasts. If these inputs had been taken to be 25 per cent. higher, the value of the Level 3 assets and profit for the year would have been GBP 3,767,551 higher. If these inputs had been taken to be 25 per cent. lower, the value of the Level 3 assets and profit for the year would have been GBP4,629,372 lower. A corresponding increase or decrease in the asset's financial forecasts would have a similar impact on the Company's assets and profit.

-- For the Company's investment in growth Level 3 assets, the valuations used in the preparation of the financial statements imply an average EV to sales multiple of 1.6x (weighted by each asset's total valuation) (2020: 0.5x). The key unobservable inputs into the preparation of the valuation of growth Level 3 assets were the EV to sales multiple applied to the asset's financial forecasts. If these inputs had been taken to be 25 per cent. higher, the value of the Level 3 assets and profit for the year would have been GBP932,486 higher. If these inputs had been taken to be 25 per cent. lower, the value of the Level 3 assets and profit for the year would have been GBP932,486 lower. A corresponding increase or decrease in the asset's financial forecasts would have a similar impact on the Company's assets and profit.

Classification of financial assets and liabilities

The table below sets out the classifications of the carrying amounts of the Company's financial assets and liabilities into categories of financial instruments.

 
 31 January 2021 
                                                                      At amortised 
                                                  At fair value               cost            Total 
 Financial assets                                           GBP                GBP              GBP 
----------------------------------   --------------------------  -----------------  --------------- 
 Investments at fair value 
  through profit or loss                            117,256,810                  -      117,256,810 
 Cash and cash equivalents                                    -         27,854,701       27,854,701 
 Trade and other receivables                                  -             98,200           98,200 
                                                    117,256,810         27,952,901      145,209,711 
                                     ==========================  =================  =============== 
 Financial liabilities 
----------------------------------   --------------------------  -----------------  --------------- 
 Trade and other payables                                     -            659,645          659,645 
 Unsecured loan note instruments*                             -          3,956,822        3,956,822 
                                                              -          4,616,467        4,616,467 
                                     ==========================  =================  =============== 
 
 
 31 January 2020 
                                                                      At amortised 
                                                  At fair value               cost            Total 
 Financial assets                                           GBP                GBP              GBP 
----------------------------------   --------------------------  -----------------  --------------- 
 Investments at fair value 
  through profit or loss                             83,382,923                  -       83,382,923 
 Cash and cash equivalents                                    -         25,604,783       25,604,783 
 Trade and other receivables                                  -            135,745          135,745 
                                                     83,382,923         25,740,528      109,123,451 
                                     ==========================  =================  =============== 
 Financial liabilities 
----------------------------------   --------------------------  -----------------  --------------- 
 Trade and other payables                                     -            678,704          678,704 
 Unsecured loan note instruments*                             -          3,936,217        3,936,217 
                                                              -          4,614,921        4,614,921 
                                     ==========================  =================  =============== 
 

*The directors consider that the fair value of the unsecured loan note instruments is equal to carrying value.

13 Cash and cash equivalents

 
                                    2021         2020 
                                     GBP          GBP 
---------------------------  -----------  ----------- 
 Current and call accounts    27,854,701   25,604,783 
---------------------------  -----------  ----------- 
                              27,854,701   25,604,783 
---------------------------  -----------  ----------- 
 

The current and call accounts have been classified as cash and cash equivalents in the Statement of Cash Flows.

14 Trade and other payables

 
                                             2021        2020 
                                              GBP         GBP 
--------------------------------------   --------  ---------- 
 Trade payables                               688           - 
 Accrued administration fee                47,677      38,569 
 Accrued audit fee                         43,466      24,136 
 Accrued professional fee                  53,131     103,166 
 Accrued investment advisor fees          500,000     500,000 
 Accrued Directors' fees                   12,833      12,833 
 Provision for future issue of shares           -     350,000 
 Other payables                             1,850           - 
  Total                                   659,645   1,028,704 
---------------------------------------  --------  ---------- 
 

15 Non-current liabilities

The Company has issued Unsecured Loan Notes ("ULN") which pay interest at 7.5 per cent. per annum and are redeemable on 23 July 2022 (subject to voluntary early redemption by the Company). At 31 January 2021, GBP3,987,729 (2020: GBP3,987,729) of ULNs in principal amount were outstanding. Issue costs totalling GBP144,236 have been offset against the value of the loan note instrument and are being amortised over the life of the instrument. The total issue costs expensed in the year ended 31 January 2021 was GBP20,605 (2020: GBP20,605). The carrying value of the ULNs in issue at the year-end was GBP3,956,822 (2020: GBP3,936,217). The total interest expense for the ULNs for the year is GBP319,685 (2020: GBP319,685). This includes the amortisation of the issue costs.

16 Share capital

 
                                          2021        2021          2020        2020 
                                        Number         GBP        Number         GBP 
-------------------------------   ------------  ----------  ------------  ---------- 
 Authorised share capital 
 Ordinary shares of 5p each         45,000,000   2,250,000    45,000,000   2,250,000 
--------------------------------  ------------  ----------  ------------  ---------- 
 Called up, allotted and fully 
  paid 
 Ordinary shares of 5p each         34,616,554   1,730,828    34,539,061   1,726,953 
 Ordinary shares of 5p each 
  held in treasury                 (2,467,731)           -   (1,668,251)           - 
--------------------------------  ------------  ----------  ------------  ---------- 
                                    32,148,823   1,730,828    32,870,810   1,726,953 
 -------------------------------  ------------  ----------  ------------  ---------- 
 

During the year ended 31 January 2021, 77,493 ordinary shares of 5 pence each were issued at a price of 172.50 pence each. Therefore, the share capital of the Company increased by GBP3,875 (GBP223,667 as at 31 January 2020) and the share premium increased by GBP129,801 (GBP9,622,617 as at 31 January 2020).

During the year ended 31 January 2021, the Company repurchased 799,480 shares (2020: 752,001 shares) with a total value of GBP2,068,761 (2020: GBP1,411,642). These shares are held as treasury shares.

During the year ended 31 January 2021, the Trust purchased 462,435 shares (2020: nil) with a total value of GBP786,140 (2020: nil). At the year-end 1,419,004 shares were held by the Trust (2020: 956,569) (see note 7).

   17   Basic and diluted profit per share (pence) 

Basic profit per share is calculated by dividing the profit of the Company for the year attributable to the ordinary shareholders of GBP38,253,046 (2020: GBP36,224,743) divided by the weighted average number of shares outstanding during the year of 32,782,089 after excluding treasury shares (2020: 32,095,510 shares).

Diluted profit per share is calculated by dividing the profit of the Company for the year attributable to ordinary shareholders of GBP38,253,046 (2020: GBP36,224,743) divided by the weighted average number of ordinary shares outstanding during the year, as adjusted for the effects of all dilutive potential ordinary shares, of 32,782,089 after excluding treasury shares (2020: 32,095,510 shares).

18 NAV per share (pence)

The Company's NAV per share of 437.63 pence (2020: 317.18 pence) is based on the net assets of the Company at the year-end of GBP140,692,608 (2020: GBP104,257,996) divided by the shares in issue at the end of the year of 32,148,823 after excluding treasury shares (2020: 32,870,810).

The Company's diluted NAV per share of 437.63 pence is based on the net assets of the Company at the year-end of GBP140,692,608 (2020: GBP104,257,996) divided by the shares in issue at the end of the year, as adjusted for the effects of dilutive potential ordinary shares of 32,148,823 after excluding treasury shares (2020: 32,870,810).

19 Net cash used in operating activities

Reconciliation of profit before finance cost and tax to net cash used in operating activities:

 
                                                        2021          2020 
                                                     Company       Company 
                                                         GBP           GBP 
----------------------------------------------  ------------  ------------ 
 Profit before finance cost and tax (Revenue)    (3,439,412)   (3,024,062) 
 Adjustments: 
 Adjustment for accrued interest on loan 
  to Hamsard 3463 Limited                                  -     (151,776) 
 Share-based payment expense                         682,525        71,158 
 Movement in loans from associates                 (154,268)      (33,907) 
                                                 (2,911,155)   (3,138,587) 
 Non-cash items 
 Movement in trade and other receivables              37,647        66,517 
 Movement in trade and other payables               (19,059)       185,826 
 Net cash used in operating activities           (2,892,567)   (2,886,244) 
----------------------------------------------  ------------  ------------ 
 

20 Financial instruments

The Company's financial instruments comprise:

-- Investments in listed and unlisted companies held by associates, comprising equity and loans

   --      Cash and cash equivalents, loans and convertible loan note instruments; and 
   --      Accrued interest and trade and other receivables, accrued expenses and sundry creditors. 

Financial risk management objectives and policies

The main risks arising from the Company's financial instruments are liquidity risk, credit risk, market price risk and interest rate risk. None of those risks are hedged. These risks arise through directly held financial instruments and through the indirect exposures created by the underlying financial instruments in the associates. These risks are managed by the Directors in conjunction with the Investment Advisor. The Investment Advisor is responsible for day to day management of financial instruments in the associates.

Capital management

The Company's capital comprises share capital, share premium and reserves and is not subject to externally imposed capital requirements.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's liquid assets comprise cash and cash equivalents and trade and other receivables, which are readily realisable.

Residual contractual maturities of financial liabilities

 
                                 Less 
                                 than     1 - 3     3 months       1 - 5   Over 5   No stated 
                              1 Month    Months    to 1 year       years    years    maturity 
 31 January 2021                  GBP       GBP          GBP         GBP      GBP         GBP 
-----------------------    ----------  --------  -----------  ----------  -------  ---------- 
 Financial liabilities 
 Trade and other 
  payables                    659,645         -            -           -        -           - 
 Loan note instruments              -         -                4,436,341        -           - 
 
 Total                        659,645         -            -   4,436,341        -           - 
-------------------------  ----------  --------  -----------  ----------  -------  ---------- 
 
                                 Less 
                                 than     1 - 3     3 months       1 - 5   Over 5   No stated 
                              1 Month    Months    to 1 year       years    years    maturity 
 31 January 2020                  GBP       GBP          GBP         GBP      GBP         GBP 
-----------------------    ----------  --------  -----------  ----------  -------  ---------- 
 Financial liabilities 
 Trade and other 
  payables                  1,028,704         -            -           -        -           - 
 Loan note instruments              -         -                4,735,415        -           - 
 
 Total                      1,028,704         -            -   4,735,415        -           - 
-------------------------  ----------  --------  -----------  ----------  -------  ---------- 
 

Credit risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company.

The Company, through its interests in associates, has advanced loans to a number of private companies which exposes the Company to significant credit risk. The loans are advanced to unquoted private companies, which have no credit risk rating. They are entered into as part of the investment strategy of the Company and its associates, and credit risk is managed by taking security where available (typically a floating charge) and the Investment Advisor taking an active role in the management of the borrowing companies.

Although the Investment Advisor looks to set realistic repayment schedules, it does not necessarily view a portfolio company not repaying on time and in full as 'underperforming' and seeks to monitor each portfolio company on a case-by-case basis. However, in all cases the Investment Advisor reserves the right to exercise step in rights. In addition to the repayment of loans advanced, the Company and associates will often arrange additional preference share structures and take significant equity stakes so as to create shareholder value. It is the performance of the combination of all securities including third party debt that determines the Company's view of each investment.

At the reporting date, the Company's financial assets exposed to credit risk amounted to the following (excluding exposure in the underlying associates):

 
                                       2021         2020 
                                        GBP          GBP 
-----------------------------   -----------  ----------- 
 Cash and cash equivalents       27,854,701   25,604,783 
 Trade and other receivables         98,200      135,745 
 Total                           27,952,901   25,740,528 
------------------------------  -----------  ----------- 
 

Cash balances are placed with HSBC Bank plc, Barclays Bank plc, both of which have the credit rating of A1 Negative (Moody's) and Santander International which has the credit rating of A2 (Moody's).

Market price risk

Market price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk). The Company is exposed to a market price risk via its equity investments held through its interests in associates, which are stated at fair value.

Market price risk sensitivity

The Company is exposed to market price risk with regard to its investment in the partnerships, which own equity interests in a number of quoted and unquoted companies which are stated at fair value. Luceco plc was quoted on the Main Market of the London Stock Exchange at 31 January 2021. If Luceco plc's share price had been 5.0 per cent. higher than actual close of market on 31 January 2021, EPE Special Opportunities Limited's NAV / share would have been 2.96 per cent. higher than reported. If Luceco's share price had been 5.0 per cent. lower than actual close of market on 31 January 2021, EPE Special Opportunities Limited's NAV / share would have been 2.96 per cent. lower than reported. Such movement would have had a corresponding effect on the profit for the year.

Interest rate risk

The Company is exposed to interest rate risk through its investment in the associates and on its cash balances. The associates provide loans to portfolio companies. Most of the loans are at fixed rates. Cash balances earn interest at variable rates. The unsecured loan note instruments carry fixed interest rates.

The table below summarises the Company's exposure to interest rate risks. It includes the Company's financial assets and liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying values of assets and liabilities:

 
                                Less than     1 month         1 - 5       Over   Non- interest 
 31 January 2021                  1 month    - 1 year         years    5 years         bearing         Total 
 Assets                               GBP         GBP           GBP        GBP             GBP           GBP 
---------------------------   -----------  ----------  ------------  ---------  --------------  ------------ 
 Receivables and 
  cash 
 Trade and other 
  receivables                           -                         -          -          98,200        98,200 
 Cash and cash equivalents     27,854,701           -             -          -               -    27,854,701 
----------------------------  -----------  ----------  ------------ 
 Total financial 
  assets                       27,854,701           -             -          -          98,200    27,952,901 
----------------------------  -----------  ----------  ------------  ---------  --------------  ------------ 
 
 Liabilities 
 Financial liabilities 
  measured at amortised 
  cost 
 Trade and other 
  payables                              -           -             -          -       (659,645)     (659,645) 
 Unsecured loan note 
  instruments                           -           -   (3,956,822)          -               -   (3,956,822) 
 Total financial 
  liabilities                           -           -   (3,956,822)          -       (659,645)   (4,616,467) 
----------------------------  -----------  ----------  ------------  ---------  --------------  ------------ 
 
 
                                      Less than     1 month         1 - 5       Over   Non- interest 
 31 January 2020                        1 month    - 1 year         years    5 years         bearing         Total 
 Assets                                     GBP         GBP           GBP        GBP             GBP           GBP 
-----------------------------  ----------------  ----------  ------------  ---------  --------------  ------------ 
 Receivables and cash 
 Trade and other receivables                  -           -             -          -         135,745       135,745 
 Cash and cash equivalents           25,604,783           -             -          -               -    25,604,783 
-----------------------------  ----------------  ----------  ------------ 
 Total financial assets              25,604,783           -             -          -         135,745    25,740,528 
-----------------------------  ----------------  ----------  ------------  ---------  --------------  ------------ 
 
 Liabilities 
 Financial liabilities 
  measured at amortised 
  cost 
 Trade and other payables                     -           -             -          -     (1,028,704)   (1,028,704) 
 Unsecured loan note 
  instruments                                 -           -   (3,936,217)          -               -   (3,936,217) 
 Total financial liabilities                  -           -   (3,936,217)          -     (1,028,704)   (4,964,921) 
-----------------------------  ----------------  ----------  ------------  ---------  --------------  ------------ 
 

Interest rate sensitivity

The Company is exposed to market interest rate risk only via its cash balances. A sensitivity analysis has not been provided as it is not considered significant to Company performance.

Currency risk

The Company's has no significant exposure to foreign currency risk.

Exposure to other market price risk

The investment advisor monitors the concentration of risk for equity and debt securities based on counterparties and industries (and geographical location). The Company's equity and debt investments are concentrated in the following industries.

 
                                                                     2020    2019 
                                                                        %       % 
---------------------------------------------  --------------------------  ------ 
 Retail                                                              13.3    21.2 
 Engineering, Manufacturing and Distribution                         61.2    52.5 
 Healthcare                                                           2.7     0.7 
 Credit Funds                                                         3.6     1.4 
 Bank Deposits                                                       19.2    24.2 
---------------------------------------------  --------------------------  ------ 
                                                                    100.0   100.0 
---------------------------------------------  --------------------------  ------ 
 

The Company notes that there was a concentration on the Engineering, Manufacturing and Distribution sector, representing 61.2 per cent. of investments for the year ended 31 January 2021 (31 January 2020: 52.5 per cent.). The Company monitors carefully the sector concentration risk across the portfolio.

Operational risk

'Operational risk' is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the Company's activities (both at the Company and at its service providers) and from external factors (other than credit, market and liquidity risks) such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour.

The Company's objective is to manage operational risk so as to balance the limitation of financial losses and damage to its reputation with achieving its investment objective of generating returns to investors.

The primary responsibility for the development and implementation of controls over operational risk rests with the Board of Directors. This responsibility is supported by the development of overall standards for the management of operational risk, which encompasses the controls and processes at the service providers and the establishment of service levels with the service providers, in the following areas:

   --      documentation of controls and procedures; 
   --      requirements for: 
   -       appropriate segregation of duties between various functions, roles and responsibilities; 
   -       reconciliation and monitoring of transactions; and 
   -       periodic assessment of operational risk faced; 
   --      the adequacy of controls and procedures to address the risks identified; 
   --      compliance with regulatory and other legal requirements; 
   --      development of contingency plans; 
   --      training and professional development; 
   --      ethical and business standards; and 
   --      risk mitigation, including insurance if this is effective. 

The Company's key service providers include the following:

   --      Administrator: Langham Hall Fund Management (Jersey) Limited 
   --      Investment Advisor: EPIC Private Equity LLP 
   --      Financial Administrator: EPE Administration Limited 
   --      Nominated Advisor and Broker: Numis Securities Limited 

The Directors' assessment of the adequacy of the controls and processes in place at the service providers with respect to operational risk is carried out via regular discussions with the service providers as well as site visits to their offices. The Company also undertakes periodic third-party reviews of service providers' activities.

21 Directors' interests

Five of the Directors have interests in the shares of the Company as at 31 January 2021 (2020: four). Nicholas Wilson holds 131,265 ordinary shares (2020: 128,764). Robert Quayle holds 112,577 ordinary shares (2020: 109,979). Clive Spears holds 133,270 ordinary shares (2020: 129,270). Heather Bestwick holds 19,263 ordinary shares (2020: 13,888). David Pirouet holds 11,162 ordinary shares (2020: nil).

22 Related parties

Directors' fees expense during the year amounted to GBP154,000 (year ended 31 January 2020: GBP154,264) of which GBP12,833 is accrued as at 31 January 2021 (2020: GBP12,833)

Certain Directors of the Company and other participants are incentivised in the form of equity settled share-based payment transactions, through a Joint Share Ownership Plan (see note 7).

Details of remuneration payable to key service providers are included in note 5 to the financial statements.

In August 2020, the Investment Advisor acquired a controlling interest in Atlantic Capital Management Limited ("ACML"). ACML is the manager of Atlantic Credit Opportunities Fund and the sub-advisor to the segregated account of Prelude Structured Alternatives Master Fund LP. On 1 September 2020, the Company completed a GBP1.9 million investment into Atlantic Credit Opportunities Fund. On 12 November 2020, the Company completed a further $2.5 million investment in a segregated account of Prelude Structured Alternatives Master Fund LP. The Company will not pay any management or performance fees to ACML in relation to these two investments.

23 Subsequent events

Following the year end, the Directors purchased 6,088 ordinary shares in the Company at a price of 271.00 pence per ordinary share on 18 February 2021 and 2,911 ordinary shares at 278.80 pence per ordinary share on 12 February 2021.

Schedule of shareholders holding over 3% of issued shares

As at 31 January 2021

 
                                                         Percentage holding 
--------------------------------------------------      ------------------- 
 Giles Brand                                                         32.10% 
 Corporation of Lloyds                                                9.92% 
 Premier Miton Investors                                              6.75% 
 Canaccord Genuity Wealth Management                                  6.22% 
 Boston Trust Company Limited (Trustee to the ESO 
  JSOP Scheme)                                                        4.47% 
 Lombard Odier Darier Hentsch                                         3.11% 
 Total over 3% holding                                               62.57% 
------------------------------------------------------  ------------------- 
 

Company Information

 
 Directors                            Administrator and Company Address 
 C.L. Spears (Chairman)               Langham Hall Fund Management 
                                       (Jersey) Limited 
 H. Bestwick                          Liberation House 
 D.R. Pirouet                         Castle Street, St Helier 
 R.B.M. Quayle                        Jersey JE1 2LH 
 N.V. Wilson 
 
 
 Investment Advisor                   Nominated Advisor and Broker 
 EPIC Private Equity LLP              Numis Securities Limited 
 Audrey House                         10 Paternoster Square 
 16-20 Ely Place                      London EC4M 7LT 
 London EC1N 6SN 
 
 
 Auditors and Reporting Accountants   Registered Agent (Bermuda) 
 KPMG Audit LLC                       Conyers Dill & Pearman 
 Heritage Court                       Clarendon House, 2 Church Street 
 41 Athol Street                      Hamilton HM 11 
 Douglas                              Bermuda 
 Isle of Man IM1 1LA 
 
 
 Bankers                              Registrar and CREST Providers 
 Barclays Bank plc                    Computershare Investor Services 
                                       (Jersey) Limited 
 1 Churchill Place                    Queensway House 
 Canary Wharf                         Hilgrove Street 
 London E14 5HP                       St. Helier JE1 1ES 
 
 HSBC Bank plc                        Investor Relations 
 1st Floor                            Richard Spiegelberg 
 60 Queen Victoria Street             Cardew Company 
 London EC4N 4TR                      5 Chancery Lane 
                                      London EC4A 1BL 
 Santander International 
  PO Box 545 
  19-21 Commercial Street 
  St Helier, Jersey, JE4 8XG 
 

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