TIDMPEQ
RNS Number : 5496F
Private Equity Investor PLC
28 July 2016
PRIVATE EQUITY INVESTOR PLC
ANNUAL FINANCIAL REPORT
FOR THE YEARED 31 MARCH 2016
INVESTMENT OBJECTIVE AND POLICY
Investment Objective
The objective of the Company has been to provide Shareholders
with long-term capital growth. The Company is not making
investments in new private equity funds but is managing its
existing investments with a view to making periodic returns of
capital to Shareholders.
Investment Policy
Risk Diversification
The Company has invested in and maintains a broad portfolio of
US-based venture capital and buyout funds (the "Funds"), managed by
a number of different management groups and focused on various
stages of growth so as to obtain exposure to a diversified
underlying portfolio of investments primarily in private companies
in the technology sector. Through the Funds, the Company has
exposure to a diverse portfolio of underlying companies.
No New Fund Investments
It is the policy of the Company not to make new fund
investments. However, the Company will continue to meet existing
capital commitments to the Funds and may on occasion support
follow-on commitments in existing Funds or affiliated annex
funds.
No Over-commitment; Ring-fenced Accounts
Over-commitment is the practice of making commitments to funds
which exceed the cash available for investment. The Company has a
policy not to be over-committed. All amounts required to fund
existing capital commitments to the Funds are held in ring-fenced
accounts.
Distributions Received From the Funds
The managers of the Funds invest principally in unlisted
technology companies based in the US. After the flotation or sale
of their investments, the Funds may distribute cash or securities
to the Company. As a result, the Company may from time to time hold
listed securities. It is the policy of the Company to sell listed
securities received as distributions from the Funds within a short
period of time unless the stock price has decreased meaningfully,
in which case the Company may hold these securities for a longer
period of time until favourable selling conditions exist. The
listed securities received as distributions from the Funds
typically do not represent a significant part of the Company's
overall investments.
Liquidity
The Company may hold substantial cash balances due to existing
capital commitments to the Funds, due to the receipt of cash
distributions from the Funds, or due to cash realised upon the sale
of listed securities received from the Funds as distributions.
These cash balances are principally in open-ended investment funds
pending capital call requests from the Funds, used for corporate
purposes or for distribution to Shareholders.
Return of Capital to Shareholders
The Company proposes to make periodic returns of capital to
Shareholders from the proceeds of distributions received from the
Funds. As the timing and amount of distributions from the Funds
fluctuates and is not known, the Company cannot predict when a
return of capital to Shareholders may be made, or the amount.
Gearing
In normal circumstances the Company does not expect to borrow.
The Company's Articles of Association limit borrowing to an amount
broadly equal to its capital and reserves. Some investments made by
the Funds may be geared but the Company does not review the level
of gearing of these underlying investments.
Derivatives
The Company does not make use of financial derivatives and does
not hedge against currency fluctuations.
Dividends
The Funds provide little income. Income may be generated from
liquid funds and the Company may be required to pay dividends to
continue to qualify as an Investment Trust. Such dividends are,
however, likely to be small and irregular.
SUMMARY OF RESULTS AND FINANCIAL HIGHLIGHTS
31 March 31 March % change
2016 2015
Group Group
Net assets and Shareholders'
funds GBP25,231,000* GBP35,339,000 (28.6)
Net assets per Ordinary
Share ("NAV") 211.2p 238.7p (11.5)
Net assets and Shareholders'
funds in US$ $36,277,000* $52,461,000 (30.8)
Net assets per Ordinary
Share in US$ 303.7c 354.4c (14.3)
Mid-market price per Ordinary
Share 166.0p 194.5p (14.7)
Discount to NAV 21.4% 18.5%
Net revenue loss after GBP(514,000) GBP(532,000)
taxation
Net total (loss)/return GBP(3,361,000) GBP1,188,000
Total (loss)/return per
Ordinary Share (27.8)p 7.7p
Exchange rate at year
end (US$/GBP) 1.4378 1.4845 3.1
Number of Ordinary Shares
in issue 11,945.519* 14,805,508
Ongoing charges (Company
only)** 1.8% 1.4%
Ongoing charges (Group)** 1.8% 1.6%
Cumulative cash returned
to Shareholders through GBP76,850,000 GBP70,150,000
tender offers*
* Following the tender offer completed in April 2015 when GBP6.7
million was returned to Shareholders.
** Ongoing charges at both the Company and Group level are
included. The Company's ongoing charges are calculated excluding
subsidiary expenses. Group ongoing charges include subsidiary
expenses. The Company's wholly owned subsidiary was liquidated in
December 2015.
CHAIRMAN'S STATEMENT
I am pleased to present the results for Private Equity Investor
PLC ("PEI" or "the Company" or "the Parent Company") for the year
ended 31 March 2016.
Results
The Company's Net Asset Value ("NAV") per share at 31 March 2016
was 211.2p, compared with 238.7p a year earlier, a decline of
11.5%. This was predominantly due to a decrease in LP
valuations.
The NAV per share in dollars decreased by 14.3% from 354.4c per
share to 303.7c per share, reflecting a decrease in the dollar
valuation of the Company's fund investments (individually a "Fund"
and collectively the "Funds"). The unfavourable effect of this,
however, was offset by the strengthening of the Dollar against
Sterling from $1.48 to $1.44.
The Company's share price decreased by 14.7% during the year,
from 194.5p to 166.0p. The discount to NAV at 31 March 2016 was
21.4%, compared with 18.5% a year earlier.
No dividend is proposed for the period (2015: nil).
Tender Offers
During the year, on 22 April 2015, the Company completed a
tender offer to Shareholders of GBP6.7 million. 2,859,989 shares
were purchased for cancellation at a price of 234.2590 pence per
share.
The Company has now made seven Tender Offers since December
2007, returning a total of GBP76.85 million to Shareholders.
Following the latest tender offer, there are now 11,945,519 shares
in issue. The Company will continue its policy of returning capital
as and when cash resources reach an appropriate level.
Distributions and Calls from Fund Investments
In the twelve months ended 31 March 2016, the Company received
cash and stock distributions from the Funds totalling $5.9 million,
compared with $11.4 million in the twelve months ended 31 March
2015 and $13.5 million in the twelve months 31 March 2014. Of the
$5.9 million received during the period, cash distributions
amounted to $4.9 million (GBP3.2 million) and stock distributions
amounted to $1.0 million (GBP0.6 million). The largest distribution
received by the Company was $0.9 million in cash from Dawntreader
Fund II.
During the period, two Funds called capital from the Company in
the aggregate amount of $0.3 million (2015: $1.1 million). Of the
Company's 20 portfolio of Funds, 10 Funds have been fully drawn
down but an aggregate of $4.0 million (GBP2.8 million) in uncalled
capital commitments remains outstanding in respect of the other 10
Funds. At 31 March 2016, the Company's uncalled capital commitments
are held in ring-fenced accounts in accordance with an obligation
given to the Court at the time of the conversion of the Company's
Share Premium Account.
The Company regularly contacts vintage 1999-2004 Funds that have
uncalled capital to explore the possibility of the Fund releasing
the Company from its uncalled capital commitments. In most cases,
the Company's requests have been rejected by the Funds. These
requests have been refused for a number of reasons including the
need to call additional capital to participate in future portfolio
company financings, Fund expenses, or on the advice of legal
counsel. In one case, however, at the request of PEI, a Fund has
agreed to release all limited partners from a substantial portion
of the Fund's uncalled capital commitments. The value of this
return of uncalled capital represents over 25% (or $1 million) of
the Company's outstanding commitments.
During the period, the Company also successfully led efforts to
re-negotiate the management fees of one Fund, which resulted in a
reduced management fee and a fee structure that incentivises the
Fund to return cash to Limited Partners in the near term. Where
appropriate, the Company will seek to continue these efforts with
other Funds.
Portfolio Review
At 31 March 2016, of the Company's 20 portfolio Funds, four were
still in their initial fund terms,10 were in term extensions and
six were in the process of winding-down.
As at 31 March 2016, the Company held investments, through the
20 Funds, in 189 private and 44 public companies. At that date, the
largest 25 underlying portfolio investments (21 private, 4 public),
with a value of $11.9 million, accounted for 50% of the Funds'
total value. The twelve months under review saw the Initial Public
Offerings ("IPOs") of three underlying portfolio companies (2015:
six).
On 3 November 2015, Sprout Capital IX, L.P. announced it had
completed the liquidation of all its security positions. On 10
December 2015, PEI received a distribution of $91,246 leaving a
small balance of cash remaining. On 29 June 2016, the Company
received a final distribution of $11,321.
The Company has continued with its efforts to increase the pace
of distributions from the Funds to the Company. As discussed above,
the Company actively seeks to be released from its uncalled capital
commitments. In addition, in situations where a Fund continues to
hold shares of technology portfolio companies long after these
companies have held their IPO, the Company has requested the Funds
to distribute these shares to the Fund's limited partners. The
Funds can be reluctant to distribute these public securities on the
basis that the Fund believes that the stock price will appreciate,
or that the stock is restricted due to the Fund's ownership
position, representation on the board of directors, or other legal
or contractual restrictions. The Company will continue to encourage
Funds to make distributions to limited partners as soon as
practicable. Finally, at PEI's request, the Company is represented
on the advisory boards of two Funds, and in these cases is
participating as an advisory board member and actively encouraging
the Funds to seek liquidity of their underlying investments.**
US Venture Capital Industry Liquidity Update
The following chart gives details of the US mergers &
acquisitions ("M&A") and IPO activity of venture capital-backed
companies in calendar year 2015 and the first quarter of 2016. The
year 2015 was a difficult year for liquidity in the US venture
capital markets, with both venture-backed M&A and IPO activity
down significantly from 2014.
Quarter/Year Total Total Disclosed Number Total IPO
M&A Deals M&A Value* of IPOs Amount
($m) ($m)
----------- ---------------- --------- ----------
2014 485 48,140 117 15,512
----------- ---------------- --------- ----------
2015 Q1 97 2,182 17 1,437
2015 Q2 79 4,187 29 3,799
2015 Q3 111 6,883 15 1,904
2015 Q4 105 4,256 16 2,239
----------- ---------------- --------- ----------
2015 392 17,508 77 9,379
----------- ---------------- --------- ----------
2016 Q1 79 4,782 6 574
----------- ---------------- --------- ----------
2016 79 4,782 6 574
----------- ---------------- --------- ----------
Source: National Venture Capital Association/Thomson Reuters
press release dated 4 April 2016.
* Figures only account for deals with disclosed values.
** Advisory committees may be established by a Fund, and the
general partner of the Fund typically has absolute discretion to
appoint or remove advisory board members. Advisory board members
are not allowed, by contract and by law, to actively participate in
the business or management of a Fund; rather, they serve to advise
the general partner on matters typically relating to valuation and
conflicts of interest.
Ongoing Charges Ratio
The ongoing charges ratio for the Company for the year ended 31
March 2016 was 1.8% (2015: 1.4%). As the Company returns cash to
Shareholders and the Company's NAV decreases, the percentage of
expenses to net assets is likely to increase. The Company continues
to work to reduce the Group's costs which reduced from GBP547,000
to GBP520,000 in the year to 31 March 2016. During the period under
review, the Company changed the provider of its Administration and
Company Secretarial services resulting in a reduced fee. In
addition, the non-cash assets of Campton Group, Inc ("CGI"), a
Californian Corporation and the Company's wholly owned subsidiary,
were sold and CGI was liquidated in the period resulting in the
Company now using external advisers on a limited basis.
Continuation Vote
In September 2014, the Board amended its Articles of Association
in order for Shareholders to consider the continuation of the
Company as an investment trust annually rather than every five
years. The Board strongly believes that continuation of the Company
as an investment trust is in the best interests of Shareholders.
The alternative to a continuation of the Company is to seek an
immediate sale of the assets, which could be difficult as there are
legal and contractual restrictions on transfers for some of the
Funds, or to appoint a liquidator to realise the assets over time.
The appointment of a liquidator would place the assets under the
control of someone without knowledge or experience of the assets
and might result in the sale of Funds at unattractive prices and in
the loss of quotation of the Company's shares.
The Board believes that an annual continuation vote is in the
best interests of Shareholders and notes that four Funds are still
in their initial terms, which expire from late-2016 to 2018. It is
probable that it will take some time after the expiration of these
initial terms for these Funds to be fully wound down. As a result,
the Board believes that an orderly winding down of the Company
could take some time but is considering and pursuing all
opportunities to accelerate this process whilst maximising
Shareholder value.
Outlook
The Company's portfolio of Funds consists of two baskets of
vintage years: 15 Funds of the 1999-2004 vintage years and five
Funds of the 2006-2007 vintage years. The Funds of the 1999-2004
vintage years are either in term extension periods or are in
liquidation. These Funds are not making new investments and are
managing their portfolios to achieve liquidity events and
wind-down. The Company expects that several of these vintage
1999-2004 Funds will liquidate in the next 12-24 months.
As these vintage 1999-2004 Funds search for liquidity for their
investments, they have several options. First, the Funds can manage
the investments to a "natural" liquidity event, for example, the
sale of a portfolio company or an IPO. This approach is intended to
maximise the value of the proceeds to the Funds, but also may take
longer to realise. This approach is used by most of the Funds.
Second, when a Fund's ownership position in a portfolio company is
significant, the Fund may attempt to force an underlying portfolio
company to sell itself in a managed sale process. Such forced sales
may result in the Fund obtaining less, and possibly significantly
less, in proceeds than the value the investment is being carried in
the Fund's financial statements. On the other hand, the Fund may
well realise proceeds from a forced sale faster than managing for
"natural" liquidity events. Another option is that a Fund may sell
some or all of their portfolio investments on the secondary market,
in transactions known as "direct secondaries." This approach may
result in the Fund receiving less, possibly significantly less, in
proceeds than the value the investments are being carried in the
Fund's financial statements. The timing of a secondary sale,
however, is typically faster than managing for "natural" liquidity
events. The Company understands that a few Funds are exploring
opportunities on the direct secondary market. Any decision on the
sale of underlying portfolio investments is at the sole and
absolute discretion of the general partner of each Fund. Limited
Partners, such as the Company, are prevented by contract and by law
from actively participating in the business and affairs of the
Funds. These 1999-2004 vintage Funds may also undertake a
restructuring, whereby some existing limited partners may obtain
liquidity for their interests (typically at a discount to net asset
value) while other limited partners may continue with the Fund.
Funds of the 2006-2007 vintage years are generally not making
new investments, and are now in the realisation phase of their
funds. During this realisation phase of their investment process,
the Funds will manage their portfolios for "natural" liquidity
events as described above. The Company believes that it could take
some time before these Funds fully liquidate.
The Company receives distributions from the Funds in the form of
cash or stock. The timing and amount of these distributions are at
the discretion of the Fund managers. A Fund may make a distribution
after a company has been sold, held its IPO or a secondary
offering, or is recapitalised and once all applicable contractual
and legal restrictions (such as escrows and IPO lock-up periods)
have been fulfilled. Alternatively, a Fund may decide not to make a
distribution but instead need available capital for follow-on
investments, management fees or other expenses. In some cases, when
an underlying portfolio company holds its IPO, a Fund may continue
to hold the public securities after applicable contractual and
legal restrictions have expired. This typically occurs when the
Fund expects the value of the public securities to rise or when the
IPO is considered more of a financing event rather than a liquidity
event.
The pace of distributions received from the Company's Funds has
slowed considerably over the past year. The Company believes this
is primarily due to the difficult markets discussed above, and also
due to the age of the Funds and the age and quality of their
underlying portfolio investments, particularly with respect to the
1999-2004 vintage Funds. If the slow market continues, the pace of
distributions received by the Company may continue to be slow. This
in turn impacts the Company's ability to return capital to its
Shareholders via tender offers.
As portfolio Fund assets decline, Fund expenses, such as
management fees and other expenses, become a larger percentage of
Fund assets which can negatively impact Fund performance.
The Company continues actively to seek liquidity for its
positions in the Funds, for example, through sales of the Company's
interests in the Funds on the secondary market. On 4 July 2016 the
Company announced that it had received a proposal to acquire 15 of
its LP investments at a 35% discount to the net asset value of
these holdings as at 31 December 2015, before expenses and subject
to adjustments for subsequent distributions and calls. Since then
the Company has received other approaches for its assets.
It continues to be the Company's policy to make periodic returns
of capital to Shareholders in a cost-effective manner and the
Company will continue to implement this policy as appropriate.
PETER DICKS
Chairman
28 July 2016
PORTFOLIO OF FUNDS
Investment portfolio as at 31 March 2016
% of % of
Total Fair* Fair* net net
commitment value value assets assets
US$'000 US$'000 GBP'000 2016 2015
Unquoted Funds
Dawntreader Fund
II 30,000 514 357 1.4 3.7
Draper Fisher Jurvetson
ePlanet Ventures 30,000 3,613 2,513 10.0 11.5
Draper Fisher Jurvetson
Fund VI 2,000 404 281 1.1 1.3
Draper Fisher Jurvetson
Fund VII 5,000 1,658 1,153 4.6 5.4
Draper Fisher Jurvetson
Gotham Venture Fund 3,300 726 505 2.0 1.7
Focus Ventures II 30,000 1,258 875 3.5 2.2
Francisco Partners
II 5,000 1,906 1,326 5.2 4.9
Institutional Venture
Partners XII 5,000 1,986 1,381 5.4 5.1
New Enterprise Associates
9 5,000 626 435 1.7 1.4
New Enterprise Associates
10 10,000 2,864 1,992 7.9 6.1
New Enterprise Associates
12 3,000 1,408 979 3.9 3.8
Oak Investment Partners
X 10,000 2,147 1,493 5.9 6.3
Sprout Capital IX 3,750 11 8 0.0 0.2
TCV IV 25,000 21 14 0.1 0.2
Vanguard VII 3,000 110 77 0.3 1.1
VantagePoint Venture
Partners 2006 5,000 2,078 1,445 5.7 4.3
VantagePoint Venture
Partners IV 10,000 1,258 875 3.5 3.5
Vector Capital IV 4,000 3,371 2,345 9.3 6.7
Zone Venture Fund
II 10,000 456 317 1.3 1.2
Zone Venture Fund
II Annex 400 34 24 0.1 0.1
Total Unquoted Funds 199,450 26,449 18,395 72.9 70.7
----------- -------- -------- ------- -------
Open-ended Investment
Funds
USD
BlackRock ICS Institutional
USD Liquidity Fund - 2,000 1,391 5.5 3.8
JP Morgan USD Liquidity
Premier Distribution
Fund - 1,800 1,252 5.0 4.0
RBS Global Treasury
Funds Plc USD Money
Fund Distributing - 100 69 0.3 0.2
GBP
RBS Global Treasury
Funds Plc GBP Money
Fund Distributing - 1,582 1,101 4.3 0.3
Total Open-ended
Investment Funds - 5,482 3,813 15.1 8.3
Total Investments 199,450 31,931 22,208 88.0 79.0
----------- -------- -------- ------- -------
Net current assets 4,346 3,023 12.0 21.0
-------- -------- ------- -------
Net assets 36,277 25,231 100.00 100.0
* Of remaining investment.
Summary of Individual Fund Investments:
31 March
2016
Total
Fund PEI called
Vintage size commitment capital
Name US$(m) US$ US$
Dawntreader Fund
II 2000 204 30,000,000 30,000,000
Draper Fisher Jurvetson
ePlanet Ventures 1999 646 30,000,000 29,550,000
Draper Fisher Jurvetson
Fund VI 1999 379 2,000,000 2,000,000
Draper Fisher Jurvetson
Fund VII 2000 643 5,000,000 5,000,000
Draper Fisher Jurvetson
Gotham Venture Fund 1999 94 3,300,000 3,112,200
Focus Ventures II 2000 425 30,000,000 28,650,000
Francisco Partners
II 2006 2,300 5,000,000 4,655,000
Institutional Venture
Partners XII 2007 606 5,000,000 5,000,000
New Enterprise Associates
9 1999 880 5,000,000 4,900,000
New Enterprise Associates
10 2000 2,323 10,000,000 9,850,000
New Enterprise Associates
12 2006 2,525 3,000,000 2,955,000
Oak Investment Partners
X 2000 1,616 10,000,000 10,000,000
Sprout Capital IX 2000 1,082 3,750,000 3,750,000
TCV IV 2000 1,625 25,000,000 24,400,000
Vanguard VII 2000 210 3,000,000 3,000,000
VantagePoint Venture
Partners 2006 2006 1,003 5,000,000 4,875,000
VantagePoint Venture
Partners IV 2000 1,399 10,000,000 10,000,000
Vector Capital IV 2007 1,224 4,000,000 3,381,410
Zone Venture Fund
II 1999 99 10,000,000 10,000,000
Zone Venture Fund
II Annex 2004 4 400,000 400,000
------------ -------------
Total Unquoted Funds 199,450,000 195,478,610
------------ -------------
Other Information
Company Activities and Status
Until December 2015, the Group comprised the Company and its
wholly-owned subsidiary, CGI. In December 2015 CGI was liquidated.
CGI acted as a non-discretionary investment adviser to the
Company.
The Company is an investment company as defined under Section
833 of the Companies Act 2006 ("the Companies Act"), and was
incorporated and registered in England and Wales on 19 January 2000
with Company Number 3912487. Its shares are listed on the London
Stock Exchange under the ticker PEQ.
The Company has received written approval from HM Revenue and
Customs as an authorised investment trust under Section 1158 of the
Corporation Tax Act 2010 ("CTA"). The Company will be treated as an
investment trust company for each subsequent accounting period,
subject to there being no serious breaches of the conditions. In
the opinion of the Directors, the Company has directed its affairs
so as to enable it to continue to qualify for such approval. The
Articles of Association provide for Shareholders to consider the
continuation of the Company as an investment trust at each AGM and
such resolution will be proposed at the AGM on 21 September
2016.
The Company's shares qualify as investments in Individual
Savings Accounts ("ISAs").
Company Objectives and Business Model
The principal activity of the Company is to carry on business as
an investment trust in accordance with its Investment Objective and
Policy. The Company has a portfolio of Funds to which it has made
capital commitments, some of which remain to be drawn down. The
Company will honour these remaining commitments and expects to
continue to receive distributions in cash and in shares from its
portfolio of Funds. The Company does not, however, intend to enter
into any new commitments and expects to continue making periodic
returns of capital to Shareholders when sufficient monies are
received from the Funds.
Investment Objective
The objective of the Company has been to provide Shareholders
with long-term capital growth. The Company is not making
investments in new private equity funds but is managing its
existing investments with a view to making periodic returns of
capital to Shareholders.
Investment Policy
The Company has invested in the Funds, which are managed by a
number of different management groups and focused on various stages
of growth so as to obtain exposure to a diversified underlying
portfolio of investments primarily in private companies in the
technology sector. Through the Funds, the Company has exposure to a
diverse portfolio of underlying companies.
It is the policy of the Company not to make new fund
investments. However, the Company will continue to meet existing
capital commitments to the Funds and may on occasion support
follow-on commitments in existing Funds or affiliated annex
funds.
The full Investment Policy is set out above.
Net Asset Valuation
The NAV per Ordinary Share at 31 March 2016 was 211.2p (2015:
238.7p).
The Funds are stated at Directors' valuation, which is normally
based on the valuations provided by the managers of those Funds,
which are received by the Company quarterly. The valuation
methodology normally used by these Funds is that the underlying
investments are valued at fair value, which is in accordance with
IFRS 13.
In the case of marketable securities, funds in the US typically
value on a mark to market basis, which in in accordance with IFRS
13.
Results and Dividends
The results for the year are set out in the consolidated
statement of comprehensive income below. The Directors are not
recommending the payment of a dividend for the year ended 31 March
2016.
Key Performance Indicators ("KPIs")
The Board reviews the performance of the Funds at its meetings
by reference to a number of KPIs. The Board considers that the most
relevant KPIs are those that communicate the financial performance
and strength of the Company as a whole, being:
-- the NAV performance of the Company's shares;
-- share trading discount to NAV; and
-- ongoing charges ratio.
The financial performance of the Company is set out below:
Year ended Year ended
31 March 2016 31 March 2015
Net assets and Shareholders' GBP25,231,000* GBP35,339,000
funds
Net assets per Ordinary
Share 211.2p 238.7p
Discount to NAV 21.4% 18.5%
Ongoing charges (Company
only)** 1.8% 1.4%
Ongoing charges (Group)** 1.8% 1.6%
*Following the tender offer completed in April 2015 when GBP6.7
million was returned to Shareholders.
** Ongoing charges at both the Company and Group level are
shown. The Company's ongoing charges are calculated according to
the AIC guidance and, as such, exclude subsidiary expenses. Group
ongoing charges are calculated on the same basis, but include
subsidiary expenses.
Ongoing Charges Ratio
The Directors endeavour to run the Company efficiently and
monitor its operational expenses on an ongoing basis. The ongoing
charges ratio for the Company for the year ended 31 March 2016 was
1.8% (2015: 1.4%) and was 1.8% for the Group (2015: 1.6%). As the
Company returns cash to Shareholders and the Company's NAV
decreases, the percentage of expenses to net assets is likely to
increase. Efforts have been made to reduce costs, for example the
change of Company Secretary and Administrator made during the year
and the liquidation of CGI resulting in the Company using external
advisers on a limited basis.
Costs have reduced from GBP547,000 to GBP520,000 in the year to
31 March 2016. Despite these efforts, the ongoing charges ratio has
increased during the year as a result of the reduction in overall
new assets of the Company following tender offers.
Principal Risks and Uncertainties and their Mitigation
A risk assessment and a review of internal controls are
undertaken annually by the Board in the context of the Company's
overall investment objective. The review covers the key business,
operational, compliance and financial risks facing the Company.
Full details of how the Board fulfils this role are shown on pages
29 and 30 of the Annual Report.
The principal risks and uncertainties identified by the Board
are discussed below, together with an outline of how the Board
recognises and seeks to control these risks. Mitigation of the
principal risks is sought and achieved as far as possible. Further
information regarding financial risks is set out in Note 18 to the
Financial Statements below.
Stock Market Performance Risk
The Funds in which the Company is invested typically seek to
realise their own investment objectives by selling, recapitalising
or floating their investee companies. Consequently a proportion of
the Company's underlying investments is in publicly quoted stocks
(listed primarily on the NASDAQ Stock Market and NYSE) - typically
as a result of IPOs or as a result of trade sales in which the
consideration has been by way of listed equity in the acquirer.
When such shareholdings are distributed, it is the Company's
normal policy to sell them, ideally close to or above the
distribution price, as soon as possible. There may be instances
where the Company continues to hold distributed shares, in an
effort to obtain a higher price. However, this practice exposes the
Company to market risk. The Company did not directly hold any
publicly quoted investments at 31 March 2016.
Company and Fund Performance Risk
By their nature, investments in early stage and unlisted
companies often present greater risk than those in more established
enterprises. In addition, the Funds may make poor investments. The
Company has sought to mitigate this risk through the
diversification of its investment across a range of Funds
(currently 20), which are themselves invested in 233 underlying
investments.
As PEI's portfolio of Funds matures and winds down, the
Company's investment portfolio will experience greater
concentration risk.
Regulatory Breach Risk
Relevant legislation and regulations which apply to the Company
include the Companies Act 2006, the CTA and the Listing Rules of
the Financial Conduct Authority ("FCA"). The Company has noted the
recommendations of the UK Corporate Governance Code. Its statement
of compliance appears on page 27 of the Annual Report. A breach of
CTA could result in the Company losing its status as an investment
trust company and becoming subject to capital gains tax, whilst a
breach of the Listing Rules might result in censure and/or a fine
by the FCA. At each Board meeting the status of the Company is
considered and discussed, so as to ensure that all regulations are
being adhered to by the Company and its service providers.
To the knowledge of the Directors there have been no breaches of
laws or regulations during the period under review and up to the
date of this announcement.
Discount
The Directors regularly monitor the level of discount at which
the Group's shares are trading. On 31 March 2016 the Group's share
price stood at a discount of 21.4% to NAV, compared to 18.5% at 31
March 2015.
The Directors have considered the introduction of a discount
protection mechanism, whereby the Company might purchase shares in
the market at a stated minimum discount to NAV. Unlike many other
investment trusts, however, the Company does not hold readily
marketable investments from which such purchases might be funded.
Moreover, it has already indicated that it will make periodic
tender offers to return the proceeds of distributions from its
portfolio to Shareholders. In these circumstances, the Directors do
not consider that a formal discount protection mechanism is
appropriate, however, they continue to seek authority annually to
exercise their ability to buy back shares.
Investment Trust Status
The Board also regularly reviews the share register to confirm
that the Company is not a close company (as defined in the CTA),
however, the Board acknowledges that it has no control over
Shareholders purchasing shares nor their concentration on the share
register. Being a close company would breach the CTA rules and the
Company would be likely to lose its investment trust qualification,
as further discussed under "Regulatory Breach Risk" above.
The Company monitors the significant Shareholder positions on an
on-going basis and where the Company receives or is made aware of
information from significant Shareholders in relation to their
shareholdings and voting rights, the Company investigates as
appropriate the disclosures that have been made and considers their
impact so as to ascertain whether or not there is any impact on the
Company's close company status for the relevant financial
period.
Fund Term Risk
When a venture capital or buyout firm reaches the end of its
term (including extensions), the fund manager typically engages in
an orderly winding-down of the Fund. During this winding-down
period, which can last several years, the manager of the Fund
attempts to exit the remaining investments while maximising value
for the Fund's investors. There is a risk, however, that a Fund in
wind-down may realise proceeds on the sale of investments at less
than reported fair value. If this happens, it could adversely
impact the value of interests in the Fund held by investors. In
addition, a Fund in wind-down will incur expenses (and possibly
management fees) during this period, which could also adversely
impact the value of investors' interests in the Fund. Ten of the
Company's twenty funds are in term extensions and six are in the
process of winding down.
Valuation Risk
The Directors are, to a significant extent, reliant on the
accuracy and timeliness of the financial information provided to
them by the General Partners of the Funds in which the Company has
invested. The Company receives valuations on a quarterly basis and
there is typically a time delay in the valuations being reported to
the Company and reflected in its NAV. The valuation of investments
held in the Funds is undertaken by the General Partner on a
quarterly basis and is reviewed annually by the Funds' auditors
during the annual audit. Annual accounts and quarterly reports are
reviewed by PEI and discussed by the Board.
Market Operation Risk
The Company is reliant on the efficient operation of markets to
provide an exit route from investments held within the Funds. Exits
are typically achieved through trade sales, recapitalisations or
the sale of stocks following an IPO of an underlying company. In
periods of uncertain markets, exits can be delayed and the Company
may see a decrease in distributions received. The Company(1)s
policy is to sell holdings which are distributed in specie at the
earliest possible moment, subject to an agreed procedure to
optimise proceeds.
Exchange Rate Risk
The majority of the Company's assets are held in US dollar
denominated securities and, since the Company's shares are quoted
in sterling, Shareholders are exposed to currency fluctuations
between these currencies. It is not the Company's policy to hedge
against currency fluctuations.
Alternative Investment Fund Managers' Directive ("AIFMD")
AIFMD was conceived by European Union legislators to address a
perceived regulatory gap to protect investors and is intended to
provide a harmonised regulatory and supervisory framework
throughout the European Union for regulating Alternative Investment
Funds.
The Company registered as a Small Alternative Investment Manager
with the FCA and is subject to a reduced level of requirements
under its regulations.
Outlook
The Company's portfolio of Funds has delivered periodic cash and
stock distributions to the Company, and this is expected to
continue. As the underlying portfolio matures, it is expected that
the pace and amount of distributions from the Funds will slow. The
timing and level of distributions will also depend on the state of
capital markets as well as economic and other factors. It is the
Company's stated policy not to make new fund investments, however,
the Company will continue to meet existing capital commitments to
the Funds and may on occasion support follow-on commitments in
existing Funds or affiliated annex funds.
Employees, Environmental, Human Rights and Community Issues
The Company has one employee, the office manager of its London
office.
The Board is composed entirely of non-executive Directors. The
Company was fully aware of each General Partner's investment policy
at the time it committed to each new Fund. Limited Partners such as
the Company, however, are not consulted on individual investments
made by the General Partner in their particular funds. In light of
this, the Company attempts to conform to best practice on
environmental and other social responsibility issues. The Company
itself has no environmental, human rights, or community policies.
In carrying out its activities and in relationships with suppliers,
the Company aims to conduct itself responsibly, ethically and
fairly.
Stewardship
The Company has noted the principles of the UK Stewardship Code.
As a result of its investment objectives it does not often hold
stocks directly other than for short periods and therefore does not
normally have opportunities to vote at general meetings. The
Company maintains an open dialogue with the Funds and typically
participates in any investor actions when it is appropriate to do
so.
Contractual Arrangements Essential to the Business of the
Company
Other than the administration agreement described on page 18 of
the full Annual Report there are no contractual arrangements that
are considered essential to the business of the Company.
Gender Diversity
During the year, the Board of Directors comprised three male
directors. Appointments to the Board are made according to a
person's existing knowledge and expertise taking into account the
Company's strategic priorities. The Company has one female employee
and, until its liquidation, the Company's subsidiary, CGI, had one
part-time male employee,
Viability Statement
The Board has considered the need to confirm that the Company is
able to meet all liabilities when due and that it can continue to
operate for a period of at least twelve months from the date of
signing the Annual Report. The Directors state below that they
consider the Company is a going concern over this timeframe.
Under the revisions to the UK Corporate Governance code there is
a new requirement that the Board also has to consider its
operations over the longer term.
The Directors consider the viability of the Company as part of
their continuing programme of monitoring risk and conclude that
three years is a reasonable time horizon to consider the continuing
viability of the Company.
In order to maintain viability, the Company has a detailed risk
control framework which has the objective of reducing the
likelihood and impact of: poor judgement in decision-making;
risk-taking that exceeds the levels agreed by the Board; human
error; or control processes being deliberately circumvented.
Controls are reviewed by the Board on an annual basis to ensure
that controls are working as prescribed. In addition, reviews of
all service providers are undertaken regularly.
The Directors consider that the Company is viable for the three
year time horizon for the following reasons:
-- The Company typically retains cash equal to approximately two
years' expenses. With over 230 underlying holdings in the
portfolio, the Directors anticipate other distributions during the
period which will at least cover the expenses for the third
year.
-- The Company has an annual continuation vote. Shareholders
have supported continuation by voting over 99% in favour in recent
years.
-- The Company has a diversified investment portfolio across 20
portfolio Funds with over 230 public and private underlying
companies. The Funds are in a mix of initial terms, extension of
lives or in wind down. Funds winding down typically take a number
of years to wind down and distribute stocks and assets to
investors.
-- Cash awaiting drawdown is held in ring-fenced accounts solely
for the purpose of meeting any outstanding calls when they are due.
The Company periodically returns capital to Shareholders through
tender offers while retaining sufficient cash to pay the Company's
ongoing expenses.
-- The ongoing charges ratio of the Company as calculated using
the AIC recommended methodology equate to 1.8% of net assets which
is competitive for a Company of this size.
-- The Company has no debt or other external capital
funding.
As a result of these factors, the Directors have concluded that
there is a reasonable expectation that the Company can continue in
operation over the three year period.
On behalf of the Board
PETER DICKS
Chairman
28 July 2016
EXTRACTS FROM THE DIRECTORS' REPORT
Capital Structure
In May 2008, Shareholders approved the cancellation of the
Company's Share Premium Account which, following the necessary
court approval obtained on 29 October 2008, permitted the creation
of a special distribution reserve. This enabled the Company to make
further returns of capital to Shareholders. Since that time, the
Company has made seven tender offers, returning a total of GBP76.85
million to Shareholders and has made selected open market purchases
of its shares. No further shares were purchased in the market
during the year. No shares were held in, or issued from, Treasury
during the year.
At the year-end and the date of this announcement the Company
had an issued share capital of 11,945,519 Ordinary Shares of 0.01p
each. Each share is entitled to one vote on a poll at general
meetings.
Going Concern
The Company's Articles of Association currently require a
continuation vote to be proposed at this year's AGM and at every
AGM thereafter. In the event that any continuation vote is not
passed, the Directors shall be required to bring forward proposals
for the voluntary liquidation, unitisation or other reorganisation
or reconstruction of the Company.
The Directors have considered the application of the Statement
of Recommended Practice for Financial Statements of Investment
Trust Companies and Venture Capital Trusts, which states that, even
if an investment company is approaching a wind-up and Shareholders
have yet to vote on the issue and provided that the Board has not
concluded that there is no realistic alternative to winding up the
company, it will usually be more appropriate for the financial
statements to be prepared on a going (rather than non-going)
concern basis.
In assessing the Company's ability to continue as a going
concern, the Directors have had regard to the Company's Investment
Objective and Policy and they have reviewed the principal risks and
uncertainties facing the Company (as stated in the Strategic Report
on pages 12 and 13 of the Annual Report) together with the
Company's commitments and contingent liabilities (note 17 below)
and the Company's cash and readily realisable investments required
to meet its investment obligations and expenditure. In addition,
the Directors have considered the Company's investment performance
and the ongoing interest of investors in the continuation of the
Company, including feedback from conversations with
Shareholders.
Based on their assessment and considerations, the Directors have
concluded that they should continue to prepare the financial
statements on a going concern basis and the financial statements
have been prepared accordingly.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF
THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report
and the Group and Company financial statements in accordance with
applicable United Kingdom law and those International Financial
Reporting Standards ("IFRS") adopted by the European Union.
The Directors are required to prepare financial statements for
each financial period, which present fairly the financial position
of the Company and of the Group and the financial performance and
cash flows of the Company and of the Group for that period. In
preparing those financial statements, the Directors are required
to:
-- select suitable accounting policies in accordance with IAS 8:
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group's and Company's financial position and
financial performance;
-- state that the Group and Company have complied with
International Financial Reporting Standards subject to any material
departures disclosed and explained in the financial statements;
-- make judgements and estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Group's and
Company's transactions and disclose with reasonable accuracy, at
any time, the financial position of the Group and Company and
enable them to ensure that the Group and Company financial
statements comply with the Companies Act 2006 and Article 4 of the
IAS Regulations. The Directors are also responsible for ensuring
that the Strategic Report and Directors' Report is prepared in
accordance with Company Law in the United Kingdom and that the
Annual Report includes information required by the Listing Rules of
the Financial Conduct Authority. They are also responsible for
safeguarding the assets of the Group and Company and hence for
taking reasonable steps for the prevention and detection of 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. The work carried out by the Auditor does not
include consideration of the maintenance and integrity of the
website and accordingly, the Auditor accepts no responsibility for
any changes that have occurred to the financial statements when
they are presented on the website. Visitors to the website need to
be aware that legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors confirm that, to the best of their knowledge:
-- the financial statements, which have been prepared in
accordance with International Financial Reporting Standards, give a
true and fair view of the assets, liabilities, financial position
and net loss of the Group and Company;
-- the Strategic Report and the Directors' Report include a fair
review of the development and performance of the business and the
position of the Group and Company, together with a description of
the principal risks and uncertainties it faces; and
-- the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for Shareholders to assess the Group and Company's
performance, business model and strategy.
For and on behalf of the Board
PETER DICKS
Chairman
28 July 2016
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the year ended 31 March 2016 and
the year ended 31 March 2015 but is derived from those accounts.
Statutory accounts for 2015 have been delivered to the Registrar of
Companies, and those for 2016 will be delivered in due course. The
Auditor has reported on those accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to
which the Auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006. The text of the
Auditor's report can be found in the Company's Annual Report and
Accounts at www.peiplc.com.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2016
Year ended 31 Year ended 31
March 2016 March 2015
Revenue Capital Revenue Capital
return return Total return return Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains
on investments
at fair
value through
profit and
loss 9 - (2,784) (2,784) - 1,793 1,793
Exchange
gains on
other items 9 - 33 33 - 35 35
-------- -------- -------- -------- -------- --------
- (2,751) (2,751) - 1,828 1,828
Operating
income
Investment
income 5 - 5 11 - 11
Other operating
income 1 - 1 4 - 4
-------- -------- -------- -------- -------- --------
Total operating
income 2 6 - 6 15 - 15
-------- -------- -------- -------- -------- --------
Operating
expenses
Administrative
expenses 3 (520) (96) (616) (547) (108) (655)
-------- -------- -------- -------- -------- --------
Operating
return/(loss) (514) (2,847) (3,361) (532) 1,720 1,188
-------- -------- -------- -------- -------- --------
(Loss)/return
before tax (514) (2,847) (3,361) (532) 1,720 1,188
-------- -------- -------- -------- -------- --------
Tax 5 - - - - - -
-------- -------- -------- -------- -------- --------
(Loss)/return
after tax (514) (2,847) (3,361) (532) 1,720 1,188
-------- -------- -------- -------- -------- --------
Other comprehensive
income
- exchange
differences
on translation
of foreign
operations - - - - 11 11
-------- -------- -------- -------- -------- --------
Total comprehensive
(loss)/income
for the
year (514) (2,847) (3,361) (532) 1,731 1,199
-------- -------- -------- -------- -------- --------
Attributable
to:
Equity holders
of the parent (514) (2,847) (3,361) (532) 1,731 1,199
-------- -------- -------- -------- -------- --------
(Loss)/earnings
per share
Basic 8 (4.3)p (23.5)p (27.8)p (3.5)p 11.2p 7.7p
-------- -------- -------- -------- -------- --------
The total column of this statement represents the Group's
Statement of Comprehensive Income, prepared in accordance with
IFRS. The supplementary revenue return and capital return columns
are both prepared under guidance published by the AIC. All items in
the above statement derive from continuing operations. The Company
has elected to take the exemption in Section 408 of the Companies
Act 2006, not to present the Company's Statement of Comprehensive
Income.
The notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2016
Capital Currency
Share Special redemption Capital translation Retained
capital reserve reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31
March 2016
As at 1 April
2015 1 35,503 4 6,261 13 (6,443) 35,339
Total comprehensive
loss for the
year - - - (2,847) - (514) (3,361)
Reclassification
of cumulative
exchange gains
of subsidiary - - - - (13) 13 -
Tender offer - (6,700) - - - - (6,700)
Tender offer
expenses - (47) - - - - (47)
-------- -------- ----------- -------- ------------ --------- --------
As at 31 March
2016 1 28,756 4 3,414 - (6,944) 25,231
-------- -------- ----------- -------- ------------ --------- --------
Year ended 31
March 2015
As at 1 April
2014 2 44,062 3 4,541 2 (5,911) 42,699
Total comprehensive
income for the
year - - - 1,720 11 (532) 1,199
Tender offer (1) (8,500) 1 - - - (8,500)
Tender offer
expenses - (59) - - - - (59)
-------- -------- ----------- -------- ------------ --------- --------
As at 31 March
2015 1 35,503 4 6,261 13 (6,443) 35,339
-------- -------- ----------- -------- ------------ --------- --------
The notes form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2016
Capital
Share Special redemption Capital Retained
capital reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended
31 March 2016
As at 1 April
2015 1 35,503 4 6,217 (6,386) 35,339
Total comprehensive
loss for the
year - - - (2,855) (506) (3,361)
Tender offer - (6,700) - - - (6,700)
Tender offer
expenses - (47) - - - (47)
-------- -------- ----------- -------- --------- --------
As at 31 March
2016 1 28,756 4 3,362 (6,892) 25,231
-------- -------- ----------- -------- --------- --------
Year ended
31 March 2015
As at 1 April
2014 2 44,062 3 4,489 (5,857) 42,699
Total comprehensive
income for
the year - - - 1,728 (529) 1,199
Tender offer (1) (8,500) 1 - - (8,500)
Tender offer
expenses - (59) - - - (59)
-------- -------- ----------- -------- --------- --------
As at 31 March
2015 1 35,503 4 6,217 (6,386) 35,339
-------- -------- ----------- -------- --------- --------
The notes form part of these financial statements.
CONSOLIDATED BALANCE SHEET
as at 31 March 2016
31 March 31 March
2016 2015
Notes GBP'000 GBP'000
Non-current assets
Investments at fair value
through profit or loss 9 22,208 27,917
Current assets
Trade and other receivables 11 272 71
Cash and cash equivalents 15 2,813 7,425
--------- ---------
3,085 7,496
--------- ---------
Total assets 25,293 35,413
--------- ---------
Current liabilities
Trade and other payables 12 62 74
--------- ---------
Net assets 25,231 35,339
--------- ---------
Capital and reserves
Share capital 13 1 1
Special reserve 14 28,756 35,503
Capital redemption reserve 14 4 4
Capital reserve 14 3,414 6,261
Currency translation
reserve 14 - 13
Retained earnings 14 (6,944) (6,443)
--------- ---------
Shareholders' funds 25,231 35,339
Total equity 25,231 35,339
--------- ---------
Net asset value per ordinary
share 16 211.2p 238.7p
--------- ---------
The Group's financial statements were approved by the Board of
Directors on 28 July 2016 and were signed on its behalf by:
PETER DICKS
Chairman
Company Registered Number: 3912487
The notes form part of these financial statements.
COMPANY BALANCE SHEET
as at 31 March 2016
31 March 31 March
2016 2015
Notes GBP'000 GBP'000
Non-current assets
Investments at fair value
through profit or loss 9 22,208 27,917
Investment in subsidiary 10 - 26
Current assets
Trade and other receivables 11 272 61
Cash and cash equivalents 15 2,813 7,407
--------- ---------
3,085 7,468
--------- ---------
Total assets 25,293 35,411
--------- ---------
Current liabilities
Trade and other payables 12 62 72
--------- ---------
Net assets 25,231 35,339
--------- ---------
Capital and reserves
Share capital 13 1 1
Special reserve 14 28,756 35,503
Capital redemption reserve 14 4 4
Capital reserve 14 3,362 6,217
Retained earnings 14 (6,892) (6,386)
--------- ---------
Shareholders' funds 25,231 35,339
Total equity 25,231 35,339
Net asset value per ordinary
share 16 211.2p 238.7p
--------- ---------
The Company's financial statements were approved by the Board of
Directors on 28 July 2016 and were signed on its behalf by:
PETER DICKS
Chairman
The notes form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2016
Year ended Year ended
31 March 31 March
2016 2015
Notes GBP'000 GBP'000
Cash flows from operating
activities
Consolidated net (loss)/return
before tax (3,361) 1,188
Adjustments to reconcile
net (loss)/return before
tax to net cash flows
from operating activities:
Losses/(gains) on investments 2,784 (1,793)
Exchange gains (31) (19)
Costs related to tender
offer 96 102
Decrease in trade and
other payables (12) (14)
Decrease in trade and
other receivables 11 7
Purchase of investments (1,165) (5,503)
Sale of investments 625 15,263
Cash distributions 3,253 4,613
----------- -----------
Net cash flows generated
from operating activities 2,200 13,844
----------- -----------
Financing
Ordinary Shares purchased (6,747) (8,559)
Costs related to tender
offer (96) (102)
----------- -----------
Net cash used in financing
activities (6,843) (8,661)
----------- -----------
Net (decease)/increase
in cash and cash equivalents (4,643) 5,183
Cash and cash equivalents
at beginning of year 7,425 2,212
Effect of foreign exchange
rates on cash and cash
equivalents 31 30
Cash and cash equivalents
at end of year 15 2,813 7,425
----------- -----------
The notes form part of these financial statements.
COMPANY CASH FLOW STATEMENT
for the year ended 31 March 2016
Year ended Year ended
31 March 31 March
2016 2015
Notes GBP'000 GBP'000
Cash flows from operating
activities
Company net (loss)/return
before tax (3,361) 1,199
Adjustments to reconcile
net (loss)/return before
tax to net cash flows
from operating activities:
Losses/(gains) on investments 2,784 (1,793)
Exchange gains (23) (27)
Costs related to tender
offer 96 102
Impairment of CGI 10 47
Decrease in trade and
other payables (10) (6)
Decrease in trade and
other receivables 1 7
Purchase of investments (1,165) (5,503)
Sale of investments 625 15,263
Cash distributions 3,253 4,613
----------- -----------
Net cash flows generated
from operating activities 2,210 13,902
----------- -----------
Investing activities
Monies from subsidiary 8 -
Net cash from investing 8 -
activities
----------- -----------
Financing
Ordinary Shares purchased (6,747) (8,559)
Costs related to tender
offer (96) (102)
----------- -----------
Net cash used in financing
activities (6,843) (8,661)
----------- -----------
Net (decrease)/increase
in cash and cash equivalents (4,625) 5,241
Cash and cash equivalents
at beginning of year 7,407 2,147
Effect of foreign exchange
rates on cash and cash
equivalents 31 19
----------- -----------
Cash and cash equivalents
at end of year 15 2,813 7,407
----------- -----------
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
at 31 March 2016
1. ACCOUNTING POLICIES
Accounting Convention
Private Equity Investor PLC is a company incorporated in Great
Britain and registered in England and Wales under the Companies Act
2006. The consolidated financial statements of the Group for the
year ended 31 March 2016 comprised the results of the Company and
its wholly-owned subsidiary, CGI (together referred to as the
"Group"). For further details see Basis of Consolidation below. The
Company is registered as a public limited company and is an
investment company as defined by section 833 of the Companies Act
2006. Until its liquidation in December 2015, CGI acted as a
non-discretionary investment adviser to the Company.
Basis of Accounting
The consolidated annual financial statements of the Group have
been prepared under International Financial Reporting Standards
("IFRS"), which comprise standards and interpretations approved by
the International Accounting Standards Board ("IASB"). The annual
financial statements of the Company have been prepared in
accordance with IFRS as adopted by the European Union, and as
applied in accordance with the provisions of the Companies Act
2006. The financial statements have also been prepared in
accordance with the Statement of Recommended Practice ("SORP")
(issued November 2014) for Investment Trust Companies and Venture
Capital Trusts except to any extent that it conflicts with
IFRS.
The accounting policies that follow set out those policies which
apply in preparing the financial statements for the year ended 31
March 2016. There are no differences between the accounting
policies applied to the Group and the Company.
The Group and Company financial statements are presented in
Sterling and all values are rounded to the nearest thousand pounds
(GBP'000) except when indicated otherwise.
Basis of Consolidation
IFRS 10 Consolidated Financial Statements
The Board considers PEI to qualify as an investment entity in
accordance with IFRS 10 paragraph 27 as the Company obtains funds
for the purpose of providing investors with investment management
services, invests funds solely for returns from capital
appreciation and/or investment income; and measures and evaluates
the performance of substantially all of its investments on a fair
value basis.
Under adoption of IFRS 10 the Board has concluded that as CGI
provided non-discretionary investment advisory services, it falls
under the key exception to the mandatory requirement to account for
Subsidiaries at fair value through profit or loss, and therefore
continues to produce consolidated financial statements.
The consolidated financial statements incorporate the financial
statements of the Company and CGI, its wholly-owned subsidiary. CGI
was liquidated in December 2015.
All profits and losses of CGI are attributable to the
Company.
The financial statements of CGI are prepared for the same
reporting year as the Company, using consistent accounting
policies. All intercompany balances and transactions, including
unrealised profits arising from them, are eliminated.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being investment business. Accordingly
a segmental reporting note is not presented. The results of CGI are
immaterial for segmental reporting purposes.
Income Recognition
Dividends receivable on quoted equity shares and debt securities
are included in the financial statements when the investments
concerned are quoted 'ex-dividend'. Dividends receivable on equity
shares where no ex-dividend date is quoted are brought into account
when the Group's right to receive payment is established. The fixed
return on a debt security is recognised on a time apportionment
basis so as to reflect the effective yield on the debt security.
Interest receivable is included on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis and are
charged through the revenue column of the Statement of
Comprehensive Income, except for expenses which are incidental to
the sale or purchase of an investment or related to tender offers,
which are charged through the capital column of the Statement of
Comprehensive Income. Stamp duty and commission related to tender
offers are charged to the special reserve.
Investments at Fair Value Through Profit or Loss
Investments where a purchase or sale is under a contract whose
terms require delivery within the timeframe established by the
market concerned are recognised and derecognised on the trade
date.
All investments held by the Company are designated upon initial
recognition as held at fair value through profit or loss.
Investments are measured at fair value, with unrealised gains and
losses on investments and impairment of investments recognised in
the Statement of Comprehensive Income and allocated to capital.
Realised gains and losses on investments sold are calculated as the
difference between sales proceeds and cost.
The Funds are stated at Directors' valuation, which is normally
based on valuations provided by the managers of those funds which
are received by the Company at least quarterly. The valuation
methodology used by these Funds is that the underlying investments
are valued at fair value in accordance with Financial Accounting
Standard 157 ("FAS 157") which is broadly comparable to
International Private Equity and Venture Capital (IPEVC)
guidelines.
For investments actively traded in organised financial markets,
fair value is generally determined by reference to Stock Exchange
quoted market bid prices at the close of business on the Balance
Sheet date, without any deduction for transaction costs necessary
to realise the asset.
Capital distributions received from investments are accounted
for on a reducing cost basis. Cash and stock distributions received
are first applied to reducing the base cost of an investment. A
realised gain will be recognised only when the cost has been
reduced to nil.
Judgements and Estimates
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported in the financial statements. However, the nature of
estimation means that actual outcomes could differ from those
estimates. The Directors consider the available observable inputs
when making these judgements. The Group primarily invests in
private equity via limited partnerships or other fund structures.
Such vehicles are typically unquoted and in turn invest in unquoted
securities. The Group's investment portfolio is recognised in the
Balance Sheet at fair value, in accordance with IPEV Valuation
Guidelines and IFRS.
Fair value is based on the Company's share of the net asset
value of the Fund, as determined by the general partner of such
funds.
Updated net asset values are received for each Fund on a
quarterly basis. The net asset value of a Fund is calculated after
determining the fair value of a Fund's investment in any investee
companies.
Adjustments to net asset value may be considered, for example,
where:
-- There has been significant elapsed time between the net asset
value calculation date and the Balance Sheet date.
-- There have been material movements in quoted prices between
the net asset value calculation date and the Balance Sheet
date.
-- The Company has agreed a sale of its holding in a fund
interest at a price other than net asset value.
-- net asset value is not derived from the fair value of underlying portfolio companies.
The valuations of publicly traded securities held by these Funds
are also affected by discounts, estimated for any legal or
contractual restrictions on sale.
Foreign Currency Translation
The functional and presentational currency of the Company is
Sterling. Transactions in currencies other than Sterling are
recorded at the rates of exchange prevailing on the dates of the
transactions. At each Balance Sheet date, monetary assets and
liabilities that are denominated in foreign currencies are
re-translated at the rates prevailing on the Balance Sheet date.
Gains and losses arising on re-translation are included in the
Statement of Comprehensive Income and are allocated either to
revenue or capital, as appropriate.
The assets and liabilities of foreign operations are translated
into Sterling at the rate of exchange ruling at the Balance Sheet
date. Income and expenses derived from foreign operations have been
translated at the rates of exchange prevailing on the date of
transaction. The resulting exchange differences are recognised in
Other Comprehensive Income and shown in the Currency Translation
Reserve. On disposal of a foreign investment, the cumulative amount
recognised in Other Comprehensive Income relating to that
particular foreign operation is recycled through the Income
Statement.
Investments in Subsidiary
The investment in CGI was previously stated in the Company's
Balance Sheet at cost less a provision for impairment. Impairment
is recognised when the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is the higher of the
asset's fair value less cost of disposal and its value in use. The
Company bases the recoverable amount of CGI on the fair value less
cost of disposal. During the period under review, the non-cash
assets of CGI were sold and CGI was liquidated.
Taxation
Deferred tax is recognised in respect of all temporary
differences at the Balance Sheet date where transactions or events
have occurred that result in an obligation to pay more, or the
right to pay less tax in the future. This is subject to deferred
tax assets being recognised only if it is considered more likely
than not that there will be suitable profits from which the future
reversal of the temporary differences can be deducted.
Current tax is expected tax payable on the taxable income for
the period, using tax rules at the Balance Sheet date and any
adjustment to tax payable in respect of previous years. The tax
effect of different items of income/gain and expenditure/loss is
allocated between revenue and capital on the same basis as the
particular item to which it relates, using the marginal method.
Dividends Payable to Shareholders
Dividends to Shareholders are recognised as a liability in the
period in which they have been declared and paid.
Any final dividend proposed by the Board is not declared until
approved by the Shareholders at the Annual General Meeting
following the year end.
Cash and Cash Equivalents
Cash and cash equivalents in the Balance Sheet and Cash Flow
Statement comprise cash in hand and short-term deposits in banks
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, with original
maturities of three months or less.
Leases
Leases where the lessor retains substantially all the risks and
benefits of ownership of the assets are classified as operating
leases and charged on a straight line basis over the life of the
lease.
New Standards and Interpretations Not Applied
The IASB have issued the following relevant standards and
interpretations which are not effective for the year ended 31 March
2016 and have not been applied in preparing these financial
statements.
New/Revised International Issued Effective
Financial Reporting Standards Date
IFRS 16 Leases January 1 January
2016 2019
The Directors do not anticipate that the initial adoption of the
above standards will have a material impact in the period of
initial application.
2 OPERATING INCOME
2016 2015
Group Group
GBP'000 GBP'000
Income from investments:
Interest from open-ended
investment funds 5 11
5 11
-------- --------
Other income:
Deposit interest 1 4
Total operating income 6 15
-------- --------
Total income comprises:
Interest 6 15
-------- --------
3. OPERATING EXPENSES
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Secretarial services 100 - 100 114 - 114
Investment advisor fee 32 - 32 - - -
Auditor's remuneration
for:
- audit 22 - 22 25 - 25
- other services* - 10 10 - 10 10
Directors' remuneration 72 - 72 89 - 89
Other expenses:
- legal and professional
fees 39 17 56 27 6 33
- office expenditure 14 - 14 16 - 16
- rent and rates 20 - 20 23 - 23
- staff costs (see note
4) 139 - 139 184 - 184
- subscriptions 9 - 9 10 - 10
- travel 15 - 15 - - -
- health insurance - - - 2 - 2
- tender offer expenses** - 69 69 - 92 92
- other expenses 58 - 58 57 - 57
520 96 616 547 108 655
-------- -------- -------- -------- -------- --------
*Relating to the tender offer.
**Stamp duty and commission have been charged against the
special reserve.
4 STAFF COSTS
2016 2015
Group Group
GBP'000 GBP'000
Salaries and other payments 122 168
Social security costs 17 16
-------- --------
139 184
-------- --------
With the exception of the Directors, whose remuneration is shown
in the Directors' Remuneration Report on pages 23 to 25 of the
Annual Report, the Group employed two members of staff during the
year (2015: two members of staff).
5 TAXATION ON ORDINARY ACTIVITIES
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK corporation
tax at 20%
(2015: 21%) - - - - - -
---------- ---------- ---------- ----------- ----------- ----------
The Group is subject to corporation tax at 20% (2015: 21%). As
at 31 March 2016 the total taxation charge in the Group's revenue
account is lower than the standard rate of corporation tax in the
UK (20%). The differences are explained below:
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net return
before finance
costs and
taxation (514) (2,847) (3,361) (532) 1,720 1,188
-------- -------- -------- -------- -------- --------
Theoretical
tax at UK
corporation
tax rate
of 20% (2015:
21%) (103) (569) (672) (112) 361 249
Effects
of:
- expenses
disallowed
for taxation
purposes - 19 19 - 23 23
- losses
in CGI not
carried
forward
as excess
management
expenses - - - 11 - 11
- gains
on investments
and exchange
losses on
capital
items - 550 550 - (384) (384)
- excess
management
expenses 103 - 103 101 - 101
-------- -------- -------- -------- -------- --------
- - - - - -
-------- -------- -------- -------- -------- --------
At 31 March 2016, the Group had no unprovided deferred tax
liabilities (2015: GBPnil). At that date, based on current
estimates and including the accumulation of net allowable
management expenses deriving from its partnership interests in its
Funds, the Group had surplus management expenses of approximately
GBP21,341,000 (2015: GBP20,694,000). A deferred tax asset of
GBP3,841,000 has not been recognised because the Group is not
expected to generate sufficient taxable income in future periods in
excess of the available deductible expenses and accordingly, the
Group is unlikely to be able to reduce future tax liabilities
through the use of existing surplus expenses.
Due to the Group's status as an investment trust, and the
intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the Group has not provided
deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
6 DIVIDS
No distribution is proposed for the year ended 31 March
2016.
7 PROFIT
As permitted by Section 408 of the Companies Act 2006, the
Statement of Comprehensive Income of the Company is not presented
as part of these financial statements. The consolidated net loss
after taxation for the financial year includes GBP3,361,000 (2015:
profit GBP1,199,000) which is dealt with in the financial
statements of the Company.
8 RETURN PER ORDINARY SHARE
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
pence pence pence pence pence pence
Return per
Ordinary
Share (4.3)p (23.5)p (27.8)p (3.5)p 11.2p 7.7p
-------- -------- -------- -------- -------- ------
Revenue return per Ordinary Share is based on the net loss on
ordinary activities after taxation of GBP514,000 (2015: net loss of
GBP532,000), and on 12,101,803 (2015: 15,423,526) Ordinary Shares,
being the weighted average number of Ordinary Shares in issue
during the year.
Capital return per Ordinary Share is based on the net capital
loss for the year of GBP2,847,000 (2015: net gain of GBP1,720,000),
and on 12,101,803 (2015: 15,423,526) Ordinary Shares, being the
weighted average number of Ordinary Shares in issue during the
year.
Total return per Ordinary Share is based on the net loss for the
year of GBP3,361,000 (2015: net gain of GBP1,188,000), and on
12,101,803 (2015: 15,423,526) Ordinary Shares, being the weighted
average number of Ordinary Shares in issue during the year.
9 INVESTMENTS
2016 2015
GBP'000 GBP'000
Group and Company
a) Investment portfolio
summary
USA
Listed investments
- common stock - -
Unlisted Funds 18,395 24,987
Other investments
- open-ended Investment
Funds 3,813 2,930
22,208 40,171
-------- --------
A full listing of the investment portfolio is provided
above.
Quoted
open-ended
Listed investment Unlisted
equities funds Funds Total
GBP'000 GBP'000 GBP'000 GBP'000
b) Analysis of
investment portfolio
movements
Opening book
cost - 2,367 25,747 28,114
Opening unrealised
appreciation/(depreciation) - 563 (760) (197)
--------- ----------- ---------- ----------
Opening valuation - 2,930 24,987 27,917
Movement in the
year:
Purchases at
cost - 1,000 - 1,000
Calls from Funds
at cost - - 165 165
Sales
- proceeds (640) (197) - (837)
- realised gains
on sales 191 43 - 234
Book cost adjustments
from capital
distributions
- cash distributions - - (3,253) (3,253)
- cash distributions
realised gains - - 1,438 1,438
- stock distributions 449 - (449) -
Unrealised appreciation/(depreciation) - 37 (4,493) (4,456)
--------- ----------- ---------- ----------
Closing valuation - 3,813 18,395 22,208
--------- ----------- ---------- ----------
Closing book
cost - 3,213 23,649 26,862
Closing unrealised
appreciation/(depreciation) - 600 (5,254) (4,654)
--------- ----------- ---------- ----------
- 3,813 18,395 22,208
--------- ----------- ---------- ----------
The Company is required to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
has the following levels:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The level in the fair value hierarchy, within which the fair
value measurement is categorised, is determined on the basis of the
lowest level input that is significant to the fair value of the
investment.
The Company considers observable data for investments actively
traded in organised financial markets, with fair value determined
by reference to Stock Exchange quoted market bid prices at the
close of business on the balance sheet date, without adjustment for
transaction costs necessary to realise the asset. The following
table analyses within the fair value hierarchy the Fund's financial
assets and liabilities (by class) measured at fair value at 31
March.
Financial instruments at fair value through profit and loss
2016 Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Open-ended investment
funds 3,813 - - 3,813
Unlisted Funds - - 18,395 18,395
3,813 - 18,395 22,208
-------- -------- -------- --------
2015 Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Open-ended investment
funds 2,930 - - 2,930
Unlisted Funds - - 24,987 24,987
2,930 - 24,987 27,917
-------- -------- -------- --------
Financial instruments that trade in markets that are not
considered to be active but are valued based on quoted market
prices, dealer quotations or alternative pricing sources supported
by observable inputs are classified within level 2. As level 2
investments include positions that are not traded in active markets
and/or are subject to transfer restrictions, valuations may be
adjusted to reflect illiquidity and/or non-transferability, which
are based on available market information.
Investments classified within level 3 have significant
unobservable inputs. Level 3 instruments include private equity
securities. As observable prices are not available for these
securities, the Company has used valuation techniques to derive the
fair value. In respect of unquoted instruments, or where the market
for a financial instrument is not active, Funds based in the United
States typically value portfolios in accordance with FAS 157 which
defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. FAS
157 is broadly comparable to IPEVC guidelines.
The following table presents the movement in level 3 instruments
for the period ended 31 March 2016 by class of financial
instrument.
Group
Unlisted
Funds
GBP'000
Opening balance 24,987
Calls 165
Distributions (1,815)
Sales (449)
Total losses for the year included
in the statement of comprehensive
income (4,493)
----------
Closing balance 18,395
----------
Significant unobservable inputs for level 3 valuations
The Funds are stated at Directors' valuation, which is normally
based on valuations provided by the managers of those Funds which
are received by the Company at least quarterly.
Fair value is based on the Company's share of the net asset
value of the Fund, as determined by the general partner of such
Funds.
Further information with regards to level 3 valuations is set
out in the accounting policies above.
The range of net asset values for the 10 largest Funds, which
have an aggregate valuation of 84.3% of the Unlisted Funds
portfolio, can be seen in the table below.
Top 10 Largest Portfolio Funds
As of 31 Total Net asset Net asset % of net
March 2016 commitment value US$'000 value GBP'000 assets
US$'000 2016
Draper Fisher
Jurvetson
ePlanet
Ventures 30,000 3,613 2,513 10.0
Vector Capital
IV 4,000 3,371 2,345 9.3
New Enterprise
Associates
10 10,000 2,864 1,992 7.9
Oak Investment
Partners
X 10,000 2,147 1,493 5.9
VantagePoint
Venture
Partners
2006 5,000 2,078 1,445 5.7
Institutional
Venture
Partners
XII 5,000 1,986 1,381 5.4
Francisco
Partners
II 5,000 1,906 1,326 5.2
Draper Fisher
Jurvetson
Fund VII 5,000 1,658 1,153 4.6
New Enterprise
Associates
12 3,000 1,408 979 3.9
Focus Ventures
II 30,000 1,258 875 3.5
Largest
10 unlisted
funds 15,502 61.4
--------------- ---------
It is recognised that the valuations of these Funds are
sensitive to movements in the values of the underlying investments.
The 10 largest underlying investments of the Funds include both
quoted and unquoted investments and represented 30.0% of the value
of the total Fund portfolio. At 31 March 2016, 8% of aggregate
value of the 10 largest underlying investments was derived from
quoted prices and 92% represented unquoted valuations.
For unquoted underlying investments, significant judgement is
applied by the Fund Managers when calculating fair value. For the
purpose of sensitivity analysis, a 10% adjustment to those unquoted
investments that are in the 10 largest underlying investments would
result in a 1.7% movement in the value of the Company's total net
assets.
2016 2015
GBP'000 GBP'000
c) Analysis of capital
gains and losses
Gains on sales 234 1,881
Decrease in unrealised
capital appreciation (4,456) (2,193)
Gains on unlisted Funds
realisations 1,438 2,105
(Losses)/gains on investments (2,784) 1,793
---------- --------
Realised exchange gains
on sales 4 16
Exchange gains on investment
holding gains 29 19
---------- --------
Exchange gains on capital
items 33 35
---------- --------
d) Significant holdings
The Company holds 15% and 10% of the total capital account
balances of the Funds in Dawntreader Fund II and Zone Ventures Fund
II respectively.
e) Transaction costs
During the year the Company incurred no transaction costs (2015:
GBPnil) in relation to purchases of investments and GBP1,500 (2015:
GBP4,000) in relation to sales of investments. These amounts are
included within gains and losses on investments at fair value
within the statement of comprehensive income.
10 INVESTMENT IN SUBSIDIARY
2016 2015
Company Company
GBP'000 GBP'000
Investment in CGI, opening
balance 26 65
Repayment of inter-company (8) -
debt
Foreign currency movements (8) 8
Impairment (10) (47)
- 26
--------- ---------
11 TRADE AND OTHER RECEIVABLES
2016 2015
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Sales for future
settlement 258 258 46 46
Prepayments and
other debtors 12 12 22 12
Accrued income 2 2 3 3
-------- -------- -------- --------
272 272 71 61
-------- -------- -------- --------
12 TRADE AND OTHER PAYABLES
2016 2015
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Other payables 62 62 74 72
62 62 74 72
-------- -------- -------- --------
13 SHARE CAPITAL
2016 GBP'000 2015 GBP'000
Allotted, called
up and fully
paid:
Balance at 1
April 2015 14,805,508 1 18,694,757 2
Tender offer
of shares (2,859,989) - (3,889,249) (1)
11,945,519 1 14,805,508 1
------------ -------- ------------ --------
The rights pertaining to each share are summarised in the
extract from the Directors' Report above.
14 RESERVES
Capital
reserve
Capital Capital investment Currency
Special redemption reserve holding translation Retained
reserve reserve realised losses reserve earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Group
At 1 April
2015 35,503 4 12,720 (6,459) 13 (6,443)
Net gains
on sale
of investments - - 1,672 - - -
Holding
losses
on investments - - - (4,456) - -
Exchange
gains - - 4 29 - -
Reclassification
of cumulative
exchange
gains of
subsidiary - - - - (13) 13
Shares
purchased
for cancellation (6,747) - (96) - - -
Net loss
for the
year - - - - - (514)
At 31 March
2016 28,756 4 14,300 (10,886) - (6,944)
--------- ----------- --------- ----------- ------------ ----------
Capital
reserve
Capital Capital investment
Special redemption reserve holding Retained
reserve reserve realised losses earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Company
At 1 April
2015 35,503 4 12,626 (6,409) (6,386)
Net gains
on sale
of investments - - 1,672 - -
Holding
losses
on investments - - - (4,456) -
Exchange
gains - - 4 21 -
Shares
purchased
for cancellation (6,747) - (96) - -
Net loss
for the
year - - - - (506)
--------- ----------- --------- ----------- ----------
As at 31
March 2016 28,756 4 14,206 (10,844) (6,892)
--------- ----------- --------- ----------- ----------
15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN CASH AND CASH
EQUIVALENTS
2016 2015
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
(Decrease)/increase
in cash in the
year (4,643) (4,625) 5,183 5,241
Effect of foreign
exchange rate
movements 31 31 30 19
-------- -------- -------- --------
Movement in cash
and cash equivalents (4,612) (4,594) 5,213 5,260
Cash and cash
equivalents at
beginning of the
year 7,425 7,407 2,212 2,147
-------- -------- -------- --------
Cash and cash
equivalents at
end of the year 2,813 2,813 7,425 7,407
-------- -------- -------- --------
Cash and cash equivalents are comprised as follows:
2016 2015
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Cash in hand at
bank 2,813 2,813 7,425 7,407
-------- -------- -------- --------
16 NET ASSET VALUE PER ORDINARY SHARE
The Group net asset value per Ordinary Share is based on net
assets of GBP25,231,000 (2015: GBP35,339,000) and on 11,945,519
(2015: 14,805,508) Ordinary Shares, being the number of shares in
issue at the year end.
The Company net asset value per Ordinary Share is based on net
assets of GBP25,231,000 (2015: GBP35,339,000) and on 11,945,519
(2015: 14,805,508 Ordinary Shares, being the number of shares in
issue at the year end.
17 COMMITMENTS AND CONTINGENT LIABILITIES
At 31 March 2016 there were financial commitments outstanding of
$4.0 million (GBP2.8 million) (2015: $4.2 million) (GBP2.8 million)
in respect of outstanding call commitments to funds. These calls,
if made, will be financed through cash and easily liquidated
assets, which are currently held in ring-fenced accounts.
18 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
As detailed above, the investment objective of the Company has
been to provide Shareholders with long-term capital growth. The
Company is generally not making investments in new private equity
funds but is managing its existing investments with a view to
making periodic returns of capital to Shareholders.
The Company and Group's financial instruments comprise
securities and other investments and bank deposits which are held
to achieve its investment objective, as well as debtors and
creditors that arise from its operations, for example sales and
purchases of securities awaiting settlement and debtors for accrued
income.
The principal risks the Company and Group face through the
holding of financial instruments are:
-- liquidity/marketability risk, i.e. the risk that the Company
or Group has difficulty in realising assets or otherwise raising
funds to meet commitments associated with financial
instruments;
-- interest rate risk;
-- credit risk;
-- market price risk, i.e. movements in the value of investment
holdings caused by factors other than interest rate or currency
movement; and
-- foreign currency risk.
As required by IFRS 7: Financial Instruments: Disclosure and
Presentation an analysis of financial assets and liabilities, which
identifies the risk to the Company of holding such items, is given
below.
Financial assets
A summary of the Company's investment portfolio is given above.
The method of valuing the fixed asset investments is discussed in
the accounting policies of the Company in Note 1 above. Cash and
debtors arising from the operations of the Company as at 31 March
2016 amounted to GBP2,813,000 (2015: GBP7,407,000) and GBP272,000
(2015: GBP61,000) respectively. Cash and debtors arising from
operations of the Group as at 31 March 2016 amounted to
GBP2,813,000 (2015: GBP7,425,000) and GBP272,000 (2015: GBP71,000)
respectively. There were no material differences between the fair
values of the investments and cash and debtors as at 31 March 2016
and 31 March 2015 and the values attributable to those investments
within the accounts.
Maturity analysis
The Company does not have any assets or liabilities maturing in
more than one year.
Liquidity risk
The nature of the Company's investment policy of investing in
specialist US Funds means that a large proportion of the securities
which it owns are less readily marketable than, for example,
'blue-chip' UK equities.
The Company currently has outstanding commitments of $3,971,000
(GBP2,762,000) (2015: $4,206,000 (GBP2,833,000)) to the Funds,
which will be financed through cash and easily liquidated assets,
which are currently held in ring-fenced accounts.
The Board manages liquidity risk by regularly reviewing its
easily liquidated assets, which mainly comprise open-ended
investment funds. Commitments to such fund investments are reviewed
and approved by the Board. In order to reduce risk, research and
due diligence work is performed before any commitment is made to
such a fund manager.
Interest rate risk
The Company's revenue may be affected by changes in prevailing
interest rates since a large portion of its income ordinarily
derives from money market funds and bank interest.
The Company's objective is to achieve capital returns from its
investments and, as such, the main exposure to interest rate risk
is indirect, through its impact on the valuation of the private
equity funds, although it is not possible to quantify such effects.
Interest rates are one of the key determinants of economic growth.
At a more specific level, interest rates and credit spreads also
have an important role in the ability of private equity funds to
secure profitable deals, as some transactions are partly financed
by debt. The effect of interest rate changes on the valuation of
investments and debt forms part of valuation risk, which is
considered separately.
At 31 March 2016, the Company held investments in AAA-rated
money market funds valued at GBP3,813,000 (2015: GBP2,930,000),
earning cash dividends at market rates. The money market funds are
redeemable on less than 24 hours notice. Other floating rate
financial assets comprised cash at bank.
As at 31 March 2016, the average interest rate profile of the
Company's financial assets was as follows:
Non Non
Fixed Floating interest Fixed Floating interest
rate rate bearing rate rate bearing
Group Group Group Company Company Company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Open-ended
investment
funds - 3,813 - - 3,813 -
Unlisted
funds - - 18,395 - - 18,395
Cash - 2,813* - - 2,813* -
Other
current
assets - - 260** - - 260**
--------- --------- --------- -------- --------- ---------
As at
31 March
2016 - 6,626 18,655 - 6,626 18,655
--------- --------- --------- -------- --------- ---------
As at 31 March 2015, the average interest rate profile of the
Company's financial assets was as follows:
Non Non
Fixed Floating interest Fixed Floating interest
rate rate bearing rate rate bearing
Group Group Group Company Company Company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Open-ended
investment
funds - 2,930 - - 2,930 -
Unlisted
funds - - 24,987 - - 24,987
Cash - 7,425* - - 7,407* -
Other
current
assets - - 61** - - 51**
--------- --------- --------- -------- --------- ---------
As at
31 March
2015 - 10,355 25,048 - 10,337 25,038
-------- --------- --------- -------- --------- ---------
* Exposure to floating interest rate risk is based on an
adjusted London Interbank Offered Rate ("LIBOR").
** Other current assets exclude prepayments which under IFRS7
are not classified as financial assets.
The Board manages interest rate risk by placing cash deposits in
short-term maturity investments such as money-market funds, but
does not consider that the Company or Group has material exposure
to interest rate risk.
Credit risk
The Company is exposed to credit risk in the following
areas:
-- Failure by counterparties to return cash deposits
Cash deposits (money market funds and cash at bank) are placed
with counterparties with a minimum credit rating of AA or
equivalent. In addition, a range of counterparties is used to
further diversify the risk.
-- Failure by counterparties to deliver cash or securities through trading activities
Transactions in listed securities are settled against delivery
using approved brokers. The risk of default is considered
minimal.
The maximum exposure to credit risk at 31 March 2016 is
GBP6,626,000 (2015: GBP10,355,000).
Market price risk
Private equity investments are not immediately sensitive to
market movements. However, over the medium/long term, the valuation
multiples applied to private equity will be affected by significant
changes in the listed equity markets.
The Company's portfolio consists of US dollar investments, which
are affected by movements in the sterling/dollar exchange rate
(refer to foreign currency risk below).
At 31 March 2016, a 10% movement in the valuation of the Group's
aggregate investments designated as fair value through profit or
loss, would result in an 8.8% (GBP2,221,000) change in
Shareholders' funds.
The method of valuing the investments is discussed in the
accounting policies note above.
Foreign currency risk
The Company is exposed to currency risk directly since the
majority of its assets and commitments are denominated in US
dollars and their sterling value can be significantly affected by
movements in foreign exchange rates. The Company does not, nor does
it intend to, hedge against foreign currency movements affecting
the value of its investments.
The Company settles its transactions from its bank accounts at
an agreed rate of exchange on the date on which any bargain was
made. For the year ended 31 March 2016, realised exchange losses of
GBP50,000 (2015: losses of GBP76,000) and unrealised gains relating
to currency of GBP29,000 (2015: gains of GBP19,000), have been
taken to the capital reserve.
Details of the foreign currency exposure are detailed in the
table below.
At 31 March 2016
Other Other
Investment current Investment current
portfolio Cash assets portfolio Cash assets
Group Group Group Company Company Company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
USA 21,107 1,102 259 21,107 1,102 259
UK 1,101 1,711 1 1,101 1,711 1
22,208 2,813 260 22,208 2,813 260
----------- -------- -------- ----------- -------- --------
At 31 March
2015
Other Other
Investment current Investment current
portfolio Cash assets portfolio Cash assets
Group Group Group Company Company Company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
USA 27,816 413 56 27,816 395 46
UK 101 7,012 5 101 7,012 5
27,917 7,425 61 27,917 7,407 51
------------- -------- ---------- ------------- -------- --------------
If the US$/GBP exchange rate had strengthened by 10% from the
rate at 31 March 2016, it would have had the effect, with all other
variables held constant, of increasing the equity Shareholders'
funds by GBP2,496,000 (2015: GBP3,142,000).
If the US$/GBP exchange rate had weakened by 10% it would have
had the effect of decreasing the equity shareholders' funds by
GBP2,042,000 (2015: GBP2,571,000).
The calculations are based on the investments held at fair value
through profit or loss and the exchange rate of 1.4378 US$: GBP as
at 31 March 2016 and these may not be representative of the year as
a whole.
Financial liabilities
The Company finances its operations primarily through equity and
retained revenue although trade creditors and accruals arise from
its operations. At 31 March 2016 and 31 March 2015, all financial
liabilities were due within one year. Other financial liabilities
amounted to GBP62,000 (2015: GBP74,000) resulting from operating
activities.
There were no borrowing facilities either drawn or undrawn at
any time during the year.
Managing Capital
The Group's equity is analysed into its various components in
notes 13 and 14. The Company manages its investments so as to
maximise the return to Shareholders while maintaining a capital
base to allow the Company to operate effectively. Strong
realisations from the investment portfolio in recent years have
facilitated the return of capital to Shareholders. This has been
achieved through the buy-back of shares through tender offers.
The Group's capital requirement is reviewed regularly by the
Board of the Company.
19 SUBSEQUENT EVENTS
The Company continues actively to seek liquidity for its
positions in the Funds, for example, through sales of the Company's
interests in the Funds on the secondary market. On 4 July 2016 the
Company announced that it had received a proposal to acquire 15 of
its LP investments priced at a 35% discount to the net asset value
of these holdings as at 31 December 2015, before expenses and
subject to adjustments for subsequent distributions and calls.
Since then the Company has received other approaches for its
assets.
It continues to be the Company's policy to make periodic returns
of capital to Shareholders in a cost-effective manner and the
Company will continue to implement this policy as appropriate.
20 RELATED PARTY TRANSACTIONS
During the year Peter Dicks, Chairman of the Company, rented
office space from the Company, for a consideration of GBP10,000,
which has been accounted for against the rent expense. (2015:
GBP10,000).
The remuneration of the Directors, who are the key management
personnel of the Company, is set out in the Directors' Remuneration
Report in the Annual Report. Full details of Directors' interests
in the ordinary shares of the Company are also set out the
Directors' Remuneration Report. At 31 March 2016, GBPnil was due to
the Directors' from the Company.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held on 21
September 2016 at 10.30 am at the offices of the Shakespeare
Martineau LLP, 6(th) Floor, 6 Gracechurch Street, London, EC3V
0HR.
The notice of this meeting can be found in the Annual Report and
Financial Statements at www.peiplc.com.
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be
submitted shortly to the National Storage Mechanism ("NSM") and
will be available for inspection at the NSM, which is situated at
www.morningstar.co.uk/uk/NSM
28 July 2016
END
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on this announcement (or
any other website) is incorporated into, or forms part of, this
announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSUWUURNRABUAR
(END) Dow Jones Newswires
July 28, 2016 08:31 ET (12:31 GMT)
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