TIDMRRF
RNS Number : 5298A
Rapid Realisations Fund Limited
30 March 2012
Rapid Realisations Fund Limited
Final Results for the year ended 31 December 2011
Rapid Realisations Fund Limited (the "Company" or "RRF"), the
AIM quoted investment company today announces its audited results
for the year ended 31 December 2011 (the "Period").
Investment Overview
During the year under review we successfully exited 4
investments and partially exited 5 others. Total realisations
during the year were circa GBP8.1 million.
Financial Highlights
-- Net Asset Value per Ordinary Share at 31 December 2011 was
25.35p
-- Fully exited 4 investments realising circa GBP2.1 million
-- Partially exited 5 investments realising circa GBP6.0
million
Since 31 December 2011
-- Fully exited 2 investments realising circa GBP0.6 million
-- Partially exited 1 investment realising circa GBP1.0
million
Investment Portfolio Activity
Investments Sales Proceeds Net (Outflow)/
Acquired and Repayment Inflow
Investment Portfolio Activity of Loans
------------ --------------- ---------------
Period GBP'm GBP'm GBP'm
5 months to 31 Dec 2007 (3.0) - (3.0)
12 months to 31 Dec 2008 (29.6) 0.4 (29.2)
12 months to 31 Dec 2009 (6.4) - (6.4)
12 months to 31 Dec 2010 (5.8) 12.4 6.6
12 months to 31 Dec 2011 - 8.5* 8.5
------------ --------------- ---------------
Total (44.8) 21.3 (23.5)
------------ --------------- ---------------
*GBP0.4m received during the year under review in respect of an
investment exited in the prior year.
Commenting, Rhys Davis Chairman:
"I am pleased to report on the performance of Rapid Realisations
Fund Limited (the "Company" or "RRF") for the year ended 31
December 2011.
In line with the investment objective and policy adopted
following the acquisition of a 17.33% stake by
Damille Investments Limited in May 2010 the Company continues to
manage the orderly realisation of its investment portfolio with the
objective of maximising the return of invested capital to
shareholders during the period ending on 30 September 2013.
In the year to 31 December 2011, the Company has continued to
make good progress against this investment objective having fully
exited 4 investments and partially exiting 5 others. The proceeds
from these realisations have been used to fund the continued return
of capital to shareholders; during the year under review a further
circa GBP9.8 million was returned to shareholders, equivalent to
17p per Ordinary Share, with an additional circa GBP2.3 million,
equivalent to 4p per Ordinary Share being returned since the year
end.
To date, in excess of GBP35.1 million, equivalent to 61p per
share, has been returned to shareholders and the Board of Directors
continues to work closely with the Company's fund manager to
maximise further realisations. Discussions in relation to a number
of additional realisations are on-going and we look forward to
returning further funds to shareholders in due course.
The NAV per Ordinary Share as at 31 December 2011 was
25.35p".
Investment Highlights
During the year under review, we successfully fully exited the
Company's investments in the following companies, realising circa
GBP2.1 million in total:
-- Enegi Oil Plc is an AIM listed independent oil and gas group.
During the year RRF sold its remaining stake in this company.
-- Green Compliance Plc is AIM listed and operates in the blue
collar compliance market. During the year RRF sold its remaining
stake in this company.
-- Kolar Gold Limited is a gold explorer and miner and was
admitted to AIM during the year. RRF sold its stake in the company
on listing.
-- Just Car Clinics Plc is the UK's second-largest independent
chain of collision repair centres. During the year RRF sold its
remaining stake in this company.
During the year under review, we partially exited the Company's
investments in the following investee companies, realising circa
GBP6.0 million in total:
-- DDM Group AG is engaged in the purchase and collection of distressed debt in Eastern Europe.
The company continued to repay the debt facility provided by
RRF.
-- Taylormade Betting Ltd is an independent bookmaker chain in
the North West of England. During the year the company fully repaid
a loan provided by RRF.
-- Take 2 Ltd, hires out camera and lighting equipment. The
company continues to repay a loan provided by RRF.
-- Keycom Plc design, install and deliver broadband based
communications solutions and services for several markets including
Tertiary education, Key workers and Multi-tenant units. During the
year RRF received the final repayment on a loan provided to Keycom
Plc.
-- Service Solutions Group Ltd, a provider of insurance claims
management services and building repairs partially repaid a loan
provided by RRF.
During the year the Company made no follow on or new investments
in line with the Company's investment policy.
Since the year end the Company has partially exited one
investment and fully exited two further investments, realising
circa GBP1.6m in total:
-- DDM Group AG. Since the year end RRF has fully exited its investment in this company.
-- Information Prophets Ltd is a developer of a specialist
energy compliance software platform. Since the year end RRF have
sold their equity holding in this company.
-- Providence Resources Plc is an Irish based oil and gas
exploration company. Since the year end RRF has received partial
repayment of the bonds it holds issued by Providence Resources
Plc.
Set out in the table below is a summary of the investment
portfolio segmented by valuation basis as at 31 December 2011 for
information:
Valuation Method Number of Valuation % of portfolio
Investments GBP'm by value
Unquoted investments at directors' valuation
Earnings multiple 5 5.4 44.2%
Price based on recent fundraising 1 0.1 0.4%
Net assets 3 5.8 47.7%
Quoted investments at market value (bid price)
Quoted market price 1 0.9 7.7%
Total 10 12.2 100.0%
Copies of the annual report will be sent to shareholders shortly
and will be available for a period of one month to the public at
the offices of Cenkos Fund Managers Limited at 6.7.8 Tokenhouse
Yard, London, EC2R 7AS and will be available at the Company's
website www.rapidrealisations.com.
Enquiries:
Rhys Davies
Rapid Realisations Fund Limited +41 (0) 79 620 215
Philip Secrett/David Hignell
Grant Thornton Corporate Finance +44 (0) 20 7383 5100
Nominated Adviser philip.j.secrett@gtuk.com
Notes to Editors:
Rapid Realisations Fund Limited ("Rapid") is a closed ended
investment fund listed on the AIM market of the London Stock
Exchange (AIM). The fund is managed by Cenkos Fund Managers
Limited.
RAPID REALISATIONS FUND LIMITED
Statement of Financial Position
As at 31 December 2011
Notes 31 December 2011 31 December 2010
--------------------------------------------- ----- ---------------- ----------------
GBP GBP
Investments 2 & 6
Fair value through profit or loss 3,770,652 9,203,219
Loans and receivables 5,225,132 13,007,472
---------------- ----------------
Total investments 8,995,784 22,210,691
---------------- ----------------
Current assets
Current Investments:
Loans and receivables 6 3,240,114 3,120,841
Other receivables 7 924,180 1,192,033
Cash and cash equivalents 8 1,503,134 2,698,579
5,667,428 7,011,453
---------------- ----------------
Current liabilities
Other payables 9 34,617 86,117
34,617 86,117
---------------- ----------------
Net current assets 5,632,811 6,925,336
---------------- ----------------
Total net assets 14,628,595 29,136,027
================ ================
Equity attributable to Ordinary Shareholders
Reserves 14,628,595 29,136,027
Total Equity 14,628,595 29,136,027
================ ================
Net asset value per Ordinary Share 11 0.2535 0.5049
The financial statements were approved at a meeting of the Board
of Directors held on 30 March 2012.
The accompanying notes form an integral part of the financial
statements.
Statement of Total Comprehensive Income
For the year ended 31 December 2011
Notes 31 December 2011 31 December 2010
------------------------------------- ------ ---------------- ----------------
GBP GBP
Income 2
Finance income 6,892 61,842
Commission income - 22,000
Loan note interest 1,434,867 2,394,588
Dividend income 12,612 51,156
Other investment income - 185,056
Net realised (losses)/gains
on fair value through profit
or loss investments 6 (621,055) 248,181
Net realised foreign exchange
gains on loan repayments 6 88,799 36,800
Net realised losses on loan
sales 6 - (18,857)
Movement in net unrealised losses
on fair value through profit
or loss investments 6 (2,694,303) (6,765,179)
Movement in impairment charge
on loans 6 (1,699,998) (2,470,211)
Movement in net unrealised foreign
exchange losses on loan investments 6 (155,814) (530,550)
Movement on net unrealised loss
on open forward foreign currency
contracts 12(d) - (90,480)
Foreign exchange (losses)/gains (58,887) 118,889
---------------- ----------------
Total income (3,686,887) (6,756,765)
Expenses
Investment management fee 3 411,878 919,712
Administration fee 3 60,982 95,583
Custodian fee 3 24,597 16,029
Loan note interest written off 13 272,568 80,743
Transaction expenses 51,140 109,516
Directors' fees and expenses 4 66,607 97,018
Auditor's remuneration 41,388 38,793
Legal and professional fees 29,500 92,132
Withholding tax on dividend
income - 5,116
Other expenses 52,814 32,405
Total expenses 1,011,474 1,487,047
Net deficit from operations (4,698,361) (8,243,812)
---------------- ----------------
Total comprehensive deficit
for the period (4,698,361) (8,243,812)
================ ================
Deficit per Ordinary Share 5 (0.0814) (0.1429)
The results for the current and prior periods are derived from
continuing operations.
The accompanying notes form an integral part of the financial
statements.
Statement of Changes in Equity
For the year ended 31 December 2011
Revenue Distributable Reserve Total
Notes Reserve Reserves
----------------------------------------- ------- ------------ --------------------- ------------
GBP GBP GBP
Balance brought forward (3,530,406) 32,666,433 29,136,027
Total comprehensive deficit for the year (4,698,361) - (4,698,361)
Capital distributions 10 & 15 - (9,809,071) (9,809,071)
Balance carried forward (8,228,767) 22,857,362 14,628,595
============ ===================== ============
For the year ended 31 December 2010
Revenue Distributable Reserve Total
Notes Reserve Reserves
----------------------------------------- ------- ------------ --------------------- ------------
GBP GBP GBP
Balance brought forward 4,713,406 55,747,011 60,460,417
Total comprehensive deficit for the year (8,243,812) - (8,243,812)
Capital distributions 10 & 15 - (23,080,578) (23,080,578)
Balance carried forward (3,530,406) 32,666,433 29,136,027
============ ===================== ============
The accompanying notes form an integral part of these financial
statements.
Statement of Cash Flows
For the year ended 31 December 2011
Notes 31 December 2011 31 December 2010
-------------------------------------- ----- ---------------- ----------------
GBP GBP
Cash flows from operating activities
Commission received - 22,000
Loan note interest received
movement 748,109 2,048,304
Dividend income received 12,612 46,040
Other investment income 41,613 (149,494)
Operating expenses paid (794,855) (1,421,393)
Net cash from operating activities 7,479 545,457
---------------- ----------------
Cash flows from investing activities
Amounts paid for purchases of
investments - (5,562,535)
Amounts received from sales
of investments 2,661,561 6,318,527
Amounts received on loan repayments 5,996,776 5,924,397
Net cash from investing activities 8,658,337 6,680,389
---------------- ----------------
Cash flows used in financing
activities
Bank interest received 6,697 69,495
Capital distribution (9,809,071) (23,080,578)
-
---------------- ----------------
Net cash used in financing activities (9,802,374) (23,011,083)
---------------- ----------------
Net decrease in cash and cash
equivalents (1,136,558) (15,785,237)
Cash and cash equivalents, start
of year 2,698,579 18,364,927
Effect of foreign exchange rate
changes on cash and cash equivalents (58,887) 118,889
Cash and cash equivalents, end
of year 8 1,503,134 2,698,579
================ ================
Cash and cash equivalents comprise
the following amounts:
Bank deposits 1,503,134 2,698,579
--------- ---------
1,503,134 2,698,579
========= =========
The accompanying notes form an integral part of these financial
statements.
RAPID REALISATIONS FUND LIMITED
Notes to the Financial Statements
Year ended 31 December 2011
1. The Company:
The Company is a closed-ended investment company and was
registered with limited liability in Guernsey on 12 July 2007. The
Company commenced business on 2 August 2007 when the Ordinary
Shares of the Company were admitted to trading on AIM. The Company
is a Guernsey Authorised Closed-ended Investment Scheme and is
subject to the Authorised Closed-ended Investment Scheme Rules
2008.
The Company is currently focusing on realising the investments
that have been made to date. These investments were made in line
with the Company's previous stated investment policy.
2. Principal Accounting Policies:
The following accounting policies have been applied consistently
in dealing with items which are considered material in relation to
the Company's financial statements (the "financial
statements"):
(a) Basis of Preparation:
(i) General
The financial statements of the Company, which give a true and
fair view, have been prepared in accordance with International
Financial Reporting Standards ("IFRS") issued by, or adopted by,
the International Accounting Standards Board (the "IASB"),
interpretations issued by the International Financial Reporting
Interpretations Committee and comply with the Companies (Guernsey)
Law, 2008 and the Listing Rules of the UK Listing Authority.
The financial statements of the Company have been prepared under
the historical cost convention modified by the revaluation of
investments and derivative financial instruments at fair value
through profit or loss.
(ii) Judgements and estimates
The preparation of financial statements in accordance with IFRS
requires management to make judgements, estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results could differ
from such estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate was revised if the revision
affects only that period or in the period of the revision and
future periods if the revision affects both current and future
periods.
The most critical judgements, apart from those involving
estimates, that management has made in the process of applying the
Company's accounting policies and that have the most significant
effect on the amounts recognised in the financial statements are
the functional currency of the Company (see note 2(d)(i)) and the
fair value of investments designated to be at fair value through
profit or loss (see note 2(e)(i)). The valuation methods/techniques
used by the Company in valuing financial instruments involve
critical judgements to be made and therefore the actual value of
financial instruments could differ significantly from the value
disclosed in these financial statements.
(iii) IFRS
New standards and interpretations adopted
The Company has adopted the following new and amended standards
and interpretations, which are applicable to the Company's
operations, for the accounting period commencing 1 January
2011:
-- Improvements to IFRSs 2010 - various standards (effective 1
January 2011)
-- Amendments to IFRS 7 Financial Instruments: Disclosures -
amendments enhancing disclosures about transfer of financial assets
(effective 1 July 2011)
-- IAS 24 - Related Party Disclosures (Revised 2009) (effective
1 January 2011)
-- IFRIC 19 Extinguishing Financial Liabilities with Equity -
addresses the accounting by an entity when the terms of a financial
liability are renegotiated and result in the entity issuing equity
instruments to a creditor to extinguish all or part of the
financial liability (effective 1 July 2010)
Significant new standards and interpretations not yet
adopted
A number of new standards, amendments to standards and
interpretations are not yet effective for the current year, and
have not been applied in preparing these financial statements. None
of these will have a significant effect on the financial statements
of the Company, with the exception of the following:
-- IFRS 9 Financial Instruments, published on 12 November 2009
(effective 1 January 2015) as part of phase I of the IASB's
comprehensive project to replace IAS 39, deals with classification
and measurement of financial assets. The requirements of this
standard represent a significant change from the existing
requirements in IAS 39 in respect of financial assets. The standard
contains two primary measurement categories for financial assets:
amortised cost and fair value. A financial asset would be measured
at amortised cost if it is held within a business model whose
objective is to hold assets in order to collect contractual cash
flows, and the asset's contractual terms give rise on specified
dates to cash flows that are solely payments of principal and
interest on the principal outstanding. All other financial assets
would be measured at fair value.
The standard eliminates the existing IAS 39 categories of held
to maturity, available for sale and loans and receivables. For an
investment in an equity instrument which is not held for trading,
the standard permits an irrevocable election, on initial
recognition, on an individual share-by-share basis, to present all
fair value changes from the investment in other comprehensive
income. No amount recognised in other comprehensive income would
ever be reclassified to profit or loss at a later date. However,
dividends on such investments are recognised in profit or loss,
rather than other comprehensive income unless they clearly
represent a partial recovery of the cost of the investment.
Investments in equity instruments in respect of which an entity
does not elect to present fair value changes in other comprehensive
income would be measured at fair value with changes in fair value
recognised in profit or loss.
The standard requires that derivatives embedded in contracts
with a host that is a financial asset within the scope of the
standard are not separated; instead the hybrid financial instrument
is assessed in its entirety as to whether it should be measured at
amortised cost or fair value.
The Directors' are currently in the process of evaluating the
potential effect of this standard. The standard is not expected to
have a significant impact on the financial statements since the
majority of the Company's financial assets are designated at fair
value through profit or loss. The amendments will become mandatory
for the Company's 31 December 2015 annual financial statements.
(iii) IFRS, continued
Significant new standards and interpretations not yet adopted,
continued
-- IFRS 13 Fair Value Measurement, currently, guidance on
measuring fair value is distributed across many IFRS. Some
standards contain limited guidance and others quite extensive
guidance that is not always consistent. IFRS 13 has been developed
to remedy this problem, by:
1) establishing a single source of guidance for all fair value measurements;
2) clarifying the definition of fair value and related guidance; and
3) enhancing disclosures about fair value measurements
The fair value measurement framework is based on a core
principle that defines fair value as an exit price, whilst
retaining the exchange price notion contained in the existing
definition of fair value in IFRS.
The standard also clarifies that fair value is based on a
transaction taking place in the principal market for the asset or
liability or, in the absence of a principal market, the most
advantageous market. The principal market is the market with the
greatest volume and level of activity for the asset or
liability.
For liabilities, the standard provides extensive guidance to
deal with the problematic issue of measuring the fair value of a
liability in the absence of a quoted price in an active market to
transfer an identical liability.
Proposed disclosures in the new standard will increase
transparency about fair value measurements, including the valuation
techniques and inputs used to measure fair value.
IFRS 13 requirements are applicable to annual reporting period
beginning on or after 1 January 2013, there they will become
mandatory for the Company's 31 December 2013 annual financial
statements.
The Directors believe that other pronouncements, which are in
issue but not yet operative or adopted by the Company, will not
have a material impact on the financial statements of the
Company.
(iv) Going concern:
Based on the consideration of assets and the business nature of
the Company the Directors, following enquiry, believe the Company
has adequate resources to continue in operational existence for the
foreseeable future. For this reason, they consider it appropriate
to adopt the going concern basis of preparation for these financial
statements.
(b) Income:
Bank interest income is classified as finance income in the
Statement of Total Comprehensive Income and is recognised on an
accruals basis at the gross amount receivable. Other investment
income, commission income, dividend income are included in the
financial statements on an accruals basis.
Interest on loans receivable is recognised in the Statement of
Total Comprehensive Income based on coupon interest rates which
were determined to approximate market interest rates.
(c) Foreign Currency:
(i) Functional and Presentation Currency
The Company's investors are mainly from the UK, with the
subscriptions and redemptions of the Ordinary Shares denominated in
sterling. The primary activity of the Company is to manage the
realisation of the Company's investment portfolio and to maximise
the return of invested capital to shareholders during the period
ending on 30 September 2013. The performance of the Company is
measured and reported to investors in sterling. The Directors
consider sterling as the currency that most faithfully represents
the economic effects of the underlying transactions, events and
conditions. The financial statements are presented in sterling,
which is the Company's functional and presentation currency.
(c) Foreign Currency, continued:
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement
of Total Comprehensive Income. Translation differences on
non-monetary financial assets and liabilities such as equities at
fair value through profit or loss are recognised in the Statement
of Total Comprehensive Income. The Company holds investments
denominated in Euro and Australian Dollars at the reporting date,
and may enter into forward foreign currency contracts to hedge the
exchange rate risk arising from future cash flows on these
investments. For the year ended 31 December 2011 there were no
outstanding forward foreign currency contracts.
(d) Financial Instruments:
Financial assets and financial liabilities are recognised in the
Statement of Financial Position when the Company becomes a party to
the contractual provisions of the instrument.
(i) Financial Assets
The classification of financial assets at initial recognition
depends on the purpose for which the financial asset was acquired
and its characteristics.
All financial assets are initially recognised at fair value. All
purchases of financial assets are recorded at trade date, being the
date on which the Company became party to the contractual
requirement of the financial asset.
The Company's financial assets are categorised as financial
assets at fair value through profit or loss. Unless otherwise
indicated the carrying amounts of the Company's financial assets
approximate to their fair values. Gains and losses arising from
changes in the fair value of financial assets classified as fair
value through profit or loss are recognised in the Statement of
Total Comprehensive Income.
A financial asset (in whole or in part) is derecognised
either:
-- when the Company has transferred substantially all the risk and rewards of ownership;
-- when it has not retained substantially all the risk and
rewards and when it no longer has control over the asset or a
portion of the asset; or
-- when the contractual right to receive cash flow has expired.
(ii) Financial Liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics.
All financial liabilities are initially recognised at fair value
net of transaction costs incurred. All purchases of financial
liabilities are recorded on trade date, being the date on which the
Company becomes party to the contractual requirements of the
financial liability. Unless otherwise indicated the carrying
amounts of the Company's financial liabilities approximate to their
fair values.
Financial liabilities measured at amortised cost include other
short-term monetary liabilities, which are initially recognised at
fair value and subsequently carried at amortised cost using the
effective interest rate method.
A financial liability (in whole or in part) is derecognised when
the Company has extinguished its contractual obligations, it
expires or is cancelled. Any gain or loss on derecognition is taken
to the Statement of Total Comprehensive Income.
(e) Investments:
The Company's investments comprise loans, equities, warrants and
convertible loan notes.
(i) Classification
Equities have been designated as fair value through profit or
loss in accordance with IAS 39 (Revised) "Financial Instruments:
Recognition and Measurement".
Investments in convertible loans have been designated as loans
and receivables and are carried at amortised cost in accordance
with IAS 39.
(ii) Measurement
Equities are initially recognised at fair value. Transaction
costs are expensed in the Statement of Total Comprehensive Income.
Subsequent to initial recognition, equities and warrants are
measured at fair value. Realised gains and losses on disposal of
investments, where the disposal proceeds are higher/lower than the
book cost of the investment are presented in the Statement of Total
Comprehensive Income in the year in which they arise. Unrealised
gains and losses arising on the fair value of investments are
presented in the Statement of Total Comprehensive Income in the
period in which they arise. Dividend income, if any, from equity
investments is recognised in the Statement of Total Comprehensive
Income within dividend income when the Company's right to receive
payments is established.
Convertible loan notes are initially recognised at fair value
less any directly attributable transaction cost. Subsequent to
initial recognition, loans are measured at amortised cost using the
effective interest rate method.
(iii) Fair Value Estimation
Quoted investments at fair value through profit or loss are
valued at the bid price on the relevant stock exchange and
discounted, where necessary, to reflect any legal restrictions.
Unquoted investments are valued in accordance with the
International Private Equity and Venture Capital valuation
guidelines. Typically investments in unquoted companies are made by
way of a package of instruments, for example a convertible loan
note or outright purchase of shares which also has an attached
equity interest in the form of a warrant or option of shares. In
these circumstances the Directors are of the opinion that it is not
possible to attribute a fair value to the warrant or option of
shares components of the investment in that company and therefore
the Directors fair value the investment package as a whole.
The determination of fair value for financial assets and
liabilities for which there is no observable market price requires
the use of valuation techniques as described above, such as earning
multiples, break up basis valuation, analysis of recent fund
raising and recent investment transactions in the investee
companies and comparison to similar instruments for which
observable prices exist. Assumptions and inputs used in valuation
techniques include estimating discount rates, bond and equity
prices and expected price volatilities. The objective of the
valuation techniques is to arrive at a fair value determination
that reflects the price of the financial instruments at the
reporting date that would have been determined by market
participants acting at arm's length. The valuation techniques
applied are consistent with accepted economic methodologies for
pricing financial instruments.
Loans are valued at amortised cost and reviewed for impairment
in accordance with IAS 39.
(e) Investments, continued:
(iv) Recognition/derecognition
All regular way purchases and sales of investments are
recognised on trade date - the date on which the Company commits to
purchase or sell the investment. Investments are derecognised when
the rights to receive cash flows from the investments have expired
or the Company has transferred substantially all risks and rewards
of ownership.
(f) Impairment of Financial Assets:
Financial assets are assessed at each reporting date to
determine whether there is any objective evidence that they are
impaired. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that
asset.
An impaired loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the original effective interest rate.
Individually significant financial assets are tested for
impairment on an individual basis. The remaining financial assets
are assessed collectively in groups that share similar credit risk
characteristics.
All impairment losses, if any, are recognised in the Statement
of Total Comprehensive Income.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was
recognised. The reversal is recognised in the Statement of Total
Comprehensive Income.
(g) Expenses:
Expenses are accounted for on an accruals basis.
(h) Cash and Cash Equivalents:
Cash and cash equivalents are defined as cash in hand, demand
deposits and highly liquid investments readily convertible to known
amounts of cash and subject to insignificant risk of changes in
value. For the purposes of the Statement of Cash Flows, cash and
cash equivalents consist of bank deposits, overdrafts and money
market equivalents.
(i) Non-Consolidation of Investments:
IAS 27 "Consolidated and Separate Financial Statements" requires
a company to prepare and present a set of consolidated financial
statements for a group of entities under the control of a parent.
Ordinarily control is the legal power to govern the financial and
operating policies of an underlying investment company so as to
obtain benefits from its activities.
In assessing control, the Company has taken into consideration
the following:
-- potential voting rights that currently are exercisable;
-- whether the remaining voting rights are spread across
numerous other shareholdings/few significant shareholdings;
-- ability of the Company to exercise significant influence over
an underlying investment company; and
-- whether or not the Company and an underlying investment
company have common key management personnel.
(j) Non-Consolidation of Investments, continued:
The Company has two investments where the Company has
significant equity holdings (circa 49%), however the shareholder
base of these investments is made up of very few other
shareholders. In the Directors' opinion the Company does not have
legal control of the underlying investment companies and therefore
has not consolidated the results of these investments into the
results of the Company.
(k) Determination and Presentation of Operating Segments:
The Company has adopted IFRS 8 as of 1 January 2009, which
requires a "management approach", under which segment information
is presented on the same basis as that used for internal reporting
purposes.
The Board has considered the requirements of IFRS 8. The Board,
as a whole, has been determined as constituting the chief operating
decision maker ("CODM") of the Company.
The Board is charged with setting the Company's investment
strategy in accordance with the Prospectus. They have delegated the
day to day Investment Management of the Company to the Investment
Manager, under the terms set out in the Investment Management
Agreement, but the Board retains the responsibility to ensure that
adequate resources of the Company are directed in accordance with
their decisions. All investment recommendations made by the
Investment Manager are reviewed by the Board for compliance with
the policies and legal responsibilities of the Directors and the
provisions of the Prospectus. Only after such reviews have been
satisfactorily conducted will the Board approve the investment
recommendations. The Board therefore retains full responsibility
for the allocation decisions made on an ongoing basis. Pursuant to
the terms of the Investment Management Agreement the Investment
Manager is obliged to comply with the investment strategy detailed
in the Prospectus. This strategy sets out guidelines for proposed
investments and the procedures that the Investment Manager is
required to follow in dealing with the Company's assets. These
guidelines and procedures are regularly reviewed and can be altered
by the Board if it considers it appropriate to do so.
The key measure of performance used by the Board in its capacity
as CODM, is to assess the Company's performance and to allocate
resources based on the total return of each individual investment
within the Company's portfolio, as opposed to geographic regions.
As a result, the Board is of the view that the Company is engaged
in a single segment of business, being investment in companies in
"pre-IPO" and other late stage situations with a view to
arbitraging differences in public and private company valuations.
Therefore, no reconciliation is required between the measure of
gains or losses used by the Board and that contained in these
financial statements.
Information on realised gains and losses derived from sales of
investments are disclosed in note 6.
The Company is domiciled in Guernsey. All of the Company's
income from investments is from underlying companies that are
incorporated in the United Kingdom, Ireland, Switzerland and
Australia.
The Company has a highly diversified portfolio of investments
and, with the exception of investments, has no other assets
classified as non-current assets.
The Company also has a highly diversified shareholder population
however three individual investors own more than 10% of the issued
capital of the Company.
3. Related Parties & Material Agreements:
The Company is responsible for the continuing fees of the
Investment Manager, Administrator, Registrar and the Custodian in
accordance with the Investment Management, Administration,
Registrar and Custodian Agreements.
Investment Management Agreement
Pursuant to the provisions of the Investment Management
Agreement, the Investment Manager is entitled to receive an
advisory fee during the period at 1.0% per annum of the net asset
value ("NAV") of the Company, increasing to 2.0% per annum when 50%
of the net proceeds of the Placing have been invested (this
threshold was reached on 23 September 2008). This fee is paid
quarterly in advance based on the prior quarter end NAV, with a top
up payment payable in arrears once the current quarter end NAV is
finalised. For the year ended 31 December 2011, the investment
management fee expense was GBP411,878 (31 December 2010:
GBP919,712). As at 31 December 2011, the investment management fee
creditor was GBPnil (31 December 2010: GBPnil).
The Investment Manager is also entitled to a performance fee for
a relevant accounting period when the following two tests are
met:
-- If the adjusted closing NAV per Ordinary Share (where the
adjusted NAV is the NAV of the Company excluding any liability for
accrued management and performance fees and after adding back any
dividends declared or paid during the performance period) exceeds
the opening NAV per Ordinary Share by a hurdle rate equivalent to
7.5% per annum (the "Hurdle NAV per Ordinary Share"); and
-- If the adjusted closing NAV per Ordinary Share is higher than
the highest previously recorded opening NAV per Ordinary Share as
reduced by the sum of all dividends and distributions per Ordinary
Share (including distributions of capital) since the date such
highest opening NAV per Ordinary Share was established (the "High
Watermark").
Once entitled to a performance fee for a relevant accounting
period the fee is payable, in arrears, by reference to the amount
the adjusted closing NAV per Ordinary Share exceeds either (i) the
opening NAV per Ordinary Share, (where the adjusted NAV is the NAV
of the Company excluding any liability for accrued performance fees
and after adding back any dividends declared or paid during the
performance period), or (ii) where the High Watermark exceeds the
Hurdle NAV per Ordinary Share for the relevant accounting
period.
The performance fee is calculated by taking an amount equal to
20% of the NAV increase per Ordinary Share in that relevant
accounting period, multiplied by the time weighted average of the
total number of Ordinary Shares in issue for the relevant
accounting period. The first performance period began on Admission
and ended on 31 December 2007. Each subsequent performance period
is a period of one financial year. For the year ended 31 December
2011, the performance fee expense was GBPnil (31 December 2010:
GBPnil). As at 31 December 2011, the performance fee creditor was
GBPnil (31 December 2010: GBPnil).
Administration Agreement
Pursuant to the provisions of the Administration Agreement,
Praxis Fund Services Limited is entitled to receive an
administration fee during the period of 0.15% per annum of the net
asset value of the Company, subject to an annual minimum of
GBP60,000 applied on a quarterly basis, calculated and paid
quarterly in arrears. For the year ended 31 December 2011, the
administration fee expense was GBP60,982 (31 December 2010:
GBP95,583). As at 31 December 2011, the administration fee creditor
was GBPnil (31 December 2010: GBP27,720).
Registrar Agreement
Pursuant to the provisions of the Registrar Agreement, Capita
Registrars (Guernsey) Limited is entitled to a fee of GBP5,000 per
annum together with a per deal fee per shareholder transaction. For
the year ended 31 December 2011, the registrar fee expense was
GBP36,681 (31 December 2010: GBP16,912). As at 31 December 2011,
the registrar fee creditor was GBP2,017 (31 December 2010:
GBP2,017).
Custodian Agreement
Pursuant to the provisions of the Custodian Agreement, Cenkos
Channel Islands Limited is entitled to receive a custodian fee
during the period of 0.03% per annum of the net asset value of the
Company, subject to an annual minimum of GBP15,000 applied on a
quarterly basis. For the year ended 31 December 2011, the custodian
fee expense was GBP24,597 (31 December 2010: GBP16,029). As at 31
December 2011, the custodian fee creditor was GBP3,750 (31 December
2010: GBP3,750).
Directors' Interest
None of the Directors, who held office during the period or
their families, hold any interest in the Company.
There were no changes in the interests of the Directors prior to
the date of this report.
No Director, other than those listed above, and no connected
person of any Director has any interest, the existence of which is
known to, or could with reasonable diligence be ascertained by that
Director, whether or not held through another party, in the share
capital of the Company.
Rhys Davies and Brett Miller are directors of Damille
Investments Limited which holds 10,000,000 ordinary shares,
representing 17.33% of the issued share capital of the Company.
4. Directors' Fees:
Each of the Directors has entered into an agreement with the
Company providing for them to act as a non-executive director of
the Company. Their annual fees, pro-rata for periods less than one
year, excluding all reasonable expenses incurred in the course of
their duties which will be reimbursed by the Company are as
follows:
31 December 2011 31 December 2011 31 December 2010 31 December 2010
Annual Fee Actual Fees Annual Fee Actual Fees
----------------- ----------------- ----------------- -----------------
GBP GBP GBP GBP
Rhys Davies 20,000 21,200 20,000 10,300
Brett Miller 15,000 16,200 15,000 7,800
David McHugh 15,000 16,200 15,000 7,331
Rhys Davies and Brett Miller Director fees are paid to Damille
Investments Limited.
With effect from 6 August 2010, the Directors also became
entitled to a communication expense of GBP100 per month.
5. Deficit per Ordinary Share:
Deficit per Ordinary Share for the year ended 31 December 2011
was 8.14p (31 December 2010: deficit per Ordinary Share 14.29p).
Deficit per Ordinary Share is based on the net deficit from
operations for the year of GBP4,698,361 (31 December 2010: deficit
of GBP8,243,812) and on a weighted average of 57,701,445 (31
December 2011: 57,701,445) Ordinary Shares in issue during the
year.
6. Investments:
Fair Value Through Profit or Loss Investments: 1 January 2011 1 January 2010
To To
31 December 2011 31 December 2010
------------------ ------------------
GBP GBP
Investments listed on recognised investment exchanges 937,500 4,811,730
Unlisted investments 2,833,152 4,391,489
------------------ ------------------
3,770,652 9,203,219
================== ==================
Book cost brought forward 15,708,192 22,238,901
Purchases - 83,990
Sales (2,117,209) (6,862,880)
Net realised (loss)/gain on fair value through profit or loss
investments (621,055) 248,181
------------------ ------------------
Book cost carried forward 12,969,928 15,708,192
Net unrealised (losses)/gains on fair value through profit or loss
investments brought forward (6,504,973) 260,206
Movement in net unrealised losses on fair value through profit or loss
investments (2,694,303) (6,765,179)
------------------ ------------------
Net unrealised losses on fair value through profit or loss investments
carried forward (9,199,276) (6,504,973)
Fair value carried forward 3,770,652 9,203,219
================== ==================
1 January 2011 1 January 2010
Loans and Receivables: To To
31 December 2011 31 December 2010
------------------ ------------------
GBP GBP
Loans > 1 year 3,240,114 13,007,472
Loans < 1 year 5,225,132 3,120,841
------------------ ------------------
8,465,246 16,128,313
================== ==================
Book cost brought forward 18,147,254 18,326,833
Loan advanced - 5,478,545
Payment in kind interest capitalised 100,722 248,329
Loan repayments (5,996,776) (5,924,396)
Net realised foreign exchange gains on loan repayments 88,799 36,800
Net realised losses on loan sales** - (18,857)
------------------ ------------------
Book cost carried forward 12,339,999 18,147,254
Net unrealised (losses)/gains on loans investments brought forward (2,018,941) 981,820
Movement in impairment charge on loans (1,699,998) (2,470,211)
Movement in net unrealised foreign exchange losses on loans investments (155,814) (530,550)
------------------ ------------------
Net unrealised losses on loans investments carried forward (3,874,753) (2,018,941)
Amortised cost carried forward 8,465,246 16,128,313
================== ==================
1 January 2011 1 January 2010
Total Investments: To To
31 December 2011 31 December 2010
------------------ ------------------
GBP GBP
Investments listed on recognised investment exchanges* 937,500 4,881,730
Unlisted investments 2,833,152 4,391,489
Loans 8,465,246 16,128,313
------------------ ------------------
12,235,898 25,331,532
================== ==================
Book cost brought forward 33,855,446 40,565,734
Purchases of investment - 83,990
Loans advanced - 5,478,545
Payment in kind interest capitalised 100,722 248,329
Sales of investments (2,117,209) (6,862,880)
Loan repayments (5,996,776) (5,924,396)
Net realised (loss)/gain on fair value through profit or loss
investments (621,055) 248,181
Net realised foreign exchange gains on loan repayments 88,799 36,800
Net realised losses on loan sales** - (18,857)
------------------ ------------------
Book cost carried forward 25,309,927 33,855,446
Net unrealised gains on investments brought forward (8,523,914) 1,242,026
Movement in net unrealised losses on fair value through profit or loss
investments (2,694,303) (6,765,179)
Movement in impairment charge on loans (1,699,998) (2,470,211)
Movement in net unrealised foreign exchange losses on loans investments (155,814) (530,550)
------------------ ------------------
Net unrealised (losses)/gains on fair value through profit or loss
investments carried forward (13,074,029) (8,523,914)
Investments carried forward 12,235,898 25,331,532
================== ==================
*representing 6.41% (31 December 2010: 16.75%) of Total Net
Assets
**As a result of a loan sale to third party
7. Other Receivables:
31 December 2011 31 December 2010
----------------- -----------------
GBP GBP
Loan note interest receivable* 899,597 582,468
Investment sales receivable - 544,352
Prepayments 24,387 65,213
Bank interest receivable 196
----------------- -----------------
924,180 1,192,033
================= =================
*Loan note interest receivable is shown net of Accrued loan
interest written off amounting to GBP272,568 (31 December 2010:
GBP80,743).
The Directors consider that the carrying amount of other
receivables approximates fair value.
8. Cash and Cash Equivalents:
31 December 2011 31 December 2010
----------------- -----------------
GBP GBP
Cash at bank 1,503,134 2,698,579
================= =================
9. Other Payables:
31 December 2011 31 December 2010
----------------- -----------------
GBP GBP
Administration fee - 27,720
Custodian fee 3,750 3,750
Legal and professional - 13,290
Audit fee 28,500 36,750
Directors' fees - 2,090
Registrar's fee 2,016 2,017
Other payables 351 500
----------------- -----------------
34,617 86,117
================= =================
The Directors consider that the carrying amount of other
payables approximates fair value.
10. Share Capital:
31 December 2010
&
31 December 2011
-----------------
Authorised Share Capital GBP
Unlimited Shares of no par value that may be
issued as Ordinary Shares -
-----------------
-
=================
No allotted, issued and fully paid shares were issued or paid
for during the year ended 31 December 2011 (31 December 2010:
GBPnil).
On 18 July 2007 the holders of the Subscriber Shares, Praxis
Nominees Limited and Praxis Fund Services Limited, passed a written
resolution approving the cancellation of the entire amount which
stood to the credit of the share premium account immediately after
the Placing, conditionally upon the issue of the Ordinary Shares
and the payment in full thereof and with respect to any further
issue of Ordinary Shares. The cancellation was confirmed by the
Royal Court on 23 November 2007. The cancelled share premium of
GBP57,677,695 was transferred to the distributable reserve.
By a resolution dated 18 July 2007 the holders of the Subscriber
Shares in the Company granted the Company the authority to make
market purchases of up to 14.99% of its own issued Ordinary Shares
following the conclusion of the Placing. This authority expired at
the earlier of the date 18 months following the passing of such
resolution and the conclusion of the first annual general meeting
of the Company. A renewal of the authority to make purchases of
Ordinary Shares was passed at the last annual general meeting, held
on 14 September 2010, and will be sought from Shareholders at each
subsequent annual general meeting of the Company. As at 31 December
2011 the Company held none (31 December 2010: none) of its own
Ordinary Shares in treasury with all 57,701,445 Ordinary Shares
remaining in the market (31 December 2010: 57,701,445).
At the annual general meeting of the Company held 14 September
2010, the Company passed a resolution approving a scheme for
returning capital to shareholders by way of a bonus issue of new B
Shares. See note 15 for further details on the return of capital to
shareholders.
11. Net Asset Value per Ordinary Share:
The net asset value per Ordinary Share as at 31 December 2011 is
25.35p (31 December 2010: 50.49p). The net asset value per Ordinary
Share is based on the net assets attributable to equity ordinary
shareholders of GBP14,628,595 (31 December 2010: GBP29,136,027) and
on the year end number of Ordinary Shares in issue of 57,701,445
(31 December 2010: 57,701,445).
12. Financial Instruments:
(a) Significant accounting policies:
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of its financial assets, including
convertible loan notes, and financial liabilities are disclosed in
note 2 to these financial statements.
(b) Categories of financial instruments:
Financial instruments comprise equities, warrants, convertible
loan notes and cash and cash equivalents. The warrants are
derivative instruments and have been classified as held for trading
and are accounted for as fair value through profit or loss.
Investments in convertible loan notes have been classified as loans
and receivables. All other financial instruments have been
classified as fair value through profit or loss. As at 31 December
2011, the fair value of the Company's financial assets was
GBP13,739,032 (31 December 2010: GBP28,030,111). This was 93.92%
(31 December 2010: 96.20%) of net assets attributable to ordinary
shareholders.
Percentage of net
At 31 December 2011: assets attributable
Fair Value to holders of Ordinary
Shares
--------------------------------------------------- ------------ ------------------------
Assets GBP %
Financial assets at fair value through
profit or loss:
Listed equity securities 937,500 6.41
Unlisted equity securities 2,833,152 19.37
------------ ------------------------
3,770,652 25.78
Loans and receivables*:
Loans 8,465,246 57.87
Cash and cash equivalents 1,503,134 10.28
------------ ------------------------
13,739,032 93.93
============ ========================
Percentage of net
At 31 December 2010: assets attributable
Fair Value to holders of Ordinary
Shares
--------------------------------------------------- ------------ ------------------------
Assets GBP %
Financial assets at fair value through
profit or loss:
Listed equity securities 4,811,730 16.51
Unlisted equity securities 4,391,489 15.07
------------ ------------------------
9,203,219 31.58
Loans and receivables*:
Loans 16,128,313 55.36
Cash and cash equivalents 2,698,579 9.26
------------ ------------------------
28,030,111 96.20
============ ========================
* Amortised cost is not considered to be materially different
from fair value
There are no financial liabilities.
Fair values versus carrying amounts
The Directors consider that the carrying amount of financial
instruments is equal to fair value.
(b) Categories of financial instruments, continued:
Fair values versus carrying amounts, continued
Classification of Fair Value Measurements
The Company adopted the amendment to IFRS 7, effective 1 January
2009. This requires the Company 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); and
-- 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 in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, the measurement is a level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes "observable" requires
significant judgement by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The following table analyses within the fair value hierarchy the
Company's financial assets (by class) measured at fair value at 31
December 2011:
Fair Value as at 31 December 2011
Level Level 2 Level 3 Total
1
---------- ---------- ------------ ------------
GBP GBP GBP GBP
Fair value through profit
or loss 937,500 - 2,833,152 3,770,652
Loans and receivables - - 8,465,246 8,465,246
---------- ---------- ------------ ------------
937,500 - 11,298,398 12,235,898
========== ========== ============ ============
Fair Value as at 31 December 2010
Level Level 2 Level 3 Total
1
------------ -------- ------------ ------------
GBP GBP GBP GBP
Fair value through profit
or loss 4,811,730 - 4,391,489 9,203,219
Loans and receivables - - 16,128,313 16,128,313
------------ -------- ------------ ------------
4,811,730 - 20,519,802 25,331,532
============ ======== ============ ============
Investments whose values are based on quoted market prices in
active markets, and therefore classified within level 1, include
active listed equities. No adjustments are made to the quoted price
for these instruments.
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 may 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 generally based on available market information. None of
the Company's current investments are level 2 investments.
(b) Categories of financial instruments, continued:
Investments classified within level 3 have significant
unobservable inputs, as they trade infrequently. Level 3
instruments include corporate compound debt instruments and
unquoted equity instruments which the Company values in accordance
with the International Private Equity and Venture Capital valuation
guidelines. The Company considers liquidity, credit and other
market risk factors.
The table below provides a reconciliation from brought forward
to carried forward balances of financial instruments categorised
under level 3:
1 January 2011 to 31 December 2011
Assets at Fair Value based Equity investments Loan
on investments Total
Level 3:
------------------- ------------- -------------
GBP GBP GBP
Fair value brought forward 4,391,489 16,128,313 20,519,802
Payment in kind interest capitalised - 100,721 100,721
Sales (300,000) - (300,000)
Loan repayments - (5,996,776) (5,996,776)
Net realised gains on fair
value through profit or loss
investments 50,000 - 50,000
Net realised gains on loan
repayments/disposals - 88,799 88,799
Movement in impairment charge
on loans - (1,699,997) (1,699,997)
Movement in net unrealised
foreign exchange gains on loans
investments - (155,814) (155,814)
Movement in net unrealised
gains on fair value through
profit or loss investments (1,308,338) - (1,308,338)
------------------- ------------- -------------
Fair value carried forward 2,833,151 8,465,246 11,298,397
=================== ============= =============
1 January 2010 to 31 December 2010
Assets at Fair Value based Equity investments Loan
on investments Total
Level 3:
------------------- ------------- -------------
GBP GBP GBP
Fair value brought forward 15,406,886 19,308,653 34,715,539
Purchases 83,990 - 83,990
Loans advanced - 5,478,545 5,478,545
Payment in kind interest capitalised - 248,329 248,329
Sales (3,857,476) - (3,857,476)
Loan repayments - (5,924,396) (5,924,396)
Net realised gains on fair
value through profit or loss
investments 2,716,774 - 2,716,774
Net realised gains on loan
repayments/disposals - 17,943 17,943
Movement in impairment charge
on loans - (2,470,211) (2,470,211)
Movement in net unrealised
foreign exchange losses on
loans investments - (530,550) (530,550)
Movement in net unrealised
gains on fair value through
profit or loss investments (9,958,685) - (9,958,685)
------------------- ------------- -------------
Fair value carried forward 4,391,489 16,128,313 20,519,802
=================== ============= =============
(c) Net gains and losses on financial assets:
Movement in net unrealised Movement in net unrealised Net realised gains/(losses)
gains/(losses) impairment on disposals
Year ended 31
December 2011
---------------------------- ---------------------------- ---------------------------- ----------------------------
GBP GBP GBP
Financial assets
at fair value
through profit
or loss:
Listed equity
securities (1,385,965) - (671,055)
Unlisted equity
securities (1,308,337) - 50,000
---------------------------- ---------------------------- ----------------------------
(2,694,302) - (621,055)
Loans and
receivables:
Loans - (1,669,998) 88,799
---------------------------- ---------------------------- ----------------------------
(2,694,302) (1,669,998) (532,256)
============================ ============================ ============================
Movement in net unrealised Movement in net unrealised Net realised gains/(losses)
Year ended 31 gains/(losses) impairment on disposals
December 2010
---------------------------- ---------------------------- ---------------------------- ----------------------------
GBP GBP GBP
Financial assets
at fair value
through profit
or loss:
Listed equity
securities 3,193,506 - (2,399,360)
Unlisted equity
securities (9,958,685) - 2,647,541
---------------------------- ---------------------------- ----------------------------
(6,765,179) - 248,181
Loans and
receivables:
Loans (530,550) (2,470,211) 17,943
---------------------------- ---------------------------- ----------------------------
(7,295,729) (2,470,211) 266,124
============================ ============================ ============================
(d) Derivatives:
In accordance with the Company's scheme particulars the Company
may invest in derivatives or forward foreign exchange contracts for
the purpose of efficient portfolio management.
No derivatives were held at the year end (31 December 2010:
nil).
13. Financial Risk Management:
Strategy in Using Financial Instruments:
The Company's activities expose it to a variety of financial
risks: market risk (including currency risk, fair value interest
rate risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk. The Company's overall risk management
program focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Company's
financial performance.
The Company is currently focusing on realising the investments
that have been made to date. These investments were made in line
with the Company's stated investment policy.
Market Price Risk:
Market price risk results mainly from the uncertainty about
future prices of financial instruments held. It represents the
potential loss the Company may suffer through holding market
positions in the face of price movements and changes in interest
rates or foreign exchange rates, with the maximum risk resulting
from financial instruments being determined by the fair value of
the financial instruments.
All securities investments present a risk of loss of capital.
The Investment Manager moderates this risk through a careful
selection of securities and other financial instruments within
specified limits. The maximum risk resulting from financial
instruments is determined by the fair value of the financial
instruments. The Company's portfolio and investment strategy is
reviewed continuously by the Investment Manager and the Investment
Manager and on a quarterly basis by the Board.
Strategy in Using Financial Instruments, continued:
The Company's exposure to market price risk arises from
uncertainties about future prices of its investments. This risk is
managed through diversification of the investment portfolio.
Generally the Company will seek not to invest (or commit to invest)
more than 15% of the Company's net assets in any single investment
at the time of investment (or commitment), or more than 15% of the
Company's net assets in special situations (such as investments in
companies already listed) at the time of investment (or
commitment), although such limit may be increased to 30% in certain
cases where the Board deems appropriate on the advice of the
Investment Manager.
At 31 December 2011, the Company's market risk is affected by
three main components: changes in actual market prices, interest
rate and foreign currency movements. Interest rate and foreign
currency movements are shown below. A 10% increase in the value of
investments, with all other variables held constant, would bring
about a 8.36% (31 December 2010: 8.69%) increase in net assets
attributable to ordinary shareholders. If the value of investments
had been 10% lower, with all other variables held constant, net
assets attributable to ordinary shareholders would have fallen by
8.36% (31 December 2010: 8.69%).
Interest Rate Risk:
The Company is exposed to risks associated with the effects of
fluctuations in the prevailing levels of market interest rates on
its financial instruments and future cash flows. The Company is
exposed to interest rate risk as its cash and cash equivalents are
invested at short term rates. All the Company's loan instruments
have fixed rate coupons and therefore are not exposed to risks
associated with the effects of fluctuations in the prevailing
levels of market interest rates. The Investment Manager manages the
Company's exposure to interest rate risk daily in accordance with
the Company's investment objectives and policies. The Company's
overall exposure to interest rate risk is monitored on a quarterly
basis by the Board of Directors.
The table below summarises the Company's exposure to interest
rate risks:
31 December 2011 31 December 2010
WAEIR* Total WAEIR* Total
---------------------------------------------------- -------- ----------- -------- -----------
GBP GBP
Assets
Fixed interest rate unquoted debt securities 10.46% 8,465,246 10.46% 16,128,313
Cash at bank 0.14% 1,503,134 0.38% 2,698,579
Non-interest bearing - 4,694,832 - 10,395,252
----------- -----------
Total assets 14,663,212 29,222,144
=========== ===========
Liabilities
Non-interest bearing - 34,616 - 86,117
----------- -----------
Total liabilities 34,616 86,117
=========== ===========
* - weighted average effective interest rate
The sensitivity analyses below have been determined based on the
Company's exposure to interest rates for interest bearing assets
and liabilities (included in the interest rate exposure table
above) at the period end date and the stipulated change taking
place at the beginning of the financial period and held constant
through the reporting period in the case of instruments that have
floating rates.
A 50 basis point increase or decrease is used when reporting
interest rate risk internally to key management personnel and
represents management's assessment of the possible change in
interest rates.
If interest rates had been 50 basis points higher and all other
variables were held constant, the Company's net assets attributable
to ordinary shareholders for the year ended 31 December 2011 would
have increased by GBP7,515 (31 December 2010: GBP13,493) due to the
increase in the interest earned on the Company's cash balances.
Interest Rate Risk, continued:
If interest rates had been 50 basis points lower and all other
variables were held constant, the Company's net assets attributable
to Ordinary shareholders for the year ended 31 December 2011 would
have decreased by GBP2,104 (31 December 2010: GBP10,255) due to the
decrease in the interest earned on the Company's cash balances.
The Company's sensitivity to interest rates has decreased during
the current period as the Company has continued its Capital Return
Scheme thereby reducing its cash balances that are interest
bearing.
Foreign Currency Risk:
Foreign currency risk is the risk that the fair value of future
cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates.
Accordingly, without foreign currency hedging in place, the
Company is at high risk that the value of an investment portfolio
may be significantly affected favourably or unfavourably by
fluctuations in exchange rates. The Company has the ability to
manage this risk through forward foreign exchange contracts to
hedge its exposure back to sterling (see note 12(d) for details of
currency hedging in place as at 31 December 2011).
Some of the net assets of the Company are denominated in
currencies other than Sterling. The carrying amounts of these
assets and liabilities are as follows (these assets and liabilities
do not include amounts receivable/payable on open forward foreign
currency contracts and are pre currency hedging exposures):
31 December 2011
Assets Liabilities Net
GBP GBP GBP
Australian Dollar 723,148 - 723,148
British Pound 7,609,215 (34,617) 7,574,598
Euro 6,330,849 - 6,330,849
---------- ----------- ----------
14,663,212 (34,617) 14,628,595
========== =========== ==========
31 December 2010
Assets Liabilities Net
GBP GBP GBP
Australian Dollar 721,489 - 721,489
British Pound 17,174,266 (86,117) 17,088,149
Euro 11,326,389 - 11,326,389
--------------------- ---------------------- ---------------------------
29,222,144 (86,117) 29,136,027
===================== ====================== ===========================
The Company is exposed to Euro and Australian Dollar currency
risk. The Company has the ability to manage this risk through
forward foreign exchange contracts to minimise the impact of any
currency movements. As at 31 December 2011, the Company had no open
forward foreign exchange contracts.
The sensitivity analysis below has been determined based on the
sensitivity of the Company's outstanding foreign currency
denominated financial assets and liabilities to a 20% increase /
decrease in the Sterling against Australian Dollar and Euro,
translated at the period end date.
The following details the Company's sensitivity to a 20%
increase / decrease in foreign currency rates. 20% is the
sensitivity rate used when reporting foreign currency risk
internally to key management personnel and represents management's
assessment of the possible change in foreign exchange rates.
Currency Exposure, continued:
As at 31 December 2011 if sterling had weakened by 20% against
the Australian Dollar and Euro, with all other variables held
constant, the increase in net assets attributable to Ordinary
Shares would have been 9.64% (31 December 2010: 8.27%) lower.
Conversely, if Sterling had strengthened by 20% against the
Australian Dollar and Euro, with all other variables held constant,
the decrease in net assets attributable to ordinary shareholders
would have been 9.64% (31 December 2010: 8.27%) higher.
Liquidity Risk:
Liquidity risk is the risk that the Company will encounter in
realising assets or otherwise raising funds to meet financial
commitments.
It is the aim of the Company to manage the realisation of the
Company's investment portfolio and to maximise the return of
invested capital to shareholders during the period ending on 30
September 2013.
Maturity Analysis:
The table below shows the maturity analysis of the Company's
assets and liabilities as at 31 December 2011:
At 31 December 2011 Less than 1 month 1-12 months 1-2 years No fixed maturity Total
--------------------------------------- ------------------ ------------ ---------- ------------------ -----------
GBP GBP GBP GBP
Assets
Fixed interest rate unquoted
debt securities 71,931 4,271,294 3,939,621 182,400 8,465,246
Cash at bank 1,503,134 - - - 1,503,134
Non-interest bearing 760,691 135,010 - 3,799,131 4,694,832
------------------ ------------ ---------- ------------------ -----------
Total assets 2,335,756 4,406,304 3,939,621 3,981,531 14,663,212
================== ============ ========== ================== ===========
Liabilities
Non-interest bearing - - - 34,616 34,616
------------------ ------------ ---------- ------------------ -----------
Total liabilities - - - 34,616 34,616
================== ============ ========== ================== ===========
At 31 December 2010 Less than 1 month 1-12 months 1-3 years 3-5 years No fixed maturity Total
-------------------------- ------------------ ------------ ---------- ---------- ------------------ ------------
GBP GBP GBP GBP GBP
Assets
Fixed interest rate
unquoted debt
securities - 3,120,841 7,568,268 5,439,204 - 16,128,313
Cash at bank 2,698,579 - - - - 2,698,579
Non-interest
bearing 1,077,564 114,469 - - 9,203,219 10,395,252
------------------ ------------ ---------- ---------- ------------------ ------------
Total assets 3,776,143 3,235,310 7,568,268 5,439,204 9,203,219 29,222,144
================== ============ ========== ========== ================== ============
Liabilities
Non-interest
bearing - - - - 86,117 86,117
------------------ ------------ ---------- ---------- ------------------ ------------
Total liabilities - - - - 86,117 86,117
================== ============ ========== ========== ================== ============
Credit Risk:
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company.
To the extent that the Company invests in customised financial
instruments or non-UK securities, the Company takes the risk of
non-performance by the other party to the contract. This risk may
include credit risk of the counterparty and the risk of settlement
default. This risk may differ materially from those entailed in UK
exchange-traded transactions which generally are supported by
guarantees of clearing organisations, daily marking-to-market and
settlement, and segregation and minimum capital requirements
applicable to intermediaries. Transactions entered directly between
two counterparties generally do not benefit from such protections
and expose the parties to the risk of counterparty default. In
addition, there are risks involved in dealing with the custodians
or brokers who settle trades particularly with respect to non-UK
investments.
At the reporting date financial assets exposed to credit risk
include loan instruments and derivatives disclosed in note 12 to
these financial statements. It is the opinion of the Board of
Directors that the maximum exposure to credit risk that the Company
faces is equal to the carrying value of these financial instruments
held by the Company.
The loan instruments are private loans with the underlying
counterparties and as such do not have associated agency credit
ratings. To mitigate the credit risk on these loan instruments the
Directors consider impairment on an ongoing basis also taking into
consideration the results of any reviews performed by the
Investment Manager. As at 31 December 2011, GBP1,699,997 impairment
charges (31 December 2010: GBP2,470,211) have been recognised in
the Statement of Total Comprehensive Income (see note 2(f)).
The credit risk on cash transactions and transactions involving
derivative financial instruments is mitigated by transacting with
counterparties that are regulated entities subject to prudential
supervision, or with high credit-ratings assigned by international
credit-rating agencies.
In accordance with the investment restrictions as described in
its Placing Document, the Company will generally not invest more
than 15% of its total net assets in any one underlying company
(calculated at the time of any relevant investment being made).
As at 31 December 2011, the following amounts on debt
instruments were past due:
31 December 2011 31 December 2010
----------------- -----------------
GBP GBP
Principal default - -
Interest default* 272,568 80,743
*As at 31 December 2011 and 31 December 2010 the interest owed
on debt instruments that was either past due or not considered
recoverable and had been written off as "loan interest receivable
written off" in the Statement of Total Comprehensive Income.
Concentration Risk
Concentration risk may arise if the Company's investments are
concentrated in a low number of investments each representing a
relatively large percentage of the Company's net assets. At times
the Company may hold a relatively small number of investments each
representing a relatively large portion of the Company's net
assets. Losses incurred in such investments could have a materially
adverse effect on the Company's overall financial condition. Whilst
the Company's portfolio is diversified in terms of the companies in
which it invests, the investment portfolio of the Company may be
subject to more rapid change in value than would be the case if the
Company were required to maintain a wider diversification among
types of securities, countries and industry groups.
In line with the Company's new investment objectives, the
concentration risk of the Company will naturally increase upon the
managed realisation of the Company's investment portfolio and the
subsequent return of invested capital to shareholders.
14. Dividend:
The Directors do not recommend the payment of a dividend for the
year ended 31 December 2011 (31 December 2010: GBPnil).
15. Return of Capital:
At the annual general meeting of the Company held 14 September
2010, the Company passed a resolution approving a scheme for
returning capital to shareholders by way of a bonus issue of new B
Shares (the "Capital Return Scheme"). A resolution was also passed
for the adoption of amended and restated articles of incorporation
which allow the Board to capitalise, by the issue of B Shares,
amounts standing to the credit of the Company's Distributable
Reserve and which represent the capital returns from the
realisation of investments by the Company.
Capital returns to Ordinary Shareholders entail the Company
making a bonus issue of new B Shares which are immediately redeemed
by the Company on a pro-rata basis.
On 28 September 2010, in accordance with the Company's Capital
Return Scheme authorised at the Annual General Meeting on 14
September 2010, the Company returned to Ordinary Shareholders 23p
per Share by the way of a bonus issues of B Shares to Ordinary
Shareholders on the Company's register on the record date of 14
September 2010. Following their issues the B Shares were On 26
November 2010, in accordance with the Company's Capital Return
Scheme, the Company paid to Ordinary Shareholders a return of
capital of 11p per B Share, amounting to GBP6.3 million in
aggregate.
On 17 December 2010, in accordance with the Company's Capital
Return Scheme, the Company paid to Ordinary Shareholders a return
of capital of 5p per B share, amounting to GBP2.9 million.
On 9 February 2011, in accordance with the Company's Capital
Return Scheme, the Company paid to Ordinary Shareholders a return
of capital of 5p per B share, amounting to GBP2.9 million.
On 5 May 2011, in accordance with the Company's Capital Return
Scheme, the Company paid to Ordinary Shareholders a return of
capital of 3p per B share, amounting to GBP1.7 million.
On 17 July 2011, in accordance with the Company's Capital Return
Scheme, the Company paid to Ordinary Shareholders a return of
capital of 6.5p per B share, amounting to GBP3.8 million.
On 24 October 2011, in accordance with the Company's Capital
Return Scheme, the Company paid to Ordinary Shareholders a return
of capital of 2.5p per B share, amounting to GBP1.4 million.
16. Taxation:
The Income Tax Authority of Guernsey has granted the Company
exemption from Guernsey income tax under the Income Tax (Exempt
Bodies) (Guernsey) Ordinance, 1989 and the income of the Company
may be distributed or accumulated without deduction of Guernsey
income tax. Exemption under the above mentioned Ordinance entails
payment by the Company of an annual fee of GBP600 each. It should
be noted, however, that interest and dividend income accruing from
the Company's investments may be subject to withholding tax in the
country of origin.
The Company has not suffered any withholding tax during the year
(31 December 2010: GBPnil).
17. Capital Management:
The Directors may exercise the powers of the Company to borrow
money and to give security over its assets. The Company may borrow
funds secured on its investments if the Board (with the advice of
HLFM Limited) considers that satisfactory opportunities for
investment arise, however in view of the new investment objective
policy there are no plans to borrow any such funds. In any event,
borrowing will be limited to 25 per cent. of the Company's last
announced NAV at the time of draw down. The Company may also be
indirectly exposed to the effects of gearing to the extent that
investee companies have outstanding borrowings.
18. Post Year End Events:
On 24 January 2012, in accordance with the Company's Capital
Return Scheme, the Company paid to Ordinary Shareholders a return
of capital of 4p per B share, amounting to GBP2.3 million.
There are no other significant post period end events that
require disclosure in these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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