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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Damille Inv Ii | LSE:DIL2 | London | Ordinary Share | GG00BFMHSG58 | ORD SHS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 50.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMDIL2
RNS Number : 5363W
Damille Investments II Limited
09 February 2017
DAMILLE INVESTMENTS II LIMITED (the "Company")
Annual Financial Report
In accordance with the FCA's Disclosure Guidance and Transparency Rules, the Board of directors of the Company announces the Company's results for the year ended 30 November, 2016. The full text of the annual financial report is included below.
The Company will make a further announcement once the annual financial report has been uploaded to the Company's website and submitted to the FCA's National Storage Mechanism.
For further information, please contact:
For administrative and company information:
JTC Fund Solutions (Guernsey) Limited
+44 (0) 1481 702 400
For shareholder information:
Nimrod Capital LLP
Richard Bolchover
Marc Gordon
+44 (0) 20 7382 4565
9 February, 2017
OF ANNOUNCEMENTE&OE - in transmission
Damille Investments II Limited
Annual Financial Report
For the year ended 30 November, 2016
Damille Investments II Limited
CONTENTS
Summary Information Chairman's Statement Investment Report Directors Manager, Administrator and Secretary Management Report Directors' Report Audit Committee Report Independent Auditor's Report Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity Notes to the Financial Statements Key Advisers and Contact Information
SUMMARY INFORMATION
Company Overview
Damille Investments II Limited (LSE:DIL2) (the "Company") is a Guernsey-incorporated company formed as a registered closed-ended investment company. It was incorporated on 3 November, 2011 and operates under The Companies (Guernsey) Law, 2008, as amended (the "Law"), The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission (the "GFSC") and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (the "FCA").
The ordinary shares of no par value (the "Shares") of the Company were admitted to trading on the Specialist Fund Segment (the "SFS") (formerly the Specialist Fund Market) of the London Stock Exchange's Main Market for Listed Securities and listed and admitted to trading on the Channel Islands Stock Exchange (the "CISX") on 9 November, 2011 ("Admission"). The listing of the Shares on the Channel Islands Securities Exchange (the successor to the CISX) was cancelled with effect from 21 July, 2014.
Investment Objective and Policy
The Company's investment objective was to realise significant capital returns for its shareholders with low volatility, by investing in a concentrated portfolio of primarily equity securities. In the opinion of the Company, many but not all of these companies would have benefited from implementing certain measures to optimise their balance sheets and align management and shareholder interests. Such issuers were expected to be, but were not limited to, closed-ended investment funds, investment companies and other corporate entities, such as real estate companies or natural resource companies.
At the Company's annual general meeting held on 4 May, 2016 a resolution put to the shareholders that, in accordance with Article 172 of the Company's Articles of Incorporation (the "Articles"), the Company continue its business as a closed-ended investment company, was not passed. Therefore, on 23 June, 2016 the Company announced that the Directors proposed to commence an orderly realisation of the Company's assets, which process was expected to take approximately 18 months. Shareholders' capital was intended to be returned to them by way of periodic distributions.
In order to permit the cost-effective return of capital to shareholders, at an extraordinary general meeting held on 5 September, 2016, the shareholders voted to adopt new articles of incorporation (the "New Articles") in substitution for and to the exclusion of the previous Articles. The New Articles include provisions permitting the Directors at their discretion to compulsorily redeem any issued Shares in the Company.
The Directors intend to continue to realise the Company's investment portfolio for cash and to return such cash to shareholders periodically by means of a compulsory redemption of a portion of each shareholder's Shares pro rata to their then percentage holding in the Company.
Capital and Income Distribution Policy
The Company previously aimed to provide shareholders with an attractive total return, comprising primarily capital growth, although there was also the potential for distributions of income to be made.
The nature of the Company's investments is such that the timing and amount of investment income can not be predicted. Because the Company is making periodic returns of capital to shareholders via compulsory redemptions of Shares, there is no current intention to declare any dividends and any surplus income received which is not needed to finance the Company's operating expenses will be distributed to shareholders when making the afore-mentioned redemptions.
As the Company has been granted "reporting fund" status by H.M. Revenue & Customs, United Kingdom resident or ordinarily resident shareholders, or any shareholders who carry on a trade in the United Kingdom through a branch, agency of permanent establishment, will be subject to UK income tax or corporation tax (as appropriate) on their share of the excess of the Company's "reportable income" for any period of account over any amounts actually distributed, in addition to such tax on amounts actually distributed. Since the Directors intend to distribute all reportable income, such shareholders should not in practice be subject to UK tax on 'excess' amounts of income not actually distributed.
Compulsory Redemptions of Shares
Since the adoption of the New Articles on 5 September, 2016, the Directors have resolved to make the following compulsory redemptions of Shares:
Date Number of Shares Redemption Price ------------- ----------------- ----------------- 9 September, 11,802,243 110.92 pence 2016 ------------- ----------------- ----------------- 18 October, 5,352,389 118.30 pence 2016 ------------- ----------------- ----------------- 14 December, 5,199,671 119.90 pence 2016 ------------- ----------------- -----------------
Each return of capital via a compulsory redemption of Shares triggered the payment of a performance fee to Damille Partners Limited ("Damille"), a 15% portion of which was payable to Nimrod Capital LLP ("Nimrod") under the Services Agreement with Damille and the Corporate and Shareholder Advisory Agreement between the Company and Nimrod Capital LLP. The performance fees were settled by the sale out of treasury to Damille and Nimrod of Shares at their prevailing net asset value. All such issues of Shares are disclosed in note 14 and 10 to the financial statements.
Discount Control
At the annual general meeting held on 4 May, 2016, the shareholders granted the Directors authority to make market purchases of up to 14.99% of the Company's Shares in issue within specified parameters, with a view to addressing any imbalance between the supply of and demand for Shares. The Directors seek annual renewal of this authority from shareholders at each annual general meeting held under section 199 of the Law.
In accordance with the Law, any repurchase of Shares will be effected by the purchase of Shares in the market for cash at a price below the estimated prevailing net asset value per Share, which is accretive to the net asset value per Share. Shares which are purchased may be cancelled or held in treasury. Although shareholders can have a reasonable expectation that their Shares will in due course be redeemed at a price close to their prevailing net asset value, there can be no guarantee as to the timing of such future compulsory redemptions, so this discount control mechanism also offers shareholders an alternative method of realising their investment sooner and increases liquidity in the Shares.
During the financial year ended 30 November, 2016 the Company repurchased 2,000 Shares. At the year end, the Company held 3,362,721 Shares in treasury.
Voluntary Redemption Offer
Under both the previous Articles and the New Articles, the Directors were and are also permitted in each year following the second anniversary of Admission to offer at their absolute discretion to each holder of Shares an option to redeem up to 15% of their shareholding, subject to any legal or regulatory requirements and, in particular, the Law (the "Redemption Offer").
Prior to the adoption of the New Articles, the following Shares were redeemed pursuant to previous Redemption Offers:
Date Number of Shares Redemption Price ------------- ----------------- ----------------- 27 February, 5,451,757 103.64 pence 2014 ------------- ----------------- ----------------- 18 February, 9,554,308 101.64 pence 2015 ------------- ----------------- ----------------- 26 February, 8,139,756 95.87 pence 2016 ------------- ----------------- -----------------
Following the adoption by the shareholders of the New Articles and the empowerment of the Directors at their discretion to compulsorily redeem Shares, the Directors do not intend to incur the additional expense of making any further Redemption Offers.
CHAIRMAN'S STATEMENT
I have pleasure in presenting the fifth audited annual report and financial statements of the Company.
The Company's audited net asset value per Share (the "NAV") as at 30 November, 2016 was 121.11 pence. As the NAV as at 1 December, 2015 was 102.15 pence per Share, the performance was up by 18.56% for the year. Since launch on 3 November, 2011 until 30 November, 2016, the Company's NAV increased by 25%.
As the Company's Shares are traded on the SFS, the Shares may on occasion trade at a discount to their NAV per Share. In structuring the Company, the Directors have given detailed consideration to the discount risk and how this may be managed. During the year, the Company bought back 2000 Shares, 719,278 Shares were sold out of treasury and 310,000 Shares were cancelled, so that the Company held 3,362,721 Shares in treasury at the year end. The Company intends to continue to buy back Shares opportunistically where they trade at significant discounts to NAV.
In addition, during the year, the Company announced a redemption offer in which shareholders could elect to redeem up to 15% of their shareholding at a price equal to the unaudited NAV per Share as at 31 January, 2016 less 2.5%. Pursuant to the redemption offer, 8,139,756 Shares were redeemed at 95.87 pence per Share.
As the Continuation Resolution put to shareholders at the Company's annual general meeting held on 4 May, 2016 was not passed, on 23 June, 2016 the Company announced that the Directors proposed to commence an orderly realisation of the Company's assets and this is currently underway. Pursuant to this, the Company has begun returning its capital to shareholders and during the year undertook two compulsory redemptions of Shares, whereby a total of 17,154,632 Shares were redeemed for GBP19.4 million. Post the year end, the Company has returned a further GBP6.2 million through a further compulsory redemption of Shares.
It should be noted that since inception (when the Company raised GBP70.7 million net of expenses) the Company has returned GBP52.9 million to shareholders through redemption offers, share buy backs and compulsory redemptions.
Richard Prosser
Chairman
INVESTMENT REPORT
During the year, the Company's NAV per Share increased by 18.56%. Since launch on 3 November, 2011 until 30 November, 2016, the Company's NAV increased by 25%.
At the year end, the Company was invested with weightings of approximately 86.2% in equities and 14.1% in cash and net working capital. However shareholders should note that, as the Company is in realisation mode, equities have been sold and cash returned to shareholders.
At the year end, the Company held fifteen investments, of which four are currently notifiable under the Disclosure Guidance and Transparency Rules ("DGTR"). The five largest investments account for 73.6% of NAV. In total the top ten investments (including cash) accounted for 82.7% of the Company's NAV.
At the annual general meeting held on 4 May, 2016, the resolution put to the Company's shareholders that, in accordance with Article 172 of the Company's Articles, the Company continue its business as a closed-ended investment company, did not pass. Accordingly, and as announced on 23 June, 2016, the Company is now in an orderly realisation which is expected to have concluded by the end of the 2017 calendar year.
We set out below a summary of the Company's portfolio composition as at the year end. Where any particular investments are notifiable under the DGTR these are detailed as in previous periods. However, where investments are not notifiable under the DGTR we do not disclose names, so as not to prejudice our ability to further deal in those investments and realise these holdings.
Overview of Investments
The Company's portfolio is demarcated into five distinct "classes" as follows:
1. Private Equity and Venture (three holdings representing 13.1% of NAV)
Whilst we have realised a substantial amount of this exposure, we retain some exposure to the Listed Private Equity and Venture sectors. During the year we disposed of our holding in Private Equity Investor plc which was the subject of a recommended cash offer.
2. Real estate and other funds (three holdings representing 19.5% of NAV)
The investment case for these investments was based on the combination of attractive discounts to realisable net asset value and rational capital management policies. The underlying exposures here are extremely diverse.
The Local Shopping REIT plc ("LSR")
The Company holds 22.2% of LSR. LSR is a UK Real Estate Investment Trust with an established portfolio of local shops in urban and suburban areas throughout the United Kingdom. LSR is in a realisation phase whereby it is seeking buyers for its properties with a view to returning cash to shareholders. During the year we disposed of a small part of this holding. Since the year end the Company has obtained board representation at LSR.
St Peter Port Capital Limited ("SPPC")
The Company holds 8.5% of SPPC. SPPC is a Guernsey registered, closed-ended investment company established with the aim of generating value for shareholders by investing in growth companies. During the year SPPC announced a strategic review and commencement of formal sales process and the Company awaits the outcome of this.
3. Holding company trading at a discount (one holding, Sistema JSFC, representing 33.8% of NAV)
During the year we realised a number of holding company investments but retained our position in Sistema JSFC, a major private investor in Russia's economy with interests in mobile telecoms, speciality retail, agriculture, forestry, technology, defence, real estate and banking.
4. Natural resources companies (six holdings representing 16.6% of NAV)
Certain natural resource companies are valued at significant discounts to their asset values.
Kolar Gold Limited ("Kolar")
Kolar is a gold exploration company, incorporated in Guernsey and focused primarily on the Kolar Gold Field region to the east of Bangalore in India. At the year end the Company had a 14.6% shareholding in Kolar.
Ovoca Gold plc ("OVG")
OVG is a cash-rich gold explorer incorporated in Ireland and operating in Russia. At the year end the Company had a 5.0% shareholding in OVG, which was reduced slightly during the year.
Sunrise Resources plc
Sunrise Resources plc is an AIM-traded, diversified mineral exploration and development company. The Company holds 56,500,000 shares in Sunrise Resources plc and 30,000,000 warrants.
Investment Allocation
As at 30 November, 2016, the Company's net assets were allocated in the following proportions (% net assets):
Notifiable shareholdings: 17.3 %
18,300,000 shares in Local Shopping REIT PLC: 13.8%
4,315,000 shares in St Peter Port Capital Limited: 1.4%
28,183,173 shares in Kolar Gold Limited: 0.9%
4,382,100 shares in Ovoca Gold plc: 1.0%
56,500,000 shares in Sunrise Resources plc: 0.2%
Non-Notifiable shareholdings: 68.9%
Cash (incl. net working capital): 13.8%
Outlook
As the Company has adopted a realisation mode there is currently every expectation that all its assets will be sold by the end of 2017 - as announced on 23 June 2016.
Brett Miller Rhys Davies Executive Director Executive Director
DIRECTORS
Richard Prosser: Chairman (independent non-executive)
Richard Prosser is a Chartered Accountant. Richard is a shareholder of Estera Trust (Jersey) Limited, a corporate and fiduciary administrator authorised to conduct trust company business in Jersey and is a director of a number of companies quoted in London and elsewhere, including property companies, hedge funds and investment management companies. Richard is Chairman of Threadneedle Investments (C.I.) Limited, manager of the Threadneedle Property Unit Trust. He is also Chairman of the Aberdeen Latin American Income Fund, listed on the CISE and the London Stock Exchange.
David Copperwaite: Director (independent non-executive)
David Copperwaite retired as the Managing Director of Lloyds Bank Fund Managers (Guernsey) Limited on 31 December 1997. He is based in Guernsey and provides consultancy and advisory services to offshore fund management groups. He is the director of a number of regional, global, private equity and emerging market investment funds, including Aberdeen Private Equity Fund Limited which is listed on the CISE and the London Stock Exchange. David has considerable experience in the management and administration of offshore funds.
Martin Tolcher: Director (independent non-executive)
Martin Tolcher is a Chartered Fellow of the Chartered Institute for Securities and Investment (Chartered FCSI) and has been involved within the fund administration industry in Guernsey for over 25 years. He has worked at a senior level for three fund administration subsidiaries of Bermudan and Canadian international banks, gaining considerable experience in a wide variety of funds and private equity structures. Martin joined Legis Group in 2005 as a director of Legis Fund Services Limited and became Managing Director of that company at the beginning of 2007, a role he had until 31 December 2010 (he remained as a director until 30 September 2011). Martin is a non-executive director of a number of open and closed-ended Guernsey domiciled funds and associated management companies.
Brett Miller: Director (executive)
Brett Miller is an executive director of the Company. Brett presently serves as a non-executive Director of M&L Property & Assets plc, Manchester and London Investment Trust plc and The Local Shopping REIT plc. Brett graduated from the University of Witwatersrand (South Africa) with a bachelor's degree majoring in law and economics and additionally holds a law degree from the London School of Economics (after having relocated to the United Kingdom in 1988). He qualified as a solicitor and practised until December 1997.
Rhys Davies: Director (executive)
Rhys Davies is an executive director of the Company. Rhys also presently serves as the non-executive Chairman of EIH plc, an AIM quoted Isle of Man registered investment company. Rhys holds degrees from the University of Wales, Cardiff and Imperial College, London, as well as the CFA designation.
MANAGER, ADMINISTRATOR AND SECRETARY
Management and Administration
The Directors, whose details are set out in above, are responsible for managing the business affairs of the Company in accordance with its New Articles and have overall responsibility for the Company's activities, including the review of investment activity and performance. Rhys Davies and Brett Miller act in an executive capacity, while each of the other Directors are non-executive. The Directors have delegated certain functions to other parties, such as the Consultancy Services Provider, the Administrator and Secretary and the Registrar.
Consultancy Services Provider
Damille Partners Limited, a company incorporated in the British Virgin Islands and controlled by the respective family interests of the executive Directors, provides investment support to the Directors and the Company. Pursuant to the Services Agreement between the Company and Damille Partners Limited dated 4 November, 2011, as amended, Damille Partners Limited provides the Company with the services of the executive Directors, together with certain support services, including the delivery of research and reports on investments and monitoring and analysing the Company's investments.
Administrator and Secretary
Pursuant to an Administration and Secretarial Agreement between the Company and JTC Fund Solutions (Guernsey) Limited* ("JTCFSL") dated 4 November, 2011, JTCFSL was appointed to act as the Company's Administrator and Secretary. JTCFSL carries out the general secretarial functions required by the Law and supports the Company's compliance with its continuing obligations as a company traded on the SFS. JTCFSL also carries out the Company's general administrative functions, such as the calculation and publication of the NAV, calculating the performance of the Company's investments and the maintenance of accounting records.
Registrar
Pursuant to a Registrars Agreement dated 4 November, 2011 between the Company and Anson Registrars Limited ("ARL"), ARL was appointed to act as the Company's Registrar. ARL maintains the Company's register of members and also acts as paying agent.
The Board keeps under review the performance of all service providers and the powers delegated to them. In the opinion of the Board, the continuing appointment of the current service providers is in the best interests of the Company and its shareholders as a whole.
*On 1 January, 2017, JTC (Guernsey) Limited, the Company's Administrator and Secretary, was amalgamated with JTC Fund Solutions (Guernsey) Limited, the surviving amalgamated company. The existing agreement with the Administrator and Secretary was subsumed into the surviving company and remains in full force and effect.
MANAGEMENT REPORT
A description of important events that have occurred during the financial year, their impact on the financial statements and a description of the principal risks and uncertainties facing the Company, together with an indication of important events that have occurred since the end of the financial year and are likely to affect the Company's likely future development are included in the Chairman's Statement, the Executive Directors' Investment Report and the notes to the financial statements. They are considered to be incorporated here by reference.
There were no events or changes in the related parties during the financial year which had or could have had a material impact on the financial position of the Company, other than those disclosed in the Directors' Report and the notes to the financial statements.
Responsibility Statement
The Directors jointly and severally confirm that, to the best of their knowledge:
(a) the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
(b) this management report (including the information incorporated by reference) includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
Signed on behalf of the Board of Directors on 9 February 2017.
David Copperwaite Richard Prosser Director Director
DIRECTORS' REPORT
The Directors present their annual report and the audited financial statements of the Company for the year ended 30 November, 2016.
Principal Activities and Business Review
The principal activity of the Company is to carry on business as an investment company. Since the continuation vote was not passed in May, 2016, the Directors have been realising the Company's investment portfolio for cash and returning such cash to shareholders periodically by means of compulsory redemptions of a portion of each shareholder's Shares pro rata to their then percentage holding in the Company. The Directors expect all investments to be realised by the end of 2017, after which the voluntary liquidation of the Company will be proposed to shareholders. A description of the activities of the Company in the year under review is given in the Investment Report above.
Guernsey Tax Exemption
The Company's management and administration takes place in Guernsey and the Company had been granted exemption from income tax in Guernsey by the Administrator of Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. It is the intention of the Directors to continue to operate the Company so that each year this exemption is renewed.
Results
The results of the Company for the year are set out on the Statement of Comprehensive Income below.
Directors
The Directors in office are shown above. Further details of the Directors' responsibilities are provided below.
The following interests in Shares of the Company are held by persons discharging managerial responsibility and their persons closely associated:
Hot Features
Premium
Number of Shares Number of Shares
held as at 30 held as at the date
November 2016 of this report
Richard Prosser 10,488 8,706
Damille Partners
Limited 792,691 1,008,470
Brett Miller and Rhys Davies are directors of Damille Partners Limited, the Company's Consultancy Services Provider. Damille Partners Limited is owned equally by the respective family interests of Brett Miller and Rhys Davies.
Other than the above shareholdings as well as the investment advisory fee and performance fee as disclosed in Note 14, none of the Directors nor any persons connected with them had a material interest in any of the Company's transactions, arrangements or agreements during the year and none of the Directors has or has had any interest in any transaction which is or was unusual in its nature or conditions or significant to the business of the Company and which was effected by the Company during the reporting year.
As at the year end and as at the date of this report, there were no outstanding loans or guarantees between the Company and any Director.
Substantial Shareholdings
As at the date of this report, the following shareholders had notified the Company that they held or controlled 5% or more of the total voting rights of the Company in issue:
Name % of Voting Number of Voting
Rights Rights
Nortrust Nominees Limited 38.31% 9,665,864
Damille Investments II
Limited 12.25% 3,092,096
HSBC Global Custody Nominee
(UK) Limited a/c 988424 7.73% 1,949,695
The Bank of New York
(Nominees) Limited a/c
236403 6.06% 1,528,791
Chase Nominees Limited 5.40% 1,363,476
Net Asset Value ("NAV")
The NAV of the Company's Shares as at 30 November, 2016, as calculated in accordance with the New Articles, was 121.21 pence per Share.
Principal Risks and Uncertainties
The Board has identified the key risks to the Company and these are set out below, including the mitigating actions taken to manage those risks:
-- Investment Risks: The success of the Company depends on the executive Directors' ability to advise on and realise investments in accordance with the Company's investment objective and to realise the assets of the Company in an optimal way. The Board reviews reports from the executive Directors at each quarterly Board meeting, paying particular attention to the portfolio, the performance of underlying investments and the executive Directors' compliance with the Company's investment policy.
-- Control environment at service providers: The Company is exposed to risks arising from failures of systems and controls in the operations of its service providers. The Remuneration and Management Engagement Committee performs an annual review of each of the Company's service providers and considers their systems of internal controls.
-- Regulatory Risk: The Company is required to comply with the Law, together with the DGTR of the FCA, The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, the Registered Collective Investment Scheme Rules 2015 issued by the GFSC and various EU regulations. The Secretary monitors the Company's compliance with applicable laws and regulations and will notify the Board immediately if it identifies or is notified of any breach of applicable law or regulations.
Corporate Governance
Statement of Compliance with The UK Corporate Governance Code (as published in September 2014) (the "Code")
The Company is committed to complying with the corporate governance obligations which apply to Guernsey registered companies. As a Guernsey incorporated company and under the DGTR, the Company was not, for the year under review, required to comply with the Code. However, the Directors place a high degree of importance on ensuring that high standards of corporate governance are maintained and have therefore chosen voluntarily to comply with the provisions of the Code to the extent that they are considered relevant to the Company.
The Company is committed to the highest standards of corporate governance, and, having reviewed the Code, considers that it has maintained procedures during the year to ensure that it has complied with the Code, other than the exceptions explained overleaf:
-- There is no chief executive position within the Company, which is not in accordance with Provision A.1.2 of the Code. The Company is a self managed investment company and so has no requirement for a chief executive. The Company has two executive Directors and three non-executive Directors who each share responsibilities in running the Company's business.
-- There is no Senior Independent Director, which position is recommended in Provision A.4.1 of the Code. Taking into account the size and nature of the Company and the fact there are three independent non-executive Directors on the Board, this position is not seen as necessary.
-- Following the annual general meeting held on 4 May, 2016, at which the continuation resolution was not passed, the Directors are realising the Company's assets in an orderly manner and returning shareholders' capital to them by way of periodic compulsory redemptions of a portion of each shareholder's Shares pro rata to their then percentage holding in the Company. This process is expected to be completed by the end of the 2017 calendar year. Therefore, the Board does not consider that it is necessary or appropriate to comment on the long term viability of the Company in detail, as is recommended by and C.2.2 of the Code, so has included a short term viability statement at the end of this report.
-- There is no internal audit function in the Company. Under Provision C.3.6 of the Code the Audit Committee considers that, as all of the Company's administrative functions have been delegated to independent third parties, there is no need for the Company to have an internal audit facility.
Subject to the areas of non-compliance explained above, the Company complied with the other recommendations of the Code during the year. The Code is available on the UK Financial Reporting Council's website: www.frc.org.uk.
The Company is also required to have regard to the Finance Sector Code of Corporate Governance (the "Guernsey Code") published by the GFSC. As the Company reports against the Code it is deemed to meet the requirements of the Guernsey Code.
Board Evaluation
The Board has conducted a performance evaluation of itself, its Committees and each of the Directors, as required by Provision B.6.1 of the Code. The process was led by the Board and the consisted of each Director completing questionnaires regarding the performance of the Board as a whole and of the Chairman. Each Director also completed a self assessment questionnaire.
The completed questionnaires were sent to and reviewed and discussed by the entire Board, which agreed that the Board was effectively constituted and that each Committee and individual Director was contributing effectively to the Company's ongoing operations and governance, such that no changes to the Board's composition or that of any of its committees was necessary or desirable at this juncture.
Board Responsibilities
The Board comprises five Directors, who meet at least quarterly to consider the affairs of the Company in a prescribed and structured manner. Biographies of the Directors appear above, demonstrating the wide range of skills and experience they bring to the Board. Rhys Davies and Brett Miller act in an executive capacity and all the other Directors are independent and non-executive, with Richard Prosser acting as Chairman.
Each of the non-executive Directors is paid a fee of GBP20,000 per annum and the Chairman is paid a fee of GBP25,000 per annum. The Chairman of the Audit Committee, David Copperwaite, is paid an additional GBP3,500 for his services in this role. The executive Directors, Rhys Davies and Brett Miller, receive a fee of GBP50,000 per annum each in respect of their services in that capacity and are subject to a Service Agreement dated 4 November, 2011, as amended.
The Board meets at least four times per year to consider the business and affairs of the Company for the previous quarter and the outlook for the coming quarter and beyond, at which meetings the Directors review the Company's investments and all other important issues to ensure control is maintained.
The Directors may, in the furtherance of their duties, take independent professional advice at the Company's expense. The Directors also have access to the advice and services of the Corporate and Shareholder Advisory Agent and the Secretary through their respective appointed representatives, who are responsible for providing guidance to the Board on their procedures and adherence thereto, as well as compliance with applicable laws, rules and regulations. To enable the Board to function effectively and allow Directors to discharge their responsibilities, full and timely access is given to all relevant information.
The other significant commitments of the current Chairman are detailed in his biography above. The Board was satisfied during the year and remains satisfied that the Chairman's other commitments do not interfere with his day-to-day performance of his duties to the Company and that he has the commitment and time to make himself available at short notice, should the need arise.
During the year the number of full Board meetings and committee meetings attended by the Directors were as follows:
Board of Full Board Audit Committee Remuneration and
Directors Meetings Management Engagement
Committee
Richard 6 of 9 2 of 2 1 of 1
Prosser
------------------ ----------- ---------------- -----------------------
David Copperwaite 9 of 9 2 of 2 1 of 1
------------------ ----------- ---------------- -----------------------
Martin Tolcher 9 of 9 2 of 2 1 of 1
------------------ ----------- ---------------- -----------------------
Brett Miller 5 of 9 N/A N/A
------------------ ----------- ---------------- -----------------------
Rhys Davies 8 of 9 N/A N/A
------------------ ----------- ---------------- -----------------------
There is a range of matters reserved for the Board, which includes strategic decisions, performance and risk oversight and shareholder relations. Day to day management, which includes investment and divestment decisions, has been delegated to the Company's executive Directors, who report directly to the Board as a whole.
Board Committees
Audit Committee
Richard Prosser, David Copperwaite and Martin Tolcher are members of the Audit Committee, with David Copperwaite acting as Chairman. The Audit Committee meets at least twice a year and the principal duties of the Audit Committee are to review the annual and half-yearly financial reports, to consider the appointment of the external auditor, to discuss and agree with the auditor the nature and scope of the audit, to keep under review the scope, results and cost effectiveness of the audit and the independence and objectivity of the auditor, to review the auditor's letter of engagement and reports to management and to analyse the key financial reporting procedures adopted by the Company's service providers.
The Audit Committee also considers the nature, scope and results of the auditor's work and reviews, develops and implements policy on the supply of any non-audit services that are to be provided by the auditor. It receives and reviews reports from the executive Directors for inclusion in financial reports. The Audit Committee focuses particularly on compliance with legal and regulatory requirements and financial reporting standards and ensures that an effective system of internal financial and non-financial controls is maintained. The ultimate responsibility for reviewing and approving the annual financial report remains with the Board of Directors.
During the year the Audit Committee met to consider the annual financial report for the year ended 30 November, 2015 and the half-yearly financial report for the period ended 31 May, 2016.
Remuneration and Management Engagement Committee
Richard Prosser, David Copperwaite and Martin Tolcher are members of the Remuneration and Management Engagement Committee, with Martin Tolcher acting as Chairman. The Remuneration and Management Engagement Committee meets formally at least annually. The principal duties of the Remuneration and Management Engagement Committee are to review the appointment and remuneration of the executive Directors and Damille Partners Limited, to review the fees payable to the other Directors and to review the fees of the Company's other main service providers.
The remuneration of the Board is reviewed on at least an annual basis and compared with the level of remuneration for directors of other similar investment companies. All Directors receive the fixed fees disclosed earlier in this report and there are no share options or other performance related benefits available to them, save that Damille Partners Limited, which is owned by the respective family interests of the executive Directors, receives a performance fee, payable in Shares, based on NAV performance.
Nomination Committee
All Directors of the Company are members of the Nomination Committee, with Martin Tolcher acting as Chairman. The Nomination Committee meets as and when it is deemed appropriate to review, inter alia, the structure, size and composition of the Board and to identify, nominate and recommend for approval of the Board candidates to fill Board vacancies as and when they arise.
Internal Control and Financial Reporting
The Board is responsible for establishing and maintaining the Company's system of risk management and internal controls, which is reviewed for effectiveness on an annual basis. Internal controls are designed to meet the particular needs of the Company and the risks to which it is exposed and by their very nature provide reasonable, but not absolute, assurance against material misstatement or loss.
The key procedures which have been established to provide effective internal controls are as follows:
-- The Company is a self-managed investment Company with no separate Investment Manager. The Board is responsible for setting the overall investment policy.
-- The Board is responsible for the Company's systems of risk management and internal controls and for reviewing their effectiveness. The Board confirms that there is an on-going process for identifying, evaluating and monitoring the significant risks faced by the Company. The internal controls are designed to meet the Company's particular needs and the risks to which it is exposed.
-- Administration and secretarial services are provided to the Company by JTC Fund Solutions (Guernsey) Limited (previously known as JTC (Guernsey) Limited).
-- The assets of the Company are held through segregated brokerage and bank accounts established in the name of the Company.
-- The duties of investment management, accounting and the custody of assets are segregated. The procedures of the individual parties are designed to complement one another.
-- The Directors clearly define the duties and responsibilities of their agents and advisers. The appointment of agents and advisers is conducted by the Board after consideration of the quality of the parties involved and the Board monitors their on-going performance and contractual arrangements.
-- The Directors regularly review the performance of and contractual arrangements with the Company's agents and advisers.
-- The Directors review financial information produced by the Administrator on a regular basis.
-- Investment transactions and expense payments are approved by specified Directors in accordance with delegated authorities approved in advance by the Board.
Dialogue with Shareholders
All shareholders have the right to receive notice of, and attend, general meetings of the Company, at which the Directors are available to discuss issues affecting the Company.
The primary responsibility for shareholder relations lies with the Company's Corporate and Shareholder Advisory Agent. However, the Directors are always available to enter into dialogue with shareholders and the Chairman is always willing to meet major shareholders, as the Company believes such communications to be important. The Directors can be contacted via correspondence sent to the Company's registered office.
Going Concern
The Company's principal activities are set out in the Investment Report above. The financial position of the Company is set out below. In addition, the Summary Information above and note 13 to the financial statements include the Company's investment objectives, policies and processes for managing its capital; its financial risk management objectives and its exposures to credit risk and liquidity risk.
Following the annual general meeting held on 4 May, 2016, at which the continuation resolution was not passed, the Directors are realising the Company's assets in an orderly manner and returning shareholders' capital to them, which process is expected to be completed by the end of the 2017 calendar year. Therefore, the Company is not a going concern.
However, the Directors believe that the Company has adequate resources to continue in operational existence whilst its investment portfolio is realised for cash. Once all investments have been realised and all invested capital returned to shareholders, less a reserve for final expenses, the Board will convene a general meeting of the shareholders for the purposes of voting the Company into solvent voluntary liquidation.
Viability Statement
As required by provision C.2.1 of the Code, the Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity, and those are reported elsewhere in this annual financial report.
Provision C.2.2 of the Code recommends that companies publish a viability statement and this statement is intended to meet that requirement.
The Directors regularly consider the viability of the Company and are required by the Law to do so on every occasion that any distribution is to be declared, including, but not limited to, dividends, the redemption of Shares, whether pursuant to a redemption offer or otherwise, and repurchases by the Company of its own Shares. Under Law, there is no limit on the period of time for which the Directors are required to consider the Company's future solvency. However, because the Board expects to have realised all of the Company's investments for cash by the end of the 2017 calendar year, where after the Company's liquidation will be proposed to the shareholders, the Directors have considered the Company's viability up to its expected liquidation in early 2018.
The Company's assets exceed its liabilities and the Board is confident that the Company has sufficient liquid assets to meet its debts as they become due. The Company has no external borrowings. In addition, should the Company in future temporarily have insufficient cash to meet its expenses, the Company expects that it would very rapidly be able to realise sufficient investments to meet such expenses.
Although the Board is periodically compulsorily redeeming Shares, such compulsory redemptions require prior satisfaction of a solvency test, so that no compulsory redemption of Shares could reasonably be expected to cause the Company to become insolvent.
The Board therefore confirms that there is reasonable expectation that the Company will continue to meet its obligations as they fall due whilst proceeding with an orderly disposition of the Company's portfolio for its estimated remaining life.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations. The Law requires the Directors to prepare financial statements for each financial period. Under the Law they have elected to prepare the financial statements in accordance with the International Financial Reporting Standards ("IFRS") as adopted by the European Union.
The financial statements are required by Law to give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Law. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.
The Directors consider that this Annual Financial Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for the members of the Company to assess the Company's position and performance, business model and strategy.
Disclosure of information to auditor
The Directors who held office at the date of approval of this Directors' Report confirm in accordance with the provisions of Section 249 of the Law that, so far as they are each aware, there is no relevant audit information of which the Company's auditor are unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
Auditor
Grant Thornton Limited has expressed its willingness to continue in office as auditor. A resolution proposing its reappointment will be submitted at the forthcoming annual general meeting to be held pursuant to section 199 of the Law.
Signed on behalf of the Board on 9 February 2017.
David Copperwaite Richard Prosser Director Director
AUDIT COMMITTEE REPORT
The Company has established an Audit Committee with formally delegated duties and responsibilities within written terms of reference (a copy of which is available from the Company' Secretary on request). The membership of the Audit Committee and its terms of reference are kept under regular review.
Role and Responsibilities of the Audit Committee
The Audit Committee acknowledges and embraces its role of protecting the interests of the Company's shareholders as regards the integrity of published financial information by the Company and the effectiveness of the audit of the Company.
Audit Committee responsibilities include:
- overseeing the Company's financial reporting process;
- reviewing and maintaining the integrity of the Company's financial statements, including its annual and half-yearly financial reports and any other formal announcement relating to its financial performance and monitoring compliance with statutory, regulatory and other financial reporting requirements;
- reviewing and reporting to the Board on significant financial reporting judgements;
- advising the Board on whether it believes the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy;
- reporting to the Board on the appropriateness of the Company's accounting policies and practices, including critical accounting policies and practices;
- making recommendations to the Board for it to put to the shareholders in general meeting in relation to the appointment, re-appointment and removal of the external auditor of the Company, as applicable;
- overseeing the relationship and maintaining active dialogue with the external auditor;
- monitoring the accounting and internal control systems operated by the Company and by the Company's principal service providers; and
- reviewing and monitoring the external auditor's independence and objectivity and the effectiveness of the audit process.
Summary of Audit Committee meetings held during the Year
The Audit Committee met twice during the year, with the Secretary in attendance at both meetings. The auditor also attended one of those meetings.
At its two meetings during the year, the Audit Committee focused on the matters set out below.
Financial reporting
The Audit Committee reviewed the half-yearly and annual financial statements, particularly, but not limited to, the existence and valuations of the Company's assets and the clarity and completeness of the financial reports. To inform its review, the Audit Committee considered reports prepared by external service providers and a report from the external auditor on the outcome of their annual audit. There were no significant issues relating to these financial statements identified by the auditor during the course of their audit which needed to be brought to the attention of the Audit Committee.
Internal Controls
The Audit Committee considered the risks to which the Company was exposed and the mitigating measures and controls implemented by the Board and its advisers and satisfied itself that such measures and controls were adequate and properly implemented.
The Audit Committee also reported to the Board on its activities and matters of particular relevance to the Board considered in the conduct of its work.
Internal audit
The Company has no employees and no physical systems of its own, relying instead on the employees and systems of its external service providers. The Audit Committee does not believe that it would be of any benefit to the Company to appoint an internal auditor. The Audit Committee reviews this decision annually and reports to the Board on its conclusions.
External audit
The current external auditor, Grant Thornton Limited, was reappointed as auditor at the annual general meeting held on 4 May, 2016. This is Grant Thornton Limited's fourth year in harness as the Company's auditor.
The effectiveness of the external audit process is dependent on appropriate audit risk identification at the start of the audit cycle. The Audit Committee receives from the auditor a detailed audit approach memorandum, identifying their assessment of any high risk areas of the audit. For the year under review, the primary risks identified were in relation to revenue recognition, financial asset valuation and existence, fee calculations performed and the possibility of management's avoidance of controls. These risks were tracked through the year and the Audit Committee challenged the work performed by the auditor in these high risk areas.
The Audit Committee assess the effectiveness of the audit process through the reporting it receives from the auditor. In addition the Audit Committee also seeks feedback from the Company's administrator on the effectiveness of the audit process. During the year under review, the Audit Committee met with both the administrator and the auditor and received regular reports on the annual financial reporting process. The Audit Committee also reviewed and commented upon several drafts of the annual financial report. The Audit Committee was satisfied that there had been appropriate focus and challenge on the high risk areas identified at the start of the audit cycle and concluded that the quality of the audit process was satisfactory.
Having considered the position for the current year, the Audit Committee has recommended to the Board that Grant Thornton Limited be reappointed as auditor for the current financial year. Accordingly a resolution proposing the reappointment of Grant Thornton Limited as auditor will be put to the Company's shareholders at the annual general meeting to be held in May 2017.
Any non-audit services provided by the auditor would be required to be approved in advance by the Audit Committee, subject to their satisfaction that relevant safeguards were in place to protect the auditor's independence and objectivity.
There were no non-audit services provided for the year ended 30 November 2016.
There are no restrictions on the Audit Committee's and Board's choice of external auditor.
David Copperwaite
Chairman of the Audit Committee
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF DAMILLE INVESTMENT II LIMITED
Our opinion on the financial statements is unmodified
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's affairs as at 30 November 2016 and of its profit for the year then ended;
-- are in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and
-- comply with The Companies (Guernsey) Law, 2008.
Other matter
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in Note 2(a) to the financial statements concerning the basis of preparation of the financial statements. As described in that note, the directors have prepared the financial statements on a non-going concern basis.
Who we are reporting to
This report is made solely to the Company's members, as a body, in accordance with Section 262 of The Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
What we have audited
Damille Investments II Limited's financial statements for the year ended 30 November 2016 comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.
Our assessment of risk
In arriving at our opinions set out in this report, we highlight the following risks that, in our judgement, had the greatest effect on our audit:
Financial assets designated at fair value through profit or loss
The risk: The investment objective of the Company is to realise significant capital returns for its shareholders with low volatility, by investing in a concentrated portfolio of primarily equity securities. As described in the Directors' Report under 'Principal Risks and Uncertainties', the ability to realise these in an optimal way is important to that objective. Accordingly, the investment portfolio is a significant and material item. The existence and valuation of the investment portfolio is therefore a risk that requires special audit attention.
Our response on existence: In order for us to confirm that the investments referred to above were owned by the Company, our audit work included, but was not restricted to: obtaining an understanding of management's process to recognise the investments; obtaining a confirmation of investments held at the year-end directly from the independent brokers and testing the reconciliation of the independent broker's statement to the records maintained by the Company's administrator; and checking a sample of investment purchases and sales transactions to contract notes and Company's bank accounts.
Our response on valuation: Our audit work on valuation for investments included, but was not restricted to: understanding the Company's administrator's process to value the quoted investment and the process to value unquoted investments; agreeing the valuation of 100% of the quoted investment to an independent source of market prices; reviewing and challenging the valuation methodology used to value 100% of the unquoted investments, including an assessment of whether the valuations were made in accordance with published guidance and discussions with the administrator; and, in order to confirm that the quoted investments were actively traded, we obtained trading volumes of those held at year end.
The Company's accounting policy on investments, including financial assets designated at fair value through profit or loss, is shown in Note 2(j) and related disclosures are included in Note 7. The Audit Committee identified financial asset valuation and existence as a primary risk in its report above, where the Committee also described the action that it has taken to address this issue.
Income
The risk: The Company measures performance through the realisation of its investments and investment and dividend income. As described in Note 1 to the financial statements, the ability to realise significant capital returns for its shareholders is key to the success of the Company, especially since the continuation vote put to shareholders at the Company's Annual General Meeting was not passed and the assets are now being realised in an orderly manner. Both investment and dividend income are measured in the Statement of Comprehensive Income. We identified completeness and occurrence of income as risks that required special audit attention.
Our response on occurrence: Our audit work included, but was not restricted to: assessing whether the Company's accounting policy for revenue recognition was in accordance with International Accounting Standard (IAS) 18 'Revenue'; obtaining an understanding of the Company's process for recognising revenue in accordance with the stated accounting policy; testing whether a sample of income transactions was recognised in accordance with the policy.
Our response on completeness: Our audit work included, but was not restricted to: obtaining, for a sample of investments held in the year, the ex-dividend dates and rates for dividends declared during the year from an independent source and agreeing the expected dividend entitlements to those recognised in the general ledger; and performing cut-off testing of dividend income around the year end.
The Company's accounting policy on income is shown in Notes 2(f) (dividend income) and 2(g) (bank interest and other income and related disclosures are included in Note 3. The Audit Committee identified revenue recognition as a primary risk in its report above, where the Committee also described the action that it has taken to address this issue.
Our application of materiality and an overview of the scope of our audit
Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work.
We determined materiality for the audit of the financial statements as a whole to be GBP367,000, which is 1% of net assets. This benchmark is considered the most appropriate because the users of the financial statements are sensitive to changes in net asset value as an indicator of the value of their investment in the Company.
Materiality for the current year is lower than the level that we determined for the year ended 30 November 2015, which corresponds with the decrease in the Company's net asset value over the accounting period.
We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial statement materiality for the audit of the financial statements. We also determine a lower level of specific materiality for certain areas such as investments, net asset value-based fees, directors' remuneration and related party transactions.
We determined the threshold at which we will communicate misstatements to the audit committee to be GBP18,350. In addition we will communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds.
Overview of the scope of our audit
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Financial Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
We conducted our audit in accordance with International Standards on Auditing (ISAs) (UK and Ireland). Our responsibilities under those standards are further described in the 'Responsibilities for the financial statements and the audit' section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Company in accordance with the Auditing Practices Board's Ethical Standards for Auditors, and we have fulfilled our other ethical responsibilities in accordance with those Ethical Standards.
Our audit approach was based on a thorough understanding of the Company's business and is risk-based. The day-to-day management of the Company's investment portfolio, the custody of its investments and the maintenance of the Company's accounting records is outsourced to third-party service providers. Accordingly, our audit work is focussed on obtaining an understanding of, and evaluating, internal controls at the Company and the third-party service providers, and inspecting records and documents held by these third-party service providers. We undertook substantive testing on significant transactions, balances and disclosures, the extent of which was based on various factors such as our overall assessment of the control environment, the effectiveness of controls over individual systems and the management of specific risks.
Matters on which we are required to report by exception
Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:
-- proper accounting records have not been kept by the Company; or -- the Company's financial statements are not in agreement with the accounting records; or
-- we have not obtained all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit.
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:
-- materially inconsistent with the information in the audited financial statements; or
-- apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or
-- otherwise misleading.
In particular, we are required to report to you if:
-- we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable; or
-- the annual report does not appropriately disclose those matters that were communicated to the audit committee which we consider should have been disclosed.
We have nothing to report in respect of any of the above matters.
We confirm that we do not have anything material to add or to draw attention to in relation to:
-- the directors' confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity;
-- the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated; and
-- the directors' statement in the financial statements about whether they have considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements.
-- the directors' explanation in the annual report as to how they have assessed the prospects of the company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Responsibilities for the financial statements and the audit
What the directors are responsible for:
As explained more fully in the Statement of Directors' Responsibilities set out above, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
What are we responsible for:
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
Cyril Swale
For and on behalf of Grant Thornton Limited
Chartered Accountants
St Peter Port, Guernsey, Channel Islands Date: 9 February 2017
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 November 2016
Year ended Year ended
30 Nov 30 Nov
2016 2015
Notes GBP GBP
Net unrealised gains
on financial assets designated
at fair value through
profit or loss 7 6,494,214 1,950,190
Realised (loss) / gain
on financial assets designated
at fair value through
profit or loss 7 1,617,516 (3,129,181)
---------------------- --------------------
Net gain / (loss) on
financial assets designated
at fair value through
profit or loss 8,111,730 (1,178,991)
Operating income 3 1,430,092 1,655,532
Operating expenses 4 (2,353,291) (1,428,959)
Net profit / (loss) before
tax 7,188,531 (952,418)
Withholding taxes (113,694) (40,196)
Profit / (Loss) and Total
Comprehensive Income
/ (Loss) for the year
attributable to Shareholders 7,074,837 (992,614)
---------------------- --------------------
Pence Pence
Earnings / (losses) per
share for the year -
Basic and Diluted 6 22.29 (1.72)
---------------------- --------------------
A non-going concern basis (refer to note 2(c)) has been adopted in arriving at the results for the year.
The notes below form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
as at 30 November 2016
30 Nov 30 Nov
2016 2015
Notes GBP GBP
NON-CURRENT ASSETS
Financial assets designated
as at fair value through
profit or loss 7 - 44,942,965
CURRENT ASSETS
Financial assets designated
as at fair value through
profit or loss 7 31,692,067 -
Trade and other receivables 8 292,879 2,147,839
Cash and cash equivalents 5,188,861 9,115,572
------------------------- ----------------------
37,173,807 56,206,376
TOTAL ASSETS 37,173,807 56,206,376
------------------------- ----------------------
CURRENT LIABILITIES
Trade and other payables 9 414,264 119,537
------------------------- ----------------------
NET ASSETS 36,759,543 56,086,839
------------------------- ----------------------
EQUITY
Share capital 10, 11 25,374,076 51,776,209
Accumulated reserves 11,385,467 4,310,630
TOTAL EQUITY 36,759,543 56,086,839
------------------------- ----------------------
Pence Pence
Net asset value per Ordinary
share based on 30,328,369
(Nov 2015: 54,905,479)
shares in issue 121.21 102.15
------------------------- ----------------------
The financial statements were approved by the Board of Directors and authorised for issue on 9 February 2017 and are signed on its behalf by:
David Copperwaite Richard Prosser Director Director
The notes below form an integral part of these financial statements.
STATEMENT OF CASH FLOWS
as at 30 November 2016
Year ended Year ended
30 Nov 30 Nov
2016 2015
Notes GBP GBP
OPERATING ACTIVITIES
Profit / (Loss) and Total
Comprehensive Income
/ (Loss) for the year
attributable to Shareholders 7,074,837 (992,614)
Adjustments for:
Net unrealised gains
on financial assets designated
at fair value through
profit or loss 7 (6,494,214) (1,950,190)
Interest income 3 - (51,962)
Bond income 3 (40,831) (16,514)
Dividend income 3 (1,389,261) (1,587,056)
(849,469) (4,598,336)
Increase / (decrease)
in payables 9 294,727 (8,301)
Decrease in receivables 8 2,470 2,219
Realised loss / (gain)
on financial assets designated
at fair value through
profit or loss 7 (1,617,516) 3,129,181
(2,169,788) (1,475,237)
Interest received - 51,962
Bond interest received (31,266) 16,514
Dividends received from
investments 1,501,282 3,920,953
Purchase of investments (75,000) (31,557,964)
Proceeds from sale of
investments 23,250,194 14,064,216
Returns of capital - 1,756,444
NET CASH FLOW USED IN
OPERATIONS 22,475,422 (13,223,112)
----------------------- ----------------
FINANCING ACTIVITIES
Costs of redemption of
Ordinary shares 10 (27,226,508) (9,711,000)
Subscription of shares 10 826,465 -
Purchase of own shares 11 (2,090) (921,252)
NET CASH FLOW USED IN
FINANCING ACTIVITIES (26,402,133) (10,632,252)
----------------------- ----------------
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 9,115,572 32,970,936
Decrease in cash and
cash equivalents (3,926,711) (23,855,364)
CASH AND CASH EQUIVALENTS
AT OF YEAR 5,188,861 9,115,572
----------------------- ----------------
The notes below form an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
as at 30 November 2016
Share Accumulated
Capital Reserves Total
Notes GBP GBP GBP
Balance as at 1 December
2015 51,776,209 4,310,630 56,086,839
Profit / (Loss) and
total comprehensive
income for the year - 7,074,837 7,074,837
Treasury shares issued
in lieu of Performance
Fees 11 826,465 - 826,465
Share redemptions during
the year 10 (27,226,508) - (27,226,508)
Treasury shares acquired
during the year 11 (2,090) - (2,090)
Transactions with owners (26,402,133) - (26,402,133)
Balance as at 30 November
2016 25,374,076 11,385,467 36,759,543
------------------ ---------------------- ----------------------
Share Accumulated
Capital Reserves Total
GBP GBP GBP
Balance as at 1 December
2014 62,408,461 5,303,244 67,711,705
Profit / (Loss) and
total comprehensive
loss for the year - (992,614) (992,614)
Share redemptions during
the year 10 (9,711,000) - (9,711,000)
Treasury shares acquired
during the year 11 (921,252) - (921,252)
Transactions with owners (10,632,252) - (10,632,252)
Balance as at 30 November
2015 51,776,209 4,310,630 56,086,839
------------------ ---------------------- ----------------------
The notes below form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
as at 30 November 2016
1. GENERAL INFORMATION
Damille Investments II Limited is a closed-ended investment company incorporated in Guernsey on 3 November 2011 whose Shares were admitted to trading on the Specialist Fund Segment ("SFS") of the London Stock Exchange's Main Market on 9 November 2011.
The principal activity of the Company was to realise capital growth from a portfolio of equities and to generate a significant capital return to Shareholders.
The Company's investment objective was to realise significant capital returns for its Shareholders with low volatility, by investing in a concentrated portfolio of primarily equity securities. In the opinion of the Company, many but not all of these companies would have benefited from implementing certain measures to optimise their financial position and align management and Shareholder interests. Such issuers were expected to be, but were not limited to, closed-ended investment funds, investment companies and other corporate entities, such as real estate companies or natural resource companies.
At the Company's annual general meeting held on 4 May, 2016 a resolution put to the shareholders that, in accordance with Article 172 of the Company's Articles of Incorporation (the "Articles"), the Company continue its business as a closed-ended investment company, was not passed. Therefore, on 23 June, 2016 the Company announced that the Directors proposed to commence an orderly realisation of the Company's assets, which process was expected to take approximately 18 months. Shareholders' capital is intended to be returned to them by way of periodic distributions.
2. ACCOUNTING POLICIES
The significant accounting policies adopted by the Company are as follows:
a) Basis of Preparation
The financial statements have been prepared in conformity with International Financial Reporting Standards ("IFRS") as adopted by the European Union on a non-going concern basis (refer to note 2 (c)) which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC"), together with applicable Guernsey law. The financial statements have been prepared on an historical cost basis except for the measurement at fair value of certain financial instruments.
Changes in Standards and Interpretations
The following Standards or Interpretations have been issued by the IASB but not yet adopted by the Company:
IAS 1 Presentation of Financial Statements - Amendments resulting from December 2014 disclosure initiative, effective for annual periods beginning on or after 1 January 2016.
IFRS 7 Financial Instruments - Amendments resulting from September 2014 Annual Improvements to IFRSs, effective for annual periods beginning on or after 1 January 2016.
IFRS 7 Financial Instruments: Disclosures - Deferral of mandatory effective date of IFRS 9 and amendments relating to additional hedge accounting disclosures (and consequential amendments). Applies only when IFRS 9 is adopted, which is effective for annual periods beginning on or after 1 January 2018.
IFRS 9 Financial Instruments - Classification and measurement of financial assets, effective for annual periods beginning on or after 1 January 2018.
IFRS 9 Financial Instruments - Accounting for financial liabilities and derecognition, effective for annual periods beginning on or after 1 January 2018.
IFRS 9 Financial Instruments - Classification and measurement of financial liabilities and derecognition, effective for annual periods beginning on or after 1 January 2018.
The Directors have considered the above and are of the opinion that the above Standards and Interpretations are not expected to have a material impact on the Company's financial statements except for the presentation of additional disclosures and changes to the presentation of components of the financial statements. These items will be applied in the first financial period for which they are required.
b) Use of estimates and judgements
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. The preparation of the Company's financial statements requires the Directors to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements and disclosures. However, uncertainty about these assumptions and estimates could result in outcomes that could require material adjustment to the carrying amount of the assets or liabilities in future periods.
Information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are disclosed below. The Directors consider that the most significant estimate is the valuation of Level 3 investments as shown in Note 7.
c) Non-going concern
The Continuation Resolution put to shareholders at the Company's annual general meeting held on 4 May 2016 was not passed. The Directors are realising the Company's assets in an orderly manner and returning their invested capital to Shareholders via periodic compulsory redemptions. Therefore, the Directors believe it is appropriate to adopt a non-going concern basis in preparing the financial statements, as they consider that the Company will be voluntarily liquidated within the next 18 months. The Directors believe that the Company will be able to realise its remaining investments in an orderly manner and therefore do not consider there to be a material difference in the value of the Company's assets, and liabilities, compared to if the financial statements had been prepared on a going concern basis. This has also not resulted in changes in the principle accounting policies and valuation methodology for investments. Non-current assets have been reclassified to current as a result of the financial statements being prepared on a non-going concern basis. The estimated costs of winding up the Company have not been included in preparing these financial statements as these costs cannot be accurately determined at this stage. Further information is given in the Directors' Report above.
d) 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 GBP1,200 for each year in which the exemption is granted. 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. With effect from 1 January 2008 the standard rate of income tax for most companies in Guernsey became 0%. Tax exemption continues to be available and the Company has been granted this status for 2016. The Directors intend to conduct the Company's affairs so that it continues to remain eligible for exemption from Guernsey income tax.
e) Expenses
All expenses are accounted for on an accruals basis.
f) Dividend income
Dividend income is recognised when the right to payment is established.
g) Bank interest and other income
Bank interest income and other income is included in the financial statements on time apportioned basis using the effective interest rate method.
h) Cash and Cash equivalents
Cash and cash equivalents in the Statement of Financial Position comprise of cash at bank, call deposits, short term deposits, short term cash with original maturities of three months or less 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 cash and cash equivalents defined above.
i) Share issue costs
The share issue costs borne by the Company are recognised in the Statement of Changes in Equity, as the Company's Ordinary shares are classified as equity under paragraphs 16C and 16D of IAS 32 Financial Instruments: Presentation.
j) Financial assets designated as at fair value through profit or loss
All investments have been designated as financial assets "at fair value through profit or loss". Investments are initially recognised on the date of purchase at cost, being the fair value of the consideration given, excluding transaction costs associated with the investment. After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments recognised in the Statement of Comprehensive Income.
Investments are derecognised when the rights to cash flows from the investments have expired or substantially all risks and rewards of ownership have been transferred. Upon derecognition any previously recognised unrealised gain or loss is reversed in the current period's "net movement in unrealised depreciation on investments" and recognised in the "realised gain on investments" along with any additional gain or loss recognised for the year. In accordance with IFRS the "net gains on investments" shows the total gain or loss recognised in the current year.
Commissions paid on the sale or purchase of investments are recognised in the Statement of Comprehensive Income as incurred.
IFRS 13 Fair value measurement defines fair value as a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value also reflects the credit quality of the issuers of the financial instruments.
For investments actively traded in organised financial markets, fair value is determined by reference to stock exchange quoted market bid prices as at the close of business on the reporting date. If no quoted market bid price is available at the close of business on the reporting date, the last available market bid price is used.
Where no quoted market prices are available, the valuation of the investment is based on the quarterly NAV provided to the Company, adjusted for any subsequent distributions received.
Warrants held by the Company are valued using an option pricing model which uses directly observable market inputs.
k) Trade Date Accounting
All "regular way" purchases and sales of financial assets are recognised on the "trade date", i.e. the date that the entity commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of the asset within the time frame generally established by regulations or convention in the market place.
l) Segmental Reporting
The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business and operates solely from Guernsey. Therefore, no segmental reporting has been provided based on operating segments. Geographical information is based on the location of the Company's investments. Geographical locations are determined based on the country of primary listing for listed investments and the country of incorporation for unlisted investments. All dividend income as detailed in note 3 was primarily received from investments with a country of incorporation or primary listing in Europe, with less than 10% of the income being derived from investments incorporated or listed in the rest of the world.
m) Foreign Currencies
The financial statements are expressed in Pounds Sterling ('GBP'), which is the functional and presentation currency of the Company.
Transactions denominated in foreign currencies are translated into GBP at the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to GBP at the rate of exchange ruling at the dates the values were determined.
3. OPERATING INCOME
Year
ended Year ended
30 Nov 30 Nov
2016 2015
GBP GBP
Bank interest - 51,962
Bond income 40,831 16,514
Dividend income 1,389,261 1,587,056
1,430,092 1,655,532
-------------------- ---------------
4. OPERATING EXPENSES
Year
ended Year ended
30 Nov 30 Nov
2016 2015
GBP GBP
Investment advisory
fees 702,244 880,991
Performance fees 14 1,154,235 -
Directors' fees 168,378 168,500
Corporate and shareholder
advisory fees 90,090 120,943
Brokerage 34,908 83,274
Custody fees 45,868 38,898
Administrator's fee 49,321 51,238
Annual fees 13,049 12,584
Audit fees 14,845 14,068
Directors' and Officers'
insurance 8,135 8,043
Public Offering of
Securities Insurance 2,257 2,260
Legal and professional
fees 11,267 3,003
Sundry costs 34,958 12,034
Registrar's fee 9,832 7,732
Bank interest and
charges 389 2,040
Loss on foreign exchange 13,515 23,351
Net operating expenses for
the year 2,353,291 1,428,959
------------------ --------------------
5. DIRECTORS' REMUNERATION
The non-executive Directors are paid GBP20,000 per annum (2015: GBP20,000 per annum). David Copperwaite receives an additional fee of GBP3,500 (2015: GBP3,500) as Chairman of the audit committee and Richard Prosser receives an additional fee of GBP5,000 (2015: GBP5,000) as Chairman of the Company. The executive Directors are each paid GBP50,000 per annum (2015: GBP50,000 per annum).
6. EARNINGS PER SHARE
Earnings per share is calculated by dividing the earnings for the year attributable to Shareholders of GBP7,074,837 (2015: loss of GBP992,614) by the weighted average number of ordinary shares in issue during the year 31,744,653 (2015: 57,589,850). There are no dilutive instruments and therefore basic and diluted earnings per ordinary share are identical.
7. FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS
TOTAL TOTAL
30 Nov
30 Nov 2016 2015
GBP GBP
Opening valuation 44,942,965 33,345,272
Additions - cost 75,000 30,584,646
Returns of capital - (1,756,444)
Proceeds from sales (21,509,725) (16,051,518)
Realised (loss) / gain on
investments 1,617,516 (3,129,181)
Accrued amortisation 72,097 -
Movement in unrealised appreciation
on investments 6,494,214 1,950,190
Closing valuation 31,692,067 44,942,965
-------------------- ----------------------
Closing portfolio cost 25,882,145 45,699,354
-------------------- ----------------------
Unrealised depreciation
on valuation carried forward 5,809,922 (756,389)
-------------------- ----------------------
IFRS 13 requires the fair value of investments to be disclosed by the source of inputs, using a three-level hierarchy as detailed below:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
-- Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2);
-- Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
As at 30 November Level Level Level
2016 1 2 3 Total
----------------- ----------------- ------------------ -----------
Equity securities 26,471,625 387,989 - 26,859,613
Investment funds - - 4,832,454 4,832,454
26,471,625 387,989 4,832,454 31,692,067
================= ================= ================== ===========
As at 30 November Level Level Level
2015 1 2 3 Total
------------------ ------------------ ------------------ -----------
Equity securities 39,951,569 11,291 - 39,962,860
Investment funds - - 4,980,105 4,980,105
39,951,569 11,291 4,980,105 44,942,965
================== ================== ================== ===========
Investments held by the Company have been classified as Level 1, for those investments that are quoted and are valued using quoted market bid prices.
The Company invests in warrants which are valued using an option pricing model using observable market inputs and are therefore classified as Level 2. Where the Net Asset Value (NAV) or current market price per share is below the warrants' exercise price the warrants are being valued at the Directors' best estimate of fair value, considering the likelihood of the warrants being exercised, and are therefore classified as Level 3.
The Company also invests in managed funds which are not quoted in an active market and which may be subject to restrictions on redemptions. Investments in those funds are valued based on the Net Asset Value (NAV) per share published by the administrator of those funds adjusted for any distributions. The Company classifies the fair value of these investments as Level 3. The value of these investments as at 30 November 2016 was GBP4,832,454 (2015: GBP4,980,105). If the NAV of these investments was to increase/ decrease by 10%, this would result in an increase/ decrease in the fair value as at 30 November 2016 of GBP483,245 (2015: GBP498,011).
The following table shows a reconciliation of all movements in the fair value of financial instruments categorised within Level 3 between the beginning and the end of the reporting period:
30 Nov 30 Nov
2016 2015
GBP GBP
Opening valuation 4,980,105 7,059,771
Sale proceeds - (1,841,199)
Net gain on valuation - 162,030
Movement in unrealised depreciation
on valuation (147,651) (400,497)
Closing valuation 4,832,454 4,980,105
------------------ -------------
8. TRADE AND OTHER RECEIVABLES
30 Nov 30 Nov
2016 2015
GBP GBP
Prepayments and
accrued income 35,026 149,517
Broker debtors 257,853 1,998,322
292,879 2,147,839
------------- ------------
The above carrying value of receivables is equivalent to its fair value.
9. TRADE AND OTHER PAYABLES
30 Nov 30 Nov
2016 2015
GBP GBP
Accrued expenses 414,264 119,537
414,264 119,537
-------------- ---------
The above carrying value of payables is equivalent to its fair value.
10. SHARE CAPITAL
The Company is authorised to issue an unlimited number of ordinary shares of no par value.
30 Nov 2016 30 Nov 2015
SHARES GBP SHARES GBP
Shares of no par
value
Issued shares at
the start of the
year 54,905,479 51,776,209 65,516,734 62,408,460
Shares issued in
lieu of Performance
Fees 719,278 826,465 - -
Redemption of shares (25,294,388) (27,226,508) (9,554,308) (9,711,000)
Purchase of shares
into Treasury (2,000) (2,090) (1,056,947) (921,252)
Shares in issue
at the end of the
year 30,328,369 25,374,076 54,905,479 51,776,209
--------------- -------------- -------------------- ----------------------
Shareholders are entitled to receive, and participate in any dividends out of income, other distributions of the Company available for such purposes and resolved to be distributed in respect of any accounting period, or other income or right to participate therein.
On a winding up, Shareholders are entitled to the surplus assets remaining after payment of all the creditors of the Company.
Shareholders also have the right to receive notice of and to attend, speak and vote at general meetings of the Company and each shareholder being present in person or by proxy or by a duly authorised representative at a meeting shall upon a show of hands have one vote and upon a poll each such holder present in person or by proxy or by a duly authorised representative shall have one vote in respect of every ordinary share held by him (or her).
11. TREASURY SHARES
30 Nov 2016 30 Nov 2015
SHARES GBP SHARES GBP
Shares held in
Treasury
Opening balance 4,389,999 3,928,697 3,333,052 3,007,445
Purchase of shares
into Treasury 2,000 2,090 1,056,947 921,252
Treasury shares
issued in lieu
of Performance
Fees (719,278) (826,465) - -
Treasury shares
cancelled during
the year (310,000) - - -
Shares in Treasury
at the end of the
year 3,362,721 3,104,322 4,389,999 3,928,697
--------------- ------------- -------------------- ----------------------
The treasury shares represent 3,362,721 (2015: 4,389,999) Shares purchased in the market at various prices per share ranging from GBP0.83 to GBP1.045 and held by the Company in treasury. Cancellations of 310,000 treasury shares took place during the year.
12. FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
a) Cash and cash equivalents that arise directly from the Company's operations; and b) Quoted investment securities; c) Unquoted investment securities; d) Trade and other receivables; and e) Trade and other payables. 13. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Company's financial instruments are market price risk, credit risk, liquidity risk, interest rate risk, and capital management risk. The Board regularly reviews and agrees policies for managing each of these risks and these are summarised below:
a) Market Price Risk
Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Executive Directors actively monitor market prices and report to the Board as to the appropriateness of the prices used for valuation purposes.
If the value of the Company's investment portfolio were to increase by 30%, it would represent a gain of GBP9,507,620 (2015: GBP13,482,889) and this would cause the net asset value of the Company to rise by 25.86% (2015: 24.04%).
If the value of the Company's investment portfolio were to decrease by 30%, it would represent a loss of GBP9,507,620 (2015: GBP13,482,889) and this would cause the net asset value of the Company to fall by 25.86% (2015: 24.04%).
A substantial proportion of the Company's investments is in closed-ended funds or companies sharing similar characteristics to closed-ended funds and is subject to the risk of concentrating its investments in this asset class. The Directors attempt to minimise this market risk by undertaking a detailed analysis of the risk/reward relationship prior to any investment being made. In addition, the Company have invested in equity securities reducing the concentration of assets to one type of asset class. No further investments are being made as the Company is in the process of realising its assets.
b) Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company. The Directors receive financial information on a regular basis which is used to identify and monitor risk.
It is Company policy not to invest more than 20% of the NAV of the Company as at the date of admission in the securities of any one company or group at the time the investment is made. No further investments are currently being made as the Company is in the process of realising its assets.
Investors should be aware that the prospective returns to Shareholders mirror the returns under the investments held or entered into by the Company and that any default by an issuer of any such investment held by the Company would have a consequential adverse effect on the ability of the Company to pay some or all of the entitlement to Shareholders. Such a default might, for example, arise on the insolvency of an issuer of an investment.
The Company's financial assets exposed to credit risk are as follows:
30 Nov 30 Nov
2016 2015
GBP GBP
Cash and cash equivalents 5,188,861 9,115,572
Broker debtors and
accrued income 281,314 135,483
5,470,175 9,251,055
------------------- ----------------
The Company is exposed to credit risk in respect of its cash and cash equivalents, arising from possible default of the relevant counterparty, with a maximum exposure equal to the carrying value of those assets. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The Company monitors the placement of cash balances on an on-going basis.
At the year end the cash was held in an account with Barclays, which has a credit rating of BBB, as rated by Standard & Poor's. No cash is held in Broker custody at year end.
The investments of the Company are held in custody by Midas Investment Management Limited and Redmayne Bentley. Bankruptcy or insolvency of the Brokers may cause the Company's rights with respect to investments held by the Brokers to be delayed. Investments held with Midas Investment Management Limited and Redmayne Bentley are ring fenced and will be protected should the Brokers become bankrupt or insolvent.
c) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments. The Company's main financial commitment is its ongoing operating expenses.
The Directors ensure that the Company has sufficient liquid resources available to meet its financial obligations as they fall due.
The table below details the residual contractual maturities of financial liabilities:
As at 30 November Over
2016 1-3 months 1 year
GBP GBP
Accrued expenses 414,264 -
Broker creditors - -
414,264 -
----------------------- -------------------
As at 30 November Over
2015 1-3 months 1 year
GBP GBP
Accrued expenses 119,537 -
Broker creditors - -
119,537 -
----------------------- -------------------
d) Interest Rate Risk
At the year end the Company held cash with Barclays, the returns on which are subject to fluctuations in market interest rates. The Company also holds an immaterial investment that is accruing interest at the fixed rate of 8%.
The following table details the Company's exposure to interest rate risks:
As at 30 November
2016:
Floating Fixed Fixed
Less 1-3 months Greater Non-interest Total
than than bearing
1 month 3 months
GBP GBP GBP GBP GBP
Assets
Designated
as at fair
value through
profit or
loss on initial
recognition:
Investments - - - 31,692,067 31,692,067
Loans and
receivables:
Trade and
other
receivables - - - 292,879 292,879
Cash and
cash equivalents 5,188,861 - - - 5,188,861
------------------- ------------------- ------------------- ------------------- --------------
Total Assets 5,188,861 - - 31,984,946 37,173,807
------------------- ------------------- ------------------- ------------------- --------------
Liabilities
Financial
liabilities
measured
at amortised
cost:
Accrued expenses - - - 414,264 414,264
------------------- ------------------- ------------------- ------------------- --------------
Total Liabilities - - - 414,264 414,264
------------------- ------------------- ------------------- ------------------- --------------
Total interest
sensitivity
gap 5,188,861
-------------------
As at 30 November
2015:
Floating Fixed Fixed
Less 1-3 months Greater Non-interest Total
than than bearing
1 month 3 months
GBP GBP GBP GBP GBP
Assets
Designated
as at fair
value through
profit or
loss on initial
recognition:
Investments - - - 44,942,965 44,942,965
Loans and
receivables:
Trade and
other receivables - - 31,254 2,116,585 2,147,839
Cash and
cash equivalents 9,115,572 - - - 9,115,572
----------------- ----------------- ----------------- ----------------- ------------------
Total Assets 9,115,572 - 31,254 47,059,550 56,206,376
----------------- ----------------- ----------------- ----------------- ------------------
Liabilities
Financial
liabilities
measured
at amortised
cost:
Accrued expenses - - - 119,537 119,537
Broker creditors - - - - -
----------------- ----------------- ----------------- ----------------- ------------------
Total Liabilities - - - 119,537 119,537
----------------- ----------------- ----------------- ----------------- ------------------
Total interest
sensitivity
gap 9,115,572
-----------------
Interest rate sensitivity
If interest rates had been 25 basis points higher and all other variables were held constant, the Company's net gain attributable to Shareholders for the year ended 30 November 2016 would have increased by approximately GBP12,972 (2015: GBP22,789) or 0.04% (2015: 0.04%) of Net Assets due to an increase in the amount of interest receivable on the bank balances at the year end.
If interest rates had been 25 basis points lower and all other variables were held constant, the Company's net gain attributable to Shareholders for the year ended 30 November 2016 would have decreased by approximately GBP12,972 (2015: GBP22,789) or 0.04% (2015: 0.04%) of Net Assets due to an decrease in the amount of interest receivable on the bank balances at the year end.
e) Foreign Exchange Risk
The Company does not have significant monetary assets and liabilities denominated in currencies other than GBP at the end of the reporting period. GBP13,883,107 (2015: GBP20,266,528) of the Company's portfolio is invested in securities priced in foreign currencies. The Company does not normally hedge against foreign currency movements affecting the value of the investment portfolio, but takes account of this risk when making decisions.
If the value of the Company's investment portfolio priced in foreign currencies were to increase by 10%, it would represent a gain of GBP1,388,311 (2015: GBP2,026,653) and this would cause the net asset value of the Company to rise by 3.78% (2015: 3.61%).
If the value of the Company's investment portfolio priced in foreign currencies were to decrease by 10%, it would represent a loss of GBP1,388,311 (2015: GBP2,026,653) and this would cause the net asset value of the Company to fall by 3.78% (2015: 3.61%).
f) Capital Management Risk
The investment objective of the Company was to provide Shareholders with attractive long term returns, expected to be in the form of capital, through a diversified portfolio.
As the Company's Ordinary shares are traded on the SFS, the Ordinary shares may trade at a discount to their NAV per Share on occasion. However, in structuring the Company, the Directors have given detailed consideration to the discount risk and how this may be managed.
The Company monitors capital on the basis of the carrying amount of equity as presented on the face of the statement of financial position.
There are no external requirements for the Company to maintain a minimum level of capital.
14. RELATED PARTY TRANSACTIONS AND DIRECTORS' BENEFICIAL INTERESTS
The Company is provided with investment advice by Damille Partners Limited (the "Service Provider"), which owns 792,691 Ordinary Shares (2.61%) in the Company. Brett Miller and Rhys Davies are directors of both the Service Provider and the Company.
Under the Services Agreement, Damille Partners Limited is entitled to receive fees of 1.45% per annum of the Company's NAV per annum on a monthly basis. During the year the Company incurred GBP702,244 (2015: GBP880,991) of fees, of which GBP43,898 (2015: GBP69,396) was outstanding as at the year end and is shown as part of accrued expenses.
The Service Provider and Nimrod Capital LLP shall be entitled to receive a Performance Fee from the Company payable in certain circumstances. The details of the fee can be found in the Company's prospectus available from the Company's website. The performance fee accrued for the period amounted to GBP1,154,235 (2015: GBPnil) of which GBP327,776 was outstanding at year end (2015: GBPnil).
There have been no related party transactions with the Directors during the year (other than those disclosed in Note 5).
There is no one entity with ultimate control over the Company.
15. SIGNIFICANT AGREEMENTS
Nimrod Capital LLP is the Company's Corporate and Shareholder Advisory Agent and is entitled to receive fees of 0.20% of the Company's NAV per annum. The minimum annual total fees payable to Nimrod Capital LLP is GBP75,000. During the year the Company incurred GBP90,090 (2015: GBP120,943) of costs of which GBP12,410 (2015: GBP19,377) was outstanding at the year end as shown as part of accrued expenses.
16. SUBSEQUENT EVENTS
On 9 December 2016, the Company announced that it would return to Shareholders by way of a compulsory partial redemption of Shares a further amount of approximately GBP6.2 million, representing approximately 17 percent of the Company's issued share capital. 5,199,671 Ordinary Shares were redeemed on 14 December, 2016 and cancelled. The redemption proceeds due on the redemptions of those Ordinary Shares were paid on 20 December, 2016.
KEY ADVISERS AND CONTACT INFORMATION
Key Information
Exchange: Specialist Fund Segment
of the LSE's Main Market
Mnemonic: for Listed Securities
Admitted to trading on: DIL2
Financial year end: 9 November, 2011
Base currency: 30 November
ISIN: Pounds Sterling
SEDOL: GG00BDFF8F11
Country of Incorporation BDFF8F1
and registered number: Guernsey - Registered
Website: number 54192
www.damilleinv.com
Management and Administration
Registered Office Secretary and Administrator
Ground Floor JTC Fund Solutions (Guernsey)
Dorey Court Limited
Admiral Park (formerly JTC (Guernsey)
St Peter Port Limited)
Guernsey GY1 2HT Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 2HT
Consultancy Service Provider Registrar
Damille Partners Limited Anson Registrars Limited
Blenheim Trust (BVI) Limited PO Box 426
PO Box 3483 Anson House
Road Town Havilland Street
Tortola St Peter Port
British Virgin Islands Guernsey GY1 3WX
Placing and Corporate Auditor
and Shareholder Advisory
Agent
Nimrod Capital LLP Grant Thornton Limited
3 St Helen's Place PO Box 313
London EC3A 6AB Lefebvre House
Lefebvre Street
St Peter Port
Guernsey GY1 3TF
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSSSLFIUFWSEIE
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February 09, 2017 10:56 ET (15:56 GMT)
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