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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Terra Catalyst | LSE:TCF | London | Ordinary Share | KYG8761F1431 | ORD 1P (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 35.00 | 30.00 | 40.00 | 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
TIDMTCF
RNS Number : 5277F
Terra Catalyst Fund
28 July 2016
28 July 2016
TERRA CATALYST FUND
(the "Company")
AUDITED FINANCIAL STATEMENTS
Terra Catalyst Fund (the "Company" or "TCF") (AIM: TCF) today announces the release of its Audited Financial Statements for the year ended 31 March 2016 ("the Financial Statements").
An electronic copy of the Financial Statements is available on the Company's website at www.terracatalystfund.com*. Printed copies of the Financial Statements will be posted to shareholders shortly and will also be available, free of charge, for one month from the date of posting from the Company's investment manager, Laxey Partners Ltd, 4th Floor, Derby House, 64 Athol Street, Douglas, Isle of Man IM1 1JD.
*Neither the content of Terra Catalyst Fund's website nor the contents of any website accessible from hyperlinks on that website (or any other website) is incorporated into, or forms part of, this Announcement.
ENQUIRIES TO:
Terra Catalyst Fund
Mike Haxby, Director
www.terracatalystfund.com
Tel: +44 (0)1624 690 900
Smith & Williamson Corporate Finance Limited
Azhic Basirov
Tel: +44 (0)20 7131 4000
Directors' Report
For the year ended 31(st) March 2016
The Directors have pleasure in presenting their report and audited financial statements of the Company for the year ended 31(st) March 2016.
The Company
Terra Catalyst Fund (the "Company" or "TCF") was incorporated in the Cayman Islands on 21(st) December 2007 and was admitted to the AIM Market of the London Stock Exchange plc, on 25(th) February 2008.
Investment Objective
The investment objective of the Company changed at the Annual General Meeting on 25(th) September 2012 when a Realisation Resolution was approved by shareholders. The new investment objective and policy is to seek realisation of the Company's portfolio of investments in the ordinary course of business and, subject to retaining sufficient cash to meet operating costs and liabilities, to return the net proceeds of all such realisations to shareholders on a periodic basis, following which the Company will be wound-up.
The Company will make no new investments except follow on investments required to protect the interests of the Company.
Results and Distributions
The Net Asset Value per share of the Company at 31(st) March 2016 was GBP2.26 (31(st) March 2015: GBP1.89).
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.
In addition, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards, as adopted by the EU.
The financial statements are required 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 they have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company. 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 are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.
The Directors have resolved to prepare the financial statements for each financial year.
Directors
The Directors who held office during the year and to date were as follows:
Robert Thomas Ware (Chairman) Martin Michael Adams Michael Andrew Haxby
As at 31(st) March 2016 the interests of the Directors in the issued share capital of the Company was as follows:
Hot Features
Premium
2016 2015
Number Number of
of
Director Shares Shares
Martin Michael
Adams 6,637 6,637
Michael Andrew Haxby 12,191 12,191
Robert Thomas Ware 33,729* 33,729*
*Robert Thomas Ware's shares are held in his Self-invested Personal Pension.
Details of Directors' Remuneration for the year are given in Note 18.
Auditor
Our Auditors, KPMG Audit LLC, being eligible, have expressed their willingness to continue in office.
For and on behalf of the Board of Directors 27 July 2016
Michael Andrew Haxby Martin Michael Adams
Director Director
Investment Manager's Report
For the year ended 31(st) March 2016
Portfolio Review and Investment Activity
The remaining asset in Terra Catalyst Fund ("TCF") is Spazio Investments NV ("Spazio"). More information on Spazio can be found at www.spazioinvestment.com. This externally managed, previously AIM listed property fund specialises in investment in Italian industrial real estate. Through a wholly-owned Italian regulated property fund, Spazio Industriale ("the Fund"), Spazio owns a portfolio of Italian industrial properties. The external manager of the Fund is Idea FIMIT, who replaced the former external manager, Prelios RE, in May 2013. TCF indirectly holds a 26.7% interest in Spazio as at 31(st) March 2016. Laxey Partners Ltd (the "Investment Manager"), TCF and other funds under the management of the Investment Manager together control 72.4% of Spazio.
Spazio
Carrying value
The carrying value per share of Spazio in these financial statements is EUR7.0083, being the audited Net Asset Value per share of Spazio as at 31(st) December 2015.
Strategy and Market Update
The Fund invests in Italian property and continues to concentrate on its strategic plan to improve the marketability of the portfolio through asset refurbishment and re-leasing, with a focus on (i) increasing rental income and extending lease duration and (ii) selling vacant properties at the highest possible value, aiming to reduce the operating costs of the Fund attributable to assets that do not generate income in order to release cash and improve the Fund's cash flow.
The Italian real-estate market (Source: CBRE, Italian Investment Quarterly Q3 2015)
Published data shows that the Italian Real Estate market continued to grow throughout 2015, with a total of EUR5.1bn in completed transactions for the first nine months of the year. Q3 of 2015 recorded investments worth EUR1.5bn, up 40% on the same quarter last year. Of that EUR1.5bn, just 21% represented purchases of property portfolios, like Spazio, confirming the depletion of such stock. Q3 figures also show that foreign investment grew by 9% on the previous quarter to EUR1.3bn. Foreign investment accounted for 85% of the Q3 total.
In the sector most relevant to Spazio, the logistics-industrial sector, investments for the first nine months of 2015 totalled EUR196m, with Q3 accounting for EUR103m of that; mainly via three significant transactions. It is expected that 2015 will show just under EUR200m of investment in the logistics-industrial sector. As indicated, portfolio transactions drove the volume in Q3 - the sale of five logistics properties in Lombardy represent more than 60% of the volume recorded in that quarter.
Portfolio
The Fund owns a portfolio of 168 properties with predominantly industrial and logistics use, located throughout Italy and with a total Open Market Value ("OMV") as at 31(st) December 2015, the date of the most recent audited accounts for Spazio, of EUR375.2m, an increase of EUR17.4m from the valuation of EUR357.8m as at 31(st) December 2014. The main reason for the increase in the valuation is the successful renegotiation of the Telecom Italia leases.
On 4(th) February 2014 the Fund signed a conditional preliminary contract of sale for a property in Portoferraio (LI), Corso Italia, worth EUR2.65m. For the sale to complete, certain conditions were required to be met in order for the final deed to be signed no later than 31 December 2016. At the time of writing, only one condition was outstanding: the collection of the building permit (from the Portoferraio Municipality). Spazio is confident it will meet the December 2016 deadline.
As at 31(st) December 2015, the total annualised passing rent was approximately EUR15.9m after the discount of EUR1.7m provided to Telecom Italia in order to renegotiate the lease agreements which now have an extended average duration of 16.5 years.
During the year to 31(st) December 2015, no new investments were made by the Fund and sales for a total value of EUR3.2m were completed.
In Q1 of 2016, the remaining two units of the Edificio 16 building (a Milan based post-industrial redevelopment into 65 lofts) were sold for a total value of EUR757.8k.
Bank financing
On 30(th) December 2015, the Fund signed a new financing contract with Natixis S.A., Unicredit S.p.A and Banca IMI S.p.A for EUR213.9m (inclusive of refinancing costs). The EUR3.3m refinancing cost breaks down to EUR534.8k in taxes and EUR2.9m in upfront fees. A change in the spread from 250bps to 290bps per annum came into effect with the new financing arrangement.
From 1(st) January 2017, the Fund's debt will be hedged with an Interest Rate Swap that will cover 80% of the outstanding loan (according to the amortising schedule), at a fixed interest rate of 0.14%, expiring on 31(st) December 2020.
Under the new financing arrangement, the possibility now exists for cash distributions to Shareholders upon the sale of certain of the Fund's portfolio properties. Any sales excluding the Telecom Italia stock and the Alstom/ABB asset will release 50% of the net cash proceeds, after allocated debt plus 10% release price payment has been subtracted. The excluded assets had an OMV of EUR160.7m as at 31(st) December 2015.
Future Prospects for TCF
As previously detailed, cash sweeps in place since October 2013 meant that there was no free cash for distributions from the Fund back to Spazio. However, the new debt financing arrangement now in place allows for the possibility of distributions from the sale of certain portfolio properties, subject to there being excess cash available after debt repayment. Spazio has returned EUR3.38 per share to TCF and its other shareholders to date, equivalent to 66% of the bid price for Spazio. TCF is of the view that further substantial distributions from Spazio are not expected in the short to medium term. Spazio has a residual payment obligation to the Italian tax authorities of approximately EUR1.5m relating to the tax settlement signed in July 2014.
Corporate Governance Statement
The Company's shares are quoted on the AIM market of the London Stock Exchange. As an AIM quoted company, the Company is not required to follow the provisions of the UK Corporate Governance code. However, the Company intends to comply with the corporate governance regime for listed investment companies in the UK, currently the AIC Code of corporate governance, to the extent appropriate for a Cayman Islands incorporated investment company quoted on AIM and the Board is committed to high standards of corporate governance. A summary of the main elements of corporate governance are described below:
Board of Directors
The composition of the Board is set out in the paragraph headed 'Directors' above. The Board meets regularly and is provided with relevant information on financial, business and corporate matters prior to meetings.
The following committees deal with specific aspects of the Company's affairs:
Audit Committee
The Audit Committee is responsible for reviewing the adequacy of the Company's internal controls, accounting policies and financial reporting and provides a forum through which the Company's external auditors report to the Company.
The Audit Committee comprises Martin Adams (Chairman) and Robert Ware.
Remuneration Committee
The Remuneration Committee is responsible for setting the remuneration of Directors. The Remuneration Committee comprises Robert Ware (Chairman) and Martin Adams.
Nomination Committee
The Nomination Committee is responsible for making recommendations regarding the composition of the Board. The Nomination Committee comprises Robert Ware (Chairman) and Martin Adams.
Management and Engagement Committee
The Management and Engagement Committee is responsible for the supervision of the Investment Manager and its performance under the Investment Management Agreement. The Management and Engagement Committee comprises Robert Ware (Chairman) and Martin Adams.
Internal Control
The Directors are responsible for establishing and maintaining the Company's system of internal control. This system of internal control is designed to safeguard, as far as is reasonably practical, the Company's assets and to ensure proper accounting records are maintained and that financial information produced by the Company is reliable. There are inherent limitations in any system of internal control and such a system can provide only reasonable, but not absolute, assurances against material misstatement or loss. The Directors, through the Audit Committee, have reviewed the effectiveness of the Company's system of internal control.
Report of the Independent Auditors, KPMG Audit LLC,
To the Members of Terra Catalyst Fund
We have audited the accompanying financial statements of Terra Catalyst Fund for the year ended 31(st) March 2016, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs), as adopted by the EU.
The report is made solely to the Company's members, as a body. 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 the opinion we have formed.
Respective responsibilities of Directors and Auditors
As explained more fully in the Statement of Directors' Responsibilities above, the Directors are responsible for the preparation of financial statements that give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
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 Directors 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.
Opinion on the financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's affairs as at 31(st) March 2016 and of its gain for the year then ended; and
-- have been properly prepared in accordance with IFRSs, as adopted by the EU.
Emphasis of matter - valuation of holding in Spazio investment NV
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in notes 2(b), 3 and 6 to the financial statements concerning the valuation of the holding in Spazio Investment NV ("Spazio") of GBP34,053,412. This is stated at Directors' valuation, with the advice of the Investment Manager, in the absence of readily ascertainable and reliable market values and is based on the net asset value of Spazio per its latest audited accounts as at 31st December 2015. Due to the inherent uncertainty associated with the determination of the valuation the amount realised on disposal may differ materially from the amount at which it is stated in the financial statements. The impact of such uncertainty cannot be quantified.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
Statement of Comprehensive Income
For the year ended 31(st) March 2016
2016 2015
Notes GBP GBP
Income
Distributions on long equity
securities and investment funds - 72,461
Interest - Cash balances 2,796 3,743
Net realised (losses)/gains
on financial assets and liabilities
at fair value through profit
or loss
- Cash balances (3,077) (6,858)
- Equities and Funds - 357,313
Net unrealised gains/(losses)
on financial assets and liabilities
other than currency forwards
at fair value through profit
or loss
- Cash balances (180) (22,458)
- Equities and Funds 6 6,255,065 (4,698,186)
Total net investment income/(expense) 6,254,604 (4,293,985)
---------- ------------
Expenses
Investment management fee 4 174,169 266,640
Administration fee 5 47,747 45,731
Audit fees 16,042 18,613
Directors' remuneration 18 100,000 100,000
Other expenses 172,442 165,859
Interest expense - Cash balances 64 33
Total expenses 510,464 596,877
---------- ------------
Profit/(loss) for the year 5,744,140 (4,890,862)
---------- ------------
Total comprehensive income/(loss)
for the year 5,744,140 (4,890,862)
========== ============
Earnings per share
Basic and fully diluted 12 GBP0.37 (GBP0.30)
---------- ------------
The Directors consider that all results derive from continuing activities.
The notes are an integral part of the financial statements.
Statement of Financial Position
As at 31(st) March 2016
2016 2015
Notes GBP GBP
Current assets
Cash at bank 15 1,405,947 1,732,602
Equities - long at fair value
through profit or loss 6 34,053,412 27,798,347
Other debtors and accrued income 9 3,837 4,686
Total assets 35,463,196 29,535,635
============= =============
Equity
Share capital 7 155,048 155,048
Share premium 8 52,935,499 52,935,499
Retained losses 8 (17,975,015) (23,719,155)
------------- -------------
Total equity 35,115,532 29,371,392
------------- -------------
Liabilities
Other creditors and accrued expenses 10 347,664 164,243
------------- -------------
Total liabilities 347,664 164,243
Total liabilities and equity 35,463,196 29,535,635
============= =============
Net asset value per ordinary
share 11 2.26 1.89
============= =============
These accounts were approved and authorised by the Board of Directors on 27 July 2016 and are signed on their behalf by:
Michael Andrew Haxby Martin Michael Adams Director Director
The notes are an integral part of the financial statements.
Statement of Changes in Equity
For the year ended 31(st) March 2016
Share Share Retained
Capital Premium losses Total
GBP GBP GBP GBP
Balance at 1(st) April
2014 176,051 55,214,300 (18,828,293) 36,562,058
Total comprehensive
income
Loss for the year - - (4,890,862) (4,890,862)
Transaction with owners
recorded directly
in equity:
Contributions by and
distributions to owners
Repurchase of shares (21,003) (2,278,801) - (2,299,804)
--------- ------------ ------------- ------------
Balance at 31(st) March
2015 155,048 52,935,499 (23,719,155) 29,371,392
========= ============ ============= ============
Share Share Retained
Capital Premium losses Total
GBP GBP GBP GBP
Balance at 1(st) April
2015 155,048 52,935,499 (23,719,155) 29,371,392
Total comprehensive
income
Profit for the year - - 5,744,140 5,744,140
Balance at 31(st) March
2016 155,048 52,935,499 (17,975,015) 35,115,532
======== =========== ============= ===========
The notes are an integral part of the financial statements.
Statement of Cash Flows
For the year ended 31(st) March 2016
Note 2016 2015
GBP GBP
Cash flows from operating activities:
Distribution received - 176,147
Interest received 2,860 3,498
Prepaid expenses 784 (1,954)
Management fee paid 4 9,462 (192,329)
Administration fee paid 5 (47,681) (43,757)
Other expenses paid (288,760) (298,255)
Interest paid (64) (34)
Net realized and unrealized
losses on foreign currency (3,257) (29,316)
Proceeds from sales of investments - 3,715,625
Net cash (outflow)/inflow from
operating activities 14 (326,656) 3,310,625
---------- ------------
Cash flows from financing activities:
Repurchase of shares - (2,299,804)
Net cash flow from financing
activities - (2,299,804)
---------- ------------
(Decrease)/ Increase in cash
and cash equivalents (326,656) 1,010,821
========== ============
Opening cash and cash equivalents 1,732,602 721,781
Closing cash and cash equivalents 15 1,405,947 1,732,602
========== ============
The notes are an integral part of the financial statements.
Notes to the financial statements
For the year ended 31(st) March 2016
1. General
The Company was incorporated in the Cayman Islands on 21(st) December 2007 and its shares were admitted to the AIM Market of the London Stock Exchange plc, on 25(th) February 2008.
2. Accounting policies (a) Basis of preparation
The financial statements of the Company have been prepared in accordance with the historical cost convention as modified by the revaluation of investments. The principal accounting policies which have been applied are set out below. Such policies are in accordance with and comply with International Financial Reporting Standards ("IFRS"), as adopted by the EU.
The Company has adopted the Pound Sterling (GBP) as its measurement and reporting currency in which shares are issued.
(b) Financial assets and liabilities
Classification
The Company classifies its investments in equities, investment funds and related derivatives as financial assets or financial liabilities at fair value through profit or loss. These financial assets and financial liabilities are classified as held for trading or designated by the Board of Directors at fair value through profit or loss at inception.
Recognition/derecognition
Purchases and sales of investments are accounted for on the date the securities are purchased or sold. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. The computation of the cost of sale of securities is made on the first in first out basis. Realised and unrealised gains and losses are recognised in the profit or loss, and are shown net of all estimated broker charges.
Measurement
Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in the Statement of Comprehensive Income. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets or financial liabilities at fair value through profit or loss' category are presented in the Statement of Comprehensive Income in the period in which they arise.
Valuation of financial instruments
IFRS 13 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I - Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded equity securities and are valued at the closing bid price on a national securities exchange on the valuation date. Securities sold, not yet purchased that are listed or dealt on a national securities exchange are valued at the closing offer price on the valuation date. As required by IFRS 13, the Company does not adjust the quoted price for these investments even in situations, if any, where the Company holds a large position and a sale could reasonably impact the quoted price.
Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, are valued at prices for similar assets or liabilities in markets that are not active, or determined through
the use of models or other valuation methodologies. Investments which are generally included in this category are publicly traded equity securities with restrictions and derivative contracts.
Level III - Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value of these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, independent appraisals of the values of the underlying properties, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
Unrealised gains and losses resulting from recording securities and derivative financial instruments at fair value are included in net unrealised appreciation/(depreciation) in the Statement of Comprehensive Income.
All financial assets and liabilities not stated at fair value in the financial statements are categorised as Level II in the fair value hierarchy.
(c) Income
Dividend income is recognised in the Statement of Comprehensive Income when the relevant investment is first listed ex-dividend and is shown net of withholding taxes. Other income is recognised on a receivable basis.
(d) Taxation
Under current laws of the Cayman Islands, there are no income, estate, transfer, sales or other taxes payable in the Cayman Islands by the Company.
(e) Fair values
The Company's financial instruments are investments, cash, accrued income, broker receivables, accrued expenses and broker payables. The value of these financial instruments in the financial statements approximates to their fair value.
(f) Cash and cash equivalents
Cash and cash equivalents comprise cash balances held at banks together with bank overdrafts. The banks overdrafts are repayable on demand and form an integral part of the Company's cash management.
(g) Accrued expenses
Accrued expenses are recognised at fair value and subsequently stated at amortised cost using the effective interest rate method.
(h) Translation of foreign currencies
Foreign currency transactions during the year are translated into Pounds Sterling at the rates of exchange ruling at the dates of the transactions. Assets and liabilities denominated in foreign currencies are translated into Pounds Sterling at the rates of exchange ruling at the balance sheet date. Exchange differences are included in the Statement of Comprehensive Income.
(i) Future changes in accounting policies
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31(st) March 2016, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the measurement of the amounts recognised in the Company's financial statements.
IFRS 9 Financial Instruments (effective from 1 January 2018)
IFRS 9 specifies how an entity should classify and measure financial assets and liabilities, including some hybrid contracts. The standard improves and simplifies the approach for classification and measurement of financial assets compared with the requirements of IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39"). Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged. The standard applies a consistent approach to classifying financial assets and replaces the numerous categories of financial assets in IAS 39, each of which had its own classification criteria. The standard is not expected to have a significant impact on the Company's financial position or performance, as it is expected that the Company will continue to classify its financial assets as being at fair value through profit or loss. This standard has not yet been adopted by the EU.
There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Company.
3. Critical accounting estimates and assumptions
The preparation of financial statements in conformity with IFRS as adopted by the EU requires the Directors to make estimates and assumptions that affect the reported amounts in the financial statements. The Directors believe that the estimates utilised in preparing its financial statements are reasonable and prudent, however, actual results could differ from these estimates. The most significant estimates and judgements that are required to be made are in respect of the valuation of investments for which no reliable market price is available (see Note 6).
4. Investment Management fee
Management fee basis:
- A monthly payment of one twelfth of 0.5% of the Company's NAV, adjusted for the carrying value of the Company's indirect interest in Spazio NV;
- 1.5% of the gross amount of any distributions made to shareholders.
Aggregate management fees charged during the year were GBP8,789 (2015: GBP69,132) of which GBP0 (2015: GBP53,497) related to distribution fees. Fees of GBP655 (2015: GBP1,700) were outstanding at the year end.
The agreement between the Company and the Investment Manager may be terminated subject to twelve months' notice by either party.
The Investment Manager receives a fee from Terra European Investments BV ("TEI"), a group company of Spazio Investment NV ("Spazio"). The Investment Manager receives an annual management fee of 0.5% based on the latest audited NAV of Spazio, payable monthly in arrears. The fee remunerates the Investment Manager for managing TEI's holding in Spazio. The carrying value of Spazio is not included in the calculation of the management fee paid by the Company to the Investment Manager. Aggregate management fees charged during the year in relation to TEI were GBP165,380 (2015: GBP197,507). Fees of GBP239,986 (2015: GBP57,486) were outstanding at the year end.
5. Administration fee
The Company pays a fee to the Administrator at the rate of 0.16% per annum of the NAV. The fee is calculated and paid on a monthly basis.
The agreement between the Company and the Administrator may be terminated subject to three months' notice by either party.
6. Investments
2016 2015
GBP GBP
Long positions:
Market value 34,053,412 27,798,347
=========== ===========
Cost 15,145,206 15,145,206
=========== ===========
The Company's accounting policy on fair value measurement is disclosed in note 2(b). All securities are categorised as Level III. The changes in the investments classified as Level III are as follows:
2016 2015
GBP GBP
Balance at 1(st) April 27,798,347 32,559,900
Movement in unrealised gains/(losses) 6,255,065 (4,761,553)
Balance at 31(st) March 34,053,412 27,798,347
=========== ============
Cost of investments held at
year end 13,988,345 13,988,345
=========== ============
Investment categorised as Level III comprises Spazio.
As at 31(st) March 2016, the Company had an interest in Spazio of GBP34,053,412 (2015: GBP27,798,347) or 96.02% (2015: 94.12%) of the total assets of the Company. The Directors, with the advice of the Investment Manager, have resolved to carry the investment at its most recent audited Net Asset Value, being EUR7.0083 per share (2015: EUR6.2695 per share).
Spazio owns a portfolio of 168 properties with predominantly industrial and logistics use, located throughout Italy and with a total Open Market Value (OMV) as at 31(st) December 2015 of EUR375.2m, an increase of EUR17.4m from the valuation of EUR357.8m as at 31(st) December 2014. The main reason for the increase in the valuation is the successful renegotiation of the Telecom Italia leases.
The Company held a 26.7% interest in Spazio as at 31st March 2016 (2015: 26.7%)
The aggregate of realised gains/losses and movement in unrealised gains/losses for the year resulting from Spazio recorded in the Statement of Comprehensive Income amounted to a gain of GBP6,255,065 (2015: loss of GBP4,761,553).
7. Share capital
2016 2016 2015 2015
Number GBP Number GBP
Ordinary shares of GBP0.01 each 1,000,000,000 10,000,000 1,000,000,000 10,000,000
10,000,000 10,000,000
=========== ===========
2016 2016 2015 2015
Number GBP Number GBP
Issued share capital
At 1(st) April 15,504,787 155,048 17,605,067 176,051
Issued during the year - - - -
Repurchased during the year - - (2,100,280) (21,003)
15,504,787 155,048 15,504,787 155,048
=========== ======== ============ =========
8. Reserves
2016 2015
GBP GBP
Share premium
At 1(st) April 52,935,499 55,214,300
Relating to repurchase of shares - (2,278,801)
At 31(st) March 52,935,499 52,935,499
============= =============
Retained losses
At 1(st) April (23,719,155) (18,828,293)
Total comprehensive income/(loss)
for the year 5,744,140 (4,890,862)
------------- -------------
At 31(st) March (17,975,015) (23,719,155)
============= =============
9. Other debtors and accrued income
2016 2015
GBP GBP
Prepaid consulting fees 2,169 2,950
Prepaid listing fees 1,432 1,436
Interest receivable 236 300
3,837 4,686
====== ======
10. Other creditors and accrued expenses
2016 2015
GBP GBP
Administration fee payable 4,290 4,224
Accounting fees payable 9,239 15,461
Audit fee payable 12,500 12,500
Corporate secretarial fees
payable 2,000 2,000
Directors' fees payable 25,000 25,000
Investment management fee payable 240,641 57,011
Accrued Liquidation fee 35,000 35,000
Other payables 18,994 13,047
347,664 164,243
======== ==========
11. Net asset value per ordinary share
2016 2016 2015 2015
Total Per Share Total Per Share
GBP GBP GBP GBP
Net asset value 35,115,532 2.26 29,371,392 1.89
=========== ========== =========== ==========
12. Earnings per share
The basic and fully diluted earnings per share is based on the profit for the year of GBP5,744,140 (2015: loss of GBP4,890,862) and the weighted average number of shares outstanding at the year of 15,504,787 (2015: 16,470,491).
13. Risk profile
The Company's activities expose it to a variety of financial risks: market price risk, currency risk, interest rate risk, credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.
13.1 Market price risk
Market price risk is the risk that the market price of a financial instrument will fluctuate due to changes in factors specific to the security or its issuer, factors affecting all securities traded in the market, foreign exchange rates or market interest rates.
Following the disposal of most of its securities the Company primarily now invests in Spazio, which represents 96.02% of total assets. The Company is therefore exposed to the performance of Spazio, which invests in Italian commercial property.
If the fair value of the Company's investment portfolio had increased/decreased in value by 5% as at 31(st) March 2016, the effect on net assets would have been an increase/decrease of GBP1,702,671 (2015: GBP1,389,917).
13.2 Interest rate risk
The majority of the Company's financial assets and liabilities are non-interest bearing. As a result, the Company is not subject to the significant amounts of risk due to fluctuation in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. Overdrawn balances at brokers are also subject to short-term market interest rate movements.
13.2 Interest rate risk (continued)
Cash balances and overdrawn balances at brokers are due on demand. A sensitivity analysis regarding interest rate risk has not been given as the Company is not subject to significant interest rate risk.
13.3 Credit risk
The Company assumes exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The Company is exposed to credit risk in relation to its cash balances, investments and debtor balances as stated in the Statement of Financial Position.
The Company mitigates credit risk through using only reputable banks and brokers. The credit worthiness of the banks and brokers are monitored by the Investment Manager.
13.4 Liquidity risk
Liquidity risk may arise from the potential inability to sell a financial instrument without undue delay at a price close to its market value. The Company's policy in managing liquidity risk is to have sufficient liquid assets to meet its liabilities as they fall due, without incurring undue losses.
The table below provides a breakdown of the Company's financial liabilities into relevant maturity groupings based on the remaining period at the end of the financial year to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows.
Less No stated
than
1 month 1-12 maturity Total
months
GBP GBP GBP GBP
-------- -------- ---------- --------
As at 31(st) March
2016
Other creditors and
accrued expenses 347,664 - - 347,664
-------- -------- ---------- --------
Total financial liabilities 347,664 - - 347,664
======== ======== ========== ========
Less No stated
than
1 month 1-12 maturity Total
months
GBP GBP GBP GBP
-------- -------- ---------- --------
As at 31(st) March
2015
Other creditors and
accrued expenses 164,243 - - 164,243
-------- -------- ---------- --------
Total financial liabilities 164,243 - - 164,243
======== ======== ========== ========
13.5 Currency risk
The Company holds assets denominated in currencies other than its functional currency, the Pound Sterling. It is therefore exposed to currency risk, as the value of the securities denominated in other currencies will fluctuate due to changes in exchange rates. The following table summarises the Company's exposure to foreign currencies as a percentage of net assets.
At 31(st) March 2016 the Company's exposure to foreign currency, on a look through basis, was as follows:
2016 2015
Weighted Weighted
% %
GBP 3.24% 4.81%
EUR 96.76% 95.17%
USD - 0.02%
100.00% 100.00%
========= =========
At 31(st) March 2016 and 31(st) March 2015 the Company held no open forward contracts.
14. Reconciliation of gain/(loss) for the year to net cash inflow from operating activities
2016 2015
GBP GBP
Total comprehensive income/(loss)
for the year 5,744,140 (4,890,862)
Net realized loss/(gain) on financial
assets 3,077 (350,455)
Net unrealised (gain)/loss on financial
assets (6,254,885) 4,720,644
Decrease in revenue debtors and
accrued income 849 99,055
Increase in revenue creditors and
accrued expenses 183,421 45,934
Net realized and unrealized losses
on foreign currency (3,257) (29,316)
Sale of investments - 3,715,625
------------ ------------
Net cash (outflow)/inflow from
operating activities (326,655) 3,310,625
============ ============
15. Cash at bank and brokers
2016 2015
GBP GBP
At 1(st) April 1,732,602 721,781
Increase/(decrease) in cash and
cash equivalents (326,655) 1,010,821
At 31(st) March 1,405,947 1,732,602
========== ==========
Cash at bank 1,405,947 1,732,602
1,405,947 1,732,602
========== ==========
16. Prime brokerage agreements
Under the terms of the Company's prime brokerage agreement, the prime broker holds a first fixed charge over the Company's assets and cash held with the prime broker as security for the payment and performance by the Company of its obligations to the prime broker.
17. Related parties
The Company and the Investment Manager are related by virtue of the existence of a material contract as referred to in Note 4. As at 31(st) March 2016, the Investment Manager owned 1,303,467 shares (2015: 1,303,467 shares) in the Company. Fees charged by the Investment Manager in respect of the year were GBP8,789 (2015: GBP69,132) of which GBP655 (2015: GBP1,700) was outstanding at the year end.
Michael Haxby, a Director of the Company, is also a Director of the Investment Manager and of member companies of the Spazio group. Mr Haxby receives a fee from TEI, a Spazio group company, of EUR12,000 per year.
The Investment Manager receives a fee from Terra European Investments BV ("TEI"), a group company of Spazio Investment NV ("Spazio"). The Investment Manager receives an annual management fee of 0.5% based on the latest audited NAV of Spazio, payable monthly in arrears. The fee remunerates the Investment Manager for managing TEI's holding in Spazio. The carrying value of Spazio is not included in the calculation of the management fee paid by the Company to the Investment Manager. Aggregate management fees charged during the year in relation to TEI were GBP165,380 (2015: GBP197,507). Fees of GBP239,986 (2015: GBP57,486) were outstanding at the year end.
Colin Kingsnorth, a Director and an ultimate beneficial owner of the Investment Manager is also a director of Spazio.
The Company held a 26.7% interest in Spazio as at 31(st) March 2016 (2015: 26.7%). The Investment Manager, TCF and other funds under the management of the Investment Manager together control 72.4% of Spazio (2015: 72.4%).
18. Directors' remuneration
Details of Directors remuneration earned in respect of the financial year by each Director of the Company acting in such capacity during the financial year are as follows:
2016 2015
GBP GBP
Robert Thomas Ware 65,000 65,000
Martin Michael Adams 35,000 35,000
Michael Andrew Haxby* - - -
100,000 100,000
-------- --------
*Michael Haxby has waived the right to receive a Directors fee from the Company while he is a director of the Investment Manager.
The fees detailed above are the only remuneration paid to the Directors.
19. Subsequent events
In preparing these financial statements, the Company has evaluated events that have occurred from 1(st) April 2016 through 27 July 2016 (the date that the annual statements were issued/available to be issued) and except as already included in the notes to financial statements, it has determined that no events have occurred that would require recognition or additional disclosures in these financial statements.
Supplementary Information (unaudited)
Reconciliation of Net Asset Value to Total Equity per Statement of Financial Position as at 31(st) March 2016
2016 2015
GBP GBP
Net Assets as at 31(st) March 31,525,694 30,067,071
Revaluation of Spazio Investment
NV from EUR6.2695 per share
to EUR7.0083 per share
(2015: from EUR6.4264 per share
to EUR6.2695 per share) 3,589,838 (695,679)
Shareholder's Funds per Statement
of Financial Position 35,115,532 29,371,392
=========== ===========
This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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July 28, 2016 07:30 ET (11:30 GMT)
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